MNCs essential good sales see mixed trend amid boycott

KARACHI: The manufacturers of essential foreign items in Pakistan have not experienced significant declines, unlike foreign soft drink, mineral water, and fast food sales, which have been adversely affected by consumer boycott in response to the massacre of thousands of Palestinians by Israeli forces over the past year.

For example, Nestlé Pakistan’s sales for the nine months ended Sept 30 stood at Rs149.2 billion, reflecting a decline of meagre 1.3pc compared to Rs151bn in the same period last year. However, the company’s profit-after-tax (PAT) plunged 29.50pc to Rs12.2bn from Rs15.8bn the previous year.

Nestle said this was a decline primarily influenced by the implementation of taxes in the Finance Act, passed on to consumers, leading to price hikes and reduced demand. Additionally, challenges such as rising commodity and energy prices and increased investment in the brands contributed to decreased operating profit.

Nestle maintains a cautious outlook for the rest of the year while focusing on optimisation across the value chain.

However, the net sales of FrieslandCampina Engro Pakistan Ltd (FCEPL) rose 12pc to Rs85.5bn during nine months ending on Sept 30 from Rs74bn in the same period last year, while PAT improved to Rs2bn from Rs1.6bn.

Out of total sales, dairy-based segment revenue posted a growth of 12pc to Rs73.5bn, according to a press release.

Effective July 1, an 18pc sales tax was imposed on the sale of UHT milk, which was previously zero-rated.

In an environment where the disposable income for an average consumer is declining, the imposition of sales tax has severely impacted the processed milk category, leading to a significant decline. This also incentivises the consumption of loose milk, which is untaxed.

The enhanced gross margins and reduced tax expense drove the growth in PAT.

With consumer demand under pressure, the company will continue to adapt and respond to the evolving market through relevant consumer offerings and stricter cost rationalisations to enhance its profitability and shareholder returns, Friesl­andCampina said.

Overall sales of Unilever Pakistan Foods Ltd (UPFL) declined by 6.2pc to Rs24.8bn from Rs26.4bn in the nine months of 2023. PAT fell to Rs5.43bn from Rs7.5bn.

The company said the business faced a drop in sales but recently landed pack price architecture interventions resulted in a volume uplift. In response to compounding inflation, Unilever took resilient measures and successfully delivered a gross margin of 39.1 pc, while earnings per share declined by 27.3 pc due to the maturity of tax credits.

Unilever said that the new IMF loan, declining policy rate and subsiding inflation were signs of the country moving towards economic stability. However, the implementation of ambitious reforms is crucial for long-term growth.

Like the absence of goods volume, the manufacturers have shown no serious sales concerns in the financial results for the current and upcoming months, given soaring Middle East tension.

Many consumers have rejected foreign soft drinks and mineral water, thus paving the way for locally-made soft drinks to gain a major share.

However, the data of Large-Scale Manufacturing showed no extraordinary manufacturing of soft drinks and mineral water as they produced 607m litres in July-August compared to 600m litres in the same period in 2023.

Published in Dawn, October 27th, 2024