NFM: We cannot produce flour at a loss | Local company
National Flour Mills Ltd (NFM) PRESIDENT Nigel Romano said yesterday the majority state-owned company is considering all options as it continues to grapple with rising international prices for wheat, the main input for flour , which is by far the favorite staple of T&T citizens.
âIt’s a perfect storm,â said Romano, referring to the higher prices of wheat and the higher cost of transporting the commodity from the country’s major import markets in North America.
Romano said that since 2019, NFM’s raw material cost per metric ton of flour has increased by just under 30% and is expected to rise another 5% in the fourth quarter of 2021.
He said, however, that the company’s overall cost of production per metric ton of flour only increased by 12%, due to savings resulting from improved labor efficiency and process through our continuous improvement efforts.
âWe are trying to do whatever we can. The focus has been on what we can controlâ¦ but at some point we have to consider other alternatives, âhe said.
When asked if he is warning the public to prepare for a rise in flour prices, Romano said: âI am not warning the public about anything. I’m saying we need to look at all the options. At the end of the day, we cannot run an unprofitable operation. We cannot produce at a loss, especially at a loss of gross profit. “
For the six months ended June 30, 2021, NFM’s gross profit declined 26.6% to $ 41.13 million, from $ 56.08 million for the first six months of 2020. But after-tax profit of the publicly traded company for the period January to June 2021 plunged. 84.3% to 2.14 million dollars against 13.68 million dollars in 2020.
Romano said he does not believe recent signs of rising wheat prices in North American markets will push NFM into a deficit position at the end of its current fiscal year on December 31, 2021.
He said, however, that the company is more concerned about the price of wheat next year, “because this thing doesn’t seem to be getting better.
âThe prices of inputs in wheat production are increasing. And on top of that, you have the cost of transportation. So it is not only the higher prices of wheat, the cost of shipping wheat has also increased. “
Climate change and the impact of the coronavirus on people’s ability to work are also impacting the price of wheat, he said.
And he ruled out accessing cheap wheat from anywhere in the world other than North America.
In fact, on a global scale, the price of wheat has increased considerably.
On Thursday, the Wall Street Journal reported that “a poor spring wheat harvest and concerns about the winter harvest have pushed grain prices to their highest levels in years and signal further food inflation to come” .
The newspaper reported that futures prices for hard red spring wheat, which grows during the summer in the northern plains and is favored by bakers and pizza makers, reached its highest price on the market last week. Minneapolis Grain Exchange since the 2008 planting season.
The Wall Street Journal said drought in the northern hemisphere is the main driver of rising wheat prices, but strong demand around the world, booming supply lines and rising farm input costs, like fertilizers and fuel, contribute to it.
âWhat we did was try to substitute another type of wheat, which hasn’t grown as much. But even that is affected by the unprecedented increases. But you can only do part of that without affecting the quality, âsaid Romano.
NFM traditionally imports two types of wheat: soft red winter wheat and dark northern spring wheat. A company official told the Sunday Express yesterday that NFM recently reintroduced the harsh red winter.
In its president’s report accompanying NFM’s financial results for the six months to June 30, 2021, Romano said that NFM “remains committed to keeping the price of flour at 2008 levels for the time being.” Yesterday, he said the company has not adopted a policy not to pass higher wheat prices on to local customers in the form of higher flour prices.
Romano added: âWe have made the decision to maintain (flour prices) as long as possible, without impacting profitability. And as you know, we have worked very hard to improve productivity, by becoming more efficient on the production side. “
He said that while the company is still reviewing all options because these price increases are unprecedented, NFM has not adopted a policy.