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FMN: Transforming powerhouse of the Nigerian agricultural sector

16/11/2018

Flour Mills of Nigeria (FMN) is one of the leading food and agro-allied group in Africa. Evolving from a single Flour Mill in the port of Apapa more than five decades ago, FMN is now one of the largest flour milling companies in the world. It operates over 20 milling units in the country, controlling the largest feed mill in sub-Saharan Africa, one of the largest palm and soybean oil extraction and refining plants in Africa. Richard Hedges, Flour Operations Director of the FMN, told Miller Magazine the leading role of the Nigerian food giant in the agriculture in Nigeria and their investments and projects in the milling industry. “FMN creates value along the entire food chain with its farm-to-table model. Our Group’s strategic imperative in the years ahead is to create value in the supply chain and reduce dependence on imported raw materials” Hedges said.

Richard Hedges, Flour Operations Director of the FMN, answers our questions:

Flour Mills of Nigeria Plc. (FMN) is the leading food group in Nigeria. Could you tell us how your company has come to its current position?
It’s very simple. FMN has always focused on three key aspects of the business: Customers (at the end of the day they pay our wages), our employees (our most important asset) and product quality. In recent years Nigeria has seen more and more international companies entering the Nigerian market. We have risen to the challenge and upped our game!

Our mills are manned by a team of highly trained and skilled professionals working at a high level of efficiency. Our flour manufacturing facilities are world class and operate within an internationally recognized quality system. FMN had over the years made huge investments in milling technology and human capital to sustain its leading position and maintain its competitive advantage in the Nigerian flour milling industry.

Flour Mills of Nigeria has a strong people-focused policy. The continuous development and welfare of employees is a key concern. FMN has been a major contributor of milling students to the Swiss Milling School and the Nabim London City & Guild program over the last 10 years. In the last few years, Buhler opened their African milling school and again Flour Mills has had students attending each year.

FMN EMPLOYS 14,000 PEOPLE
Could you please introduce your company?
Incorporated in September 1960 and quoted on the Nigerian Stock Exchange since 1978, Flour Mills of Nigeria (FMN) Plc. is one of Nigeria’s leading food and agro-allied companies. With a broad basket of food products, an iconic brand “Golden Penny” and a robust pan-Nigerian production distribution and supply chain network FMN is a fully integrated and diversified food and agro-allied group.

The FMN group strives in its mission to “Feed the Nation, Everyday” through its five core food value chains: Grains, Sweeteners, Oils and Fats Proteins and Starches. FMN creates value along the entire food chain with its “farm-to-table” model by providing inputs and know-how to farmers aggregating and sourcing crops and raw materials to supply its world-class processing facilities across Nigeria and distributing its innovative food brands to its customers.

FMN group employs directly and indirectly 14,000 people from diverse ethnic cultural and religious backgrounds with a strong interest in improving lives. FMN is steering the green revolution in Nigeria with the use of locally sourced materials to develop and produce consumer foods and industrial ingredients for local markets. This strategy is reducing dependence on imported raw materials and creating value for consumers, businesses, and the Nation at large.

FMN continues to demonstrate its commitment to the environment and corporate social responsibility by engaging only in sustainable business activities and social investments to improves the lives of communities where it does business.

FMN pioneered flour milling in Nigeria when our first mill was commissioned at Apapa Lagos in 1962 with a grinding capacity of 500 MT of wheat per day. Today the Apapa milling complex has a rated capacity of over 8,000 metric tons per day making it one of the largest single-site mills in the world.

What is the role of your company in Nigeria and Africa?
Recent statistics from the Nigeria Bureau of Statistics (NBS) suggest that over 1.5 million Nigerians became unemployed in the first quarter of 2016 and Nigeria’s unemployment rate grew from 10.4% in the last quarter of 2015 to 12.1% of the labor force in the first quarter of 2016. To many Nigerians right now being gainfully employed is all that matters. Employment is placed above the three necessities of life. After all aren’t food, clothing and shelter determined by the jobs that we find?

This is why at FMN we are passionate about creating job opportunities and other sources of livelihood for as many people through the various ways our operations touch their lives. This is how we have managed to keep over 14,000 diverse Nigerians employed in our farms and factories and our various lines of businesses.

