December 14, 2021 (MLN): Unity Foods Limited (UNITY) has informed that the company had utilized Rs1.8 billion (48%) out of right shares of Rs3.75 billion issued in the year 2019 while Rs1.9bn (52%) remained unutilized as the work on the stipulated projects for the right issue remained slow due to the impact of the last wave of COVID-19, the company filing on PSX shown today.
The proceeds were to be utilized for the purchase of fixed assets.
However, the company remains committed to executing its well-laid down expansion plan. It is expected that the remaining machinery additions to Port Qasim Refinery will be delivered by June 2022. The remaining unutilized amount will be fully utilized to set up the supporting infrastructure by the time machinery is delivered and installed.
The notice said that the company has identified a site for the establishment of the Oil Terminal and negotiations are being initiated. Unity Foods will share the updates on the above in due course with details of the utilization of funds.
Unity Foods topline is growing at an impressive double-digit growth rate per annum since its acquisition and revival. Last full year's topline sales of Rs. 66 billion is over 120% increase compared to gross sales of the year ended June 2020. This is a contribution of both price and volume increase.
In order for the company to operate at an optimal level and to continue its growth in a measured way, it requires a total working capital of over Rs33 billion. The company, today, has total working capital lines of around Rs10 billion with various banks.
In addition, it is supporting its sales with the help of its single largest shareholder, Wilmer International. Wilmar has extended a suppliers' credit facility of USD40 million to help the company in importing the raw material that it needs to run its business. In addition, Rs4.5 billion from the previous rights issue is also fully deployed for working capital.
Also, the company has been hit hard by a double whammy, where international commodity prices are at an all-time high at the same time when the rupee has considerably depreciated against the U.S Dollar in the last six months. This increases the working capital requirements as with even the same sales level the higher conversion value of the raw material purchase in Pak Rupee pushes the working capital requirement even higher.
In order to import raw material, the company needs a Letter of Credit for the suppliers and the minimum collateral that the banks require for such facility is charged on current assets, therefore, the current assets are being used as collateral with the banks for the opening of the LCs.
The current right issue of Rs5.4 billion will go towards bridging the gap that is explained above through a right issue of two million shares at a price of Rs27 per share. Also, in these economically challenging times, this right issue will further strengthen the balance sheet of the company, which will give healthy support to its business operations as well as confidence to the investors.
The right issue is expected to positively impact the profitability, thereby adding value to the shareholders and enhancing the expectation of dividends.
The paid-up capital will rise from Rs9,940,500,000 to Rs11,940,500,000. The break-up value per share before the right issue (as of September 30, 2021) was Rs13.43. After issuance of the right shares, the break-up value is expected to rise to Rs15.70.
According to the notice issued, there is no risk related to the project as the proceeds of the rights issue will be deployed towards meeting increased working capital requirements as explained hereinabove.
Copyright Mettis Link News
29570
