Corporate result: Stiff competition shaves 25% off Engro Foods’ profit

Company earned Rs2.38b in 2016 compared to Rs3.16b in previous year

Our Correspondent February 03, 2017

KARACHI: Engro Foods Limited has announced a decline of 25% in its net profit in the year ended December 31, 2016 following a drop in sales due to stiff competition in the packaged food segment.

The company recorded a profit of Rs2.38 billion in the year compared to earnings of Rs3.16 billion in 2015, according to a company announcement sent to the Pakistan Stock Exchange (PSX) on Friday.

Accordingly, earnings per share fell to Rs3.11 in 2016 from Rs4.13 in the preceding year.

Elixir Securities, in its post-result comments, said: “(The) decline in earnings was largely expected by the market amidst rising competition in the sector.”

Along with the results, the board of directors recommended a final cash dividend of Rs10 per share. This included a one-time special dividend of Rs9 per share.

The entitlement will be paid to the shareholders whose names will appear in the register of members on March 17.

The stock price of the foods company rose 1.40%, or Rs2.82, and closed at Rs203.88 with a volume of 4.14 million shares.

Elixir added it was the first-ever cash dividend announced by the company and that came as a major surprise. The dividend would translate into an earnings impact of Rs5.84 per share for Engro Corporation given its 39.9% shareholding in the foods company, it estimated.

The payout was “likely attributable to the re-alignment of capital structure by the acquiring company (FrieslandCampina) and will likely be financed by debt in a bid to rebalance the debt-equity mix,” Elixir said.

The company retired Rs4.48 billion of debt in the past one year. This has notably changed the debt-equity mix.

Net sales of Engro Foods dipped 11% to Rs44.34 billion in 2016 from Rs49 billion in the previous year. Other income halved to Rs148.50 million from Rs325.52 million last year.

On the flip side, the finance cost fell 2.5 times to Rs348.03 million from Rs856.41 million.

In the fourth quarter (Oct-Dec) alone, the brokerage house reported, the company booked a net loss of Rs208 million (loss per share of Rs0.27) compared to earnings of Rs624 million (earnings per share of Rs0.81) in the corresponding period of previous year.

Published in The Express Tribune, February 4th, 2017.

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