The current high tariff of energy is beginning to have a toll on one of the companies in the country. The Flour Mills of Nigeria Plc said it has spent N22.88 billion on fuel and power expenses in the first half of the year. this, according to the company, represents 136.28 percent increase from N9.68 billion spent in the first half of last year.
The concern is that this means that fuel and power expenses took 3.38 per cent of the company’s total cost of sales, which amounted to N676.31bn during the period. The rise in costs is attributed to the high inflationary environment in 2024, which has driven up the prices of goods and services across the country. The information is contained in the unaudited results, which tracked key factors contributing to the increased cost pressures comprising the removal of fuel subsidies, exchange rate harmonization, and the depreciation of the Naira.
Additionally, macroeconomic inflationary pressures, particularly evident in the domestic market with elevated average inflation, further exacerbated these challenges.
In Nigeria, many manufacturers rely heavily on self-generated power due to the persistent inadequacies of the state power grid.
Despite nearly a decade since the privatisation of the power sector, there has been minimal improvement in electricity supply for manufacturers, forcing them to depend on alternative power sources. Nigeria’s inflation rate in June 2024 had surged from 33.95 per cent in May 2024 to 34.19 per cent in June according to the report from the National Bureau of Statistics, NBS.
The headline inflation rate in June 2024 increased by 0.24 per cent points in June when compared to the figure for May 2024. The headline inflation rate in June 2024 was 11.40 percentage points higher compared to June 2023, rising from 22.79 per cent.
However, notwithstanding the inflation, Flour Mills of Nigeria grew revenue by 67 per cent to N763.2bn in the first ended June 30, 2024, from the N456.4bn recorded in the same period last year. A statement from the firm indicated that its gross profit surged by 73 per cent to N86.9bn.
The profit for Q1 2024/2025 was N7.4bn, reversing the loss recorded in the previous year’s first quarter and returning to profit levels seen in the past two years. The company’s operating profit rose to N49.9bn, supported by revenue growth and effective cost management strategies. The financial performance was complemented by a cash position of N159bn, providing the company with the flexibility to invest in growth opportunities and manage economic uncertainties.
Commenting on the performance, the Group Managing Director/Chief Executive Officer of FMN, Boye Olusanya, said, “Our Q1’24/25 results demonstrate FMN’s ability to deliver solid performance despite significant headwinds. We’ve shown remarkable agility in navigating the challenging macroeconomic environment, including persistent inflation and exchange rate volatilities.”