National foods up, up and away
In the recent result season almost all the FMCGs have shown healthy top line growth. Same is the case for National Foods. However, the food giant has also been successful in improving its margins, something not commonly seen in recent times, due to rising input costs, energy shortfalls and weakening financial position of general households owed to sluggish economic growth and inflation. The latest results posted by National Foods for 1HFY12 show an increase of 34 percent in net sales, compared to the same period year. Key categories such as recipe mix, sauces and pickles have shown excellent performance. According to Company officials, the investments that the Company had made in, advertising and promotional activities are reaping good returns. Strong demand was experienced from both local and export markets, which resulted in a growth of 34 percent (local) and 30 percent (export) in 1HFY12 compared to 1HFY11. It looks like the Companys efforts like participation in the Gulf Food Festival in FY11 to gain more international exposure are paying off well. The Company has posted a gross profit of Rs.1.2 billion in 1HFY12; exhibiting growth of 47 percent over 1HFY11. The gross margin for the food giant improved by 300bps in 1HFY12 compared to the same period last year. The Company owes improved margins to the better pricing, improved product mix and containment of fixed costs. On the operating side, despite increase in the administrative expenses, efficiency improved due to the firms continuous efforts to control sales and distribution expenses, which make up a significant portion of the Companys net sales. The Company has been engaged in rationalising the advertising costs over same period. The bottom line is that higher other operating income and lower finance cost due to improved working capital management resulted in a PAT more than double the level from last year. In the short run the shaky economic environment, high inflation and weak household income would continue to baffle the industry, however, in the long run the favourable demographics of Pakistan promise good returns for FMCGs, especially ones in the food business.
Source: KSE notice