1QFY13 OVERVIEW During the first quarter of the year, MFFL's net sales of Rs 484 million were whittled down year-on-year due to slightly depressed sales of some seasonal product categories. Sales for the company's condiments remained strong whereas beverages including fruit juices etc remained slow due to the cold weather wave blanketing most of Punjab, which has traditionally been the biggest market for the food producing group.
The quarter however showed many positives. The firm's evolution of business continued to show growth in most of the sales regions. At present, almost 90 percent of the company's products are sold locally and only 10 percent are exported, although Mitchell's has identified emerging potential in the export market, which it is constantly looking to exploit.
During the quarter, sales to UK, US and Europe remained strong and helped cover up some of the ground lost in the local sector. The firm was also able to keep a firm lid on its expenses during this rather lean quarter, which is a commendable feat despite the immense pressure cast upon the local industry in Punjab by the energy crises. The Gross profit at Rs 119 million for the quarter hence exhibits an improvement in margin by one percent despite continuing shortages of electricity and gas and the leaner top line.
Profit from Operations at Rs 38 million and Net Profit at Rs 25 million also showed an improvement of five percent over the corresponding period last year on account of judicious management of funds. Additionally, the firm's financial costs were driven down by 40 percent over last year, another factor which trickled down into improved margins. Consequently, the growth translated into a 5 percent hike in the firm's EPS, which rose to Rs 4.93 over Rs 4.71 that was recorded during the same period last year.
FINANCIAL HIGHLIGHTS FY12 The year saw Mitchell's business grow despite the adverse economic conditions which stagnated growth for much of the country's industry. However, like all major food producers, Mitchell's enjoyed a healthy growth over the year which saw the sales volumes for the company's popular brands gear up by as much as 15 percent year on year.
While the firm's top line grew by a healthy five percent, the bottom line managed to expand by a much drastic 47 percent, hitting Rs 108 million by the year end. This double-digit growth was largely on account of exceptionally high margins across various categories which were strengthened by improved distribution efficiencies. Additionally, investment over the year into improved rationalisation of the product mix as well as the supply chain efficiencies allowed the firm to get into form.
Interest from abroad remained another factor which played into Mitchell's profitability this year. The year saw the company's export sales hit Rs 163 million over Rs 149 million recorded last year, a nine percent hike on account of spiking interest from middle eastern markets.
Compared to FY11, MFFL was also able to keep a lid on its cost of sales to Rs 1.4 billion despite inflationary pressures mainly as a result of management policies that have been concentrating on optimisation of costs and operating margins. As a result, while the COGS grew by a small sum, as a percentage of net sales the figure actually came down by 3 ppt -to 75 percent as compared to 78 percent recorded during FY11.
OPERATIONAL HIGHLIGHTS The positive financial performance recorded by the food manufacturing giant has come entirely at the hands of its management's initiatives to drive down costs and invest in modernising and automating major equipments and processes used in the production of various products that MFFL produces.
The company has invested heavily into improving and optimising its operating efficiencies throughout FY12. Additionally, the year also saw the firm delving into human resource development endeavours which saw trainings for the staff in sales, supply chain, quality assurance and productivity. Consequently, these trainings played a pivotal role in improving the firm's overall operational performance which has been the major growth driver for the firm this year.
FUTURE OUTLOOK Over the last year the food and beverages sector has been the sole ray of sunshine for Pakistan's large scale manufacturing, being amongst the few sectors that have shown actual and measurable growth. At the close of the year, things remain exceptionally positive for MFFL, which has come a long way since its inception. The massive and incremental explosion in food consumption amongst Pakistani households has boded well for almost all food producing and processing industrial giants this year, in the future, the same trend is likely to continue. For MFFL- one of the only food manufacturing companies to have actually managed to shuttle down costs despite immense inflationary pressures- this means that better times are yet to come.
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Operating Results
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Rs(mn) 1QCY12 1QCY13 Chg
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Sales 513 484 -5.75%
Gross profit 120 119 -0.91%
Profit from operations 43 44 4.29%
NPAT 24 25 4.64%
EPS 4.71 4.93 4.67%
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Source: Company Records
MFFL- KEY INDICATORS
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2009 2010 2011 2012
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Net sales Rs mn 1,255 1,377 1,794 1,885
Gross profit Rs mn 235 303 394 463
Other revenue Rs mn 72 107 147 175
PAT Rs mn 14 46 73 108
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Profitability Ratios
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GP margin % 18.7 22 22 24.56
NP margin % 1.1 3.4 4.1 5.75
ROA % 1.9 7.1 9.6 13.31
ROE % 5.2 15.2 20.4 25.05
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Liquidity Ratios
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Current ratio times 0.98 1.25 1.33 1.52
Quick ratio times 0.37 0.47 0.47 0.33
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Gearing Ratios
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Debt to assets % 62.93 53.35 52.91 46.86
Debt-Equity Ratio times 1.7 1.14 1.12 0.88
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Activity Ratios
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Fixed Asset Turnover times 3.81 4.40 5.40 5.36
Total Assets Turnover times 1.72 2.10 2.35 2.31
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Investment Ratios
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EPS Rs 2.79 9.22 14.57 21.5
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Source: Company Records