A leading producer and supplier of refined corn ingredients and products in the region, Rafhan Maize was incorporated in 1953 and is a subsidiary of Corn Products International Inc. USA which holds the majority shares of the company. One of the oldest and most respected names in the industry, having managed to amass a diversified base of loyal customers over the years, Rafhan Maize engages in the production of a number of specialty products and food ingredients using Maize.
Some of the industries it serves include textiles, food, cardboard and paper, confectionery, corrugation, beverages, livestock and animal feeds manufacturers. Over the years, the firm has maintained a close link with Maize farmers and has worked closely with them for sustainable improvement in crop yields and crop health. Through a careful combination of research and market driven product development, Rafhan Maize Products today holds the distinction of being one of the top performing companies listed on Pakistan's stock exchanges. Currently Rafhan Maize has an extensive and diversified product portfolio and produces a number of ingredients including industrial starches, liquid glucose, dextrose, dextrin and a variety of Gluten meals.
Financial highlights 1QFY12 Inflationary pressures added to the sharply rising prices of energy and other inputs meant that at the end of the first quarter 2012, Rafhan maize posted a 14 percent decrease in income after tax over the same period last year.
The company which supplies a variety of industrial ingredients to a large number of different industrial concerns was among the many hit by the tough economic conditions, with the demand for its products somewhat muted as downstream industrial customers struggled to cope. A three percent decrease in net turnover was observed during the period ending January-March as a result of depressed demand for starches from a number of segments including processed food, paper and packaging. As a result gross sales fell to Rs 4.5 billion compared to Rs 4.7 billion recorded during 1QFY11.
The company, which had posted a massive 18 percent year on year growth in the last quarter of 2011, was unable to keep up the momentum as a result of shrinking margins. With distribution and operating expenses rising along inflationary lines, other expenses such as finance costs have risen dramatically contributing to a 14 percent decrease in NPAT over the same period last year.
The firm's export figures during the first quarter also remain unimpressive. Despite the broad-based product portfolio and consistent efforts to remain focused on expanding market share, Rafhan's exports have not managed to go beyond previous highs. The sales this quarter ended at Rs 107 million; significantly lower than Rs 166 million recorded during the same period last year.
Sector-wise industrial performance The last few years have been very challenging for the economy of the country with the industry having to bear much of the brunt. The market conditions for the industrial ingredients business have also remained unfavourable and the demand from a number of sectors has been fluctuating since the beginning of 2011.
Demand for Q-Tac starches from the paper, board and packaging industries has been decreasing over the last year and was further affected by cheap imports and local competition flooding the market during 1QFY12, thus being a major contributor to lower sales.
On the other hand, the corrugating industry operated as usual and demand from manufacturers of packaging material for vegetables, fruits, sports and textiles etc remained strong throughout the past two quarters. Same was the case for some food industries including an export-led boom in the confectionary industry which drove demand for liquid glucose in the last year.
However it was the animal nutrition ingredients which categorically fared the worst among all other sectors to which Rafhan Maize Co caters. Affected by the massive gas curtailments, the sector clocked in very low production levels, leading to significant volume loss for Rafhan and the overall low performance during 1QFY12.
Future Outlook In the last year alone, the firm has spent Rs 1,122 million on capacity development and acquisition of new technology and is looking to further expand into new channels in the glucose refinery and pre-gelatinised starches.
While on the one hand issues such as rising costs of production, exorbitant fuel prices and high logistic costs have been hacking away from the firm's margins, the fact that it has a marked global presence and strong local relations remains in its favour, allowing Rafhan Maize Products Co plenty of room to grow back into its previous momentum.
Through continuous process optimisation and production enhancements, Rafhan Maize Products Co has been able to enjoy both financial success and meaningful growth in the last decade. Overall, despite the less-than-stellar start to FY12, the future for Rafhan on paper remains bright in the coming quarters.
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Rafhan Maize Products Co Ltd.
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2009 2010 2011
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Net sales Rs mn 11,428 13,913 18,271
Gross profit Rs mn 2,435 3,298 3,800
Profit from Operations Rs mn 2,131 2,955 3,400
NPAT Rs mn 1,297 1,838 2,034
Profitability Ratios
GP margin % 21.3 23.7 20.8
NP margin % 11.4 13.2 11.1
Operating leverage % 1.9 1.8 0.5
ROA % 30.4 34.6 32.5
ROE % 34.2 41.0 37.5
Liquidity Ratios
Current ratio times 2.5 2.1 2.0
Cash to current liabilities times 0.7 0.0 0.0
Cash flow from operations
to sale times 0.3 0.0 0.1
Activity Ratios
Inventory turnover ratio times 6.2 3.1 4.3
Total Assets Turnover times 2.2 1.9 2.2
Fixed Asset Turnover times 6.5 6.4 8.0
Investment Ratios
EPS Rs 140 199 220
Dividend yield % 5.0 5.0 5.0
Market Value per share
@ year end Rs 1,485 2,110 2,513
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