Corporate results: National Foods’ earnings turn sour

Decrease due to higher distribution costs and administrative expenses.

KARACHI:

National Foods’ earnings declined significantly on the back of higher distribution costs and administrative expenses during the six-month period that ended December 31, 2013, according to an official notification sent to the Karachi Stock Exchange on Monday.

Arguably the country’s biggest maker of spices and pickles for over 30 years, the company saw its profits decline by 16.6% to Rs366 million or Rs7.07 per share during the first half of the fiscal year (FY)2014 compared with Rs439 million or Rs8.48 per share in the corresponding period of the last fiscal year.

The quarterly results presented an even more disappointing picture with profits declining by 38% to Rs148 million during October-December quarter compared with Rs239 million of the same quarter last year.

The company’s revenues increased by 6.4% to Rs4.5 billion in the first half of FY2014 compared with Rs4.3 billion in the corresponding period of FY2013. The gross profit margin remained stable.

“It is mainly the higher distribution cost and administrative expenses that ate up their profits for the period,” said Zeeshan Afzal, Senior Manager Research at Topline Securities – the distribution cost for the first half of FY2014 increased by 13.5% to Rs927 million while administrative expenses rose by 33% to Rs174 million.

The analyst, however, said there was some volumetric decline as well. If the increase in their revenue during the first half of FY2014 is adjusted against the inflation rate for the same period, there is most likely a decline in volumes, Afzal said – the inflation for the period under review clocked in at almost 10% while National Foods revenues grew by 6.4% in the period, he said.

Published in The Express Tribune, February 25^th, 2014.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.