When expenses double and cost of operating business jacks up as a result of inflation, the impact cannot be lost on the performance of a company even when its revenue prints good numbers.
This is the situation with Honeywell Flour Mills that slipped from top to bottom at the end of operations for the year ended March 31, 2022.
Honeywell Flour Mills posted a loss amounting to N983 million for the year, making an unimpressive report compared to the previous year when the company reported a N1.1 billion profit.
According to its financial report, the company recorded a loss despite an improvement in the revenue for the period by 24%.
As Business Metrics took a cursory look at the data, it became clear that the negative performance was is triggered by inflation which caused the cost of sales to rise significantly, thereby reflecting on the gross profit.
To put this in perspective, as the end of March, 2022, the Consumer Purchasing Index (CPI) which measures inflation, increased to 15.92 per cent on year-on-year (YoY) basis.
Similarly, the last few months have witnessed a rise in prices of various commodity such that the Central Bank of the Nigeria increased Monetary Policy Rate (MPR) as a measure to temper the hike in prices across sectors.
For Honeywell Flour Mills, the cost of sales was up by 32% to reach N124 billion during the period under review from N94 billion the previous year.
The spike was due to a hike in raw and packaging materials consumed from N83 billion to N111 billion.
On this note, there was a slide in gross profit to N11.6 billion compared to the amount it recorded the previous year at N15.6 billion.
Meanwhile, the company saw a rise in other operating income significantly triggered by the sale of by-product and net gain on sale of property reaching N338 million during the period from N140 million; while selling and distributing expenses was N4.5 billion from N5.5 billion and general and administrative expenses was N2.68 billion from N2.57 billion.
Operating profit stood at N4.6 billion from N7.6 billion, and finance cost was N5.5 billion from N6 billion, while the operating loss before tax was valued at N172 million from N1.6 million.