Corporate result: Engro Foods suffers Rs145m loss in 2nd quarter

Gross margins are the worst for a second-quarter result

KARACHI: Engro Foods Limited has posted a loss of Rs145 million in the second quarter ended June 2017 compared to a profit of Rs853 million in the same period of previous year, according to a company notice sent to the Pakistan Stock Exchange (PSX).

“The result was significantly lower than estimates,” a Topline Securities’ report said on Friday. The loss was primarily due to lower gross margins (which were several percentage points below expectations), the worst in a second-quarter result, it added.

Loss per share stood at Rs0.19 in April-June 2017 compared to earnings per share of Rs1.11 in the same quarter in 2016.

The KSE 100-share Index closed at 45,288, down 345 points or 0.76% on Friday. Engro Foods’ share price closed at Rs111.98, down 5%.



Net revenues in the April-June quarter dropped 19% year-on-year. The company has been facing fierce competition from new entrants in the tea-whitening category, which has hurt sales of its flagship tea whitener ‘Tarang’.

Although the company has come up recently with promotional campaigns to boost its market share in the tea-whitening category, they did not bear much fruit, the report said.

Engro Foods reported its worst gross margins in a second quarter, down 11.2 percentage points to 15.6%.

This considerable decline was due to lower volumetric sales, down about 20-30%, which pushed up fixed charges, and because of changes in the tax regime under the federal budget 2016-17, which substantially increased the cost of doing business for the UHT industry.

Moreover, an increase in duty on milk and payment of 0.5% technical fee and 2% of net revenues to Engro Corp and Royal FrieslandCampina respectively also hit the company.

Although the company increased prices of UHT milk by about 5% on a yearly basis to Rs120 per litre, it was not able to fully pass on the sales tax and duty impact.

Published in The Express Tribune, August 12^th, 2017.

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