Amid dwindling earnings, Flour Mills declares N5.5b dividends

In from Success Allantee

Flour Mills of Nigeria Plc, Nigeria’s largest flour-milling company, would be distributing N5.51 billion as cash dividends to shareholders for the immediate past year ended March 31, 2015.

In a dividend recommendation released yesterday, the board of the company said it has recommended that about 65.13 per cent of the company’s net profit be distributed to shareholders as cash dividends. The dividend recommendation indicated that shareholders would receive a dividend per share of N2.10.

Flour Mills last week started the process to raise N40 billion from shareholders through a rights issue.

In 2014, Flour Mills had distributed N5.01 billion as cash dividends on the basis of N2.10 per each ordinary share. Also, a total of 238.6 million ordinary shares of 50 kobo each were also distributed to shareholders through a bonus of one for 10 shares.

The current dividend recommendation belied the poor performance of the company, which recorded operational loss before the net bottom-line was boosted by proceeds from disposal of assets and tax gains.

The audited report and accounts of Flour Mills for the year ended March 31, 2015 showed that total sales dropped to N308.76 billion in 2015 as against N325.79 billion in 2014. Gross profit also declined from N37.30 billion in 2014 to N35.37 billion in 2015. Operating profit slumped to N10.22 billion in 2015 compared with N19.38 billion in 2014. With decline in investment income from N5.03 billion to N2.3 billion and increase in interest expense from N16.10 billion to N18.70 billion, Flour Mills was primed for a loss during the year.

However, the company’s bottom-line was mitigated by a N14.29 billion gain from disposal of investment from an associate company and a N738.3 million tax income gain. Profit before tax still closed lower at N7.72 billion in 2015 as against N8.23 billion in 2014. With the tax gain, profit after tax rose from N5.37 billion to N8.46 billion. Earnings per share thus stood at N3.47 in 2015 as against N1.93 in 2014.

Flour Mills last week received shareholders’ nod for a N40 billion rights issue, which the company plans to use to bolster its working capital and restructure its leveraged balance sheet in order to avoid long drain of financial mismatch.

Read also: SEC, CBN push for e-dividend payments

Shareholders of Flour Mills, Nigeria’s most capitalised and largest flour-milling company, also last week approved increase in the authorised share capital of the company. Shareholders approved increase in authorized share capital of the company from N2 billion to N2.5 billion through the creation of additional 1.0 billion ordinary shares of 50 kobo each. Besides approving the N40 billion rights issue, the meeting also granted a waiver to the board that in the event of under-subscription, the board can allocate unsubscribed rights’ shares to interested investors.

The meeting generally mandated the board of directors to use net proceeds of the rights issue to meet the funding requirements of the company.

Chairman, Flour Mills of Nigeria, Mr. John Coumantaros, said the company would use the net proceeds to also cushion the adverse effect of the sudden slump in global crude oil prices, which has resulted in major devaluation of the naira and caused increases in import costs and financial charges.

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