FMN has been a key player in the agricultural industry and food processing for many years; what trends have driven the company's growth over the past five to 10 years?
Our core business is food, and we started wheat milling over 50 years ago. We started with one mill producing 500 metric tons per day. Today our capacity has grown to 10,000 metric tons per day and we can confidently say that we are one of the biggest flour milling operations in this part of the world. Over the decades we have diversified, and rather than limiting ourselves to the production of flour for the bread baking and confectionary industries. In 1972, we established the first plant for producing pasta in Nigeria. Today, we have become the biggest pasta manufacturing company in Africa. FMN has further diversified in the recent past into the production of noodles, snacks, and breakfast cereals that primarily use locally sourced ingredients. Currently, we are also the largest agro-allied company in the country. Our strategy is to develop value chains, particularly with crops where we have a comparative advantage in Nigeria. We aggregate corn in this country from local farms and process it into animal feed and have developed our animal feed business to become the biggest in Sub-Saharan Africa. We have an animal feed procession plants in Ibadan, Sapele, and Calabar with a combined output of 700,000 metric tons per annum, making it the largest in Sub-Sahara Africa. As we produce animal feed, we are also keen to develop our poultry operation as well. In addition we have a sugar refinery in Lagos, which has a refining capacity of 750,000 tons per annum and due to the National Master Plan we have developed sugar estates, vegetable oil and margarine processing facility by ROM Oil, a FMN subsidiary company. Our strategy is to ensure that we strengthen our core food business through diversification of our business by going downstream and also supporting our business through the agro-allied businesses by expanding the value chains that will help to sustain and develop local content.
Earlier this year you sold your cement business to Lafarge, what drove that decision?
In order for us concentrate or expand our two portfolios in the food business and in the agro-allied business, we decided to divest from cement, where we are just partial players. Formerly we had held around a 30% stake in UNICEM from Calabar Cement and Lafarge and Holcim were holding the balance of 70% and, from the moment they merged in 2014, we were at a terrible disadvantage, and it was natural that we would then divest and concentrate on our core business.
How would you characterize your performance and the health of the sector for the first half of 2015?
Most of the bottom line profit came from the sale of our cement operations. Otherwise it was a tough year. There was the issue of irregular gas supply, intense gridlock in Apapa due to a tanker driver's strikes, and the naira devaluation. We depend on imports, so that was wiping out our bottom line. Also the entire north-east of Nigeria, basically the three states of Yobe, Borno, and Adamawa were totally cut off because of the insurgency activities and so on, people were displaced, and so the market all but collapsed in those places. So with these issues it was obvious that we could not maintain our top line or grow. We should be commended for any result that we got, because under similar circumstances, many companies would have been wiped out.
How was FMN affected by the Forex restrictions on imports recently issued by the Central Bank?
I support the decision, especially for the restrictions on rice, which we should be producing here ourselves. However, I think the Central Bank should be very clear and let us know what the monetary policy is with regard to foreign exchange and help the businesses, manufacturing, industry, and investors to know exactly where they belong. Otherwise, if we do not have consistency, we do not have confidence in the direction that the monetary policy will go, and it will be difficult to plan and hard for investors to enter the market.
You recently announced that Flour Mills would seek to raise capital; what would be your preferred method of access to capital and where would the funds be invested?
We are highly leveraged, because of the investments that we have made, especially in the agro-allied space in the last five years, and it has really raised our debt profile. We are under the weight of high interest payments and that is what we plan to address. In order to do that we have to source our funds from areas other than banks, and that is why we are planning a rights issue. The rights issue will give opportunities for our shareholders to support the company and help the company lower its debt profile. That will also confirm the confidence of shareholders in the company, who know that the company is undervalued in the stock market and this is the time to take advantage.
What are your expectations for the year ahead?
Our expectations are high, and we hope to know what the policy direction of the new government is very soon. The government creates the environment for business, and once that is established, it will be easier for us to plan the next five and 10 years. We also need to know what the monetary policies of the government are, because at this point in time we are borrowing at 18%. The most critical point is infrastructure. The government needs to focus on this. The government needs to ensure that the power sector improves. Roads are another issue. Our company is repairing the roads outside of our plant, for example. You cannot develop agriculture sufficiently if there is no water management or irrigation infrastructure. We need skill development, and human capacity building is important. We cannot depend on expatriates to run our businesses forever, even family businesses. We need to look at education that is targeted for special purpose, not just going to university, but targeted education with skill sets that are required for the growth of our economy. Once we have these clear views from government, it is easy for us to really plan. We are going to focus on our food business and our agri allied businesses as we move forward, even as we move abroad to the continent. Once government continues to examine the economy and people are gainfully employed, and disposable income is improving, you will see the country and investments continue to grow.