United Distributors Pakistan Limited (PSX: UDPL) is incorporated in Pakistan as a public limited company. The company is engaged in the manufacturing, trading, and distribution of pesticides, fertilizers, and other allied products.

Pattern of Shareholding

As of June 30, 2024, UDPL has a total of 35.271 million shares outstanding which are held by 1,138 shareholders. Genesis Holdings (Private) Limited, the parent company of UDPL, holds 84.81 percent of its shares followed by the local general public holding 7.86 percent shares. Around 4.97 percent of the company’s shares are held by Modarabas & Mutual Funds. The remaining ownership is distributed among other categories of shareholders.

Financial Performance (2019-24)

UDPL’s topline boasts an uphill journey in all the years under consideration. Conversely, the bottom line didn’t prove to be encouraging. UDPL’s bottom line slid in 2019, yet, stayed in the positive zone. Albeit since 2020, the company registered a net loss until 2023. In 2024, the company posted a net profit after four years of sustained net losses. UDPL’s margins portray an oscillating pattern over the years (see the graph of profitability ratios). Net profit margin is found to be the most erratic one on account of the share of profit/loss from associate company, FMC United (Private) Limited. The detailed performance review of each of the years under consideration is given below.

In 2019, UDPL’s net sales grew by 19.85 percent year-on-year on account of the contribution of new brands, better sales mix, and concentrated branding efforts by changing the look and feel of the products. Cost of sales surged by 21.98 percent year-on-year in 2019 on account of a spike in the price of raw and packaging materials due to the Pak Rupee depreciation, rising global commodity prices as well as general inflation. Gross profit improved by 16.85 percent in 2019, however, the GP margin ticked down to 40.4 percent from the GP margin of 41.4 percent recorded in 2018. Operating expenses expanded by 9.2 percent year-on-year in 2019 on the back of increased sales volume, sales territory expansion, inflation, and higher amortization expenses incurred during the year. Payroll expenses also hiked in 2019 due to an uptick in the number of employees from 80 in 2018 to 93 in 2019. Operating profit picked up by 61.95 percent year-on-year in 2019 with OP margin rising up from 6.9 percent in 2018 to 9.3 percent in 2019. The tables turned for UDPL when its finance cost multiplied by 359.79 percent on account of the hefty exchange loss incurred in 2019 due to steep depreciation in the value of the local currency. This coupled with a 68.21 percent year-on-year decline in the share of profit from associate company translated into a 69.74 percent year-on-year plunge in UDPL’s bottomline which stood at Rs.50.37 million in 2019. EPS dived from Rs.5.43 in 2018 to Rs.1.43 in 2019. NP margin also registered a drastic slump from 37 percent in 2018 to 9.3 percent in 2019.

In 2020, UDPL’s net sales registered a decent 19.19 percent year-on-year rise. This was despite economic headwinds emanating from the outbreak of COVID-19, locust attacks on crops as well as non-seasonal rainfall in 2020. Cost of sales radically hiked by 26.69 percent year-on-year on account of the steep depreciation of the Pak Rupee which inflated the product cost. Gross profit inched up by 8.11 percent in 2020, however, GP margin shrank to 36.6 percent. Operating expenses grew by 5.44 percent year-on-year in 2020 due to higher payroll expenses, depreciation, and amortization as well as commission and incentives. Lower dividend income from IBL Healthcare Limited in 2020 drove down the other income by 32.84 percent. Operating profit rose by 8 percent year-on-year in 2020, however, OP margin plummeted to 8.4 percent. 58.10 percent reduction in finance cost in 2020 gave some hope, however, a hefty share of loss from an associate company proved to be disastrous for UDPL’s bottom line which translated into a net loss of Rs.223.04 million in 2020. Loss per share clocked in at Rs.6.32 in 2020.

UDPL’s topline registered a negligible 0.36 percent year-on-year growth in 2021. This was on account of curtailed cultivation of cotton crops which is a significant source of revenue for the company. This coupled with the disruption of the global supply chain delayed the company’s import shipments and resulted in idle capacity. Gross profit improved by 5.71 percent year-on-year due to the addition of high-margin brands to the company’s sales mix. GP margin progressed to 38.6 percent in 2021. UDPL kept a check on its operating expenses which ticked up by only 1.95 percent in 2021. Operating profit improved by 19 percent year-on-year in 2021 with OP margin climbing up to 10 percent. Finance costs tumbled by 34.38 percent year-on-year due to monetary easing. Share of loss from associate companies also slipped by 54.54 percent in 2021. This translated into a 64.81 percent reduction in the net loss for the year which clocked in at Rs.78.48 million in 2021. Loss per share also contracted to Rs.2.22 in 2021.

