National Foods riding on branding

National Foods (KSE: NATF), one of the forerunners of packaged food additives in Pakistan announced pleasant results for 1QFY14.
Last few months have mostly been considered as a sluggish time for the FMCG segment, in spite of the eventful time of the year for the food manufacturers i.e. Ramazan, taking place in the start of the quarter. National Foods displayed a significant 38 percent year-on-year rise in net profit on account of the firms rising sales and improved margins.
Each division, especially the recipe masala segment saw good growth in the 1QFY14. The demand for National Foods products increased both locally and internationally with the year-on-year growth being 23 percent and 20 percent, respectively.
NATF consumer base overseas is growing as they made way into the international market, especially Canada, by means of appointment of new distributors. While local sales grew due to their continued Nationals Converter Activity program, an initiative to enhance consumer interaction at the market level.
Regardless of an upsurge in price of inputs caused by inflationary pressures and the intensification in energy crisis, NATF due to its decent product portfolio and sturdy brands exhibited resilience and revealed an improved gross margin.
On the operational aspect, even with the growth in the administrative costs of 67 percent year-on-year, efficiency enhanced due to the company's incessant efforts to control sales and distribution incidentals and rationalising the advertising expenses that account for a considerable share of NATF net sales.
Moving forward, NATF endeavours towards diversification of their product portfolio are expected to abet it to perform well in the future.

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National Foods Limited

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Rs (000)                       1QFY14      1QFY13     chg

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Net Sales                   3,041,091   2,475,402     23%

Cost of sales               1,883,947   1,540,131     22%

Gross profit                1,157,144     935,271     24%

Distribution expenses         557,873     506,024     10%

Administrative expenses       132,996      79,663     67%

Profit for the period         299,424     217,593     38%

EPS (Rs)                         5.78        4.20

Gross profit margin             38.1%       37.8%

Operating profit margin         15.3%       14.1%

Net profit margin                9.8%        8.8%

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Source: KSE notice