FCEPL remains in the black

October 20, 2021 (MLN): FrieslandCampina Engro Pakistan Limited (FCEPL) (previously Engro Foods Limited) on Wednesday announced its nine-month financial results ended on 30th Sept’21 whereby the company posted net profits of Rs1.96 billion, showing a six-fold jump when compared to profits of Rs321mn reported in the corresponding period last year.

This has translated into earnings per share (EPS)-basic and diluted of Rs2.56 during 9MCY21 against EPS of Rs0.42 in 9MCY20.

This improvement in net income is due to a 38% YoY decline in finance cost amid a lower interest rate regime that resulted from a reduction in the rate of borrowing and effective management of working capital.

During the period under review, the company witnessed a 19.5% YoY jump in revenue that clocked in at Rs38.67bn on an account of strengthening distribution and ensuring the availability of products along with investment in brands.

The upsurge in net revenue was led by strong volumetric growth in all categories - particularly Olpers, complemented by strong marketing campaigns on conversion awareness and a narrowing delta vs. loose milk, as per a research note by Intermarket Securities.

While the business operating environment remained challenging due to rising commodity prices. Nevertheless, the company managed to offset these challenges through improvement in mix and saving initiatives across the value chain.

Resultantly, the gross margins of the company expanded by 3.91ppts to 19% in the said period.

On the cost front, the distribution and marketing expenses surged by 17% YoY, administrative expenses by 6.1% YoY while other expenses by 2.4x YoY during 9MCY21. This was compensated by a 38% YoY reduction in finance cost amid a lower interest rate regime.

As per the financial statement, the company paid an income tax of Rs772mn, up by 6 times YoY as opposed to the tax of Rs125mn that the company paid in the same period last year.

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