NATF: Synopsis ~ Annual Report Takeaways FY17
More innovation to capitalize FMCG growth
National Foods Limited (NATF), incorporated in Pakistan in 1970, is involved in the business of manufacturing and sale of convenience food products. The company has many well renowned products including National Ketchup, Various powders for dishes, National Mayo and National iodized salt just to name a few. Subsidiaries of the company are: National Foods Pakistan (UK) and National Foods DMCC in UAE which through its subsidiary National Epicure
(NEI) in Canada acquired a 60% share in A-1 bags and Supplies Inc., a Canada based company engaged in distribution and wholesale of food products, disposables, janitorial and sanitation products. The paid-up capital of the company is PKR 518.03mn, with a current price of PKR 334, and a 52-week high and low of and 413.71 and 260.0.
During FY17, PAT clocked in at PKR 984.9mn (EPS: PKR 9.51), an increase of 27% YoY, against PAT of PKR 773.7mn (EPS: PKR 7.47) primarily due to (i) an increase in revenue by 12.73% and, (ii) An increase in other income by 45.1%. Revenues of the company mainly improved due to an increase in volumetric sales, due to the introduction of two new products National Mayo and National Diet Jams, coupled with successful marketing and sales campaigns both locally and internationally. Other income of the company mainly improved due to a gain of 1.4x YoY in the income from other than financial assets section of other incomes. The finance cost of the company increased by 1.8%. The company is currently trading at a P/E of 35.12x.
Pakistan is a food-loving country, and all signs indicate towards a continued growth in the food related business. There are several factors which are also helping the FMCG sector, like changing demographic and income level not only in the urban areas but also in the rural locations of Pakistan. Furthermore, as more female participation in the workforce increases, so do the demand for readymade spice and other food items in the country.
A company like National Food is standing in the middle of this phenomenon and would certainly take advantage of this swing. Also, the hard-hitting marketing campaigns and continues brand loyalty will create further openings for the company. However, as National Foods Limited is focusing on to become PKR 50 billion Food Company by the year 2020. At the same time, competition is quickly catching up. That's why it's necessary for the firm to focus on research and innovation.