Al-Shaheer’s not-so meaty affairs

For a company in the business of slaughtering animals and selling their meat, it’s quite ironic that its own bottom-line is being slaughtered primarily by the altar of Daronomics and to some extent the firm’s own expansion plans.

Popular for its MeatOne brand, Al-Shaheer Corporation (ASC), announced a nearly Rs21 million after-tax loss yesterday for the year end June 2017. That’s down from an after-tax profit of Rs364 million in FY16, which by the way was 85 percent improvement over the year before.

ASC’s biggest revenue spinner is overseas sales. Last year, it accounted for 70 percent of total sales. This year, if 9MFY17 results are any guide, it accounted for 63 percent, with the rest of course being domestic sales. This change in pie is partly because of the decline in ASC’s export business (down 23% in 9MFY17) that led to a 7 percent fall in the firm’s FY17 top-line.

The firm’s CEO Kamran Khalili told BR Research that export business was feeling the brunt because Pakistan’s competitors in regional meat market – India, Australia, Brazil — had witnessed currency depreciation, whereas Pakistan’s has not. And that has had negative fallout on Pakistan’s meat exports to the region.



It’s another thing though, that while Kamran’s views were echoed by one of his local competitors - a senior meat player based out of Lahore (who requested anonymity) stated that the central bank database shows quite another picture. According to SBP export database HS-Code 201 – which is fresh or chilled bovine meat (ASC’s main product) – saw an export growth of 38 percent in FY17. The SBP and the meat industry would do well to sit together and reconcile the numbers.

Back to ASC! The company has also been facing margins pressures on account of higher livestock pricing, which according to Kamran rose 8 percent in the year ended June 2017. Meanwhile, he maintains, the price of animal skin has eased to Rs1700 from Rs4000 in the year before, because the leather industry is not faring well.

Kamran says the company is currently operating at 30-35 percent capacity, and it’s in the process of adding fresh capacity by November this year, when the much-awaited Lahore plant will commence operations. That plant will have a capacity of 9000 birds per hour (chicken segment) and processed meat capacity of 50 tons per day.



This capacity addition is in line with the firm’s plans to focus on domestic retail and institutional segment; back in June 2015, Kamran had told BR Research that over the next two years, he was expecting the mix of export and domestic sales to be at 50:50. However, if ASC is able to export processed chicken meat to regional markets as well, it could be quite a boon for the firm since chicken meat exports has plenty of potential in the region (See BR Research column Can Pakistan grow muscle on meat exports published March 29, 2017).

Despite all these plans, investors do not seem to be buying into ASC’s story of ‘expansion with bright prospects’; they have been punishing the stock since last many quarters even though the likes of brokerage BMA Capital say ASC’s target price is Rs70-ish. Perhaps they think the proof of meat pudding is also in eating it.