Flour Mills Applies to Raise N40 Billion via Rights Issue
Flour Mills of Nigeria Plc (FMN) has applied to the Nigerian Stock Exchange (NSE) to raise about N39.856 billion from the existing shareholders. The funds would be raised through the issuance of 1,476,142,418 ordinary shares of 50 kobo each at N27 per share Rights Issue to existing shareholders on the basis of nine new shares for every 16 shares already held.
The company had been contemplating raising fresh capital to since 2015 to ease the debt burden and reduce high interests. However, the company’s stockbrokers, Stanbic IBTC Stockbrokers Limited, formally applied to the NSE for the Rights Issue last week.
Following the high bank charges FMN was paying on borrowings, which has driven costs of finance upwards for many years, shareholders authorised the directors to raise up to N40billion of additional equity via a Rights Issue in 2015.
However, the directors in July 2016 put the right issue on hold and planned to later raise the funds in three tranches. According to the directors, given the economic headwinds, they decided to undertake the Rights Issue through a Shelf programme (a situation whereby securities are sold over a period of time) to enable the company raise the required funds in several transactions over three year period.
The directors said they had already registered a N40 billion Shelf Programme with the Securities and Exchange Commission (SEC), adding that they would continue to assess the economic climate to determine the most appropriate time to launch the first tranche.
But last October FMN said board of directors had given approval to commence with the activities to raise the funds through the right issue and a Medium Term Notes (MTN).
Apart from the rights issue, the company had also said it would to raise up to N70 billion through the MTN.
The leader in food and agro-allied products in Nigeria recently announced improved financial performance for the half year ended September 30, 2017, growing its revenue by 17 per cent from N255.30 billion in 2016 to N298.44 billion in 2017.
Profit before tax rose from N8.80 billion in 2016 to N13.38 billion in 2017, while profit after tax improved from N6.46 billion in 2016 to N9.36 billion in 2017.
Commenting on the results, the Group Managing Director of the company, Mr. Paul Gbededo, said: “Our half year results show continued growth through most segments of our businesses, especially in the food business, delivering strong top and bottom line financials in line with our objectives. The Group recorded growth from volume and product mix. This growth was despite what continued to be a challenging business environment. Overall, the business shows an impressive performance in the first half of the year. We are positive that we are on track to meet our growth targets for the remaining part of 2017/18 financial year.”