Corporate results: Engro Foods records about 500% rise in profit

Local foods giant posts after-tax profit of Rs1.9b for 1HCY15

KARACHI:

Taking momentum forward from the previous quarter’s comeback results, Engro Foods once again performed strongly as profits rose about 500% to nearly Rs2 billion in the first half of 2015, the company’s financial report revealed on Friday.

A subsidiary of Engro Corp - Pakistan’s largest private-sector conglomerate - the local foods giant reported an after-tax profit of Rs1.9 billion or Rs2.6 per share for the six-month period ended June 2015 compared to Rs329 million or Rs0.4 per share in the same period of last year.

The maker of Olper’s, which had been through a roller coaster ride in 2013 and 2014 because of disruption in the distribution network and declining margins, saw its revenues climb to Rs25 billion during the period under review, up 25% compared to Rs20 billion in the corresponding period of 2014.

The results, which according to analysts were in line with market expectations, follow a strong performance in the first quarter when it made a comeback with more than 400% increase in profit.

“We attribute the higher rupee sales to record Olper’s volumes, recovering Omung sales and growing ice cream business, in addition to higher selling price,” Taurus Securities’ Zeeshan Afzal said while commenting on the results.

During the six-month period, he added, revenues of the dairy producer improved 24% to Rs24.9 billion.

However, Afzal said the basic thrust to the profit came from record low international milk powder prices and domestic milk procurement prices. As a result, gross margins significantly improved to 26.2%, he said.

Amidst profit-taking, Engro Foods share price declined 3.3% with trading in nearly two million shares worth Rs323 million on Friday. Opening at Rs169.9 per share, the stock reached a low of Rs163.8 during intra-day session and traded at Rs164.4 at the close of business.

It may be recalled that Engro Foods had been facing problems in its distribution system for the last two years. Though the company was able to fix the distribution infrastructure in late 2013 or early 2014, it continued to report declining margins. The latest results, however, indicate that it is back on the track of profitability.

Published in The Express Tribune, August 1^st, 2015.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.