Data Agro Limited (PSX: DAAG) was established as a private limited company in 1992 under the repealed Companies Ordinance, 1984 (now Companies Act, 2017) and was later converted into public limited. It took two years to set up the cotton seed delinting plant, hence it started business in 1994.
The company started off with producing and marketing delinted cotton seed. Subsequently, it added other crops such as wheat, paddy, oilseeds and pulses.
Later on, it also included value added products such as hybrid corn, hybrid forages, sunflower and vegetable crops.
Shareholding pattern
With a little over 34 percent held under this category, the directors, CEO, their spouses and minor children hold the majority of the shares in the company. The breakdown reveals that Mr. Saad Rahim Khan, one of the directors of the company, holds the biggest share within the category at 9 percent. Close to 10 percent shares of the company are with the associated companies, undertakings and related parties. This solely includes Data Enterprises (Private) Limited. A little more than 53 percent of the shares are held under the category of individuals while the remaining 3 percent is with the rest of the shareholders as depicted.
Historical operational performance
After depicting an increase in FY14, the profit margins have been relatively stable through the years, with gross margin roughly hovering around an average of 20 percent and net margin also gradually on the rise.
During FY16, Data Agro witnessed a nearly 17 percent growth in its topline. This was as a result of good results produced by the Hybrids. There was a positive response from the market and farmers that enhanced sales. At close to 75 percent of the revenue, cost of production was also considerably lower compared to last year’s 84.5 percent. This was a result of continuous efforts by the company to curtail costs. Moreover, a notable reduction in fuel expenses was also seen that contributed to a controlled total cost of sales in absolute terms. However, the company was not able to translate the higher gross margin of more than 25 percent into a higher net margin as well. This was due to a major incline in distribution expense coming from bad debts written off, commission expense and salaries expense. Thus, the company posted a loss of Rs 5 million.
In FY17, the company saw its topline growing exorbitantly by close to 47 percent. In the previous year the company received positive response regarding the cotton crop. Therefore, in FY17 “the results show an increase in third party cotton seed processing/delinting totaling 1,682 Metric Tons (FY16: 1,283 Metric Tons). However, the cost of production as a percentage of revenue rose to 78 percent, causing gross margins to reduce to 22 percent. But since distribution cost returned to its previous level primarily in the absence of expense related to bad debts written off, the company was able to post a positive net margin of close to 2 percent.
Topline growth in FY18 was relatively subdued at 7 percent compared to that seen in the last two years. The company continued to grow on positive experiences of farmers. However, given that FY18 was an election year there was a lot of uncertainty in the business environment. Although the company claims that third party cultivation reduced their cost, numbers suggest that cost of production had actually increased as a percentage of revenue- close to 79 percent. Following this gross margin also reduced to 21 percent. However, net margin improved to a little over 2 percent on the back of a curtailment in operating costs, particularly distribution related expenses.
Data Agro was back on its growth trajectory as topline grew by almost 14 percent in FY19. However, this was accompanied by a rising cost of production that caused gross margin to reduce marginally. However, administrative expense saw a rise as a share in revenue. This was primarily driven by rent expense and salaries expense. Despite this, the company managed to maintain net margin at a stable level around a little beyond 2 percent.
Recent result and future outlook
The company experienced negative growth in topline for the first time since FY13, although it reduced only marginally by around 1 percent. This was due to the outbreak of Covid-19 and its impact on the business environment. However, cost of production by a lower rate than the decrease in revenue causing gross margins to improve to 22 percent. The effect of this trickled down to the net margin that increased to 4 percent, given other expense staying at a relatively similar level as last year, with the additional Rs1 million brought in through other income, supporting the bottomline.
The company aims to focus on Hybrid corn seed and also venture into vegetable seed market in addition to investing in cotton and wheat seed.
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