The Organic Meat Company Limited: performance and outlook

The Organic Meat Company Limited (PSX: TOMCL) was incorporated in Pakistan as a private limited company in 2010. The company is engaged in the processing and sale of halal meat and allied products. It is also one of the leading exporters of red meat and meat by-products. Middle Eastern countries are the major export market of TOMCL. However, the company has recently added pet food raw material to its portfolio which enabled it to tap the USA and Europe markets. Besides, the company also has significant business from Far East, CIS and South Asian markets.

Pattern of Shareholding

As of June 30, 2025, TOMCL has a total of 178.491 million shares outstanding held by 7089 shareholders. Directors, CEO, their spouse and minor childrenhave the majority stake of 48.60percent in the company followed by local general public holding 42.46 percent shares. Other local companies account for 4.67 percent shares of TOMCL while insurance companies hold 2.04 percent shares. Around 1.64 percent of TOMCL’s shares are held by Modarabas & Mutual Funds. The remaining 0.53 percent shares are held by Banks, DFIs and NBFIs and 0.06 by foreign general public.

Financial Performance (2019-25)

TOMCL’s topline staggeringlygrew over the period under consideration. Its bottomline followeda similar trajectoryuntil 2023 followed by a drop in 2024 and 2025. Its margins didn’t portray a definitepattern and oscillatedover the period under review (see the graph of profitability ratios). The detailed performance review of the period under consideration is given below.

In 2019, TOMCL’s topline grew by 25.55 percent year-on-year to clock in at Rs. 2577.52 million. This came on the back of a considerable improvement in both export and local sales.Cost of sales grew by 27.71 percent year-on-year in 2019,which culminated into GP margin of 15.82 percent in 2019 versus GP margin of 17.24 percent recorded in the previous year. What hit the company hard during 2019 was a massive year-on-year rise of 119.79 percent in the distribution expense coupled with allowance for doubtful debt worth Rs. 84.56 million booked during the year.

This took a heavy toll on the operating profit which slid by 46.14 percent year-on-year with OP margin clocking in at 5.17 percent in 2019 versus OP margin of 12.10 percent posted in 2018. The main culprits behind the humungous distribution expense were clearing and forwarding charges, export duties as well advertisement and promotion expense incurred during the year.

Administrative expense also hiked by 20.97 percent year-on-year in 2019 on the back of elevated payroll expense as the number of employees grew from 83 in 2018 to 133 in 2019. Finance cost grew by 24.25 percent year-on-year on the back of high discount rate coupled with increased short-term borrowings during the year to meet the working capital requirements. In 2019, TOMCL recorded other income of Rs. 203.12 million versus other expense of Rs.33.71 million recorded in the previous year.

The stunning growth in other income came on the back of exchange gain and reversal of provision against trade debt. This resulted in 52.13 percent year-on-year increase in net profit which clocked in at Rs.217.97 million in 2019. NP margin also rose to 8.46 percent in 2019 versus NP margin of 7 percent registered in the previous year. EPS plunged from Rs.7.09 in 2018 to Rs.4.46 in 2019 due to additional shares issued during the year taking the tally to 71.818 million shares in 2019 versus outstanding share volume of 10 million shares in 2018.

In 2020, TOMCL registered topline growth of 31.29 percent year-on-year. This resulted in net sales of Rs.3384.11 million in 2020. The main growth propeller during the year was the export of fresh chilled meat products; however, the export of fresh chilled boneless vacuum products witnessed a complete halt due to COVID-19. To cater to the increased demand of fresh chilled meat products, TOMCL enhanced its capacity by 300 tons a month. Offal exports to far eastern countries also showed exciting growth during the year.

To meet the rising demand, TOMCL achieved 50 percent capacity utilization in 2020 versus capacity utilization of 35 percent recorded in 2019 (see the graph of actual versus utilized capacity).High sales volume coupled with better pricing and cost management resulted in an improvedGP margin of 18.38percent in 2020.Administrative expense escalated by 10.63 percent year-on-year in 2020 mainly on account of higher payroll expense despite the fact that TOMCL’s workforce shrank to 123 employees in 2020.

