Treet Corporation Limited (PSX: TREET) was incorporated in Pakistan as a public listed company in 1977. The company is engaged in the manufacturing and sale of razors and razor blades along with other trading activities. The company has a product range of over 75 SKUs including shaving razors, body razors and feminine razors.
The company, besides having a major share in the local market, sells its products to over 40 countries across the globe.Its production plant has the capacity to produce 2.15 billion units per year.
TREET operates under the umbrella of Treet Group in Pakistan. Treet Holdings Limited, First Treet Manufacturing Modaraba, Renacon Pharma Limited and Treet Battery Limited are the subsidiaries of TREET.
Pattern of Shareholding
As of June 30, 2024, TREET has 371.029 million shares outstanding which are held by 12,050 shareholders. Local general public has the majority stake of 43.30 percent in the company followed by Directors, CEO, their spouse and minor children holding 42.51 percent shares.
NIT and ICP hold 5.78 percent shares of the company while Joint stock companies hold 4.82 percent of the company’s shares. Around 2.89 percent of TREET’s shares are held by Banks, DFIs and Insurance companies. The remaining shares are held by other categories of shareholders.
Historical Performance (2019-24)
TREET’s topline posted year-on-year growth in all the years under consideration except 2020. Conversely, the company has consistently posted net losses in all the years under consideration except 2021 and 2023. From 2021 to 2024, the company was able to post operating profit; however, this couldn’t trickle down into a positive bottomline except in 2021 and 2023.
TREET’s gross margin dropped in 2019 followed by a sound recovery for the next two years. The GP margin dipped again in 2022 and then grew to reach its optimum level in 2024. Operating margin followed an inclining trend from 2021 to 2023 followed by a dip in 2024. The detailed performance review of the period under consideration is given below.
In 2019, the consolidated net sales of TREET registered year-on-year rise of 27.22 percent to clock in at Rs.11,972.06 million. Except its trading business and bike sales, all other segments - razors, soap, corrugation, pharmaceutical and battery registered year-on-year growth in net sales in 2019.
Battery segment led the pack with over 446 percent year-on-year growth in net sales in 2019. 35 percent year-on-year hike in cost of sales in 2019 was the consequence of Pak Rupee depreciation, high global commodity prices as well as elevated level of inflation.
The company was in the process of grid installation during the year and hence high fuel cost had to be borne by the company. Corrugation margins were also compressed due to rigorous completion.
Overall, gross profit plunged by 15 percent year-on-year in 2019 with GP margin falling down from 15.60 percent in 2018 to 10.41 percent in 2019. Administrative expense spiked by 36.76 percent year-on-year in 2019 on account of generous donations and increased payroll expense as number of employees increased from 2898 in 2018 to 3051 in 2019.
Distribution expense also multiplied by 28.26 percent year-on-year in 2019 on the back of higher salaries & wages of sales force and increased advertisement budget. Operating loss magnified by 749.63 percent in 2019 to clock in at Rs.793.19 million.
Higher profit related provisioning, exchange loss as well as unrealized loss on short-term investment at FVTPL resulted in 103.45 percent escalation in other expense in 2019.
However, it was absorbed by 87.87 percent higher other income recorded in 2019 which primarily came on the back of hefty scrap sales and export rebate. 164.74 percent higher finance cost incurred by TREET in 2019 was the result of monetary tightening and increased short-term borrowings. TREET posted net loss of Rs.2125.25 million in 2019, up 237 percent year-on-year. Loss per share was recorded at Rs.12.69 versus loss per share of Rs.3.97 posted in 2018.
In 2020, the company’s factories were closed due to lockdown period resulting in a marked drop in the sales of soaps and blades, bikes, corrugated boxes. While pharmaceutical and battery sales and trading business registered growth, yet couldn’t sustain the topline which dropped by 7.18 percent year-on-year to clock in at Rs.11,111.58 million in 2020. The major hit came from the export sales because of restriction on the movement of people and products in the major export markets of TREET.
Gross profit improved by 5 percent year-on-year due to improved selling prices and cost cutting measures. GP margin also climbed up to 11.80 percent in 2020.While distribution expense dropped by 10.18 percent during the year due to lesser advertisement and marketing activities, however, proportionally, it stood at over 11 percent of the company’s revenue and hence a major culprit behind the company posting operating losses in most of the years. Administrative expense slid by 38.83 percent year-on-year in 2020 on the back of lower payroll expense as TREET rationalized its workforce to 2791 employees.
