Working capital management: FCEPL pays short-term advances to farmers

KARACHI: As part of financial inclusion programme, the Friesland Campina Engro Pakistan Ltd (FCEPL) has paid short-term advances over Rs 1 billion to its farmers for working capital management.

According to Imran Husain, CFO Friesland Campina Engro Pakistan Ltd under the regular dairy development programmes, the company has also trained over 53,000 farmers in one year on animal health, nutrition and farm management.

He informed that the last few years have been tough for many industries in Pakistan, especially considering the sharp increases in commodity prices due to inflation, currency devaluation and corona-related challenges.

“During this time, we adopted an agile approach and remained focused on our strategy of providing nutritious and safe products to our consumers, while driving business growth and improving conversion from unsafe loose milk to packaged milk”, he added.

In 2019, increase in commodity costs and rupee devaluation coupled with unfavorable taxation policies hit the FCEPL business and this resulted in stress on the gross profit of the company. Also, higher interest rates doubled the financial costs, leading to a negative profit after tax, he mentioned.

CFO FCEPL said that high inflation not only impacts cost of doing business, but it also erodes the purchasing power of our consumers. This impact is more pronounced on the food basket as the consumption is reduced.

Rupee devaluation negatively impacts the cost of imported packaging material as well as utilities and logistics cost hence forcing companies to price up or erode margins, he informed.

“While we foresee a challenging business environment in the future, several initiatives are being taken in FCEPL to drive efficiencies, manage inflation, and optimize financial performance and our priority remains to ensure a consistent supply of nutritious and safe products to millions of Pakistanis”, he added. Imran said that the rise is recent prices are due to global inflation which is hitting us like all other companies however since milk is essential nutrition, we don’t want it to become unaffordable for the larger population of Pakistan and to ensure it FCEPL is in continuous engagement with government and stakeholders.

To make sure prices do not hike, FCEPL is also focusing on enhancing productivity and yields across the value chain. In addition, FCEPL is continuously working with our dairy farmers to improve yields and milk quality via knowledge transfer on dairy farming, implementation of good dairy farm practices and increasing financial inclusion for farmers.

During corona closure FCEPL acted swiftly and launched our direct-to-consumer website and mobile app in just three days. Today ecommerce and digital RTM contributes a sizeable percentage in FCEPL overall sales, and FCEPL is continuing to invest behind it, he informed.

“On supply side FCEPL has automated the complete end to end milk collection cycle which is helping both, the Company and farmers”, Imran said.

CFO FCEPL informed that Pakistan is 4th largest milk producer and 5th largest milk consumer. The total size of the tradeable milk market is 27,400 million liters however 90 percent of that is loose milk which is unsafe.

“If we are successful in converting consumers from unhygienic, adulterated, and unsafe milk the nation will be able to get multiple benefits including improvements in health of our future generations, increase in tax revenue for government and positive impact on overall ecosystem”, he mentioned.

Copyright Business Recorder, 2021