Flour Mills Of Nigeria: Earnings Trajectory, Best in a Decade

Vetiva Research
-
0
Flour Mills Of Nigeria: Earnings Trajectory, Best in a Decade

Continued expansion across segments accelerates PAT growth

Sustaining the impressive growth momentum from the H1’21 period, Flour Mills reported a 31% y/y growth in topline to ₦555.3 billion and a 91% y/y growth in PAT to ₦15.6 billion in 9M’21. The expansion in the bottom line came down to impressive volumes, improved margins from cost efficiencies and increased investment income.

The company reported a 6% y/y increase in volume, driven by its emphasized focus on B2C marketing and investment in key distribution strategies. Thus, although the cost of sales increased 29% y/y – mostly from input sourcing challenges and other inflationary pressures, as well as a 6% y/y surge in Opex, the company’s operating margin grew 1ppt to 6%.

government policies, Flour Mills of Nigeria, market share,
www.brandspurng.com

Furthermore, boosted by higher cash and debt balances, Finance income and Finance costs surged nearly 400% and 14% y/y respectively, with Net Finance costs dipping 6% y/y to ₦12.4 billion. Overall, Flourmills’ PBT and PBT margin came in at ₦23.6 billion and 4% respectively (9M’20: ₦12.3 billion and 3% respectively), with EPS growing ₦1.81 to ₦3.80.

Following a 15x growth in PAT, Flourmills’ most profitable business line is now its Agro-allied segment, reporting ₦8.8 billion as PAT, largely boosted by an improved contribution from edible oils, feed and fertilizer as well as a low base.

That said, we suspect that topline growth in this segment may be peaking, given its underwhelming 5% y/y growth in this quarter, especially when we compare this to the performance from its other business segments, showing an average growth of 30% y/y (including its support services segment).

Boosted by operating efficiencies, cash flow from operations soared 11% y/y to ₦50.1 billion; this, in addition to increased borrowings, contributed to the company’s 2x y/y increase in overall cash balances to ₦81.2 billion and propped total assets to ₦493.2 billion. Thus, RoA for the company improved 1ppt y/y to 3%.

Expect a strong close to the year.

To end the financial year, we are still bullish on the company’s volumes, despite the possible headwinds that the AfCFTA poses, given its solid investments in new products and distribution as well as its placement in the value segment. However, we remain cautious on growth expectations for the agro-allied segment. That said, we expect the company to report full-year Revenue of ₦749.5 billion, which would represent a 31% y/y growth.

This places the expected Q4’21 Revenue at ₦194.2 billion (+29% y/y). In terms of margins, expecting largely stable conditions (at least in line with the current run rate), we forecast gross margin at 13% y/y under the expectation that the company’s export effort would continue to mitigate FX sourcing costs.

Flour mills has been able to set up three Regional Distribution Centres in the North, with expansion plans to include four more centres possibly in this quarter, we project a 6% y/y increase in Opex for FY’21. Taking in all our assumptions we forecast an FY’21 PBT of ₦30.3 billion and PAT of ₦20.0 billion, each representing 75% y/y expansions respectively.

Therefore, we value Flourmill at ₦37.45 and rate the stock a HOLD.

Flour Mills Of Nigeria Earnings Trajectory, Best in a Decade Brandspurng
Source: Company filings, Vetiva Research
Flour Mills Of Nigeria Earnings Trajectory, Best in a Decade Brandspurng
Source: Company filings, Vetiva Research

MTN partners with African Union on COVID-19 vaccinations

Esan Bolaji
-
0
MTN partners with African Union on COVID-19 vaccinations

MTN partners with African Union on COVID-19 vaccinations

How to Participate in the Face of Niger Delta Cultural Pageant 2021 Edition

Esan Bolaji
-
0
How to Participate in the Face of Niger Delta Cultural Pageant 2021 Edition

The Face of Niger Delta Cultural Pageant (FONDCUP) has formally announced entries from contestants for its 2021 rebranded edition.

