Financial results: Fall in profits leaves sour taste for Engro Foods

Rough year for local giant as profit dips 66%.

KARACHI: Engro Foods on Friday announced disappointing results and posted a profit-after-tax of Rs870 million for the year ending December 2013, down by 66% compared to Rs2.6 billion in the same period of previous year.

The earnings per share (EPS) dropped to Rs1.14 compared to EPS of Rs3.43 during the period under review.

Engro Foods − a subsidiary of Engro Corp, Pakistan’s largest private-sector conglomerate − saw weak sales during the year that declined to Rs37.9 billion, down by 6% year on year (YoY) against sales of Rs40.2 billion.



Last year was a particularly tumultuous one for the company with the collapse of its distribution network, and an unexpected change in leadership which saw Sarfaraz Rehman take up his old post.

The losses are attributable to Engro Foods’ Canada business (Netherlands BV, whose takeover was completed on December 16, 2013) where the company lost an estimated of Rs29 million, JS Global Research reported on Friday.

Charges related to sales tax during the period, when Federal Board of Revenue (FBR) removed zero rating status of dairy products, amounted to Rs208 million also dampened earnings, the report added.

However, a press release by the company puts the amount of all such ‘one-time’ charges at Rs881 million.

In fourth quarter (4Q) alone, the company booked a loss both on a reported and recurring basis primarily attributable to depressed gross margin of 13% in 4Q of CY13. In the same quarter, the company recorded a recurring pre-tax loss of Rs360 million (estimated 4Q recurring loss per share (LPS) at Rs0.45).

Analysts say the depressed sales of the company are mainly because of the distribution issues facing the company, price competition with Nestle and overall slowdown in UHT milk market.

“Corrective steps undertaken by the management for the company’s distribution issues are likely to start depicting results from the next quarter,” an AKD Research report said. “For calendar year 2014, the company is expected to be back on a growth path with an earnings of Rs2.0 billion.”

Published in The Express Tribune, January 25^th, 2014.

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