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FLOUR MILLS OF NIGERIA PLC
N28.2bn Rights IssueInvestors’ presentation
September 2011
Contents
1 Executive Summary 3
2 Market Overview 6
3 Flour Mills of Nigeria Plc 9
4 Financial Highlights 18
5 The N28.2bn Rights Issue 23
6 Q&A 26
7 Contact Details 27
2
1 Executive Summary
3
One of the largest and most successful industrial conglomerates in Nigeria, focusing on
• Food
• Agro-allied
• Cement
“Golden Penny”, an iconic brand, remains the best known and preferred choice amongst
end-consumers and industrial users alike
Market leader in all its business lines with growing market share
Customer centric culture, supported by an extensive distribution network
Top-notch management team and skillful labor force
Related portfolio of activities creating synergies along the value chain
Raising ~US$180m via a rights issue to fund high-growth, high-margin opportunities in
the food, agro-allied and cement sectors
Executive Summary
4
Rights Issue Outline
Issuer
Issue size
and method
Use of net
proceeds
Market
Capitalization
Rights status
5
Flour Mills of Nigeria Plc
N28.2bn via a rights issue of 455,566,222 ordinary shares at N62 per share; i.e. 8 new
ordinary shares for every 33 ordinary shares held as at close of business on 7 October 2011.
N150.3 billion (~US$970 million), as at 31 August 2011.
The shares being issued will rank pari passu in all respects with the existing issued ordinary
shares of the Company.
S/N Fund Utilization N'bn %
1. Expansion of food business, including investment in WC 13.66 49.3
2. Expansion of cement business 6.47 23.4
3. Expansion of agro-allied business, including investment in WC 6.55 23.7
4. Baking & Food Technology Centre 1.00 3.6
Total 27.68 100
2 Market Overview
6
Growing penetration of convenience foods such as bread and
pasta versus traditional food items
Positive growth outlook due to:
Large, young and fast growing population;
Low per capita consumption compared to other emerging
markets
Increasing disposable income (growing middle
class, increases in minimum wage);
Urbanization driven lifestyle changes underpin increasing
demand for ready-to-eat or quick meals
High capacity utilization; installed capacity persistently lagging
behind aggregate demand
Sector Outlook
7
140 150 160 170 180 190
2010
2011
2012
2013
2014
2015
Nigeria’s population forecast
(millions)
0 100 200 300
Moroc…
Algeria
China
India
Nigeria
Per capita consumption of flour-based products (kg)
Flour Mills: a force to reckon with…
8
Flour Mills dominates in each of its key markets
~55% of pasta market
>45% in retail semolina category
>50% in industrial flours
Portfolio of premium brands in all categories, commanding higher margins
vis-à-vis industry’s average
Expanding portfolio includes
Sugar
Rice
Edible oils
Breakfast cereals Snacks
3 Flour Mills of Nigeria Plc
9
Group Overview
Evolved into one of the largest millers in the world
Leading food company in Nigeria with a diverse and growing offering of retail (eg: pasta) and
industrial products (eg: bakery flour)
“Golden Penny”, an iconic brand, remains the best known and preferred brand amongst end-
consumers and industrial users (eg: bakers and confectioners)
Strategically positioned in cement manufacturing via Unicem, a JV with Lafarge and Holcim
supplemented by cement handling through its Lagos terminal
The Group comprises several subsidiaries engaged in various related activities, such as pasta and
noodles production, sugar refining, edible oils processing, animal feeds, agriculture, cement, port
operations, logistics and packaging
Listed on the Nigerian Stock Exchange since 1978; won numerous awards and accolades including
the Nigerian Stock Exchange Annual Merit Award for the Food & Beverages Sector in 1999 and
2006
10
Flour Mills - Group Structure
Flour Mills of Nigeria Plc
Northern
Nigeria Flour
Mills Plc
52.6%
Nigerian Eagle
Flour Mills
Limited
51%
Niger Mills
Company
Limited
98.9%
Golden Pasta
Company
Limited
100%
Golden
Noodles
Company
Limited
100%
Golden Sugar
Company
Limited
100%
Golden
Transport
Company
Limited
100%
Golden
Shipping
Company
Nig. Limited
100%
Nigerian Bag
Manufacturing
Company Plc
70%
Apapa Bulk
Terminal
Limited
100%
Premier Feed
Mills
Company
Limited
62%
Kaboji Farms
Limited
100%
Flour Mills
Registrars
Limited
100%
UNICEM28.15%
Food businesses
Cement businesses
Agro-allied businesses
Support businesses
11
Flour Mills - Management Profile
B.Sc. Chemistry - University of Nigeria, Nsukka. | Doctor of Science Degree (Honoris
Causa) - Ladoke Akintola University Ogbomoso. | Advanced Management Programme -
Lagos Business School. | Advanced Management Programme - IESE, Spain.