FONDCUP, a cultural pageant organized by LizGold Global International Ltd., in partnership with World Kindness Initiative Nigeria (WKIN) says the 2021 season will showcase the rich cultural heritage of the Niger Delta and the enormous beauty of her maidens.

How to Participate in the Face of Niger Delta Cultural Pageant 2021 Edition

WHO IS ELIGIBLE TO PARTICIPATE

The competition will focus on showcasing the physical beauty, personality, intelligence, kindness, compassion and talents of young maidens, within the ages of 18 – 25years from the Region, which comprises of 9 states namely; Ondo, Edo, Delta, Imo, Abia, Akwa Ibom, Cross River, Rivers and Bayelsa respectively.

HOW TO PARTICIPATE

  1. Go to FONDCUP website (www.fondcup.ng)
  2. Make a payment of N5,000 online
  3. Fill the registration form.
  4. Make a 60 seconds video introducing yourself (upload and submit alongside your registration form online).

How to Participate in the Face of Niger Delta Cultural Pageant 2021 Edition

Elizabeth Era says prizes range from the main winner which is the Crowned Queen, the 1st runner-up, 2nd runner-up and other contestants. “Crowned Queen: A brand new car, N1 million, Kindness Ambassador for the Niger Delta, running a project with the World Kindness Initiative, and signed to modelling agencies for one year.

“As the Face of Niger Delta, her job will be to preach love, kindness and show to Nigeria and the world that people are more than just fighting. “She will also be trained in any skill of her choice. She will work with a telecommunication company and advert agency for a period of one year, she adds. “1st runner-up will get N1 million, modelling contract and skill acquisition contract for one year.

“2nd runner-up gets N500,000 and other juicy opportunities. Other contestants from the 9 Niger Delta states will get N200,000 each and lots of other consolation prizes. The contestants will be camped for a period of 22 days, starting from May 16, while the grand finale holds in June 2021.

The activities in the house will be live-streamed and their environment will be a cultural setting to showcase the different beautiful cultures of the Niger Delta region. According to the organisers, auditioning for contestants will be done strictly online in accordance with Covid 19 guidelines.

The Eko Atlantic City: All You Need To Know

Esan Bolaji
-
0
The Eko Atlantic City: All You Need To Know

Eko Atlantic City, officially known as Nigeria International Commerce city, is located in Lagos, one of the fastest-growing megacities in the world. This cutting edge coastal city is being constructed on land reclaimed from the Atlantic ocean and is designed to help stop the erosion of the Lagos City coastline.

The land being reclaimed was lost to the surge of the sea which started around 1912. In 1905, the authorities saw that the commodore channel was too shallow resulting in a tedious process of delivering cargo to the Lagos port.

The Eko Atlantic City Brandspurng All You Need To Know13

The larger vessels anchored at about 3km offshore where they were met by smaller vessels who delivered the cargo to the port. This affected trade and economic growth. It was therefore decided that a channel would be created to allow larger vessels to enter the port.

The construction of the East and West Moore started, and it was completed in 1912. These structures worked effectively to protect the channel and trap sand.

However, the structures also led to interruptions in the littoral drift which allows for transportation of materials, like sand, from coast to coast. It resulted in large sand deposits in some areas like Victoria Island and the complete erosion of land in other areas like the Bar beach.

The Eko Atlantic City Brandspurng All You Need To Know13

The Eko Atlantic City Brandspurng All You Need To Know13

By 2005, the Bar beach was lost, leaving Victoria Island exposed to heavy ocean surge. The Island( which is a key financial centre in Lagos), and consequently other densely populated areas of Lagos, were in danger of being lost to the sea. To prevent this imminent ecological disaster, the Eko Atlantic City project was born.

The project started in 2003 and is being carried out as a public-private partnership with the Lagos State Government (backed by the Federal government) acting as a strategic partner while the private companies and investors, both local and international, are involved in the designing, building and funding.

