Published On: Wed, Nov 11th, 2015

Pakistan’s consumer firms enjoy 58pc growth in profits

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KARACHI: Pakistan’s capital market-listed consumer firms earned a robust Rs11.2 billion worth of net profits in the three-month period of this year as buying power of people increased while cost of inputs decreased, said a brokerage house report on Wednesday.

This bottom line depicted a straight 58 percent year-on-year (YoY) jump over the corresponding period last year.

“Improving revenue on revival of consumers’ confidence and a considerable fall in the cost of production jacked up profits,” said analyst Nabeel Khursheed at Topline Securities.

However, future is not as bright.

“A substantial slowdown in rural economy, deplorable law and order situation, increase in commodity prices and inflationary pressure pose risk to the growth trend,” said Khursheed.

Analysts said inflation, which was heading towards its bottom, has started to regain strength.

The consumer price index inflation clocked in at 1.6 percent in October 2015 as against 1.3 percent in the previous month.

Likewise, an analyst said global oil prices seem to be gaining upward momentum after falling to $50/barrel this year.

However, consumer confidence index ratcheted up 25 percent YoY in the period of August-September 2015 as compared to 10 percent in June-July 2015, showed a joint survey by the State Bank of Pakistan and Institute of Business Administration, Karachi.

A Nielsen survey also recorded an improvement in recessionary sentiments in Pakistan.

“Growth in profitability of these firms, with a combined market capital of more than US$200 million, also emanated from low interest rate and soft energy and logistics cost because of low oil prices,” Khursheed said.

Resilient auto sector led the 53 percent surge in net earnings of consumer discretionary sector comprising durable goods, apparel and other non-essential products companies to Rs4.8 billion in July-September 2015, the report said.

Profits of consumer staple companies, such as Nestle and Engro Foods, rose 20 percent to Rs6.4 billion.

Income inequality is a stark reality of the South Asian nation and the consumerism is restricted to a very small portion of the population as a huge majority lives on subsistence or below poverty line.

An estimate said Pakistan’s 18 million richest people consume 1.5 times more than the poorest 72 million.

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