Engro Foods Limited has proved to be a delicious and popular brand for public and profitable and crunchy for its parent organization, Engro Corporation, as it posted a profit of Rs1.018 billion in the first half of 2012, showing a whopping growth of 370% year-on-year compared to Rs 216 million in the same period last year.
In 2Q alone, the earnings registered a growth of 9% quarter-on-quarter to Rs 532 million as the growth was mainly derived from the dairy and juices segment, which has now touched the market share of 50 percent from 44 percent in the end of 2011.
Despite growth in the revenues of ice cream business, up 180%QoQ, the bottom line remained red which somewhat curtailed the cumulative growth.
Tarang and Omung drive the growth
UHT segment was the primary contributor in the Dairy and Juices business. The UHT segment witnessed a volumetric growth of 39%YoY in 1H2012 mainly because of higher sales of Tarang (tea whitener) and Dairy Omung (for budget conscious society of the country). To recall, the recent hike in milk prices by Rs10/litre was only applicable on Olper’s while Dairy Omung prices remained intact.
However in 2Q alone, the Dairy and Juices business reported a decline of 3.3%QoQ in revenues due to seasonality factor. Consequently, the net profit margin has decreased by 1ppt to 6%.
Omore getting popularity among ice cream lovers
The revenues of ice cream business (Omore) witnessed an increase of 180%QoQ in 2Q2012 due to the seasonality factor and the gross margin has increased to 40%, up 17ppt from previous quarter.
However, the bottom line remained red due to continuous expansions and brand building exercises. The segment reported a loss of 31mn in 2Q2012.
Engro Foods has planned to invest Rs8.7 billion in 2012 mainly for expansion purposes, of which Rs1.5 billion has been actually spent till 1H2012. The management expects to make commitments for the full amount of targeted capital expenditure plan till the end of the year.
New product: Omung Lassi
In the dairy segment, Engro Foods has introduced a new product known as Omung Lassi and the management is following an aggressive marketing campaign for the popularity of the product.
According to the management, the initial public response of the product is good but also stated the common belief that it is too early to gauge the acceptability of the product. The company has also introduced new ice creams like Buzz and Magic Hat to target the teen and kids segment.