Karachi January 27 2023: Fauji Foods Limited reported loss of PKR 2.2 billion in 2022 on higher raw material prices, according to company filing to Pakistan Stock Exchange.
FFL achieved 44 percent growth in net revenue for the year 2022. This was driven by 66 percent increase in Nurpur UHT milk volume, doubling the institutional sales and distribution increase of 57 percent. This growth was a result of increased marketing investment, distribution automation, and leveraging group synergies.
“Looking ahead the management expects the growth momentum to carry on in 2023. Key efficiency initiatives of cheaper energy mix (solar and bio fuel), localized packaging and optimized processes are expected to yield savings of approximately PKR 1 bn in 2023” says Company Chairman Sarfaraz Ahmed Rehman.
He added, “The Q1 equity injection shall eliminate the debt of PKR 8 bn, removing the burden of interest cost on the business. All these factors make for a strong start to 2023. We remain confident that going forward, we will build upon the current positive trajectory.”
Inflationary pressure on the back of devaluation, floods, and macro-economic uncertainty resulted in a 50 percent increase in raw milk price and other major cost components. That in turn, eroded the margins by circa 7 percent in Q2.
Management responded by a) increasing prices and b) deploying cost saving initiatives. Consequently, the margins were fully restored in Q4. The volume growth, complimented by pricing and efficiency initiatives, delivered a Q4 EBIDTA of PKR 383mn (PKR 77mn excluding one-time sales tax reversal), a 262 percent growth over Q3.
The loss after tax was PKR 2.17 Bn. The interest cost of PKR 1.26 bn constitutes 58 percent of the loss.
“The sponsors have committed to inject equity of PKR 11.71 billion via Other than Rights Share. This will eliminate the debt overhang and rid the business of the interest cost that is a drag on company’s performance” says Company Chief Executive Officer Usman Zaheer Ahmad.
