Clover Pakistan Limited

Listed on the Karachi Stock Exchange and Lahore Stock Exchange, Clover Pakistan Limited (CPL) was established in Pakistan in 1986 as a public limited company under the Companies Ordinance, 1984. Its main office is situated on Sarwar Shaheed Road, Karachi. The company has a trademark license agreement with US-based Kraft Foods Holdings Incorporated.
Clover Pakistan Limited is primarily involved in the manufacture and sale of food products. It has successfully entered the export market, selling food and personal care products to African and Middle Eastern markets. The company's major production is the powdered soft drink, TANG, a trademark of Kraft Food.
FINANCIAL ANALYSIS OF CLOVER PAKISTAN LIMITED
Profitability Despite a decline in the overall consumption of prepared beverages in FY09 due to high inflation, the company's main product, TANG managed to grow its market share.
Net sales of the company during FY09 fell by five percent, from Rs 1, 085 million in FY08 to Rs 1, 035 million. This may be attributed to the change in the consumption pattern of consumers in light of persisting ongoing inflation. This figure continued its upward trend in the subsequent periods, reaching Rs 1,341 million in FY11. Depreciation of the Pakistani rupee over the years since FY09 has affected the overall input costs. Additionally, sugar prices have continued their upward trend in international as well as local markets.
High inflation and substantial increases in the price of the flavouring pre mix have added to the cost of the product, shrinking the company's earnings. Gross profit of CPL fell by 22 percent in FY09 compared with the previous year. It increased only marginally in FY10, by just 2.46 percent in FY11.
The company's profit before taxation fell considerably from Rs 141.808 million in FY08 to Rs 14.239 million in FY09. In FY10, the management of the company was able to control the distribution, marketing and administrative costs and reduce financial charges.
As a result, the profit before tax increased by 125 percent, moving from Rs 14.239 million to Rs 31.985 million. This figure reached Rs 63.378 million in FY11 owing to the significant increase in the other operating income of the company, along with the managements' successful efforts to minimise costs.
The company has been able to increase its profitability over the years since FY09, with improved control over its costs. This is evident from the increase in the profit margin which rose from 0.37 percent in FY09 to 2.95 percent in FY11. Return on equity for the company has also shown a positive rising trend, increasing from 1.09 percent in FY09 to 9.99 percent in FY11.
Liquidity As a result of the prudent management of CPL, the company enjoys a healthy liquidity position with a strong ability to pay off its short-term obligations. This can be seen by the current ratio value of 1.70 in FY09, which improved to 1.84 in FY11. The quick ratio of CPL has also increased from 1.06 in FY09 to 1.18 in FY11.
Capital Management Management at CPL is focused on ensuring optimal capital structure for smooth running of the business. This has led to a decline in the cost of borrowing of the company, which fell from Rs 6 million in FY09 to Rs 1 million in FY10.
Operational Efficiency The company has shown phenomenal improvement in the fixed assets turnover ratio, indicating the company's ability to generate revenues from investment in fixed assets. This ratio increased by 108 percent, from 11.72 in FY09 to 24.41 in FY11.
Market Value As a result of the low profitability of the company, the earnings per share (EPS) registered a sharp decline of 96 percent, moving from Rs 10.26 in FY08 to Rs 0.41 in FY09. The EPS improved to Rs 1.60 in the FY10, shooting by 162 percent in FY11 to reach Rs 4.19.
Future Prospects Over the years, TANG has been able to maintain its position as the market leader in powdered drinks. It is now sold in five different flavours and has a lot of potential for growth. However, this growth is likely to be affected by the increase in competition from local brands that are coming up with similar products. Also, high inflation has affected the consumption pattern of consumers, affecting the sales of the company.
Yet, as in the case of all companies in the fast moving consumer goods segments, CPL to can bank upon a booming youth population and rising trends of consumerism in coming years. Given the brand equity that the company's main product enjoys, it is well poised to perform strongly in the local market in coming periods. All information and data used are from reliable source(s) and subjected to extensive research after diligent and reasonable efforts to determine the soundness of the source(s).
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