Matco Foods Limited (MFL) held its corporate briefing session today to discuss its business results for FY20, and the future roadmap. To recall, the company reported earnings of PKR 0.15Bn (EPS: PKR 1.24) in FY20, as opposed to 0.41Bn (EPS: PKR 3.38) in FY19, down 63% YoY.
The company essentially has three business segments: 1) Rice, 2) Rice Glucose and Protein division and 3) NPD. It operates five rice processing and milling plants with rice production capacity of 94,290MT per annum of the Karachi plant, and rice processing capacity of 40,410MT per annum of the Sadhoke plant. On the other hand, production capacity of rice gulucose and protein stood at 30,000MT and 3,000MT respectively.
During FY20, the company reported sales revenue of PKR 11.29Bn during the period as against PKR 7.86Bn, up 44% YoY. The improvement in revenue was mainly on the back of higher sales volume recorded in FY20 at 57,796MT (↑36% YoY).
Private label rice contributed around 85% to the total revenue, whereas branded rice contributed 15% to the total revenue. Within the rice segment, basmati rice contributed around 90% to the total revenue.
Pakistan’s brown basmati exports for FY20 stood at 281,000 MT (32% of overall exports) as opposed to 177,000MT in FY19, up 59% YoY. During the same period, exports to Iran clocked-in at 136000MT, while exports to Saudi Arabia were recorded at 79000MT.
Gross margins during FY20 clocked-in at 9%, down by 3.0ppts YoY. The decline in profitability was mainly on account of business disruptions due to COVID-19, lower other income (↓73% YoY) during the period, and exchange losses due to extreme volatility in FX rates.
During 1QFY21, the company posted loss of PKR 0.08Bn as opposed to profitability of PKR 0.06Bn in SPLY. Net revenue recorded growth of 33% at PKR 2.80Bn, whereas gross margins were down by 6.0ppts to 6% during the quarter. The decline in profitability was mainly due to higher cost of sales and losses suffered on account of shipment of brown rice at lower rate contracts.
As per the management, India has applied for GI tag in EU for basmati rice, and Pakistan has filed an application against this right of exclusivity because the country produces large quantity of this type of rice. This issue is a serious concern as it can negatively affect the demand for rice exports.
Going forward, the company expects demand of around 50,000MT in FY21. Additionally, the company plans to launch at least 2 new products in a year for achieving diversified growth in the FMCG market.
BMA Capital Management Ltd.