Treet Corporation Limited (PSX: TREET) is a diversified manufacturing and marketing group with a rich legacy spanning over seven decades. Established in 1949, TREET began with the production of carbon steel blades and has since evolved into a market leader across various sectors, including blades, razors, batteries, soaps, packaging solutions, and pharmaceuticals. With an 85 percent domestic market share in blades and exports to over 45 countries, the company is a global player in its field. Its subsidiary, Treet Trading L.L.C., based in Dubai, enhances its footprint in the Middle East, strengthening its export operations. The company has continuously been developing innovative products, such as Treet Shaving Foam and Pakistan’s first maintenance-free automotive batteries while prioritizing sustainability through lean manufacturing, waste reduction, and carbon footprint minimization.
TREET Past Financial and Operational Performance
Treet Corporation faced a challenging FY20 with a 10.65 percent decline in net sales due to COVID-19 disruptions. The Blades and Razors Division remained the largest contributor despite an 11.09 percent drop, while the Battery and Pharmaceutical Divisions grew by 24.26 percent and 25.18 percent, respectively. Operational improvements, including increased blade yields and a 43 percent rise in battery unit sales, demonstrated resilience, as the company retained all employees despite significant financial losses and impairments.
In FY21, Treet rebounded with a 25.4 percent increase in net sales, driven by strong growth in the blades and razors (25.4 percent) and battery (62.95 percent) divisions. Gross profit rose 28.44 percent, and net profit recovered from the previous year’s loss. The Blade and Razor Division maintained a 93.9 percent capacity utilization rate and 85 percent domestic market share, with exports contributing 33.19 percent of revenue. The Battery Division launched new products and met rising demand for SMF and deep-cycle batteries. Strategic actions such as divesting Global Arts Limited and converting subsidiary debt into equity improved liquidity and operational efficiency.
In FY22, net sales declined slightly by 1.98 percent, with domestic sales up 1 percent and exports down 7.98 percent. The Battery Division grew 37.06 percent, driven by demand for heavy vehicle batteries, while the Pharmaceutical and Corrugation Divisions also showed strong growth. However, the Soap Division declined by 34.23 percent. Gross profit fell 13.22 percent, and net profit declined by 43.99 percent due to lower margins and rising financial costs. Despite challenges, Treet maintained its 85 percent domestic market share in blades and razors, expanded exports to 45 countries, and achieved significant growth in heavy vehicle battery sales, while focusing on deleveraging and cost optimization to navigate supply chain disruptions and currency devaluation.
In FY23, Treet Corporation achieved a 38 percent increase in net sales, driven by a 31 percent rise in domestic sales and a 48 percent surge in exports. Gross profit grew by 42 percent due to operational efficiencies, but an 85 percent increase in finance costs led to a net loss. The Battery Division saw a 67 percent revenue increase, while the Pharmaceutical Division grew by 46 percent. Treet expanded exports through a Dubai subsidiary, introduced innovative products, and improved production efficiency. Despite high inflation and currency devaluation, the company’s diversified portfolio and strategic initiatives position it for sustained growth.
TREET in FY24 and beyond
In FY24, Treet Corporation demonstrated resilience despite a challenging economic environment marked by high inflation and rising financial costs. The company’s consolidated revenue grew by 7 percent year-on-year, supported by a diversified portfolio and strategic pricing adjustments to offset cost pressures. Gross profit increased by 30 percent year-on-year, though the gross margin remained relatively low at 2.72 percent due to inventory losses and fluctuating fuel prices. The company continued its deleveraging efforts, reducing group borrowings by 6 percent and successfully completing a rights issue to enhance financial stability.
Operationally, Treet’s divisions displayed mixed performance. The Blades and Razors Division maintained its strong market position with an 85 percent domestic share, bolstered by improved production efficiencies and ISO-certified facilities. The Battery Division reported notable growth in revenue, driven by strong demand for solar and high-performance vehicle batteries. Meanwhile, the Pharmaceutical Division saw increased revenue from dialysis-related products and began preparations for a new production facility to expand capacity. However, the Soap and Corrugation Divisions faced declining sales and profitability, reflecting the broader economic challenges.
