Ayesha Mudassar

Friesland Campina Engro Pakistan Limited (FCEPL) witnessed a fall of 33% in its profitability, which clocked in at Rs664.7 million during the first quarter of the ongoing calendar year 2024 compared to net profit of Rs990.3 million over the corresponding period of 2023, reports WealthPK. The decline in profit was mainly attributed to challenging economic conditions caused by currency devaluation, inflationary pressures and rising interest rates.

As per the company’s quarterly report, the profit-before-tax also declined 26% to Rs1,105.6 million in 1QCY24. Additionally, the earnings per share (EPS) for the quarter stood at Rs0.87, representing a 33% decline compared to the same period last year. This reduction in EPS indicates a decrease in the company’s earnings available to shareholders per share. On the positive side, the net sales posted a reasonable year-on-year growth of 21% to clock in at Rs27.4 billion against Rs22.6 billion in 1QCY23. This growth in sales was fuelled by volume growth and enhanced consumer offerings.

Pattern of shareholding

As of December 31, 2023, the company had 766.5 million outstanding shares held by 7,791 shareholders. Associated companies, undertakings and related parties held 90.9% of the company’s shares, which is followed by the local and general public with 6.06% of the shares. The remaining shares were held by other categories of shareholders, each holding less than 1%.

Financial performance in CY23

The company continued its growth trajectory and delivered a record year with the highest-ever top line and operating profit in CY23 despite facing a challenging macroeconomic environment and intense competition. Furthermore, the company achieved a remarkable milestone by surpassing the Rs100 billion revenue mark during the year, reflecting a 36% increase compared to the previous year.

The company recorded a 19% growth in gross profit; however, the gross margin decreased by 2.1% due to high inflation, global supply chain disruptions, foreign exchange constraints, and currency devaluation. In addition, the operating margin fell by 1.2% compared to the previous year, due to cost rationalisation and efficiency improvement initiatives. The net profit declined from Rs2.4 billion in CY22 to Rs1.5 billion in CY23. This was on the heels of a substantial rise in finance costs with interest rates nearly doubling during the year.

The company and its operations

Friesland Campina Engro Pakistan is a publicly listed company incorporated under the Companies Ordinance, 1984 (now the Companies Act, 2017). The company is a subsidiary of Friesland Campina Pakistan Holdings BV (the holding company), a subsidiary of Zuivelcoöperatie Friesland Campina UA (the ultimate parent company). The principal activity of the company is to manufacture, process and sell dairy-based products and frozen desserts. The company also owns and operates a dairy farm. Dairy farmers are the backbone of the company’s supply chain.

Future outlook

The coming months present unprecedented challenges and uncertainties with continuing political instability, exchange rate volatility and high inflation. Given the unpredictable economic environment, the company's management is confident to drive efficiencies across the value chain and build resilience.

Credit: INP-WealthPk