Engro Foods on the road to recovery – announces a profit of Rs. 889 million

Karachi, January 26, 2015: The Board of Directors of Engro Foods Limited has announced its year end performance with a profit after tax of Rs. 889 million for the year ended December 31, 2014 as compared to Rs.  211 million in 2013.

Engro Foods’ revenue for 2014 grew to Rs. 43 billion as compared to Rs. 37.9 billion in 2013 exhibiting a growth of 14%. Effective investment on brands and efficient product mix management remained key elements in the achievements of growth in topline of 2014.

DAIRY AND BEVERAGES SEGMENT

The key highlight of 2014 was Olper’s significant volume growth which was led by continuous investment on brand and introduction of new innovative packaging in 2013 which yielded results in the current year. Tarang was under volumetric pressure during first half of 2014 due to intense competitive environment. With the support of price promotions and consumer centric campaigns, Tarang reclaimed its market share and has surpassed historical volumes in the last quarter of 2014.

The Dairy and Beverages segment reported a top line of Rs.40 billion registering a growth of 14% over last year. Segment contributed Rs. 1,711 million to the Company’s profitability this year registering a growth of 9%.

ICE CREAM AND FROZEN DESSERTS SEGMENT
During 2014, the ice-cream business witnessed volume recovery and growth. Innovations played a major role in achieving growth in 2014 with star performers being Funties and Tutti Frutti. On the sales front, Omore continued to invest in the market by deploying new freezers and tapping into new geographical territories and focused on retailer and distributor ROIs to boost sales volume. The Ice Cream & Frozen business segment reported revenue of Rs. 2.9 billion recording a growth of 11% over last year. The segment managed to reduce its loss from Rs. 320 million in 2013 to Rs. 293 million in 2014.

DAIRY FARM SEGMENT
The Company’s Nara Dairy Farm continued to remain a rich and nutritious source of quality milk for our dairy segment. The farm produces 33 thousand liters per day in 2014 compared to 25 thousand liters per day in 2013. Due to improved production yield the Nara farm has significantly reduced its operational losses to Rs. 32 million in 2014 as opposed to a loss of Rs. 137 million in 2013.

MUBROOK – PILOT PROJECT
The Company has carried out comprehensive analysis of its pilot project commenced in 2013 under brand name of “Mabrook” and concluded that, while the results and consumer acceptance rate of the concept were encouraging, mass acceptance will take some time. We believe improvement in overall energy situation and regulators involvement to invoke minimum pasteurization law, as followed in other neighboring countries such as India, can be key success criteria for pasteurized milk growth in the country. Accordingly, the Company has decided to conclude the pilot and has recorded all the expenses in these financial statements in relation to the closure of pilot.

ENGRO FOODS CANADA
During the year, the Board carried out strategic review of its North American operations and decided to exit it, so that focus can be placed in growing local operations where growth opportunities are enormous. As a result, EF Netherlands entered into a Share Purchase Agreement (SPA) with a Canadian registered company for sale of its North American businesses, which includes Engro Foods Canada Limited (EFCL). The sale transaction was completed on October 31, 2014. Consequently, due to the sale of the Canadian operations, the Company has recorded an impairment charge of Rs. 596 million during the year.

The Company reviewed its strategy during the year and as a result of focused approach, its performance in fourth quarter 2014 improved significantly with 23% volumetric growth in Dairy and Beverages segment over 3rd Quarter 2014, achieving highest ever volumetric sale of Tarang and Olper’s. Based on the 4th quarter performance management is confident that volume and sales growth journey will continue in 2015.