NFM records $1.7m loss for third financial quarter despite flour price increases

DESPITE the National Flour Mills' (NFM) price hikes on wheat flour implemented earlier this year and a noted 16.1 per cent increase in revenues, the public limited liability company has recorded a loss of $1.7 million after its third financial quarter, dated September 30.

On Monday, NFM released its unaudited financial statements for the quarter, revealing a growth in revenue to $371.2 million in the third quarter compared to $319.7 million for the the same period last year.

NFM outlined factors contributing to a cost of sales increase of 21.4 per cent year-on-year, from $256.7 million to $311. million.

The company's chairman Nigel Romano, in his note to shareholders, highlighted the Russia-Ukraine war, the slowdown of the Chinese economy and rising geopolitical tensions as among the global factors causing negative impacts on global supply chains, the cost of food, fuel, and ultimately global inflation.

"In addition, the impact of climate change, in the form of increased rainfall in some areas and drought in others added more complexity to the operating landscape," Romano said.

"At the UN's World Climate Conference (COP27), currently under way in Egypt's Sharm El-Sheikh, it is being acknowledged that countries are not doing enough to prevent global temperatures from rising by the targeted 1.5 degrees Celsius above pre-industrial levels.

"If these targets are not met and the increase in global warming is not reversed in a very short space of time, it could be too late.

Climate change, he said, has already adversely affected the global supply of wheat.

"Droughts and excessive heat in North America and India have resulted in demand exceeding supply for wheat which led to price escalations so far this year, a trend we expect to continue."

He said the price increases implemented by NFM earlier this year "helped to blunt this impact... However, this was not sufficient to off-set the increased cost of sales, and even though our indirect expenses remained relatively stable over the period, operating profit decreased by 57.5 per cent compared to the prior year."

Romano added that, in spite of these challenges, "significant efforts were made to increase inventory levels to ensure a reliable supply to all our customers, with delivery of our products meeting all on-time and in-full benchmarks."

"In addition, we continued to invest in the upgrade of our plant and equipment to ensure that we can continue to provide safe, quality food and feed products for our customers as we continue on the journey to SQF (safe quality food) Level 3 Certification.

SQF refers to a buyer's assurance that a product is continually monitored for quality, safety, and legality, by a respected organisation.

Romano said the increase in accounts receivables was "a direct result of the price increase implemented this year and the attendant increase in credit limits for our customers.

"We wish to assure all our stakeholders that despite these challenges, we continue to explore additional avenues to serve our customers, add new customers, locally and regionally, diversify our product revenue streams and improve the efficiency of our operations."