NATF is the pioneer of the concept of hygienically packed spices and convenient and quick-prepare recipe mixes in Pakistan. At the time, spices were being sold loose and unbranded in the market and NFL's concept was an unseen phenomenon that slowly but surely took the country by storm.
Although the market seems to be teeming with competitors today, NATF still enjoys the largest market share in the country's spice and condiment business. A name recognised in over 30 countries across the globe, NATF's products are exported to the far-flung corners of the globe and over the years it has become one of the country's leading multi-category food companies, with over 250 products in 12 different product categories including recipe masalas, ketchup, jams and condiments, powdered drinks, plain spices and desserts.
PERFORMANCE FOR 1H FY14 The 1H FY14 saw the firm's key product categories including the recipe mix, sauces, pickles and desserts performing exceptionally well, allowing National Foods to sustain its growth momentum. During the period, sales grew by 6.4 percent year on year with the gross margins improving by 28 bps. The investment on the brands continued in this part of the fiscal year too, and the mega campaigns like "ChittaKukkar" and "National Ketchup Zaroori" are well received by the consumers.
Strong export's sales have on the whole helped keep up National's growth momentum through less than stellar macroeconomic conditions at home. During the 1H FY14 the firm's export figures to markets in the Middle East, Europe and America made up nearly 9.7 percent of the firm's total revenues during the period.
National Food's focus on improving their gross margin on the whole is clearly visible with the improved sales mix, containment of fixed cost and a rigorous approach to curtailment of supply chain costs bearing clear results for the firm. Also the containment of fixed cost helped in the improvement of gross profit. However, growth in top line did not trickle down to its bottom line. Despite making a net profit of Rs 366 million-net profit after tax growth declined 16.6 percent year on year. Support to bottom line is provided by decrease in other expenses by 7.8 percent year on year, respectively. However, pressures have been witnessed with distribution and administrative costs increasing by 13.6 percent year on year and 33.4 percent year on year, respectively. Finance cost for the term also appreciated by 37 percent year on year, adding further stress to bottom line expansion.
Looking at the company's unconsolidated balance sheet, a comparison of current ratio and quick ratio reveals that the gap between the two has widened significantly over the years. In 1H FY14, the inventory reported for 63 percent of the company's current assets. This represents that the company possesses huge inventory stock. The company's fixed assets turnover is 3.84 shows that the company has less money tied up in fixed assets for each unit of sales. Strong performance in 1H FY14 allowed the company to reward investors by earnings per share of Rs 7.07.
FUTURE OUTLOOK The company's management is committed and confident to deliver another year of strong financial performance on the back of its resilience in spite of challenging external environment pressures, severe power and gas outages and delayed onset of consumers' seasonal buying pattern plaguing food businesses in the country.
During the year National Foods also launched some of its major categories including recipes, pickles and desserts in India, with plans on extending the product range in subsequent years. The company believes in local footprint, strong market leadership and aggressive wooing of foreign consumers that will propel their growth prospects during 2H FY14. Despite the unstable macroeconomic conditions, the last quarter of FY12 should deliver strong organic growth as the sales tend to jump in the holy month of Ramazan.
=====================================================
1HFY12 1HFY13 1HFY14
=====================================================
Profitability
-----------------------------------------------------
Gross profit margin 32.7% 36.7% 36.9%
Operating profit margin 13.1% 14.7% 12.9%
Net profit margin 7.6% 10.2% 8.0%
ROE 26.1% 27.6% 19.3%
ROA 9.4% 12.0% 8.2%
-----------------------------------------------------
Liquidity
-----------------------------------------------------
Current ratio 1.29 1.36 1.30
Quick ratio 0.45 0.36 0.48
-----------------------------------------------------
Turnover
-----------------------------------------------------
Total asset turnover 1.23 1.17 1.03
Fixed asset turnover 4.69 4.47 3.84
-----------------------------------------------------
Market
-----------------------------------------------------
EPS - Rs 7.00 8.48 7.07
=====================================================
Source: Company accounts