State-owed National Flour Mills (NFM) has incurred a steep decline in profitability, posting an after tax profit of $4.1 million, for the nine-month period ending September 2021 due to challenges brought on by the covid19 pandemic and climate change.
In its unaudited financial statements released on Monday, NFM chairman Nigel Romano said while revenue for the period increased by three per cent year-on-year, the company faced negative impacts on sales, profit and earnings per share.
“For the same period, cost of sales increased by 14 per cent primarily driven by an increased grain and freight prices and increased labour costs associated with pandemic related changes to work arrangements.
“Consequently, at the end of the third quarter, gross profit declined by 26 per cent, down from $82.5 million in 2020 to $63 million in 2021. Profit after tax declined by 79.7 per cent, down from $20.1 million to $4.1 million and earnings per share decreased by 82.4 per cent year-on-year.” Romano said with soaring wheat prices, the landed cost of DNS wheat increased by 76 per cent due to supply constraints caused by “unusually high purchases” by Egypt, Pakistan and Saudi Arabia.
“The problem was compounded by depleted inventories due to production declines in Russia, Canada, the European Union and the United States,” he reported.
Romano said the impact of climate change was devastating with citing a Harvard University study that said droughts were predicted in 60 per cent in wheat producing areas in the coming years.
He said NFM, like other manufacturers, was focused on managing its raw material procurement and supply chain processes and were exploring other responses to the increase in commodity prices, through new investments and diversification.
“The diversification of revenue sources has become even more critical to the sustainability of NFM, and we are researching and evaluating new revenue generating initiatives.
“We are focused on becoming a more data driven company competing effectively on data analytics as well as quickly identifying alternative sources of materials and machinery to optimise our manufacturing strategies. Managing operational processes and cost will remain a priority.”
He said the company was able to also resolve issues from the last quarter that hampered operations and anticipated an efficient final quarter.
NFM products include flour, rice, animal feed, and pet food.