Lahore August 23 2022: Fauji Food Limited has formulated business plan and is undertaking margin improvement initiatives and a differentiated marketing strategy to build efficiencies in the distribution channels, according to information provided by its Parent company.
FFL took a strategic decision to invest behind the umbrella brand – Nurpur. After a hiatus of 4 years PKR 100 million were invested on the brand in marketing activities, ATL, BTL and digital.
The gradual transformation to value added categories has successfully started. A series of Margin Accretive Launches are planned in the year to build sustainable portfolio. The unprecedented growth in HoReCa business and UHT Milk will ensure that we will successfully compensate for the decline in Tea Creamer category. We will continue to invest behind the brand to build the value added portfolio. This investment is complemented by a Route to Market RTM overhaul that will increase the distribution of the value added portfolio. After successfully completing this RTM pilot in Rawalpindi/Islamabad, we are now ready to extend to the rest of the country.
Structural adjustments are being made in ‘way of doing businesses’ that leverages the industry expertise to bring down costs. Not only will this intrinsically improve the margin structure, it will also prepare the business for inflationary pressure that is expected.
During the period ended 30 June 2022, Fauji Food Limited has incurred a loss after tax of Rs. 1,253.47 million compared with loss of Rs. 758.29 million during the same period last year, resulting in accumulated losses of Rs. 17,602.10 million compared with accumulated losses of Rs. 16,395.50 million at 31 December 2021.
Further, FFL’s current liabilities exceed its current assets by Rs. 179.6 million (31 December 2021: current assets exceeded current liabilities by Rs 1,182.4 million). Accordingly, FFL’s operations are being financed via further sponsor support / equity injection and high level of external debt. As at 30 June 2022, the FFL’s total debt amounts to Rs. 7,945.94 million (31 December 2021: Rs. 7,972.41 million).
The Parent Company has committed the necessary continued financial support to FFL, including (but not limited to) equity injections and providing working capital as and when required. Further, the Parent Company is currently not demanding payments for interest accrued on FFL’s borrowings, previously obtained from it.
FFL’s Sponsors have also provided security, on behalf of FFL, in respect of FFL’s syndicate loan facility (amounting to Rs. 5,988.15 million, in the form of (a) a letter of credit amounting to Rs. 1 billion from Askari Bank Limited, a related party, and (b) a revolving corporate guarantee).
Recently, Fauji Foundation has agreed to provide equity convertible loan amounting to Rs. 2.4 billion to FFL.