Incorporated in Pakistan in 1964, Shezan was initially a joint venture between Shahnawaz Group and the Alliance Development Corporation of USA. Mainly engaged in the manufacturing, and selling of juices, pickles, jams and ketchups, the company has been constantly expanding-both into local and in international markets.
After purchasing all shares of the Company in 1971, Shahnawaz Group made it a Public Limited Company and it was listed on the Karachi and Lahore Stock Exchanges. The company has been steadily expanding its production capacity over the years. In 1980-81 a separate unit was installed in Karachi, which now caters for Karachi, Sindh and export demand. A new bottle filling plant was also set up in 1983 in the Lahore unit, increasing the capacity five folds. An independent Tetra Brick plant was commissioned in 1987 making the unit leading manufactures with comprehensive range of production in the fruit processing field in Pakistan. The registered office of the Company is situated in Lahore, Pakistan.
FINANCIAL HIGHLIGHTS
Shezan's top line in 3QFY13 amounted to Rs 1.26 billion, compared with Rs 966 million in the corresponding period of the previous year. The increase in sales was due to a quantitative increase in sales of juices in bottled as well as tetra packaging. Sales for condiments (which include jams and jellies etc) however remained range bound, summing up to Rs 616 million at the close of the third quarter.
Profits for the firm have strengthened this quarter even though the lingering wave of cold weather was expected to last well into the third quarter and put a dampener on things. For the period under review, the gross profit as a percentage of turnovers strengthened to 31.95 percent- up from 29 percent recorded during the corresponding period last year off the back of volumetric growth in the high margin juices category.
Shezan's distribution costs have been climbing up incessantly throughout the year and grew by 47.96 percent quarter on quarter. These costs include advertisement and sales promotion expense of Rs 110 million for the quarter, made on account of increased promotional activity amid the stiff competition between local and foreign packaged food brands in the market.
Meanwhile, the financing cost in the first quarter of 2013 amounted to Rs 13.6 million, compared to Rs 17.7 million in the corresponding period of the previous year. The decrease in financing expenses was mainly due to efficient use of funds during the period under review. Although short term borrowings were made during the period to stock the packaging materials to fulfil the sales demands, they were lower quarter on quarter as leaner sales during the preceding quarter meant that the seasonal fruit and pulp stock was carried forward.
In nine-month period ended 31st March, turnover was Rs 3.62 billion as against Rs 3.248 billion of corresponding period of 2012. Gross profit for the firm meanwhile has increased to Rs 1.085 billion for the period.
OPERATIONAL HIGHLIGHTS
Commodity inflation has been a big dampener for firms working in the food industry as they continue to struggle with the rising costs of running operations in the absence of electricity and gas. Although overall, the commodity producing sector has done better than the rest, Shezan's financials could have been even better if it were not for the spiralling prices of agricultural inputs.
However, as is the case for other bigger players in the food producing sector, a rapidly evolving consumer base, greater acceptance for packaged food and economies of scale achieved off the base of an extensive on ground network have all come to Shezan's aid in its time of need.
Despite continuous pressure, the close of 2012 saw the firm's bottom line thicken from Rs 251 million to Rs 371 million off the back of a 19.8 percent increase in net sales year-on-year- a performance which is likely to be improved upon as the firm heads towards the summer months.
One avenue that will likely help the cause is likely to be the company's export sales. Shezan's export sales at the close of the six month mark were higher about 40 percent as compared to the corresponding period of year 2011 and the graph is likely to go up as the demand from the Middle Eastern and African markets is reported to go up in the next quarter.
OUTLOOK
The outlook for Shezan remains favourable, despite the abysmal power situation in Punjab. Although the detracting effect of the gas load shedding and the fluctuations in POL prices are going to show up in the firm's financials for the last quarter, the company has remained largely on track with its cost cutting austerity drives and margins are very likely to hold up.
Additionally, the food sector is greatly anticipating the incoming government's term which is slated to be a harbinger of good times for the country's industry. Improved policy initiatives that enable exports and pricing policies conducive to the sector's growth seems to be in the works, something that should translate into some exciting times for the sector on the whole.
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Shezan International Ltd- Key indicators
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Rs (mn) 2008 2009 2010 2011 2012
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Net sales 2469 2729 3528 4222 5,061
Gross profit 777 754 936 1091 1,458
Other revenue -20 -20 -19 -29 -38
PAT 161 102 107 141 207
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Profitability Ratios
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GP margin 31.48 27.64 26.54 25.85 29
NP margin 6.53 3.76 3.03 3.33 4.09
ROE 21.88 13.17 12.59 14.75 15.1
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Liquidity Ratios
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Current ratio 1.93 1.97 1.75 1.64 1.75
Quick ratio 0.60 0.54 0.51 0.38 0.3
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Activity Ratios
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Fixed Asset Turnover 8.43 9.10 8.46 9.98 9
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Investment Ratios
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EPS 26.87 17.08 17.79 23.43 22.18
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Source: Company Records
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Operating Results
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Rs (mn) 3QFY12 3QFY13 Chg
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Net sales 967 1,263 31%
Cost of sales 678 859 27%
Operating Profit 79 93 18%
NPAT 39 47 21%
EPS 5.96 7.11 19%
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Source: Company Records
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