There are several features that make the Eko Atlantic city appealing for accommodation, business and tourism. This article will take a look at them.

ADVANCED INFRASTRUCTURAL FACILITIES

There is an impressive well-planned road network with fifteen bridges in place, a 1,500m long 8-lane boulevard and tree-lined streets. Plans have been made for a tree nursery with a capacity to produce a minimum of 250, 000 trees. Walkways are also being constructed with extensions overhead to provide shelter from rain and sun.

The city would have an independent clean and treated water supply that meets the WHO standard. Considering the challenges of flooding in Lagos, the developers have also designed proper drainage and waste system.

The Eko Atlantic City Brandspurng All You Need To Know13 The Eko Atlantic City Brandspurng All You Need To Know13

A canal system would run through the middle of Eko Atlantic City and receive all the stormwater flowing from the street into an underground drainage network. The technology used in designing the drainage network in the city follows best practices used worldwide.

STATE OF THE ART UTILITIES

The city will have its own power generating plant that will provide 24/7 electricity. The Eko energy plant will serve the oil and gas sector and adequate power will be produced at a reasonable price. Eko Atlantic City will not operate on the national grid.

The concept of a smart city is reinforced by the proposed city-wide fibre optic communications network. There is a possibility of a tech village in the city and services such as IT services will be made accessible.

The Eko Atlantic City Brandspurng All You Need To Know13 The Eko Atlantic City Brandspurng All You Need To Know13

The city also has plans for first-class schools (from nursery classes to university standard) and libraries, global standard health facilities, shopping and recreational centres in close proximity with the residents. One of the largest shopping malls in sub-Saharan is deliberately located at the northern boundary of the city and will act as an entertainment centre.

EFFICIENT TRANSPORTATION SYSTEM

Eko Atlantic City is described as a city of the future and so the earlier plans for light railway have been jettisoned for the more future-oriented electronic powered buses. There are plans to erect a central bus station where buses come every night and are recharged.

The developers describe this as the future of mass transportation worldwide. The city also plans to take advantage of the Lagos State water transportation scheme. The intention is to use water taxis on the corridor as this mode of transportation is a lot faster than the road.

SECURE ENVIRONMENT

Security cameras would be connected to the fibre optic network. The mobile patrol connected to the main control centre would also be used within the city and at the six main entrance into the city.

The concept of the Eko Atlantic is a mixed fuse combining residential and business buildings, and the developers have noted that a district with round the clock activities will put a check on security issues.

The Eko Atlantic City Brandspurng All You Need To Know13

STANDARD PLANNING REGULATION

The prices of plots of land differ based on district. For developers interested in land, they would be given a proposal based on their plans. International regulations would be complied with, having studied international cities like New York and London.

The contractors are rigid on planning regulations, not trying to debar people from achieving their plans but to keep to the master plan and build a city of recognized international standard.

Adequate car parking facilities for both tenants and tourists would also be provided with basement parking facilities. The land developers would have to ensure the parking lot has the capacity to fit the tenants and the visitors anticipated for the building.

The city is specifically planned for medium to high-density development. The cost of building in the city is cheaper than in Banana island or Victorian Island.

In addition to the above, Eko Atlantic City is protected by a coastal revetment known as the great wall of Lagos, a planned 8.5km long barrier made from rocks and concrete accropodes, it will act as a protection for the coastline and solve the problem of erosion.

The Eko Atlantic City Brandspurng All You Need To Know13 The Eko Atlantic City Brandspurng All You Need To Know13

The emblem of Eko Atlantic City will be put out for competition of architecture engineers. Just like the Eiffel Tower represents Paris, this proposed emblem would represent the Eko Atlantic City anywhere in the world.

Eko Atlantic City is geared to be the new financial hub in West Africa and the entire Sub-Saharan African region, with a dedicated and conducive business district and offers businesses the advantages of operating in a designated free zone.