During the year, there was a marked increase in impairment allowance on expected credit loss of trade debts. Operating loss plummeted by 53.87 percent in 2020 to clock in at Rs.365.92 million. Finance cost grew by 34.61 percent in 2020 as discount rate was high for the major part of the year. Lower profit related provisioning, abridged exchange loss and reduced unrealized loss on short-term investments at FVTPL resulted in 15.66 percent decline in other expense in 2020.
Other income also dipped by 57.39 percent in 2020 on account of curtailed scrap sales and export rebate. Share of loss from associate companies as well as loss from discontinued operations also played their due role in suppressing the bottomline. TREET’s net loss clocked in at Rs. 2655.891 million in 2020, up 24.97 percent year-on-year. This translated into loss per share of Rs.15.46.
After a dip in 2020, the topline of TREET regained momentum in 2021 and grew substantially by 27.7 percent to clock in at Rs.14,194.74 million. The topline growth was backed by higher sales volume in blades, pharma and battery segments and was partially offset by lower volumes in soap business. Better sales volumes coupled with improved pricing and product mix resulted in 94.48 percent rise in gross profit with GP margin climbing up to 17.94 percent in 2021.
Administrative expense heightened by 88.96 percent in 2021 on account of hefty payroll expense despite reduction in employee count to 2800 in 2021 from 3051 in 2020. Distribution expense ticked up by 9.65 percent in 2021 due to higher salaries and benefits of sales force. ECL on trade debts lowered by 25.10 percent in 2021. As a consequence, TREET posted operating profit of Rs.401.33 million in 2021 with OP margin of 2.83 percent.
The company also shoved off its finance cost by 39 percent in 2021 by paying a major portion of its bank loans during the year. Low discount rate also helped keeping the finance cost in check. TREET’s debt-to-equity ratio marched down from 67 percent in 2020 to 52 percent in 2021. Other income proved to be a major upbeat factor as it grew by 1266.70 percent in 2020. This was the result of reversal of deficit on revaluation, export rebate and gain on short-term investments.
During the year, TREET recorded profit of Rs. 598.64 million from divestment of 100 percent equity interest in Global Arts Limited (subsidiary company). This helped TREET record profit after tax of Rs.547.88 million in 2021 as against losses recorded in the previous years. EPS clocked in at Rs.3.22 while NP margin was recorded at 3.86 percent.
TREET posted topline growth of 11.24 percent in 2022. This resulted in its net sales reaching Rs.15,789.92 milion. This was supported by corrugation, battery and pharma business while the performance of soap business wasn’t satisfactory during the year.
With better cost control measures and improved sales volume, gross profit grew by 4.8 percent year-on-year with a marginal downtick of 100 bps in the GP margin which clocked in at 16.90 percent in 2022 despite soaring inflation and Pak Rupee depreciation.
A meticulous check on the operating expense was the result of compressed advertising budget, lower payroll expense as well as legal and professional charges incurred in 2022. During the year, TREET rationalized its workforce to 2674 employees in 2022, down from 2800 employees in the previous year.
Abridged operating expenses coupled with a plunge in the impairment allowance culminated into 97.90 percent bigger operating profit with OP margin jumping up to 5 percent in 2022. Finance cost registered a year-on-year growth of 7 percent owing to discount rate hike. Other expense slid by 34.56 percent in 2022 due to lower profit related provisioning and lesser assets written off during year.
Other income also declined by 69.16 percent in 2022 mainly on account of no reversal of deficit on revaluation recorded during the year as well as thinner export rebate. TREET posted net loss of Rs.302.99 million with loss per share of Rs.1.76 in 2022.
2023 stands out during the period under consideration with a staggering 47.90 percent year-on-year growth in TREET’s topline which clocked in at Rs.23,352.71 million. The robust sales growth was the consequence of improved sales volume across segments (except bikes) as well as price optimization strategies. As a result, gross profit multiplied by 92 percent in 2023 with GP margin climbing up to 21.95 percent.
