Consumer firms earn Rs14.6bln in June quarter

KARACHI: Profits of listed consumer sector’s companies marginally rose two percent year-on-year to Rs14.591 billion in the April-June quarter mainly due to growth in tobacco firms, a brokerage reported on Wednesday.

Tobacco companies – Phillip Morris and Pakistan Tobacco – recorded an outstanding profitability growth of 132 percent year-on-year in the June quarter.

“If we exclude tobacco companies from our sample, profitability of consumer firms declined 11 percent YoY (year-on-year) during the quarter versus 14 percent growth in the same quarter last year,” analyst Nabeel Khursheed at Topline Securities said in a report covering listed firms with market capitalisation of $200 million and above.

Revenues of consumer companies grew 19 percent year-on-year in April-June quarter. Gross margins contracted 234 basis points to 22 percent and distribution and financial charges were up eight and 29 percent, respectively.

Profits of consumer staples, including Nestle, Engro Foods and Unilever, increased three percent to Rs9.011 billion during the quarter, while consumer discretionary firms – Indus Motors, Honda and Pak Suzuki – recorded one percent rise in profits at Rs5.58 billion during the three months under review.

Sales of dairy producers remained weak in 2Q2018. EFoods’ sales declined 12 percent, while Nestle’s sales were marginally up on stiff competition in packaged milk industry, especially tea-whitening segment. Sales of discretionary sector were up 32 percent with Indus Motors recording highest sales growth of 43 percent in 2Q2018, followed by 35 percent growth recorded by Pak Suzuki.

Stellar growth in revenues of Indus and Pak Suzuki was on higher volumes and increase in prices.

“Required measures to curtail external account i.e. further currency devaluation and monetary tightening among others are expected to curtail overall aggregate demand,” Khursheed added. “We expect GDP growth to be 4.7 percent in FY2019 compared to 5.8 percent in FY2018, which will affect consumer purchasing power.”