April 20, 2022 (MLN): FrieslandCampina Engro Pakistan Limited (FCEPL) (previously Engro Foods Limited) has reported net profits of Rs663.7 million for the quarter ended March 31, 2022, registering a growth of 21.38% YoY when compared to profits of Rs546.8mn reported in the corresponding quarter of CY21, the company's filing on PSX showed today.

This has translated into earnings per share (EPS)-basic and diluted of Rs0.87 against EPS of Rs0.71 in 1QCY21.

The increase in profitability was attributed to higher revenues and other income. The Company reported revenue of Rs14 billion in the first quarter, showcasing 20.7% growth versus last year. The growth was led by improvement in the portfolio mix, coupled with an increase in volumes of both, the Dairy & Beverages and the Frozen Desserts segments.

Riddled with sharp increases in commodity costs due to continued inflation and the devaluation of the Pakistani Rupee, the business environment remained fraught with challenges. Consequently, the Gross Margins declined by 140bps.

However, the Company continued to drive cost-efficiencies through multiple cost-saving initiatives, which resulted in FCEPL registering a post-tax profit of PKR 664 million in Q1 vs PKR 547 million in the same period last year – an improvement of 10bps.

Committed to improving standards and nourishing Pakistan, FCEPL established the Pakistan-Netherlands Dairy Development Centre, in collaboration with the University of Veterinary and Animal Sciences (UVAS). By leveraging Netherland’s rich dairy expertise, the Centre aims to improve Pakistan’s dairy development capacity and quality by increasing production, improving food security, enhancing food safety, and integrating sustainability in Pakistan’s dairy value chains and food landscape.

On the costs front, the distribution and marketing expenses surged by 11% YoY, and administrative expenses jumped by 25% YoY during 1QCY22. This was compensated by a 22% YoY reduction in other operating costs and a 2.3x YoY increase in other income.

The finance cost of the company witnessed an increase of 41% YoY mainly due to an increase in interest rate.

As per the financial statement, the company paid an income tax of Rs270mn, up by 13% YoY as opposed to the tax of Rs239mn paid in 1QCY21.

Dairy and beverages

The Dairy and Beverages segment reported a revenue of PKR 12.8 billion, registering a 19.5% growth year-over-year. The segment’s growth was led by Olper’s as it continued to strengthen its position as the market leader with ongoing brand and trade investments. The segment witnessed significant expansion in the retail footprint and E-Commerce channel during the quarter and will continue to explore new channels and routes to markets to serve its customers effectively and efficiently.

To simultaneously diversify and strengthen its portfolio, and solidify its association with mornings, the Company launched Olper’s Cheese, which offers the nutritional equivalent of one glass of Olper’s milk (200g) in every slice of Olper’s cheese (20g). Additional recent launches including Olper’s flavoured milk, Olper’s full cream milk powder (FCMP), Olper’s pro-cal, Olper’s cream and Tarang Elaichi, continued to accumulate market share.
Frozen desserts

With revenue of PKR 1.2 billion, the frozen desserts segment reported a growth of 34.1% vs the same period last year. Offering a value-added product at an affordable price, the Company launched the O’more Double Choco Chips Cone in 2022 at a price point of PKR 50, which was well-received in the market and is expected to grow.

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