HONEYWELL flour mills Plc, a consumer goods company operating in Nigerian food products, sustained a loss in the first quarter of this year as the company faced a lower sales volume and a higher finance cost.
The company disclosed the negative performance in its unaudited interim financial statements for the first quarter (Q1) ended June 30, 2023, released to the investing public on Tuesday, August 29.
It showed that the company posted a loss of N1.16 billion in the review quarter, representing a 51.56 per cent drop from N2.397 loss recorded in the corresponding period of 2022.
The ICIR analysis of the reports showed that the company’s revenue, that is, total sales figure, dropped by 12.98 per cent to N35.39 billion from N40.67 billion, despite recording a significant decline in its cost of sales.
The company’s cost of sales fell by 21.01 per cent to N31.418 billion from N39.774 billion, improving its gross profit to N3.977 billion from N896 million.
However, a 116.10 per cent rise in the company’s finance cost to N3.14 billion from N1.453 billion streamed its operating profit of N1.798 billion and ultimately brought its bottom-line performance to a N1.16 billion loss for the period.
A report by The ICIR on August 1 pointed out that fast-moving consumer goods (FMCGs) companies are faced with higher finance costs arising from the companies’ inability to hedge against huge revaluation losses caused by the floating of the naira.
Honeywell flour mills involved in manufacturing and marketing of wheat-based products, including flour, semolina, whole wheat meal, noodles and pasta has been in legal battles with Ecobank Nigeria for the past eight years.
The company had, since November 2015, battled Ecobank over the freezing of its accounts and the demand by the bank to wind up its operations over-indebtedness.
But in 2018, the Supreme Court upheld the Court of Appeal ruling after the apex court was approached by Ecobank to overturn the decision to return full access to Honeywell Flour Mills.
Based on the apex court determination that the ex-parte orders obtained by the bank were improper, Honeywell flour mills, therefore, sought damages at the Federal High Court (FHC)
In the judgment delivered recently on Tuesday, July 18, by a judge, Mohammed Liman, the FHC sitting in Lagos granted all the reliefs sought by the company over the freezing of its accounts by the bank.
The court then awarded damages of N72.2 billion to the company in its eight-year legal battles with Ecobank.
The claims made by the company included losses due to foreign exchange devaluation, interest on unutilised cash balances, loss of revenue, and aggravated and exemplary damages.
Meanwhile, in a notice of April 29, 2022, Flour mills of Nigeria Plc announced its acquisition of a 71.69 per cent stake in Honeywell Flour Mills, formerly a portfolio company of Honeywell Group, and a 5.06 per cent stake in the company held by First bank of Nigeria Limited, stating that the transaction was consummated by the parties.