Background_Analysis_of_the_Financial_Performance_of_Flour_Milss_Nigeria_Plc_Group

BACKGROUND ANALYSIS OF THE FINANCIAL PERFORMANCE OF FLOUR MILLS NIGERIA PLC GROUP Background Flour Mills Nigeria Plc was established in 1960 as a manufacturing company in the foods and beverages sub-sector of the Nigerian economy. Over the years, it has grown into a formidable brand as well as the leader in its industry. The remarkable achievements recorded by Flour Mills Plc may not be unconnected with the crops of seasoned management team that has served in the Company over time. As at the time of this report, its Board is constituted of a non-executive chairman, Mr. George S. Coumantaros (USA), thirteen other non-executive members and two executive members amongst which is the Managing Director, Dr. Chief Emmanuel A. Ukpabi. Based on the aforementioned, Flour Mills Plc has evolved to be a blue chip company on the Nigerian Stock Exchange and has controlling investments in thirteen subsidiary companies including Golden Sugar Company Ltd, Kaboji Farm Ltd, Nigerian Bag Manufacturing Company Plc , Northern Nigerian Flour Mills Plc to mention` few . Considering our strategic investment goal, we are considering whether or not to acquire a major shareholding in the equity shares of the Company. In order to arrive at this crucial decision, we shall be interested in key performance indicators such as the profitability ratios, stock market ratios and the gearing ratios. The Executive Summary Nothwithstanding the limitations behind historical cost accounts on which these analysis are based, we have been able to arrive at some interesting conclusions as per the financial performance of Flour Mills Plc Group between the year 2009 across 2010. 1. Profitability-The analysis carried out revealed the major profitability measures of the Company are on the upside. These impressive results suggest why the Company is being able to continually pay dividends to its shareholders over the years and declare bonus shares. 2. Stock Market Attractiveness- We were able to deduce from the P/E ratio, EPS and DPS figures reason why general market perception has continued to place the Company within the ‘blue chip’ set of stocks. As we are considering buying up major holding in the Company stocks, we may have to offer a relatively higher price than what the average market price is, for us to acquire substantial units that will give us that controlling stake in the Company. 3. Gearing-We are however concerned about the level of the Company’s financial risks. The Company appears to be incurring a lot on financing debt as evidenced by the high debt ratio. This trend could reduce the earnings due to equity holders if the current operating profit cannot be sustained in future. As a result, we may consider raising fresh equity funds in forms of rights after we might have acquired the controlling interest as a way of paying back the debt obligations. Nevertheless, the overall financial performance of Flour Mills Group Plc is commendable and shows good prospect for future if sustained with a number of dynamic business initiatives.