The city is open to all major cooperations to come in and develop their headquarters. This environment will be economically driven. The Eko Atlantic City is benefiting Lagos and Nigeria as a whole. Effort is being made to encourage local companies as raw materials used for the project like the cement, sand, and labour are largely local.

Upon completion, the Eko Atlantic City is anticipating a population of 300,000 permanent residents and 200,000 commuters. Standing on 10 million square metres of land reclaimed from the Atlantic ocean and with a modern and efficient master-plan, this city of the future will satisfy the residential, tourism, commercial and financial needs of people.

The Eko Atlantic City Brandspurng All You Need To Know13

Zenith Bank Approves 2020 Results and Payment of a Final Dividend

Esan Bolaji
-
0
Zenith Bank Approves 2020 Results and Payment of a Final Dividend

Zenith Bank Plc’s Board of Directors has approved the Group Audited Consolidated & Separate Financial Statements for the year ended December 31, 2020, and the payment of a final dividend, subject to the approval of the Central Bank of Nigeria (CBN).

This was disclosed in a statement by the bank to the Nigerian Stock Exchange.

According to the statement, signed by Micheal Osilama Otu, Company Secretary/General Counsel, the Board considered and approved the results at its meeting held on Thursday, January 28, 2021.

Zenith Bank Plc - Resilient Earnings Profile Amid Macroeconomic Headwinds Brandspurng

Zenith Bank also noted that the Nigerian Stock Exchange, as well as the investing public, would be notified upon receipt of the approval of the Central Bank of Nigeria (CBN) of the Group Audited Consolidated & Separate Financial Statements for the year ended December 31, 2020.

Ogun State And Fan Milk Plc Seal Partnership Deal On Dairy Value Chain Opportunities (Photos)

Brand Spur
-
0
Ogun State And Fan Milk Plc Seal Partnership Deal On Dairy Value Chain Opportunities (Photos)

The Government of Ogun State and Fan Milk Plc (Danone) officially sealed partnership agreement on Dairy Value Chain activities in Ogun State, at the Memorandum of Understanding (MoU) Signing Ceremony held at the Governor’s Office Oke-Mosan, on Thursday, 28th January 2021 and subsequent groundbreaking (foundation laying ceremony) at Odeda Farm Institute, the site of the proposed Fan Milk & Danone Model Dairy Farm & Dairy Training Institute where construction work is already ongoing.

Ogun State And Fan Milk Plc Seal Partnership Deal On Dairy Value Chain Opportunities Brandspurng9 Ogun State And Fan Milk Plc Seal Partnership Deal On Dairy Value Chain Opportunities Brandspurng9

The partnership agreement is a significant step in actualizing the Backward Integration Plan (BIP) of Fan Milk Plc (Danone), which aims to improve the local farmer and community participation in dairy farming, with a target production of 1.4million litres of milk in the next 24 months.
The Project, among other things, involves the establishment of a Model Dairy Farm and Dairy Training Institute at Odeda Farm Institute, Odeda LGA, Ogun State.
Ogun State And Fan Milk Plc Seal Partnership Deal On Dairy Value Chain Opportunities Brandspurng9 Ogun State And Fan Milk Plc Seal Partnership Deal On Dairy Value Chain Opportunities Brandspurng9 Ogun State And Fan Milk Plc Seal Partnership Deal On Dairy Value Chain Opportunities Brandspurng9
Speaking, His Excellency, Prince (Dr) Dapo Abiodun, MFR, acknowledged the contribution of Fan Milk Plc to the socio-economic development of Nigeria, while expressing his firm belief in the impacts the project would have on the overall well-being of the people of Ogun State.
The Fan Milk/Danone Backward Integration Plan aligns with the Ogun State Agricultural Agenda of Support to Smallholder farming and Linkage to Industrial Process, Job Creation, Agricultural Industrialization, Food and Nutrition, Support to Private Sector, Food Security and a strong resolve to connect all Agencies and Multi-National/International Development Partners, who have the mandate to support Agriculture and Value Chain Actors.
Ogun State And Fan Milk Plc Seal Partnership Deal On Dairy Value Chain Opportunities Brandspurng9 Ogun State And Fan Milk Plc Seal Partnership Deal On Dairy Value Chain Opportunities Brandspurng9 Ogun State And Fan Milk Plc Seal Partnership Deal On Dairy Value Chain Opportunities Brandspurng9
Dignitaries at the event included the French Ambassador to Nigeria, Mr Jerome Pasqueir; Consul General of France Lagos, Mrs Laurence Monmayrant, Regional Agricultural Counsellor, Dr. Sonia Darracq; Economic Counsellor, Mr Pascal Furth; Chairman of Fan Milk, Olayinka Akinkugbe; Managing Director of Fan Milk; Ferdinand Moukwa, Company Secretary and Legal Adviser of Fan Milk, Mr Olakunle Olusanya; Secretary to the State Government, Tokunbo Talabi; Chief of Staff to the Govenor, Alhaji Shuaib Afolabi Salisu;

