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Rising raw material costs behind Oman Flour Mills drop in profits


3149119 Oman Flour Mills‘ annual profits dropped 35 per cent on the back of lower margins and higher raw material prices, according to a statement released to the Muscat Securities Market (MSM).

Annual profits fell from RO8.06mn in 2010 to RO5.22mn for 2011 as operating profits slipped 40 per cent from RO8.88mn to RO5.32mn and earnings from investments and other income also fell from RO782,000 to RO462,000.

In her statement to shareholders, Oman Flour Mills chairperson Manal al Abdwani said that the company is looking for government subsidy for feeds, after rising feed costs and a government directive to not increase its product prices put a strain on profit margins.

She said, "Feed sales have increased by ten per cent compared to the previous year, mainly due to the stoppage of feed imports from UAE. With the increase in feed cost, UAE mills are not able to supply feed to Oman at the existing price.

"The company, under direction from the government, has also not increased the price of its feed products. This has had a negative impact on the margins of the company. We are in talks with the government to introduce subsidy on feed and are awaiting the government’s approval."

Wheat prices ‘increased significantly’ from August 2010 after Russia and Ukraine banned wheat exports and Oman reintroduced, in October 2010, a subsidy on wheat which it had discontinued in October 2009.

Abdwani added that the drop in operating profit "is due to lower margins on the feed mill." However, the company’s subsidiaries have reported a turnaround in fortunes, with wholly owned subsidiary Aytab Investment turning Sohar Poultry Company from a ‘loss-making company’ into a business that generated RO345,000 in profit in the last 18 months.

Modern Poultry Farm, in which Oman Flour Mills holds a 86 per cent stake, has also made a pre-tax profit of RO306,000 compared to the previous year’s RO200,000 loss.

http://www.zawya.com/story.cfm/sidZAWYA20110904071348/Rising_raw_material_costs_behind_Oman_Flour_Mills_drop_in_profits

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