FFBL to invest Rs9.6 billion in Fauji Foods
Aftab Ahmed
Fauji Fertilizer Bin Qasim Limited (FFBL) will invest Rs 9.6 billion in Fauji Foods Limited (FFL) to achieve a turnaround.
It is seeking its shareholders’ approval to invest Rs3.5 billion in Fauji foods Limited directly.
Moreover, it will also provide a corporate guarantee to financial institutions to provide an Rs6.1 billion loan to Fauji Foods.
In a recent notice file to the stock exchange FFBL also said that it intends to convert its loan and accrued interest into equity at Rs 10 per share in the future.
This will take the total new capital allocation to Fauji Foods to Rs 9.6 billion. The company has turned more aggressive as management restricting Fauji Foods yields positive results witnessed by Rs2 billion sales mark in the recent quarter.
While talking to Newztodays senior sales executive of Fauji Foods has said, “We are confident of achieving sales growth December quarter with Rs2 billion sales mark compared to decline in sales of our competitors in December quarter”.
FFBL resolved to authorize the company to invest, provide, and continue sponsor support in and to FFL with an amount of Rs 3.5 billion.
FFBL will disburse to FFL in one or more tranches over a period of one (1) year. However, it will be subject to the terms of subordination and the approval of FFL’s lenders.
Covid-19 pandemic has provided opportunities to expand the business. Fauji Foods Limited is eying a larger market share after restructuring. It also hires professionals from leading FMCGs at key management positions to increase its market share.
Fauji Foods Limited made a major restructuring. Therefore, it hired professionals from the leading Fast Moving consuming goods sector at key management positions. Resultantly it will increase its market share. For the first time in history, the Fauji Foundation Group appointed a CEO from the corporate sector.
After intensive marketing campaigns, Fauji Foods achieved 36 percent growth in its sales in the quarter ending June 2020. After restructuring, Fauji Foods has rationalized Distribution and Admin costs, which declined by 53 and 16 percent in recent quarters.
Talking to the Newztodays, industry officials said, “ the company witnessed significant sales growth. Because people across the country avoided buying loose milk due to precautionary measures and preferred packed milk.”
Processed milk companies, including Fauji Foods, increased their prices by an average of 10% for their UHT milk brands. Fauji Food has witnessed the majority of growth in UHT milk sales.
Market sources say that FFBL was injecting more money into FFL that would result in expanding business. Processed milk companies, including Fauji Foods, increased their prices by an average of 10% for their UHT milk brands. Fauji Food has witnessed the majority of growth in UHT milk sales.
Loose milk prices also declined by 25% from Rs 60 per litter to Rs 45 per litter in rural areas in June 2020 quarter due to less demand and disruption in the supply chain. Simultaneously, processed milk companies remained able to grab this opportunity and increased their utilization to build inventory for the next quarter.
READ FFBL to invest Rs2.7 billion in Fauji Foods Limited.
The company also benefited from a delay in the axle load regime. Also, a decline in fuel prices registered a decrease in distribution costs.
Fauji Foods also did some financial restructuring in recent days and successfully converted an Rs2.63 billion loan from its parent company (FFBL) into equity investment. As a result, it issued 274 million new shares to FFBL. Similarly, Fauji Foods aims to save Rs927 million in interest expense annually.
