Unity Foods (UNITY) conducted an analyst briefing today to discuss its business performance and future outlook. The company posted revenue of Rs83bn in FY24, with 48%, 27%, 13%, and 11% coming from Edible Oil, Sunridge (Wheat), Cattle Feed, and Others, respectively. The wheat segment has witnessed growth, but it only accounted for 11% of revenue in FY23.
§ Within the edible oil segment of 48% revenue contribution, 39% came from industrial and 9% from consumer packs. Consumer pack share has declined mainly due to higher interest rates in FY24, with the consumer segment requiring a longer cash cycle.
§ In terms of new developments, Wilmar’s share increased to 42.1% in FY24. Sunridge witnessed the expansion of 7 new outlets and 4 kiosks, capacity expansion in Edible Oil, Flour, Rice, and Confectionery, and the installation of a 2MW solar plant.
§ Management expects 80-85% capacity utilisation in Edible Oil and Wheat for FY25 and FY26, respectively. Lower utilization in FY24 was due to higher interest rates and a supply glut of edible oil created by higher palm oil imports in FY23.
§ The Company has expanded Sunridge Marts with 100+ product SKUs to create brand awareness for the Sunridge range of products. The company found this to be a better strategy than above-the-line marketing (Billboards, TV commercials, etc.). Retail stores are expected to expand to Lahore in the future.
§ Distribution expenses as a % of sales increased to 2.99% in FY24 compared to 1.84% in FY23. Higher distribution expenses are due to product diversification and higher exports in FY24. Admin expenses as a % of sales increased to 1.84% in FY24 compared to 1.2% in FY2,3, mainly due to inflationary impact.
§ Exports for the company increased to 7.86bn in FY24 compared to 0.86bn in FY23. Export markets also increased, with the company now exporting to 8 countries. In the future, the strategy is to increase exports further, especially from the Rice and Confectionary segment.
§ UNITY management expects international palm oil prices to remain steady. Palm prices usually follow crude oil prices; however, due to extreme weather patterns impacting supply, prices have not declined significantly.
§ Finance cost for the company increased to 7.44bn in FY24 compared to 3.56bn in FY23. As we advance, management expects a decline in interest rates to lead to cost savings for the company.
§ UNITY plans to transition from an edible oil company into a complete staples company, with growth especially expected from the Sunridge brand.
Courtesy – Topline Pakistan Research
