grain purchases management
MAJORITY State-owned, National Flour Mills, recorded a 282 per cent increase in its audited after-tax profits for the year ended December 31, 2020, according to the company’s financial report, which was published yesterday on the website of the T&T Stock Exchange.
The rice and flour miller and distributor recorded after-tax profits of $23.45 million in its 2020 financial year, which was $17.32 million more than the $6.13 million the company reported for 2019.
NFM’s profitability in 2020 more than trebled, despite the fact that its revenue in 2020 of $417.90 million was only 1.31 per cent than the $412.47 million it declared in 2019.
In commenting on the results, NFM chairman, Nigel Romano, said: “This commendable increase in profitability was driven by a 5 per cent decrease in the cost of sales from $321 million to $304 million due to the continued focus on improving operational efficiency while strategically managing grain purchases.
“Implementation of improved control measures in the management of inventory and improvements in our processing and packaging procedures were largely responsible for the efficiency gains.”
He said that as a result of the efficiency gains the company made its gross profit margin increased by 5 per cent to 27 per cent and its operating profit increased by 170 per cent year-on-year.
Reflecting on the challenges of 2020, Romano said: “NFM was particularly affected by the disruptions to the supply chain caused by the Covid-19 pandemic, which resulted in steep increases in the price of grain and severe logistical challenges with shipments that impacted the timely receipt of raw materials.
“The supply chain disruptions were primarily driven by the purchasing of grain at above-normal levels by China to meet domestic shortfalls. The unusually high demand from China was exacerbated by dry weather conditions in South America and industrial unrest in Argentina.”
He said the global conditions resulted in price escalations for wheat, corn, soyabean and soyabean meal worldwide, a trend which has continued into 2021.
“However, the impact of the disruptions to the global supply chain was particularly severe on feed supplies since the two main players in the industry were challenged to satisfy the needs of their customers,” Romano said.
He noted that last year the company executed on opportunities for improvement the way it does business.
“A decision was made by NFM to critically review its systems and processes and to prioritise investments in the upgrading of plant and machinery to continue to achieve sustained profitability.
“NFM will also be building out its e-commerce capability, given the trend in online purchasing and will use technology to more effectively interface with its customers to achieve on-time delivery in full when the customer requires it.
“In addition, given the challenges in the grain market, which could worsen as a result of projected climate changes, increased focus will be placed on identifying additional sources of revenue.”
NFM’s major shareholder is National Enterprises Ltd, which owns 51 per cent of its issued share capital.