FACTS BEHIND THE FIGURES Flour... · needs of millions of Nigerians through branded consumer food...

FACTS BEHIND THE FIGURESA presentation to the Nigerian Stock Exchange (NSE)

8th SEPTEMBER, 2017

RC 55495

HFMP - Facts Behind the FiguresSeptember 2017

Legal Disclaimer

2

The material in this presentation has been prepared by Honeywell Flour Mills Plc. (HFMP) and is general background

information about HFMP’s activities current as at the date of this presentation. This information is given in summary

form and does not purport to be complete. Information in this presentation, including forecast financial information,

should not be considered as advice or a recommendation to investors or potential investors in relation to holding,

purchasing or selling securities or other financial products or instruments and does not take into account your

particular investment objectives, financial situation or needs.

Before acting on any information you should consider the appropriateness of the information having regard to these

matters, any relevant offer document and in particular, you should seek independent financial advice. All securities

and financial products or instrument transactions involve risks, which include (among others) the risk of adverse or

unanticipated market, financial or political developments and, in international transactions, currency risk.

This presentation may contain forward looking statements including statements regarding our intent, belief or current

expectations with respect to HFMP’s businesses and operations, market conditions, results of operations and financial

condition, capital adequacy, specific provisions and risk management practices. Readers are cautioned not to place

undue reliance on these forward looking statements. Honeywell Flour Mills Plc. does not undertake any obligation to

publicly release the result of any revisions to these forward looking statements to reflect events or circumstances after

the date hereof to reflect the occurrence of unanticipated events. While due care has been used in the preparation of

forecast information, actual results may vary in a materially positive or negative manner. Forecasts and hypothetical

examples are subject to uncertainty and contingencies outside HFMP’s control. Past performance is not a reliable

indication of future performance.


Our Story1

Our ‘Managing for Value’ Strategy2

Our Financial Results3

4

10

13

Table of Contents

3

Our Future Outlook4 18

Q & A5 29

“Our Story”


“ To produce consistently good quality flour and other wheat based

products for the complete satisfaction of our highly valued

customers, through the commitment of our well-motivated workforce”

Mission Statement

“ To be the most admired African company in terms of our

successes, practices and people”

Vision

• Responsibility beyond ourselves

• Integrity

• Courage

• Excellence

• Respect for the individual

Core Values

5

Our Directional Beacons


Established asGateway

Honeywell Flour Mills

Changed name to Honeywell Flour

Mills Ltd

1998

Built Mill A (200MT/Day) in Tincan Apapa,

Lagos

Launched Honeywell Superfine Flour (HSF)

Increased production capacity to 360MT/Day

2001

Built Mill B (250MT/Day) in

Tincan Port Apapa-Lagos

Added Mills C&D. Resulting capacity

is 1,610MT/Day

2008

Acquired Honeywell

Superfine Foods Ltd, Ikeja-Lagos

Successfully held Initial Public Offer

(IPO)

Launched Whole Wheat Meal Ball

Food

Listed on the Nigerian Stock

Exchange

2009 2013

Commissioned ‘Twin Mills’: E&F increasing milling

capacity to 2,610MT/Day

2014

Launched Honeywell

Composite Flour

Commenced development of the Honeywell Foods & Agro-

allied Industrial Complex, Sagamu

199919951985 2005

6

In the last 20 years, Honeywell Flour Mills Plc. (HFMP) has fulfilled the nourishment needs of millions of Nigerians through branded consumer food products

2006

Launched Semolina Ball

Food

2017

Launched Honeywell

Bakers’ Delight Flour

We are one of the largest manufacturers of shelf stable food products in Nigeria


• 4 Noodles Lines• 2 Pasta Lines

1,500 direct employees

3 Locations

2 States

HFMP, Apapa Lagos

HFMP, Ikeja Lagos

HFMP, Foods and Agro & Allied Industrial Complex, Sagamu, Ogun State

• 6 Flour Mills

Flour Ball Foods

Instant Noodles Pasta

7

We operate from two locations in Lagos State, while a third location is currently in development in Sagamu, Ogun State

• 4 Pasta Lines

Pasta

Over 3,000 indirect employees


8

We produce food staples that are both quality and market leaders in their various

categories

Two Brands Top 3 market positionPasta

3 Brands Leader in terms of quality Top 5 market position

Two Brands Leader in terms of quality Top 2 market position

One Brand Well recognised

Flour

Ball Foods

Instant Noodles


9

Our Board members are very experienced with diverse backgrounds

BOARD OF DIRECTORSOF

HONEYWELL FLOUR MILLS PLC

OBAFEMI OTUDEKO

GARBA DUBA

ALAN F. PALMER SOJI AKINTAYO

ZATE RAYMOND ZOUKPOWONUOLA ADETAYO

ANDREW SMITH-MAXWELL

THEOPHILUS O. SOKUNBI

OLANREWAJU JAIYEOLA ALBERT NINO OZARA BENSON EVBUOMWANROTIMI FADIPE

OBA OTUDEKO

“Our ‘Managing for Value’ Strategy”


