Fauji Foods : Transmission of Quarterly Accounts for the period ended June 30, 2023

CONTENTS

03	04	07	08	10	12
Corporate	Directors'	Directors'	Independent	Condensed	Condensed
Information	Report to the	Report to the	Auditor's	Interim	Interim Profit or
	Shareholders	Shareholders	Review Report	Statement	Loss Account
		in urdu		of Financial
				Position

13	14	15	16
Condensed	Condensed	Condensed	Notes to the
Interim	Interim	Interim	Condensed
Statement of	Statement of	Statement of	Interim
Comprehensive	Changes in	Cash Flows	Financial
Income	Equity		Statements

CORPORATE INFORMATION

Board of Directors

Mr. Waqar Ahmed Malik

Chairman

Mr. Sarfaraz Ahmed Rehman Mr. Arif ur Rehman

Dr. Nadeem Inayat

Syed Bakhtiyar Kazmi

Ms. Tania Shahid Aidrus

Mr. Ali Asrar Hossain Aga

Mr. Basharat Ahmad Bhatti

Mr. Javed Kureishi

Audit Committee

Mr. Javed Kureishi

Chairman

Syed Bakhtiyar Kazmi

Mr. Basharat Ahmad Bhatti

Dr. Nadeem Inayat

HR&R Committee

Mr. Ali Asrar Hossain Aga

Chairman

Dr. Nadeem Inayat

Ms. Tania Shahid Aidrus

Mr. Arif ur Rehman

Operation

and Business

Committee

Mr. Sarfaraz Ahmed Rehman

Chairman

Mr. Basharat Ahmad Bhatti Mr. Ali Asrar Hossain Aga

Shares Registrar

M/s Corplink (Pvt.) Limited Wings Arcade, 1-K, Commercial, Model Town, Lahore.

Tel: [phone] Fax: [phone]

E-mail: [e-mail]

Registered Office

42 CCA, Ex-Park View, DHA Phase - VIII, Lahore. Tel: [phone]E-mail: [e-mail]

Chief Executive Officer

Mr. Usman Zaheer Ahmad

Chief Financial Officer

Mr. Waseem Haider

Company

Secretary

Brig Hamid Mahmood Dar

SI(M), (Retd)

Auditors

EY Ford Rhodes

Chartered Accountants

Legal Advisers

Mr. Khurram Raza

Advocate Supreme Court

Plant

Bhalwal, District Sargodha.

Website

www.faujifoods.com

Bankers

Habib Bank Limited

United Bank Limited

National Bank of Pakistan

Bank Alfalah Limited

Faysal Bank Limited

MCB Bank Limited

Askari Bank Limited

Allied Bank Limited

Bank AL Habib Limited

Dubai Islamic Bank Pakistan Limited

Soneri Bank Limited

JS Bank Limited

Al Baraka Bank (Pakistan) Limited

HBL Microfinance Bank Limited

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Half Year ended 30 June 2023

3

FAUJI FOODS LIMITED - DIRECTORS' REPORT TO THE SHAREHOLDERS

The Board of Directors of Fauji Foods Limited is pleased to present the directors' report along with the condensed unaudited interim financial information of the Company for 6 months period ended June 30, 2023.

Pakistan remains an attractive market for consumer business with an annual consumption expenditure of circa $ 329 bn; food and dairy are amongst the largest consumer segments. FFL, with its unique portfolio and multiple strengths is perfectly placed to claim its rightful place in Pakistan's large and growing consumer market.

However, uncertainty in local and global economic environment continues to pose challenges for all businesses. High inflation coupled with continued devaluation has resulted in massive cost increases. As a consequence, input costs for raw milk, packaging, utilities etc. continued their meteoric rise in H1`23. Re-application of Sales Tax on an already declining Tea Creamer category in Q2'23 also impacted category volumes.

Despite these challenges, FFL achieved its first ever PAT positive (PKR 22 mn) quarter in Q2 2023. In fact, it was the 4th consecutive month in green by the company. With the first half revenue of PKR 9.8 bn (+105% over SPLY) the business is all set to achieve the turnaround.

The commercial sustainability is reflected through improved structure of the P&L as Gross Margins increased from 3.7% H1 2022 to 12.5% in H1 2023. Continuous focus on cost efficiencies, & timely price increases yielded an additional 8.8% Gross Margin. As a result, FFL achieved operating profit of PKR 190 mn vs PKR (708) mn loss in SPLY, an increase of PKR 898 mn. With a solid turnaround strategy delivering results, the EBIDTA which has been on a growth path since Q4`22 surged to PKR 448 mn in H1`23, a 197% growth over SPLY.

EBITDA Evolution

(PKR mn)

		448
	146	77
(464)
H1 2022	H2 2022	H1 2023
	EBITDA (PKR mn)

FFL's persistence with the strategy of Margin Accretive growth and focus on cost efficiencies has brought sustainability to business results. The impact of progress on each of these strategic pillars is captured below:

1. Margin Accretive Growth:
   FFL achieved growth of 105% in Net Revenue in H1'23 over same period last year (SPLY). This was driven by continued volume growth in UHT Milk (51% vs SPLY), increase in distribution (additional 14,000 outlets) and strong growth of Institutional sales (+202% vs SPLY).
2. Reducing The COGS:
   The topline growth was complimented by improvement in Gross margins which grew by 3.35 times, from 3.73% H1'22 to a double-digit Gross Margin of 12.51% in H1'23. Twin sustainability projects of 1 MW solar and bio mass went into production in Q1 and will continue to positively impact energy cost from here onwards.

Revenue

Operating Profit/(Loss)

Net Profit / (Loss)

(PKR mn)	9,838	(PKR mn)	190	(PKR mn)
					22
4,797					(225)	(170)
		(708)		(690)
H1'22	H1'23	H1'22	H1'23	Q3'22	Q4'22	Q1'23	Q2'23

1. Elimination of Legacy Debt and Interest Cost:
   Q1'23 interest cost of PKR 299.78 mn is essentially what resulted in the loss after tax of PKR (170) mn for Q1'23. On March 8th 2023, the entire debt of PKR 8.0 bn was paid off after completing the other than right equity injection process. The repayment of legacy debt, which was a serious drag on the business performance, now provides a platform to grow the business in a sustainable manner.

Future Outlook:

Looking ahead, the investment in brands and distribution infrastructure should continue to fuel growth. With the legacy debt burden now removed, growth in Margins and EBIDTA will help grow the business even faster whilst introducing new products. The political and economic uncertainty is unlikely to go away in the near future, however the strategy of pivoting to value added portfolio will enable the business to cover the expected inflation through pricing & margin management. We are confident that FFL driven by its vision of "Unleashing Pakistan's promise in everything we touch" will not only build a successful business but leave a mark on the broader national landscape for times to come.

The Board is thankful to the valuable stakeholders and shareholders for their trust and continued support to the company.

Waqar Ahmed Malik	Usman Zaheer Ahmad
Chairman	Chief Executive Officer
Dated: July 21, 2023

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Half Year ended 30 June 2023

5

Revenue

Operating Profit/(Loss)

Net Profit / (Loss)

(PKR mn)	9,838	(PKR mn)	190	(PKR mn)
					22
4,797					(225)	(170)
		(708)		(690)
H1'22	H1'23	H1'22	H1'23	Q3'22	Q4'22	Q1'23	Q2'23

EBITDA Evolution

(PKR mn)

		448
	146	77
(464)
H1 2022	H2 2022	H1 2023
	EBITDA (PKR mn)

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Half Year ended 30 June 2023

7