LAHORE: Unity Foods has announced intentions to expand its oil refining capacity by acquiring an existing refinery possessing a capacity of 500,000 metric tons per year.
In a notification sent to the Pakistan Stock Exchange (PSX), Unity Foods said “We are pleased to announce that in pursuance of its commitment to expand the business of the Company the management has decided to seek the expansion of its oil refining capacity. The current oil refining capacity of the Company comprise its oil refinery located in SITE Karachi which has a capacity to refine 150,000 metric ton per year of edible oil.”
“Under the proposed plan an existing refinery with a capacity of 500,000 metric tons per year is being considered for acquisition, which is already in operations, the notification read.
“However, post successful negotiations and acquisition, the management plans to make required improvements in the plant to bring it to state-of-the-art standards with capability to produce specialty fats,” said Unity Foods.
Adnan Sheikh Pak Kuwait Investment Co AVP Research told Profit, “The sector is very competitive, their brand is unknown will have a tough time with adoption, and they will likely resort to market disruption via discounts.”
He added, “Exchange rate volatility could hit the bottom-line and contract margins because either seeds are imported and processed, or unrefined oil is imported and processed.”
Furthermore, Adnan said, “But they will be adding value none the less and while potential is their investors seem to be overheating it.”
The company earlier this month had announced the launch of its new edible oil brand “Dastak” and said commercial production was expected to commence in September 2018.
Unity Foods said it was in process of establishing its distributors and dealers’ network across Pakistan and its brand “Dastak” was expected to be available for retail sale by September 2018.
Unity Foods Ltd (UFL) is an agri-business company with principal activities that entails the entire value chain from the procurement and crushing of multiple oilseeds.
Also, the company in June last year had announced a right share issue to raise Rs1.65 billion for purchasing of a solvent extraction plant, an oil refinery and, other ancillary assets and purchase of land and office building.
Pakistan is amongst the leading importer and consumers of edible oil. Current per capita consumption level of Pakistan stands at 23 kg per year compared to a global average of 28 kg per year (2015-16).
In 2017, Pakistani edible oil industry registered volumetric sales of 4m tons (translating into a market size of over Rs. 500 billion) growing at a compound annual growth rate (CAGR) of 5-7 percent, according to a report by JCR-VIS.
Unity Foods shares ended trading at Rs43.64, up Rs1.41 (+3.34 percent). KSE-100 index closed trading at 41,742.24 points, down 121.28 points on Friday.