Over 38 years experience in the milling business. Presently the President of Association
of Food Beverages and Tobacco Employers.
Masters Degree in Law - Cambridge University.
20 years at Lever Brothers in various capacities and various countries, including
marketing, sales and general management responsibilities in UK, US, Spain, India, Brazil
and Russia.
Has held CEO positions in three different UK food businesses.
Fellow, Association of Certified Chartered Accountants UK (ACCA) & Institute of Chartered
Accountants of Nigeria (ICAN). | Bachelors Degree in Economics - University of Ibadan.
Has over 16 years of experience with Flour Mills and serves at board level on some of the
subsidiary companies of the Company.
IMD alumnus (PED) and graduate of Swiss Business School.
Has over 30 years of experience, 28 of which in the Food & Beverages industry. Has held
various CFO positions, among them as CFO for Nestlé Nigeria Plc, followed by a senior
position at Nestlé’s Headquarters. He joined Flour Mills of Nigeria Plc in September 2011
Dr. (Chief) Emmanuel A.
Ukpabi (KJW).
Group Managing Director
Alhaji Yunus Olalekan Saliu
Corporate Affairs Director
& Company Secretary
Mr. Edward J.W. Jackson
Chief Operating Officer
Mr Jacques Vauthier
Chief Financial Officer
12
Flour Mills - Management Profile (cont‘d)
IMD alumnus (PED) | MBA (Finance) - ALBA Graduate School of Business, Athens, Greece
| Master’s degree in Political Science & Social Theory - University of Athens | Combined
Bachelor’s/Master’s degree in Sociology - Sofia University, Bulgaria.
Over 10 years of experience in Private Equity and Investment Banking. Previously served
as CFO and later as Deputy Managing Director of UNICEM.
Bachelor’s and Master’s degree - Mechanical Engineering.
During a period of 27 years, had worked in various organizations and various capacities in
the UK and the USA, from where he joined Flour Mills in 2007.
Bachelor’s degree in Marketing - Southern University, Baton Rouge, Louisiana. | MBA -
South Eastern Louisiana University, Hammond, Louisiana.
Over 13 years experience with Flour Mills. Was appointed Deputy Marketing and Sales
Director in February 2010.
