Fan Milk reports revenue of US$66.3M in 1st 9 months

GHANA – Fan Milk PLC has reported a revenue of US$66.3 million (GHS 726.6 million) for the period ended September 30, up from US$44.05 million (GHS 482.5 million) the previous year, according to unaudited financial statements filed with the Ghana Stock Exchange.

However, net profit edged down 3.7% to US$3.87 million (GHS 42.4 million) from US$4.02 million (GHS 44 million), while earnings per share slipped to GHS 0.36 from GHS 0.38.

The seemingly contradictory performance tells the story of a business pursuing aggressive growth while navigating intense cost pressures.

Gross profit surged 41.8% to US$23.08 million (GHS 252.8 million), but the company’s gross margin contracted from 36.9% to 34.8%, suggesting that raw material costs for milk, sugar, and packaging increased faster than selling prices could accommodate.

Operating expenses spiraled sharply during the period. Sales and distribution costs jumped 36.8% to US$9.84 million (GHS 107.8 million), while administrative expenses surged 54.4% to US$5.48 million (GHS 60 million), both outpacing gross profit growth and squeezing margins.

A one-time exceptional item of GHS 6 million further pressured profitability, though the company did not disclose the nature of this charge.

Finance income plummeted 66.6% to US$858,220 (GHS 9.4 million) from US$2.56 million (GHS 28.1 million), likely reflecting lower interest rates or reduced cash balances during parts of the period.

The bright spot came from finance costs, which fell 64.6% to US$356,070 (GHS 3.9 million) as the company benefited from reduced debt servicing obligations.

Despite the profit squeeze, Fan Milk’s balance sheet strengthened dramatically. The most striking change was the company’s cash position, which nearly tripled to US$18.11 million (GHS 198.4 million) from US$6.99 million (GHS 76.5 million) at the same point in 2024.

This remarkable buildup stemmed from exceptional operating cash flow of GHS 118.6 million, up 22% from the previous year.

The cash surge was powered by much more efficient working capital management. Trade receivables decreased significantly by US$6.49 million (GHS 71 million), indicating faster customer collections, while inventory levels also dropped by US$721,270 (GHS 7.9 million) despite higher sales volumes.

The company generated US$12.81 million (GHS 140.4 million) in cash from operations before tax payments, demonstrating strong underlying business performance.

Total assets grew to US$62.37 million (GHS 683.2 million) from US$57.15 million (GHS 625.9 million), while equity rose to US$27.91 million (GHS 305.8 million) from US$24.41 million (GHS 267.3 million), reflecting retained earnings from the profitable period.

The performance comes as Ghana’s dairy sector navigates complex macroeconomic conditions. Inflation in Ghana has been falling steadily, reaching 11.5% in August 2025, down from 12.1% in July, marking the lowest rate in almost four years.

However, milk and dairy products still face 14.8% annual inflation, pressuring manufacturers’ input costs.

Capital expenditure remained disciplined during the nine months, with the company investing US$1.83 million (GHS 20 million) in property, plant, and equipment, significantly less than the GHS 80.9 million spent the previous year.

With nearly US$18.26 million (GHS 200 million) in cash reserves, the company possesses substantial financial flexibility for strategic investments, debt reduction, or special dividends.

However, effectively deploying this capital while controlling spiraling administrative and distribution costs will be critical to sustainable earnings growth.

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