WITH very little fanfare, majority State-owned National Flour Mills Ltd (NFM) has become the talk of local corporate certain, reporting after-tax profit that increased by 73.8 per cent in its first quarter that caused its share price to jump by more than 40 per cent this year, making the flour and oil producer the top performing share on the T&T Stock Exchange for the year to date.
NFM experienced a 9.5 per cent boost to its revenues over 2019, which drove its sales to $105.2 million for the quarter.
NFM chairman, Nigel Romano, said: “The lockdown of the local economy in the latter part of the first quarter contributed to an upsurge in home cooking and baking. NFM used this opportunity to market its brands online, and as a result realised increased sales of our staple products.”
Along with stronger sales, the company also experienced “increased controls over materials utilisation arising out of detailed process analysis, coupled with strategic raw material-buying decisions,” which had a positive impact on its cost of sales, yielding a 16.3 per cent increase in its gross profit, said Romano.
He noted as well that NFM’s selling and distribution expenses benefitted from tighter route management, falling by 6.5 per cent year-on-year.
“The improved revenues along with more stringent cost controls have resulted in a 76.2 per cent improvement in profit before tax and a 73.8 per cent increase in profit after tax,” said Romano, in his chairman’s report accompanying the first quarter results.
The 51 per cent stake owned by the Corporation Sole is vested in National Enterprises Ltd (NEL), which is also listed on the T&T Stock Exchange.
A NEL director said on Monday: “Like any other shareholder, NEL will benefit from NFM’s capital appreciation, as we carry the investment on our books at market price, and of course dividend income.”
Speaking to Express Business last week on NFM’s results and its stock market performance, CEO Kelvin Mahabir said: “The market is searching for places to put funds, because of the perceived trend that is going to be impacting the general marketplace, so hence the upward movement in NFM’s shares.”
Mahabir said as the lockdown took effect, cooking and baking surged locally leading to increased revenue.
On the issue of change in sales, Mahabir said during March and early April sales increased by 9 per cent, better than 2019, due to panic buying when the initial restrictions were announced, but post the initial panic period, sales have continued to be good, however at reduced levels.
Asked how sales were looking before Covid-19, NFM’s CEO indicated that sales were just above 2019 levels and acceleration took place during the initial Covid-19 lockdown.
The company’s outstanding results and its bouyant share price have not prevented someone from claiming that NFM was experiencing a supply problem.
Last week the company was forced to respond to a social media post that went viral making that claim, assuring that its supply chain remains robust in light of the increased demand.
“NFM is mindful that its business continuity is critical in these unprecedented times and takes this corporate responsibility seriously. We wish to assure our customers that international health, safety, and quality protocols are being observed to protect our employees and operations from the negative impacts of the Coronavirus. NFM maintains consistent communication throughout its supply network and will work with stakeholders to do its part to feed the nation.”
Mahabir who has been CEO of NFM for six years, will be retiring at the end of this month. They have been interesting years, he said.
“The company moved from losses to profitability under my tenure. I am sad to leave but I have reached retirement age and also have projects to execute that have been on hold.
I am available to help NFM in the transition as it is important to ensure the survival and sustainability of the company,” Mahabir said.
NFM’s Covid-19 measures
With respect to how the company dealt with adopting measures during the pandemic, Mahabir said because NFM is an essential service it started implementing policies from early March to protect its workforce.
“Shifting, rotation, increased sanitation of premises, installation of sanitisation units and handwashing stations, distributed masks, temperature screening on entry, communication—signage, e-flyers, notices, and work-from-home have all been successfully implemented. Employees were also granted special leave (ten days paid compassionate leave) to take care of family situations due to the shutdown of schools.”
He noted that NFM continues to evolve its practices to proactively keep abreast of the requirements while maintaining its productivity levels and studies have since been commissioned to look at their processes to further improve productivity in the emerging scenarios.
performance in Covid
Mahabir gave the Government a thumbs up for being proactive in shutting down and protecting citizens.
However he said opening up of borders will be the real challenge (currently no new local cases) and the management of this in the coming months will be critical to get the economy moving.
Looking at what else the Government can do during the pandemic the CEO said an incentive regime should be made available to small and medium-size businesses to ensure they can cover restarting their businesses and recovery of markets
He continued: “Consideration should be given to automatically waiving tax penalties for late payments in 2020 given the impact on cash flows for many businesses and also the ability to conduct business and transact online (inclusive of payments) need to be drastically improved for government services.
With respect to NFM rebounding from the effects of Covid-19, Mahabir said the measures to protect workers and customers will continue with safe food and work practices.
“Rebound to pre-Covid normal will not be possible in our view in the next year but a lot will depend on how quickly economies turn around from the stringent measures due to forced economic losses and deflationary conditions.”
He added that effective drugs and vaccines will be important to any normalisation.
On how NFM intends to do things differently in the new normal that has now been created, Mahabir said the State-owned company’s strategic view long before Covid was for diversification of their revenue streams.
“New dry-mix lines, emphasis on extruded products and totally new agri-based industries with high forex earnings potential are already in the works. NFM in this light is pioneering the thrust to sustainability utilising higher local content.”
During the pandemic thousands were displaced from their work places because of the restrictions, NFM responded like many other companies and donated products to NGOs, public institutions, private organisations, community groups, religious groups, bakeries, schools to prepare food hampers, freshly baked bread and hot meals for those in need in communities across T&T.