Oct 2014 Financial News

New NFM CEO: ‘I welcome the challenge’ to turn company around

Oct 09, 2014

National Flour Mills Ltd (NFM) has reported an increase in profit after tax of 58.8 per cent for the year ended December 31, 2013, despite challenges in retaining a chief executive for the last two years.

In December 31, 2012, NFM reported $11.9 million while in December 31, 2013, the stateowned company reported $18.9 million in profit after tax.

In early 2012, the board of directors objected to Brian Frontin as chief executive officer because he did not have a MBA. In November 2012, Darren Gosine, a former brand manager at Misons Industries Ltd, was hired, He lasted four months. In June 2013, Mokesh Ramlal took up the reins as acting chief executive. On July 1, 2014, Kelvin Mahabir, former president of InvesTT, became NFM’s chief executive.

Commenting on the change in leaders, Mahabir stated in the CEO’s Review in the annual report: “The year 2013 was a challenging one for NFM. A change of boards in the middle of the year resulted in the re-evaluation of the operations of the company. Under the leadership of the new board, it was clear that it was not business as usual and managers and employees were called upon to escalate their performance in the context of the new vision for the company.”

On performance, Mahabir added NFM was “steeped in a mode of a monopoly, creating stagnation” and this resulted in NFM’s “inability” to meet the needs of a competitive environment.

He spoke to the Business Guardian on October 1 at NFM’s headquarters, Wrightson Road, Port-of-Spain.

Change in leadership internally to change in government externally would result in the organisation becoming “not very well focused” he said. As a result, there were many of the potential opportunities which NFM missed. The aim, he said, is market growth regionally.

“There are a lot of synergies in terms of importation of grain. Within Caricom, Guyana has port constraints in terms of vessel sizes that can go into Guyana. Our large vessels that dock on our port, which will bring 30,000 tonnes, will not be able to go to a smaller market like Guyana. The market size is different. Secondly, the draught restrictions, I think, it’s 15 feet. What we do is we transship products to them. Now we are moving into the market to look at actually selling finished products like feed and flour.”

Mahabir’s vision is to increase exports by 30 per cent, though globally, flour has had challenges. But the United States market is not a primary market for flour, it may become a market for animal feed.

“What we have done in the last two months is recalculated our costs to look at what is the margin we can actually ship, determining through variable costs and a margin that will allow us to move.”

The taste patterns of the market has changed globally, said Mahabir, and demand is now leaning towards healthier products.

“We are now moving into crack wheat, which is a product that looks like wheat, which is in larger chunks, but the consistency in the final product is similar to what you get in a white bread. People are moving away from the pure white flour. When we strip wheat, we take out a lot of the components to give us this white flour. What you find is that the industry has moved to whole grain products.”

“Lifestyles are changing, people cook less at home. We supply to a lot of the big customers in the country, like KISS, Bermudez and Linda’s and we have to constantly innovate our products to give them better yields, more protein content.”

Fish farming is also lucrative for NFM and could rival chicken farming.

“There is a new phenomenon now in terms of fish and fish farming. It’s an area we want to target in a big way to produce the feed. The big issue with all of these products has been: at what price can you produce the feed to make it cost competitive?”

Mahabir on leadership

Commenting on the expectation that NFM’s performance will improve, Mahabir said he welcomed the challenge.

“I’ve got a long track record of changing companies here, Jamaica with the TCL group. I thrive on (the negative press) because if there is nothing for me to fix, there is no need for me to be here. It is like what we did with e-TecK, we took an organisation that lost its way, fix it, created InvesTT, which is the premier investment promotion agency for the country, opened up Tamana, which was 15 years in the making and they (detractors) said we could not have opened. We built the Tobago hotel, which they said wasn’t going to be done because six years it was closed and rotted.”

Regarding the management structure, he said two new managers were hired. One is the general manager of business support services. Mahabir added that one of the key responsibilities of that position would be to create a corporate plan for NFM.

Secondly, general manager of finance. With negotiations for the next collective period beginning next month, Mahabir is confident it would go smoothly.

NFM’s subsidy

In August 2013 and in March 2014, the Government offered two discounts through NFM. Careful not to disclose the cost of those discounts, Mahabir said: “The good thing about it is the Government has totally reimbursed us for the discount that we gave. It is an initiative of the Government. The Goverment is not asking us to take out money from our pockets. Remember, you have minority shareholders which you cannot disenfranchise.”

According to the annual report for the period ended December 31, 2014, and accounted for under account receivables, NFM stated:

“Included in accounts receivable and prepayments is $3.6 million due from the Government of the Republic of T&T. This amount is as a result of the company offering discounts to customers to pass on to the public on specific products in December 2013 at the request of the GORTT.”

Mahabir said the amount paid by the Government would be disclosed in the third quarter results.

NFM’s performance

NFM’s finances are under a microscope as projections have been made for sales, cost and grain purchasing.

“It is very important for us to improve our controls both on the information and communications technology and the financial side and physically, in terms of how things are moved around and how we track products.”

Looking at the cash position, according to the annual report, cash and cash equivalents for the year ended December 31, 2013, was $96.6 million compared to the same period in 2012 which was $98.7 million.

Asked whether NFM should be privatised, he said: “NFM is a good balance in terms of the capital structure. What we need is a privatisation of the way we think and do business.”

 

Source:
NADALEEN SINGH
nadaleen.singh@guardian.co.tt
Trinidad Guardian, BG4
Thursday October 9, 2014