Honeywell Flour Mills Plc

Ahead of its Annual General Meeting on  September 24 at the Civic Center, Lagos, Honeywell Flour Mills Plc, a major manufacturer and marketer of wheat based products in Nigeria may be forced to sell off some of its long term or capital assets, going by the challenging financial situation being faced by the company.

Though, Honeywell is yet to file its first quarter 2015 financials at the Nigerian Stock Exchange for the assessment of the turnaround steps being taking to escape bankruptcy, the analysis of the audited full year financial results for the period ended March 31, 2015 showed that revenue declined by 10.9 per cent to 49.1 billion from N55.1 billion.

Profit before tax (PBT) also decreased by 66 per cent to 1.4 billion from N4.2 billion recorded in 2014, while Profit for the year (PAT) fell by 66.6 per cent to N1.12 billion from N3.35 billion.

While expenses grew by 5.13 per cent or N270.7 million to N5.6 billion from N5.3 billion, earnings per share (EPS) dropped to N14.13 from N42.26 kobo recorded in 2014.

Moreover, Total Liabilities increased by 10.2 per cent or N4.4 billion to N47.63 billion for the financial period under review.

FINANCIAL ANALYSIS

The company’s statement of financial position indicated weak liquidity as its cash and equivalents dropped by 63.2 percent or N6.68 billion to N3.89 billion from N10.6 billion held in 2014.

It’s 0.12 per cent cash ratio for the company positions signifying frail fluidity and the need for more than its available cash reserves to pay off its current debt.

Difficulty in paying off debts was further reiterated by its current ratio of 0.58 per cent indicating the importance of active operations to support its investing and financing activities

Moreover, the quick ratio of 0.19 per cent showed that the company may be forced to sell off some of its long term or capital assets.

ANALYSIS ON PROFITABILITY

Gross Profit margin decreased to 15.3 per cent from 18.9 per cent in 2014 displaying a reduction in the sale of goods and inefficiency in business management.

While Operating profit margin also declined to 4.45 per cent from 9.87 per cent, Total Assets for the financial period appreciated by 6.4 per cent or N4.1 billion to N67.9 billion from N63.8 billion in 2014.

As Return on total assets fell to 1.65 per cent from 5.25 per cent for the period under review, it reduced efficiency of Honeywell’s assets for the generation of revenue.

Depletion in shareholders rate of return on investment was evident as return on common equity declined to 5.5 per cent from 17.12 per cent achieved in 2014.

The manufacturers and marketers of flour, semolina, whole wheat meal, noodles and pasta traded 891.8 shares worth N2.5 million on Friday 14th August at the Nigerian Stock Exchange, closing 0.19 kobo or 7.09 per cent higher at N2.87.

Despite the challenges, the company has proposed a dividend of 5kobo per share to be paid on 25th September as it closes its register on 14- 18th September 2015.

By Pita Ochai

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