Commissioner for Finance/Chief Economic Adviser to the Governor, Mr Dapo Okubadejo; Commissioner for Commerce, Trade and Investment, Mrs Kikelomo Longe; Ogun Agric team, led by the Commissioner for Agriculture, Dr. Adeola Odedina; comprised of the Senior Special Assistants to the Governor on Agriculture, Dr. Adelaja Kuye and Hon. Tolu Bankole; Permanent Secretary, Ogun State Ministry of Agriculture, Dr. Dotun Sorunke; Director of Administration, Director of Agricultural Services; Programme Manager, Ogun State Cassava Revolution Programme; Programme Manager, Ogun State Agricultural Development Programme, and the Principal of Odeda Farm Institute, Ogun State.

Dr Bukola Olujide Releases 50 Songs of Praise as She Clocks 50

Esan Bolaji
-
0
Dr Bukola Olujide Releases 50 Songs of Praise as She Clocks 50

Evangelist Bukki Olujide is set to launch 50 songs of praise in celebration of her birthday on the 30th January 2021 at Redeemed Christian Church of God, Osun Province 6, Zion Mega, Ibikunle, Osogbo, Osun state.

Dr Adebokala Omotola Olujide, a princess of two royal families and an achiever clocks 50 years of age.

Dr Bukola Olujide Releases 50 Songs of Praise as She Clocks 50 Brandspurng

She has achieved numerous feats in her 50 years in life. Among her numerous feats are being a Medical doctor that specialises in public health and a founder of a medical Non-government organisation. She is the Director of Medical Services, Osun state Primary Health Care Board and her medical non-government organisation named Total Family Initiative focuses on Dietary health of the family.

Dr Bukola Olujide Releases 50 Songs of Praise as She Clocks 50 Brandspurng

Her love for the family had her rewarded and blessed with 3 children, two boys and one girl. The love she tries to share is not just for humans but for God as she also happens to be an Evangelist, Gospel Singer, a writer and a Drama Minister. She uses her talent for God.

In celebration of her 50 years of existence, she is releasing a gospel album titled “50 songs of praise”. The album is broken into four parts which are 14 songs of Thanksgiving, 14 songs of praise, 14 songs of worship and 8 new songs by her.

This album comes after her first two albums. The first album, named Odun tuntun, is a new year song released in 2013 and we also have the second album named Ireti Ire, released in 2017.

OMO Auction: Cash shortages in the Money Market deters OMO T-bills auction buyers

ZedCrest Capital
-
0
OMO Auction: Cash shortages in the Money Market deters OMO T-bills auction buyers

Today, the FGN bond market retained its bearish stance as sellers continue to overwhelm the market with offers across the curve. We witnessed some EOM short-covering and client demand on selected papers: 2029s,2034s,2037s, and 2049s bonds, which we expect to calm the selling pressure.

