Frieslandcampina Engro posts loss of Rs808.8m

Earnings dented by lower-than-expected gross margins

KARACHI: Frieslandcampina Engro Pakistan (formerly known as Engro Foods) has announced a loss of Rs808.8 million for nine months ended September 30, 2019 due to lower-than-expected gross margins.

The company had reported a profit of Rs513.2 million in the same period of the previous year, according to a notice sent to the Pakistan Stock Exchange on Friday.

Loss per share of the company stood at Rs1.05 in Jan-Sept 2019 compared to earnings per share of Rs0.67 in the same period of the previous year.

Net sales recorded a growth of 19.9% to Rs28.7 billion in the period under review compared to Rs23.9 billion in the corresponding period of the previous year.

"We attribute higher volumetric sales and increase in prices to partial pass-on of rupee devaluation that has led to revenue accretion," said Topline Securities' analyst Sunny Kumar.

However, gross profit declined 12.12% to Rs3.88 billion mainly due to higher imported raw material cost amidst rupee devaluation, the analyst said.

Share price of Frieslandcampina Engro Pakistan went down Rs3.52 or 4.99% to Rs67.02 with trading in 398,500 shares at the PSX.

On the other hand, distribution expenses dipped 4.09% to Rs3.06 billion owing to lower marketing expenses. "This was due to a higher base effect when the company was aggressive in media campaigns to re-position Olper's and Tarang brands."

Finance cost jumped a massive 83.9% to Rs866.9 million due to an increase in policy rates. Other income dipped 16% to Rs332.9 million in the period under review.

"We flag rising competition, the decline in processed milk consumption, any unanticipated regulatory changes and volatility in international raw milk prices as key risks for the company," Kumar added.

Quarterly result

The company recorded a loss of Rs569.97 million in the quarter ended September 30, 2019 compared to a profit of Rs1.89 million in the same period of the previous year. It reported loss per share of Rs0.74 in the quarter.

Published in The Express Tribune, October 19^th, 2019.

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