At-Tahur Limited (PSX: PREMA) was incorporated in Pakistan as a public limited company in 2007. The company is engaged in the production and processing of milk and dairy products.
Pattern of Shareholding
As of June 30, 2024, PREMA has a total of 218.639 million shares outstanding which are held by 2380 shareholders. Directors, CEO, their spouse and minor children are the major shareholders of the company with a stake of 72.57 percent followed by local general public holding 16.25 percent shares of PREMA.
Modarabas and Mutual funds account for 5.013 percent shares of PREMA while joint stock companies hold 2.89 percent shares. Around 1.54 percent of the company’s shares are held by insurance companies. The remaining shares are held by other categories of shareholders.
Financial Performance (2019-24)
The topline of PREMA rode an upward trajectory over the period under consideration. Gain arising from initial recognition of milk at fair value less cost to sell at the time of milking also shows an ascending trend in all the years. Conversely, gain arising from changes in fair value less cost to sell dairy livestock posted a dip in 2020, 2021 and 2024. The company’s bottomline plunged in 2020 and 2024.
PREMA’s margins which posted an uptick in 2019 drastically fell in 2020. In 2021, gross margin continued to inch down while operating and net margins considerably progressed. PREMA’s margins boasted their optimum level in 2022 followed by a plunge in the subsequent years. The detailed performance review of the period under consideration is given below.
In 2019, PREMA’s total revenue jumped up by 41.4 percent year-on-year to clock in at Rs.2699.81 million. Gain from the sale of dairy livestock boasted the highest rise of 121.13 percent, however, its contribution in the total revenue basket stays under 20 percent in all the years under consideration. Revenue from contracts with customers increased by 25.64 percent year-on-year in 2019 while gain arising from initial recognition of milk grew by 46.62 percent year-on-year during 2019.
The company sold 12.29 million liters of milk in 2019 as against 9.49 million liters sold in 2018. The increased volume is attributable to the launch of new products during the year. Gross profit grew by 43.69 percent year-on-year in 2019. GP margin also jumped up from 28.83 percent in 2018 to 29.29 percent in 2019. Operating expense increased in line with increased production and capacity utilization.
During the year, PREMA inducted new employees to take the tally up to 475 employees from 354 employees in 2018. This particularly drove up the salaries expense. Vehicles’ running expense was another major contributor of elevated operating expenses in 2019. Other expense magnified by 20 percent in 2019 on account of loss on sale of dairy livestock and allowance booked for ECL and WPPF.
Other income dropped by 36.55 percent in 2019 due to high-base effect as PREMA wrote off credit balance in 2018 and also recorded amortization of deferred income on sale and lease back. Operating profit grew by 60 percent year-on-year in 2019. OP margin also enlarged from 8.89 percent in 2018 to 10.06 percent in 2019. Finance cost grew by 143.96 percent in 2019 due to rise in discount rate coupled with increased borrowings during the year.
However, with debt-to-equity ratio of 6 percent, finance cost isn’t an issue for the company. PREMA’s net profit grew by 52 percent year-on-year in 2019 to clock in at Rs. 270.10 million with NP margin of 10 percent versus NP margin of 9.31 percent posted in 2018. EPS stood at Rs.1.69 in 2019 versus EPS of Rs. 1.62 recorded in 2018.
In 2020, the total revenue of PREMA magnified by 15 percent year-on-year to clock in at Rs.3107.32 million. This was due to launch of new products and change in sales mix. Pak Rupee depreciation also increased the value of PREMA’s export sales in 2020. Due to 20.86 percent year-on-year rise in cost of sales, gross profit could only grow by 1.17 percent in 2020 which pushed the GP margin down to 25.75 percent in 2020.
Administrative and marketing expense didn’t show any respite due to rise in inflation. To meet the rising demand, the company also hired new resources which drove up its workforce to 505 employees in 2020. Other expense tremendously grew during 2020 due to death of dairy livestock and loss on the sale of dairy livestock. Other income didn’t compensated either due to lesser profit on bank deposits, lesser sale of scrap and no common facilities cost charged during the year.
