FrieslandCampina Engro Pakistan Limited (formerly known as Engro Foods) recorded a loss of Rs. 238 million for the half-year ended June 30, 2019, compared with a profit of Rs. 511 million in the same period last year.
The losses can be attributed to Rupee’s devaluation against the US dollar, higher finance costs and an increase in operating expenses.
However, the company reported an increase of 21.80% in sales, which stood at Rs. 18.70 billion as compared with Rs. 15.34 billion in the previous year. The increase in sales was due to higher volumetric sales as the sales momentum has improved by re-branding existing products and product extensions.
The company relaunched its brand Tarang which is a major contributor to its dairy segment revenue. It was able to regain its lost market share and the company’s new product, Olper’s milk powder, has been successful in gaining the market’s attention.
The company ran aggressive media campaigns to re-position its Olpers and Tarang brands.
The finance cost was up by 78.52% due to an increase in the interest rates. The company reported a loss per share of Rs. 0.31, as compared to earnings per share of Rs. 0.67 for the same period last year.
Other major differences can be seen below.
| Condensed Interim Statement Profit or Loss Account for the half-year ended June 30, 2019 (Amounts in thousands Except for earnings / (loss) per share | |||
| Jun-19 | Jun-18 | % Change | |
| Net Sales | Rs. 18,690,096 | Rs.15,346,020 | 21.79% |
| Cost of Sales | (Rs. 15,637,784) | (Rs. 12,210,999) | 28.06% |
| Gross Profit | Rs. 3,052,312 | Rs. 3,135,021 | -2.64% |
| Distribution and Marketing Expenses | (Rs. 2,157,539) | (Rs. 2,250,847) | -4.15% |
| Administrative Expenses | (Rs. 571,049) | (Rs. 419,531) | 36.12% |
| Other Operating Expenses | (Rs. 111,648) | (Rs. 47,600) | 134.55% |
| Other Income | 251,976 | 304,682 | -17.30% |
| Operating Profit | Rs. 464,052 | Rs. 721,725 | -35.70% |
| Finance Cost | (Rs. 550,925) | (Rs. 308,600) | 78.52% |
| Loss/Profit before Taxation | (Rs. 86,873) | Rs. 413,125 | Â Â Â Â Â – |
| Taxation (charge) / reversal | (Rs. 151,918) | Rs. 98,171 | Â Â Â Â Â – |
| (Loss)/Profit for the Period | (Rs. 238,791) | Rs. 511,296 | Â Â Â Â Â – |
| (Loss)/Earnings per Share – Basic and Diluted (Rs) | (Rs. 0.31) | Rs. 0.67 |      – |
Quarterly wise, the FCEPL booked revenue of Rs. 10 billion for the first time since Q4 CY16. The company booked a tax charge of Rs. 151 million against a tax reversal of Rs 98.17 million during the same period last year.
Talal Khan, a market analyst based in Karachi, said that the current economic slow down hasn’t affected the company as its products are sold on a daily basis. He added that increasing competition in the food segment and a decline in overall processed milk sales can create problems for the company.
At the time of filing this report, FCEPL shares were trading at Rs. 43.55, down by Rs. 0.42 or -0.96% with a turnover of 12000 shares on Tuesday.
