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 At the close of the third quarter ended March 31st, Shezan's turnover grew by 19.8 percent, going up to Rs 3.2 billion as compared to Rs 2.71 billion in the corresponding period last year. This significant increase in sales revenue came as a consequence of the company's efforts to re-invent their products, introducing newer packaging, designs and products in a market which is currently facing rapid local expansion.
The firm's bottom line saw a fat 90 percent growth at the third quarter mark, managing to hit nearly Rs 120 million in comparison to Rs 63 million at the close of 3QFY11, a testimony to the rising demand of Shezan's products, specifically their juices. Managing to rapidly expand its market share in the Tetra-pack and bottled juice market- a market constantly dominated by giants like Nestle- Shezan managed to earn a gross profit of Rs 900 million at the close of 9FMY12, against Rs 654 million that the company earned in the same period last year. Greater investments in marketing and advertisements have garnered much needed consumer interest in this regard.
During the last nine months, the company's distribution and marketing expenses have increased by 36.57 percent on an overall basis, compared with last corresponding period of 2011, primarily due to increase in advertisement and promotion expense of Rs 78.926 million. Moreover, the firm's Finance costs also increased by Rs 11.124 million, going up a significant 32.5 percent over the last corresponding period.
This can mainly be attributed to the increase in working capital requirements which had to be financed through short-term borrowings. The borrowings made during this period were mainly used for the procurement of sufficient inventories for packaging materials, glass bottles and fruit pulp to cater to the rising demand for Shezan's products in the coming quarter.
Operational Highlights Despite the inflationary pressures and rising costs of inputs on the producers end- which has meant that a 250ml package of juice that cost Rs 15 even an year ago, is now selling between Rs 20-25 consumption for edibles such as juices and other such beverages is constantly on the rise in Pakistan. Consequently, producers are able to pass of most of their rising costs onto customers.
For Shezan, this meant that despite pressures such as Rupee depreciation and the rampant energy shortages and gas loadshedding, the gross margins as a percentage of net sales were not only maintained, but actually managed to flourish. Moreover, Shezan is currently in the process of giving its entire product line a much needed face-lift. Extensive advertisement campaigns, design endeavours and re-invention in products and packaging has been carried out in this regard.
Consequently, consumer acceptance of the company's juice brands, specifically Twist and All-Pure has increased significantly as evident from ever-increasing turn-over. The company's All-Pure Juices specifically are rapidly becoming customer favourites on account of their relatively lower prices and the similar quality against competitors like Nestle Fruita Vitals in the Premium juice market. Currently, the company is also engaged in re-inventing some of its other products, such as their ketchups, jams and jellies and has been continually adding capacities and upgrading their infrastructure.
Future Outlook Although there is much consternation among experts regarding the health of businesses in the country, general consensus remains that the future remains bright for the food producing and manufacturing sector of the economy. The rising consumerism in Pakistan-mainly abetted by rising disposable incomes- means that people are now readily willing to make routine purchases of expensive food items that were previously bought only occasionally, a fact which will spell out most positively for Shezan's juice division in the future.
And despite the fact that there has been a rapid upsurge in prices of materials such as pulps, edible oils, sugar and the tetra-packaging, margins have remained intact mainly as a consequence of the Shezan's ability to keep its administrative expenses into check.
As a result, the profit earned from the firm's core business operations has historically shown a positive trend, and abetted by the fact that the rising consumerism in the country means big bucks for food manufacturers; the future for Shezan looks nothing less than decidedly rosy.
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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) 3QFY11 3QFY12 % chg
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Net sales 2,712,460 3,248,856 20%
Cost of sales 2,057,807 2,348,797 14%
Operating Income 128,338 227,207 77%
NPAT 63,127 119,660 90%
EPS 10.52 19.94 90%
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Source: Company Records