Frou-Frou factory construction works begin

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Targets to lift ROE to 15%

Alkis Hadjikyriakos (Frou-Frou Biscuits) Ltd. has announced that the construction works on a new factory situated at the company’s distribution centre in Kokkinotrimithia have started.

Chairman of the Board Alkis Hadjikyriakos told shareholders during the company’s AGM address that construction works on the new factory have already started.

Hadjikyriakos acknowledged that while there has been some delay in starting construction works, this has been for the benefit of the company, since the price tag has been cut.

As opposed to initial plans that earmarked CYP 8 mln in expenditure, Frou-Frou will have its new factory at a cost of CYP 2.7 mln, while it will also spend CYP 3 mln on new equipment.

“We shall finance the cost of construction and equipment from our own resources,” said Hadjikyriakos. As at end of last year, FBI had CYP 4.3 mln in cash at the bank against CYP 2.3 mln in loans, while its cash flow is CYP 2.2 mln positive annually from operations.

Hadjikyriakos told the Financial Mirror that the new factory is expected to commence production by the end of 2006, incorporating the latest systems in production of biscuits, cereals and other goods.

The new factory is expected to reduce the cost of production, increase productivity, broaden the product range and allow FBI to compete head-on with cheaper imports.

Once the current production facilities are transferred from Engomi to the new unit in Kokkinotrimithia, then the land on which the current facilities is situated will be sold.

ROE target

Hadjikyriakos is upbeat on future prospects and while acknowledging the difficulties ahead, insists that FBI will be able to lift its Return on Equity (ROE) to 15% by 2007 from 6% now.

“It’s an ambitious target, but we are confident we shall meet our target once our new factory becomes fully operational.”

As at end of 2004, the total shareholders funds amounted to CYP 17.9 mln, which based on the 15% target means the company is forecasting net profits more than doubling to CYP 2.7 mln from the current CYP 1 mln level.

The FBI group, which boasted annual turnover of CYP 12.12 mln in 2004 compared to CYP 11.38 mln in 2003, derived CYP 4.3 mln of sales from production and distribution of its popular biscuits and cereals such as Morning Coffee, while another CYP 7.8 mln of sales is derived from imported goods such as Cadbury chocolates and others.

Net profits were up 25% in 2004 to CYP 1.01 mln from CYP 802,820 in 2003, with CYP 434,762 originating from local production and distribution and CYP 595,687 from the imported goods. In terms of margins, local products boasted a 10.1% net profit margin over sales while the imported products had a 7.6% margin of profit to sales.