Demographics of Pakistan comprising a large youth bundle promise healthy returns for food and related industries. Enjoying the demographics, National Foods one of the pioneers of packaged food additives in Pakistan posted good results for 1QFY12. The Company is making numerous products under the heads of recipe masala, ketchup, jams, rice, desserts, powdered drinks, pickles, plain spices, salt, etc. Each segment experienced good growth in the 1QFY12 according to the Company sources. Leading this surge in demand was the recipe masala segment which saw an enormous increase in demand both locally and internationally, the high quality, easy to cook recipe masala has become the choice for everyone. The demand for National Foods products raised both domestically and internationally, the year-on-year growth for exports is 16 percent and local demand surged by roughly 37 percent in the 1QFY12 as compared to the same period in FY11. Despite an increase in price of inputs due to inflation and the increase in electricity crisis, the Company due to its good product portfolio and strong brands showed resilience and is able register an improved gross margin. Apart from the excellent product mix which despite increased input costs helped National Foods contain its expenditure, the Company also attributes business growth to the successful advertising and promotion activities like television campaigns and attractive store displays. One should not rule out the fact that Ramadan fell in the 1QFY12; in the month of Ramadan there was a spike in the demand for Foods products. Thus, seasonality played an important part in the increase in demand for National Foods in the 1QFY12. Even though the coming months would see the demand leveling back to normalcy, the long-term outlook for National Foods appears strong as the brand is becoming stronger by the day, since the Company has been successfully adding products to its already well diversified portfolio. National Foods was able to pass the inflationary pressure built due to increase in prices of chilies and other inputs to its customers, not just that but as compared to the 1QFY11, in the quarter ending Sept 11 National Foods was able to increase its top line profitability, depicted by the increase in gross profit margin from 28.5 percent to 30.6 percent. The profit after tax for the quarter saw a jump of roughly 74 percent over the last quarter (4QFY11) same was the case for the EPS, this gigantic increase in sales was seasonal as Ramadan fell in the 1Q of the financial year and further adding to the sales were the distributors and wholesalers who had started filling their inventory one and a half month before Eid-ul-Azha eyeing high sales. The effect of Eid would continue till the 2nd quarter of the year hence the outlook for the 2nd quarter is also good. Adding to the upwards pressure would be the spike in sales during the month of Moharram which will also fall in the 2nd quarter of FY12. The surge in demand experienced by the Company in the first half of the FY12 would not persist in the last two quarters and the demand is expected to fall to normal levels in the 3rd and the 4th quarters of FY12.
============================================= NATIONAL FOODS ============================================= (Rs mn) 1QFY12 1QFY11 chg ============================================= Net sales 2,000 1,483 35% Cost of sales 1,388 1,058 31% Gross profit 612 424 44% Gross profit margin 31% 29% 7% Operating expenses 459 341 35% PAT 89 27 230% EPS (Rs) 2.15 0.67 --------------------------------------------- Source: KSE notice =============================================
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