Fauji foods suffered heavy losses

Fauji foods suffered losses of Rs5.79 billion

Fauji Foods Limited declared loss of Rs5.79 billion for the year ended Dec 31, 2019. The company suffered the loss of Rs 10 .96 per share.  The loss of Fauji foods doubled in a year. Last year it suffered the loss of Rs2, 85 billion. It means a loss of Rs5.39 per share in 2018.    

Net sales of the company plunged to Rs5.74bn for the latest year from Rs7.65m a year ago and the impact was exacerbated by a billion more rupees incurred in finance costs amounting to Rs 1.70bn, from Rs0.67bn the earlier year.

The analysts are saying that food prices are going up and market competition has increased in last few years with the entry of more players. The market share and sales are shrinking as the high inflation and increased prices impacted the purchasing power of consumers.

The losses were increased primarily due to decline in top-line earnings by 31.4%, which turned company's gross profit in to negative (Rs.415.5 million) despite considerable cut down (20%) in cost of sales which logged in at Rs.2.95 billion in the first half of year 2019.

The other factors that contributed to increase in losses were the jump in finance cost by 163%, administrative expenses by 3.8% and tax payments by 4%. The dramatic increase in the financial costs contributed hugely in the increase of losses.

However, other income of the company saw an increase of Rs. 98.31 million, up by 451% as compared with Rs. 17.81 million recorded in the previous year. The finance cost saw a massive increase as it soared by 151.7% to Rs. 1.69 billion in 2019 as compared with Rs. 674.79 million in 2018. Other expenses were also up by 118.3% to Rs. 218 million versus Rs. 100 million last year. The company paid taxes worth Rs. 1.53 billion during the year, while it got a tax credit of Rs 463 million last year.

Fauji Group was looking to sell its food operations. However, negotiations with the buyer did not end successfully. During the year, China’s Inner Mongolia Yili Industrial Group had withdrawn its intention to acquire a majority stake in Fauji Foods Limited as both parties failed to reach an agreement before the deadline.

On the stock market-the share of the company dropped to Rs13.06 Rs 19 per share.  The share dropped Rs 5 in 2019.

                                                             Business correspondent