FFL: Struggling to surface up with positive bottom line, loss plunges by 57% in 2HFY21

July 29, 2020 (MLN): Fauji Foods Limited (FFL) revealed its financial statement on July 28, 2021 for the period of six months ended on June 30, 2021, as per which company incurred losses of Rs758billion (LPS: 0.94), i.e. around 57% lower than the losses witnessed in the same period of last year (SPLY).

This decline in net losses is mainly owing to the significant drop in finance cost and substantial increase in other income.

According to the financial statement sent to PSX, the company managed to uplift the topline by 39% to 4.49tr in 2HFY21 on the back of improved distribution network, efficient procurement and process advancement.

Going in to the details, the focus of the management is to grow company’s topline and to achieve that, FFL is actively working on expanding its distribution network. As per management, company has strengthened its retail network in northern regions and it is also penetrating in southern market by enhancing its footprint in Karachi.

Resultantly, the company saw a major turnaround in gross profit worth Rs545 billion during 2HFY21 as compared to the gross loss of Rs109 bn in SPLY.

According to Muhammad Shahroz, Equity Research Analyst at Insight Securities, given the improved outlook of sales volume, turn around in gross profit, restructuring of debt, borrowing price differential between packaged and loose milk and recent change in taxation regime, it is expected that company’s bottom-line to turn positive in CY23.

With regards to the major expenses, the company observed 11.8% expansion in terms of marketing and distribution expenses to clocked in at Rs487.33bn in 2HFY21. On the other hand, administrative expenses plunged by 3.7% to stand at Rs175.76bn during the period under review.  

Meanwhile, the finance cost of the company has tumbled by 39.4% on the back of interest rate cut by State Bank of Pakistan in order to provide smooth business environment in the wake of Covid-19 pandemic.

On the income front, the head of other income expanded by 95% during the period to locked in at Rs61bn, whereas company did not report any amount in terms of other expenses during the period under review.

However, on the taxation side, company booked effective tax rate at 10% during 2HFY21 as compare to 2.22% in SPLY.

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