Ismail Industries Limited (PSX: ISIL) has been linked with the biscuit industry long before its inception. It came into existence in 1988. Since then it has been expanding into various businesses. It commenced its operations from CandyLand which is the first division of IIL. With the vision to continuously expand, it added Bisconni to its business domain, with SnackCity, in 2006 its latest inclusion and Astro Films in 2004. They have also ventured into the health side in an attempt to improve nutrition.
CandyLand has remained their star performer over the years, and consistent efforts have assisted them to maintain their global presence, with ISIL being Pakistan's biggest confectionery exporter, exporting to over 40 countries across all major continents.
Majority of the company shares are held by the company's directors and CEOs.
Operational and historical performance: Ismail Industries Limited's annual reports suggest that their food division is the major contributor to the top-line; of that, 95 percent of the sales are in the domestic market, leaving only 5 percent of their production for exports.
Due to the nature of their product offering, it is no surprise that the company has seen a continuous increase in its top-line. Although the rate of growth slowed down in FY17, it picked up again the following year. This is attributed to their continuous innovation, marketing and risk taking. ISIL's sales increased significantly by 26 percent approximately, year-on-year.
The cost of sales has increased justifiably, with a corresponding increase in sales, hence allowing for a stable gross profit margin. However, there is an alarming drop in net and operating margin, owing to rising finance costs and taxation combined with a considerable decrease in profit from associated undertaking. ISIL holds approximately 24 percent of the paid-up capital of The Bank of Khyber; the latter reporting share of profit relating to statement of profit or loss at Rs45 million in FY19 compared to Rs393 million in FY18.
Rising finance costs have impacted majority of the companies in the sector, same is the case with Ismail Industries Limited. For instance, in FY18, the effective rate of interest on long term Islamic finance was 5 percent whereas in FY19, it rose to 10 percent, clearly doubling year-on-year. Thus the earnings per share declined from Rs22.13 in FY18 to Rs15.15 in FY19.
Ismail Industries Limited has fairly maintained its capacity utilization figure, at an average of about 70 percent through the years. Since its product portfolio falls in the fast moving consumer goods category, the demand has not varied a lot in response to rising inflation and unfavourable economic environment.
ISIL has continuously added to its capacity to maintain and enhance their market share as and when opportunities arise. In 2006, it set up a new plant at Hub with the aim of venturing into the production of chips. Achieving success in a short span of time, it was able to add to its production capacity, installing another plant in Lahore in 2010 which caters to North and Central regions of the country. In 2017, ISIL added another production line to meet the growing demand for Marshmallow while more were under process for their two popular brands, Cocomo and Novita.
The fall in debt to equity ratio of the company in 2010 is due to rise in total equity of the company owing largely to the premium received on rights share issued during the year at Rs20 per share. Since then, it has hovered between 2 and 3 times, which seems like an ideal situation considering it is a capital intensive industry.
In 2010, the company's total equity rose causing a sudden fall in return on equity. The ROE fell again in FY19; however, the fall is attributed to the fall in income due to adverse business conditions affecting all.
Ismail Industries Limited has never ignored the importance of marketing. With constant innovation, each year it adds several products to its portfolio; in FY19 it launched thirteen new brands in its CandyLand division. In addition to this, ISIL runs new marketing campaigns for each of its divisions, allowing them to grab market share in the increasingly competitive environment without diverting focus from quality.
Future outlook: With thorough risk management, cost controls, innovation and expansion, the company have managed to stay at the top of its game where a lot of the companies incurred losses. In addition, it has kept its marketing campaign intact, with new packaging to catch consumer's attention, new adverts to remain in the minds of the consumer, all the while maintaining and enhancing product quality. Moreover, a visible and prominent focus on research and development, foreseeing risks and preparing for them has allowed ISIL to remain one step ahead of its competition.
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Ismail Industries Limited
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Pattern of shareholding (as at June 30, 2019) Share
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CEO, directors, their spouses and children 98.80%
Associated company 0.68%
Foreign companies 0.01%
Others 0.01%
General public 0.50%
Total 100%
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Source: Company accounts
Copyright Business Recorder, 2019
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