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The first quarter came to an end and 1Q CY14 numbers showed a sound quarter revival versus losses posted in previous quarter. The improved quarter-on-quarter performance likely hints at likely recovery for the company in terms of volumes.
Olpers and Tarang comprise 86 percent of its revenues. Sales revenue has increased to 5.7 percent year on year, pushed primarily due to the efforts made to increase Tarang sales on the back of its price discount policy and 6 percent price increase in Olpers in January 2014, as stated by Zoya Ahmed of BMA Capital Management. Moreover, the company received decent reaction on its Mabrook pilot project which is a new initiative to target loose milk segment as 6 outlets of Mabrook have been launched in Karachi up till now and is targeting 30 outlets by the end of CY14.
But then again, gains from this accretion were largely offset by the companys margins taking a hit instead. According to Sateesh Balani of Elixir Research, milk supply usually increases considerably during flush season due to which cost of raw material goes down. Margins still fell during the quarter predominantly due to high base effect and the firms inability to pass on rising costs to consumers.
According to FMCG analysts, EFOODS enjoyed 49 percent market share in UHT dairy segment while Nestle around 48 percent in December. With Nestles much improved top line growth of 18 percent this quarter, the title of market leader may well have slipped for EFOODS this quarter.
The supply chain issues for the company which dampened CY13 earnings seem to have been resolved now and company has engaged new distributors--evident by a sizeable drop in distribution expenses.
EFOODS powdered milk plant is likely to be operational in 2Q CY14 and company has plans to export it to Afghanistan. The company also intends to launch its products (Olpers and ghee) internationally that will augment volumetric sales of the company and cost pressures could decrease due to streamlining of the whole milk process.


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Engro Foods
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(Rs mn) 1QCY13 1QCY14 chg
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Sales 9,624 10,168 6%
Cost of sales 6,782 8,103 19%
Gross profit 2,842 2,065 -27%
Distribution & marketing expenses 1,364 1,068 -22%
Administrative expenses 271 405 49%
Finance cost 200 256 28%
NPAT 653 190 -71%
Profitability
Gross profit margin 29.5% 20.3%
Operating profit margin 12.5% 5.8%
Net profit margin 6.8% 1.9%
Market
EPS(Rs) 0.86 0.25
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Source: KSE notice

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