Engro Foods (EFOODS) on Thursday posted earnings of Rs 190m (EPS Rs 0.25) in 1Q2014 which is significantly higher than 4Q2013 loss of Rs 370m (Rs 0.48 per share) but down by 71%YoY, analysts at Topline Securities said. They said that sequential increase in earnings is attributable to increase in the price of 'Olpers', though volumes remained under pressure.
As a result, the revenues of the company increased by 2.6% to Rs 10.2bn while gross margins increased by 7.5% to 20.3%. During 1Q2014, EFOODS gross profits stood at Rs 2.1bn. They said that further improvement in earnings was provided by 15.2% fall in distribution costs to Rs 1.1bn due to less media campaigns and 78% lower other expenses to Rs 61m.
To recall, in 4Q2013 other costs include one-time charge of Rs 208mn (Rs 0.3 per share) relating to sales tax payable for the period (June 13, 2013 to July 17, 2013) when the FBR temporarily removed zero rating of dairy products. However, on the negative side, recent Pak rupee appreciation negatively affected valuation of Biological assets (farm animals) as the company records them in US dollars, they added.
On year-on-year basis, they said that sales increased by 5.7% from Rs 9.6bn in 1Q2013 but gross margins dipped by 9.2% from 29.5% in 1Q2013 to 20.3% in 1Q2014. As a result, gross profits declined by 27%YoY from Rs 2.8bn. This decline is mainly attributable to the company's inability to timely and completely pass on the cost pressures, analysts added.
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