Unity Foods Limited (PSX: UNITY) reported a rebound in profitability, recording a profit after tax of Rs51.23 million (EPS: Rs0.04) for the quarter ending September 2024, compared to a loss of Rs280.99 million (LPS: Rs0.24) in the same period last year (SPLY). This turnaround was achieved despite a significant reduction in revenue.
Revenue Decline and Cost Management
Unity Foods’ revenue for Q1 FY25 slipped by 34.4% year-over-year, reaching Rs12.93 billion compared to Rs19.71 billion in the previous year. The cost of sales also declined by 36.1%, marginally outperforming the revenue drop. This relative improvement in cost structure helped Unity Foods manage its gross profit contraction to 22%, achieving Rs1.83 billion for the quarter. Consequently, gross margins rose to 14.1%, up from 11.9% in the same period last year, highlighting improved cost efficiencies despite lower sales volumes.
Other Income and Operating Expenses
Other income showed a modest increase of 7.6% to Rs248.55 million, contributing positively to the company’s financials. Additionally, Unity Foods successfully reduced its expense burden, with administrative expenses down by 0.6% to Rs201.38 million, and selling and distribution expenses cut significantly by 28.5% to Rs244.21 million. Other operating expenses saw a drastic drop of 81.1%, totaling Rs2.13 million, which helped boost profitability.
Finance Costs and Tax Impact
The company’s finance cost contracted slightly by 3.3%, settling at Rs1.59 billion in Q1 FY25. Unity Foods also benefited on the tax front, receiving a tax credit worth Rs22.52 million compared to an expense of Rs431.65 million in SPLY, which further supported its return to profitability.
Financial Summary (in Thousands):
| Item | Q1 FY25 (Rs ‘000) / Q1 FY24 (Rs ‘000) |
|---|---|
| Sales | 12,925,408 / 19,710,149 |
| Cost of Sales | 11,097,309 / 17,366,029 |
| Gross Profit | 1,828,099 / 2,344,120 |
| Administrative Expenses | 201,384 / 202,643 |
| Selling & Distribution Expenses | 244,209 / 341,308 |
| Other Income | 248,548 / 231,001 |
| Finance Cost | 1,592,261 / 1,646,283 |
| Profit Before Taxation | 28,709 / 150,669 |
| Net Profit for the Period | 51,227 / (280,985) |
| Earnings Per Share (EPS) | 0.04 / (0.24) |
Outlook
Unity Foods’ return to profitability this quarter reflects effective cost management strategies and improved gross margins. While the decline in sales poses challenges, the company’s focus on operational efficiencies and reductions in finance and operating costs has supported its financial recovery. Going forward, maintaining these efficiencies amid fluctuating revenues will be essential for sustained profitability.
