Unity Foods Limited Financial Results for the Half Year Ended December 31, 2021

 Unity Foods Limited

Financial Results for the Half Year Ended December 31, 2021

That the Board of Directors of our Company in their meet ing held on February 28, 2022 at 12:00 noon at the Registered Office of the Company at Unity Tower, 8-C, Block-6, PECHS, Karachi has recommended the following:

i) CASH DIVIDEND Nil

ii) BONUS SHARES Nil

iii) RIGHT SHARES Nil

iv) ANY OTHER ENTITLEMENT/ CORPORATE ACTION Nil

iv) ANY OTHER PRICE SENSITIVE INFORMATION Nil

The financial results of the Company are attached.

The Half Yearly Report of the Company for the period ended December 31, 2021 will be transmitted through PUCARS separately, within the specified time

Directors' Review Report

On behalf of the Board of Directors of Unity Foods Limited (UFL or the Company) we are pleased to present the Directors' Review Report for the half year ended December 31, 2021.

Unity Foods Limited:

During the six months under review, the Company's topline on an unconsolidated basis stood at PKR 36.76 billion - growth of 25% 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% (corresponding period last year) to 9.63%. This includes unrealized inventory gains also reported for the last quarter, as stated in the previous Directors' Review Report, 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. We are happy to inform that Alhamdollilah, with the relentless support of our shareholders, the Company has successfully raised the said amount and is now geared to sustain and grow operations.

Sunridge Foods (Private) Limited:

During the half year, Sunridge Foods (Pvt) Ltd., a 100% 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%, largely as part of our brand building activities, fruits of which will be reaped in the years to come.

Consolidated Financials:

 

On a consolidated basis, our topline sales stood at around PKR 39.6 billion.

 

	KEY FINANCIAL HIGHLIGHTS                      1HFY22          1HFY21            FY21              FY20 (Consolidated) PKR 'millions'
	Net Sales		39,583	29,769	68,831	30,480
Gross Profits			3,780	2,637	5,651	2,100
Operating Profits			2,793	1,857	4,004	1,122
Net Income/ (Loss)			976	1,557	3,338	214
Earnings/ (Loss) per Share (PKR)			0.98	1.88	3.61	0.36
Total Assets			53,510	40,185	44,186	19,541
Total Equity			17,162	11,817	13,188	5,893

 

 

 

Ratio Analysis                                                1HFY22          1HFY21            FY21              FY20
Gross Margins	9.55%	8.86%	8.21%	6.89%
Operating Margins	7.06%	6.24%	5.82%	3.68%
Net Margins	2.47%	5.23%	4.85%	0.70%
Asset Turnover	0.81	1.00	2.16	2.03
Current Ratio	1.21	1.19	1.14	1.16

 

Future Outlook

 

The challenge to the global economy continues as there is no let up 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 volatility.

 

Despite these challenges, the management continues to remain nimble and is actively monitoring inventory positions and ensuring operational excellence to maintain profitability.

 

The Company is now focusing on consolidating in the markets where it has achieved optimal product penetration. 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.

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. 

Risks and Uncertainties

 The Company faces risks or uncertainty primarily in two exogenous factors i.e. commodity prices and currency exchange rate movements as its operations are dependent upon import of oil seeds, edible oil and animal feed ingredients. The management takes all possible measures to evaluate, monitor, contain and control the risk and has been successful in keeping the impact of adverse price and exchange rate movements on Company's profitability to a minimum by prudent supply chain management. 

Commitments and Contingencies

 There have been no major changes in commitments affecting financial position of the Company's affairs between the balance sheet date and the date of this report.

Acknowledgement

 Alhamdulillah, we are humbled and grateful to our various stakeholders including the shareholders, bankers and others for the faith imposed in the Company that helped our growth over the last four years. We thank them for their relentless support, as without this backing it would not have been possible to achieve these successes in such a short span of time. We look forward to this unwavering support and confidence from these stakeholders to help the Company grow further and expand its product portfolio.

 

We would also like to thank the Pakistan Stock Exchange Limited, the Securities & Exchange Commission of Pakistan and the Central Depository Company of Pakistan Limited for their continued support and cooperation towards the Company.

 

We also acknowledge the efforts and hard work of our committed human resource for the extraordinary efforts they put in to bring to fruition the outstanding results. We expect continued efforts from our employees to attain higher goals going forward.

 

For and on behalf of the Board,