Currently Rafhan Maize has an extensive and diversified product portfolio and produces a number of ingredients including industrial starches, liquid glucose, dextrose, dextrin and a variety of Gluten meals. Some of the industries it serves include textiles, food, cardboard & paper, confectionery, corrugation, beverages, livestock and animal feeds manufacturers.
Financial highlights HY12 It seems that inflationary pressures combined with the sharply rising prices of energy and other inputs are slowly continuing to whittle away the company's profitability in the last two quarters, with softening demand acting as the proverbial salt to the firm's wounds.
Posting a seven percent increase over the first quarter, and a two percent increase over the same period last year, Rafhan's top line managed to reach the Rs 4.9 billion mark, spurred on by increased demand from the packaging and animal nutrition segments. However, although the period from March to July was slightly better performance wise, the year has been harder than usual for the company, which supplies a variety of industrial ingredients to leading local and international manufacturing concerns.
During the period ending Mar-Jul, demand from the paper manufacturing units remained depressed on account of the availability of cheap imported paper in the market, consequently, while revenues grew and margins remained firm, overall, net sales, at Rs 9.4 billion remained one percent below last years' figures of Rs 9.5 billion at the half-year mark.
On the whole, the company, which had posted a massive 18 percent year on year growth in the last quarter of 2011, barely managed to right its momentum as a result of austerity drives and strategic initiatives, which helped the firm sustain its margins.
The firm's export figures during the year have also remained unimpressive. Despite the broad-based product portfolio and consistent efforts to remain focused on expanding market share, Rafhan's exports have not managed to go beyond previous highs. The sales this quarter ended at Rs 84.3 million; significantly lower than Rs 191.5 million recorded during the same period last year.
Sector wise Industrial Performance Due to the tough economic conditions, local demand for industrial ingredients has remained depressed throughout out the year, as downstream industrial customers struggled to cope in the trying times. Demand for Rafhan's Q-Tac starches from the paper, board and packaging industries has been decreasing over the last year and was further affected by cheap imports and local competition flooding the market during the year, thereby affecting sales targets.
However, on the other hand, the Corrugation industry performed normally, and there was consistent demand for Rafhan's corrugation products. Sales to meet packaging demands from fruit, textiles, sports, electronics and other non-food industries remained strong throughout the quarter. And while demand from the food industries for liquid glucose- mainly as a consequence of the export-led boom in the confectionery industry- had hiked up substantially in the last two quarters, the sales for the company's sweeteners remained subdued during the quarter.
This was a direct consequence of the downward hike of local sugar prices, which led to an overall lower demand for Rafhan's sweeteners throughout the last six months. Moreover, the Animal Nutrition ingredients which had categorically fared the worst among all other sectors during the last quarter, picked up through increased demand from poultry, dairy and aquaculture industries.
Affected by the massive gas curtailments, the sector had previously clocked in very low production levels, leading to significant volume loss for Rafhan and the overall low performance during 1QFY12. However, the company's operational efficiency optimisation drives have managed to mitigate these circumstances, through increased productions which were able to meet the rising demand in the market.
Future Outlook On the whole, the firm has managed to keep its margin's intact throughout the tough economic times. Although the severe energy shortages and the overall unhealthy economic environment has leached away the firm's profitability somewhat, it has managed to remain largely on track on account of strategic initiatives to cut down SG&A costs as well as to optimise energy usage.
In the last year alone the firm has spent Rs 1,122 million on capacity development and acquisition of new technology and is looking to further expand into new channels into many of its business segments. The last six months have seen Rafhan struggle with dampened local and international demand for many of its industrial ingredients due to the tough economic climate. And since there are no outward signs of things changing on that front, Rafhan will have to continue to focus on increasing volumes, overall productivity and cost control measures, as well as extend its customer base if it plans to enjoy the fruits of profitability in the future.
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Operating Results
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Rs(mn) 2QFY11 2QFY12 chg 1QFY12 chg
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Gross sales 4,795 4,902 2.23% 4,568 7%
Operating Income 766 887 15.82% 738 20%
NPAT 462 536 16.11% 450 19%
EPS 49.99 58.04 16.10% 48.77 19%
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Rafhan Maize Products Co Ltd.
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2009 2010 2011
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Net sales Rs mn 11,428.10 13,912.77 18,271
Gross profit Rs mn 2,435.36 3,297.74 3,799.82
Profit from Operations Rs mn 2,130.94 2,954.88 3,399.87
NPAT Rs mn 1,297.08 1,837.94 2,033.83
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Profitability Ratios
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GP margin % 21.31 23.7 20.8
NP margin % 11.35 13.21 11.13
Operating leverage % 1.86 1.78 0.48
ROA % 30.39 34.64 32.51
ROE % 34.2 41.02 37.54
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Liquidity Ratios
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Current ratio times 2.53 2.05 2.03
Cash to current liabilities
Cash flow from times 0.69 0.02 0.03
operations to sale times 0.25 0.02 0.13
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Activity Ratios
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Inventory turnover ratio times 6.23 3.09 4.29
Total Assets Turnover times 2.18 1.92 2.21
Fixed Asset Turnover times 6.47 6.4 8
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Investment Ratios
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EPS Rs 140.43 198.99 220.2
Dividend yield % 5 5 5
Market Value per share @ year end Rs 1,485.00 2,109.87 2,513.28
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