Flour Mills:An inside view(2)
March 20th, 2007 Ogbuotobo Chuks || chuks@stockmarketnigeria.com
By Ogbuotobo Chuks
Management Efficiency
The amount of turnover that went to cost of sales in 2005 was 86 per cent. That means that it costs the company N86 to produce a product that could be sold for N100. In other words, out of every N100.00 worth of sales N14.00 went to gross profit.
This situation was improved upon in 2006 as the cost of sales came to 82 per cent. In 2005, a total of N680.296 million went to distribution expenses and that accounted for one per cent of the year’s turnover. In 2006, N984.893 million went to the same cost centre and that was one point one per cent. In 2005, a total of N4.040 billion went to administrative expenses and that was six per cent of the company’s turnover in the year. The same cost centre had N5.015 billion in 2006.
It was also six per cent of the company’s turnover just as it was in 2005. Interest expenses in 2005 were N1.517 billion. Further analysis shows that 2.3 per cent of the company’s turnover in 2005 went for servicing interest. In 2006, the amount devoted to this was N1.304 billion. That means that 2.0 per cent of its turnover in 2006 went to interest servicing. Pre-tax profit per employee in 2005 was N453, 877 for it to record a major leap to N1.689 million in 2006. This was some 272 per cent improvement over what each employee generated in 2005.the proportion of total liabilities to operating profit in 2005 was1, 399 per cent. The value came down considerably in 2006 to 568 per cent.
Profitability
From the turnover of N66.805 billion in 2005, the company made N86.572 billion in 2006. That was N19.765 billion or some 30 per cent growth over the value of 2005. The cost of sales in 2005 was N57.498 billion. The value came to N71.418 billion in 2006. This value is better appreciated when taking along with the turnover it generates. In 2005, 86 per cent of the company’s turnover went to it. But in 2006, it came down to 83 per cent. Gross profit in 2005 was N9.308 billion; it added N5.846 billion or some 63 per cent to become N15.154 billion in 2006. Interest expenses in 2005 was N1.518 billion, it came down by 14 per cent in 2006 to end the year at N1.304 billion. Profit before taxation in 2005 was N2.025 billion; it added N4.283 billion to become N6.308 billion at the end of 2006 accounting period. This represents 212 per cent growth. After tax profit in 2005 was N1.462 billion, it stood at N4.668 billion in 2006. In absolute term, that was N3.206 billion or 219 per cent improvement.
Gross profit margin in 2005 was 14 per cent. It was improved upon in 2006 to end the year at 18 per cent. Net profit margin in 2005 was two per cent; it became 5.4 per cent in 2006. The return the company gave on the assets it employed in the business in 2005 was 11 per cent. That means that means it was able to make a return of 11 kobo on every one hundred kobo it employed in the year. This value recorded a great leap in 2006 as it became 24 per cent in the accounting period. It made a return of 24 kobo on every 100 kobo assets it employed in the business in the year.
Also, returns on equity in 2005 were 17.4 per cent. The value was improved upon in 2006 to stand at 42 per cent at the end of the year. In 2005, the company gave a gross dividend of N815.360 million, it became N990.080 million. That value of 2005 was improved upon to the tone of N174.72 million which is 21.4 per cent growth. Per share dividend was 70 kobo in 2005, it became 85 kobo in 2006. The dividend of 2006 was 15 kobo better than that of 2005. That was 21.4 per cent.
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