Mr. Vlassis Liakouris
Group Treasury Director
Mr. Emmanuel E. Ogbon
Marketing & Sales Director
Mr. Stephen A. Ndukwe
Technical Director
13
Flour Mills – Overview of Business Lines
Food Agro-allied Cement Support
Products &
services
Consumer goods:
GP Pasta
GP Noodles
GP Semovita
GP Goldenvita
GP Sugar
GP Rice
GP Edible oils
Intermediate products:
GP Flour
GP Soft flour
GP Confectionery flour
GP Sugar
GP Edible oils
Animal feeds
Sugarcane
Maize
Rice
Palm
Various fertilizer
blends:
UREA 46-0-0
NPK 15-15-15
Burham cement :
50kg bags
Jumbo bags
Bulk
UNICEM cement:
50kg bags
Bulk
BAGCO packaging
Logistics
Transportation
Power generation
Port operations
14
Flour Mills - SWOT Analysis
Strengths
Market leader with an estimated market share of
>45% in its invested food business
Very strong brand recognition
Economies of scale; state-of-the-art production
facilities
First-class customer support
Extensive distribution network
Top-notch management team; skilled and loyal
labor personnel
Healthy financial position
Opportunities
Nigeria’s low per capita consumption of
convenience food coupled with large and growing
population
Leverage the strength of the Portfolio
Tap into needs arising from changing lifestyles
Backward integration opportunities, particularly in
the agro-allied sector
Expansion into the highly promising and attractive
cement business
Weaknesses
Inverse demand correlation with local crops
Relatively high price elasticity due to low
disposable income
Threats
Input prices and foreign exchange volatility
Changes in regulatory framework
Entry of new players/competitors
15
Flour Mills – Competitive Edge Analysis
Flour Mills of Nigeria PlcStrong brands
A household name for
generations
Economies of scale
and scope
Value adding support
businesses
Extensive distribution First-class management
16
Market leader
Growth and Expansion Strategy
Food
Agro-allied
Cement
Moving up the value chain with focus on introducing high margin retail
products, such as breakfast cereals and snacks, amongst others
Route to market
Construction of new state-of-the-art 750,000MT sugar refinery expected
to come online by H2-2012
Rapid scale-up of the edible oils business
Expand capacity at Premier Feed Mills
Expand the cultivation of sugarcane, palm trees, maize, soya beans
and rice
Focus on local manufacturing
Further expansion to enhance competitive position & market share
17
4 Financial Highlights
18
Overview of financial performance
18.516.4
12.8
22.3
16.8
0.0
5.0
10.0
15.0
20.0
25.0
0
50,000
100,000
150,000
200,000
250,000
300,000
2011 2010 2009 2008 2007
Turnover & Gross margin
Turnover (N'm) Gross margin
0
20
40
60
80
100
120
140
160
180
2011 2010 2009 2008 2007
Total assets & average total assets
Total assets (N'million) Average
125,919
3.9%
8.2%
2.2%
5.0%
7.1%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
0
5,000
10,000
15,000
20,000
25,000
30,000
2011 2010 2009 2008 2007
PBT, PAT & Net profit margin
Profit before taxation Profit after taxation Net Profit Margin
Turnover consistently up between 2007 and 2011,
with good and relatively stable gross margin. 2009
financial meltdown had a significant adverse impact
on margins.
Profit declined in 2011 due to (i) an one-off, non-
cash, write-down of N4.8 billion in UNICEM; (ii) high
input prices.
PBT and PAT grew by a CAGR of 13.8% and 6.0%
respectively between 2007 and 2011.
19
Overview of financial performance (cont’d)
Consistent return to shareholders, with an average return
on invested capital of 13.2% between 2007 to 2011.
Dividend of 200 kobo/share in both 2010 and 2011.
Dividend payout ratio of 44.2% in 2011.
44.2%
20.7% 22.4% 24.5%
18.7%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
0
50
100
150
200
250
2011 2010 2009 2008 2007
Dividend per share (kobo) Dividend pay out ratio
12.1%
17.9%
9.2% 9.2%
17.4%
13.2%
0.0%
5.0%
10.0%
15.0%
20.0%
2011 2010 2009 2008 2007
Return on invested capital Average
58%
42%
Debt/Equity ratio (2011)
Debt Equity
55%45%
Debt/Equity ratio (2010)
Debt Equity
20
Financial Statements – Group P&L (Highlights)
Robust turnover and
EBITDA growth.
Good and stable
margins
Strong and rising
profitability
Attractive dividend
payout
2011 profit marginally
down, due to:
• an one-off, non-cash
write-down of
N4.8bn in UNICEM
• high input prices
21
Year ended 31 March (N mn) 2011 2010 2009 2008 2007
Turnover 238,796 206,608 180,068 127,662 105,669
Gross profit 40,185 46,066 23,075 20,917 19,510
EBITDA 32,649 35,182 24,290 15,379 14,637
Profit before taxation* 21,283 24,440 5,470 9,873 9,792
Profit before taxation 16,445 24,440 5,470 9,878 9,792
Profit after taxation 9,450 16,948 3,892 6,363 7,474
Retained profit for the year 8,487 16,518 3,815 6,340 7,474
DPS (kobo) – FMN plc 200 200 50 100 90
Basic EPS (kobo) * 709 967 605 408 481
Basic EPS (kobo) 452 967 223 408 481
Gross margin 17% 22% 13% 16% 18%
Profit Margin 9% 12% 7% 8% 9%
*Before an exceptional, non-cash, N4.8bn write-down of FMN’s share in the accumulated losses
of UNICEM
Financial Statements – Group Balance Sheet
Total assets up 14% due to
various expansionary
initiatives.
