Lovello's capital machinery import delayed over hurdle in LC opening

With an aim to expand business, Taufika Foods and Lovello Ice-Cream PLC — an ice cream maker and marketer with the brand name Lovello — went public and raised Tk30 crore from the stock market around three years ago.

However, the hope for expanding business with the raised money is being delayed due to complexity over opening of the letter of credit (LC) for dollar shortage in banks.

As a result, its procurement of plant and machinery is hampered, compelling the company to keep the fund idle. 

Now, Lovello wants another more year time extension to utilise the fund raised from the initial public offering (IPO).

At present, of the raised fund, the company utilised Tk25.67 crore till June 2023. Now Tk4.32 crore remains unutilised. The unutilised fund is mostly allotted for the procuring capital machinery, and freezers.

"We faced hurdles in opening LCs to import capital machinery within the stipulated time. That is why the expansion plan has been delayed. However, we hope to overcome the situation soon," said the company's Secretary Mohammad Didarul Alam.

He added, "As we couldn't utilise the full amount, we need more time. So, in the annual general meeting (AGM), shareholders allowed an extension by a year till January 2025."

Before the shareholders' approval, the board of directors of the company in October last year had decided to extend another year.
Previously, the company also got a year extension till January 2024 to use the money. 

Lovello's fund usage

According to its prospectus filed to the regulator, the raised fund is supposed to be utilised within 24 months after receiving consent from the Bangladesh Securities and Exchange Commission (BSEC). 

The expansion plan was scheduled to start operation after six months of the fund utilisation. However, three years have gone after receiving funds, but the company has only partially procured capital machineries and freezers. 

The allocation for loan repayment Tk9 crore, and vehicles purchase Tk2.05 crore has been fully utilised within the stipulated time. 

According to its annual report for 2022-23, Lovello used additional Tk64 lakh in vehicle purchase than the allocation. 

The allocation in acquisition of plant and machinery was Tk9.03 crore, according to its prospectus, and the company used Tk6.51 crore, and Tk2.52 crore remains un-utilize. 

Freezer purchase allocation was Tk5.78 crore, it used Tk4.68 crore and unused amount Tk1.10 crore. 

The allocation for investment in depots was Tk1.32 crore, but the full amount remained unused, according to its annual report for FY23. 

Lovello's financials

In FY23, Lovello witnessed a fall in revenue as its sales dropped by 1.73% to Tk94.36 crore and net profit by 13% to Tk10.52 crore. 

The ice cream maker said the decline was due to increase in all input raw material prices, significant volatility in foreign currency market and limitation for opening LC to import raw materials and increase in production cost.

Although its profit shrunk, the company declared a 10% cash dividend for the shareholders, which was approved by the shareholders but is yet to distribute.

In FY22, it paid a 12% cash dividend to its shareholders. 

In the first quarter of the 2023-24 fiscal, its revenue declined by 33% to Tk21.89 crore, and profit by 43% to Tk2.69 crore. 

Its shares price has been stuck at floor price at Tk37.90 for over six months.