Operating profit contracted by 36.60 percent year-on-year in 2020 with OP margin standing at 5.54 percent. Finance cost grew by 138.83 percent year-on-year in 2020 due to increase in discount rate during the initial quarters of FY20 coupled with elevated borrowings particularly running finance. Debt-to-equity ratio slightly increased to 8 percent in 2020. PREMA’s net profit declined by 79.68 percent to clock in at Rs.54.89 million in 2020 with NP margin of 1.77 percent. EPS drastically dropped to Rs.0.34 in 2020.
In 2021, PREMA’s revenue again rebounded by 43.56 percent year-on-year to clock in at Rs. 4461.01 million. This was on the heels of a splendid rise in revenue from contract with customers and gain arising from initial recognition of milk. Despite 45 percent year-on-year increase in cost of sales particularly on the back of raw milk and forage consumed during the year, gross profit multiplied by 39.29 percent year-on-year in 2021; however, GP margin couldn’t post any growth and ticked down to 24.98 percent. Administrative and selling expense grew in line with inflation and increase in operations.
Except butter, the capacity utilization of all other segments – pasteurized milk, yoghurt, raita, chunky yoghurt and cream cheese significantly improved during the year. This required additional resources resulting in workforce expansion to 570 employees in 2021. Enhanced sales also resulted in hefty vehicle running expense incurred during the year. Other expense massively increased due to loss incurred on the sale of dairy livestock and death of dairy stock in 2021. WWF and WPPF also increased during the year due to high profitability.
Other income grew by 12.19 percent in 2021 due to reversal of allowance on ECL, amortization of government grant and gain on termination of lease. Operating profit boasted a stunning growth of 144.72 percent year-on-year in 2021 with OP margin of 9.45 percent.
Finance cost grew by 8.29 percent in 2021 despite drop in discount rate during the year. This was due to elevated long-term borrowings during the year. PREMA’s debt-to-equity ratio jumped up to 19 percent in 2021. The bottomline posted staggering growth of 377.85 percent year-on-year in 2021 to clock in at Rs.262.27 million with NP margin of 5.88 percent and EPS of Rs.1.32.
PREMA’s revenue continued to outshine the previous year’s mark in 2022 with a year-on-year growth of 47.19 percent to clock in at Rs.6566.08 million. Gain from the sale of dairy livestock which had been dropping since 2020 posted an incredible growth of 223.19 percent in 2022 with its share in total revenue basket jumping up to 18 percent in 2022 from 8 percent in 2021 (see the graph of revenue mix).
This is attributable to local currency depreciation as well as an increase in the prices of herd globally. Cost of sales grew by 37.22 percent year-on-year in 2022, yet healthy revenue growth provided impetus to gross profit which magnified by 77.11 percent in 2022 with GP margin clocking in at 30 percent. Administrative and selling expenses grew by 32.68 percent and 28.71 percent respectively in 2022 due to increased payroll and vehicle running expense.
Number of employees grew to 695 in 2022 due to tremendous growth in capacity utilization across product categories. Other expense didn’t show any respite and grew by 52.69 percent in 2022 due to death of dairy livestock and loss on sale of dairy livestock. Gain on sale of fixed assets and amortizations of government grant resulted in 145.85 percent rise in other income in 2022.
Operating profit posted 143.59 percent year-on-year growth in 2022 with OP margin climbing up to 15.64 percent. Finance cost kept moving up as discount rate saw multiple upward revisions in 2022. PREMA’s short-term and long-term borrowings also heightened during the year driving up its debt-to-equity ratio to 21 percent in 2022. Net profit grew by 228.34 percent year-on-year in 2022 to clock in at Rs.861.14 million with NP margin of 13.11 percent, the highest mark among all the years under consideration. EPS jumped up to Rs.4.33 in 2022.
In 2023, PREMA’s topline registered staggering year-on-year growth of 55.20 percent to clock in at Rs.10,190.85 million. This was on account of successful upward price revision, increased sales volume, product portfolio expansion, gain arising from sale of dairy livestock and gain arising on initial recognition of milk. High cost of raw and packaging material, Pak Rupee depreciation as well as elevated energy cost resulted in 59.82 percent higher cost of sales in 2023. While gross profit enhanced by 44.47 percent in 2023, GP margin ticked down to 27.98 percent.
Administrative and selling expenses escalated by 20.48 percent and 54.15 percent respectively in 2023 on the back of high vehicle running expense as well as payroll expense. Number of employees mounted to 701 in 2023. 64.29 percent higher other expense incurred by PREMA in 2023 was the result of higher loss from death and sale of dairy livestock. Other income grew by 130.39 percent in 2023 on account of higher sale of scrap, sale of operating fixed assets and amortization of government grant.
