Engro posts Rs1.1bn profit

KARACHI: Engro Foods (EFOODS) reported 1H2013 profit of Rs1.1 billion, translating into earning per share (eps) at Rs1.46. Although the earnings represent increase of 9 per cent over the profit at Rs1.0 billion and eps at Rs1.35 for the first half of the previous year, the results were thought to be lower than market expectations. Revenues decreased by 4pc to Rs18.9bn yet the earnings improved mainly on account of 3.5pc improvement in gross margins and lower taxation. Further, 9pc uptick in selling expenses to also affected the bottom line. Analysts Zeeshan Afzal said that the depressed sales in first half under review were mainly on account of distribution issues being faced by the company and price competition with Nestle. However, on the positive front, timely increase in product prices resulted in 3.5 points improvement in gross margins to 28pc. Analyst believed that though the results were below initial earnings estimates, the company could be back on the growth track after commencement of its new powder milk plant in 3Q2013 and resolution of distribution issues. Analysts at brokerage Shajar Capital stated that during first half of the year 2013, the company’s gross margin rose by significant 3.5 points to 28 per cent on the back of efficiency measures introduced by the company. Resultantly, the company’s gross profit rose by 9pc to Rs2.6bn in the period under review. In addition, lower financial cost (down 10pc YoY) and reduced effective tax rate also supported its bottomline growth.