Punjab Oil Mills Limited (POML), a leading manufacturer of edible oils and fats in the country has given an interesting result for the financial year end June 2015. The company has reported a loss of 11 percent year-on-year in its top line from FY14. However, the profit after tax for the oil company has increased by a whopping 127 percent, which is by far the highest bottom line the company has seen in its history. According to company sources, the decline in the sale is a combination of a decrease in average selling price due to the lower international price of edible oil price and fall in the volume.
Market sources argue that the largest contributor to the volume decrease was the sale of lowest margin product, purely price based. It seems that POML did not encourage the sale of low margin products. Secondly, during the year, Government of Punjab used the Price Control Act to control the price of edible oil. This governmental act has contributed to the fall in the volume of the premium brand products.
The gross margin has improved by 500 bps. The global decline in commodity and fuel prices along with the increasing share of higher-margin products helped. These improvements at the gross profitability level also caused the operating margins to increase by 300 bps.
The net profit margin for the nine months rose by 200 bps. Thanks to a decline in finance charges and increase in other income due to better investment return combined with better-operating margin - POML posted sizeable bottom line.
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