UNITY sees profits slip on exchange losses, higher finance costs

April 28, 2022 (MLN): Unity Foods Limited (UNITY) has witnessed a notable decline in its net profits of 37% to clock in at Rs1.80 billion (EPS: Rs1.79) during 9MFY22 when compared to Rs2.87 billion (EPS: Rs3.32) recorded in the same period last year, the company filing on PSX showed today.

The decrease in profits is due to an exchange loss of Rs1.42bn and higher finance costs.

Going by the financial statement, the top line of the company increased by 22% YoY to stand at Rs60.82bn. With a 21% increase in the cost of sales, the gross margins remained stable at 9% during 9MFY22.

The company is cognizant of the macroeconomic headwind that it continues to face with higher international commodity prices and weakening local currency against the US Dollar and is therefore running a tight ship with respect to inventory management and costs.

Since the State Bank of Pakistan has increased the policy rate by 350 basis points (100 basis points increase in December of 2021 and 250 basis points increase in April 2022), the financial charges of the company surged by a whopping 94% to Rs1.24bn.

To counter the adverse effects of an increase in the cost of doing business, the company has been able to reduce its selling and distribution expenses by 7% YoY. Administrative expenses, however, have increased massively by 2 times YoY during the period under review. One of the components that have added to this cost is the license fee of SAP 4 Hana software.

Meanwhile, the company paid taxes worth Rs230mn.

Considering all the challenges that the company has faced due to macroeconomic instability, it has remained profitable during the nine months of the current financial year.

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