Home' Trinidad and Tobago Guardian : June 8th 2017 Contents JUNE 8 • 2017 guardian.co.tt BUSINESS GUARDIAN
STOCKS | BG17
Taxes, interest eat at NFM's gains
Operational and purchasing
efficiencies helped National
Flour Mills Ltd (NFM) deliv-
er an improved profit.
Let us now review NFM's
results to December 31, 2016.
Total assets expanded from $429 million to
$502.8 million or by 17.2 per cent.
Property, plant and equipment fell mar-
ginally to $164.5 million from $166.5 million.
Total additions of almost $11 million were out-
weighed by depreciation charges of almost $13
million. Additions were concentrated under
office furniture and equipment ($2.7 million)
and work in progress of $7 million.
The retirement benefit asset climbed to $20.3
million from $9 million. This represented the
excess of the fair value of the plan's assets of
$180.3 million (2015: $171.8 million) over the
present value of its future obligations of $160
million (2015: $162.7 million).
The largest movements in the plan's assets
were under TT dollar bonds and cash and
equivalents; the former rose to $72.3 million
from $65 million while the latter declined to
$18.6 million from $21.7 million.
Inventories dropped to $72 million from
$78.9 million. Raw materials fell to $57.3 mil-
lion from $66.9 million. In contrast, packaging
materials rose marginally to $4.1 million from
$3.8 million while finished goods and work in
progress expanded to $10.6 million from $8.2
Accounts receivable and prepayments fell
to $70.7 million from $75.7 million. After
provision for doubtful amounts, net trade
receivables declined to $58.3 million from
$62.7 million. Other receivables rose from $9.9
million to $11.4 million; included in the latter
was VAT receivable of $7.3 million (2015: $6.3
million). Prepayments declined to $1 million
from $3.1 million.
Sums due from the Government of T&T
(GORTT) were little changed at about $15
million. This comprises payments due from
the Food Production Ministry for the manage-
ment fee and associated cost of running the
rice mill ($7.9 million) together with discounts
to customers to pass on to the public of $7.3
million (2015: $7.3 million).
In the case of the former, as we shall see later,
there is a liability due to GORTT that exceeds
this figure. However, in the case of the latter,
the lack of movement and any commentary
thereon suggests that is no interest penalty
applicable to this receivable. Perhaps, given the
materiality of other transactions with GORTT,
this sum may eventually be recovered via an
Restricted deposits rose from $6.2 million
to $60.9 million. The long-term portion was
unchanged at $6.2 million while the current
portion climbed from zero to $54.7 million.
The long-term amount is used to secure the
company's lease facility while the current por-
tion is held to secure overdue unpaid balances
on foreign denominated debt.
Cash and cash equivalents improved to
$95.4 million from $65 million. The bulk of
this represented cash in hand and at bank and
was helped by increased borrowings.
Total liabilities rose to $274.9 million from
$233.2 million or by 17.9 per cent.
Total borrowings advanced to $149.7 mil-
lion from $107.6 million. Almost 84 per cent
of this debt or $125.3 million is denominated
in US dollars. Total US dollar debt increased
from US$16.7 million to US$18.6 million, all
of which is long-term.
Borrowing from the Export Import Bank of
T&T Ltd rose from US$5.2 million to US$9.3
On the other hand, sums due to Citibank
T&T Ltd declined to US$9.3 million from
US$11.5 million. The current portion of total
debt was $24.5 million, all of which is due to
Republic Bank Ltd.
Accounts payable and accruals declined
from $62.1 million to $47 million. The largest
contraction was shown under trade payables,
which closed at $29.3 million from $48.1 mil-
lion. In contrast, accrued expenses rose from
$8.5 million to $9.5 million. In addition, payroll
related liabilities moved from $5.5 million to
$8.3 million; included in the latter was $3.3
million due to employees under the ESOP.
Sums due to GORTT rose from $9.6 million
to $11.6 million. This represented the net of the
amounts paid to rice farmers for paddy offset
by the proceeds from the sale of processed rice.
Amounts payable under the medical and life
insurance plan declined marginally to $16.8
million from $17.2 million.
Total equity improved to $227.9 million from
Retained earnings advanced to $110.3 million
from $75.6 million. The current period's profit
of $34.7 million together with an actuarial gain
of $9.7 million on both the retirement benefit
and medical and life insurance enhanced the
brought forward balance. However, dividends
to shareholders of $9.6 million lowered the
Stated capital was unchanged at $120.2 mil-
lion while the number of issued shares was
120,200,000. The book value of each share
improved to $1.90 from $1.63 as at December
Income and profit
Total revenue fell by 2.2 per cent to $470.5
million from $481.2 million.
