Treet Corporation Limited (PSX: TREET) is one of the strategic business units of Treet Group of Companies. The group has various other businesses under its banner including Treet Holdings Limited , Treet HR Management (Private) Limited, First Treet Manufacturing Modaraba, Global Arts Limited, Treet Battery Limited, Renacon Pharma Limited as well as Treet Power Limited which is currently dormant.
Treet Corporation Limited was established in 1977 as a public limited company under the Company's Act 1913 (now Companies Ordinance 1984). It is engaged in the manufacturing of shaving blade and disposable razor, marketing and selling to both domestic and exporting markets. The latter has contributed more than half of the total sales during FY19.
Shareholding pattern
A major share of the company, about 44 percent is held by the directors, CEO, their spouses and minor children. Of this, 33 percent is held by Mr. Syed Shahid Ali, one of the directors of the company and also the CEO, while similar ownership is held by individuals. The rest of the ownership is divided between associated companies such as Loads Limited and other institutions and bodies.
Historical performance
Treet Corporation Limited's top-line is mostly dominated by local sales. Prior to FY15, Treet's top-line was growing at an average of 23 percent each year, after which its revenue fell in FY15 and picked up again although at a lower rate.
The FY15 top-line was affected mostly by a fall in exports which took up 43 percent share in total revenue. The latter was adversely affected due to the political conflicts in the Middle East which is one of the major export markets for the company. Local sales, on the other hand, maintained growth despite the presence of smuggled goods in the market from India and Egypt. Operating and net margins saw a greater negative impact than gross margin due to salaries and wages increasing by approximately 1.5 times that year.
During FY16 the country witnessed a stable exchange rate, a fall in CPI inflation, a GDP growth rate of 4.71 percent and growth in electricity generation and distribution and gas distribution of 12.18 percent. This was reflected in the figures for the FY16- a marked improvement in top-line of almost 20 percent year on year. Of this, export sales grew marginally while domestic revenue recorded a growth of 21 percent. The fall in price of metals, used as raw material, also contributed to better profitability for the year.
In FY17, Treet's top-line continued to grow albeit at a lower rate of 13 percent compared to previous year's 20 percent where local sales outshone exports. The first half of FY17 witnessed an increase in price of commodities and metal which resulted in an increase in costs of production. However, due to increase in volumes, the company was able to improve margins from Rs220 million in FY16 to Rs314 million in FY17. In addition, income from financial assets such as dividend income and charges to subsidiary company also contributed to net profits doubling from Rs33 million in FY16 to Rs66 million in FY17.
While top-line continued to grow by almost 14 percent year on year during FY18, the company faced several other challenges which adversely impacted profitability for the year. Most importantly, the price of commodities and metals continued to increase which marred gross margins while finance cost, which was about 9 percent of the revenue of FY18, due to increased short term borrowing affected net margins. The increased other income could also not improve profitability for the company, which eventually incurred a loss of Rs83 million for the period.
Externally the economy experienced a slowdown in FY19 as the currency depreciated, and inflation rose from 3.9 percent to 7.3 percent while sectoral growth also recorded below targets. Despite the unfavourable economic environment, Treet's profitability improved remarkably, with the top-line growing at 10 percent, and cost of production as a percentage of sales reducing significantly. Administrative costs saw an increase due to an increment in salaries and donations made to Society for Cultural Education.
Treet Corporation Limited has been operating at above 90 percent capacity while gradually adding to its capacity over the years.
Recent performance and outlook
The last quarter of FY19 experienced difficult times for the economy and hence the manufacturing sectors. While a lot of the companies saw the aftermath of economic correction in the first quarter of FY20, Treet Corporation yielded relatively better results with top-line growing by 9.5 percent year on year and margins improving considerably. Currency depreciation may have also allowed for better exports while local sales had been increasing through the years.
The year 2019 was difficult with high inflation, devalued currency, increasing KIBOR rates and changes in taxation measures; the latter creating problems for the company in its supply chain. Moreover, Treet Corporation Limited's annual report states that the company foresees a better top-line while exchange rate will play a vital role in governing competition in the international market, since the company is involved in trading.
============================================================== Treet Corporation Limited: Recent quarterly results ============================================================== Rs (mn) 1QFY20 1QFY19 YoY ============================================================== Net revenue- LHS 1,717 1,569 9.43% Cost of sales (947) (1,047) -9.55% Gross profit 770 522 47.51% Administrative expenses (97) (130) -25.38% Distribution expenses (198) (199) -0.50% Operating profit 475 193 146.11% Finance cost (286) (193) 48.19% Other operating expenses 0 0 Other operating income 9 16 -43.75% Workers' profit participation fu (9) (0) 8900.00% Workers' welfare fund (4) 0 Profit before taxation 185 16 1063.52% Taxation (46) 27 -270.37% Profit from continuing operation 139 43 224.01% EPS 0.84 0.27 ==============================================================
=================================================================== Treet Corporation Limited: Shareholding pattern as at June 30, 2019 =================================================================== Categories of shareholders % =================================================================== Directors, CEO, their spouse and minor children 43.87 Associated companies, undertakings and related part 5.28 NIT 9.36 Foreign Company 0.59 Banks, DFIs, insurance 2.63 Public sector 0.2 Joint stock and investment companies 3.61 Modaraba 0.11 Executive 0.16 Company secretary 0.01 Others 1.22 Individual 32.96 =================================================================== Total 100 ===================================================================
Source: Company accounts
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