Punjab Oil Mills Limited 9MFY16

Punjab Oil Mills Limited (PSX: POML), one of the leading manufacturers of edible oils and fats in the country has reported a decline of two percent year-on-year in its revenues for 9MFY16. As per the notice to PSX on Monday; the company has also shown a two percent year-on-year decline in its earnings for the period. POMLs tepid top line growth in 9MFY16 has largely been due to lower average selling price; edible oil prices have remained depressed in the international market for over a year, and the average selling price for 1HFY16 dipped by seven year-on-year.
In terms of volumes, the firms high-margin cooking oil brands expanded during the period under review, resulting in better gross margins. However, POML continued to feel the pinch from its low-margin Banaspati products that are purely price based. As per company policy, POML is not pushing the sale of Banaspati products in FY16 as they are not getting prices that justify the resources to sell these products. Punjab Oil Mills has been pursuing this strategy since FY15 by compromising on volumetric growth in order to increase the overall profits through efficient use of resources. Though POMLs gross profit increased by 16 percent year-on-year in 9MFY16, the firms operating profit was impacted by higher selling and distribution expenses. Most of the increase is attributable to higher advertising spend and costs related to expanding into the UAE market. POML is investing in core brands and expanding to new markets.
During the nine-month period, the firm finance cost stayed flat, and the other income increased quite substantially due to the sale of coffee and gain on disposal of assets. Earlier last year, POML introduced its coffee brand TRU BRU in the market. These have helped the company limit the decrease in earnings for the period.

==============================================================

Punjab Oil Mills Limited

==============================================================

Rs (mn)                            9MFY15   9MFY16         YoY

==============================================================

Net Sales                           3,079    3,027         -2%

COGS                                2,591    2,462         -5%

Gross profit                          488      565         16%

Selling and distribution expenses     106      181         71%

Adminestration expense                 94       85        -10%

Operating profit                      288      300          4%

Finance Cost                            2        2          0%

Other operating charges                21       23         10%

Other income                            6       19        217%

Profit before tax                     272      293          8%

Taxation                               75      102         36%

Profit after tax                      196      192         -2%

EPS                                 36.38    35.56           ?

Gross profit margin                   16%      19%  Up 300 bps

Operating profit margin                9%      10%  Up 100 bps

Net profit margin                      6%       6%           -

==============================================================