Dented profitability will not dent Unity’s expansion plans

November 22, 2020: Unity Foods, in an analyst briefing on Friday, attributed the decline in FY20 earnings per share to the fallout from Covid-19. The company saw its EPS during 2019-10 fall to Rs0.39, from Rs1.03.

The management also cited a high policy rate for most of the year and the depreciating rupee, due to which it had to book exchange rate losses on account of unsold inventory.

However, the topline still continued to grow impressively, clocking in at Rs29.87 billion in FY20, from Rs14.1bn. This was partly thanks to bulk orders initiated by organization's under “Raashan drives”.

According to a flash note published by Topline Securities, Unity is “planning to do a Sukuk issue of Rs3bn (including Rs1bn greenshoe) to fund working capital requirements of the company as sales growth is expected in the range of 50-60%.”

On a related note, the company reiterated its plans for expansion and enters into the staples food (rice, pulses, etc) business. This is an addition to Unity’s acquisition of a 69% stake in Sunridge Foods in February this year, which brings in a capacity of 130 MT a day.  

Moreover, Unity announced capacity expansion of its flour mill to 440MT per day by 4QFY21, and its oil terminal to 45,000MT by 2QFY22. Additionally, its soap production line is expected to begin operations in 3QFY21. The company also disclosed the commencing of two new projects which include the Physical & Chemical Refinery plant and Fractionation plant, as per BMA Research’s note.