National Foods Limited (KSE: NATF) a household term in the country, was established in 1970 as a spice company. In 1988, NATF, then a private limited company was transferred into a public limited, and is now registered on all the three stock exchanges of Pakistan.
NATF is the forerunner of the concept of hygienically packed spices and, handy and quick-prepare recipe mixes in Pakistan. At the time, spices were sold openly and unbranded in the market and NATF's concept was an unseen phenomenon that slowly but surely took the country by storm.
Although the market seems to be swarming with competitors today, NATF still relishes the leading market share in the country's spice and condiment business. A name recognised in over 30 countries across the globe, NATF's products are exported to the far-flung corners of the globe and over the years it has become one of the country's prominent multi-category food companies, with over 250 products in 12 different product groups including recipe masalas, ketchup, jams and condiments, powdered drinks, plain spices and desserts.
Performance for FY14 The year FY14 saw the NATF's main product categories comprising the recipe mix, sauces, pickles and desserts performing remarkably well, allowing National Foods to brook its growth momentum. In the course of the period FY14, net sales increased by 13.8 percent year-on-year, with recipe mix and ketchup categories contributing to 17 percent and 20 percent growth in sales. The investment on the brands continued in this part of the fiscal year too, and the mega campaigns like "Recipe Wedding Campaign" and "National Made Easy" were received well by the shoppers.
Solid export's sales have on the whole helped keep up National Food's growth impetus through less than stellar macroeconomic environments at home. During the FY14 the company's export numbers to markets in the US, Canada, Middle East, Europe and America made up nearly 12 percent of the corporation's total revenues.
NATF's emphasis on improving their gross margin on the whole is noticeably evident, with the enhanced sales mix, control of fixed cost and an arduous approach to curtailment of supply chain outlays having clear results for the business. Also, the check of fixed cost facilitated in the improvement of gross profit.
Yet, double-digit growth in topline did not trickle down to double-digit growth bottom-line making a net profit of Rs 708 million. Assistance to bottom-line is given by decline in 'other expenses' to 0.1 percent year-on-year. However, pressures have been observed with administrative expenses growing by 35 percent year-on-year, respectively. Finance cost for the FY14, also grew by 17 percent year-on-year, adding extra pressure to bottom-line development.
Viewing at the business's unconsolidated balance sheet, a contrast of current ratio and quick ratio reveals that the disparity between the two has broadened considerably over the years. In FY14, the inventory stated for 63 percent of the firm's current assets. This signifies that the firm possesses big inventory stock. Good performance in FY14 allowed National Foods to reward investors by earnings per share of Rs 13.68.
Future outlook
Owing to competitive working capital management NATF attained another landmark of improvement in the long term credit rating from A + to AA- by JCR-VIS. The improvement displays that the firm is moving in the right track. In the face of the unstable macroeconomic conditions, the management of the company is sturdily devoted to growth and will be investing in new food groups both in international and domestic markets to delight their stakeholders in future.

===========================================
                             FY13      FY14
===========================================
Profitability
===========================================
Gross profit margin         36.7%     36.9%
Operating profit margin     14.7%     12.9%
Net profit margin           10.2%      8.0%
ROE                         27.6%     19.3%
ROA                         12.0%      8.2%
-------------------------------------------
Liquidity
-------------------------------------------
Current ratio                1.36      1.30
Quick ratio                  0.36      0.48
-------------------------------------------
Turnover
-------------------------------------------
Total asset turnover         1.17      1.03
Fixed asset turnover         4.47      3.84
-------------------------------------------
Market
-------------------------------------------
EPS - Rs                     8.48      7.07
===========================================