Home' Trinidad and Tobago Guardian : July 7th 2016 Contents JULY 7 • 2016 www.guardian.co.tt BUSINESS GUARDIAN
STOCKS | BG15
Despite having increased com-
petition, National Flour Mills
Ltd (NFM) continues to hold
its ground and make
improvements in both sales
and profitability. These
achievements directly result from intense focus
on procurement processes and nimble cash
management. In addition, the introduction of
a productivity incentive scheme, among other
initiatives, continues to drive efficiencies.
Let us now review NFM s results to December
Changes in financial position
NFM s 2014 comparative accounts now
reflect multiple reclassifications and restate-
ments that impacted on its assets, liabilities,
equity, expenses and profits for that period.
From a shareholder s perspective, the most
significant movement was the decline in net
profit to $19.17 million from the previously
stated figure of $21.78 million. This lowered
EPS to $0.16 from $0.18.
Total assets rose to $429 million from $401.7
million; both long-term and current assets
Long-term assets advanced to $194.2 million
from $190.8 million.
Plant, property and equipment rose to $166.5
million from $158.3 million. The prior year s
adjustment increased the opening figure by
$6.1 million to $158.3 million; this mainly
reflected the reclassification of capital spare
In the current period, additions of $19.4
million were then reduced by depreciation and
disposals of $11.2 million. Much of this reflected
improvements to the old flour mill building
to enhance the effectiveness of the dog food
production process and the installation of
The deferred tax asset for 2014 was adjusted
from a zero balance to $20.1 million; this
reflected a restatement of $10.5 million and
a reclassification of $9.5 million. As at the end
of 2015, this amount fell to $11.9 million; this
figure reflects sums disputed with the BIR
with respect to 2010 expenses.
A new item is a restricted deposit of $6.2
million (2014: nil). This item earns interest of
0.15 per cent and is secured against the com-
pany s lease facility.
Current assets rose to $234.8 million from
Accounts receivable and prepayments rose
to $75.7 million from $65.4 million. Net trade
receivables increased to $62.7 million from
$55.8 million. Here, industrial customers bal-
ances rose to $14.1 million from $9.7 million
while other customers balances fell to $4.4
million from $7.7 million.
Inventories declined to $78.9 million from
$88 million. The most significant fall was
recorded under raw materials, which closed
at $66.9 million from $79.3 million, mainly
reflecting lower wheat prices.
Cash and cash equivalents rose to $65 million
from $42.9 million. Almost all of this represents
cash on hand or in the bank. This improvement
was almost entirely due to the increased oper-
Total liabilities increased by 2.2 per cent to
$180.7 million from $176.8 million.
Debt, all of a long-term nature and denom-
inated in US dollars, fell to $107.6 million from
$122 million. US$5.21 million is owed to the
Export Import Bank of T&T, which carries an
interest rate of 6.5 per cent. The larger portion,
US$11.72 million, is owed to Citibank T&T Ltd
and carries interest that ranges from 2.82 to
2.91 per cent.
Given its currency exposure, this profile has
given the company much greater incentive to
expand its exports in order to generate addi-
tional sums of US dollars. Of course, it can
also seek to develop acceptable local substitutes
for imported wheat.
Accounts payable and accruals increased
from $43.9 million to $62.1 million. The largest
movement was shown under trade payables,
which climbed to $48.1 million from $16.9
million. On the other hand, accrued expenses
fell to $8.5 million from $17.7 million.
Stockholders equity advanced to $195.8
million from $170.8 million. There was no
change in share capital.
Retained earnings improved to $75.6 million
from $50.6 million. The current year s profit
of $34 million enhanced the brought forward
balance while dividends of $7.2 million and
an actuarial loss on retirement and other long-
term liabilities of $1.8 million restricted the
With 120,200,000 shares outstanding, each
share had a book value of $1.63 (December
Income and profits
Total revenues increased by 2.3 per cent to
$481.2 million from 2014 s $470.3 million. The
bulk of this increase reflected higher sales of
Soya-based products, which rose to $48.4
million from $12.5 million.
Gross profit advanced by 31.3 per cent to
$115.8 million from $88.1 million. This improve-
ment reflected the decline in the cost of sales,
which fell to $365.5 million from $382.2 million.
A large part of this resulted from the fall in
direct material costs, which dropped to $283.8
million from $305.6 million.
