Quice Food Industries Limited

Quice Food Industries Limited (PSX: QUICE) was incorporated in Pakistan as a private limited company in 1990. The company’s status was changed into a public limited company in 1993. The company is principally engaged in the manufacturing and sale of jam, jelly, syrups, pickles, essences, custard powder, juices, and aerated drinks as well as other related products. Besides catering to the local market, the company has its exports business in the USA, Canada, UAE, South Africa, East Africa, UK, and Australia.

Pattern of Shareholding

As of June 30, 2024, QUICE has 98.462 million shares outstanding which are held by 4278 shareholders. The general public, with a stake of 65.597 percent forms the largest shareholder category of QUICE followed by sponsors and their family members holding 31.88 percent shares. Modarabas and Mutual Funds account for 1.26 percent of shares of the company while banks, DFIs, and NBFIs hold 1.148 percent of shares. The remaining shares are held by other categories of shareholders.

Financial Performance (2019-24)

Except for a marginal dip in 2019, the topline of QUICE has shown growth in all the years under consideration. Yet the company is unable to post net profit and operating profit after 2015. The only happy sight is that the GP margin of the company which dipped in 2020 started improving thereafter. However, in 2024, the GP margin posted a dip. Furthermore, the magnitude of net losses which had been diminishing since 2021 massively grew in 2024. A detailed financial analysis of each of the periods under consideration is given below.

In 2019, QUICE’s topline registered a year-on-year drop of 8.39 percent owing to the overall economic slowdown. Not only did the local sales of the company post a slump, but export sales also nosedived during 2019. Low volumetric sales resulted in an 11.26 percent drop in the cost of sales. Eventually, the company was able to post a GP margin of 9.81 percent in 2019, up from a GP margin of 6.89 percent posted in 2018 with gross profit in absolute terms posting a year-on-year rise of 30.45 percent in 2019. Distribution costs dropped by 7 percent in 2019 due to a massive drop in advertisement expenses. However, administrative and other expenses didn’t give any breather, thanks to inflationary pressure. Other expenses rose by 68.50 percent mainly because of re-measurement loss on investment and deficit on the revaluation of the building. While other income rose by 24.63 percent year-on-year in 2019 on the back of investment income and profit on savings accounts. However, it is too small in absolute terms to create any impact on the bottom line. The finance cost of the company was negligible and comprised of bank charges only. QUICE posted a net loss of Rs.37.38 million in 2019, signifying a year-on-year drop of 6.81 percent. Loss per clocked in at Rs.0.38 in 2019 versus a loss per share of Rs.0.439 recorded in 2018.

In 2020, QUICE’s topline grew by 59.87 percent year-on-year mainly on the back of the company’s increased focus on export sales. While local sales boasted a year-on-year increase of 32 percent in 2020, export sales multiplied by 577 percent with a primary focus on the UK, South Africa, and Mauritius region. The high cost of sales due to the staggering rise in the commodity prices coupled with Pak Rupee depreciation magnified the cost of sales, resulting in a drop in GP margin to 6.93 percent in 2020. Gross profit, in absolute terms, managed to increase by 12.9 percent during the year.31 percent year-on-year rise in distribution cost came on the back of increased marketing expenses and outward freight and handling charges incurred during the year. Administrative expenses declined by 22.73 percent in 2020 as the company streamlined its workforce to 45 employees from 112 employees in the previous year. The company was still not able to make an operating profit. Operating loss for 2020 clocked in at Rs. 38.69 million, down 12 percent year-on-year. The favorable movement of other income and an unfavorable movement of finance costs couldn’t produce any significant impact on the bottom line. The company posted a net loss worth Rs.39.44 million in 2020, up 5.53 percent year-on-year. Loss per share stood at Rs. 0.401 in 2020.

In 2021, QUICE’s topline grew by 27.31 percent year-on-year mainly on the back of a historic 62 percent growth in the syrup segment of the company owing to its induction in the modern trade markets. Cost of sales grew by 25.19 percent year-on-year in 2021, however, with the rising export sales and depreciation of the Pak Rupee, the company was able to earn a GP margin of 8.48 percent in 2021. The company was able to keep a check on its operating expenses which enabled it to lower its operating loss by 26.56 percent year-on-year to Rs.28.42 million in 2021. Other income also boasted a tremendous 73.41 percent year-on-year growth mainly on the back of re-measurement gain on investment as well as capital gain. Finance costs dropped by 37 percent year-on-year in 2021. Net loss of the company stood at Rs.29.37 million in 2021 signifying a 25.54 percent year-on-year drop since the previous year. Loss per share clocked in at Rs.0.298 in 2021.

