FrieslandCampina Engro Pakistan Limited (FCEPL) announced its financial results for Quarter 3, 2024.Effective July 1, 2024, an 18% sales tax was imposed on the sale of UHT milk, which was previously zero-rated. In an environment where the disposable income for an average consumer is declining. The imposition of Sales Tax has severely impacted the processed milk category, leading to a significant decline. This also incentivizes the consumption of loose milk, which is unsafe and remains untaxed.With an agile business model in place, the company continued to drive cost efficiencies across its value chain, effectively mitigating the impact of inflation. The drive for efficiencies led to an improvement in the gross margin by 60 basis points compared to last year. As a result, the year-to-date profit after tax saw a significant increase of 28% from the previous year.The growth in profit after tax was driven by the enhanced gross margins and a reduction in tax expense.The purpose of the company continues to be the provision of nutrition for all Pakistanis. Accordingly, the company has continued to advocate with relevant stakeholders to increase awareness around the benefits of UHT Milk and increase accessibility, driving the school milk program and working towards the safe milk city pilot with the Government.DAIRY-BASED PRODUCTS SEGMENTThe segment reported revenue of Rs. 73.5 billion, reflecting 12% growth compared to the same period last year. The growth was led by flagship brand, Olper’s, through a consistent focus on strengthening the value proposition and driving distribution coverage.Olper’s UHT maintained a strong presence in 2024 with the ‘Happy Mornings’ campaign across key touchpoints, including TV, digital platforms and in-store. The campaign continued to position Olper’s as an enabler of Happy Mornings by providing high-quality, nutritious, and delicious milk. These efforts across consumer touchpoints strengthened Olper’s leadership in both market share and brand equity within the category. Other value-added brands under the Olper’s umbrella continued to expand penetration across households through a mix of equity-building campaigns and best in class market execution. FROZEN DESSERTS SEGMENTThe segment continued to perform with a growth of 11% vs last year. Consistent investment was made towards the Wow Bharay Deserts” campaign to de-seasonalize the category and leverage broader consumption occasions outside the scope of traditional festivitiesFINANCIAL PERFORMANCEThe financial performance of the company for the nine months ended September 30, 2024, is summarized below: Nine months endedVariation(Rs. in million)20242023Net Sales82,51273,81911.8%Operating Profit5,9415,31611.8%% of sales7.2%7.2%0 bpsProfit / (Loss) after tax2,0191,575% of sales2.4%2.1%31 bpsEarnings / (Loss) per share (Rs.)2.632.06FUTURE OUTLOOKDespite the implementation of 18% sales tax on the UHT milk category, the company demonstrated remarkable resilience, achieving growth across business segments. With consumer demand under pressure, the company will continue to adapt and respond to the evolving market through relevant consumer offerings and stricter cost rationalizations, to enhance its profitability and shareholder returns.The company will also continue to engage with relevant stakeholders to implement a level playing field in the milk category. This will help the company pursue its objective of providing better nutrition to Pakistanis, now and for generations to come.Leveraging its global expertise and 150 years of heritage, FCEPL remains committed to the highest standards of hygiene, food safety and sustainability, and providing safe, affordable, and nourishing dairy products to millions of Pakistanis, every day.
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