Engro Foods explores opportunities in North American market with acquisition of Al-Safa brand
1. Company Name:
Engro Foods
Industry of operation:
Food Industry
Introduction of Company:
Engro Foods is among the biggest and fastest growing companies in Pakistan with a vision to
cater to local needs with products conforming to global standards.
Engro foods is highly passionate about providing millions of people across the length and
breadth of Pakistan and beyond with the ultimate brand experience. Engro portfolio comprises
some of the country's biggest and best selling brands including:
Olper's
Olper's Lite
Omore
Dairy Omung
Olper's Lassi
Tarang
Whether it is thick, creamy all-purpose milk, scrumptious ice-cream high on nutrition content or
refreshing range of beverages, approach remains largely the same as we strive to keep product
innovation at the forefront of our guiding philosophy and consumer satisfaction at the heart of
company operational strategy.
The business owns two milk processing plants in Sukkur & Sahiwal and operates a dairy farm in
Nara.
International expansion:
Engro foods is exploring new horizons and untapped markets
Encouraged by phenomenal success in the local market, it has recently made big leap into the
632 billion dollar global foods business with the acquisition of Al-Safa, a leading halal meat
brand of North America.
Newly formed global venture Engro Foods Canada Ltd and its subsidiary Engro Foods USA,
LLC give it the distinct advantage of being Pakistan's first local conglomerate to explore the
world's fastest growing consumer segment and acquire a top quality international meat brand.
2. We have strengthened our presence in the North American market by expanding our product
portfolio and drawing upon our local expertise in the foods business to emerge as a major
contender and a key player within the international market.
Subsidiary:
The parent company of Engro foods is Engro Corporation. Engro Foods Limited is an 87%
owned subsidiary engaged in the manufacturing, processing and marketing of dairy products, ice
cream and fruit juices.
Financial Highlights:
3. Market capitalization:
Year 2013 2012 2011
Market
capitalization
93087000000 46357000000 17779000000
Market capitalization defines the value of a company in terms of market price per share and no
of shares traded. The increasing amount of market capitalization shows that over the time both
the number of shares traded as well as the share price has increased.
Market share:
Year 2013 2012
Market share 49% 25%
Market price per share:
Year 2013 2012 2011
Market price per share 121.43 60.87 23.65
Major competitors
Nestle
Millac
Halla
Prime
Nurpur
Nirala
4. Ratio Analysis:
Liquidity Ratios
1. Current ratio:
Current Ratio= current assets/ current liability
year 2013 2012 2011 2010
Current Assets 8012194 9512702 6369139 3737993
Current
Liabilities 4655356 4441432 3480987 2521517
Current Ratio 1.721070096 2.141809669 1.829693417 1.482438151
Current ratio matches current assets with current liabilities and tells us whether the current assets
are enough to settle current liabilities. From 2010 to 2012 the current ratio has increased which
means that there is increase in company’s efficiency in utilizing its current assets to pay off its
current liabilities and the creditors. There are no liquidity issues. From 2012 to 2013 the ratio has
decreased but as it is above 1 therefore it is satisfactory. The company is still able to pay off its
current liabilities.
2. Quick Ratio:
Quick ratio= (current assets - inventory) / current liabilities
Year 2013 2012 2011 2010
Current Assets 8012194 9512702 6369139 3737993
Inventory 3083583 3494605 2637816 2089221
0
0.5
1
1.5
2
2.5
2013 2012 2011 2010
currentratio
Current Ratio
Series1
5. Current
liabilities 4655356 4441432 3480987 2521517
Quick ratio 1.058696907 1.354990237 1.071915236 0.653880977
Quick ratio measures the liquidity of a business by matching its cash and near cash current assets
with its total liabilities that is why we exclude inventory from its current assets. Since 2010 to
2013 the company has a constant increase in its quick ratio which means the efficiency of
utilizing its most liquid assets to pay off current liabilities is constantly increasing.
