Nigeria | NGX

Palm oil is of strategic importance as it is used in the production of more than half of the products sold in supermarkets globally. The continuous importance of Crude Palm Oil (CPO) for food, biofuel and cosmetics purposes has led to uptick in its demand universally. Palm oil remains the cheapest and most edible vegetable oil globally. The oil palm tree produces 4.95 ton of edible oil per hectare (ha), six times more than the rapeseed tree, the next highest. In addition to its use as cooking oil, it is also used in the manufacture of soaps and detergents, cosmetics, pharmaceuticals, biscuits, biodiesel among others.

Extablished in 1960 as Lagos Stock Exchange, the name was changed to Nigerian Stock Exchange in 1977. Operations began officially on August 25, 1961 with 19 securities listed for trading but informal operations had commenced earlier in June, 1961.

In our view, Flour Mills of Nigeria Plc (FMN) looks set to record strong traction in operating performance in the current financial year. The company has already surprised market watchers with a 4.3ppts YoY increase in gross margin to 16.5%1 and a c.3.0x surge in operating cash flow to N16.7 billion in the peak of COVID-19 restrictions (April to June or Q1'20/21). While panic buying/stockpiling (one-off support for top-line growth in Q1'20/21, by our assessment) has stopped, lingering border closures and gravitation to value brands are likely to remain supportive for the rest of the year (revenue: FY'20/21E: +5.5% YoY N605 billion; previous forecast: N524.8 billion).