National Foods Limited

National Foods Limited (NFL), founded in 1970 as a spice company, is Pakistan's leading multi category food company with around 250 different products in 12 categories. In 1988, National Foods became the certified vendor of McCormick, USA. In the same year, National Foods, then a Private Limited company was converted into a Public Limited, listed on all the three stock exchanges of Pakistan.
NFL holds ISO 9001, ISO 22000, and HACCP certifications along with SAP business technology to drive the company's strong commitment to quality and management excellence.
Highlights 9MFY2012 According to the company's nine month financial report, National Foods delivered an organic growth of 29.5 percent year-on-year in the third quarter. The investment on the brands continued in this part of the fiscal year too, and the "Recipe Princess Cooking Contest' for college girls also was extended to Lahore in the third quarter after its success in Karachi.
The exports also reported a good result, with the top line value sales growth of 29.9 percent. The key exports to North America, USA and UK showed good performance. It is found from the report that the company has designed a new business model for the export business and its execution is expected to bring some real long-term benefits for the company.
The sales in 9MFY2012 compared to 9MFY2011, showed an increase of 29.54 percent, and the gross profit increased by 45.75 percent year-on-year. The operating profit rose by 99.29 percent and profit after tax increased by 142.14 percent. In this quarter, categories like sauces, pickles, jams and jelly, desserts and salt showed impressive volumetric growth.
Also the containment of fixed cost helped in the improvement of gross profit. The burdening on borrowings has reduced significantly and in effect resulted in lowering the finance expense by 40.6 percent over the same period last year.
Profitability The company is experiencing increase in its sales with each passing year. The local sales contribute a major chunk to the sales revenue. In 2011, the marketing campaign "Hamare Khane Hamare Tehwaar" was a great success and received an overwhelming response from the consumers which helped NFC in growing the top line. In 2011, keeping in mind the backdrop of a difficult operating scenario, inflation and devastating impact of floods, NFC managed to pick up its net profit margin and brought it to 4.18 percent.
Alhough fiscal year 2010 proved to be the toughest year, the environment of FY10, low economic growth and high inflation in the country, made National Food think to divert its focus towards the international market. National Foods kept growth as its major objective and continued the efforts to maintain its credibility in the tough conditions.
National Foods strong brand portfolio (which includes, Bombay Biryani Masala, Achar Gosht, Karahi Gosht, Murghi Masala, Fish Masala and Fruitily), effective marketing activities and operational excellence helped it maintain a strong financial performance. Although, the company faced heightened pressure on the cost side due to inflation in agriculture commodities and volatility in the raw material prices in international market, it enabled to maintain its grip on its gross margins, showcasing its strong market presence as well as the ability to pass on the prices to the end consumer. Moreover, the company performed efficiently on the distribution cost front, despite a sizeable increase in domestic fuel prices.
Leverage The JCR-VIS rated National Foods credit quality unchanged for the fifth year in a row (in FY2011), and the short-term rating were 'A2' and long-term rating as 'A+". The annual financial report 2011 reveals that out of the total financial assets of Rs 311.46 million (2010: Rs 297.03 million) the financial assets exposed to the credit risk amount to Rs 310.43 million (2010: Rs 295.91 million).
Future prospects The Company's management is committed and confident to deliver another year of strong financial performance on the back of its resilience despite the unstable macroeconomic conditions. The Company believes it in local footprint and strong market leadership. The last quarter of FY12 should deliver strong organic growth as the sales tend to jump in the holy month of Ramadan.