Fan Milk leads GSE's September charge with 113% gain

Dairy producer Fan Milk emerged as biggest gainer on the Ghana Stock Exchange (GSE) in September, posting a 112.8 percent increase of its share price during the month.

This surge comes as the GSE Composite Index (GSE-CI) continues its upward trajectory for the fourth consecutive month, gaining 87.56 points and closing September with a year-to-date return of 29.81 percent.

Fan Milk’s stock faced a challenging period starting from the middle of May this year, hitting its lowest share price ever at GH¢1 – a sharp decline from its GH¢3 starting-point at beginning of the year. Between the close of May and start of September, Fan Milk’s stock traded relatively flat, hovering between GH¢1.3 and GH¢1.38. However, during the course of September, the stock made a remarkable rebound – surging from GH¢1.38 to GH¢3.01 and surpassing its year-beginning price.

This performance translates to a 128 percent gain over the past three months, and an impressive 133 percent increase over the past six months. Notably, this turnaround coincided with the release of Fan Milk’s unaudited interim financial reports which showed a marked improvement from the end of 2022 numbers.

By end of June 2023, Fan Milk had recorded a pre-tax profit of GH¢15.78million and a post-tax profit of GH¢20.19million. This is in stark contrast to the same period of 2022, when the company posted significant losses of GH¢4.84million and GH¢4.89million.

In the previous year, 2022, Fan Milk reported a loss before tax, which increased from GH¢20.87million in 2021 to GH¢33.56million. When accounting for income tax expenses/credits, the company’s loss after tax also grew; from GH¢13.4million in 2021 to GH¢41.6million in 2022. However, Fan Milk experienced revenue growth of 13.98% by reaching GH¢30.54million and its gross profit reached GH¢100.5million.

Furthermore, Fan Milk Ghana’s net assets decreased from GH¢246.7million on December 31, 2021 to GH¢205.1million on December 31, 2022. During the same period, the company invested GH¢11.70million in capital expenditure – a substantial decrease compared to the GH¢47.19million spent in 2021. This investment was primarily allocated to acquiring additional intangible assets and property, plant and equipment to bolster the company’s operational capacity.

In an earlier interview with the B&FT, Managing Director-Fan Milk, Ziobeieton Yeo, acknowledged that the company had been constrained by developments in the wider economy, with manufacturing companies being some of the hardest hit.

“Fan Milk, like many other companies, has been affected by external factors over the past three years. The onset of COVID-19, inflation and fluctuating exchange rates significantly increased our input costs. In response, we have diligently worked to reduce our cost base. Unfortunately, some of our product categories have been more adversely affected; primarily those considered non-essential. Nevertheless, we firmly believe that in a world where healthcare costs are soaring, nutritional products should never be deemed non-essential. This is a message we’ve been consistently advocating,” he explained.

Mr. Yeo maintained that his outfit is committed to expanding its product offerings and optimising its market approach, with the current focus being utilising local substitutes that align with the Ghanaian palate while reducing our dependence on imports.

Technology, he added, plays a pivotal role in its operations, especially within the supply chain: “This technological integration has greatly improved our product quality. Today we can actively monitor temperatures during transit, ensuring that everything reaches our customers in a fresh and pristine condition”.

He is optimistic that the worst is over and lessons learned from the recent downturn will prove beneficial in the long run, even as the manufacturer seeks to increase its export revenue beyond the current 25 percent.

“Fan Milk proudly boasts a rich 65-year history, firmly establishing itself as a truly Ghanaian enterprise. We have remained relevant through the years, maintaining a steadfast commitment to positively impacting the lives of Ghanaians through our nutritional products… The extensive network of distributors, vendors and agents which sustain our business remains intact. The countless Ghanaians who derive their livelihoods from Fan Milk continue to thrive, and it is in our collective interest to ensure the enduring success of this ecosystem,” he explained.

As at close of September 2023, Fan Milk boasted a market capitalisation of GH¢350million, based on its 116 million outstanding shares. The company reported an Earnings Per Share (EPS) of GH¢0.2716 and a Price/Earnings Ratio of 11.08.

The wider equities market experienced a notable decline in both trading volume, which fell by 37.88 percent, and the total traded value, which dropped by 31.1 percent compared to the preceding month. Beyond Fan Milk, the other top-five gainers for September included Guinness (34.9 percent), Societe Generale (31.67 percent), Unilever (18.08 percent) and Standard Chartered Bank (17 percent).

The GSE Financial Stock Index also advanced by 134 points in the month, reducing its year-to-date losses to 7.92 percent.