Even in the face of soaring raw material prices that weighed heavily on its gross margins, National Foods (KSE: NATF) has managed to post solid earnings growth in 9MFY15. The growth was made possible by increase in sheer volumetric sales as the company has been giving considerable attention to an aggressive and multi-dimensional focus on brand building and customer interception activities.
According to the company’s results, which were announced on Friday at Karachi Stock Exchange, the firm’s top line saw a handsome growth of 20 percent year-on-year in 9MFY15. The quarter ended March 2015, National’s sales clocked-in at Rs2.5 billion, which is 17 percent higher on year-on-year comparison.
However, gross margins that had stood at 36 percent in 9MFY14 fell to 34 percent in 9MFY15. On 3QFY15 basis, gross margins dropped even more sharply on account of higher prices of red pepper, which is the single biggest raw material for the firm.
All its other costs, such as distribution and administration and other expenses, remained in check, rising only in tandem with the increases in sales volume, whereas the firm’s finance costs decreased considerably, plausibly on account of lower interest rates and lower running finance under mark-up arrangements. National’s other income on the other hand rose possibly on the back of exchange gains, and gain from mutual fund units in its investment portfolio.
However, these can only be confirmed when the firm releases its detailed financial accounts.
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NATIONAL FOODS LIMITED
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Rs (mn) 3QFY15 CHG 9MFY15 CHG
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Sales 2,507 17% 8,075 20%
Cost of sales 1,719 22% 5,315 23%
Gross profit 788 8% 2,760 14%
Distribution cost 437 15% 1,496 16%
Administrative expenses 106 14% 333 24%
Other expenses 20 31% 80 35%
Other income 30 n/a 85 81%
Operating Profit 253 7% 935 10%
Finance cost 11 -53% 36 -47%
Profit after Tax 173 24% 617 19%
Earning per share 1.67 5.95
Gross profit margin 31% down 254 bps 34% down 180 bps
Net profit margin 7% up 40 bps 8% down 8 bps
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Source: KSE notice
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