Northern Nigeria Flour Mills profit crashes 99% as revenue slumps, debt surges to N15bn

Northern Nigeria Flour Mills Plc posted a sharply weaker financial performance for the year ended March 31, 2026, as declining revenue, collapsing margins and rising debt pressures dragged profit almost to breakeven level.

The company’s audited financial statement showed that revenue fell by 39.1 percent to N21.55 billion in 2026 from N35.39 billion recorded in the previous year, underscoring huge operational challenges in Nigeria’s flour milling industry.

Gross profit also declined significantly from N5.15 billion to N1.75 billion, while gross margin weakened from about 14.6 percent to 8.1 percent, indicating that the company struggled to transfer rising production costs to consumers amid inflationary pressure, foreign exchange volatility and elevated energy costs.

Despite aggressive cost-cutting measures, the company’s earnings remained under severe pressure. Selling and distribution expenses dropped by about 51 percent, while administrative expenses declined by roughly 24 percent. However, operating profit still slumped by 89 percent to N329.7 million from N2.89 billion recorded a year earlier.

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A major shift in the company’s financing structure also emerged during the year, with borrowings rising from zero to N15.02 billion. Consequently, finance costs surged from N12.7 million in 2025 to N306.8 million in 2026, leaving the company with only a narrow earnings buffer after interest obligations.

Profit after tax declined dramatically from N1.75 billion to N25.6 million, reflecting a near-total erosion of profitability despite the company remaining technically in positive territory.

The financial statement also revealed significant pressure within the company’s working capital structure. Trade receivables rose sharply from N1.01 billion to N8.63 billion, suggesting slower collections, increased customer credit exposure or attempts to sustain sales volumes through credit transactions.

Inventory levels remained elevated at N19.1 billion, almost equivalent to the company’s annual revenue, raising concerns over inventory turnover efficiency and possible liquidity strain in a volatile operating environment.

Although cash balances improved from N880 million to N1.54 billion, analysts note that the liquidity improvement appears largely debt-driven, given the company’s substantial new borrowings during the year.

Meanwhile, total assets expanded significantly from N30.5 billion to N43.2 billion, largely supported by property revaluation gains rather than stronger operational performance. Property, plant and equipment increased from N7.18 billion to N12.02 billion after the company recorded a N5.07 billion revaluation gain and a N7.48 billion revaluation reserve.

Total equity also rose from N9.69 billion to N12.14 billion, but the increase was driven primarily by asset revaluation rather than retained earnings, as profit contribution during the year remained minimal.

Overall, the 2026 results point to a company facing mounting operational and financial pressure, characterised by shrinking revenue, weaker margins, rising leverage and growing working capital risks.

While Northern Nigeria Flour Mills remains solvent and maintains a sizeable asset base, the figures suggest the company is transitioning into a more leveraged and financially strained phase as it attempts to stabilise operations amid a difficult business environment.

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“The flour milling industry is hard hit by what constrains the manufacturing sector in Nigeria. For instance, there is poor power supply, which forces them to spend heavily on energy,” said a Lagos-based development analyst, Dr Charles Akhigbe.

“Apart from power, logistics costs are also huge. Don’t also forget that they import wheat due to the challenges of getting sufficient locally-grown wheat in the right quantity. There have been efforts to source raw materials locally, but the industry is still exposed to foreign exchange challenges. You should also factor in insecurity, especially for companies like Northern Nigeria Flour Mills, which operates in the North.”

The Nigerian flour milling sector is dominated by major industrial conglomerates including Flour Mills of Nigeria Plc, Olam International, and BUA Foods. Together, they control over 75 percent of the market share. The milling sector is capital-intensive and historically highly sensitive to exchange rate fluctuations, which strain profit margins.