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Flour Mills and its diverse challenges

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Flour Mills of Nigeria Plc. walked directly into the heat of the Covid-19 pandemic in its first quarter for its new financial year 2020/2021. As the Group Managing Director, Paul Gbededo, noted while speaking on the Q1 20/21 results, the first quarter of the financial year is ordinarily a very complex period for businesses. Hence, the additional headwinds of the Covid-19 pandemic was enough to disrupt the company’s operations. The challenges birthed by it is part of what has formed the series of strategies the company has put in place over the past months.

The flour and pasta maker earlier in April had sold N30 billion in a commercial paper as part of its measures to mitigate the impact of the pandemic on its business activities. More recently, just a few weeks ago, it had also revealed its plans to issue a bond within the next 2 months as part of a N70 billion ($184 million) programme towards refinancing its existing debt. Its Q1 financials results reveal a 160% growth in short term borrowings from N23.3 billion in the previous year to N60.8 billion in Q1 20/21. While the company has set out to reduce its reliance on short term sources of capital, the real challenge is not the increased debt but how much of the overall debt is merely as a result of the challenges in the foreign exchange market.

The nation’s leading integrated Food and Agro-allied Company has enjoyed increased demand for its products in recent time. This is primarily as a result of the federal government-led closure of the border. In its Q1 20/21 results, revenue had increased by 14.7% from N134.7 billion in Q1 19/20 to N154.6 billion in the quarter under review. While the cost of sales had also increased by 9% to N129 billion, the biggest deterrent of its profit is the -6130.7% increase in Net operating losses from a N126 million gain in Q1 19/20 to a whopping loss of N7.6 billion in Q1 20/21.

The challenge being faced by the company is a very peculiar one. Even though agriculture is a key part of Nigeria’s economy, it does not produce enough in yields to cover its ever-expanding population. This, of course, is largely attributed to the deficiencies in mechanization, the limitations in data in the industry, and maybe a level of inefficiency in sourcing raw materials. Corporations like Flour Mills that had relied heavily on imported input have now commenced sourcing for raw materials locally. For the company, one of its main goals is to reduce the costs of Maize per ton particularly with CBN’s announcement in July that it will stop issuing FX to maize importers at the official rate.

Still, there is only so much that can be done as the nation simply doesn’t have the capacity to meet the burgeoning demand. Given the foregoing challenges, the company which currently sources 25% of its raw materials locally is already making plans to increase local sourcing by 40% in the year 2024 in view of same Forex constraints. Even with the various headwinds including the impact of Nigeria’s currency devaluation on its profit margins, the company managed to keep its profit for the period positive. The results reveal a 17.3% increase in profit after tax from N4.2 billion in Q1 19/20 to N5 billion in Q1 20’21.

At a share price of N19.00, the company is around midpoint of its 52-week average which is between N13 and N24 per share. Its price to book ratio of 0.5084, however, presents an opportunity to invest in a relatively undervalued growth stock. With tighter operational efficiencies particularly in the areas of sourcing materials alongside the relatively lower cost of raising capital in a Covid-19 era, long term potentials of the stock still exists.

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VP Osinbajo calls for provision of capital to grow businesses for long term

The Vice President has stated that the banking sector plays a crucial role in promoting increased & inclusive growth in Nigeria.

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There is need to further deepen the provision of capital that will allow businesses to grow over the long term. This was disclosed by Vice President Yemi Osinbajo during the Bankers Committee on Friday.

He commended the DMBs for their patriotic contributions to sustain growth but called for the need to further deepen the provision of capital that would allow businesses to grow over the long term.

“The banking sector plays a crucial role in promoting increased & inclusive growth in Nigeria. I commend #CBN for the forward-looking support for growth-related initiatives, especially under the economic sustainability plan,” he said.

What you should know

  • On Friday, VP Osinbajo had called for crypto regulation, knowing fully well the role crypto plays in the global financial ecosystem, as he opined that such disruption often made room for progress, according to Nairametrics.
  • Osinbajo also advised the SEC, and Central Bank of Nigeria to create a regulatory road map, while fully appreciating the stance of the CBN, Nigerian SEC, and law enforcement agencies on the possible abuses of crypto assets.
  • The vice president further stressed the important role cryptocurrencies would play in the coming years as they would most likely challenge traditional banking, including reserve banking, in ways the world hadn’t yet imagined. He thus stressed the need for Nigeria to be prepared for such a seismic shift.

 

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Sanwo-Olu says construction work on Fourth Mainland Bridge to start end of 2021

Governor Sanwo-Olu has disclosed that the foundation for the proposed 4th Mainland Bridge would be laid before the end of 2021.

