Consumer companies’ profits up by 86pc YoY in 3QFY20

LAHORE: Consumer companies, including discretionary, pharmaceuticals and staples, have registered an increase in profitability by 86 per cent YoY during 3QFY20 as compared to -15pc YoY in 2Q2020. NESTLE posted the highest increase in profits in absolute terms during 3Q2020.

Category wise, consumer discretionary firms posted significant 206pc YoY improvement in profitability, followed by 75pc YoY increase in consumer staples and 48pc YoY rise in pharma earnings.

In discretionary, the highest growth in profits was seen in Thal Limited (THALL).

According to Topline Securities, sales of overall consumer firms increased by 29pc YoY as compared -26pc YoY in 2Q2020 with easing of Covid-19 lockdown, while overall gross margins nominally increased by 0.72ppts YoY to 21.1pc in 3Q2020 from 20.4pc in 3Q2019, where a stable PKR also helped.

Discretionary

These firms took the lead where revenues were up 39pc YoY as compared to -64pc YoY in 2Q2020 mainly due to increase in volumetric sales given (1) pent-up demand from previous quarter amidst Covid-19 lockdown and (2) low-interest rates, Topline securities stated. 

Total Car and Pak Elektron Limited (PAEL’s) appliances sales increased by 8pc YoY & 30pc YoY, respectively in 3Q2020.

The overall gross margins for this segment increased by 1.98ppts YoY to 8.1pc, led by Pak Suzuki Motor Company Limited (PSMC) +6.06ppts and followed by Thal Limited (THALL) +5.39ppts. Margins of all others in this segment were down in the range of 0.2ppts YoY to 3.63ppts YoY.

Pharmaceuticals

Sales of Pharmaceuticals’ segment witnessed an improvement of 26pc YoY mainly due to resumption in OPDs and regular health care services, which were halted due to the risk of patients getting infected by Covid-19. 

GlaxoSmithKline Consumer Healthcare (GSKCH) +35pc YoY and GlaxoSmithKline Pakistan Limited (GLAXO) +32pc YoY led sales increase.

Topline Securities stated that all our sample companies in the pharmaceuticals segment reported a decline in gross margins, with the exception of Abbott Laboratories (Pakistan) Limited (ABOT), which reported increase of 10.7ppts YoY to 35pc from 25pc mainly due to better sales mix i.e. increase in high margin nutrition segment sales.

A notable decline in gross margins within pharmaceuticals’ was witnessed in (1) GlaxoSmithKline Consumer Healthcare (GSKCH) -4.9ppts YoY due to adverse sales mix and procurement of raw material at higher prices and (2) AGP Limited (AGP) -4.8ppts YoY amid one-off provisioning of Covid-19 testing kits.

Staples 

The sales for this segment increased by 23pc YoY. All companies within the staples segment reported increase in sales except for Bata Pakistan Limited (BATA) -13% YoY due to lower volumetric sales as educational institutions opened after Sep 15, 2020 in phased manner. 

Notable increase in sales was witnessed in  Unity Foods Limited (UNITY) +176pc YoY due to addition of new product lines along with capacity expansion.

Gross margins of consumer staple companies were up by 0.86ppts YoY to 27.8pc during 3Q2020.

Overall profitability of consumer companies was up by 41pc QoQ led by Consumer Discretionary firms again which turned in profits of Rs4,105mn in 3Q2020 as compared to losses of Rs1,479mn in 2Q2020. 

According to Topline Securities, Overall sales during 3Q2020 increased by 37pc QoQ mainly due to increase in revenues of Consumer Discretionary +144pc QoQ amid higher volumetric sales driven by pent-up demand and low interest rates.

Turnover of Pharmaceuticals’ and Consumer Staples firms were also up by 14pc QoQ and 7pc QoQ, respectively.

The overall gross margins were down by 3.7ppts QoQ to 21.1pc amidst Pak Rupee devaluation by 2pc QoQ which the companies were unable to immediately pass on to the final consumers, the Topline securities said.