Engro Foods provides a bigger bang for the buck

Engro Food’s corporate results for the outgoing quarter are in and the sight is prettier than ever. Posting a bottom line of Rs1.6 billion at the end of the first nine months of the current year, the food manufacturing giant has raked up a monumental year-on-year growth on the back of accelerated sales and improving margins.
Coinciding with Ramazan, the last three months saw the company‘s sales climb up to Rs9.6 billion, which can predominantly be attributed to the accelerated demand for the firm’s dairy products.
Additionally, the heat wave hitting the country’s urban centres has continued well into September, driving and sustaining the demand for the Olfruit range of juices and Omung Lassi right across the season’s tail-end.
On the one hand, while the firm’s selling and administrative expenses hiked up quite predictably along inflationary lines - making up 11 and two percent of the revenues respectively - the finance costs slipped down significantly, going down by 23 percent year on year.
Easily explained by the high base effect on account of infrastructural investments that the firm was in the process of carrying out during the same period last year, this expense slash has nonetheless helped improve margins this quarter.
Overall, although the quarter and indeed the year; has been kinder than ever to food manufacturers, Engro has seen a slight down tick in sales in comparison to the previous quarter’s revenues, mainly on account of the struggling ice cream segment which continues to steal the company’s thunder and stifle the bottom line somewhat.
However, the exceptional top line growth has, in effect, managed to filter down into improved margins, with the gross margin climbing up by 3.6 percentage points year-on-year, settling around 24.8 percent at the close of 9MCY13.
Consequently, the EPS has trebled over the same period last year, clocking in at Rs2.14 at the end of 3QCY12.
On the whole, the close of the third quarter marks a particularly promising time for Engro Foods, which going forward, is likely to focus on further improving efficiencies within the dairy and juice segments.
Already accounting for nearly 90 percent of the firm’s revenue stream, this is where the firm’s future lies and experts agree that the next few months will likely be marked with the firm engaging in infrastructure investments to further improve their liquid and powder milk capacities.

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Engro Foods Ltd.

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Rs (mn)                  3QCY11   3QCY12      chg

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Sales                     7,922    9,630      22%

Cost of sales             6,220    7,175      15%

Gross profit              1,702    2,454      44%

Gross profit margin         21%      25%

Distribution & other        987    1,099      11%

selling expense

Administrative expenses     112      192      71%

Finance cost                308      236     -23%

NPAT                        191      601     215%

Earning per share (Rs)     0.26     0.79

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Source: KSE notice