Unity Foods Limited (UNITY) posted un-consolidated profits of Rs893mn during 3QFY22. This translates into a diluted EPS of Rs0.75 as compared to Rs0.95 in 3QFY21. The result came lower than our expectation of Rs0.86/share, due to (i) lower than expected gross margins, and (ii) higher than expected exchange losses.

We estimated gross margins of around 10% for 3QFY22, however actual gross margins clocked in at 9%. However, gross margins in 2QFY22 stood at 11% due to inventory gains as the company’s oil procurement price was quite low.

The company reported exchange loss of around Rs329mn in 3QFY22 as against the exchange gain of Rs389mn in 3QFY21. This makes the 9MFY22 exchange loss to Rs1.4bn vs. exchange gain of ~Rs650mn in 9MFY21. The loss is attributable to foreign currency denominated trade payables.

Net revenues of the company clocked in at ~Rs20bn (up 6% YoY and down 1% QoQ), mainly led by decent growth witnessed in Edible Oil segment where major contribution came from Palm Oil category.

Selling and Distribution expense were down 46% YoY to Rs173mn whereas admin expense surged to Rs171mn in 3QFY22 vs. Rs75mn in 3QFY21.

Finance cost increased by 49% YoY to Rs379mn due to rise in short term borrowings and higher interest rate.

Courtesy – Topline Securities