Tri-Pack Films limited frog leaped ahead in its quest to close CY11 on a high. The packaging films manufacturer continued the momentum of earlier quarters in the third quarter as well, keeping its margins intact, as revealed in the financial results for nine months ended September 30, 2011, yesterday. As the penetration and consumption of fast-moving consumer goods are increasing in the country, demand for packaged goods is also on the rise. Being part of the supply-chain of the packaged goods industry, Tri-Pack is benefitting from both the rising demand of packaged goods and the zeal of Pakistani multinationals to increase their year-on-year volumes. Tri-Packs sales are heavily tilted towards domestic market, where its BOPP and CPP films are in much demand. The momentum in the consumer goods industry helped the company amass over Rs.9 billion in sales during 9MCY11. After deduction of taxes and duties, the net sales still showed a whopping growth of 36 percent 9MCY10. The top line for 9MCY11 almost touched that of the full-year CY10. Movements in the prices of crude oil and polypropylene granules; two major raw materials in the production of packaging films, directly impact the companys cost of sales and resulting margins. However, growth in cost of sales was below that of net sales during this period. Tri-Pack seems to have reined in the cost of sales, which consumed 82 percent of net sales in 9MCY11 compared to 85 percent during 9MCY10. The less-than-proportionate growth in cost of sales helped strengthen Tri-Packs gross profits, which improved to 18.21 percent in 9MCY11, from 15.14 percent in the same period last year. In absolute terms, gross profits surged by a hefty 64 percent. The distribution and administrative expenses increased tremendously over the period under review, a bit out of step with sales growth. However, as a percentage of sales, the two expenditure heads are hovering at similar levels corresponding to same period last year. Hence, overall operating expenditures appear to be well-managed, thus far in CY11. By all means, a better operating performance helped the companys operating profit shoot up by 70 percent during the period under review. The operating margin rose to 14.58 percent, showing an improvement of 289 bps over the period. Tri-Packs finance costs declined by 43 percent during the period under review; and ate up just over 1 percent of revenues in 9MCY11, compared to 3 percent in 9MCY10. The heads of other income and other expenses increased by 22 percent and 160 percent, respectively. Owing to higher margins carried forward, the company had to pay more than twice the taxes it paid for the same period last year. The positive effects of stellar sales growth and controlled operating expenditures were visible in the bottom line which almost doubled during the period under review. Net margins improved by 228 bps to stand at 7.95 percent in 9MCY11. The EPS also doubled during the same period. It has been a nice ride so far! Tri-Packs net profits in 9MCY11 are already higher than the full-year profits of any of the previous three years. Going forward, growth in demand of packaged goods, and the international prices of key raw materials would determine the growth in the companys margins. The expansion of BOPP films production capacity (expected to be operational by 2HCY12) bodes well for the future top-line growth for the company.
==================================================== Tri-Pack Films Limited ==================================================== Rs (mn) 9MCY11 9MCY10 Chg ==================================================== Net Sales 7,413 5,445 36% Cost of sales 6,063 4,621 31% Gross profit 1,350 824 64% Operaing profit 1,080 636 70% Finance costs 93 162 -43% PAT 589 308 91% Net margin 7.95% 5.66% - EPS (Rs) 19.64 10.28 91% ====================================================
Source: KSE notice
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