Announcements Corporate Rating Alerts

GCR upgrades the national scale long-term Issue rating of Flour Mills of Nigeria Plc’s Senior Unsecured Bonds, Outlook Stable.

Lagos, Nigeria, 11 October 2021 – GCR Ratings (“GCR”) has upgraded the long-term Issue rating accorded to each of Flour Mills of Nigeria Plc’s Series 1-2, Series 3 (Tranches A and B), and Series 4 (Tranches A and B) Senior Unsecured Bonds to A-(NG). The Outlook on the ratings is Stable.

Rated Entity / Issue Rating class Rating scale Rating Outlook / Watch
N10.1bn Series 1 Bond Long Term Issue National A-(NG) Stable
N10bn Series 2 Bond Long Term Issue National A-(NG) Stable
N12.5bn Series 3 Tranche A Bond Long Term Issue National A-(NG) Stable
N7.5bn Series 3 Tranche B Bond Long Term Issue National A-(NG) Stable
N4.89bn Series 4 Tranche A Bond Long Term Issue National A-(NG) Stable
N25bn Series 4 Tranche B Bond Long Term Issue National A-(NG) Stable

Rating Rationale

The upgrade to various Bond Notes follows the recent upgrading to the national scale long-term Issuer rating accorded to Flour Mills of Nigeria Plc (“FMN” “the Issuer”), to A-(NG). The upgrade reflects FMN’s dominant position in the Fast Moving Consumer Goods (“FMCG”) manufacturing subsector and significant control of its value chain, underpinning its large market share and sound revenue generation. These are, however, balanced against weak earnings margins due to rising cost of production (amid tight competition) and consequently volatile net profit.

The Series 1, Series 2, Series 3 (Tranches A and B), and Series 4 (Tranches A and B) Bonds are direct, unconditional, senior, unsecured obligations of Flour Mills of Nigeria Plc, and therefore bear the same default risk as the Issuer. As such, the national scale long term Issue rating of the Bonds is equalized with the national scale long term Issuer credit rating of FMN.

Outlook Statement

The Stable Outlook reflects GCR’s view that FMN will maintain a leading market share, which will support stronger revenue and earnings growth, thereby facilitating further moderation in leverage metrics over the medium term.

Rating Triggers

Given that the bond rating is intrinsically linked to the issuer’s long term credit rating, any change to the corporate rating assigned to FMN will directly affect the Bond rating.

Analytical Contacts

Primary analyst Biyi Baruwa Analyst: Corporate and Public Sector
Lagos, NG Biyi@GCRratings.com +234 1 904 9462
Committee chair Eyal Shevel Sector Head: Corporate and Public Sector
Johannesburg, ZA Shevel@GCRratings.com +27 11 784 1771

Related Criteria and Research

Criteria for the GCR Ratings Framework, May 2019
Criteria for Rating Corporate Entities, May 2019
GCR Ratings Scale, Symbols & Definitions, May 2019
GCR Nigeria Country Risk Score report, October 2021
GCR Nigeria Corporate Sector Risk Scores report, August 2021
FMN Rating Announcement, released 11 October 2021

Ratings History

FMN Plc’s Series 1-2, Series 3-4 (Tranches A & B) Senior Unsecured Bond

Rating class Review Rating scale Rating Outlook/Watch Date
N10.1bn Series1 Bonds Initial National BBB+(NG) Stable September 2018
N10bn Series 2 Bonds Initial National BBB+(NG) Stable September 2018
N12.5bn Series 3 Tranche A Initial National BBB+(NG) Stable September 2019
N7.5bn Series 3 Tranche B Initial National BBB+(NG) Stable September 2019
N4.89bn Series 4 Tranche A Initial National BBB+(NG) Stable December 2020
N25bn Series 4 Tranche B Initial National BBB+(NG) Stable December 2020
N10.1bn Series1 Bonds Last National BBB+(NG) Stable October 2020
N10bn Series 2 Bonds Last National BBB+(NG) Stable October 2020
N12.5bn Series 3 Bonds Tranche A Last National BBB+(NG) Stable October 2020
N7.5bn Series 3 Tranches B Last National BBB+(NG) Stable October 2020

Glossary

Debt An obligation to repay a sum of money. More specifically, it is funds passed from a creditor to a debtor in exchange for interest and a commitment to repay the principal in full on a specified date or over a specified period.
Indicative Rating An indicative Rating is denoted by an ‘IR’ suffix to indicate that a credit rating has been accorded based on review of final draft documentation and expectations regarding final documentation.
Issuer Ratings See GCR Rating Scales, Symbols and Definitions.
Issuer The party indebted or the person making repayments for its borrowings.
Leverage With regard to corporate analysis, leverage (or gearing) refers to the extent to which a company is funded by debt.
Liquidity The speed at which assets can be converted to cash. It can also refer to the ability of a company to service its debt obligations due to the presence of liquid assets such as cash and its equivalents. Market liquidity refers to the ease with which a security can be bought or sold quickly and in large volumes without substantially affecting the market price.
Long Term Rating See GCR Rating Scales, Symbols and Definitions.
Maturity The length of time between the issue of a bond or other security and the date on which it becomes payable in full.
Rating Horizon The rating outlook period
Rating Outlook See GCR Rating Scales, Symbols and Definitions.

Salient Points of Accorded Ratings

GCR affirms that a.) no part of the ratings process was influenced by any other business activities of the credit rating agency; b.) the ratings were based solely on the merits of the rated entity, security or financial instrument being rated; and c.) such ratings were an independent evaluation of the risks and merits of the rated entity, security or financial instrument.

The credit rating has been disclosed to FMN Plc. The rating above was solicited by, or on behalf of, the rated entity, and therefore, GCR has been compensated for the provision of the rating.

FMN Plc participated in the rating process via telephonic management meetings, and other written correspondence. Furthermore, the quality of information received was considered adequate and has been independently verified where possible. The information received from FMN Plc and other reliable third parties to accord the credit ratings included:

  • Series 1 Trust Deed and Trustee report
  • Series 2 Trust Deed and Trustee report
  • Series 3 (Tranches A & B) Trust Deed and Trustee report
  • Series 4 (Tranches A & B) Trust Deed


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