Long term liabilities up 52%
due to the bond issuance in
2011. Bond proceeds of
N37.5 billion was used to
finance expansion and
refinance bank loans.
Share capital up 10% due to
bonus issue of shares.
Year ended 31 March (N'Million) 2011 2010
Fixed Assets 88,618 90,425
Other Assets 65,767 46,706
Cash and Bank 8,876 6,389
Total Assets 163,261 143,520
Current Liabilities (56,238) (52,732)
Long Term Liabilities (57,028) (37,521)
Net Assets 49,996 53,267
Capital and Reserves:
Share Capital 939 854
Share Premium 5,867 5,867
Reserves 38,418 43,131
Minority Interest 4,772 3,415
Shareholders' Funds 49,996 53,267
22
5 The N28.2bn Rights Issue
23
Issuer Flour Mills of Nigeria Plc
Issuing HousesLead: Stanbic-IBTC Bank PLC
Joint: FCMB Capital Markets Limited
Zenith Capital Markets Limited
N28.2bn Rights Issue
Use of proceedsExpansion of food and agro-allied business, incl. working capital; further investment
in cement business; development of baking & food technology centre
Issue size and
method
N28.2 billion via a rights issue of 455,566,222 ordinary shares at N62 per share; i.e. 8
new ordinary shares for every 33 ordinary shares held as at close of business on 7
October 2011.
Listing Nigerian Stock Exchange
Governing Law Federal Republic of Nigeria
24
Market leadershipStrong and growing market position in chosen businesses, supported by a very strong
brand heritage, a customer centric culture and a first-class distribution network.
Top-notch management team
Highly competent and driven personnel.Outstanding
human capital
Manufacturing
excellence
Superior and consistent product quality on the back of outstanding capacity utilization
(>70%), economies of scale and operational efficiency.
Sound and
diversified
business model
Well diversified and sustainable business model, integrating key components of the value
chain with a proven track record of consistently delivering healthy results over picks and
troughs of economic cycles.
Moving up the
‘value chain’
Expanding basket of high-growth, high-margin retail products, such as Golden Penny
pasta and semolina, while sustaining continuous growth in the established categories.
Ambitious & well
thought through
business plan
Wide range of retail products to be launched, including breakfast
cereals, snacks, convenience foods etc.
New, state-of-the-art, 750,000 mtpa sugar refinery expected to come online in H2-2012.
Rapid scale-up of the edible oils business.
Backward integration in the agro-allied sector
Further expansion into the very promising cement sector.
Investment case
25
6 Q&A
26
7 Contact details
27
Issuing Houses’ Contact Information
Stanbic IBTC Bank PLC
Oyinda Akinyemi
Head, Equity Capital Markets
Corporate Finance
Stanbic IBTC Bank Plc ,
Building A, I.B.T.C. Place
Walter Carrington Crescent
Victoria Island
Lagos
Tel: +234 (0)1 448 8900
Cell: +234 (0)803 301 1896
Email: [email protected]
FCMB Capital Markets Limited
Damilola Aloba
Vice President
FCMB Capital Markets Limited
First City Plaza
6th Floor, 44 Marina
Lagos
Tel: +234 (0)1 461 2620
Cell: +234 (0)807 710 7931
Email: [email protected]
For additional information, please contact :
Zenith Capital Limited
Simon Bassey
Zenith Capital Limited
Zenith Heights
87 Ajose Adeogun Street
Victoria Island
Lagos
Tel: +234 (0)1 278 1140
Cell: +234 (0)802 354 5228
Email: [email protected]
28