However, the cost of sales contracted by a
larger margin of 9.6 per cent to $330.5 million
from $365.5 million. This was helped by the
fall in direct materials costs, which contract-
ed to $253.5 million from $283.8 million. This
contributed to a gross profit improvement to
$140 million from $115.8 million.
Selling and distribution expenses fell to $35.6
million from $38.7 million while administration
expenses rose to $43.7 million from $41 mil-
lion. These movements were helped by lower
transportation, security, utilities and handling
charges, which closed at $22.9 million from
$24.7 million. Salaries and wages were little
changed, moving from $80.4 million to $80.7
Helping the overall picture, other expenses
fell to $13.7 million from $15.4 million while
the provision for doubtful accounts contracted
to $2.5 million from $5.5 million.
Other operating income declined to $5.9
million from $9.7 million. The core amounts,
comprising the operation of the Carlsen Field
Rice Mill ($4.8 million) and the T&TEC sub-
lease of $800,000 were unchanged. Howev-
er, the contribution from other sources fell to
$309,000 from $4.1 million.
These changes saw operating profit register
at $66.6 million from $45.7 million.
Finance costs increased from $2.6 million to
$10.9 million. The 2015 figure was reduced by
a foreign exchange gain of $2.2 million.
In 2016, higher debt pushed up core inter-
est and bank charges to $6.3 million from $4.8
In addition, a foreign exchange loss of $4.7
million added to the current period's cost.
These movements saw pre-tax profit regis-
ter at $55.6 million from 2015's $43.1 million.
However, higher taxes almost completely ne-
gated this improvement.
Taxation charges climbed to $20.9 million
from $9.1 million. The new tax rate saw the
deferred tax component increase to $11.9 mil-
lion from $8.1 million while the current portion
was $9.1 million.
The net profit registered at $34.7 million
versus $34.0 million; that result translated
to EPS of $0.29 compared with the previous
The food division recorded a 4.6 per cent
increase in revenue and delivered a 29 per cent
improvement in pre-tax profit. The largest
component, flour, saw a marginal improvement
in sales to $276.8 million from $271.4 million
while the sales of parboiled rice declined to
$6.2 million from $7.5 million.
However, sales of dry mixes almost dou-
bled to $20.3 million from $10.6 million while
trading revenue was $5.3 million for both pe-
riods. The profit increase was influenced by
favourable commodity prices and improved
operational efficiencies along with a healthy
mark-up on dry mixes.
The animal feed division recorded a 6.1 per
cent fall in revenues while pre-tax profit also
expanded by 29 per cent. Reduced export de-
mand largely accounted for the lower revenues.
The steep 27.5 per cent revenue decline at
the other segment largely reflects the reduced
sales of soya, which contracted to $29 million
from $48.4 million.
In contrast, the sales of both corn and oil
improved; the former expanded to $6.2 million
from $4.6 million while the latter rose to $8.9
million from $7.8 million.
Total exports declined to $44.3 million from
$51.6 million. In 2016, export sales represented
9.4 per cent of total sales versus 10.7 per cent
Lower exports reduced the company's access
to foreign exchange, which resulted in delays
in paying suppliers and precipitated interest
charges and penalties.
Even as it tries to maintain its traditional
markets (eg Jamaica), the company is focussed
on expanding its export reach, especially to the
larger North Caribbean territories of Cuba and
the Dominican Republic. Exports to Venezuela
proved to be more challenging than expected.
Q1 2017 results
For the first quarter ended March 31, 2017,
NFM recorded a 7.5 per cent fall in revenues to
$102.8 million from 2016's $111.2 million. Even
so, the cost of sales contracted by $9.7 million
or 12 per cent to 70.6 million from $80.3 mil-
lion. This helped its operating profit to improve
to $15.2 million from $13.9 million.
However, higher finance costs and increased
taxes pulled down the net profit to $8.8 million
from $9.2 million. Consequently, EPS weak-
ened to $0.07 from $0.08.
NFM's share price closed at $2.70 on De-
cember 31, 2015 but then retreated to $1.79 on
February 24, 2016. It eventually recovered from
that low point and closed 2016 at $2.52. This
year, the price climbed to as high as $2.70 on
January 23 but, more recently, was quoted at
Dividends increased from $0.08 for 2015 to
$0.10 for 2016. That dividend is payable on July
6, 2017. Relating the current dividend to the
recent price of $2.30, the yield is an attractive
4.35 per cent. That price also reflects a P/E
multiple of 7.9 and price to book value of 1.21.
In next week's article, we will review Prestige
Holdings Ltd's 2016 results.
Total assets expanded from
$429 million to $502.8 million
or by 17.2 per cent...Total
liabilities rose to $274.9 million
from $233.2 million or by 17.9
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