The company kept a check on its distribution expense which dropped by 11.53 percent year-on-year in 2020 on the back of lower clearing & forwarding charges and export duties. Allowance for doubtful debt also ticked down by 17.52 percent year-on-year in 2020. All these factors resulted in year-on-year growth of 179.29 percent in TOMCL’s operating profit in 2020 with OP margin clocking in at 11 percent.

Finance cost increased by 26.74 percent year-on-year in 2020 as discount rate was high for the first three quarters of the year. Other income slid by 99.49 percent year-on-year in 2020 due to thinner exchange gain on account of stability in the value of local currency. Net profit grew by 22.20 percent year-on-year to clock in at Rs. 266.36 million in 2020 with NP margin standing at 7.87 percent. EPS clocked in at Rs.3.71 in 2020.

During 2021, the net export volume of meat dropped by 10 percent year-on-year. While frozen meat and frozen offal exports grew by 78 percent and 1016 percent respectively in 2021, the export of fresh chilled meat dropped by 36 percent year-on-year due to lackluster sales in the CIS market. Export of fresh chilled meat constituted 49 percent of TOMCL’s business.

Poor performance in this category nullified the volumetric growth in other segments. However, due to favorable pricing and currency dynamics as well as impressive offal sales, the company was able to post 16 percent year-on-year topline growth in 2021.This culminated in the net sales of Rs. 3927.82 million in 2021. Cost of sales increased from Rs. 437 per kg to Rs. 498 per kg in 2021 on the back of higher procurement cost and depreciation charges due to increase in fixed assets.

This pushed the GP margin down to 16.54 percent in 2021 with a marginal 4.44 percent rise in gross profit in absolute terms. While the company put a check on its advertisement and promotion charges in 2021, higher clearing and forwarding charges pushed the distribution expense up by 34.10 percent year-on-year in 2021. Administrative expense remained largely intact during the year.Allowance for doubtful debt also gave some respite and dropped by 81.83 percent year-on-year in 2021.

As a consequence, operating profit improved by 11.74 percent year-on-year in 2021, however, OP margin slightly inched down to 10.60 percent. Finance cost dipped by 0.78 percent year-on-year in 2021 on the back of low discount rate although short-term borrowings slightly increased during the year. Other income also buttressed the bottomline as it grew by 1216.83 percent year-on-year in 2021 on the back of exchange gain, profit on saving accounts as well as gain on biological assets. Net profit multiplied by 13.94 percent year-on-year in 2021 to clock in at Rs.303.48 million with NP margin of 7.73 percent and EPS of Rs.2.47.

In 2022, the company’s export sales grew by only 2 percent year-on-year. This time around, fresh chilled meat exports did a commendable job and grew by 55 percent year-on-year while frozen meat and frozen offal exports dipped by 78 percent and 37 percent respectively. Pricing power and Pak Rupee depreciation kept the topline buoyant which grew by 18.58 percent year-on-year to clock in at Rs.4657.77 million in 2022.

However, high cost of sales stood at Rs. 646 per kg in 2022 resulted in a shrunken GP margin of 13.10 percent with gross profit plummeting by 6.17 percent in absolute terms. Administrative expense grew by 45.36 percent year-on-year in line with inflation and also because of induction of new resources as the company initiated its animal fattening farm. TOMCL’s workforce stood at 176 employees in 2022 versus 161 employees in the previous year.

Distribution charges grew by 81.23 percent year-on-year in 2022 on the back of higher freight charges as there was a global container shortage as well as Pak Rupee depreciation. Operating profit dropped by 52.19 percent year-on-year in 2022 with a thinner OP margin of 4.27 percent. Finance cost would’ve been higher by 37 percent year-on-year in 2022; however, it was offset by lower provisioning on export rebate receivable in line with IFRS.

Hence, finance cost dipped by 1.10 percent in 2022. Other income grew by 2431.96 percent in 2022 on the back of tremendous exchange gain as well as gain on biological assets. Consequently, bottomline grew by 35.57 percent year-on-year to clock in at Rs.411.42 million in 2022 with EPS of Rs.3.05 and NP margin of 8.83 percent.

In 2023, TOMCL’s topline growth was recorded at 36.66 percent year-on-year. This resulted in net sales of Rs.6365.24 million in 2023. Export volume stood at 6163 MT, down 2 percent year-on-year. This was the consequence of 6 percent decline in the volume of fresh chilled meat, 66 percent increase in frozen meat and 18 percent plunge in frozen offal exports.