However, the reverse was the case as yields remained pressured till the end of the trading session while the market struggled to find a support level.

We expect the market to close the week on a bearish note barring any renewed buying interest from local asset managers and Pension Funds. 

Treasury Bills

The T-bills market traded on a muted note as participants shifted their focus to the OMO auction floated by the CBN today. Yields gapped higher in the secondary market in anticipation of a possible bearish shift in OMO stop rates, while buyers constrained by low cash remained on the side-lines.

At the OMO auction, the CBN issued a total of N150Bn while maintaining the stop rates across the three tenors on offer. Volume bided at today’s auction also declined significantly due to cash shortage in the Money Markets, which excluded most local banks from the auction, hence the low bid-to-cover ratio of 1.35X 1year paper.

We expect the market to close the week on a bearish note as market participants, especially offshore investors, seek to profit on their OMO winnings closing the month. 

Money Markets

Interest rates trended northwards by about c.500bps today as naira dealers scrambled to cover their positions due to OMO T-bills Auction cash provisioning and some FG statutory remittance of over c.200Bn debited from the banking system. Consequently, OBB and Overnight rates closed at 9.00% and 10.00%, respectively, from 5.00% and 5.50% the previous day.

We expect funding costs to remain elevated closing the week as system liquidity thins out. 

FX Market

The Naira depreciated marginally at the I&E FX window by N0.08K due to scarcity of funds, with the market staying rooted to the BUY side. Approximately $37.58million changed hands during the trading session as most participants remained buyers within a wide range of N388.00/$1 – 395.00/$1.

Other FX market segments remained unchanged except for the FX cash market, which appreciated by N1.50k due to the increase in FX supply from BDCs weekly collections from the CBN. 

Eurobonds 

The NIGERIA Corps saw some selling actions today as the bears’ sort to recoup some gains from yesterday’s rally by bettering their offers except for the SEPLLN 2023s bonds, which stood out amongst the tracked papers, strengthening by -c.41bps D/D due to the scarcity of the bond paper.

Likened to the corporate bonds, the NIGERIA Sovereigns remain firmly bearish throughout the session as profit-takers’ actions seem not to persist, causing yields to expand by c.6bps across the sovereign curve.

Chemical and Allied Products Profit Declines; Revenue Up 3.9% in Full-Year 2020 Results

Esan Bolaji
-
0
Chemical and Allied Products Profit Declines; Revenue Up 3.9% in Full-Year 2020 Results

28 January 2021 – Chemical and Allied Products Plc (CAP), one of Nigeria’s leading paints ana decorative companies, announces its unaudited results for the fourth quarter and twelve months ended 31 December 2020.

Commenting on the performance, Managing Director, David Wright, stated:

“CAP recorded modest top-line growth last year despite the COVID-19 lockdown in the second quarter of 2020 and protests in the fourth quarter of 2020, effectively losing 7 weeks of sales. We are encouraged by the growth in revenue which has been solely driven by underlying volume growth in line with our strategy.

Alongside the rest of the world, we experienced supply chain disruptions which impacted our raw material sourcing and resulted in input costs pressures. We have embarked on initiatives focused on mitigating these disruptions and expect to see positive results in 2021.

Chemical and Allied Products posts 24% drop in profit after tax

We announced the proposed merger between CAP and Portland Paints and Products Nigeria Plc in the fourth quarter of 2020. We have received preliminary regulatory approvals and an order from the Federal High Court to hold a Court-Ordered Meeting. Merger completion is subject to shareholder approval and final regulatory approvals and we expect to conclude the merger in the first quarter of 2021.”

