Topline Securities organised the Pakistan Mid-Cap Conference 2025. The first session of Day 3 focused on National Foods (NATF), featuring key speakers Mr. Abrar Hasan, CEO of NATF, and Mr. Zahid Majeed, Chairperson of NATF.
On a standalone basis, revenue growth in 3QFY25 was driven by a combination of seasonality, an increase in volume, and price increases. The seasonality was attributed to Ramadan occurring in the last month of 3QFY25.
– In 9MFY25, revenue growth resulted from a combination of a price increase and a volumetric increase, with each contributing 50%.
– In 3QFY, gross margins on a standalone basis rose to 39%, compared to 31% in 3QFY24. The improved margins can be attributed to several factors, including a shift of major production to Faisalabad, the localisation of tomato supply, and enhancements in operational efficiency and cost management.
The company anticipates maintaining and achieving gross margins of 40% and above in the future. These margins have significantly improved in recent quarters due to cost optimisation, price increases, the trimming of loss-making portfolios, and enhanced operational efficiency.
– Approximately 70% of the company’s production has been relocated to Faisalabad, resulting in efficiencies and reduced freight costs.
– NATF faced challenges due to import restrictions imposed on Pakistani businesses in FY23. The company has initiated the localisation of tomato paste through its ‘Seed to Table’ project, where farms have achieved peak production of 42 tons per acre and an average of 30 tons per acre, resulting in a cost reduction of US$ 4 per ton compared to imported products.
– The tax rate will remain lower until 2035 under the Special Economic Zone (SEZ) regulations as production continues to shift to Faisalabad.
The company aims to reduce human resource costs through automation at the new Faisalabad plant.
– NATF’s international business has grown at a 5-year compound annual growth rate (CAGR) of 24%, reaching US$200 million by FY24. Profits have increased at a 5-year compound annual growth rate (CAGR) of 26%, amounting to US$5.5 million.
– A-1 Cash and Carry, the company’s retail stores in Canada, have seen a revenue CAGR of over 30% since their acquisition in 2017.
– Cash and carry revenue stood at CA$38 million in 2017 and has increased to CA$280 million as of FY24, with current store growth exceeding 20%.
National Foods DMCC is currently experiencing losses on a standalone basis due to its investment in a growth strategy, but management anticipates breaking even by FY27.
– NATF is a leader in 6 out of 12 food categories in Pakistan, holding a market share of over 50% in four of those categories.
Courtesy – Topline Pakistan Research
