Islamabad March 4 2022: Unity Foods Limited (Unity) is now focusing on consolidating in the markets where it has achieved optimal product penetration, as per company filling at the exchange.
It will continue to build relations with both its suppliers and distributors for smooth and efficient delivery of goods, while continuing to increase its market share with respect to consumer packs.
The Company will also continue to develop its client base in the Industrial/Commercial segment. With the country recovering smoothly from the adverse effects of COVID, the Company expects HORECA sector to achieve full strength and complement the already supportive demand.
The challenge to the global economy continues as there is no letup in high commodity and energy prices and the surge remain relentless as we report. The situation is further exacerbated by geo-political uncertainty which is expected to enhance volatlity.
Despite these challenges, the management continues to remain nimble and is actively monitoring inventory positions and ensuring operational excellence to maintain profitability.
Import prices are expected to remain high owing to low global production amongst various agricultural commodities. Palm Oil prices currently at record highs due to interventions made by government of Indonesia to limit local price hikes (taking the impact of demand supply gap onto export prices). Demand rationing is expected as food basket prices continue to be out of reach of end consumers and a similar pattern is expected for buyers of animal feed ingredients.
High inflationary environment may require government intervention through fiscal and monetary tools, which may lead to a rise in finance costs as well. Overall, the market is not expected to normalize in the short term; keeping prices high and affordability low.
During the six months under review, the Company’s topline on an unconsolidated basis stood at PKR 36.76 billion – growth of 25 percent over corresponding period last year. Despite turbulent times, your Company continues to excel and grow its sales, and despite rupee devaluation and volatile commodity markets, our profit stood at PKR 1.09 billion for the period. During the period under review, our gross margins improved from 8.46 percent (corresponding period last year) to 9.63 percent.
This includes unrealized inventory gains also reported for the last quarter, contributing to the overall gross margins. However, owing to unprecedented and unpredictable rupee devaluation during the period, our bottom-line has been adversely affected by PKR 1,097.5 million which comprises of PKR 753.7 million realized exchange loss whereas the remaining PKR 343.7 million represents unrealized exchange loss. The unrealized loss corresponds to inventory held by the Company at cost having higher Net Realizable Value (NRV) on the balance sheet date. The impact of unrealized exchange losses, till the time of realization, may vary (positively or negatively) in line with exchange rate movement. Moreover, given high commodity prices and enhanced working capital requirements, your Company had announced a rights issue of PKR 5.4 billion during the quarter under review.
During the half year, Sunridge Foods (Pvt) Ltd., a 100 percent owned subsidiary of Unity Foods posted sales of PKR 2.89 billion and a net loss of PKR 110.9 million was reported. The total sales grew over 1.72 times compared to the six months ended December 2020 owing largely to rapid expansion of their brand, higher volumes and rising local prices. The company’s selling and distribution expense in this segment have also increased by over 264 percent, largely as part of our brand building activities, fruits of which will be reaped in the years to come.
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