Engro Foods’ profit plunges 68% to Rs200m

Decline in sales and surge in finance cost lead to the drop

KARACHI: Engro Foods’ profit plunged 68% to Rs200.16 million in the quarter ended September 30, mainly due to drop in sales and surge in finance cost, according to a bourse filing on Monday.

The company had booked a profit of Rs633.45 million in the same quarter of the previous year.

Earnings per share (EPS) dropped to Rs0.26 from Rs0.83 in the previous period.

Its share price rose 3.91%, or Rs3.39, to Rs90.04 with a volume of 1.16 million shares at the Pakistan Stock Exchange.



“Earnings fared better than expectations, restricting the decline to 68%, mainly due to lower distribution expenses, around 50% of which comprises of advertisement expense,” Topline Securities said in a post-result comment.

The net sales decreased 16% to Rs9.13 billion from Rs10.84 billion “We attribute this [low sales] to lower than anticipated volumetric sales of the company’s dairy products. Engro Foods is facing fierce competition from new entrants in tea-whitening category, which has significantly dented market presence of the company’s flag ship tea-whitener Tarang, which is a major contributor to its dairy segment revenue,” the brokerage house added.

The finance cost increased more than double to Rs169.76 million from Rs79.40 million.

The company reported gross margins of 16.5%, down 4.2 percentage points in the quarter under review.

“We believe that this was due to lower volumetric sales thereby making it difficult for the company to pass on fixed charges, changes in tax regime under the federal budget, 2016 which substantially increased the cost of doing business for the UHT industry, and payment of technical fees of 0.5% and 2% of net revenues to Engro Corp (ENGRO) and Royal FrieslandCampina [the partner company], respectively,” it said.



The brokerage house flagged rising competition in tea-whitener category, decline in overall consumption owing to security reasons, adverse regulatory changes and volatility in international raw milk prices as key risks for the food company. Cumulatively in the nine months, the profit declined to Rs385.75 million (EPS at Rs0.50) from Rs2.59 billion (EPS at Rs0.3.38).

Published in The Express Tribune, October 24^th, 2017.

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