Treet Corporation Limited is one of the oldest business groups in Pakistan. The company has its roots before the partition of subcontinent almost a century ago, when it was established as a diversification from canteen and agricultural business. After the partition, the company explored new business opportunities in automobiles, trucks, tractors, soap, ghee and razor. Recently, the group has also ventured into production and trading of batteries for UPS and automobile sector as well as the pharmaceutical sector with the purchase of the majority stake in Renacon Pharma Limited.
TCL became a public limited company in 1977 and was listed on all the three stock exchanges of the country. Treet Group of Companies (TGC) is a consortium of six entities with Treet Corporation Limited (TCL) as the Holding Company. TGC has been operating for more than 55 years and exports to over 35 markets globally. Currently, Treet Group of Companies (TGC) is principally engaged in the manufacturing & sale of blades, soap, corrugated packaging, motor bikes as well as the recently added battery division
Treet's famous brands include TRBC (Treet Blade Coated) in Carbon Steel and TPS (Treet Platinum Super) in Stainless Steel that enjoy high market share in double-edge blades category. While in bonded razor category, Trim-II XL, Treet-II, and Treet Hygiene disposable razors are leading brands in popular price segment of the market. Treet has become a significant player in exports over the years. Currently, Treet is exporting its products to over 35 countries around the globe with the majority going to the Middle East, China and Bangladesh respectively.
Historical performance:
Treet Corporation has diversified their business significantly over the years. This diversification has been the key force behind revenue growth for the company. From revenues of Rs 3.5 billion in FY10, the firm's top line stood at Rs 7 billion in FY14, reflecting a 19 percent year-on-year growth over FY13. The major contributors to this growth were corrugation and blade.
More recently, Treet's top line grew almost 10 percent for FY16 compared to FY15. The bulk of this increase could be attributed to blade sales, which picked up 20 percent while the bike segment posted a decline of almost 25 percent in the face of stiff competition. However, 62 percent of the revenue for FY16 came from blades, which more than offset the lacklustre performance of other segments including corrugated boxes and bikes.
Treet's gross margin had fallen to 20 percent in FY14 as against 25 percent in FY12 and 22 percent in FY13. This is because the company was facing higher cost of electricity tariffs as well as rising cost of raw material. Although the company had increased its gross profit margin for FY16, the net margins were still under stress.
In addition, Treet has been active in reviving its soap business by introducing new brands and investing in vegetable base soap brand to take advantage of lower palm oil prices. The company's recently launched maintenance free sealed batteries (MFSB) with the brand name "Daewoo" have been a pleasant surprise sales wise with large growth in volumes.
TCL's gross profit margins increased in FY17 on the back of strong performance by the blade segment as well as the addition of the pharmaceutical business segment. Treet has acquired 58 percent equity stake in Renacon Pharma Limited, which is the market leader in production of dialysis concentrates in Pakistan.
The disposable razor registered good growth in the local market while lower fuel and power consumption coupled with volumetric growth led to gross profit margins for the division getting a boost. Soap segment also saw a rise in volumes although margins took a hit on account of escalating palm oil prices during the period.
The company's motor cycle segment registered decreasing margins, which TCL attributes to intense market competition. However, the company is hoping to bring some life into the segment by introducing new models and undertaking cost rationalisation.
Snapshot 1QFY18
Once again the blade business emerged as the star performer during the period with an increase of almost 18 percent in the segment's top line. The soap and corrugation showed lacklustre performance during the period.
However, whereas the soap segment was able to maintain its profitability margins, the same did not hold true for corrugation that saw margins shrinking on account of intense competition in the local market. For a change, TCL's bike segment showed an increase in revenue as well as margins as compared to the same period last year.
Stock performance
Treet started the previous year on par with the benchmark KSE-100 index but as the year progressed, the stock price fell in comparison with the index. The stock reached its lowest point in December, 2017 compared to the benchmark index. However, there has been improvement lately with the stock rebounding a bit - although it continues to under-perform the KSE-100 index by a wide margin.
Future outlook
The razor blades segment still continues to be the star performer of TCL and is the largest revenue driver for the company. However, increased competition has led to marginal growth in profitability amongst existing divisions, which has led the company to enhance its diversification efforts. Treet Corporation now has plans to start trading operations in the chemical business, which will include resins and epoxy in FY18.
Treet has already expanded into the battery sector that promises to perform well. Along with use in UPS backup systems, the growth in the automotive sector will also lead to increase demand. The group has also entered the pharmaceutical sector, which is further going to expand its segment portfolio. Although the motorbike division has had problems, it does not have high fixed costs and the recent rise in sales means it makes sense to continue.
=================================================================
Treet Corporation Limited: Pattern of shareholding Percentage
share held
=================================================================
Directors, CEO & their spouse/minor children 39.37
-----------------------------------------------------------------
of which
-----------------------------------------------------------------
Syed Shahid Ali 28.2
Syed Sheharyar Ali 7.67
Associated Companies and Related Parties 5.45
-----------------------------------------------------------------
Of which
-----------------------------------------------------------------
Loads Limited 5.45
NIT 8.93
-----------------------------------------------------------------
Banks, DFI's, NBFIs, insurance
/takaful firms, modarabas & pension Funds 8.68
Foreign investors 4.16
Individuals 29.23
Joint-stock companies 3.19
Others 0.67
Total 100
=================================================================
Source: Company accounts