Administrative expense surged by 32.36 percent in 2023 on account of inflation and expansion in workforce which stood at 2697 employees versus 2674 employees in the previous year. Higher salaries of sales force, elevated advertisement budget as well as towering warranty claims and provisions resulted in 54.45 percent spike in distribution expense in 2023. The company didn’t book any provision for ECL in 2023.
As a consequence, operating profit picked up by 204 percent in 2023 with OP margin registering its highest value of 10.34 percent. Finance cost surged by 75 percent in 2023 on account of unprecedented level of discount rate as well as increased long-term financing obtained during the year for balance sheet re-profiling. Hefty exchange loss translated into 63.44 percent higher other expense incurred by TREET in 2023.
Conversely, other income declined by 24.79 percent in 2023 on account of lesser profit recorded on the disposal of property, plant and equipment. TREET also booked share of loss worth Rs.218.12 million from an associate company. The company recorded net profit of Rs.28.385 million in 2023. The loss attributable to the equity holders of the parent company was recorded at Rs.0.697 million in 2023. This translated into loss per share of Rs.0.003 in 2023.
In 2024, TREET recorded 7.42 percent year-on-year uptick in its net sales which clocked in at Rs.25,086.31 million. This mainly came on the back of improvement in the sales of blades and trading income, battery, hemodialysis concentrates and soaps. Cost of sales ticked up by 6.29 percent in 2024, resulting in 11.45 percent growth recorded in gross profit with GP margin recording its optimum level of 22.77 percent in 2024.
Administrative expense mounted by 41.22 percent in 2024 due to higher payroll expense, legal & professional charges as well as travelling & conveyance charges incurred during the year. The company streamlined its workforce from 2,737 employees in 2023 to 2,666 employees in 2024. Distribution expense also escalated by 41.22 percent in 2024 due to elevated freight & octroi charges, salaries of sales force, warranty claims & provisions as well royalty charges incurred during the year.
Operating profit slid by 4.76 percent in 2024 with OP margin ticking down to 9.17 percent. Finance cost surged by 24 percent in 2024 due to higher discount rate. Other expense dropped by 51.82 percent in 2024 as no exchange loss was incurred during the year.
Other income ticked up by 12.28 percent in 2024 due to exchange gain and mark-up income recorded during the year. TREET recorded share of profit of Rs.72.51 million of associate company as compared to share of loss of Rs.218.12 million recorded in the previous year. TREET recorded net loss of Rs.48.578 million in 2024. This translated into loss per share of Rs.0.603 in 2024.
Recent Performance (9MFY25)
During 9MFY25, TREET recorded 3.20 percent uptick in its net sales which clocked in at Rs.19.186.15 million. This was on account of better product mix and price interventions. The company recorded 18.56 percent improvement in its gross profit in 9MFY25 with GP margin clocking in at 26.35 percent versus GP margin of 22.94 percent recorded in 9MFY24. Administrative expense hiked by 30.11 percent in 9MFY25 due to inflationary pressure. Distribution expense also surged by 24.86 percent in 9MFY25.
The company recorded 7.36 percent uptick in its operating profit in 9MFY25 with OP margin clocking in at 10 percent versus OP margin of 9.67 percent recorded in 9MFY24. Lower discount rate and payment of outstanding liabilities resulted in 29.89 percent decline recorded in finance cost in 9MFY25. Other expense surged by 157.22 percent in 9MFY25 probably due to profit related provisioning done during the period.
Conversely, other income dipped by 6.96 percent in 9MFY25 seemingly due to lower mark-up income on the back of monetary easing. Share of profit of associate company posted a staggering growth of 360.34 percent in 9MFY25 to clock in at Rs.42.37 million. TREET posted net profit of Rs.257.387 million in 9MFY25 versus net loss of Rs.128.76 million posted in 9MFY24. EPS was recorded at Rs.0.69 in 9MFY25 versus loss per share of Rs.0.88 posted in 9MFY24.
Future Outlook
The company is making greater strides to improve its sales volume which is evident from its topline growth over the years. Besides growth in volumes, TREET is also undertaking price optimization to pass on the impact of cost hike to its consumers.
Besides launching new products, the company also plans to enhance the capacity of its hygiene razors due to high demand. New production facility of Renacon Pharma Limited is also successfully commissioned. The company is actively tapping export market to improve its sales mix and create a more balanced portfolio.
Copyright Business Recorder, 2025
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