Flour Mills of Nigeria plans share sale to reduce debt



Flour Mills of Nigeria plans to sell shares via a rights issue to cut debt and is registering a 70 billion naira ($223 million) bond programme to refinance short-term loans, the conglomerate said on Wednesday.


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Several Nigerian companies have tapped capital markets this year to shore up their balance sheets after a currency crisis in 2015 dragged the country’s economy into recession and stoked inflation, frustrating businesses and consumers.

Nigeria’s economy has since recovered, but growth is fragile and although Flour Mills expects consumer activity to pick up, it said confidence was only slowly improving, with personal incomes under pressure and not keeping pace with inflation.


The conglomerate, which has interests in food manufacturing, agro-business, packaging and logistics, said it was in the process of concluding the timing and size of the share sale.


“We are now looking at going to the market,” Jacques Vauthier, chief finance officer, told an analysts call. He said directors will meet soon to decide on the offer size.


Flour Mills registered plans with regulators to raise up to 40 billion naira in equity over a three year period and obtained approval from shareholders last year to sell shares, but weak capital markets delayed its launch.


Last year, it said it had $20 million in foreign currency loans and was exploring alternative financing sources to mitigate higher costs from a weak naira.


The company posted a 53.1 percent rise in six-month pretax profit to 13.48 billion naira in September, but said finance costs rose 48.9 percent to 16.27 billion naira.


It said food manufacturing was the main driver of growth and accounted for 78 percent of its revenue.


Vauthier said the bond sale will be launched in tranches early next year and that the company was preparing itself for when it sees positive trend in interest rates.


The central bank has been mopping up funds from the banking system to tighten liquidity, curb inflation and battle currency weakness. However, this has pushed up costs especially for companies looking to refinance dollar loans into naira.


Shares in the company, which have gained 70.4 percent so far this year, rose 1.94 percent on Wednesday to 33.08 naira. ($1 = 314.50 naira) (editing by Alexander Smith and David Evans)