KARACHI: Country’s key consumer firms posted 20 percent growth in profits at Rs65.624 billion in 2016 as local demand escalated during the last year, a brokerage reported on Monday.
The consumer companies (both staples and discretionary), listed on the Pakistan Stock Exchange, recorded three percent rise in sales to Rs587.565 billion in 2016, said Topline Securities in a report. The companies account for 18 percent of the total market capitalisation of $90 billion.
“While competition amongst manufacturers will keep the sales growth in pressure in the shorter run, we foresee buoyancy in consumerism to continue on lower inflation, growing income levels, expanding middle class population (40 percent of total), and improving liquidity among farmers due to subsidy,” said Hashim Sohail, an analyst at Topline Securities.
Profitability of consumer firms rose 49 percent year-on-year (YoY) and 15 percent quarter-on-quarter (QoQ) to Rs15.612 billion in the quarter ended December 31, 2016.
The country’s consumer confidence index reached to an all-time high of 106 points in 4Q2016, expanding five points since the last quarter and three points since 4Q2015. A survey, conducted by the State Bank of Pakistan in collaboration with the Institute of Business Administration, found that the consumer confidence index reached the highest-ever level of 174 points in November 2016.
Consumer staple firms, including Nestle, Engro Foods and Packages Limited, earned Rs40.769 billion in 2016, up 32 percent. Their profits increased 66 percent YoY, but decreased four percent to Rs7.627 billion for the last quarter, said Topline Securities.
Revenue of dairy sector remained flat in 4Q2016, while Engro Foods registered a decline of 19 percent YoY in its revenue. “We attribute this to heated competition in the ultra high treated milk segment, while share of Engro Foods contracted six points to 48 percent since December 2015 according to AC Nielsen,” Sohail said.
The sector’s profitability increased 11 percent, mainly contributed by Nestle as revenue growth, better margins and lower taxation, led the company’s bottom line to surge by 88 percent YoY.
Consumer discretionary companies, such as Indus Motors and Honda Car, posted five percent growth in profit at Rs24.855 billion during the past year. They recorded profit of Rs7.984 billion in October-December 2016, showing a rise of 36 percent YoY and increasing 41 percent QoQ.