Flour Mills Of Nigeria To Invest US$600mn

Flour Mills of Nigeria (FMON), which has ambitions of becoming the world's largest flour milling company, has announced plans to invest NGN100bn (US$600mn) over a five-year period as it looks to ramp up capacity. The idea is to leverage off Nigeria's fast-growing economy and young population (in excess of 160mn) which combined provide outstanding long-term opportunities for consumer goods companies, particularly those that are already well established and able to take on ambitious investment programmes like FMON. Given its population, it is no surprise that Nigeria is Sub-Saharan Africa's outstanding long-term opportunity. FMON is among a number of companies, including Nigerian Breweries, Guinness Nigeria, Nestlé Nigeria and PZ Cussons (based in the UK but Nigeria accounts for about one third of its sales) that are very well placed to capitalise.

The rising spending power of the Nigerian population, particularly its middle class, is creating new opportunities for FMON. For instance, as part of its US$600mn programme, it is believed that the company will be looking to position itself to be in a better position to take advantage of rising demand for fast food. YUM! Brands, which owns the KFC franchise, is expected to invest heavily in Nigeria over the next few years, while demand for convenience is also growing strongly. According to FMON's Chief Financial Officer Jacques Vauthier, just 80 grams of flour are consumed per person on a daily basis currently, which is well short of the near 200 grams consumed in South Africa. Statistics such as these emphasise how much room there is for growth.

From a share price perspective, FMON, like most consumer-focused stocks, has outperformed the banks-heavy Nigerian All-Share Index going back to January 2010. However, its shares have come back by about 20% since 2011. Fundamentally speaking, the room for growth across its core industries bodes well going forward.

Down In 2012
Flours Mills Of Nigeria Daily Share Price (NGN)

Flour Mills Of Nigeria To Invest US$600mn

Flour Mills of Nigeria (FMON), which has ambitions of becoming the world's largest flour milling company, has announced plans to invest NGN100bn (US$600mn) over a five-year period as it looks to ramp up capacity. The idea is to leverage off Nigeria's fast-growing economy and young population (in excess of 160mn) which combined provide outstanding long-term opportunities for consumer goods companies, particularly those that are already well established and able to take on ambitious investment programmes like FMON. Given its population, it is no surprise that Nigeria is Sub-Saharan Africa's outstanding long-term opportunity. FMON is among a number of companies, including Nigerian Breweries, Guinness Nigeria, Nestlé Nigeria and PZ Cussons (based in the UK but Nigeria accounts for about one third of its sales) that are very well placed to capitalise.

Down In 2012
Flours Mills Of Nigeria Daily Share Price (NGN)

The rising spending power of the Nigerian population, particularly its middle class, is creating new opportunities for FMON. For instance, as part of its US$600mn programme, it is believed that the company will be looking to position itself to be in a better position to take advantage of rising demand for fast food. YUM! Brands, which owns the KFC franchise, is expected to invest heavily in Nigeria over the next few years, while demand for convenience is also growing strongly. According to FMON's Chief Financial Officer Jacques Vauthier, just 80 grams of flour are consumed per person on a daily basis currently, which is well short of the near 200 grams consumed in South Africa. Statistics such as these emphasise how much room there is for growth.

Relative Outperformance vs Market
Flours Mills of Nigeria, Nestle Nigeria & Nigerian All-Share Index (31-12-09=100)

From a share price perspective, FMON, like most consumer-focused stocks, has outperformed the banks-heavy Nigerian All-Share Index going back to January 2010. However, its shares have come back by about 20% since 2011. Fundamentally speaking, the room for growth across its core industries bodes well going forward.

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