Northern Nigeria Flour Mills Plc (NNFM) is facing one of its most challenging years in recent history, as rising costs and shrinking margins erode profitability despite continued revenue generation.
The company’s nine-month results for the period ended December 2025 show a sharp deterioration in financial performance, with declines in gross profit, operating margins, and a return to losses after tax — marking its weakest showing in five years.
Although NNFM generated N18.38 billion in revenue, it was only able to retain N1.33 billion as gross profit, N84 million as operating profit, and ultimately posted a loss after tax of N144 million. These figures have raised concerns among analysts and investors about the company’s ability to sustain profitability and continue its long-standing dividend-paying record.
From steady dividends to dividend doubts
For much of the past five years, NNFM has been regarded as a dependable dividend payer on the Nigerian Exchange. Shareholders received N0.15 per share in 2021, with dividends rising steadily to a peak of N0.50 per share in 2024.
However, the latest results suggest that a dividend in 2026 is increasingly unlikely. With profits under severe pressure and the company slipping into losses, NNFM may be forced to prioritise balance sheet stability over shareholder payouts.
Revenue falling, costs rising
NNFM’s results tell the story of a company struggling to retain value from its sales.
Revenue for the nine-month period fell by nearly half compared with the same period last year, indicating weaker sales volumes and possibly softer demand. At the same time, the cost of sales — especially raw materials such as wheat and maize used in flour and semovita production — remained elevated.
These rising input costs have severely compressed margins, leaving little room to absorb operating expenses, let alone generate meaningful profits.
Margins collapse to five-year lows
The most striking feature of NNFM’s 2026 performance is the collapse in profitability ratios.
Gross profit fell by 65% year-on-year to N1.33 billion, while the gross profit margin declined to just 7%, down from 13% in the corresponding period of 2025. This means that direct costs consumed about 93% of revenue — the worst ratio recorded by the company in five years.
With such a high cost-to-revenue structure, NNFM was left with very little to cover overheads. As a result, operating profit dropped sharply to just N84 million, compared with over N4 billion in the same period last year.
This pushed the operating margin down to a razor-thin 0.46%, highlighting how little value the company is currently retaining from its operations.
Management response and transparency concerns
Management has indicated that it is working to reverse the trend by cutting operational costs and improving sales performance. However, given the scale of the margin compression and persistently high material costs, the effectiveness of these measures remains uncertain.
One area investors may focus on is greater transparency around material costs. With raw materials consuming more than 85% of revenue, shareholders may expect more detailed disclosures to better understand what is driving such high costs and whether there is room for meaningful efficiency gains.
Ownership structure and strategic influence
NNFM is majority-owned by Golden Penny Food Ltd (formerly Flour Mills of Nigeria Plc), which holds 59.6% of the company’s equity and was recently delisted from the NGX.
The ultimate controlling parent is Excelsior Africa Investments Limited, a Liberian-registered company, with beneficial ownership linked to a trust set up by the late John S. Coumantaros.
This layered ownership structure may influence strategic decisions, potentially prioritising broader group interests over NNFM’s standalone performance, which could limit the company’s flexibility in responding to its specific operational challenges.
Bottom line
NNFM’s nine-month results paint a clear picture of a company under pressure. Rising input costs, collapsing margins, and a return to losses suggest that 2026 could be its worst year in the last five.
With profitability severely weakened, the chances of a dividend in 2026 appear slim, and investors will be watching closely to see whether management can stabilise margins and restore earnings power.
There is, however, a modest silver lining. The company has reported stronger cash flow from operating activities, which could provide some liquidity support during this difficult period.
Despite the challenges, NNFM’s share price is flat year-to-date, following a strong 92% gain in 2025. With a market capitalisation of about N15 billion — nearly double its net assets of N9 billion — the market still appears to be pricing in the possibility of a recovery, even as near-term fundamentals remain under significant strain.