TCL was incorporated in January 1977 as a public limited company and was listed on all the three stock exchanges of the country. Treet Group of Companies (TGC) is a consortium of six entities with Treet Corporation Limited (TCL) as the Holding Company. TGC has been operating for more than 55 years and exports to over 35 markets globally. Currently, Treet Group of Companies (TGC) is principally engaged in the manufacturing & sale of blades, soap, corrugated packaging, motor bikes as well as the recently added battery division.
Treet's famous brands are TRBC (Treet Blade Coated) in Carbon Steel and TPS (Treet Platinum Super) in Stainless Steel enjoy high market share in double-edge blades category. While in bonded razor category Trim-II XL, Treet-II, and Treet Hygiene disposable razors are leading brands in popular price segment of the market. Treet has become a significant player in exports over the years. Currently, Treet is exporting its products to over 35 countries around the globe with the majority going to the Middle East, China and Bangladesh respectively.
Historical performance:n=Treet Corporation has diversified their business significantly over the years. This diversification has been the key force behind revenue growth for the company. From revenues of Rs 3.5 billion in FY10, the firm's top line stood at Rs 7 billion in FY14, reflecting a 19 percent year-on-year growth over FY13. The major contributors to this growth were corrugation and blade.
More recently, Treet's top line grew almost 10 percent for FY16 compared to FY15. The bulk of this increase could be attributed to blade sales which picked up 20 percent while the bike segment posted a decline of almost 25 percent in the face of stiff competition. However, 62 percent of the revenue for FY16 came from blades which more than offset the lacklustre performance of other segments including corrugated boxes and bikes.
Treet's gross margin had fallen to 20 percent in FY14 as against 25 percent in FY12 and 22 percent in FY13. This is because the company was facing higher cost of electricity tariffs as well as rising cost of raw material. Although the company has increased its gross profit margin for FY16, the net margin is still under stress.
In addition, Treet has been active in reviving its soap business by introducing new brands and investing in vegetable base soap brand to take advantage of lower palm oil prices. The company's recently launched maintenance free sealed batteries (MFSB) with the brand name "Daewoo" have been a pleasant surprise sales wise with large growth in volumes.
Snapshot 1QFY17 Treet's first quarter performance saw a marginal increase of 1.83 percent but the gross profit increased almost 22 percent. However, the bottom-line remained under pressure with net profit for the 1QFY17 decreasing 36 percent. Subsequently EPS on a consolidated basis declined from Rs 1.18 to Rs 0.74 on year-on-year basis.
The break-down of segment wise sales showed average growth of roughly 2 percent for the blade segment whereas soap sales increased by 3.5 percent. Corrugation did not fare so well with a decline of 10 percent but the recently problematic motorbike division saw its revenue increase by 13 percent. The star performer in terms of revenue growth was the batter segment which a 200 percent increase but its currently low share in the sales mix could not make up for the lacklustre performance of the other segments.
Stock performance Treet started the previous year on par with the benchmark KSE-100 index but as the year progressed, the stock price fell in comparison with the index. The stock reached its lowest point in October, 2016 compared to the benchmark index. However, there has been improvement of late with the stock rebounding a bit although it continues to underperform the KSE-100 index by a wide margin.
Future Outlook Following its history of diversification, Treet Corporation has yet again expanded into the battery sector which promises to perform well. Along with use in UPS backup systems the growth in the automotive sector will also lead to increased demand. Moreover, according to market analysts the Treet is expected to do an initial public offering (IPO) of a pharmaceutical company that specializes in dialysis medicines. The previous IPO of Loads Limited was a success and the company aims to take advantage of the positive sentiment. Although the motorbike division has had problems, it does not have high fixed costs and the recent rise in sales means it makes sense to continue. The razor blades segment still accounts for the largest revenue driver and the increased competition has led to marginal increment in growth.
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Treet Corporation Limited: Pattern of shareholding Percentage share held
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Directors, CEO & their spouse/minor children 39.27
Associated Companies and Related Parties of which 5.53
Loads Limited 5.53
NIT 8.86
Banks, DFI's, NBFIs, insurance/takaful firms,
modarabas & pension Funds 4.33
Foreign investors 4.29
General public 31.74
Joint-stock companies 2.85
Others 2.73
Total 100
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Copyright Business Recorder, 2017