Rafhan Maize Products Company Ltd. (RMPL) held an analyst briefing on May 16 to discuss the company’s CY24 financial results and future outlook.

The following are the key points:

·         To recall, company reported earnings of PkR7.5bn (EPS: PkR809) in CY24, compared to PkR6.9bn (EPS: PkR748) in the prior year, an increase of 8%YoY. The improvement was primarily driven by a 14%YoY increase in sales volume to 569k tons, largely attributed to higher exports.

·         Gross margins contracted by 45bps to 20.9%, down from 21.4% in SPLY. Distribution and admin expenses increased by 11%YoY, mainly due to inflationary pressures, while other expenses declined by 2%YoY owing to the absence of foreign exchange losses during the year.

·         Finance cost surged by 54%YoY during CY24, driven by increased debt levels due to higher procurement costs for corn and elevated interest rates.

·         On a segment-wise basis, industrial starch and glucose each contribute 40% to the sales mix, while dextrose accounts for the remaining 20%.

·         Management highlighted that corn prices rose last season due to lower production yields. Avg. prices during spring’24 ranged between PkR22–24k/ton, while autumn season prices stood at PkR32–34k/ton.

·         Management expects corn output in the ongoing season to remain strong, supported by higher prices in the previous season and comparatively better weather conditions.

·         On the demand side, management stated that market conditions have started to recover, and they foresee a stable 5–7% annual growth across all segments moving forward.

·         Management expects significant export growth potential. Additionally, export margins vary by product range but are at par with or higher than domestic margins.

·         Regarding energy requirements, management guided that the main corn plant relies on a coal-fired power plant for electricity, while other facilities mainly use grid power. Solar currently contributes ~2% to total energy needs. Additionally, a combination of LPG and RLNG is utilized across various manufacturing processes.

· The company is expanding 200TPD corn grind and 100TPD liquid glucose capacity, which is expected to come online in CY26.

·         Management confirmed that three expressions of interest have been received for acquiring a majority stake in the company, all of which have been disclosed. Any further updates will be promptly communicated to investors through PSX.

Courtesy – AKD Research