Corporate results: Engro Foods earnings skyrocket, profits 300% higher than last year
Improvement attributable to higher sales and improved gross margins over the year.
KARACHI:
Engro Foods has announced its earnings results for the first nine months of calendar year 2012 (9MCY12) today, posting a net profit of Rs1.62 billion for the period.
The company has witnessed a staggering four-fold increase in its earnings, if compared to the more modest profit of Rs408 million it posted for the corresponding period of last year. The improvement is attributable to higher sales and improved gross margins over the year, analysts said.
On a quarter-on-quarter (QoQ) sequential basis, Engro Foods saw its profits climb 13% to Rs601 million in the third quarter (July-September) of this calendar year, as compared to the Rs532 million it posted for the preceding quarter.
During the quarter, the company’s revenues improved by almost 22% as compared to the same period of the previous year to reach Rs9.63 billion, but were lower by 5% as compared to the preceding quarter in spite of higher prices. The QoQ decline in revenue was likely due to lower sales in the ice cream segment, according to Shajar Research Investment Analyst Raza Hamdani.
AKD Securities’ Senior Investment Analyst Ayub Ansari pointed that the decline in the company’s revenues came despite the month of Ramazan, which fell during the previous quarter, and said that its gross margins were also flat over the previous quarter despite a hike in dairy product prices. These indicate that the company’s improved profitability during the quarter has been helped less by improvement in sales of its products – which may be worrisome, given that the month of Ramazan is a period of high demand. On the contrary – as Topline Securities analyst Zeeshan Afzal pointed out – a 21% decline in the company’s distribution expenses is to be credited by the company’s improved profitability.
The company’s financial expenses meanwhile declined by 24% as compared to the previous year to Rs236 million, indicating lower debt-financed capital expenditure spending, according to Ansari. Although helped by the central bank slashing benchmark interest rates, this may nonetheless be a cause of concern, given the management’s ambitious growth plans.
Outlook
“Going forward, we expect the dairy segment to continue to drive growth,” said Hamdani; referring to the company’s strong domination in the packaged UHT milk segment through its Olpers brand, and increasing market share in the tea creamers segment through its Tarang brand. Six out of Engro Foods’ seven products – Olper’s, Olper’s Lite, Olfrute, O’more, Omung, Omung Lassi and Tarang – are dairy-related.
“We expect market share of Engro Foods in 9MCY12 in the UHT and tea creamers segments at 55% and 72% respectively,” Hamdani said. Engro Foods itself boasts of over 5 million consumers that use its products nationwide daily.
The Express Tribune had reported earlier that Engro Foods 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.
Analysts and investors are also waiting for an update regarding the management’s expansion plans for the company, which will set the future trajectory of Engro Foods.
Published in The Express Tribune, October 19th, 2012.
Engro Foods has announced its earnings results for the first nine months of calendar year 2012 (9MCY12) today, posting a net profit of Rs1.62 billion for the period.
The company has witnessed a staggering four-fold increase in its earnings, if compared to the more modest profit of Rs408 million it posted for the corresponding period of last year. The improvement is attributable to higher sales and improved gross margins over the year, analysts said.
On a quarter-on-quarter (QoQ) sequential basis, Engro Foods saw its profits climb 13% to Rs601 million in the third quarter (July-September) of this calendar year, as compared to the Rs532 million it posted for the preceding quarter.
During the quarter, the company’s revenues improved by almost 22% as compared to the same period of the previous year to reach Rs9.63 billion, but were lower by 5% as compared to the preceding quarter in spite of higher prices. The QoQ decline in revenue was likely due to lower sales in the ice cream segment, according to Shajar Research Investment Analyst Raza Hamdani.
AKD Securities’ Senior Investment Analyst Ayub Ansari pointed that the decline in the company’s revenues came despite the month of Ramazan, which fell during the previous quarter, and said that its gross margins were also flat over the previous quarter despite a hike in dairy product prices. These indicate that the company’s improved profitability during the quarter has been helped less by improvement in sales of its products – which may be worrisome, given that the month of Ramazan is a period of high demand. On the contrary – as Topline Securities analyst Zeeshan Afzal pointed out – a 21% decline in the company’s distribution expenses is to be credited by the company’s improved profitability.
The company’s financial expenses meanwhile declined by 24% as compared to the previous year to Rs236 million, indicating lower debt-financed capital expenditure spending, according to Ansari. Although helped by the central bank slashing benchmark interest rates, this may nonetheless be a cause of concern, given the management’s ambitious growth plans.
Outlook
“Going forward, we expect the dairy segment to continue to drive growth,” said Hamdani; referring to the company’s strong domination in the packaged UHT milk segment through its Olpers brand, and increasing market share in the tea creamers segment through its Tarang brand. Six out of Engro Foods’ seven products – Olper’s, Olper’s Lite, Olfrute, O’more, Omung, Omung Lassi and Tarang – are dairy-related.
“We expect market share of Engro Foods in 9MCY12 in the UHT and tea creamers segments at 55% and 72% respectively,” Hamdani said. Engro Foods itself boasts of over 5 million consumers that use its products nationwide daily.
The Express Tribune had reported earlier that Engro Foods 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.
Analysts and investors are also waiting for an update regarding the management’s expansion plans for the company, which will set the future trajectory of Engro Foods.
Published in The Express Tribune, October 19th, 2012.