Research Analyst
June 15 - 21, 2009

National Foods Ltd (NFL) is a Pakistan's leading multi-categories Food Company. It has diversified into a versatile Food Company with over 110 products and 165 and above SKUs (Stock Keeping Unit) for the domestic market and over 100 different products for the international markets.

National Foods is consistently developing innovative food products based on convenience and fast preparation in line with modern lifestyles. The company's focal point remains on Customer's needs through Product development in line with the changing market trends. National Foods as a professionally managed Human Resource company, set up more than 7 years ago, came into being by transforming an informal company into a very dynamic and progressive management structure in line with industry practices.


(RS IN '000)


  MARCH 31, 2009 MARCH 31, 2008
Sale net 2,830,339 2,222,570
Gross profit 836,076 731,512
Admin expense 104,699 84,742
Profit before tax 153,217 137,744
Profit after tax 100,086 95,230
EPS (Rs) 3.02 2.87
Source: NFL

National Foods has maintained the trend of earlier sales growth in the last nine months in term of generation of top line sales revenues. NFL crossed the notable milestone of Rs4.0 billion in sales during the financial ending June 30 2008. During nine months 2008-09, the National Foods has witnessed the trend established in two previous financial reports from the start of the year. However, the economic pressure exerted depressive effects on the financial results and gross margin of the company. The gross profit as a percentage to net sales has declined by 3.37%. Additional burden of increased financial expenditure due to high bank borrowing rates has stressed the operations by further 0.92%. The company during the period has generated additional cash flow of Rs. 2.11 million from the operation. On the other hand, operational expenses have been curtailed for the period, which has offset the inflationary trend partially with a resultant decline in pre tax profit to net sales by 0.79%. The company has set the target of Rs. 50 billion in annual sales by the year 2020.


On the International front, national foods launched its products in India. Strategic distribution partners were signed and marketing and PR activities were done, created ripples across the Indian masala market. Consumers welcomed the NFL products with open arms, and the company hopes to see sales growth in a short time. NFL also aggressively spread activities in other countries with participation in major international exhibition including the prestigious ANUGA trade fair in Germany, the food and hotel (FHC) trade fair in shanghai, and the 4 weeks long Indian international trade fair (IITF) in New Dehli. The company also participated in the Gulf food exhibition in Dubai and the AAHAR-2008 food exhibition in New Delhi on March 2008. New distribution has also been signed up in several countries to broaden the reach of national foods products to international consumers.


According to JCR-VIS, the National Foods has maintained the medium to long-term entity rating of A+ (Single A Plus) and short term entity rating of A-2 (A Two). National Foods is the only food company in Pakistan to have ISO 9001 and HACCP certifications along with SAP business technology.


In Pakistan, the food inflation was hovering at 28 percent during July-March 2008-09 as against 13.8 percent in the comparable period of last year. Although food inflation has eased during the later course of the current fiscal year, it remains painfully high and a major cause of concern. This can be attributed to the stubbornness in prices of some key commodities such as edible oil, pulses, rice, milk, sugar, poultry, meat, wheat, wheat flour, and fresh vegetables.

('000 US$)
Food Group 220,133 219,685
1. Rice 134,938 126,135
A) Basmati 81,639 81,741
B) Others 53,299 44,394
2 Fish & Fish Preparations 21,512 22,790
3 Fruits 10,978 16,954
4 Vegetables/Leguminous Vegetable 6,000 4,750
5 Tobacco 1,545 545
6 Wheat Unmilled 0 0
7 Spices 1,245 1,160
8 Oil Seeds, Nuts and Kernals 6,772 6,487
9 Sugar 0 0
10 Meat and Meat Preparations 7,325 7,732
11 All Other Food Items 29,817 33,131
Import payments by commodity    
Food Group 327,374 337,730
1.Milk And Cream Incl For Infants 4,706 3,940
2.Wheat Unmilled 80,874 87,598
3.Dry Fruits 5,849 4,873
4.Tea 15,562 23,321
5.Spices 3,799 4,081
6.Soyabean Oil 1,639 10,878
7.Palm Oil 87,088 91,328
8.Sugar 4,111 6,477
9.Pulses 21,023 25,249
10.All Others Food Items 102,724 79,985
Source: SBP
P: Provisional, R: Revised


Currently, global recession and domestic unrest are serious threat to Pakistan's economy. High inflation has resulted in decline of purchasing power of consumers and if unabated will result in lower disposable income of consumer. National Foods have the capability to respond to such challenges and continue to seek opportunities to drive growth in existing categories and with innovative new products. Although the company's sales volume growth is expected to contribute positively to the bottom line growth, profitability will largely depend on cost controls.