As a responsible company operating in Nigeria, we recognize that the Government alone cannot provide enough jobs to cater to all the rising employment needs, so the onus rests on us as a private organization to provide opportunities for Nigerians. The provision of employment opportunities is one of the key drivers of our Backward Integration Programmes (BIP). Apart from initiatives and investments to transform the nation’s agricultural sector boost output and generate much needed foreign exchange, our investments in agriculture are also creating employment opportunities for thousands.

Apart from those directly employed in our operations, we have given rise to the establishment of other businesses in the SME sub-sector that have provided jobs and a source of living for millions. They include third-party service providers distributors wholesalers and retailers. For every FMN product, a whole value chain of these people exists providing thousands of jobs along the line.

I was very excited to join FMN in January 2017 as Flour Operations Director – to run the operations in one of the largest flour milling companies in the world affecting so many lives is a challenge that only a few have had the opportunity to embrace!

OPERATING OVER 20 MILLING UNITS IN NIGERIA
How many mills do you have in Nigeria? Where are they located?
We are primarily a Nigerian centric company with assets in Apapa (Lagos), Ibadan, Calabar and Kano. We operate over 20 milling units in the country.

You must remember though that we are a large and diversified company. For example, BAGCO (a Division of FMN) is a pacesetter in woven polypropylene sack manufacturing. It has two giant plants in Lagos and Kano and is the largest and supplier of choice to many industrial and agro-allied companies in Nigeria in the packaging of flour, cement, grains, salt, detergents, fertilizer and farm harvests shopping etc.

Our Group’s strategic imperative in the years ahead is to create value in the supply chain and reduce dependence on imported raw materials. To this end, we have recently invested billions of Naira in our agro-allied ventures. The Group’s strategic diversification into agribusiness began in 1978 with the investment in the 10,000ha Kaboji Farm.

We have subsequently made many other significant investments in primary processing of locally grown soybean, palm, fruit, cassava, maize and sugar cane including storage aggregation and distribution of locally sourced grains and export commodities along with manufacture and distribution of agro-inputs such as seeds and fertilizers. These strategic investments across the major crop value chains are setting the pace for others to follow and continue to strengthen our position as Nigeria’s Premier Food and Agro-Allied Company.

To ensure the continued viability and sustainability of our Food and Agro-Allied operations in a challenging business environment, we have also invested heavily in support services in the form of manufacturing and marketing of packaging materials, power generation, ground transport logistics and port operations including shipping customs clearing and even a shipping agency!

Flour Mills is a significant employer in Nigeria with over 14,000 people in the various diversified businesses. In Food of which milling is a part, there are just over 4,000 employees.

DAILY MILLING CAPACITY OVER 10,000 MT
Can you give us some information about your milling and storage capacity and technologies you use? Which kind of products do you produce?
As I commented earlier, we have assets in Apapa (Lagos), Ibadan, Calabar and Kano. We actually operate over 20 milling units in the country with a combined capacity of over 10,000 MT milling per day. Nigeria is a huge importer of wheat and hence we have a significant wheat storage capacity of around 200K MT.

Our product range includes bread, pasta, confectionary, pizza, noodle and biscuit flours and we produce products unique to Nigeria for use in ‘ball’ foods including Semovita, Dawavita (sorghum) and Goldenvita (wholewheat).

From where do you import wheat?
With our wide range of products, we must select the best quality wheat and hence we source from Canada, USA, Europe, The Baltic Region and Australia. There is also about 60,000 MT of locally grown wheat which at times we try to include in our grits. However, -whilst this wheat is sound and of good protein- it does not have the necessary gluten characteristics to be viable in bread making flours. Part of the brief for our recent joint venture with DowDuPont is to research and develop both new maize and wheat varieties for Nigeria.

Where do you export your products?
With a population of nearly 200 million people, Nigeria is our key focus but we do export both consumer finished products and bran. Target markets include Sub-Saharan Africa, USA, Morocco and Costa Rica.

Could tell us your ongoing milling projects?
Over the years, we have ensured our mills have been either refurbished or replaced as well as building new capacity. All the mills are PLC controlled using Buhler’s WinCos platform. As a result of that first round of investments, FMN’s milling capacity rose to about 5,750 tons per day. The commissioning of the West Mills facility in September 2012 raised FMN’s total milling capacity by 39% to its current level.

