Dubai-listed dairy, beverage maker hikes prices to recoup losses

Milk, ice cream manufacturer Unikai also unveils plans to discontinue some products

  
Image used for illustrative purpose. A woman looks at products as she buys food supplies at a supermarket.

Image used for illustrative purpose. A woman looks at products as she buys food supplies at a supermarket.

REUTERS/ Jumana El-Heloueh

Unikai Foods, which has a manufacturing facility in Dubai, has unveiled plans to increase sale prices and discontinue some of its products as part of a multi-year plan to recoup accumulated losses that have so far reached about 20 percent of the company’s paid-up capital.

The maker and distributor of milk, laban and juice products have been incurring losses since 2018, partly due to stiff competition in the market and the implementation of the value-added tax and excise tax in the UAE.

Its revenues fell by eight percent to 312 million UAE dirhams ($84 million) in 2019 when compared to 2018, and by 12 percent when compared to 2017. The company expects its revenues to drop further this year by more than 20 percent to 243 million UAE dirhams, due to the coronavirus pandemic.

In a statement to the Dubai Financial Market (DFM) on Wednesday, the company said, it intends to improve its gross margins by approximately 35 percent to 37 percent over the next few years through the implementation of a loss recovery plan.

It also shared plans to expand into other markets in the Gulf Cooperation Council (GCC) region, such as Saudi Arabia and Kuwait.

Strategy

Part of the strategy is to increase the prices of its key products by eight percent to 10 percent. “Although this is expected to result in a decline in revenue in 2020, however, it will improve the profitability to reasonable levels, setting a benchmark for the company to maintain sustainable profits in the coming years,” the firm said.

The company is also now working to discontinue its loss-making products and to reduce the trading of some items with low margins.

“Such discontinuation of products and scaling down of few low-margin items, combined with price increases of certain key products is expected to impact revenue moderately. However, they will result in better profit margin,” Unikai said.

New products, warehouse

The company said it aims to introduce new products by co-packing it with existing goods, with minimal or no investment required.

It also wants to explore new export markets and improve its distribution capabilities to increase customer base, such as by establishing new warehousing facilities in Ras Al Khaimah to further penetrate the northern emirate market.

“The year 2019 has been a classic example of the success of implementation of these strategic priorities. The company has seen significant improvement and turnaround relative to the year 2018 in terms of financial and operational performance with good progress on cost-reduction programmes across the areas of administration, procurement, manufacturing and distribution,” said the company.

“These strategic measures are expected to continue and improve the financial standing of the company in the next few years,” it added.

The company has four branches in the UAE and eight branches in Oman. Recently, it is expanding into the African markets, Levant and other Gulf Cooperation Council (GCC0 states, such as Bahrain. It plans to extend its reach to Saudi Arabia and Kuwait.

(Reporting by Cleofe Maceda; editing by Seban Scaria)

Cleofe.maceda@refinitiv.com

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