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 local market, the company has its exports business in USA, Canada, UAE, South Africa, East Africa, UK and Australia.

Pattern of Shareholding

As of June 30, 2023, QUICE has 98.462 million shares outstanding which are held by 4550 shareholders. General public, with a stake of 66.21 percent in the company forms the largest shareholder category followed by sponsors and their family members holding 31.88 percent shares of QUICE. Modarba and Mutual Funds account for 1.31 percent shares of the company. The remaining shares are held by other categories of shareholders, each holding less than 1 percent shares of the company.

Financial Performance (2018-23)

Except for a marginal dip in 2019, the topline of QUICE has been growing in all the years under consideration. Conversely, its bottomline is unable to post net profit in a single year after 2015. Not just that, the company is unable to make operating profit since 2015.The only happy sight is that the GP margin of the company which dipped in 2020 started improving since 2021. Furthermore, the magnitude of net losses has also been consistently diminishing over the years. A detailed financial analysis of each of the years under consideration is given below.

In 2019, QUICE’s topline registered a year-on-year drop of 8 percent owing to overall economic slowdown. Not only did the local sales of the company post a slump, export sales also nosedived during the period. Low volumetric sales resulted in a drop in cost of sales. Eventually, the company was able to post GP margin of 9.8 percent in 2019, up from 7 percent in 2018 with gross profit posting a year-on-year rise of 30 percent in 2019. Distribution cost dropped due to a massive drop in advertisement expense. However, admin and other expense didn’t give any breather, thanks to inflationary pressure. Other expense rose by 68 percent mainly because of re-measurement loss on investment and deficit on the revaluation of building. While other income rose by 25 percent year-on-year on the back of investment income and profit on savings accounts, it’s yet too small in absolute terms to create any impact on the bottomline. Finance cost of the company is negligible and comprises of bank charges only. The bottomline posted a net loss of Rs.37.38 million in 2019, signifying a drop of 7 percent. Loss per share for the year clocked in at Rs.0.38 versus Rs.0.439 in 2018.

In 2020, the topline grew by 60 percent year-on-year mainly on the back of 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 primary focus on UK, South Africa and Mauritius region. High cost of sales due to staggering rise in the commodity prices coupled with Pak Rupee depreciation magnified the cost of sales, resulting in a drop in GP margin to 6.9 percent in 2020. Gross profit, however, managed to increase by 13 percent during the year. A huge 31 percent year-on-year rise in distribution cost came on the back of massive marketing expenses and outward freight and handling charges. Administrative expense declined by 23 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 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 cost couldn’t produce any significant impact on the bottomline which nevertheless posted net loss worth Rs.39.44 million in 2020, up 6 percent year-on-year. Loss per share stood at Rs. 0.401 in 2020.

In 2021, QUICE’s topline grew by 27 percent year-on-year mainly on the back of historic 62 percent growth in the syrup segment of the company owing to its induction in the modern trade markets. The cost of sales grew by 25 percent year-on-year, however, with the rising export sales; the company was able to earn high margins owing to depreciation of Pak Rupee. GP margin improved to 8.5 percent in 2021. The company was able to keep a check on its operating expenses which enabled it to lower its operating loss by 27 percent year-on-year to clock in at Rs.28.42 million. Other income also boasted a tremendous 73 percent year-on-year growth mainly on the back of re-measurement gain on investment as well as capital gain. Finance cost dropped by 37 percent year-on-year in 2021. The net loss of the company stood at Rs.29.37 million in 2021 signifying a 26 percent year-on-year drop since previous year. Loss per share clocked in at Rs.0.298 in 2021.

2022 witnessed a stunning 124 percent growth in the topline of QUICE. 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. The unprecedented level of inflation experienced by the country during the year took its toll on the cost of sales which multiplied by 118 percent in 2022, yet better off-take and improved pricing enabled QUICE to post a GP margin of 10.9 percent in 2022. Operating expenses grew relentlessly in 2022 owing to inflationary pressure which drove up the salaries and wages expense. QUICE also expanded its workforce to comprise of 111 employees in 2022 versus 55 employees in the previous year Moreover, outward freight and handling expense, distribution claim, marketing expense etc also played a pivotal due role in inflating the operating expense in 2022. QUICE’s operating loss clocked in at Rs. 18.71 million in 2022, showing a downtick of 34 percent over last year. Other income dropped by 69 percent in 2022 as company made investment income, capital gain and re-measurement gain on investment in 2021 which wasn’t there in 2022. The net loss stood at Rs.24.04 million in 2022, down 18 percent year-on-year with loss per share of Rs.0.244.

2023 also proved to be a significant year for QUICE with 58 percent year-on-year enhancement in its topline which stood at Rs.838.45 million. The 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 GP margin of 14.8 percent in 2023 – the highest among all the years under consideration. Gross profit also boasted a tremendous year-on-year growth of 113 percent in 2023. 100 percent surge in distribution expense in 2023 was the effect of higher salaries & wages as well as 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 expense also surged by 23 percent in 2023 on account of higher payroll expense as QUICE increased its human resource count to 189 in 2023 versus 111 in 2022. Moreover, higher travelling and communication expense and utilities also kept the administrative expense up in 2023. Operating loss slid by 58 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 309 percent due to robust performance of both financial and non-financial assets. Bank charges (finance cost) grew by 283 percent in 2023 to clock in at Rs.0.4 million. QUICE was able to trim its net loss by 49 percent in 2023 to clock in at Rs.12.33 million with loss per share of Rs.0.125

Recent Performance (1QFY24)

QUICE’s topline nosedived by 22.58 percent year-on-year in 1QFY24. While export sales continued to pick up during the quarter, drastic drop in local sales on account of declining purchasing power of local consumers wreaked havoc on the overall sales of the company.Growing share of export sales in the total sales mix of QUICE is evident from the fact that the company was able to drive up its GP margin to 20.1 percent in 1QFY24 from 18.4 percent during the same period last year despite significant plunge in sales. Distribution expense slipped by 17 percent year-on-year in 1QFY24 apparently on account of lower sales volume. Administrative expense also ticked down by 27 percent during the quarter due to shrunken operational activity on the back of inadequate demand. QUICE was able to curtail its operating loss by 50 percent year-on-year in 1QFY24 to clock in at Rs.3.03 million. Other income spiraled by 30 percent year-on-year during the quarter. Financial cost, which comprised of bank charges, also dropped by 56 percent in 1QFY24. Net loss also plummeted by 50 percent year-on-year in 1QFY24 to clock in at Rs.3.63 million with loss per share of Rs.0.037 versus loss per share of Rs.0.073 in 1QFY23.

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 relationship with the suppliers, better pricing strategy, stability in global commodity prices as well as steadiness in Pak Rupee are all the factors that hint of improvement in the company’s financial performance in the