In 2023, TOMCL registered a robust 502 percent rise in the revenue proceeds from pet chews as the company tapped North & South American markets. Cost of sales climbed up to Rs.894.56 per kg due to higher procurement and depreciation charges. While average prices of the company’s products dropped by 2.78 percent in 2023, Pak Rupee depreciation saved the day for TOMCL and culminated into GP margin of 13.40 percent.

Administrative expense surged by 42.71 percent year-on-year in 2023 as a result of a bigger workforce comprising 225 employees. Higher fee and subscription charges also contributed to driving up the administrative expense in 2023. Distribution expense also spiked by 40.56 percent year-on-year in 2023 primarily due to higher clearing and forwarding charges.

Allowance for doubtful debt dropped by 83.21 percent in 2023. All these factors culminated into 57.43 percent bigger operating profit posted by TOMCL in 2023 with OP margin slightly inching up to clock in at 4.92 percent. Finance cost magnified by 104.73 percent in 2023, which was on account of higher discount rate and increased short-term borrowings. It is to be noted that TOMCL’s gearing ratio has considerably dropped from 41 percent in 2018 to 16 percent in 2023 despite enlarged borrowing profile.

This is because of increased equity of the company not only because of reserves and revaluation surplus but also because of increased share capital which stood at 134.992 million shares as of June 30, 2023. This also justifies erosion in its EPS despite sound growth in its net profit over the years. 90.45 percent higher other income recorded in 2023 was the result of exchange gain, gain on biological assets, reversals and interest income. This gave great impetus to TOMCL’s net profit which posted a stupendous 75.54 percent year-on-year growth to clock in at Rs.722.19 million in 2023 with NP margin of 11.35 percent and EPS of Rs.4.86.

In 2024, TOMCL registered a staggering 85.35 percent year-on-year growth in its topline which clocked in at Rs.11,797.76 million. This was on account of 62 percent rise in export volumes. This came on the back of improved demand from key international markets such as China, UAE and other Gulf countries. Besides, the company also entered new geographical markets. A key milestone unlocked during the year was receiving approval from General Administration of Customs China (GACC) to export heat treated frozen beef.

In order to meet the growing demand in both local and international markets, the company increased its production capacity by 40 percent during the year. In order to mitigate the effect of hiking energy and raw material prices, the company adopted several cost optimization measures such as waste minimization, supply-chain optimization and negotiation with suppliers to secure more favorable pricing. All these measures enabled TOMCL to maintain its gross margin at 13.40 percent in 2024.

In absolute terms, gross profit enhanced by 85.14 percent in 2024. Administrative expense surged by 41.23 percent in 2024 particularly on the back of higher payroll expense. This was the result of inflation as well as workforce expansion from 225 employees in 2023 to 380 employees in 2024. Distribution expense mounted by 41.32 percent in 2024 due to higher clearing & forwarding charges as export volumes significantly rose during the year. Allowance for doubtful debt also increased by 559.54 percent in 2024 to clock in at Rs.35.18 million.

TOMCL recorded 151.81 percent higher operating profit in 2024 with OP margin climbing up to 6.70 percent. Finance cost escalated by 27.87 percent in 2024 due to higher discount rate. This was despite the fact that the company paid off a large portion of its outstanding liabilities during the year which drove down the gearing ratio from 16 percent in 2023 to 11 percent in 2024.

Net other income also fell by 86.75 percent in 2024 on account of exchange loss incurred during the year due to stability in the value of local currency. This put a dent on TOMCL’s financial performance in 2024. Its net profit slumped by 31.13 percent in 2024 to clock in at Rs.497.37 million with EPS of Rs.3.35 and NP margin of 4.22 percent.

In 2025, TOMCL’s net sales grew by 18.72 percent to clock in at Rs.14006.07 million. During the year, the company changed its business model from mostly exports led to incorporate local sales particularly institutional sales in the niche categories.