11

We continue to pursue our business objectives using a clear strategy for sustainable growth

Achieve a 20% share of the primary flour market by 2020 and expand into non-wheat categories

Drive demand

for primary

flour

Transform our FMCG

offer at retail

Governing Objective

1 2

Attract and retain

talent

Grow shareholder value over the long term

3 4 5

Ambition

Strategic Objectives

Enabling Drivers GROWTH EFFICIENCY CAPABILITY

Become an advantaged

low-cost producer

Deepen participation in ball foods


12

Our day to day activities are centered around three business drivers : GROWTH, EFFICIENCY and CAPABILITY

GROWTH

EFFICIENCY

CAPABILITY

• Leadership• Strategy• Brands• Innovation• Marketing• Sales

• Manufacturing Assets & Capabilities• Supply Chain Assets & Capabilities• Continuous Improvement

• Finance• Human Capital• Technology• Business Processes

“Our Financial Results”


14

THE FACTS: Over the last 10 years, we grew our top line at a compounded

annual rate of 13% while PBT also grew at CAGR 24%

7.32 7.79

13.15 15.60

20.90

28.58

33.53 34.06

38.05

45.71

55.08

49.06 50.88

53.23

1.01 0.88 2.28 2.35

2.81 3.64

7.44 7.12 6.57

7.92 10.46

7.50 4.36

15.51

0.20 0.19 0.72 0.64 0.92 0.69 2.33

3.52 3.66 3.81 4.24 1.43

(2.87)

5.47

(10.00)

-

10.00

20.00

30.00

40.00

50.00

60.00

FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017

N’Billion

Years

Honeywell Flour Mills Plc. 10 Year Growth Trend

Turnover Gross Profit PBT


15

THE FACTS: This growth was achieved through investments in people; product

quality & innovation; property and; manufacturing plants

10.92

23.55

29.50

55.44

67.94

113.15

3.58 5.41

15.31 18.55 20.32

52.33

-

20.00

40.00

60.00

80.00

100.00

120.00

FY2007 FY2009 FY2011 FY 2013 FY 2015 FY 2017

N’Billion

Years

Honeywell Flour Mills Plc. 10 Year Growth Trend

Total Assets Net Assets


16

In millions of ₦ FY 15/16 FY 16/17Change

%

Revenue 50,884 53,228 5%

Gross Profit 4,361 12,713 192%

Gross Profit Margin 9% 24%

Operating Expenses (6,569) (5,662) -14%

Operating Profit/(loss) (2,049) 8,263

Operating Profit Margin -4% 16%

Net Finance Charges (820) (2,793) 241%

Profit/(loss) before Tax (PBT)

(2,869) 5,470

PBT Margin -6% 10%

Taxation (155) (1,165) 652%

Profit/(loss) after Tax (PAT)

(3,024) 4,305

PAT Margin -6% 8%

Earnings per Share (38.13) 54.29

In FY2016/17, we achieved growth in both top line and bottom line indices despite a particularly difficult operating environment

Revenue growth of 5% was limited by acuteraw material shortages due to the FX crisis

192% increase in gross profit due torelentless focus on lower cost sourcing forraw materials and foreign exchange andincreased efficiency in manufacturing

Operating expenses were influenced by:

o High inflation environment

o Strategic focus on below-the-linemarketing

o Lower volumes on constrained supply

Our net finance costs rose significantly dueto several factors including:

o Increased working capital needs(occasioned by the Naira devaluation)

o Need for cash-backing of all LCs

o Higher bank charges on Import FinanceFacilities

We achieved above industry averageprofitability ratios from the gross level (24%)to the PBT level (10%)

The Facts


In millions of ₦ Q1 FY16/17

Q1 FY 17/18

Change%

Revenue 9,980 18,270 83%

Gross Profit 2,384 3,837 61%

Gross Profit Margin 24% 21%

Operating Expenses (1,386) (1,798) 30%

Operating Profit/(loss) 1,014 2,105 108%

Operating Profit Margin 10% 12%

Net Finance Charges (890) (1,301) 46%

Profit/(loss) before Tax (PBT)

124 804 548%

PBT Margin 1% 4%

Taxation (23) (161) 600%

Profit/(loss) after Tax (PAT)

