FCEPL posts 34% decline in half yearly profits

August 25, 2022 (MLN): FrieslandCampina Engro Pakistan Limited (FCEPL) (formerly Engro Foods Limited) has made net profits of Rs938 million (EPS: Rs1.22) for the half-year ended June 30, 2022, registering a decline of 34% YoY when compared to profits of Rs1.41 billion (EPS: Rs1.84) reported in the corresponding period of last year.

The decrease in profitability was attributed to lower margins amid high inflation and depreciation of the Pakistani Rupee (PKR) and higher finance costs.

According to the financial results, the topline of the company witnessed an increase of 25% YoY to Rs31bn in 1HCY22 that was fuelled by improvement in the portfolio mix, coupled with an increase in volumes of both, the Dairy & Beverages and Frozen Desserts segments. However, with soaring inflation and devaluation of the rupee against the dollar, the business environment remained challenging. Resultantly, the gross margins reduced from 21% to 17% in 1HCY22.

On the costs front, the distribution and marketing expenses surged by 18% YoY, and administrative expenses jumped by 19.5% YoY during 1HCY22. This was somehow compensated by a 16.5% YoY reduction in other operating costs and a 2.2x YoY increase in other income.

Meanwhile, the finance cost saw an increase of 53% YoY to clock in at Rs625mn, affecting the financial health of the company.  This increase might be due to rate hike by the central bank in order to slow down inflation.

Notably, the effective tax rate increased to 44% as compared to 29% in 1HCY21.

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