While COVID-19 pandemic had a relatively less impact on the operations of the essential foods companies as they were allowed to operate without lockdown restrictions, food inflation pushed up the raw material cost and dragged gross profits for companies where the cost pressures could not be passed on entirely to the consumers. National Foods Limited (PSX: NAFT) announced its financial performance for FY21 earlier this week where the company’s core business earnings (unconsolidated)were seen climbing by 14.5 percent year-on-year. The growth in profits emanated from higher revenue growth, which stood at 20 percent year-on-year, mainly through brand and consumer led initiatives to drive volume. The double-digit revenue growth came from both local and export sales. However, with over 22 percent rise in cost of sales, NAFT’s gross margins dipped slightly during the year. This could be attributable to inflationary pressures despite cost optimization that the company undertook to avert the COVID-related cost impact.
On the expenses side, distribution and administrative costs increased in tandem with the operations by 16.3 and 11.8 percent year-on-year, respectively. A major part of the operations is the marketing and sales promotion, which is a big chunk of the distribution cost.
Besides the core local and international business, NAFT has controlling interest in A1 Bags & Suppliers Inc., the share of which has been rising in the company’s revenues. On a consolidated basis, the group sailed through the 2021 choppy waters fine with a healthy topline growth of 20.5 percent, and a bottomline growth of 19.4 percent year-on-year.
National Foods Limited also announced a cash dividend of Rs% per share along with the recommendation of bonus shares of 1 for every 4 held (25 percent).