‘Maniker F&G’ Unable to Smile Even Amid COVID-19

[Asia Economy Reporter Yoo Hyun-seok] Maniker F&G, which was expected to benefit from the increase in delivery and online orders due to COVID-19, is not seeing those benefits. This is because the business-to-business (B2B) sector, such as franchises and catering companies, experienced a decrease in supply due to COVID-19. Additionally, the debt ratio has increased recently due to investments.

◇Stagnant Sales and Declining Profitability= Maniker F&G was established in 2004. It is a meat processing food specialist company that processes and produces products from chicken, pork, and beef. It has secured major franchise and catering clients such as McDonald's, Lotteria, Burger King, as well as Samsung Welstory, Hyundai Green Food, and CJ Freshway. The company was listed on KOSDAQ in 2019.

Recent performance has stagnated. Sales, which were 99.4 billion KRW in 2018, were 99.8 billion KRW in 2019 and 92.3 billion KRW last year. Operating profits during the same period were 6.2 billion KRW, 4.4 billion KRW, and 3.7 billion KRW respectively. In the first quarter, sales and operating profit were 20.8 billion KRW and 700 million KRW, down 11.79% and 14.98% year-on-year respectively.

Especially last year, there was damage caused by COVID-19. This was because the sales proportion of the franchise sector, which was the main focus, decreased. In 2018, the B2B sector including franchises and catering companies accounted for 79.45% of total sales. It was 73.41% in 2019 but sharply dropped to 61.85% last year. The first quarter of this year accounted for 58.19%. On the other hand, business-to-consumer (B2C) transactions increased due to non-face-to-face orders and online sales, rising from 23.18% in 2019 to 36.45% last year, and further to 39.65% in the first quarter.

The biggest cause of performance stagnation is attributed to stagnant chicken prices and production shortages. Maniker F&G’s meat processing production capacity was 138,000 tons in 2019 and 2020, with operating rates of 92% and 95% respectively. They have already produced as much as possible. However, the average live chicken price continues to decline. According to the Korea Rural Economic Institute, the average live chicken price was 1,475 KRW in 2018, dropping to 1,259 KRW in 2019, and 1,121 KRW last year.

Along with this, the continuously declining operating profit margin is also cited as a cause of reduced profitability. The operating profit margin was 6.25% in 2018, 4.38% in 2019, 4.01% last year, and 3.21% in the first quarter. The company explains this is because the sales proportion of B2B products, which have relatively better cost ratios, decreased while B2C sales proportion increased.

◇Rights Offering to Fund Facility Investment and Debt Repayment= Maniker F&G conducted a rights offering worth 23.85 billion KRW last month. The planned issuance was 5 million shares, accounting for about 46.43% of the total 10.768 million shares. From the 28th to the 31st of last month, existing shareholders subscribed to a total of 5,449,541 shares, achieving a subscription rate of 108.99%.

Maniker F&G plans to invest 9.6 billion KRW in facility funds such as facility expansion and replacement. The company stated that due to production shortages, night shifts were operated, causing productivity decline and excessive labor costs. To resolve this, funds will be used for expanding production facilities, constructing refrigerated and frozen warehouses for inventory storage, wastewater treatment plants, and auxiliary facility construction.

3.7 billion KRW will be used for raw material purchases and new product development. Chicken accounts for the largest portion of Maniker F&G’s raw materials. Given the current outbreak of highly pathogenic avian influenza (AI), funds will be invested to prepare for related risks.

Additionally, 10.5 billion KRW will be used to improve the financial structure by repaying borrowings. The debt ratio, which was 152% in 2017, dropped to 59.46% in 2019 but rose to 119.88% in the first quarter. The company explained that the debt ratio increased due to short-term borrowings and private bond issuance for real estate purchases and liquidity securing related to the establishment of a new production plant last year. However, it remains lower than the industry average of 148.53%.

This content was produced with the assistance of AI translation services.