Shezan Foods Limited

Initiated in Pakistan in 1964, Shezan International Limited (KSE: SHEZ) was at the start a joint venture between Shahnawaz Group and the Alliance Development Corporation of USA. Generally involved in the manufacturing, and selling of juices, pickles, jams and ketchups, the firm has been relentlessly expanding-both into local and in international markets.
Subsequently purchasing all shares of the company in 1971, Shahnawaz Group made it a public limited company and it was registered on the Karachi and Lahore stock exchanges. The establishment has been gradually expanding its production capacity over the years. In 1980-81 a separate unit was installed in Karachi, which now caters for Karachi, Sindh and export demand.
A new bottle filling plant was also set up in 1983 in the Lahore unit, growing the capacity five folds. An independent tetra brick plant was specially made in 1987 making the unit leading manufactures with complete range of production in the fruit processing field in Pakistan. The registered office of the company is situated in Lahore.
PERFORMANCE FOR FY14 The top line of SHEZ in FY14 increased by 19.1 percent year-on-year, increasing to Rs 6.76 billion as compared to Rs 5.7 billion in the corresponding period last year. The growth in sales was as a result of a quantitative surge in export sales of juices in bottled as well as tetra packaging. Sales for condiments (which include jams and jellies etc) stayed range bound. Likewise, their production facility at Karachi remained constant to meet the export requirements in Middle East, Africa, USA and Europe.
The gross profits for SHEZ have improved in FY14 despite the fact cost of sales increased by 19.5 percent year-on-year. This is thanks to energy crunch playing havoc specifically in the Punjab. The company unremittingly has to be dependent on furnace oil for boilers in the non-existence of gas and diesel to run the generators when there is no electricity, augmenting to the cost of production.
The profit after tax clocked in at Rs 259 million as against Rs 249 million of the former period due to striking top line. However, SHEZ's distribution costs have been surging persistently during the course of the year and increased by 26.6 percent year-on-year. These outlays take account of advertisement and sales promotion expenditure made in view of better promotional activity in the midst of the rigid competition amongst local and foreign packaged food brands in the market.
In addition, the firm's finance costs also decreased to Rs 28 million, dropping a significant 37.6 percent year-on-year over the previous corresponding period due to efficient use of borrowed capital. Together current assets and current liabilities increased by 21.6 percent year-on-year due to increased trade borrowings, reportedly, during the year to stock the seasonal fruits, pulps and packaging materials to fulfil the sales demands of the products. The EPS was Rs 35.75 as compared to Rs 34.34 that was recorded last year.
FUTURE OUTLOOK Even though there is much trepidation among experts regarding the health of dealings in the country, broad unanimity remains that the future stays upbeat for the food creating and manufacturing sector of the economy.
The point of view for SHEZ remains optimistic, regardless of the abysmal power state in Punjab. Even though the skeptical effect of the gas load shedding showed up in the corporation's financials for the FY14, the enterprise has persisted essentially on track with its cost cutting austerity initiatives and margins are very in the offing to hold up. And notwithstanding the fact that there has been a prompt gain in prices of materials such as pulps, edible oils, sugar and the tetra-packaging, margins have stayed intact generally as a consequence of the SHEZ's ability to keep its administrative outlays into check.

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                           FY13           FY14

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Profitability

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Gross profit margin        30.1%         30.0%

Operating profit margin     9.6%          8.0%

Net profit margin           4.4%          3.8%

ROE                        19.0%         17.2%

ROA                        10.9%          9.7%

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Liquidity

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Current ratio              1.65           1.65

Quick ratio                0.56           0.62

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Turnover

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Total asset turnover       2.49           2.52

Fixed asset turnover       7.42           7.98

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Market

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EPS - Rs                  34.34          35.75

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