HIGHLIGHTS
NFM HY2024
- Earnings: Earnings Per Share increased 28.9% from $0.13 to $0.17
- Performance Drivers:
- Lower revenue
- Higher Margins
- Reduced Finance Costs
- Outlook:
- Increase economic activity
- Rating: Maintained at MARKETWEIGHT
AHL HY2024
- Earnings: Earnings Per Share decrease 15.8% from $0.38 to $0.32
- Performance Drivers:
- Reduced Revenues
- Lower Margins
- Outlook:
- Lower Operating Expenses
- Rating: Maintained at UNDERWEIGHT
This week, we at Bourse review the performance of National Flour Mills (NFM) and Angostura Holdings Limited (AHL) for their respective six-month periods ended 30th June 2024. NFM would have benefitted from improved margins, while AHL – despite growth in international markets – would have been constrained by reduced revenues and lower margins in the first half. How will both companies fare in the months ahead? We discuss below.
National Flour Mills Limited (NFM)
NFM reported Earnings per Share (EPS) of $0.17 for the financial year ended June 30th, 2024 (HY2024), 28.9% higher relative to $0.13 reported in the prior comparable period (HY2023)
Revenue for the period contracted 12.4% year-on-year (YoY) to $253.3M from a prior $289.2M. Cost of Sales fell by 15.6% to $182.3M from $216.0M, leading to a decline in Gross Profit of 3.0%, from $73.2M to $71.0M in HY2023. Selling and Distribution Expenses amounted to $21.5M, 1.4% lower year-on-year, conversely, Administrative Expenses grew 4.6% to $26.2M, compared to $25.0M in the prior period. Other Operating Income grew 14.4% to $3.17M, relative to $2.77M a year earlier. Despite a drop of 9.1% in Operating Profit, from a prior $29.2M in HY2023 to $26.5M in HY2024, Profit before Taxation grew 3.0% year on year and amounted to $26.0M, with effective tax rate of 21.2%. Overall, NFM declared Profit After Taxation (PAT) of $20.5M, up 29.0% or $4.6M higher relative to $15.9M in HY2023.
Revenue Lower
NFM’s revenue declined by 12.4% to $253.3M from a prior $289.2M as the Company commendably passed some of the lower purchasing cost of feedstock through to consumers through reduced prices. According to NFM, sales volumes improve 5% relative to the prior comparable period.
Margins Higher
Despite lowering its prices, NFM’s profitability margins were broadly stable relative to the prior comparable period and appear to have normalized following COVID and supply chain affected HY2021 and HY2022. Gross Profit Margin improved from 25.3% in HY2023 to 28.0% in HY2024, owing to increased stability in grain markets. Operating Profit Margin was marginally higher by 10.5%, from a prior 10.1% in HY2023. Profit before Tax expanded by 10.3% compared to 8.7%, a year earlier. NFM reiterated its focus on operational efficiency, from purchasing to production, which is expected to yield benefits through enhanced revenue and cost management.
The Bourse View
At a current price $1.80, NFM trades at a trailing P/E multiple of 5.3 times, below the Manufacturing Sector average of 10.1 times. The stock offers investors a trailing dividend yield of 1.7%, below the Manufacturing Sector average of 3.9%.
NFM’s resilient profitability in a dynamic industry and willingness to pass favourable market conditions through to consumers should be commended. On the basis of improved profitability margins and below sector average valuations, but tempered by a relatively low dividend yield, Bourse maintains a MARKETWEIGHT rating on NFM.
Angostura Holdings Limited (AHL)
Angostura Holdings Limited (AHL) for the six-month period ended June 30, 2024 reported Earnings per share (EPS) of $0.32, down 15.8% from the $0.38 earned in HY2023. Revenue fell by 3.2% from a previous $473.8M in HY2023 to the current $458.7M. A 6.5% increase in cost of sales contributed to Gross Profit decreasing 11.6% from $254.5M to $225.1M. Selling and marketing expenses grew 2.0% to $95.0M, while administrative expenses declined 18.6% to $45.9M. Overall, AHL reported a decline in Results from Operating Activities of 17.5%, from $104.0M in the previous comparable half year to $85.8M in HY2024. Inclusive of Net Finance Costs and Income, Profit Before Tax (PBT) for AHL contracted 16.0% in HY2023 from $111.8M to $94.0M. Results showed a Profit for the period of $66.2M for AHL, down 14.9% from the profit of $77.8M stated for the prior comparable period.
Revenue Falls
Total Revenue for the most recent six-month period dipped by 3.2%, from $474M in HY2023 to $459M in HY2024 and bucking the trend of increases since HY2021. According to AHL, Local revenue declined 7.0%. Meanwhile, Caribbean and International branded revenue reportedly grew 13% and 3% respectively in the period under review.
Margins Dip
AHL’s profitability margins all declined over the six-month reporting period. AHL’s Gross Profit margin reduced from 53.7% to 49.1%, with cost of sales driven up on account of industry-related inventory revaluations. Operating Profit margin fell from 21.9% in HY2023 to 18.7% despite lower operating expenses, while Profit After Tax margin fell to 14.4% in HY2024 from 16.4% (HY2023).
The Bourse View
Angostura Holdings Limited (AHL) is currently priced at $17.00, down 22.6% year-to-date. The stock trades at a trailing P/E of 25.0 times, above the Manufacturing Sector average of 10.1 times. The group declared an interim dividend payment of $0.10 per share, to be paid to shareholders on September 30, 2024. The stock offers investors a trailing dividend yield of 2.2%, below the sector average of 3.9%.
Notably, the Group continues to celebrate its 200th year anniversary in 2024 with new product releases and commemorative limited editions.
While international revenue diversification remains a strength of the Group, AHL’s recent revenue headwinds will be on the radar of investors. Maintenance of margins will also be in focus, with inventory-related cost of goods increases expected to be transient in nature. AHL continues to trade at a relatively elevated Price-to-Earnings (P/E) ratio when compared to its sector peers, suggesting that earnings still have to ‘catch up’ with AHL’s stock price. Accordingly, Bourse maintains an UNDERWEIGHT rating on AHL.
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