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The Lagos State Governor, Mr Babajide Sanwo-Olu, has revealed that the foundation for the proposed Fourth Mainland Bridge would be laid before the end of the year 2021.

The execution of the bridge is geared towards improving the transport infrastructure and movement across the state.

According to a report from the News Agency of Nigeria (NAN), this disclosure was made by Sanwo-Olu during the 16th Executive/Legislative Parley, with the theme: ”A Consensus Agenda for Rebuilding Lagos”, organised by the Office of Civic Engagement.

He pointed out that the promise to construct the Fourth Mainland Bridge is not a political one.

What the Lagos State Governor is saying

Sanwo-Olu during the interactive session said, ”We did not politically promise Fourth Mainland Bridge but we are going to do Fourth Mainland Bridge.

”With your prayers and by the grace of Almighty God, we shall turn the sod and lay the foundation for the building and construction of that Fourth Mainland Bridge before the end of this year.

”We are on course and I am sure that the 37km ring road is on track, which will change the face of transportation and movement in Lagos,” the governor said.

The governor also disclosed that his administration was on course to complete the Blue Line and Red Line rail projects which were started several years back, saying the project will be completed and trains will move on the two rail lines before the end of his administration.

He said, ”It is a commitment that we have given to Lagosians and it is a commitment that we will see will come to fruition because we have finished the financial closure and we are excited about that project.’

Speaking at the event, the Special Adviser, Office Of Civic Engagement, Princess Aderemi Adebowale, said that the executive and legislature would discuss extensively the theme of the retreat, “A Consensus Agenda for Rebuilding Lagos”.

While saying that the discussion in the next 48 hours would help to fast track the rebuilding of the state, Adebowale said that they would delve deeply into issues such as Youth Leadership Role, Grassroots Development: a catalyst for growth, and Role of Social Media in Nation Building, among others.

What you should know

  • It can be recalled that the Lagos State Government has shortlisted 6 companies for the design, development, construction, operation, and maintenance of the Fourth Mainland Bridge.
  • This followed the government’s issuance of a Request for Qualification (RFQ) in February this year. The 6 companies were said to have completed the technical and financial capacity requirements.
  • Lagos State said it will announce the selection of the next stage in due course, even as the RFQ will be given to the pre-qualified bidders.
  • The Fourth Mainland Bridge is a 37.4km freeway subdivided into three sections namely Island Section, Lagoon Section and Mainland Section. It will commence from Abraham Adesanya Roundabout in Lekki through Ajah and Langbasa areas, crossing the Ado Badore Road before arriving at the Lagoon shoreline.
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Lagos to totally close Third Mainland Bridge again ahead of full reopening

Lagos State Government has announced a 24hour closure of the Third Mainland Bridge from midnight Friday, February 26.

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The Lagos State Government has announced that it will shut down the Third Mainland Bridge for 24 hours from midnight Friday, February 26 to midnight Saturday, February 27.

The expected total closure of the bridge is to enable the contractors to move the equipment used for its rehabilitation and maintenance ahead of the full reopening of both the Oworonshoki and Adeniji bound lanes open to traffic.

The disclosure is contained in a statement issued by the Lagos State Commissioner for Transportation on Wednesday, February 24, 2021.

Oladeinde, therefore, advised motorists approaching the Third Mainland bridge from Ogudu, Alapere and Gbagada to use Ikorodu Road, Jibowu and Yaba, as alternative routes, while Iyana Oworoshoki-bound traffic from Lagos-Island, Iddo, Oyingbo, Adekunle and Yaba are to use Herbert Macaulay Way, Jibowu and Ikorodu Road as alternative routes.

The Commissioner assured that traffic management personnel would be deployed along the affected routes to minimize the impact of the shutdown and address any traffic impediments during the closure.

He was also full of commendation for Lagosians for their cooperation during the prolonged repair works of the bridge and assured that the bridge is now safe for use by everybody.

What you should know

  • The Federal Government had on July 24, 2020, announced the partial shutdown of the Third Mainland Bridge for a period of 6 months for another round of rehabilitation works.
  • This was extended by an extra one month due to disruption caused by the #EndSARS protests last year, when the re-opening date moved to February 15, 2021.
  • The Federal Government later announced that the bridge, which was to reopen on February 15 will no longer be opened as work was expected to commence on the casting of the last expansion joint on the bridge before it will be finally reopened.
  • The 11.8km bridge, which was commissioned in 1990 by the then Military President, Ibrahim Babangida, is the longest of the 3 bridges connecting Lagos Island to the Mainland.
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