Profitability and capacity utilization of rice milling enterprises in Ondo State, Nigeria

Abstract

The study estimated profitability of rice milling enterprises and determined their mills' capacity utilization in Ondo State of Nigeria Data collected from 85 rice millers in eight Local Government Areas of the State were analysed, using simple proportions, budgetary techniques, financial ratios and ordinary least squares analysis. Average net returns/tonne per season ranged from N205.29 to N514.0I while returns/miller per season ranged from N5,776.02 to Nl4,165.66. Averages were N351.73 for the .tanner and N10,326.02 for the latter with standard deviations of N93.49 and N2,448.17 respectively. Investment turnover and simple rate of return were 39.4% and 23.5% respectively while the operating ratio was N23.90 of operating expenses to N100.00 of revenue with an income/expenses ratio of N2.76 to N1.00. Mills' capacity utilization ranged from 8.5% to 18.9% with an average of 12.7% and a standard deviation of 3.4% per season. Regression results showed that cost of labour, cost of fuel and lubricants, maintenance expenses, mill's capacity utilization and rice yield having elasticity estimates of -0.109, -0.037, -0.164, 1.043 and -l.584 respectively explained 54.0% of the variability in gross marginal earned by rice millers per season. Estimated coefficient of each regressor had a priori sign but only that of mill's capacity utilization was significant at the 1.0% level.

Key words: Rice milling, profitability, capacity utilization.