Financial Review: Q4 2020

  • Revenue increased 4.4P to a2.8 billion in Q4 2020, supporter by strong volume growth (30.4P) across key product lines.
  • Gross profit of a1.1 billion was achieved in Q4 2020 from a1.2 billion in Q4 2019, reflecting a 13.2% decline. The decline in gross profit was due to higher input costs on account of supply chain disruptions resulting in a scarcity premium on raw materials which were in short supply.
  • EBIT was a475 million compared to a640 million in Q4 2019 on account of the higher cost of sales. Operating expenses only increased by 0.3% YoY while operating expenses/ sales improved 90 bps.
  • Profit Before Tax of &532 million was achieved in Q4 2020, a 28.1% decline from &739 million on account of the combined effects of the decline in operating profit mentioned above and a 42.6P reduction in net finance income given lower treasury yields compared to the prior year.

Financial Review: FY 2020

  • Revenue increased 3.9% from a8.4 billion in FY 2019 to a8.7 billion in FY 2020, driven by strong volume growth despite the disruptions in April, May and October.
  • Gross profit declined 5.5% to a3.8 billion, with a gross margin of 43.0P. Gross profit declined due to input cost pressures on account of currency revaluation and supply chain disruptions.
  • EBIT of a1.6 billion, reflecting a decline of 22.4%, with EBIT margin reducing 638 basis points from 25.2% to 18.9%. Key drivers of the reduction in EBIT are the decline in gross profit ana investments in talent to strengthen the workforce and drive profitable growth.
  • The decline in EBIT, coupled with a 41. 1 P recline in net finance income on account of lower investment income yields resulted in a Profit Before Tax decline of 25.5P to a1.9 billion in FY 2020. Profit Before Tax Margin declined 860 basis points to 21.7P.
  • Total profit for the year was a1.3 billion, a 26.0P decline from a1.7 billion reported in FY 2019. Earnings per share for the period of 182 kobo, down 26.1P from 249 kobo in FY 2019.
  • Free Cosh Flow of a1.0 billion in FY 2020, compared to a1.5 billion in FY 2019. Free cash flow impacted by lower operating cash flows which were offset by a reduction in net capital expenditure (-58.4% decline to a113 million in FY 2020). The company continues to maintain a strong cash position (a5.8 billion) which will be deployed towards growth initiatives.

Key Financial Highlights

Chemical and Allied Products Profit Declines; Revenue Up 3.9% in Full-Year 2020 Results Brandspurng

Chemical and Allied Products Plc (CAP) is a leading paints and coatings company in Nigeria with globally recognised brands such as Dulux and Caplux. CAP manufactures and sells premium and standard paints ana coatings and is the sole technological licensee of Akzo Nobel Coatings International B.V. in Nigeria.

CAP pioneered the colour centre concept in Nigeria in 2005, which resulted in the evolution of the Nigerian paint industry. Today, CAP has Z6 colour centres and colour shops across 31 states. CAP is a public company listed on The Nigerian Stock Exchange. It is a subsidiary of UAC of Nigeria PLC which holds 51.49% of the company’s shares.

Diageo Reports 8.3% Drop in Operating Profit; Mainstream Spirits and Malta Guinness Grew Double-Digit in Nigeria

Esan Bolaji
-
0
Diageo Reports 8.3% Drop in Operating Profit; Mainstream Spirits and Malta Guinness Grew Double-Digit in Nigeria

Diageo today publishes its interim trading update for the half-year ended 31 December 2020. Diageo said that its net sales (£6.9 billion) down 4.5%, as organic growth of 1.0% was more than offset by the unfavourable exchange. Reported operating profit (£2.2 billion) declined 8.3%, driven by unfavourable exchange and a decline in organic operating profit.

The beverage company’s organic net sales rose by 1.0%, despite a significant impact from Travel Retail and on-trade restrictions. North America was up 12.3%, offsetting declines in other regions, except for Africa which was broadly flat.

Nigeria and Africa Regional Markets

Africa net sales were flat. Growth in Nigeria and Africa Regional Markets was not enough to offset declines in East Africa and South Africa. East Africa declined 5% driven by Kenya, which was significantly impacted by on-trade restrictions, partly offset by growth in Tanzania and Uganda.