Profitability ratios:
3. Return on Capital Employed:
Return on Capital Employed=Net operating profit after taxes /capital
Where
Capital= (long term liabilities + shareholder equity)
years 2013 2012 2011 2010
net operating profit after
taxes 210960 2595173 890973 175622
shareholder equity 10715210 10054273 7236942 5124407
long term liabilities 7126994 6023070 5610000 4625000
capital 17842204 16077343 12846942 9749407
Return on Capital Employed 1.182365138 16.14180278 6.935292461 1.801360842
2008
2010
2012
2014
2013 2012 2011 2010
quickratio
Quick Ratio
Series1
6. A higher value of return on capital employed is favorable indicating that the company generates
more earnings per dollar of capital employed. From 2010 to 2012 company has been very
successful in using the funds generated through long term liabilities and shareholder equity. The
company was making more profit than the funds invested in the company. However the ratio has
decreased in 2013 but it doesn’t necessarily means that company is not performing good. It may
also means that company is investing its profit somewhere else for example for expansion etc.
4. Net profit margin
Net profit margin=Net Operating Profit After Taxes/net sales
years 2013 2012 2011 2010
net operationg profit after
taxes 210960 2595173 890973 175622
net sales 37890688 40168919 29859226 20944943
net profit margin 0.556759487 6.460649339 2.983911907 0.838493569
From 2010 to 2012 the company has increasing net profit margin. It means out of every dollar of
sales the company has increasing actually earnings. However in 2013 the ratio has decreased
which means a low margin of safety. Higher risk that shows a decline in sales will erase profits
and result in a net loss.
5. return on equity
Return on equity=Net Operating Profit after Taxes /shareholder equity
0
5
10
15
20
2013 2012 2011 2010
RCE RCE
Series1
0
2
4
6
8
2013 2012 2011 2010
netprofitmargin
net profit margin
Series1
7. years 2013 2012 2011 2010
net operating profit after
taxes 210960 2595173 890973 175622
shareholder equity 10715210 10054273 7236942 5124407
return on equity 1.968790159 25.81164247 12.31145697 3.42716728
From 2010 to 2012 return on equity has increased meaning that the company is efficient in
generating income on from the funds taken from shareholders. However there is decrease in
2013 may means that company isn’t making much profit but it can also mean that company is
investing these funds somewhere else which can cause decrease in profit in short term.
6. gross profit margin
gross profit margin=gross profit/net sales
Years 2013 2012 2011 2010
gross profit 8173174 10320618 6628781 4392826
net sales 37890688 40168919 29859226 20944943
gross profit margin 21.57040273 25.69304392 22.20010994 20.9732058
0
10
20
30
2013 2012 2011 2010
ROE
ROE
Series1
0
5
10
15
20
25
30
1 2 3 4
GPM
GPM
Series1
8. There is increase in gross profit margin from 2010 to 2012 which means that company has
improvement in controlling its indirect expenses however from 2012 to 2013 there is decrease
which may mean there is increase in indirect expenses.
Gearing Ratios:
7. Capital based gearing
capital based gearing=long term liabilities/(LTL + SHE)
Years 2013 2012 2011 2010
long term liabilites 7126994 6023070 5610000 4625000
shareholder equity 10715210 10054273 7236942 5124407
capital based gearing 39.94458308 37.46309325 43.66797951 47.43878269
The ratio has decreased from 2010 to 2012 which means that the amount of debt on which
company was operating has decreased which means the risk has decreased. However there is
slight increase in 2013 which may mean that debt has increased but this debt may have been
taken for making more profits in future through investments etc.
8. Income based Gearing
interest based gearing= PBIT/interest charges
years 2013 2012 2011 2010
profit before interest and
taxes 2174140 4823292 2411801 929662
0
10
20
30
40
50
2013 2012 2011 2010
CapitalBasedGearing
Capital Based Gearing
Series1
9. interest charges 784904 902503 1049141 659562
interest based gearing 276.994384 534.4350102 229.8833998 140.9514193
The ratio has increased from 2010 to 2012 which means that company was able to pay off its
interest very easily year by year however in 2013 the ratio has decreased which means that there
are more interest charges as compare t previous years.
Activity Ratios:
9. inventory/stock turnover ratio
stock turnover ratio= (inventory/cost of sales)*365
years 2013 2012 2011 2010
Inventory 3083583 3494605 2637816 2089221
cost of good sold 29717514 29848301 23230445 16552117
stock turnover ratio 37.87355144 42.73378324 41.44573382 46.07058209
0
100
200
300
400
500
600
2013 2012 2011 2010
IBG
IBG
Series1
10. The ratio is increasing from 2010 to 2013 which means that the control of a company on its
inventory is improving year by year.
