One of the biggest food and agro-allied firms in Nigeria, Flour Mills of Nigeria PLC has announced the issuance of up to N55 billion in Series 3 Commercial Papers as part of its NGN200 billion Commercial Paper Programme.
According to Nairametrics, the commercial paper issue is intended to provide short-term funds for the company’s working capital and general corporate objectives. It will be open from Friday, June 23, 2023, until Friday, June 30, 2023.
Since it began doing business in Nigeria in 1960, the company has developed into a major manufacturer of flour, pasta, noodles, edible oil, sugar, animal feeds, and other food items. Additionally, FMN has large assets in the agro-allied industry, which includes grain growing, milling, storage, and distribution.
As of December 2023, Flour Mills has around N303 billion in total external borrowing, of which N52.8 billion was made up of bonds and commercial papers. The company’s debt increased from roughly N148 billion to N303 billion in just one year.
However, in February 2023, the company’s series 1 and 2 Commercial Paper issuance of up to N40 billion under its N200 billion Commercial Paper program opened and closed.
As things stand, the corporation has the ability to continue making loan payments, but doing so will disadvantage shareholders in the short term by reducing dividend payments. For instance, the dividend paid for the entire past year was merely N5.7 billion, which is significantly less than the repayment of debt.
“The bond voyage of Flour Mills will be successful if it produced enough earnings and cash flow to cover the cost of debt,” according to remarks from one of the rating agencies, Augusto & Co.
“To support its upcoming expansion goals, Flour Mills has successfully registered a Bond Programme of up to 200 billion pounds. Although we expect the Company’s gross debt level to increase due to issuances under this new bond program, we expect an improvement in both earnings and cash flows.”