101 643 537%

PAT Margin 1% 4%

Earnings per Share 1.27 8.11 539%

17

In Q1 of our current FY, we demonstrated strong market share recovery

Top line growth of 83% on theback of improved supply situationdue to FX stability

Y-o-Y Gross Margin decline as aresult of higher input costs

Opex increase in line with highervolumes sold

Improvement in net finance costto sales ratio from 9% to 7% onthe back of improved trading

The business is back on thetrajectory of growth … remarkableimprovement in profit margins

Traffic gridlock in Apapa continuesto impact service delivery. We areimplementing several initiatives tomanage the situation and makeour customers happy

The Facts

“Our Future Outlook”


19

We have redesigned our Masterbrand logo to better communicate our new beginnings in outlook and performance


20

NEW HONEYWELL B2C RANGE

Our new product packaging designs are able to confidently cut through the clutter of brands and reach our consumers in a deeply engaging manner


21

NEW HONEYWELL B2B FLOUR RANGE

In addition we are expanding our products and brands portfolio to meet the needs of segments of the consumer base that we had hitherto underserved


22

Leverage 3%p.a population growth (200 million mouths to feed) by 2020

o New births p.a. = population of Denmark

o increased demand for staples like bread and ball foods in Nigeria

Leverage growth in per capita consumption of wheat

o Currently 23kg and low compared to countries like Egypt (207kg) or South Africa(62kg)

Growing and diversifying our product portfolio to meet future food needsin volume, quality and variety

Rising Population

Increasingly busy lifestyles and global oriented youths leading to strongdemand for fast flour based foods and quick-to-make meals e.g. Pasta andNoodles

Our packaged ball foods like Semolina and Wheat Meal provide credibleoptions to other traditional ball foods

Increased Preference for Convenience

Foods

Opportunities Our Response

Nigeria’s growing population and the increasing demand for convenience foods is the spring board for the growth of our business


23

Using locally available inputs would help in conserving foreign exchangeand diversifying our product base

o Nigerian Wheat

o Sorghum and other grains

We will make more of our products available in smaller servings to driveaffordability

Local Input Sourcing/

Need for Affordability

Government Support

Work with the Federal Government to ensure:

o Adequate industry protection policy

o Incentives for backward integration

o Incentives for manufacturing investments

o Incentives for job creation

The Honeywell Brand

Leverage the Honeywell Brand to create a basket of fast moving consumergoods in the medium to long term

o Renowned for quality

o Trusted by consumers

o Well recognized

Opportunities Our Response

We are going beyond wheat, working with Nigerian farmers, to make nutritious and fortified food more available and affordable in our country


Our ongoing and near term investments are geared towards Capacity Expansion, Route-to-Market enhancements and Backward Integration (I)

24

Development of the Honeywell Foods &

Agro-allied Industrial Complex, Sagamu

1. Completion of Pasta Plant - Q1, 2018

2. Commence construction of Swing Mill –2018

B2C Route to Market Expansion – 2017/18

Backward Integration: Farm to Factory

Supply Chain Capabilities - Ongoing


25

Our ongoing and near term investments are geared towards Capacity Expansion, Route-to-Market enhancements and Backward Integration (II)

Honeywell Foods & Agro-allied Industrial Complex, Sagamu: Phase 1


26

Our ongoing and near term investments are geared towards Capacity Expansion, Route-to-Market enhancements and Backward Integration (III)

Honeywell Foods & Agro-allied Industrial Complex, Sagamu: Phase 1


Over the long term, as we meet the needs of our consumers, we will increasingly create more value for our shareholders in a sustainable manner

27

20% 20%21%

20%21%

15%17% 17% 17% 17%

7%8%

10% 10%11%

0%

5%

10%

15%

20%

25%

FY2017/18 FY2018/19 FY2019/20 FY2020/21 FY2021/22

5 Year Profit Margin Forecast

Gross Margin

EBITDAMargin

PBT Margin

4%5%

7% 7% 7%

9% 9%

11% 11% 11%

0%

2%

4%

6%

8%

10%

12%

FY2017/18 FY2018/19 FY2019/20 FY2020/21 FY2021/22

5 Year Performance Ratios Forecast

ROA

ROE


THANK YOU

HONEYWELL FLOUR MILLS PLC

Apapa Factory

2nd Gate Bye-Pass Tincan Port

Apapa, Lagos

Ikeja Factory

Plot YABB Mobolaji Johnson Avenue

Ikeja, Lagos

e-mail: [email protected]

Website: www.honeywellflour.com


Q & A

FACTS BEHIND THE FIGURES Flour... · needs of millions of Nigerians through branded consumer food...

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