Karachi, Fauji Foods Limited (FFL) recently conducted a corporate briefing session to discuss its financial performance in the first nine months of the fiscal year 2023 and to outline its strategic vision for the future. The company reported significant growth in revenues and gross profits, with notable achievements in various business segments.
According to AKD Research, FFL achieved an 83% year-on-year increase in revenues and a 545% rise in gross profits during the third quarter of 2023. The company also recorded its fourth consecutive highest profit after tax (PAT) in September 2023, amounting to PKR 38.5 million, translating to an earnings per share (EPS) of PKR 0.02. The growth was driven by substantial volume and value increases across major business segments, including UHT milk, butter, cream, and cheese, with Karachi, Rawalpindi, and Lahore being the fastest-growing metropolitan regions for FFL’s products.
FFL has expressed intentions to acquire Fauji Foundation’s stakes in Fauji Cereals and Infraavest Foods, planning to also acquire a pasta plant upon the equity stake's full transfer. The management believes that cereal and porridge markets are well-established in Pakistan and views these acquisitions as strategic moves to expand the company's portfolio. The transaction is expected to be completed by the first quarter of 2024, with potential financing options including an 'other than rights issue'.
The company's management declined to provide specific figures regarding the historical margins of cereals and pasta segments but affirmed that these businesses are expected to be margin and EPS accretive and sustainable in the long term. The market sizes for cereals, pasta, and loose pasta in Pakistan are estimated at PKR 6 billion, PKR 12 billion, and PKR 6 billion per annum, respectively. FFL’s primary competitors in the pasta market are Bake Parlor and Kolson.
In the retail butter market, FFL commands a 56% share and holds the third position in the milk segment, showing exponential growth each year. The company's product sales exhibit seasonality, with cream and butter experiencing sales surges during winter, while milk sales remain consistent year-round.
Regarding the recent social boycott trend, FFL’s management noted that a preference for home-grown brands over imported ones had been emerging for nearly two years, mainly due to currency devaluation and macroeconomic shocks.
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