KARACHI: Pakistan consumer companies (discretionary, staples and pharmaceuticals) listed at PSX, recorded increase in profits by 42 percent on year-on-year basis in the third quarter of 2021.

Amongst them, discretionary recorded highest growth in profits to reach Rs 9 billion, up 129 percent, followed by Staples (up 22 percent) and Pharmaceuticals (up 17 percent on YoY).

Net revenues of consumer companies increased by 40 percent, due to low base of last year amidst COVID-19 lockdowns, and general macro economic recovery, Muhammad Saad Ziker at Topline Securities said.

Gross margins during the quarter clocked in at 20 percent as it declined by 119bps on YoY which is largely driven by higher commodity prices, currency depreciation and general inflationary environment, he added.

Discretionary: This segment posted a significant turnaround in profits on the back of higher net sales (up 71 percent on YoY) in third quarter of 2021 which was affected the most in the same period last year due to COVID-19 related lockdowns.

To note, higher sales were mainly attributable to improvements in car and appliances sales led by improvement in macroeconomic conditions and lower interest rates. Gross margins of the segment slightly improved to 9.3 percent in third quarter of 2021 as compared to 8.4 percent in the same period last year due to lower per unit fixed cost for auto assemblers. "Except Thal Limited (THALL), all companies in our discretionary segment witnessed increase in profits, with notable improvements recorded in Indus Motors (up 194 percent on YoY) and Pak Suzuki (Rs 994 million profit versus loss of Rs 547 million in same period last year)", he said.

Staples: Staple companies profits improved by 22 percent on YoY during the period on account of improvement in net sales by 23 percent on YoY, driven by strong demand coupled with higher prices. However, gross margins declined to 28 percent in third quarter of 2021 from 30 percent in the third quarter of 2020, mainly attributable to higher raw material and commodity prices.

"All companies in our sample recorded increase in profitability with notable improvements witnessed in Pakistan Tobacco (up 28 percent on YoY) and Nestle Pakistan (up 43 percent on YoY)."

Pharmaceuticals: Pharmaceuticals companies profits increased by 17 percent on YoY with net sales rising by 14 percent on YoY on the back of health care awareness across the market in the backdrop of the COVID-19 outbreak. Gross margins declined to 36.4 percent in third quarter of 2021 from 38.6 percent in third quarter of 2020 mainly due to higher raw material prices and currency depreciation. Improvement in profits were led by Searle Pharmaceuticals (up 40 percent on YoY) and Abbott Laboratories (up 23 percent on YoY), while AGP Limited (AGP) witnessed a negative change of 40 percent on YoY.

Copyright Business Recorder, 2021