NNFM earnings fall by 98% on weaker sales, cost pressure

Northern Nigeria Flour Mills Plc (NNFM) posted a 98 percent decline in earnings for the financial year ended March 31, 2026, as weaker sales and mounting operating pressures dragged the company’s bottom line.

According to the audited financial statement for the year ended March 31, 2026, the Kano-based flour miller, a subsidiary of Golden Penny Foods Limited, saw profit after tax fall to N25.6 million in the year ended March 31, 2026, from N1.75 billion in the same period of 2025.

A review of the income statement shows that the biggest pressure point came from the top line.

Revenue fell sharply by 39.1 percent to N21.55 billion from N35.39 billion in 2025, suggesting a substantial contraction in product demand, lower sales volumes, pricing pressure, or a combination of all three.

Raw material costs remained substantial, with inventory consumption standing at N17.9 billion, highlighting the capital-intensive nature of the milling business even in a weak sales year.

Operating profit dropped to N329.7 million from N2.89 billion, a decline of nearly 89 per cent, indicating that core operations generated far less value than in the previous year.

Profit before tax also plunged to N112.8 million from N2.89 billion, reflecting the burden of operating stress and finance-related pressures. The company recorded finance costs of N306.2 million, sharply above the N13.9 million recorded a year earlier, pointing to significantly higher borrowing costs in a high-interest-rate environment.

Although finance income improved to N89.8 million from N12.7 million, this was nowhere near enough to offset the increase in finance expenses. While profitability weakened, the balance sheet expanded significantly. Total assets rose 41.3 percent to N43.17 billion from N30.55 billion.

Non-current assets jumped to N12.02 billion from N7.18 billion, driven largely by a N5.07 billion land revaluation gain. Property, plant, and equipment increased to N12.02 billion from N7.18 billion.

Current assets also increased to N31.16 billion from N23.36 billion, indicating heavier working capital deployment.

Inventory remained a major balance sheet component at N19.12 billion, although slightly lower than the N20.46 billion reported a year earlier. One notable development was the emergence of N1.71 billion in intercompany loans receivable, absent in the previous year, reflecting funding exposure to related entities.

Trade and related receivables also expanded materially, which may suggest slower collections or increased credit exposure across counterparties. The more concerning aspect of the balance sheet lies in the liability profile. Total liabilities surged 48.8 percent to N31.03 billion from N20.86 billion. Current liabilities rose to N27.51 billion from N19.84 billion, indicating heavier short-term obligations.

Borrowings stood at N17.88 billion, while trade and other payables reached N11.32 billion, showing the extent to which the business relies on external financing and supplier obligations to sustain operations.

However, shareholders’ funds improved to N12.14 billion from N9.6 billion despite the weak earnings outcome.

During the period, cash and cash equivalents rose to about N1.54 billion from N879.5 million, offering some short-term liquidity relief.

However, this cash buffer looks modest relative to short-term obligations exceeding N27 billion and borrowings nearing N18 billion.

The company is currently the 107th most valuable stock on the NGX with a market capitalisation of N14.1 billion, which is about 0.0088 percent of the Nigerian Stock Exchange equity market.