10. total assets turnover
Total assets turnover=sales/total sales
Years 2013 2012 2011 2010
Sales 37890688 40168919 29859226 20944943
total assests 24045553 22188685 16639184 12460064
total assests turnover 1.575787756 1.810333465 1.79451264 1.680965924
From 2010 to 2012 the ratio is increasing which means with fewer assets it has a higher turnover
ratio which tells it is a good company because it is using its assets efficiently. However in 2013
the ratio has turned very low which may mean company is not using its assets optimally.
11. trade receivable collection period
Trade receivables collection period= (trade receivables/credit sales)*365
Years 2013 2012 2011 2010
0
20
40
60
2013 2012 2011 2010
AxisTitle inevntrory turnover
Series1
1.4
1.5
1.6
1.7
1.8
1.9
2013 2012 2011 2010
AxisTitle
Total assets turnover
Series1
11. trade receivables 153573 149074 87121 51879
credit sales 692766 555489 597454 413353
trade receivables collection
period 80.91353357 97.95335281 53.22445745 45.81032435
Increasing number of days in collection period from 2010 to 2012 may mean that
company was having loose credit policy or there were no discounts in paying early which
has improved in 2013.
12. trade payables payment period
trade payable payment period= (trade payables/credit purchases)*365
Years 2013 2012 2011 2010
trade payables 1968715 1281398 1168250 866936
credit purchases 1959606 2729743 2188861 978518
tarde payable payment period 366.6966599 171.3385729 194.8096521 323.378456
0
200
400
2013 2012 2011 2010
AxisTitle
Payment period
Series1
0
50
100
150
2013 2012 2011 2010
AxisTitle
Collection period
Series1
12. From 2010 to 2012 the payment period is decreasing which means that the company is easily
able to pay off its credits however the ratio is high in 2013 which means may means that the
company is having liquidity issues in paying off the credits.
13. dividend yield
Dividend yield= (dividend per share/market price per share)*100
dividend yield
years 2013 2012 2011 2010
dividend per share 0 0 0
market price per share 121.43 60.87 23.65
dividend yield 0 0 0
14. dividend cover
Dividend cover= NPATAPD/paid dividend
Years 2013 2012 2011
net profit after tax and preferred
dividend 210960 2595173 890973
paid and proposed dividends 0 0 0
dividend cover
15. earnings per share
earnings per share=net profit after tax and dividend/no of ordinary shares issued
years 2013 2012 2011 2010
NPATPD 210960000 2595173000 890973000 175622000
number of ordinary shares
issued 766596075 761577575 751789855 700000000
earning per share 0.275190556 3.40762791 1.185135705 0.250888571
13. Earnings per share has increase from 2010 to 2012 which means that on every share year by year
company was able to give more profits however in 2013 the profit have decreased but it doesn’t
necessarily means that company is going in loss it may also means that it is using its profits
somewhere else.
16. price/earnings ratio
Price/earnings ratio= market price per share/earning per share
years 2013 2012 2011
market price per share 121.43 60.87 23.65
earnings per share 0.275190556 3.40762791 1.18135705
price/earnings ratio 441.2578751 17.86286578 20.01934978
The ratio is increasing from 2011 to 2013 which means that investors are anticipating higher
growth in the future.
0
2
4
2013 2012 2011 2010
EPS EPS
Series1
0
100
200
300
400
500
2013 2012 2011
AxisTitle
Price/earning ratio
Series1
14. Z – Score:
Year 2013
currentassets 8012194
currentliabilities 4655356
total assets 24045553
A 0.139603277
Year 2013
retainedearnings -9581
total assets 24045553
B -0.000398452
Year 2013
profitbefore interestandtax 2174140
total assets 24045553
C 0.09041755
Year 2013
No.of shares 766596075
marketprice per share 121.43
15. marketvalue of preferredandordinaryshares 93087761387
bookvalue of total liabilities 13330343000
D 6.98314825
Years 2013
Sales 37890688
total assets 24045553
E 1.575787756
Year 2013
1.2A 0.167523933
1.4B -0.000557833
3.3C 0.298377916
0.6D 4.18988895
1.0E 1.575787756
z-score 6.231020722
As z-score is above 2.99 therefore it means that there are n no chances of bankruptcy. It also tells
that company is credit worthy.
