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It is said that firms that produce spirits thrive during recessions globally, as people consume more intoxicants in bad times than good. Whether that holds true for Pakistan or not is tainted by limitations of sample size; but it appears that the land of pure has its own share of recession-resilient stocks: the FMCG sector.

A cursory look at the financial statements of Fauji Foods (PSX: FFL) would indicate that the company stands for all that is wrong with domestic FMCG segment: aggressive expansion lacking long-term strategy; and, management hubris egged on by deep sponsor pockets. Yet, ever since the lockdown began on March 23rd, FFL’s performance –both financial, and at the bourse – show that if done right, tragedy can be turned into opportunity.

FFL (previously Noon Pakistan until 2015) has been a loss-making entity long before it was acquired by the Fauji Group. When the Rs7 billion injected by the new sponsors since acquisition failed to turn the fortunes around, the business was put on the block. Even the much-touted potential of Pakistan’s “untapped dairy industry” failed to retain the interest of a Chinese bidder last year, given the high level of leverage and accumulated losses.

But the fortune favors the bold, or in this case ‘the prepared’. Right when it seemed that the endless price-wars and tax distortion had doomed the dairy industry forever, Covid-19 happened. During the early days of lockdown, an increase in volumetric offtake of dairy companies was written off as panic buying. More than a quarter has passed since, and it looks as if that the take-off in performance is rooting itself in solid foundations.

As wonderful as a double-digit growth in topline looks, the real story for FFL is curtailment of losses led by a sharp control on cost of production and overhead expenses. Recall that dairy industry has been notoriously famous for improving its profitability margins by taking a hit on volumes (increasing prices). Matters appear to have seen a sharp reversal in the just ended 1H of 2020.

Was it panic buying then? Clearly, not for the entirety of second quarter. Instead, market intelligence suggests that the company won a long-term sale contract with a multinational fast food giant for sale of its dairy value-added products at the beginning of CY20, the revenue from which has begun to trickle in since.

If this does not mark a reversal in company’s fortunes, the long-term slide into abyss has at least plateaued. The pandemic may not have helped everyone, but the lockdown and ensuing pizza deliveries have certainly saved some.