Flour Mills of Nigeria Plc (FMN) has reported an impressive 49% revenue growth to N2.3 trillion for the fiscal year ended March 31, 2024. However, this stellar performance has sparked concerns among financial analysts that the glittering profits may be masking a worrying trend of escalating expenditures.
To fully understand FMN’s 2024 results, it’s important to look at the company’s performance over the past three years:
While FMN’s revenue has surged from N1.16 trillion in 2022 to N2.3 trillion in 2024, profit growth has lagged behind. In 2023, despite a 32% revenue increase, profit before tax grew by just 1% to N39.78 billion, suggesting higher costs that year.
FMN attributes its 54% gross profit growth to N278 billion and 61% operating profit surge to N208 billion in 2024 to effective portfolio management and cost optimization. However, industry experts argue that these impressive figures are primarily driven by aggressive price hikes rather than genuine cost efficiencies. This theory is supported by the historical data: in 2023, despite substantial revenue growth, profit growth was muted, indicating rising costs that needed to be offset by price increases.
The company’s product innovation strategy, which drove the Food segment’s 51% revenue growth in 2024, comes at a hefty price. Substantial R&D and marketing costs are likely behind this aggressive expansion, as seen in the slower earnings per share growth compared to dividends in 2022 and 2023.
Interestingly, while FMN’s profits have grown, its market capitalization slightly decreased from N127.32 billion in 2022 to N127.11 billion in 2023, suggesting that investors were already cautious about rising costs eating into profitability. This concern seems validated by FMN’s 2024 results, where high expenditures lurk behind impressive revenue figures.
Another red flag is the drastic 110% fall in non-controlling interest’s profit share from 2022 to 2023, turning negative. This suggests that FMN’s subsidiaries or joint ventures were struggling with profitability issues, a trend that may have influenced the parent company’s aggressive pricing strategies in 2024.
While FMN celebrates reducing its net debt from N285 billion to N235 billion in 2024, this reduction meant a N50 billion cash outflow in debt repayments. With interest expenses estimated at N41 billion, based on historical figures, the strain on cash flows is evident.
As FMN navigates this complex financial landscape, the key question emerges: Can the company manage its escalating expenditures without further burdening consumers? The historical data shows a company achieving impressive revenue growth year after year, but with profits that don’t keep pace—suggesting a reliance on price hikes to maintain margins.
“Looking at FMN’s performance from 2022 through 2024, we see a company adept at driving revenue growth but increasingly challenged to convert that into proportional profits,” observes Chioma Nwosu, an economist at the University of Lagos. “The 2024 results, while dazzling, continue a pattern where costs are rising faster than operational efficiencies can manage. In a country where many already struggle with food affordability, FMN’s strategy of offsetting expenses with price increases is fraught with risk.”
As shareholders celebrate FMN’s robust 2024 revenue, this three-year perspective serves as a critical reminder: in the food industry, where margins are often thin and social responsibility is paramount, sustainable growth isn’t just about making more money—it’s about making it more efficiently.
