JS Securities Limited – Result Review

Karachi, February 12, 2018 (PPI-OT): EFOODS: 4Q2017 bottom-line comes to break-even

Engro Foods (EFOODS) announced 2017 results today, where the company posted earnings of Rs379mn (EPS Rs0.49), down by massive 84% YoY; where gross margins clocked in at 16% (-6ppt YoY). 4Q2017 posted a LAT of Rs3mn, vis-a-vis 4Q2016 LAT of Rs207mn. Alongside result, the company also announced final dividend of Rs0.40/share, taking 2017 payout ratio to 82%.

4Q2017 sales dropped by 26% YoY, which we believe is driven by lower Dairy volume sales during the quarter. Moreover, Gross Margins also declined to 13% (-98bps YoY), marking lowest quarterly margins since 4Q2013. However, distribution expenses normalized to 9% as a percentage of Sales (-5ppt YoY), taking Operating Profit up to Rs106mn, vis-a-vis loss of Rs308mn during 4Q2016. On a sequential basis, sales witnessed 19% QoQ decline, while Gross Margins dropped by 4ppt QoQ.

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