KARACHI, October 29 2024: UNITY Foods has announced its financial results for the first quarter of FY25, showcasing a significant turnaround with consolidated earnings of Rs88 million, translating to an earnings per share (EPS) of Rs0.07. This marks a remarkable recovery from a loss of Rs660 million (loss per share of Rs0.55) in the same period last year, exceeding market expectations.
The positive performance can be attributed to better-than-expected sales and improved gross margins. Despite the overall net sales for 1QFY25 declining by 22% year-on-year to Rs18.39 billion, the figure represents a substantial 34% increase compared to the previous quarter, indicating a recovery in demand.
The year-on-year decline in sales was primarily driven by lower volumetric sales across all major segments, compounded by a drop in prices for wheat flour and cooking oil. According to Pakistan Bureau of Statistics (PBS) data, the average price of a 20 kg bag of wheat flour stood at Rs1,844 in 1QFY25, down from Rs2,030 in 4QFY24 and a steep Rs2,820 in 1QFY24. Similarly, cooking oil prices averaged Rs534 per kg in 1QFY25, compared to Rs609 per kg in the same quarter last year.
Despite the decline in sales, the company managed to improve its gross margins significantly, achieving 14.4% in 1QFY25 compared to 10.9% in 1QFY24 and just 4.1% in the previous quarter. This improvement was driven by inventory gains in the edible oil and wheat segments, as local edible oil prices improved with international palm oil prices, enhancing price parity for the company. Additionally, a decline in wheat costs relative to selling prices contributed to better margins.
On the operational front, distribution expenses decreased by 22% year-on-year to Rs493 million, although they rose by 14% compared to the previous quarter, reflecting the impact of lower volumetric sales. Meanwhile, finance costs fell by 8% quarter-on-quarter to Rs1.87 billion, benefiting from a reduction in interest rates.
Despite the positive earnings report, UNITY did not announce any dividend payout for 1QFY25, which was anticipated by analysts.
In summary, UNITY Foods has demonstrated resilience and operational efficiency in 1QFY25, bouncing back from a challenging year. The company’s ability to improve margins despite declining sales signals a strategic adaptation to market conditions. Investors and analysts will be keen to monitor how UNITY builds on this momentum in the upcoming quarters as it navigates the complexities of the food sector.