This was a strategic move to avoid geopolitical shocks and adverse movement in currency parities. In 2025, export sales made 58 percent contribution to the overall sales of the company versus its share of 95.68 percent in the previous year. Stability in the value of local currency, decline in export volumes, high energy cost and high cost of livestock due to devastating floods in the country led to 18.84 percent decline in gross profit in 2025 with GP margin dipping to its lowest level of 9.15 percent.

Administrative expense escalated by 55.74 percent in 2025 mainly on the back of hefty payroll expense, fee & subscription charges, entertainment expense as well as Ijarah rentals. TOMCL streamlined its workforce from 380 employees in 2024 to 352 employees in 2025. This was despite the fact that capacity utilization grew from 39 percent in 2024 to 41 percent in 2025. The company also completed its phase-II expansion in September 2024. Distribution expense dropped by 41.57 percent in 2025 due to a switch from export-oriented sales mix.

The company booked 350.93 percent higher allowance for doubtful debt to the tune of Rs.158.64 million in 2025 to protect itself against higher domestic receivables. Operating profit deteriorated by 34.95 percent in 2025 with OP margin falling down to 3.66 percent. Finance cost plunged by 33.57 percent in 2025 due to monetary easing and settlement of outstanding debts during the year.

Thinner debt profile coupled with improved liquidity position and higher equity (due to higher reserves and right issue) translated into a gearing ratio of 1 percent in 2025 versus gearing ratio of 11 percent in 2024. Other income strengthened by 183.64 percent in 2025 due to higher gain recognized on biological assets, exchange gain, profit on saving account and gain on bargain purchase of acquisition of shares of Muhammad Saeed Muhammad Hussain Limited (MSMHL), a subsidiary company of TOMCL engaged in offal and beef casing. Net profit nosedived to the tune of 13.59 percent to clock in at Rs.429.79 million in 2025. This translated into EPS of Rs.2.76 and NP margin of 3 percent in 2025.

Recent Performance (1QFY26)

During the first quarter of the ongoing fiscal year, TOMCL recorded a paltry 3.24 percent uptick in its net sales which clocked in at Rs.3448.996 million. During the period, export sales further slid by 25 percent to stand at 51.40 percent of the company’s sales mix versus their share of 70.76 percent in 1QFY25. Conversely, local sales expanded by 71.61 percent in 1QFY26 to grab 48.6 percent share in the overall sales mix.

The company changed its strategy from being a direct exporter to be an indirect exporter by selling to local customers. Cost of sales surged by 4.21 percent in 1QFY26. While raw material and packing material prices remained stable during the quarter, change in sales mix and stability of Pak Rupee resulted in higher cost of sales.

This led to 4 percent downtick in gross profit in 1QFY26 with GP margin clocking in at 10.95 percent versus GP margin of 11.78 percent recorded in 1QFY25. Administrative expense surged by 22.44 percent in 1QFY26 due to a spike in fee & subscription charges, entertainment charges, depreciation expense as well as vehicle running & maintenance charges. Distribution expense slid by 19.42 percent in 1QFY26 due to a change in the company’s sales mix in favor of local sales.

This similar approach also led the company to increase in allowance for doubtful debt by 113.33 percent in 1QFY26. TOMCL recorded 7.62 percent decline in its operating profit in 1QFY26 with OP margin clocking in at 6.26 percent versus OP margin of 7 percent recorded in 1QFY25. The company was able to squeeze its finance cost by 63.56 percent in 1QFY26 on the back of monetary easing as well as reduction in short-term and long-term debt by around 60 percent.

Other income deteriorated by 19.71 percent to 1QFY26 probably due to a drop in profit on bank deposits and less exchange gain. TOMCL recorded 6.74 percent uptick in its net profit in 1QFY26 which clocked in at Rs.182.10 million with EPS of Rs.1.02 and NP margin of 5.28 percent. This was against the EPS of Rs.0.96 and NP margin of 5.11 percent recorded at 1QFY25.

Future Outlook

The company’s approach towards expansion, operational efficiency and diversification of sales mix and channel mix will yield encouraging results in the future. The recent expansion of white and red offal processing area at the Gadap facility, acquisition of MSMHL as well as constant investments in R&D are the steps to strengthen its financial performance.

Tapping the local market as well as procurement of orders from international giants particularly in the Middle Eastern market will broaden the horizons of its sales and shield it against shocks in any particular market.