Listed consumer sector performs well

Despite the fact that the country has been facing stiff challenges, listed consumer sector performed well as its profit before taxation increased by 28 percent on year-on-year basis to Rs 13.7 billion during nine months of the current calendar year 2011, analysts said.
"Out of the total, six of our sample companies (Nestle, Unilever Pak, Unilever Foods, Engro Foods, Rafhan Maize and National Foods) continued to excel, posting a combined solid topline growth of 30 percent on year-on-year basis during nine months of CY11 owing to rise in food inflation, which fuelled the topline of the sector, as the sector holds strong ability to pass on the price to final consumer", Yawar Uz Zaman, an analyst at InvestCap said.
However, due to slightly greater rise in the input costs during nine months of CY11, the sector''s gross margins went down by 68 bps to 27.8 percent. "Despite decline in gross margins, core profitability growth remained in the vicinity of the topline growth as sector''s bottomline blossomed by 28 percent on year-on-year basis", he said. However, on a quarter-on-quarter basis, the sector''s bottomline grew by only 13 percent, amid low topline growth (slower growth in prices with stable volumes)", he said.
On a relative basis, Engro Foods showed enormous growth of 993 percent in its bottomline during the nine month period in CY11 mainly due to low base-effect of last year (when the company turned into profits), he said. The Engro Food''s topline grew by a massive growth of 42 percent on year-on-year basis in nine months while the company''s operating profits grew even faster by 193 percent amid stable operating costs. Next, National Foods showed an impressive profit after tax growth of a colossal 186 percent on year-on-year basis in the nine months of CY11, followed by Unilever Pakistan Foods 37 percent, Unilever Pakistan 22 percent and Nestle 21 percent.
This stupendous profitability performance of the sector was also reflected in the stock performance of the companies during nine month of CY11 as the sector as a whole yielded an outstanding 47 percent (sample growth at 45 percent) in the nine month of CY11 as compared to the benchmark KSE100''s return of negative 2.2 percent during the same period. On stock performance front, Nestle was the star performer once again as its value appreciated by a huge 58 percent during the period, followed by Unilever Foods 45 percent, Rafhan Maize 29 percent and Unilever Pakistan 28 percent. National Foods was the only company showing negative growth of 12 percent while Engro Foods return was not comparable (was listed recently).
"Since the country is facing significant challenges at the moment amid gas and power outages, rise in cost of raw material, and uncertainty hovering on political front, it is all creating hurdles to boost investor confidence, not only in the capital market but in the overall investment scenario in the country", he said. However, rising urbanisation in the country with more inclination towards packaged products and increasing population will render sufficient consumer product demand going forward, he added.