FMN’s “West Mills” expansion came about after the company determined that it needed to grow its existing business to meet market demands. The West Mills expansion which was commissioned in September of 2012 consists of a bread flour mill with a 750-tonne-per-24-hour capacity, a soft flour mill with a 1,000-tonne-per-24-hour capacity and a pasta flour mill with a 450-tonne-per-24-hour capacity. A further 550 MT pasta/semolina swing mill was added in 2016.

The West Mills expansion features the latest technology and equipment from Uzwil, Switzerland based Bühler. The durum, semolina, wheat cleaning system incorporates the latest color sorting technology (Sortex). The facility has a 36,000-tonne storage capacity with the possibility to add another 15,000 tons if necessary.

The West Mills facility was designed with expansion in mind. We had already expanded the building to integrate a small household packing facility and install additional milling lines. This work will be completed in early 2019 with the addition of a further 570 MT pasta flour/semolina milling line with Rowema packing lines.

What are your future targets in your operating market? Could you tell about your future investment plans?
Beyond wheat-based products, FMN Group’s strategic imperative in the years ahead is to create value in the supply chain and reduce dependence on imported raw materials. To this end, FMN has recently invested billions of Naira in its agro-allied ventures. If you will allow me – I will expand on that a little later on.

Do you have any investment plan and business activity beyond Nigeria?
We are always looking for opportunities both inside and outside Nigeria – but I am sure you will agree with me Nigeria with a population of over 180 million and a population growth rate of 2.54%, we still have a lot of work to do here! Nigeria is the most populous nation in Africa and the eighth most populous nation in the world.

Looking to the future, what do you believe the challenges and opportunities are for the company?
The Nigerian economy experienced an appreciable recovery during the 2017 fiscal year emerging from its worst recession in a quarter of a century. Nigeria’s Gross Domestic Product (GDP) grew by 0.82% year-on-year in 2017 compared with the negative growth of -1.58% in 2016. The positive trend was complemented by a moderation of the headline inflation which declined consecutively on a monthly basis dropping to 14.33% in February 2018 from 18.6% in December 2016.

In spite of the general positive economic outlook, the manufacturing sector still faces daunting challenges posed by the inadequate public power supply, infrastructure, deficiencies, high cost of borrowing, high inflation rate, weak consumer demand and a concern for security in parts of the Nation. But from these challenges come opportunities!

Take our investment in Kano as an example. Kano is a city of some 8 million people located in the north of the country where both maize and sorghum are cultivated. Nigeria consumes about 7 million MT of each grain annually both reaching the consumers through formal and informal markets in the cities and towns. A consumer will visit the market purchase the raw grain (especially sorghum – there are several industrial maize millers) take the grain to a ‘miller’ in the same market – who will clean and then grind the kernels into a flour.

Modern processing techniques, a focus on food safety and providing a consistent product at a competitive price are key to FMNs strategy in the north. For the consumer to avoid the time and hassle of the market and to be able to purchase a product that is guaranteed each and every time at a cost that matches or betters what they can get in the market will be a huge benefit in a part of the country where a significant part of the population live on less than a dollar a day.

Could tell us flour consumption patterns in Nigeria? Is there any change in the eating habits in recent years?
A number of trends in the Nigerian market and lifestyle changes for the population are creating opportunities for FMN. These include increasing urbanization and number of working wives creating opportunities for quick-to-prepare meals and on-the-go snacks. The average urban worker spends about two hours in traffic daily and research has shown that 49% snack during this period thus accounting for the growing demand for on-the-go meals.”

In addition to the impact that work/life changes among Nigeria’s growing population is having on their consumption habits, a growing middle class and health consciousness is also driving product demands. A rapidly growing population, a growing middle class and change in taste have influenced the demand trend for wheat and wheat-based products. In addition, many people are conscious of the health implications of high concentrates of carbohydrates hence the rapidly growing sales of our whole wheat meal product — Goldenvita.

We are working hard to grow the market through baking demonstrations to show the quality and consistency of our products. We are developing and intensifying our drive to promote increased awareness and consumption of wheat-based products especially Semovita and Goldenvita.

Annual wheat consumption is around 4.0 million tons in Nigeria. However local production is about 60,000 tons. There is a huge gap and Nigeria is a net importer of wheat. FMN wants to reduce dependence on the imported raw material.

