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KARACHI: Agro Processors & Atmospheric Gases (APAG), a Pakistani food manufacturing company, plans to raise up to Rs2.6 billion ($9.37 million) through an initial public offering scheduled for this week, with the proceeds earmarked to lift production efficiency, Chief Executive Officer Ahmad Ghulam Hussain said, as the company sets its sights on growing exports to $25 million within three years by penetrating markets in the Middle East, North America and Europe.
APAG ranks among Pakistan's leading food manufacturers, best known for its flagship cooking oil brand Soya Supreme. Founded in 1981, the company also produces Smart Sauces, Smart Canola Cooling Oil and Malta Cooking Oil.
The book-building phase of the IPO is set to run from August 27 to 28, with public subscription scheduled for September 3 to 4. In an interview with Arab News on Tuesday, Hussain said the company aims to raise between Rs1.8 billion ($6.49 million) and Rs2.6 billion ($9.37 million) to fund new machinery, energy systems, warehousing, marketing and raw materials.
The company currently operates at a production capacity of 90,000 tons and intends to scale this up to 120,000 tons, according to Hussain.
'We plan to increase our exports to the Middle East, North America and European countries,' the APAG chief said. 'We will be entering those markets very soon. We want to launch our brand in some of the Middle Eastern countries.'
Hussain said the company is particularly keen to expand into Qatar and the UAE, where it sees opportunities to boost direct sales and to re-export Pakistani products to other countries.
Pakistan remains heavily dependent on imported edible oil raw materials, with Hussain estimating annual consumption at around 5 million tons. The country imports roughly 3.5 to 4 million tons of palm oil every year, mainly from Indonesia and Malaysia, alongside other soft oils such as canola, soybean, grapeseed and cottonseed.
Hussain estimated that exports account for around 5 to 8 percent of Pakistan's overall edible oil market, mostly in the form of value-added palm-based products. Ghee accounts for roughly 70 to 75 percent of domestic edible oil consumption, while cooking oil makes up around 30 percent.
APAG currently operates at about 55 percent utilization and expects the IPO to expand its production capacity by 33 percent through a balancing, modernization and replacement (BMR) program, he said.
'That would make our plant more efficient, our quality better, even one step ahead of others,' Hussain added.
The company expects the investments to deliver returns within two to two-and-a-half years while improving efficiency and product quality. Part of the capital will also enable APAG to respond to large institutional and tender orders that can require production volumes above its monthly average.
Around 41 percent of the IPO proceeds will go toward capital expenditure and plant machinery, while 17.8 percent is earmarked for biomass boilers. The company also plans to expand its solar program and invest in green utilities.
Civil works will include the construction of a warehouse at the factory, which Hussain said would reduce logistics costs and lessen dependence on rented storage.
Another 14 percent of the proceeds is expected to be spent on additional marketing, particularly in markets where APAG sees stronger potential.
Exports currently contribute seven to eight percent of APAG's revenue, and Hussain said the company intends to broaden its portfolio into mayonnaise, ketchup, chili garlic sauce and chicken spread products.
Hussain said the company was eager to launch its products in the Middle East, especially Qatar and the UAE, given the large Pakistani communities residing in both countries.
'Even the Arab world knows our brand,' he said. 'So we want to enter that market.'
The UAE, he added, is particularly attractive thanks to its well-established re-export market to Africa and other nations.
'We want to expand there and re-export our product from there to other countries,' he said.
APAG's plans to grow its Middle East exports have, however, been dented by regional tensions. Hussain acknowledged that the company could have lifted its Middle East sales, but the United States–Iran conflict weighed on shipments.
Rising competition, shipping-related pressures and other regional uncertainties have made the company more cautious, he added.
'We were very aggressive six to eight months ago,' Hussain said. 'But because of this crisis, we have to be prudent about a lot of things.' APAG expects its current exports, valued at around $5–6 million, to quadruple, a 317 percent increase.
'We want exports to go up to $20–25 million in the next three years,' he concluded.
Source: Arab News PK