In 1QFY25, Treet’s consolidated revenue increased by 4 percent year-on-year, reaching Rs. 6.96 billion, despite geopolitical headwinds affecting exports. Domestic revenues grew by 22 percent, compensating for a 9 percent decline in exports. Gross profit improved by 5.5 percent year-on-year to Rs. 1.63 billion, driven by product mix optimizations and strategic pricing interventions. However, operating profit declined due to inflationary pressures on administrative and production costs, with finance costs consuming 12.5 percent of net sales despite a 24 percent reduction in borrowing costs.
Treet’s performance in 1QFY25 highlighted its adaptability through measures like launching high-quality shaving foams and targeting younger demographics with strategic marketing campaigns. The Battery Division introduced new solar and vehicle batteries, maintaining its strong market presence despite rising production costs. The pharmaceutical and export segments also pursued growth through trade fairs and market expansion initiatives. As the macroeconomic environment improves with falling interest rates and inflation, Treet is well-positioned to leverage its strategic initiatives for long-term growth and sustainability.
Peer Comparison: TREET versus Gillette
Gillette’s revenues for FY 23/24 fell sharply, nearly halving compared to the previous year, in stark contrast to Treet Corporation, which experienced revenue growth during the same period. This disparity underscores Pakistan’s macroeconomic challenges, where high inflation has significantly impacted consumer purchasing decisions, with premium-priced brands like Gillette bearing the brunt while value-focused players such as Treet managed to thrive. Despite its status as a more prestigious brand, Gillette’s net revenue for FY 23/24 amounted to only about 15 percent of Treet’s local sales, highlighting Treet’s dominance in the mainstream market segment and its strong domestic market share. Further, the recent grassroots trend among consumers to give preference to local brands over international ones which has hit several foreign brands quite badly in 2024, may also have played a role in Gillette’s struggles.
While Gillette achieved a higher gross profit margin of 33 percent compared to Treet’s 28 percent, the difference is narrower than expected given their contrasting market positions. Gillette’s profitability was primarily driven by “Other Income” from liability write-backs, allowing it to break even, whereas Treet reported a net loss of Rs189 million due to high finance costs. In terms of financial burdens, Gillette’s interest expense stood at 14 percent of sales compared to Treet’s 17 percent. Both companies stand to benefit from falling interest rates, but Treet, with its higher borrowing levels, is likely to gain more.
Operationally, Treet showcased greater efficiency, with inventory turnover at 80 days compared to Gillette’s 270 days. This stark difference is particularly notable given Gillette’s limited local manufacturing and unusually high inventory levels. Treet also demonstrated resilience and adaptability, focusing on innovation, product diversification, and enhancing export capabilities to position itself as a forward-thinking market leader. In contrast, Gillette adopted a more defensive strategy centered on cost containment and promotional activities to sustain its market presence.
Both companies faced challenges, including high borrowing costs and export constraints. However, Treet’s strategic initiatives, such as investments in new products and international market expansion, provide a stronger foundation for long-term growth. In comparison, Gillette’s conservative approach, while stabilizing in the short term, may limit its ability to capitalize on future market opportunities.
If the recent launch of shaving foams is any indication of future strategy, there is a possibility that Treet may begin to introduce other products in the premium market where traditionally Gillette has held sway. If this does indeed come to pass, it would be very interesting to see how the availability of greater local options will change the landscape of that segment of the market, especially given the organic consumer trend in Pakistan to give preference to Pakistani companies that have only grown since October 2023.
Outlook
Treet Corporation is focusing on diversification and strategic growth to capitalize on market opportunities. With consolidated revenue of Rs25.09 billion in FY 2024, the company is expanding its product portfolio by introducing new offerings like shaving foams, and premium razors, and evaluating lithium-ion batteries. Treet is enhancing its global presence with a sales office and planned warehouse in Dubai to strengthen its reach in the Middle East and Africa. Subsidiary Renacon Pharma is prioritizing export growth and setting up a new facility in Faisalabad, while the company shifts its strategy towards value-driven growth to improve profitability.
To address high finance costs, Treet is pursuing deleveraging initiatives, including divesting part of its shareholding in Treet Battery. With investments in innovation, operational efficiency, and sustainability, Treet aims to drive long-term growth and strengthen its market position.
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