EUR 9.10 For Business Accounts Only

FFL - FY23 Analyst Briefing Takeaways, (AKD Off the Analyst's Desk Nov 24, 2023)

FFL held its corporate briefing session yesterday to shed light on the 9MFY23 results and provide insights into the future outlook:

• Revenues and gross profits have risen 83%/545%YoY during 3QCY23. Notably, the company achieved its fourth consecutive PAT, highest in Sep'23 of PkR38.5mn (EPS: PkR0.02)
• Company’s volume and value growth for its major business segments were as follows:
  UHT milk 45%/101%YoY, Butter 8%/32%YoY, Cream 50%/109%, Cheese 14%/60%, respectively. Karachi, Rawalpindi and Lahore remain the fastest growing metropolitan regions for the company’s products.
• Company recently showed intention to acquire Fauji Foundation’s stake in Fauji Cereals and Infraavest Foods. Company will also acquire the pasta plant once the equity stake is fully transferred. Management stated that cereal/porridges are a mature and established market in the country.
• With regards to financing the said transaction, management stated there is an option for an ‘other than rights issue’ if deemed necessary. The transaction is expected to be completed by 1QCY24.
• With regards to historical margins of cereals and pasta segments, management refused to provide any specific numbers although stated that the businesses are margin/EPS accretive and sustainable in the long term.
• With regards to market sizes in the country, management estimated cereals/pasta/lose-pasta to be a PkR6/12/6bn per annum on a topline basis, respectively. Company’s major competitors in pasta would be Bake Parlor and Kolson.
• As per management, butter segment commands 56% of retail butter market while FFL stands third in the milk segment, although it grows exponentially every year.
• There is seasonality factor with several of the company’s products, with cream and butter sales witnessing upsurges routinely during the winter periods. Milk segment’s sales remain consistent year round.
• Regarding the recent social boycott, management indicated that the trend towards favoring home-grown brands over imported counterparts had already been underway for nearly two years. The shift in preference was largely due to currency devaluation and macro shocks.