Engro Foods Limited (EFOODS) has reported a massive decline in annual profits during the year 2018, primarily due to decline in sales this year. It has announced a decline of 83.18% in its net profit to just Rs. 63.78 million in the year ended December 31, 2018 compared to earnings of Rs. 972 million in 2017.
Accordingly, earnings per share fell to Rs. 0.08 in 2018 from Rs. 0.49 in the preceding year.
The company reported 6.50% decline in net sales to Rs. 32.4 billion as compared with Rs. 34.65 billion for year ended. However, the costs of sales were down by 5.97% to Rs. 27.28 billion. However, the gross profit saw decline of 8.55% to Rs. 5.15 billion during the year as compared with Rs. 5.63 billion in the corresponding period last year.
The company’s decrease in profitability is due to tough competition in the Tea Whitener and UHT milk segments and rupee devaluation against US dollar amid economic slowdown according to Foundation securities.
Moreover the milk powder prices have decreased by 15.3% during 2018, but gross margins have failed to increase due to company inability to pass on the impact of rupee devaluation
The company’s distribution and marketing expenses were up by 6.93% to Rs. 4.20 billion from Rs. 3.93 billion. However, the other income was increased to Rs. 622 million from Rs. 358 million.
Additionally, Engro Foods posted a net loss of Rs. 448 million in the 4th quarter of 2018 as compared with a loss of just Rs. 3 million in the same period of the last year. This is the worst quarter result in 5 years since 2013. The company is facing some serious issues on its cost side.
However revenue jumped to 15% in this quarter owing to recovery in market share in established brands and sales from new products.
EFOOD’S shares at the bourse were trading at Rs. 86.72, down by Rs. 1.27 or -1.44%, with a turnover of 1.59 million shares on Friday.