Manufacturers enjoy robust sales amid high inflation

KARACHI: Amid an annual increase of 43.25 per cent in weekly inflation ending Dec 28 and soaring utility bills, manufacturers of consumer goods items recorded brisk sales in the first nine months of 2023.

Market people believe that the jump in sales was because of price increases but they must have suffered a slowdown in volume or quantity of goods which most manufacturers do not mention in their accounts.

They said consumers had limited their purchases as per their demand instead of lifting bulk items. Manufac­turers’ focus towards the introduction of half and one-kg pouches also reflects consumers’ squeezing buying power.

As per a review of financial accounts, manufacturers pointed out that volumes came under pressure due to high food inflation and consumers’ squeezing purchasing power, while other producers attributed high sales to demand-generating activities.

Introduction of half and one-kg pouches reflects squeezing buying power

During the nine months ended Sept 30, Nestle Pakistan Ltd (NPL) sales recorded growth of 24.9pc to Rs151.15 billion compared to Rs120.97bn in the same period last year.

The company attributed the rise in sales to broad-based growth across the products and demand-generating activities. The operating profit also improved through the localisation of raw and packaging materials, an increase in exports, a favourable product mix, and tighter control of fixed expenses.

While the rupee has shown some signs of recovery, NPL anticipates that external challenges such as high inflation, increased commodity prices, higher taxation, and limited foreign exchange availability for imports will continue to persist for the rest of the year and may adversely impact consumption as a result of significant pressure on consumers’ disposable income.

Despite these challenges, Nestle is maintaining a cautiously optimistic view of the year ahead, focusing efforts on accelerating its exports to remain resilient and contribute to the national economy.

Nestle’s profit after tax surged 41.5pc to Rs16bn during the January-September period from Rs11.3bn in the same a year ago.

FrieslandCampina Engro Pakistan Ltd (FCEPL) delivered strong top-line growth of 40pc in the January-September period despite the challenging operating environment and economic slowdown. The company generated sales revenue of Rs73.8bn compared to Rs52.8bn in the same period last year, fuelled by both volume and value growth.

However, the profit after tax dipped to Rs1.57bn versus Rs1.77bn in the same period last year as a percentage of sales declined by 121bps due to a significant increase in finance costs and taxation.

Out of the company’s total sales, the dairy-based segment reported revenue of Rs. 65.7bn, reflecting a growth of 43pc compared to the same period last year led by Olper. The company’s frozen desert segment reported revenue of Rs8.1bn, up by 20pc compared to Jan-Sept 2022 due to timely investments in occasions and innovations.

FCEPL expects to face headwinds on both the demand and supply sides due to the anticipated high levels of inflation, high-interest rates, and declining purchasing power of consumers.

Unilever Pakistan Ltd (UPL) sales rose by 34pc to Rs26bn during nine months ending September 30 from Rs20bn in the same period last year. PAT jumped by 55pc to Rs7.5bn from Rs4.8bn.

UPL said volumes came under pressure as a result of sustained double-digit inflation and consequential erosion of consumers’ purchasing power.

Unilever believes that Pakistan’s economic and operating environment remains challenging while the post-IMF standby arrangement and administrative measures taken by the government, the company has seen relative stability.

The double-digit inflation is forcing consumers to reduce discretionary expenses. Structural reforms would be required to drive long-term stability, UPL added.

Revenues of Fauji Foods Ltd (FFL) during July-September FY24 rose to Rs14.7bn from Rs8bn in the same period last fiscal year, while operating profit stood at Rs258m versus a loss of Rs1.07bn billion in the same period last year.

FFL said uncertainty in the local and global economic environment continues to pose challenges for all businesses.