FrieslandCampina Engro Pakistan announces Financial Results for 1H2020

FrieslandCampina Engro Pakistan Limited (FCEPL) announced its results to the Pakistan Stock Exchange on August 21st, 2020. Despite challenging times due to the COVID 19 pandemic, the Company recorded a 7th consecutive quarter of robust topline growth and registered a 9% growth versus last year.

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. Even under adverse circumstances, the Company has managed to grow its top line and has converted its Q1 loss into a Q2 profit. Consequently, the Company registered a profit after tax of Rs 293 million versus a loss of Rs 239 million in 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.

Led by FCEPL’s largest brand Olper’s, the Dairy and Beverages segment registered an 11% growth. The brand also witnessed further market share leadership in its respective category. The segment reported a revenue of Rs. 18.2 billion for the first half of the year versus a revenue of Rs. 16.4 billion in the same period last year. 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 Ice Cream summer season. However, the business focused on creating excitement by introducing 7 new innovations, investing in brand building through the “summer blockbuster” campaign, and expansion of the trade universe by inducting more than 4000 assets in the market, to ensure that the business segment regains the growth momentum as soon as the lockdowns are eased.

Employee safety and wellbeing remained the Company’s No.1 priority. As the pandemic unfolded, several proactive measures were implemented, including general and targeted safety communication campaigns across the organization, implementation of operational policies and procedures, and provisions of safety equipment for all field staff. Strict protocols were established at both plants, and all company and third-party personnel were required to undergo body temperature screening prior to entering the sites. A safety communication campaign ‘Agahi’ was also initiated at both plants and continues to-date. The campaign includes daily awareness sessions to ensure employees remain informed about the SOPs and best practices, both on and off-site. Employee support includes a Medical helpdesk, increased OPD packages, and the availability of Oxi-meters and oxygen tanks in case of emergency.

The Company 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 centres, 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.

Future Outlook

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, the Company foresees a challenging operating environment in the future due to declining consumer purchasing power and higher costs, which might adversely impact the business.

The Company’s purpose is to transform the health and well-being of Pakistani’s now and for generations to come, by nourishing them through unlocking the goodness of milk from grass to glass, as well as by enhancing the livelihood of farmers. Staying anchored to its purpose, the Company’s priority will be to ensure a consistent supply of nutritious and safe products to our consumers, while continuing to drive conversion from unsafe loose milk to packaged milk by:

Investing in strengthening its brand equity

Having an innovative product portfolio

Working with the Pakistan Dairy Association (PDA) to educate consumers on the health hazards of loose milk consumption and reinforce the positive characteristics of packaged milk.

Working with Regulatory Authorities to harmonize the Federal and Provincial food laws and draft legislation on minimum pasteurization.

Encouraging the Government to support in creating mass awareness around nutrition and safe milk consumption and developing favourable fiscal policies for the dairy sector

FCEPL remains committed to the highest standards of hygiene, food safety and sustainability and will continue to leverage its global expertise and 145+ years heritage to provide affordable, safe and nourishing dairy products to millions of Pakistanis, every day.

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