Operating profit posted 41.24 percent rise in 2023, however, OP margin ticked down to 14.23 percent. 97 percent higher finance cost registered by PREMA in 2023 was the consequence of unprecedented level of discount rate while debt-to-equity ratio plunged to 17 percent. PREMA’s net profit progressed by 44.90 percent in 2023 to clock in at Rs.1247.78 million with EPS of Rs.5.71 and NP margin of 12.24 percent.
In 2924, PREMA recorded 3.65 percent year-on-year uptick in its total revenue which clocked in at Rs.10562.44 million. There was stellar growth in farm milk production because of expansion of farm animals and ancillary infrastructure. Furthermore, the company also enhanced its product offerings comprising of value added downstream dairy products. Gain on initial recognition of milk also performed staggeringly during 2024; however, there was a drastic decline in gain arising from the sale of dairy livestock during the period.
This was due to the appreciation of Pak Rupee against the greenback which changed the value of the company’s biological assets. High cost of raw and packaging materials and forage consumed coupled with increased energy and utility charges, and hefty livestock medication and supplies used during the period resulted in 11.12 percent higher cost of sales in 2024.
This squeezed gross profit by 15.60 percent in 2024 with GP margin diving down to 22.79 percent. Administrative and marketing expenses escalated by 11.12 percent and 6 percent respectively in 2024. This mainly comprised of higher payroll expense, sales promotion expense and vehicle running expense on account of increased operations and capacity utilization. Number of employees peaked to 711 in 2024.
Other expense escalated by 14 percent in 2024 mainly on account of loss recorded on the sale and death of dairy livestock. Other income slumped by 46.59 percent in 2024 due to lesser scrap sales and lesser gain recognized on the sale of operating fixed assets. PREMA recorded 42.61 percent lower operating profit in 2024 with OP margin falling down to 7.88 percent.
Finance cost mounted by 25 percent in 2024 on account of higher discount rate. Debt to equity ratio plunged to 13 percent in 2024 due to settlement of outstanding liabilities during the year. PREMA’s net profit deteriorated by 71.69 percent to clock in at Rs.353.23 million in 2024 with EPS of Rs.1.62 and NP margin of 3.34 percent.
Recent Performance (9MFY25)
During the nine month period under consideration, PREMA posted a slump of 1.47 percent in its total sales which clocked in at Rs.7654.79 million. This was due to a decline recorded in revenue from yoghurt, raw milk, processed milk and other categories. Gain arising from initial recognition of milk also posted a drop in 9MFY25. Conversely, gain arising from the sale of dairy livestock increased by 10.63 percent during the period under review. However, due to its thinner proportion in the sales mix, it couldn’t produce much of an impact in the total sales of PREMA in 9MFY25.
Cost of sales dipped by 1.71 percent in 9MFY25. This resulted in 0.65 percent lower gross profit recorded during the period with GP margin clocking in at 22.94 percent in 9MFY25 versus GP margin of 22.75 percent recorded in 9MFY24. Administrative expense and marketing expense inched up by 3.55 percent and 4.38 percent respectively during the period owing to inflationary pressure. Other expense surged by 1.79 percent during 9MFY25. The main heads of other expense are loss arising from sale and death of dairy livestock.
Other income posted a tremendous year-on-year growth of 237.87 percent during 9MFY25 possibly on the back of higher scrap sales and gain recognized on the sale of operating fixed assets. Operating profit inched up by 0.4 percent in 9MFY25 with OP margin clocking in at 13.91 percent versus OP margin of 13.26 percent recorded in 9MFY24.
Discount rate cuts resulted in 27.2 percent slump in finance cost in 9MFY25. PREMA recorded 45.24 percent higher net profit to the tune of Rs.342.997 million in 9MFY25. This translated into EPS of Rs.1.57 in 9MFY25 versus EPS of Rs. 1.08 recorded during the same period last year. NP margin also strengthened from 5.51 percent in 9MFY24 to 8.35 percent in 9MFY25.
Future Outlook
The future of PREMA looks promising on the premise of reasonable growth in demand, constant innovation and renovation of its product portfolio and optimization of its value chain.