July 02, 2014

RFM to boost pasta production capacity

RFM Corp (RFM, Not Rated) announced during its annual shareholders’ meeting that it will put up another long goods production line to meet the requirements of its newly-acquired Royal pasta products. The company is alreadyoperating at full capacity to meet the demand for its own Fiesta pasta brand, the market leader with 29% market share as of 2013.

RFM expects to control half of the pasta market with the acquisition of number two brand Royal from Unilever. RFM believes that this will enable it to achieve an 18% growth in sales to P12b and 20% earnings growth to P950m this year.

Our take: The new brand acquisition and capacity expansion bodes well with the company as it can capitalize on strong brands and market leadership. This also fits in with RFM's flour milling operations. Gaining a bigger share of the pasta market gives RFM more market power amidst a highly-competitive environment. – WealthSec