September 23, 2020 (MLN): FrieslandCampina Engro Pakistan Limited (FCEPL) held its analyst briefing session yesterday, wherein the management of the company shed light on the latest financial performance as well as the ongoing endeavors and prospects.
For the uninitiated, the company had reported profits of Rs 292 million for the half-year ended on June 30, 2020 against the net losses of Rs 238 million of the corresponding period last year.
While commenting on the performance, the management of the company credited the increase in prices for UHT milk, increase in the market share for Olpers and decline in the distribution costs to the recovery in company’s earnings. The increase in the number of customers switching from loose milk towards packaged milk also contributed to the FCEPL’s profits.
Similarly, the increase in sales revenue by 8.6% was attributed to higher dairy segment sales, especially in the second quarter. However, the company did suffer substantial declines in the sale of ice-creams due to the imposition of lockdown, which caused closures of schools (major market for Omore) across the country for a prolonged period.
The improvement in the gross profits by 18.51% was the courtesy of higher selling price and lower cost of raw material. Meanwhile, the finance cost surged by 39% to clock in at Rs 765 million owing to higher interest rates as well as rise in the levels of debt.
While discussing the impact of COVID-19 on the overall performance, the management said that the decline in sales from corporate clients was compensated by higher demand from household segment due to supply disruption of raw milk and increased preference towards packaged milk on the back of precautionary measures amid outbreak of COVID-19, a report by Foundation Securities said.
To ensure minimal impact of COVID-19 on the business operations, the company has taken several steps such as initiating home delivery services, launching Olpers mart and focusing more on e-commerce selling.
Regarding the future endeavors, the management said it is gearing up for the launch of Olpers flavoured milk as well as new flavors in the ice cream category. The short-term prospects for the company also seem favorable due to the precautionary behavior of consumers, as well as the decline in duty on import of skimmed powdered milk. However, in the long-run, it will have to battle several challenges given slow conversion of consumer preferences from loose milk to packaged milk products amid economic slowdown and rising cost of living, the report added.
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