Corporate results: Engro Foods records healthy profit

Earnings clock at Rs190 million for 1QCY14.

KARACHI: Engro Foods – a subsidiary of Engro Corp, Pakistan’s largest private-sector conglomerate – has posted earnings of Rs190 million or earnings per share of Rs0.25 in the first quarter ended March 2014.

The earnings are significantly higher than the loss of Rs370 million or Rs0.48 per share in the fourth quarter of calendar year 2013 (4Q2013).

Sequential increase in earnings is attributable to the increase in price of ‘Olpers’, though volumes remained under pressure, Topline Securities reported on Thursday.

As a result, revenues of the company increased 2.6% to Rs10.2 billion while gross margins increased by 7.5% to 20.3%. During 1Q2014 (Jan-Mar), the company’s gross profit stood at Rs2.1 billion.

The 1Q2014 result is better than estimates and the company is expected to maintain growth in the coming quarters, the report added.

Analysts say the company is still in the recovery mode. The company posted a profit after tax of Rs870 million in the year ended December 2013, down 66% compared to Rs2.6 billion in CY12.

Last year’s losses were 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.

Further improvement in earnings was provided by 15.2% decrease in distribution costs to Rs1.1 billion due to fewer media campaigns and 78% lower other expenses to Rs61 million.

To recall, in 4Q2013 other costs include a one-time charge of Rs208 million or Rs0.3 per share relating to sales tax payable for the period (June 13, 2013 to July 17, 2013) when the Federal Board of Revenue temporarily removed zero rating of dairy products.

However, on the negative side, recent Pakistan rupee appreciation has negatively affected valuation of biological assets (farm animals) as company records them in dollars. Rough estimates suggest the company may have incurred Rs45-55 million revaluation loss on farm assets.

On year-on-year (YoY) basis, sales increased 5.7% from Rs9.6 billion in 1Q2013 but gross margins dipped 9.2% from 29.5% in 1Q2013 to 20.3% in 1Q2014. As a result, gross profits declined by 27% YoY from Rs2.8 billion. This decline is mainly attributable to company’s inability to timely pass on the cost pressures.

Published in The Express Tribune, April 18^th, 2014.

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