In 2022, the topline growth was recorded at 1.98 percent. Despite deteriorating macroeconomic indicators, the company was able to sustain its net revenue on account of the sizeable contribution of fertilizer products and other high-margin products in its sales mix. Gross profit jumped up by 16.53 percent year-on-year in 2022 with GP margin reaching its optimum level of 44.10 percent. Operating expenses were magnified by 13.96 percent year-on-year in 2022 due to a significant escalation in payroll expenses, freight, and vehicle running expenses incurred during the year. Higher provisioning against ECL and exorbitant exchange loss drove up the other expenses by 944.91 percent in 2022. However, it was largely offset by 51.58 percent higher other income earned in 2022 due to gain on the disposal of fixed assets. Operating profit progressed by 13.8 percent in 2022 with OP margin reaching 11.10 percent – the highest level attained by the company since 2018. Finance cost inched up by 1.86 percent in 2022, however, what pushed UDPL’s bottom line into net loss was a substantial 221.86 percent spike in share of loss from associate company. As a consequence, the company posted a huge net loss of Rs.352.41 million in 2022, up 349 percent year-on-year. Loss per share also magnified to Rs.9.99 in 2022

Followed by two years of lackluster sales growth, in 2023, UDPL posted a reasonable 19.11 percent year-on-year rise in its topline. However, the plant operations of UDPL tell another tale. During 2023, the company’s packaging of powder and granular products radically fell by 43 percent and 9.5 percent respectively to clock in at 450,716 kilograms and 813,324 kilograms respectively. This translated into a reduced capacity utilization of 50 percent of powder product packaging plants and 60.17 percent of granular product packaging plants. UDPL also fills bottles of liquid fertilizers which also slumped to 142,796 liters in 2023, down 1.24 percent year-on-year. The curtailed operations of UDPL were the result of heavy rainfall and floods during the 1HFY23 as well as import restrictions which hindered the availability of fertilizers. This shows that the topline growth was the result of upward revision in the prices during the year as the Pak Rupee extremely dwindled, commodity prices rose and indigenous inflation touched an unparalleled mark in 2023. However, the company couldn’t pass on the entire effect of the cost hike to its consumers, which is evident by the 2.61 percent slide in its gross profit in 2023 with GP margin marching down to its 6-year lowest mark of 36 percent. Operating expenses amplified by 40 percent year-on-year in 2023 on account of high payroll expenses, legal and professional charges, sales promotion expenses as well as vehicle running expenses incurred during the year. Bad debt worth Rs.62 million written off during the year coupled with an exchange loss of Rs.15.5 million pushed up UDPL’s other expenses by 660.69 percent in 2023. This culminated in an operating loss of Rs.98.61 million in 2023. Finance cost further worsened the financial results of UDPL in 2023 as it surged by 179.14 percent. Share of loss from associate company shrank by 71.61 percent in 2023, however, still stood at a massive Rs.130.25 million further adding to the company’s financial woes. UDPL registered the highest-ever net loss of Rs.372.53 million in 2023, up 5.71 percent year-on-year with a loss per share of Rs.10.56.

In 2024, UDPL’s boasted the highest year-on-year topline growth of 41.51 percent. This was on account of sustainable sales volumes and improved pricing. During the year the packaging of granular and liquid products increased by 52.41 percent and 136 percent respectively to clock in at 1,239,556 kilograms and 336,812 liters respectively. Conversely, the packaging of powder products declined by 6.3 percent to clock in at 422,322 kilograms. This was due to lackluster demand for micro fertilizers owing to poor farm economics which in turn was the effect of the wheat crisis. The high cost of raw and packaging materials and elevated energy tariff resulted in a 37 percent surge in the cost of sales. Nevertheless, gross profit strengthened by 49.39 percent in 2024 with GP margin ticking up to 38.1 percent. Operating expenses multiplied by 28 percent in 2024 due to higher payroll expenses, corporate expenses, commission & incentives as well as vehicle running charges incurred during the year. The company expanded its workforce from 88 employees in 2023 to 97 employees in 2024. Other expenses fell by 97.37 percent in 2024 owing to the high-base effect as the company wrote off bad debts and incurred an exchange loss in the previous year. Other income registered a staggering growth of 2819.59 percent in 2024. This was the result of higher dividend income from the company’s Islamic investments; higher mark-up income paid by Universal Ventures (Private) limited for late payment against disposal of shares and also because of amortization of non-compete fee. This represents the amount received from International Brand (Private) Limited to refrain from competing in the business of distribution, marketing, and sale of human pharmaceutical products for the period of three years. UDPL recorded an operating profit of Rs.465.21 million in 2024 as against an operating loss of Rs.98.61 million recorded in the previous year. OP margin stood at the highest level of 41.9 percent in 2024. Finance cost tapered off by 5.1 percent in 2024 despite a high discount rate. This was because the company paid off its short-term borrowings in its entirety because of its robust liquidity position. During the year, the company’s share of losses in associate company, FMC United (Private) Limited exceeded the value of its investment in the company. This resulted in the value of investment declining to nil. Hence, no further losses are recognized. In 2024, the company was able to post a net profit of Rs.362.47 million with EPS of Rs.10.28 and an NP margin of 32.6 percent.

Future Outlook

The ease of import restrictions and strengthening of Pak Rupee off-late will prove to be a good omen for UDPL whose sales are highly contingent on imported products. This may also ensure smooth and unhindered operations. However, rising prices of packaging material, high electricity charges, and uncertain weather conditions may weigh down UDPL’s financial performance. Other income which greatly buttressed the company’s financial performance in 2024 on the back of the amortization of non-compete fees may not be available next year. This necessitates sustainable solutions for improved financial performance in the future.