Higher wages and raw material prices led to a 65 per cent drop in Oman Flour Mills' net profit during the six-month period ending December 31, 2011.
In its unaudited financial statements released to the Muscat Securities Market (MSM) on Monday, the company reported a net profit of RO1.17mn for the six-month period down from RO3.33mn in the corresponding period of the previous year.
However, OFM's revenue increased by 28 per cent to RO29.6mn as compared to RO23mn in the corresponding period of 2010, while net investment and other income declined from RO594,000 in the previous year to RO37,000. The profit margin dropped to 3.94 per cent from 14.45 per cent in 2010.
The company is yet to receive the subsidy on animal feed products which the government recently approved with effect from January 1, 2011. The company said in its statement to the MSM, "These financial statements are prior to subsidy on animal feed products.
"The government has in principle approved the subsidy with effect from January 1, 2011, however its mechanism has yet to be agreed."
Sameer Kattiparambil, financial analyst at Al Madina Financial and Investment Services said that OFM's business has been quite good in last two quarters, but the higher prices of wheat and raw materials for cattle feed went up sharply and affected profitability as a result.
He said, "The profits have dried up in last two quarters due to increased raw materials prices, wages and loss on investment income. Once the government provides subsidy on animal cattle feed the profitability may improve, but the structure and the detail about the subsidy has not been disclosed so far."
© Muscat Daily 2012
