Nov 2007 Financial News

NFM Releases Half Year Results

Nov 07, 2007

National Flour Mills Limited (NFM)
Results for the Half Year Ended June 30, 2007

For the Half Year Ended June 30, 2007, National Flour Mills Limited (NFM) reported a Loss Per Share (LPS) of $0.16 which was an improvement over the LPS of $0.36 for the same period in fiscal 2006.

Turnover for the period stood at $146.04 million, down a substantial 26.52 per cent or $52.72 million on the corresponding figure for HY06. Cost of Sales was down by a similar margin of 26.90 per cent from $184.81 million (HY07) to $135.11 million (HY06). Thus Gross Profit fell by 21.58 per cent, year on year, to end the Half Year period at $10.93 million.

NFM’s Operating Expenses for the period under review stood at $30.05 million, up a considerable 47.07 per cent or $26.72 million on the comparable figure for FY06. Thus, the Company suffered an Operating Loss of $19.11 million for HY07. In the corresponding period in fiscal 2006, NFM had an Operating Loss of $42.82 million.

There were no Exceptional Expenses or Taxation in the period under review. As such, The Company made a Net Loss of $19.11 million.

The Chairman has stated that the poor results are a reflection of the challenges that the Company continues to be faced with in their attempt to turn things around. Sales contracted following the discontinuance of a number of product lines that were previously manufactured by the Edible Oil Complex, in addition to the decision to reduce sales of bulk raw materials to competitors.

The Company is also burdened with the slow implementation of the new information system. This has resulted in the organization releasing its results four months behind its reporting requirements. The Chairman has stated that a plan has been implemented to rectify this problem.

Also noted was the fact that there were a number of management changes at NFM as the Company seeks to ensure that following the VSEP exercise the organization has the best mix of drive, experience and expertise to become a top performer.

Finally, the Chairman stated that an improved performance is expected in the second half of the year as NFM continues in its efforts to turn around.

NFM last closed at a price of $0.90 on the local exchange. While the Chairman has stated that the Company intends to return to profitability by year end, we do not expect that the Company will have a dramatic turn around in such a short timeframe. Thus, at this time we recommend a SELL on this share.

Gia Singh
WISE Equity Research Team