20-F: Forafric Global PLC Reports Financial Results for Fiscal Year Ended December 31, 2023

Forafric Global PLC's annual report on Form 20-F details the company's financial performance for the fiscal year ended December 31, 2023, highlighting revenue, expenses, and key financial metrics.

Summary

• Forafric Global PLC's Form 20-F report covers the fiscal year ended December 31, 2023.
• The company reported revenues of $305.5 million in 2023, a 5.4% increase from $289.8 million in 2022.
• Cost of sales increased to $274.9 million in 2023, up from $260.4 million in the previous year.
• The company experienced a net loss of $12.5 million in 2023, compared to a net loss of $19.2 million in 2022.
• As of December 31, 2023, the company had cash and cash equivalents of $24.0 million.
• The company's working capital deficit was $132.0 million as of December 31, 2023.
• The company has access to revolving working capital credit lines of $50.0 million, with $1.5 million unused as of December 31, 2023.
• The company also has Wheat Credit Facilities of up to $142.0 million, with $15.5 million unused as of December 31, 2023.

Sentiment

Score: 6

Explanation: The document presents a mixed sentiment. While revenue increased and net losses decreased, the company still faces challenges such as a working capital deficit and exposure to commodity price fluctuations. The future outlook is positive, but risks remain.

Positives

• Revenue increased by 5.4% year-over-year, indicating growth in sales volume.
• Net loss decreased significantly, suggesting improved financial performance.
• Acquisition of SIMS expands market share in Morocco.
• The company has access to substantial credit lines for working capital and inventory financing.
• The company is the leader in the Moroccan market in respect of the wheat milling business, with a milling capacity of 3,000 tons per day.

Negatives

• The company reported a net loss of $12.5 million for the year ended December 31, 2023.
• The company has a working capital deficit of $132.0 million as of December 31, 2023.
• The company is subject to fluctuations in agricultural commodity and other raw material prices, transportation costs, energy prices, interest rates and foreign currency exchange rates.

Risks

• The international price of wheat is the main risk in our operations.
• The continuation of the war between Russia and Ukraine could lead to raw material shortages or increases in raw material costs.
• The company is subject to currency exchange rate fluctuations which may have an adverse effect on our business.
• A natural disaster, economic depression or other adverse events affecting Morocco where most our facilities and customers are located facilities could adversely affect our business.
• The company may be subject to significant liability that is not covered by insurance.
• The company's risk management strategies may not be effective.

Future Outlook

The company expects future growth in its market will be led by continued demographical growth in the African continent, increasing urbanization in Africa, and the continued growth in the consumption of our products in the region.

Management Comments

• We consider sustainable growth to be the pillar of its business management strategy, through which it consolidates its position as a benchmark business group in its areas of activity and as a sound, innovative, sustainable, responsible enterprise, committed to: (i) social well-being, diversity, environmental balance and social and economic progress; and (ii) tax responsibility, respect of human rights and prevention of corruption and other illegal conduct.

Industry Context

The company operates in the large and growing African food market, providing base products such as flour, semolina pasta and couscous, which are staple products for most consumers in this and other developing markets.

Comparison to Industry Standards

• The total consumption of wheat-based product per person in Morocco is the second highest in the world, with 200kg per person per year.
• This is 3 times the average consumption per person per year of the rest of the world, as bread remains a staple of both the Moroccan diet and of Moroccan culture.
• The company's major competitors in Morocco include: Moulins du Maghreb, Zine Cereales, Rica Maroc, Casagrains and Dari Couspate.

Legal Proceedings

• There are currently three separate actions pending against the Company for unfair dismissal by former employees; however, none of such proceedings, individually, or in the aggregate, would have a material adverse effect on the Company or its operations if decided adversely against the Company.

Related Party Transactions

• The company has a lease agreement with a related party for the headquarters of Forafric Maroc, with total rent of approximately $420,000 per year.
• The company has an exclusive supply agreement with Millcorp Geneve SA, a wholly-owned subsidiary of the Seller, for the supply of wheat.
• The company owes the Lighthouse Capital Limited $8 million as part of the consideration paid in consideration for the business combination consummated in 2022 with interest accruing at the rate of 8 % per annum from June 8, 2022.

Stakeholder Impact

• The company's performance impacts shareholders through share value and potential dividends.
• Employees are affected by the company's ability to maintain operations and provide employment.
• Customers rely on the company for the supply of staple food products.
• Suppliers are impacted by the company's purchasing decisions and payment terms.
• Creditors are affected by the company's ability to meet its debt obligations.

Next Steps

• The company will continue to evaluate the probability of warrant exercise over the life of our Warrants and the merit of including potential cash proceeds from the exercise thereof in our liquidity projections.

Key Dates

Keywords

Forafric Global PLC, financial results, annual report, wheat milling, Morocco, revenue, net loss, credit facilities, acquisitions, financial performance