Whether it is a recession, weakening rupee, double digit inflation, deteriorating economy or an energy crisis, the good thing about FMCG business is that they continue to grow, even when major industries suffer sharp slowdown.
The same is the case for Unilever Pakistan, as the year 2009 brought the firm higher earnings with the profits rising more than 50 percent to Rs3 billion.
Though, healthy increase in topline revenues contributed towards profitability growth but it was operational efficiency - partly stemming from restructuring cost incurred in 2008 - that cushioned the firms bottom-line. Gross profit margin, however, remained largely unchanged at 35 percent.
The growth in Unilevers turnover came on the back of higher sales in health and personal care, beverages and ice cream segments that saw sales improve by 27 percent, 21.9 percent and 8.9 percent respectively.
While the profitability of home and personal care goods can be attributed to rising demand and growing urbanization, lower palm oil prices - a key input - product innovation, strong brand equity and catchy packaging also helped the segment perform better over last year.
With the commencement of P&Gs detergent plant expected this year, Unilever might face tough competition in this sector, since market shelves are already flooded with imported low cost laundry powder from neighboring countries.
Beverage segment, which represents 30 percent of the total turnover, gave a hard time to the company due to rising tea prices in international market and weakening rupee, which made the imports expensive.
On top of that, growing influx of low cost smuggled tea, catering to half of the population, damaged branded tea sales. As a result, turnover growth in beverage segment came from higher prices that offset the impact of lower sales volume.
However, the current year looks promising for branded tea sellers, since tea prices are expected to stabilize, as weather has become favourable again in the main tea producing regions of Asia and Africa.
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Unilever Pakistan Limited
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Rs (mn) 2009 2008 %chg
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Turnover 38,188 30,957 23%
Cost of sales 24,853 20,219 23%
Gross profit 13,335 10,738 24%
Gross margin 35% 35% 1%
Admin exp 1,030 1,002 3%
Distribution cost 7,180 5,848 23%
Other operating expenses 374 247 51%
Restructuring cost 0 489 n.a
Other operating income 192 240 -20%
Finance cost 428 466 -8%
PAT 3,056 1,984 54%
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Source: KSE Announcement
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