Cash crunch hits Honeywell Flour Mill

Honeywell Flour Mill is currently struggling to meet its immediate financial obligations as it battles liquidity challenges, giving investors serious reason to worry.

The company’s first-quarter financial statement for the period ended June 2022 released currently showed that its working capital was negative as its current assets were less than current liabilities. This indicated that its current ratio was less than one, standing at 0.83, which is not a good omen for any organisation.

Honeywell Flour Mill current assets stood at N60.77 billion as of June 2022, while its current liabilities were N73.03 billion.  The company’s liquidity squeeze did not start in the year’s first quarter of 2022/2023. At the end of last year, its current ratio was 0.78 as current assets were N52.62 billion and current liabilities N67.18 billion. This is despite inventories and trades and other receivables increasing by 16.77% to N37.05 billion and 74.00% to N5.72 billion respectively.

Meanwhile, total assets still outstripped total liabilities in the first quarter. Total assets were N156.84 billion and total liabilities stood at N102.81 billion.

Attempts by Businesslive.ng to get the company’s reaction on efforts being put in place to revamp its liquidity through one of the agencies handling its Public Relations, ID Africa, were not fruitful as of the time of filing in this report. The agency promised to get back but failed to do so.

Investors are equally concerned about the bottom line of Honeywell Flour which was in the red. It posted a N2.40 billion loss in Q1 2022 compared to the N150 million it declared in the corresponding period last year, despite growing revenue by 23% to N4.67 billion from N33.06 billion in Q1 2021. The high cost of sales hampered the improvement recorded in revenue. It shot up by N39.77 billion in Q1 2022 from N29.38 billion in the same period in the previous year.

The company, which was acquired in May this year by Flour Mills of Nigeria, blamed “the impact of the unprecedented socio-economic environment and global inflationary strains. It claimed that these factors shot up the prices of its production inputs, especially wheat and diesel.

Nassib Raffoul, Managing Director, Honeywell Flour Mills, asserted in his comment in the release published on its Q1 2023 result that, “We are confident that our performance in the second quarter of the year will record significant improvement. We are deploying measures to cushion the effect of the exacerbating input prices while also strengthening and expanding our business portfolio by accessing new markets and driving margin improvement through operational efficiency. We will continue to execute our five core strategic pillars through three (3) key drivers of growth, efficiency, and capability. And with consumer behaviour evolving faster than ever, we are adapting to this new reality by executing with speed to meet the needs of our multiple stakeholders. We are committed to investing in our capabilities, know-how, and talents to continue to create value.”