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DFM 3Q update

Yesterday Tiger Brands's, Dangote Flower Mills (DFM) released their 3Q numbers. Revenue is up 15%, cost of sales is down 13% and gross profit is up 49%, so things in the operating department are moving in the correct direction. That is where the good numbers stop though. Thanks to the weakening currency (Nigerian Niara) their operating loss worsened by 66% compared to the same time last year and the loss per share went from 89.89 to 181.31. Given how big their losses have been they currently have negative cash flow which means that they are having to borrow to keep things going. The only good news from the weaker currency is that it makes it cheaper for Tiger to send funds to the Nigerian operation. I don't see the oil price recovering anytime soon and as such I don't see the Nigerian Naira recovering. What is required now is a stable currency, which is tricky given that there is a black market rate now. Expect DFM to be a loss maker for Tiger for the foreseeable future.


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