Corporate Results: In strong comeback, Engro Foods reports profit of Rs1 billion

Earnings rise 462% in first quarter, share price hits upper lock

KARACHI:

After a roller coaster ride during the last two years, Engro Foods made a strong comeback in the first quarter of 2015, beating market expectations as profits rose by more than four times to Rs1 billion, the company revealed in its financial report on Monday.

A subsidiary of Engro Corporation – Pakistan’s largest private-sector conglomerate – the local foods giant reported an after-tax profit of Rs1 billion or Rs1.39 per share during the first quarter of 2015, which translates to a staggering 462% increase compared to Rs190 million or Rs0.25 per share in the same quarter of last year.

Following an impressive result, Engro Foods’ share price closed at the upper limit of 5% as 14.4 million shares worth Rs2.1 billion or $21 million changed hands during the trading session – an above average turnover for the company.



Opening at Rs140 per share, the stock reached a high of Rs144.8 during the intra-day session and traded at Rs143.4 at the close of business on Monday.

“The company surprised the street [market] with higher gross margins for the quarter,” JS Research said in its report, adding the margins stood at 27% in the latest quarter compared to 20% in the same quarter of 2014.

The top line of the company improved in the Jan-Mar quarter on the back of expected volumetric growth in the dairy segment, it added.

Revenues for the maker of Olper’s were Rs12.6 billion during the quarter ended March 31, up 24% compared to Rs10 billion in the first quarter of 2014.

The improved margins were a factor of increased milk prices, lower local milk procurement costs and collapsed international powdered milk prices, which were down 46% from their peak level, said BMA Capital.

Topline Securities said realignment of the company’s distribution channels led to the increase in its Ultra High Temperature (UHT) market share. The improvement in gross margins was due to low cost impact, it said.

It may be recalled that Engro Foods had been facing problems in its distribution system for the last two years. Though it was able to fix its distribution infrastructure in late 2013 or early 2014, the company continued to report declining margins. The latest results, however, indicate that it is back on the profitability track.

Published in The Express Tribune, April 21^st,  2015.

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