Both selling and distribution and adminis-
tration expenses exhibited increases; the former
advanced to $38.7 million from $35.4 million
while the latter climbed to $41.1 million from
$33.9 million. These increases were influenced
by a higher wage bill and larger "other expens-
es"; the former rose to $78.3 million from
$76.2 million while the latter advanced to $10.3
million from $7.8 million.
Other operating income fell to $9.7 million
from $10.6 million. This revenue stream reflects
the management fee for the operation of the
rice mill at Carlsen Field for the Ministry of
Agriculture ($4.8 million), rental income from
a sub-lease arrangement with T&TEC
($800,000) and miscellaneous income of $4.1
These changes allowed NFM to register an
operating profit of $45.7 million, which was
55 per cent greater than the restated $29.5
million earned in 2014.
In line with lower debt, net finance costs
dropped by more than half to $2.6 million
from $5.5 million. Interest and bank charges
fell to $4.8 million from $6.7 million. In addi-
tion, foreign exchange gains rose to $2.2 million
from the previous year s $1.3 million. Conse-
quently, pre-tax profit came in at $43.1 million
from $24.1 million.
The effective tax rate held steady at 21 per
cent for both periods; in both years the com-
pany utilised $2.6 million of losses not pre-
After these allocations, NFM s after-tax
profit came in at $34.04 million, which reflects
an improvement of $14.9 million; that result
was 78 per cent greater than the restated $19.2
million recorded for 2014.
These results translated into 2015 basic EPS
of $0.28 compared with $0.16 for 2014.
Both the food and animal feed divisions
recorded marginally lower revenues but deliv-
ered strong improvements in profits.
Revenues under the other segment grew by
81 per cent while pre-tax profits, which were
still small, improved by 83.6 per cent.
The three largest revenue streams were flour,
feed-mill and soya. The first two exhibited
marginal declines to $271.4 million (2014:
$272.3 million) and $125.6 million (2014: $128.2
In the case of soya, sales expanded to $48.4
million from $12.5 million.
Exports grew from $36.4 million in 2014,
when it represented 7.7 per cent of total sales,
to $51.6 million, which now represents 10.7
per cent of total 2015 sales. This segment is
expected to grow much faster than local sales,
which are constrained by a weaker economic
Dividends and share price
The total dividend for fiscal 2015 was $0.08,
which is the same as that paid for 2012, but
it represents an improvement from the $0.06
paid for 2014.
The share price rose from its December
2014 close of $1.15 to $2.70 as at year-end
2015; this represented an appreciation of 135
per cent. In early 2016, the price experienced
significant selling pressure before closing at
$1.79 on February 24, 2016. From that point,
it staged a slow recovery and closed last Friday
at $2.30. At that price, the dividend yield is
3.48 per cent.
For the first quarter ending March 2016,
revenues declined by 8.4 per cent or $10.2
million to $111.2 million.
Notwithstanding this decline, the cost of
sales fell by $11.45 million. Consequently, gross
profit improved to $30.97 million from $29.75
Both selling and distribution and adminis-
trative expenses exhibited declines, while other
operating income was 29 per cent lower.
Despite increases in financial costs and taxes,
net period profit closed at $9.18 million from
the $9.0 million recorded for the comparative
EPS improved marginally to $0.076 from
This result largely reflects weaker local
demand. On a more positive note, the com-
pany s cash position grew by almost $34 million
to end the period at $98.9 million (December
2015: $65.0 million). This growth was partly
helped by an increase in its debt to $122.8 mil-
lion from $107.6 million. Very likely, this new
debt is earmarked to fund the purchase of a
new feed mill.
The recent sales agreement with Venezuela
has seen NFM participate in this exercise;
starting in the third quarter, their exports of
flour and other items should positively impact
its sales and, hopefully, profit.
Immediately prior to its AGM last Friday,
a special meeting was convened to remove
eight existing directors and to install six new
government-appointed directors. It is unfor-
tunate that this practice of substantially chang-
ing the board composition at state-controlled
enterprises within a year after every General
Election persists. This is not good for continuity
or corporate governance.
Perhaps, when we mature as a nation, a
more gradual, transparent and less disruptive
approach to this exercise might be adopted?
Unfortunately, this process also reflects all
government s addiction to retaining and
expanding their ownership of state enterpris-
Next week, we look at the 2015 results
of Jamaica Stock Exchange Ltd.
NFM to benefit from
sales to Venezuela
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