Mitchell's Fruit Farms Limited

Indian Mildura Fruit Farms was established in 1933, by Mr. Francis J. Mitchell, which was later renamed to Mitchell's Fruit Farms Limited (MFFL) after independence, in 1948. It is one of the oldest companies of Pakistan in the food and beverage sector,

Mitchell's offerings comprise of two categories, grocery and confectionery products. The former includes jams and jellies, beverages, ketchup and sauces, a range of ready to cook and ready to eat items, and pickles and chutneys. Confectionery product range is further divided in two categories, namely chocolate and sugar confectionery.

The company has also ventured into the dairy business, with sourcing cows from Australia; this was started as a welfare initiative with the aim of providing fresh milk to staff at lower costs. However, today it owns 85 cows, aiming to increase herd size to 200 cows.

Along with establishing itself as a household name in Pakistan, Mitchell's also exports to twenty countries; its major markets include United States, Middle-east and south-west Asia among others.

Shareholding pattern: Directors, CEO, and their spouse and minor children hold more than half, which is 58 percent of the shares in the company, followed by the general public which owns 27 percent. Modarabas and mutual funds hold approximately 10 percent; banks, DFIs and NBFIs hold a negligible share whereas "other" shareholder mainly includes joint stock companies.

Latest financial performance: Mitchell's revenue has been on a continuous decline, with the exception of 2017 when it increased by 12.6 percent year-on-year. This was due to the company's attempt to rebrand and reinforce products to the end consumers through competitive pricing and adding new products, essentially in the confectionery category; hence, the increase was more volume driven than price. Despite the positive gross profit, Mitchell's was unable to create a positive bottom-line since the cost effect surpassed the increase in revenue generated through promotions and extensive distribution. In addition, the provision of tax liability was a major factor in negative net profit.

The company had commenced a five-year growth strategy in 2018, investing to build infrastructure for expansion of its distribution network, seek retail penetration and hire individuals on better compensation packages. However, all their attempts to achieve increased sales went in vain as the wider distribution network was unable to contribute to a volume gain. This caused outflow of resources to tackle unabsorbed fixed costs, which in turn negatively affected the working capital, thereby creating negative bottom-line numbers. Trademark infringements also contributed to the declining exports.

The increase in 'other income' provided some relief to the increasing expenses. It was mainly due to the net exchange gain created by a positive change in exchange rate. However, it could do little in the face of increasing expenses seen in all aspects.

Mitchell's financial ratios also depict poor performance of the company. The company's current ratio has seen it decrease from1.81 in 2013 to 0.68 in 2018, indicating falling liquidity. Mitchell's debt to asset ratio paints a similar picture, doubling from almost 44 percent in 2013 to near 86 percent in 2018, implying business's inability to generate sufficient cash flow to service its debt. Moreover, the company's EPS has continuously reduced, more so in 2018 due to the large loss figures quoted by the company's statements, owing to a myriad of factors mentioned before.

Quarterly performance: Mitchell's seems to have recovered from a period of declining sales and incurring losses as per the quarterly report for nine months ended in 2019. It focused on reducing costs, specifically the distribution and marketing expenses, which previously failed to contribute to the bottom-line. It continued to face challenges due to the current government's economic reforms, in addition to the inflationary pressure which reduced the consumer's purchasing power. However, despite managing a positive operating profit of Rs59 million in 2019, as compared to the loss of almost Rs30 million, Mitchell's was unable to command a positive net profit owing to the inflated finance costs due to the increase in lending base rate.

Due to the nature of its products, Mitchell's is affected by climatic conditions. The company has tried to explore B2B business in the face of inadequate amount of tomato crop which is essential in the making of tomato paste.

Stock performance: Mitchell's stock performance remained more or less similar to the market from October 2018 to March 2019; since then it has become volatile, instead, performing against the market trend. When KSE-100 reduced after March 2019, Mitchell's stock, due to its own business dynamics and not being a significant market driver, was not affected by the negative sentiments portrayed by the index.

Future outlook: Mitchell's financial performance has been rather fluctuating. As per the company's 2018 report, under its new CEO, Mr. Mujeeb Rashid, Mitchell's Fruit Farms Limited is trying to accomplish efficiency in its functions.

The quarterly results for 2019 shows some improvement in its financial performance, however, the company's CEO and directors believe that alongside their efforts, economic stability in the country is required for effective business performance.