FrieslandCampina Engro Pakistan Posts Encouraging Financial Results for H1 2020

FrieslandCampina Engro Pakistan Limited (FCEPL) has announced its financial results for the half-year, ending on June 30th, 2020.

Even under adverse circumstances, the company managed to grow its sales and converted its Q1 loss into a Q2 profit. Consequently, the company registered a profit of Rs. 292.60 million as compared with a loss of Rs. 238.79 million in H1 2019.

Despite challenging times due to the COVID-19 pandemic, the company recorded its 7th consecutive quarter of robust net sales growth and registered a 9% growth versus last year. The net sales were posted at Rs. 20.15 billion as compared with Rs. 18.55 billion.

Olper’s increased its market share leadership

Led by FCEPL’s largest brand Olper’s, the dairy and beverage segment registered an 11% growth. The brand also witnessed further market share leadership in its respective category.

The company added to its portfolio by launching Olper’s Flavored Milk (fortified with added vitamins and minerals) and Tarang Tea Whitening Powder (at an affordable Rs. 10 price point) in the first half of the year. Other recent launches like Olper’s full cream milk powder (FCMP), Olper’s Creams, Olper’s Pro-Cal, and Tarang Elaichi have gained a healthy market share in a short span of time despite strong competition from established players.

The ice cream segment was impacted by the closure of retail and leisure spots due to COVID-19, which coincided with the summer season.

The overall cost environment remained challenging, with record inflationary levels leading to a sharp increase in commodity costs over the last 12 months. However, the company achieved a 150 bps improvement in gross margins versus the same period last year.

The improvement in operating margins was however offset by higher borrowing costs due to higher interest rates in the first quarter versus the same period last year.

The cost of sales of the company was reported at Rs 16.69 billion, up by 6.80% as compared with Rs. 15.63 billion. However, the finance cost of the company increased by 39% to Rs. 765. 37 million from Rs. 550.92 million.

Distribution and market expenses decreased by 8% to Rs. 1.86 billion from Rs. 2.02 billion.

Earnings per share of the company were reported at Rs. 0.38 as compared with a loss per share of Rs. 0.31. FCEPL’s shares at the bourse closed at Rs. 86.07, up by Rs. 6 or 7.49%, with a turn over of 1.2 million shares on Friday.

The company, in a statement, informed that it also continued to support farmer livelihoods and ran awareness workshops to educate its farmer community about COVID-19. Additionally, thermal scanning, hand sanitization, and disinfection activities were set up at all milk collection centers, area offices, and at the Nara farm.

Dairy farmers are the backbone of FrieslandCampina Engro Pakistan’s supply chain and the company takes great pride in its industry-leading Dairy Development Program, which is designed to ensure inclusive growth and increased profitability. The company’s goal is to further drive conversion and work with farmers to help improve productivity, yield, and volume thereby building profitability (for the farmers) and improving the communities we operate in.

Outlook

The company said that the economic fallout from the pandemic and its expected impact is already visible. Global economies are struggling, and Pakistan’s GDP has already contracted by 0.4% this year. The decline in business and trade activities, as a result of the lockdowns, may affect consumer purchasing power in the medium term.

Being a dairy company, FCEPL expects the impact on the business to be lower than that on other industries. However, it foresees a challenging operating environment in the future due to declining consumer purchasing power and higher costs, which might adversely impact the business.


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