Corporate results: Engro Foods profits grow four-fold

Upward growth likely to continue as food giant plans to introduce 13 new products: analyst.

KARACHI:

Engro Foods profits rose more than four-folds to Rs1.02 billion in the first half of 2012 led by Olpers.

“Volumetric growth of 50% is expected in the dairy segment combined with Rs10 per litre price hike in Olpers and Tarang during April to June 2012,” estimates BMA Capital as detailed account will be released on a later date. Engro Foods became the leader in tetra pack milk market in 2010 and holds a 44% market share as of March 2012.

The result is in line with market expectation as analysts estimated the local food giant to make around Rs1 billion.

Sales revenue grew by 47% to Rs19,765 billion during the period review, says a notice sent to the Karachi Stock Exchange on Tuesday.

The outgoing quarter witnessed addition Omung Lassi to its portfolio. The product is still in the introductory phase and yet to post any significant result.

The growth curve is likely to continue upwards as it plans to introduce another 13 products in the near-term future, say analysts. Engro Foods earlier this year announced plans to invest Rs8.7 billion in expansion this year. Of this Rs2 billion has been set aside for the powdered milk business, whereas the rest will be divided between cold chain infrastructure development, dairy capacity expansion and livestock acquisition.

The ice cream segment’s contribution in revenue is also expected to increase to 9.5% in the second quarter of 2012 from the preceding quarter’s 4.2% owing largely to a seasonal uptrend in sales, according to BMA Capital.

The stand out in the profit and loss statement was financial charges. Financial expenses – the cost of carrying a debt – declined by 10% indicating lower capital expenditure, which is concerning especially given the company’s aggressive expansion plans, said AKD Securities analyst Ayub Ansari in an e-mail statement to The Express Tribune.

Gross margins improved 3.51 percentage points to 24.5% thanks to higher prices for premium Olpers brand, said BMA Capital analyst Farid Aliani.

Other income increased by 294% to Rs172 million likely due to a better cash position. Meanwhile, financial charges decreased by 16% to Rs441 million during January to June 2012.

Engro Foods met market expectation on its half early earnings but failed to sustain its levels and fell from a high of Rs72 during the session to close down 3.09% at Rs67.66 during trade at the Karachi Stock Exchange on Tuesday.

Going forward, market share expansion in the company’s flagship brand Olpers is expected while Omung will likely eat into the loose milk market as well, according to analysts.

Published in The Express Tribune, July 18^th, 2012.