Ayesha Mudassar

The financial position of Treet Corporation Limited (TREET) took a prominent hit as it posted a net loss of Rs206 million during the half-year period ended December 31, 2023 against Rs254 million in net profit over the corresponding period of the earlier fiscal year, according to WealthPK. The reversal from profit to loss underscores the combined impact of the increased administrative and distribution expenses, as well as the substantial rise in financing costs.

As per the financial statement, TREET posted a loss-before-tax of Rs216 million for 1HFY24 versus a profit of Rs313 million during the same period last year. Moreover, TREET announced a loss per share of Rs0.95 for the period under review. The operating profit also posted a significant decline of 44% in 1HFY24 compared to the corresponding period of the previous year. However, despite the prevailing economic challenges, the company achieved a notable 15% increase in revenue, which illustrates its effective implementation of strategic sales approaches, both domestically and in export markets. Moreover, TREET achieved a significant milestone by successfully generating Rs2.5 billion through a right issue of shares. This capital-raising endeavour represents a strategic move aimed at bolstering the company’s financial position and enhancing its overall financial flexibility.

Performance (2019-2023)

Barring 2020 and 2022, the top line of Treet Corporation witnessed growth. However, the profit margins fluctuated over the period from 2019 to 2023. In 2020, the company's net revenue dropped by 10.7% on account of lower domestic and export sales. Owing to the outbreak of Covid-19 pandemic, TREET experienced a reduction in its gross profit. In addition, the discontinued operations played a role in suppressing the bottom line, which clocked in at negative Rs190.1 million in 2020. Following a dip in 2020, the top line of TREET regained momentum in 2021 and grew substantially by 25.4% year-on-year.

The top-line growth was backed by higher sales volume coupled with improved pricing and product mix. Consequently, the gross profit rose by 28.5%. The company recorded a net profit of Rs1,538 million in 2021 against a loss of Rs190.1 million the previous year. The net revenue of TREET witnessed a 2% reduction in 2022. With high costs and lower sales volume, the gross profit declined by 11.8% during the year. Moreover, TREET posted a net profit of Rs861.8 million with earnings per share of Rs4.88 in 2022.

The year 2023 witnessed an outstanding 37% YoY growth in its top line. The robust sales growth was the consequence of improved sales volume across segments as well as price optimisation strategies. As a result, the gross profit jumped by 45%. However, higher salary expenses, elevated advertisement costs as well as soaring finance costs resulted in a 44% reduction in net profit compared to 2022.

About the company

Treet Corporation was incorporated in Pakistan on January 22, 1977, as a public limited company under the Companies Act 1913 (now Companies Act 2017). The principal activity of the company is to manufacture and sell razors and razor blades along with other trading activities. Besides having a major share in the local market, the company sells its products to over 40 countries across the globe.

Future outlook

The company is making greater efforts to improve sales volume, which is evident from its top-line growth over the years. However, substantial net sales can only translate into profits if the company implements supply chain optimisation along with restructuring of its heavily leveraged capital structure. Apart from the financial strategies, the management is continuously dedicated to improving the quality of current products and launching new ones (such as the rubberized handle razor and Treet shaving foam).

Credit: INP-WealthPk