In 2022, QUICE witnessed a stunning 123.94 percent year-on-year growth in its topline. The export sales of the company rose by 150 percent year-on-year in 2022 to clock in at Rs.194.35. Local sales also doubled during the year to clock in at Rs.410.933 million. Unprecedented level of inflation experienced by the country during the year took its toll on the cost of sales which multiplied by 117.94 percent in 2022. However, better off-take and improved pricing enabled QUICE to post a GP margin of 10.93 percent in 2022. In absolute terms, gross profit strengthened by 188.63 percent in 2022. Operating expenses grew relentlessly in 2022 owing to inflationary pressure which drove up the salaries and wages expenses. QUICE also expanded its workforce to 111 employees in 2022 versus 55 employees in the previous year Moreover, outward freight and handling expenses, distribution claims, marketing expenses, etc also played a pivotal role in inflating the operating expenses in 2022. QUICE’s operating loss clocked in at Rs. 18.71 million in 2022, showing a downtick of 34.16 percent over last year. Other income dropped by 68.57 percent in 2022 as the company made investment income, capital gain, and re-measurement gain on investment in 2021 which wasn’t there in 2022. Net loss stood at Rs.24.04 million in 2022, down 18.15 percent year-on-year with a loss per share of Rs.0.244.

2023 also proved to be a significant year for QUICE with 57.53 percent year-on-year enhancement in its topline which stood at Rs.838.45 million. Topline growth was mainly driven by export sales which grew by 119 percent in 2023 to constitute 45.42 percent of the gross sales of QUICE in 2023 versus 35.11 percent in 2022. Local sales also mounted by a reasonable 24 percent in 2023. Cost-push increase in prices as well as Pak Rupee depreciation allowed QUICE to record the highest GP margin of 14.78 percent in 2023. Gross profit also boasted a tremendous year-on-year growth of 113 percent in 2023. 100.47 percent surge in distribution expense in 2023 was the effect of higher salaries & wages as well as a hike in outward freight and handling mainly because of export sales picking up at an exponential pace and spike in the prices of petroleum and related products. Administrative expenses also surged by 23 percent in 2023 on account of higher payroll expenses as QUICE increased its human resource count to 189 in 2023 versus 111 in 2022. Moreover, higher traveling and communication expenses and utilities also kept the administrative expenses up in 2023. Operating loss slid by 58.22 percent in 2023 to clock in at Rs.7.82 million. Other income greatly buttressed QUICE’s financial performance in 2023 as it multiplied by 308.98 percent due to the robust performance of both financial and non-financial assets. Bank charges (finance cost) grew by 282.86 percent in 2023 to clock in at Rs.0.4 million. QUICE was able to trim its net loss by 48.7 percent in 2023 to clock in at Rs.12.33 million with a loss per share of Rs.0.125.

In 2024, QUICE posted a topline growth of 7.73 percent. The growth was led by export sales which posted 42.72 percent year-on-year growth in 2024 and constituted 67.13 percent of the company’s total sales. In 2023, export sales contributed 45.42 percent of the gross sales of QUICE. The staggering growth recorded by export sales in 2024 was greatly offset by a 28 percent decline in local sales due to a sustained period of high inflation which brutally took its toll on the purchasing power of consumers. Cost of sales mounted by 8.77 percent in 2024 mainly on account of exorbitant energy costs. Gross profit inched up by 1.71 percent in 2024, however, GP margin dipped to 13.95 percent. Greater export sales resulted in higher freight charges and increased salaries of the sales force. This pushed the distribution expense by 12.78 percent in 2024. Administrative & general expenses mounted by 13.93 percent in 2024 due to higher payroll expenses on account of inflationary pressure. QUICE’s operating loss magnified by 193.45 percent to clock in at Rs.22.94 million in 2024. Other income inched up by 9.3 percent in 2024 due to higher income from saving accounts. Finance costs which comprised of bank charges plunged by 68.10 percent in 2024. The company posted a net loss of Rs.27.145 million in 2024, up 120.14 percent year-on-year. This translated into a loss per share of Rs.0.276 in 2024.

Recent Performance (1QFY25)

QUICE kicked off FY25 on a buoyant note as it was able to post a net profit in 1QFY25 after ten years of sustained net losses. Topline grew by 151.42 percent year-on-year in 1QFY25. While export sales continued to thrive, improved economic and political backdrop also provided impetus to local sales during the period under consideration. High energy costs pushed the cost of sales up by 154.70 percent in 1QFY25, resulting in a 138.37 percent rebound in gross profit in absolute terms. However, the GP margin dropped from 20 percent in 1QFY24 to 19 percent in 1QFY25. Higher sales volume pushed distribution expense up by 149.68 percent in 1QFY25. Administrative expenses also surged by 11.75 percent in 1QFY25 due to increased payroll expenses and utility expenses incurred during the period. QUICE posted an operating profit of Rs.5.68 million in 1QFY25 versus an operating loss of Rs.3.033 million posted during the same period last year. OP margin was recorded at 2 percent in 1QFY25. An increase in income from financial and non-financial assets resulted in a 14.9 percent improvement in other income in 1QFY25. Finance costs dwindled by 20.68 percent. QUICE was able to post a net profit of Rs.1.23 million in 1QFY25 versus a net loss of Rs.3.63 million registered in 1QFY24. EPS stood at Rs.0.013 in 1QFY25 versus a loss per share of Rs.0.037 posted in 1QFY24.

Future Outlook

As the company embarks on its journey to tap new geographical markets and new product lines, its margins are expected to rebound. Cost controls on the basis of better relationships with the suppliers, better pricing strategy, stability in global commodity prices as well as steadiness in Pak Rupee are all factors that hint at improvement in the company’s financial performance in the coming times.