Dangote Flour Mills finally returns to profitability

Having operated at a loss for four years under Tiger Brands, Aliko Dangote's Dangote Flour Mills (DFM) has finally bounced back to become profitable once again

According to DFM’s financial results for the 15 months ending December 2016, the company – which Dangote bought back from Tiger Brands at the end of 2015 – posted an after tax profit of 10,6 billion Naira (R445 million).

Comparatively, the company posted a 12,5 billion Naira (R547,5 million) loss for the 12 months ending 2015.

The remarkable bounce back follows four years of consecutive losses posted when Tiger Brands was in charge. It acquired a near two thirds stake in the business in 2012 for R1,6 billion, but over the years it was forced to write off close to R1 billion as the consumer group quickly realised that the flour market in Nigeria was oversaturated.

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Tiger Brands had expected DFM, which includes Dangote Flour, Dangote Pasta and Dangote Noodles, to be its cash cow as it created the perfect scale of asset that Tiger Brands was looking to gain as it expanded into the West African country. But the deal was nothing more than a massive thorn in Tiger Brands’ side.

DFM chairman, Ighodalo Asue, attributed the move back to the black to an aggressive restructuring plan, that also saw the continent’s richest businessman inject billions of Naira into the business to rejuvenate it, increase market share and to create added value for shareholders.

“We bought back Dangote Flour Mill from Tiger Branded Consumer Goods and by this move, it means we have a stronger, better, sophisticated and more focused Dangote Flour Mills,” he said in a statement.

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“Since the takeover, we have taken a lot of steps to reposition the company through expansion to drive growth. We are also using this medium to restate our commitment to increasing our shareholders.”

Tiger Brands’ bad investment brought into question the group’s due diligence processes with many commentators saying the move was rushed and not adequately researched.