Profitability of consumer firms climbs 59pc in 2015

KARACHI: The profit of Pakistan’s top consumer companies climbed 59 percent to Rs50.232 billion in 2015, as the corporate sector enjoyed a rise in sales and uptick in gross margin, a brokerage said on Tuesday. 

Topline Securities, in its analysis of the listed firms with market capitalisation of more than $200 million, said the consumer staples and discretionary companies recorded 23 percent jump in their sales to Rs526.437 billion in the last year. 

The brokerage report said the profitability of discretionary sector, including Indus Motor, Pak Suzuki Motor and Thal Limited, more than doubled to Rs19.856 billion.

The report attributed the profit rise to new car models and introduction of taxi scheme, better security situation, up in car financing
and improving per capita income. 

Moreover, the profits of consumer staples firms, including Nestle Pakistan, Pakistan Tobacco and eight other companies, rose 36 percent to Rs30.375 billion in 2015. 

“We believe consumer buoyancy is still intact as lower inflation and higher demand from the growing middle class (40 percent of the total population) and better law and order situation
will keep on driving consumer spending,” said Nabeel Khursheed at Topline Securities. 

Sales of consumer discretionary firms increased 53 percent to Rs209.144 billion, while staple companies recorded nine percent sales growth to Rs317.293 billion in 2015.    

The report further said the profits of consumer companies grew 38 percent year-on-year in the last quarter of 2015, “supported mainly by performance of discretionary sector.” 

Citing Nielsen Global Confidence survey, the report said confidence of Pakistan’s consumers increased in a three-month trend.

According to the report, profits of consumer staples grew seven percent year-on-year (YoY) to Rs5.4 billion in 4Q2015. 

“Profitability grew on the back of lower raw material costs, declining energy and transportation charges, decreasing international raw milk prices and falling financial charges as a result of lower policy rate,” Khursheed said.

According to the report, the profitability of consumer staples and discretionary companies cheered cumulative average growth rate of 25 percent in profitability in the 2011-15 period.   

“(However), we flag substantial slowdown in rural economy, deplorable law and order situation, significant increase in commodity prices and inflationary pressure as key risks to the Pakistan’s consumer sector,” Khursheed said.