Could you tell us your projects and contribution for that goal briefly?
The Group’s strategic diversification into agribusiness began in 1978 with the investment in a 10,000ha Kaboji Farm which is close to the town of Kontagora in Niger State. We have subsequently made many other significant investments in primary processing of locally grown soybean palm fruit cassava maize and sugar cane.

We are also active in storage, aggregation and distribution of locally sourced grains and export commodities. We also manufacture or source and distribute agro-inputs such as seeds and fertilizers. These strategic investments across the major crop value chains are setting the pace for others to follow and continue to strengthen our position as Nigeria’s Premier Food and Agro-Allied Company.

FMN’s diversification strategy has also included additional areas in the food sector. In order to broaden its revenue base and strengthen profitability, FMN has invested in the production of animal feed, edible oils, cassava flour production and sorghum milling.
FMN forecasted significant growth in Nigeria’s animal feed market and has made investments to meet that demand – Premier Feed Mills Ltd. in Ibadan – runs a 350,000-tonne-per-annum mill for livestock feed production along with an aqua feed mill with a capacity of 24,000 tons per annum. In 2014 a second sister feed mill was added in Calabar.

In Mid 2017 FMN took a majority stake (95%) in ROM Oil Mills Limited which has an edible oil refinery and margarine plant. The refinery consists of a 500 MTPD universal refinery plant, a 500 TPD soya oil extraction plant (including a 100 MTPD fractionation plant), a 50 MTPD margarine manufacturing and packaging plant and 100 TPD vegetable oil bottling plant. This investment was a key feature in FMN’s strategic drive to grow its food and agro-allied value chains aligning with Nigeria’s Industrial Revolution Plan (NIRP) and Government’s Agricultural Transformation Agenda (ATA).

In 2012 FMN took a controlling interest in Thai Farm which had begun operations in 2010 growing and processing cassava in Ososa Ogun State. Thai Farm has grown to be one of the two leading corporate suppliers of High-Quality Cassava Flour (HQCF) to Flour Millers in Apapa and Elsewhere for the past two years. This backward integration investment is again a demonstration of Flour Mills’ belief in ATA. In developing its cassava value chain FMN is cultivating cassava on a 10,000- hectare farm in Shao Kwara State and also on a farm in Kaboji Niger State.

In late 2017 FMN formally opened its new sorghum processing line in Kano. FMN has a controlling interest in Northern Nigerian Flour Mills (NNFM) and it aims to maximize the local grains content of the products including locally sourced sorghum and maize. The mill is installed to produce 100,000 metric tons per annum – the state-of-the-art milling facility dedicated to produce sorghum flour and other related products was built at a cost of about N2billion and will meet our market projected sales growth within the next couple of years.

In line with our core strategic focus of transforming the agricultural sector – to feed the nation – in early 2018, FMN announced a strategic partnership with Corteva AgriscienceTM, Agriculture Division of DowDuPont, on hybrid maize seed development. The collaboration will see both companies working together on key aspects of the maize value chain with a focus on promoting modern farming techniques and practices capacity development and knowledge transfer for local production and use of improved and quality inputs including seeds and crop protection.

Is there anything you want to add and share with our readers?
Very early on in the company’s existence, FMN made ancillary investments in businesses that were associated with and supportive of the company’s primary flour milling business segment. Infrastructure, logistics, power generation along with animal feed and edible oils are just a few of the areas FMN has expanded into over the years.

In the infrastructure and logistics areas, FMN incorporated the Golden Shipping Company and Southern Star Shipping Company Nigeria Ltd. to provide logistic support to incoming vessels and ensure timely discharge and clearance of cargoes.

Also in response to growing logistics and transport demands, FMN established a Fleet Operations Department, which later metamorphosed into Golden Transport Co. Ltd (GTC) in April 2007. Transport logistics is a critical factor to our success. In Nigeria because of the poor state of infrastructure FMN’s investment in its haulage company has arisen out of the need to monitor its distribution network and ensure that same is effective and efficient. Golden Transport has built a fleet of around 500 trucks.

To ensure a reliable power supply FMN has also made significant investments in electrical power generation and improved its power supply infrastructure. We have an installed capacity of some 70 MW of power generation both from turbines and generators. Gas supply in Nigeria can at times be unreliable and hence we have machines that run both on diesel or gas. We generate up to 29 MW daily.

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