Incorporated in Pakistan in 1964, Shezan was initially a joint venture between Shahnawaz Group and the Alliance Development Corporation of USA. Mainly engaged in the manufacturing, and selling of juices, pickles, jams and ketchups, the company has been constantly expanding both into local and international markets. After purchasing all shares of the Company in 1971, Shahnawaz Group made it a Public Limited Company and it was listed on the Karachi and Lahore Stock Exchanges.
The registered office of the Company is situated in Lahore, Pakistan. The Company has a bottle filling plant in Lahore, and a separate unit in Karachi to cater to the demand from within Sindh and from International buyers.
Financial Highlights The first quarter in FY13 saw Shezan's turnover climb to Rs 1.4 billion up from Rs 1.3 billion during the same period last year as the demand for the company's products saw a heavy increase amidst an ever expanding food and beverage sector. Gross profit percentage for the quarter also saw a significant improvement, climbing up to 30.08 percent as compared to 27.72 percent of the corresponding quarter of last year.
As the firm's production requirements increase on account of expanding demand, the overall requirements of working capital have also witnessed a significant growth. In order to meet its working capital needs, the Company availed short term financing facilities from commercial banks, which saw the company's finance costs rise up to Rs 12.28 million during the quarter under review.
During the last three months, distribution cost for the firm also expanded on inflationary lines, increasing by 14.09 percent to Rs 242 million. This was largely due to soaring POL and freight costs and expenses incurred on advertisement and promotional activities. Similiarly, Administrative expenses also increased by 16 percent during the period.
Overall, for the quarter under review, profit before tax clocked in at Rs 115.725 million as against Rs 93.455 million of the previous accounting period, additionally, Earnings Per Share were Rs 12.62 for the quarter as against Rs 9.91 in the comparable quarter last year, rounding off the company's impressive results in the face of increased costs of POL and energy costs during the aforementioned period.
Operational Highlights Exports during 1QFY13 were higher by 13.83 percent as compared to the corresponding quarter of last year. The firm's production facility at Karachi continued to meet the export requirements in Middle East, Africa and Europe, churning out profits marking a quarter that was healthier than expected.
The demand for Shezan's products has increased manifold over the last year, abetted by the company's efforts to re-invent their products, introducing newer packaging, designs and products. Therefore, production requirement has also significantly increased, which has translated into the firm's maintenance of higher inventory levels of raw and packaging materials.
The local business environment has also become very competitive and resultantly, Shezan's profits have been much affected by commodity inflation, however the firm's, operating profit increased from Rs 250.963 million to Rs 371.206 million at the close of the last quarter in FY12. The Company added Rs 839.071 million to the net sales in the last as consumer acceptance of their juice brands in tetra packaging and bottled juices increased significantly.
Shezan has also engaged a number of new channel partners during the year and the existing ones were made more efficient to maintain and increase the company's sales. Moreover, the firm is currently working on giving another facelift to its product range and introducing new packaging for its food products and juice brands. The additional task of adding capacities and upgrading infrastructure also continues.
Future Outlook Despite continuous pressure exerted by the depreciation of the Rupee, soaring inflation, frequent break-downs, gas loadshedding and significant increase in POL prices, Shezan was able to not only maintain, but increase gross margins as a percentage of net sales, on account of efforts made by the management in order to ensure sustainable growth in profits.
Going forward, the next quarter is likely to be less than stellar for the food producing firm that will see sales fall during one of its leanest seasons-namely winters, which will see the demand for juices and other bottled fruit drinks decline greatly. However, the company has the opportunity to cover some ground through the sales of seasonal products such as tinned foods as well as steady demand for other condiments such as its jams, jellies and pickles.
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Shezan International Ltd- Key indicators
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2008 2009 2010 2011
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Net sales Rs mn 2469 2729 3528 4222
Gross profit Rs mn 777 754 936 1091
Other revenue Rs mn -20 -20 -19 -29
PAT Rs mn 161 102 107 141
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Profitability Ratios
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GP margin % 31.48 27.64 26.54 25.85
NP margin % 6.53 3.76 3.03 3.33
ROE % 21.88 13.17 12.59 14.75
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Liquidity Ratios
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Current ratio times 1.93 1.97 1.75 1.64
Quick ratio times 0.60 0.54 0.51 0.38
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Activity Ratios
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Fixed Asset Turnover times 8.43 9.10 8.46 9.98
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Investment Ratios
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EPS Rs 26.87 17.08 17.79 23.43
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Source: Company Records
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Operating Results
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Rs (mn) 1QFY12 1QFY13 % chg
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Net sales 1,369 1,444 5%
Cost of sales 989 1,009 2%
Operating Profit 107 128 20%
NPAT 59 76 29%
EPS 9.91 12.62 27%
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