According to a report by Topline Securities, Pakistan’s pharmaceuticals witnessed a significant increase of 37% in profits during the first quarter of 2020, followed by Consumer Staples which remained largely stagnant (up 1.0% year on year) while the profitability of Consumer Discretionary (mainly autos) fell by 39% as compared with the same period last year.

Pakistan’s consumer companies’ (Staples, Pharmaceuticals, and Discretionary) profitability declined by 7% on a year-on-year basis in the first quarter of 2020.

The overall slowdown in economic activity and country-wide lockdown starting during the last week of Mar-2020 in the wake of COVID-19, resulted in lower consumers’ purchasing power said the report.

The sales of Consumer Discretionary, as a result, have declined significantly by 32% YoY compared to a decline of 38% in the fourth quarter of 2019. However, the turnover for the other two segments, i.e. Staples and Pharmaceuticals, witnessed an uptick of 8% and 7% YoY respectively (up 7% and up 12% as compared with the last year, respectively in the fourth quarter of 2019).

Overall, the gross margins of consumer firms increased by 2.12% to 23.9% in the first quarter of 2020, with companies gradually passing on the impact of PKR’s deprecation witnessed over the last two years and high costs due to inflation.

The report stated that the increase in sales within the staples segment was largely broad-based as higher revenues were a mixture of:

  • Increase in prices to pass on higher costs due to currency devaluation
  • Higher volumetric sales compared to last year.

Staples’ sales growth was mainly led by National Foods Ltd (up 28% YoY) and Unilever Pakistan Foods (up 17% YoY).

The gross margins of the staples business shrunk by 0.43% to 28% as the companies were unable to fully pass on the impact of higher costs. A notable decline in gross margins of staples was seen in Philip Morris Pakistan (down 7.8% to 35%) and Pak Elektron (4.7% to 22%).

Pharmaceuticals’ sales growth clocked in at 7% YoY, where improvement in revenues was a combination of the price increase and higher volumes. SEARL (up 13% YoY) and ABOT (up 12% YoY) led sales growth in this segment.

Similarly, gross margins increased by 1.8ppts to 34.3% amid price increase (linked to annual CPI). ABOT (up 6.4ppts to 36%) and GlaxoSmithKline Consumer Healthcare Limited (up 4.3ppts to 33%) reported a notable increase in gross margins.

Discretionary firms reported a significant decline in revenues of 32% YoY as the purchasing power of consumers and sales took a major hit due to slowdown in overall economic activity and countrywide lockdowns. The decline was in spite of price hikes as volumes witnessed a contraction of over 50% YoY.

The overall gross margins for this segment increased by 0.11% to 8.8%, led by Toyota Indus Motors (up 0.41%) While margins of all others in this segment were down in the range of 0.02% to 6.59%.

Overall sales during the first quarter of 2020 recorded an improvement of 5% on QoQ, led by revenues of Consumer Discretionary (up 18% Quarter on Quarter) amid an increase in price hike and New Year phenomena as consumer wait for the new model.

Turnover of Consumer Staple was also up by 1.0% on QoQ, whereas sales of pharmaceutical sales were down by 8% QoQ.

The overall gross margins were down by 0.1% QoQ. Overall profitability was up by 2% QoQ led by Consumer Discretionary (up 67 % QoQ) due to the above-mentioned reasons. The profitability of two other segments, ie, Pharmaceuticals and Consumer Staples witnessed a decline of 15% QoQ and 5% QoQ, respectively.

“We believe, due to countrywide lockdown amid COVID-19 outbreak, the sales of overall consumer segment will be affected due to supply chain disruptions, wherein consumer discretionary firms are likely to take the hit most among others,” the report added.

The post Pakistani Pharma Companies Saw 37% Increase in Profits in Q1 2020: Report appeared first on .

Originally Published on ProPakistani.com

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