Continuing past trend, Packages top-line increased despite a drop in export sales. While revenue has been rising for Packages Limited since 2011, its operating profit has been declining since 2015. The first quarter of the current calendar year saw a reversing of this trend with a significant increase in profit from operations.
Packages has two main divisions: Packaging division which includes folding cartons and flexible packaging and consumer products division that 7 key brands which includes Rose Petal, Tulip, Maxob, Double Horse and Zzoop. In the last calendar year, Packages made investment of over Rs700 million in its packaging division to improve quality as well as enhance capacity, whereas on the consumer products side, investments of Rs166 million were made for the toilet roll line.
It appears that sales rose on the back of this investment. Since the packaging division is more than 3 times bigger than the consumer division in terms of sales, it is likely that the increase in top-line stemmed from growth in the packaging division.
In the past few quarters, increase in raw material costs and conversions costs that were not fully passed on to customers prevented the rise in sales to trickle down to higher profits. Increase in advertisement expenses of consumer products, also resulted in a lower profit from operations. However, it appears not to be the case for the latest results posted as gross profit increased and trickled down to a higher profit from operations. This would indicate that Packages initiatives on internal cost savings and tighter controls on fixed assets are paying off.
Decline in investment income YoY has led to a lower net profit figure. This was most likely due to lower dividend income from IGI Holding Limited (formerly IGI Insurance Limited) and DIC, both of which registered lower dividends in previous quarters.
Comments
Comments are closed.