In Nigeria, net sales grew 10% due to the strong double-digit growth of mainstream spirits, primarily driven by Malta Guinness, Orijin (which benefitted from a refreshed marketing campaign and the development of a small formats strategy), as well as strong growth in Guinness.

Beer grew 3% driven by Guinness despite the disruption in October due to the civil protests.

Guinness Nigeria Renewed demand strength to prop Revenue in Q1

In South Africa, net sales declined 10%, as a result of periodic bans on alcohol sales and other severe Covid-19 related restrictions impacting sales across all categories.

Africa Regional Markets grew 7% driven by double-digit growth of beer in Ghana and Cameroon. Total Beer declined 1% driven by Senator Keg and Tusker due to on-trade restrictions in Kenya, partly offset by growth in Guinness, Malta Guinness and Serengeti. Spirits performance was flat.

The strong performance of mainstream spirits offset declines in scotch. Operating margin declined 434bps, driven by lower fixed cost absorption, one-off charges and input cost inflation partially offset by productivity initiatives.

Diageo reports 8.3% drop in Operating Profit, Mainstream Spirits and Malta Guinness Grew double-digit in Nigeria Brandspurng

North America growth was driven by resilient consumer demand, share growth of total beverage alcohol, positive category mix and the replenishment of stock levels by distributors and retailers.

Organic operating profit down 3.4%, driven by channel and category mix. Productivity benefits from everyday cost efficiencies largely offset the cost of goods sold inflation.

Net cash from operating activities up £0.7 billion to £2.0 billion, and free cash flow up £0.8 billion to £1.8 billion. This primarily reflects a lower tax payment and working capital benefit driven by reduced creditor balances at the end of fiscal 20, as a result of reduced sales demand and cost control measures triggered in response to Covid-19. Creditor balances have now recovered to more normalised levels.

Basic eps of 67.6 pence decreased by 14.6%. Pre-exceptional eps declined 12.8% to 69.9 pence, driven primarily by unfavourable exchange and lower operating profit.

Interim dividend increased 2% to 27.96 pence per share.

Strong sequential performance improvement in all regions compared to the second half of fiscal 20. Expecting continued impact in the second half of fiscal 21 from on-trade restrictions and disruption to Travel Retail.

Ivan Menezes, Chief Executive, commenting on the results said:

“We delivered a strong performance in a challenging operating environment, returning to top line organic sales growth during the half. We rapidly pivoted to the channels and occasions most relevant to consumers and invested behind new opportunities. This more than offset the impact of on-trade restrictions and the decline in Travel Retail.

North America, our largest market, performed particularly strongly and ahead of our expectations. Consumer demand has been resilient and the spirits category continues to gain a share of total beverage alcohol.

Across other regions, we delivered strong sequential improvement compared to the second half of fiscal 20. This reflects improved market share performance through excellent execution in the off-trade channel, and the partial re-opening of the on-trade channel in certain markets.

Organic operating margin improved compared to the second half of fiscal 20 driven by increased operating leverage and tight control of discretionary expenditure. The decline compared to the first half of fiscal 20 reflected an adverse channel and portfolio mix. We expect margins to improve as the on-trade and Travel Retail recover and with the continued benefit of everyday efficiency.

Our proprietary tools and data-led insights are enabling us to invest in smartly ineffective marketing and innovation. We continue to strengthen brand equity, premiums our portfolio and expand our digital capabilities.

I am proud of the creativity and adaptability of our people and their exemplary commitment to supporting our customers and communities. Our $100 million global commitment to support the recovery of the hospitality sector has already reached around 30,000 outlets in seven countries.

We expect ongoing volatility and disruption in the second half of the year, particularly in the on-trade channel, which will make performance more challenging. The medium and long-term growth drivers and opportunities for our business remain intact and I am confident in our strategy, the resilience of our business and Diageo’s ability to emerge stronger.”

1...2,1252,1262,127...3,966Page 2,126 of 3,966