National Foods Limited (NATF) held its corporate briefing session today to discuss the financial results of FY24 and the company’s future outlook. Key highlights of the briefing are as follows:
The company has manufacturing footprints in both the northern and southern regions. Its bottom line declined due to a higher effective tax rate and increased finance costs driven by high interest rates.
Overall volumetric growth was impacted by inflation; however, sales have recovered in the current period due to a significant decline in inflation.
The company’s top line increased due to higher pricing despite lower volumetric sales. Among major product categories, NATF generated revenues of PkR 19.5bn, PkR 9.0bn, and PkR 5.5bn from Recipes/Spices, Ketchup, and Pickles, respectively.
Thanks to the localization of tomatoes, the cost of a key product, ketchup, has decreased. With a bumper crop, the company has localized about 20-22% of its tomato supply. The company experienced double-digit export growth last year, and similar growth is expected this fiscal year. Exports are projected to reach USD 15mn.
In the export market, the company has successfully registered its SAUF zone entity in Sharjah and plans to expand its manufacturing facilities outside Pakistan. Canada remains a strategic market, with growth momentum supported by the increasing number of Pakistani and Indian immigrants.
Currently, NATF operates seven A1 stores in Canada. Its revenue has grown from CAD 37mn in 2017 to CAD 242mn by 2024, reflecting a 31% compound annual growth rate (CAGR).
According to management, A1 Cash & Carry is expected to generate CAD 300 mn in revenue this year. This segment can be valued using the multiples of listed Canadian wholesalers such as Costco and Sobeys.
The growth strategy in Canada includes expanding by adding one or two new stores annually. Additionally, the company aims to improve its supply chain by increasing warehouse capacity. Recently, two new warehouses, Kennedy and Edward, were added.
Supply chain hub operations have also commenced in Canada, where a distribution warehouse has been established to enhance customer service and expedite market delivery. This facility is crucial to strengthening the distribution network in Canada.
The Faisalabad manufacturing facility, which spans over 30 acres, is expected to accelerate its expansion as it handles most of the production. The company is entitled to a 10-year tax benefit at its Faisalabad plant in a special economic zone. According to management, this will help maintain the effective tax rate of 17-18%. Freight costs are also expected to decrease, as transporting products from the south to the north was previously expensive, and the northern region is a key market.
The company is focused on gaining market share in the southern region, particularly in Karachi, where Shaan Foods is the market leader. Management has reported positive feedback from the launch of its “Karachi Khas” product last year. Additionally, the company has received board approval to sell its plant located at the SITE industrial area.
Courtesy – BMA Capital Management Ltd.
