FrieslandCampina Engro Pakistan Limited (FCEPL) held its corporate briefing session today to discuss 9MCY24 financial results and provide insights on the future outlook.
The key takeaways from the call are as follows:
· During 1HCY24, the company recorded its highest-ever revenue of PkR55bn, reflecting a 17% growth compared to PkR47bn SPLY, mainly driven by a twofold increase in export volume and higher prices.
· Subsequently, gross margin remained completely unchanged in 1HCY24 despite the increased cost pressures, up by 17.3%.
· Earnings for 1HCY24 stood at PkR1.2bn (EPS: PkR1.63), a decline from the profit of PkR1.3bn (EPS: PkR1.73) SPLY, mainly due to an interest rate hike leading to 46%YoY surge in finance cost.
· For 3QCY24, the company recorded PAT at PkR765.8mn (EPS: PkR1.00), marking a significant rise from PkR249.1mn (EPS: PkR0.33), up by 207%YoY. Per management, profit is down due to cost reduction and lower financial charges, down by 19%YoY during the quarter.
· Per the management, the country’s packaged milk market share stood at 8%, while the remaining 92% belonged to loose milk.
· To highlight, the company collects 10-12% milk from farms and has 1000 collection centres.
· The company has observed a twofold increase in exports during 1HCY24, with exports to the United States already underway. Key export products include powdered milk, cream, and liquid milk.
· The company has partnered with Reon Energy to establish a 3.4 MW solar power plant at its Sahiwal facility, which is expected to generate 5,013.6 MWh of clean/cheap energy annually, reducing CO2 emissions by 2,506 tons and supporting the company’s goal of cost reduction.
· The company is committed to ensuring product availability across all channels while implementing cost optimization strategies through vendor renegotiations and operational efficiencies. Furthermore, non-essential expenditures are being curtailed to reinvest in the business and enhance profitability.
· The scrip is not under our formal coverage. We believe the company’s volumes are likely to remain subdued due to the imposition of an 18% sales tax in the near term. However, increased exports amid enhanced international buying power are expected to compensate for slow revenue growth. Moreover, cost optimization and favourable interest rates would support profitability.
Courtesy – AKD Research
