Dangote Flour records half-year after tax loss of N1bn

Dangote Flour Mills, DFM, Plc has recorded a
pre-tax and after tax losses of N2 billion and
N1 billion respectively for the half year
period ended June 30, 2013.
According to FBN Capital, the market
sentiment for the result is likely to be
negative, even as the company’s sales up by
nine percent on quarter-on-quarter basis.
According to analysis from FBN Capital,
“Although Dangote Flour’s half year (Q2)
sales of N15.3billion were up marginally by
3.3 percent Year-on-Year (y/y), a gross
margin contraction of 1,118 basis points
(bps) to 7.2 percent resulted in gross profit
declining 60 percent Year-on-Year (y/y).
A tax credit of N1.2billion reduced DFM’s net
loss after tax to N1.0billion. On a sequential
basis, sales were up by nine percent
quarter-on-quarter (q/q). With this set of
results, DFM has now reported six
consecutive quarters of losses. Relative to
our unrevised estimates, sales were 19
percent below our N18.9 billion forecast; we
were also looking for a profit after tax of
N267million.”
Furthermore, FBN Capital noted that a
combination of factors, including Operating
Expenses (opex) growth of 49 percent y/y, a
96 percent y/y increase in net interest
expense and an impairment charge of N293
million all weighed on the bottom line and
resulted in a pre-tax loss of N2.0billion.
Continuing, the FBN Capital stated “Pending
management’s comments on the results and
using Flour Mills of Nigeria (FMN) as a read-
across, we believe that one of the factors
responsible for the gross margin
contraction was higher import duties on
wheat grain (a key input for flour millers)
from five percent to 20 percent. We suspect
that the 49 percent y/y rise in opex was
driven by a spike in haulage costs,
particularly to the northern region of the
country, which accounts for about 30
percent of sales. At this point, due to the
company’s limited communication with
analysts, we cannot comment in detail on
the asset impairment charges.
However, Tiger Brands management had
disclosed that DFM may not become
accretive in the near-term. As such, we
would not be surprised to see more losses
reflected in the company’s next set of
quarterly results.”