16. Adjustment in Z-Score
Z= 1.2*0.16 + 1.4*0.00 + 3.3*0.0945 + 0.6*6.98 + 1.0*1.57
Z= 6.26
other operating expenses 2013 2012 2011 2010
operating assets written off 55
loss on biological assets 19175 5357
exchange loss 778
provision of culling of biological assets 15916
biological assets written off 50533
employee separation benefits 16600
total 102224 0 778 5412
17. 2013 2012 2011 2010
gain on sale on investment in subsidarty 78436
amortization of deffered income 30 81
exchange gain 3814 7349
insurance claims 3543
stated liability 38653
total 3814 46002 78466 3624
Assets 2013 2012 2011 2010
non current assest
deffered employee shares options
compensation expenses
168865
advance against purchases of shares of
engro food
863018
investment in subsidiries 427286
Total 596151 863018
current assets
derivative financial instruments 25787
provision of culling of biological assets 15916
Total 15916 25787
Total Assets 612067 863018 25787
18. Liabilities 2013 2012 2011 2010
no current liabilities
obligation under financial leases 1295 4714
differed liabilities 1,870 3462
deferred income 9,410 17,390
Total 9,410 17,390 3,165 8176
current liability
adjusted differed taxes 271429.8 271429.8 271429.8 271429.8
Total 271429.8 271429.8 271429.8 271429.8
Total Liabilities 280,840 288,820 277,760 287781.8
net profit after taxation
years 2013 2012 2011 2010
profit before interest and taxes 2174140 4823292 2411801 929662
interest charges 784904 902503 1049141 659562
net profit before taxation 1389236 3920789 1362660 270100
average taxation 271429.8 271429.8 271429.8 271429.8
net profit after taxation 1117806.2 3649359.2 1091230.2 -1329.8
19. Profitability Ratios
Return on Capital Employed
years 2013 2012 2011 2010
net operationg profit after taxes 210960 2595173 890973 175622
Add: operating expense 102224 0 778 5412
Substarct: operating Income 3814 46002 78446 3624
Adjusted net operating profit after taxes 309370 2549171 813305 177410
shareholder equity 10715210 10054273 7236942 5124407
long term liabilites 7126994 6023070 5610000 4625000
substarct: non current liability 9410 17930 3165 8176
adjusted non current libilities 7117584 6005140 5606835 4616824
capital 17842204 16077343 12846942 9749407
adjusted capital 17832794 16059413 12843777 9741231
adjusted Return on Capital Employed 0.017348375 0.15873376 0.063322884 0.0182123
returnonequity
years 2013 2012 2011 2010
netoperationgprofitaftertaxes 210960 2595173 890973 175622
Adjustednetoperatingprofitaftertaxes 309370 2549171 813285 177410
shareholderequity 10715210 10054273 7236942 5124407
return on equity 1.968790159 25.8116425 12.31145697 3.4271673
adjustedreturnonequity 0.028872043 0.25354106 0.112379649 0.0346206
netprofitmargin
years 2013 2012 2011 2010
netoperationgprofitaftertaxes 210960 2595173 890973 175622
Adjustednetoperatingprofitaftertaxes 309370 2549171 813305 177410
netsales 37890688 40168919 29859226 20944943
netprofitmargin 0.556759487 6.46064934 2.983911907 0.8384936
adjustednetprofitmargin 0.008164803 0.06346128 0.02723798 0.0084703
20. Gearing Ratios
Capital based gearing
years 2013 2012 2011 2010
long term liabilites 7126994 6023070 5610000 4625000
adjusted long term liabilities 7117584 6005140 5606835 4616824
shareholder equity 10715210 10054273 7236942 5124407
capital based gearing 39.94458308 37.4630932 43.66797951 47.438783
adjusted capital based gearing 0.399128931 0.37393272 0.43654098 0.4739467
Income based Gearing
years 2013 2012 2011 2010
profit before interest and taxes 2174140 4823292 2411801 929662
Add: operating expense 102224 778 5412
Substarct: operating Income 3814 46002 78466 3624
adjusted profit before interest and taxes 2272550 4777290 2334113 931450
interest charges 784904 902503 1049141 659562
income based gearing 276.994384 534.43501 229.8833998 140.95142
adjusted income based gearing 2.89532223 5.29337853 2.224784848 1.4122251
total assests turnover
years 2013 2012 2011 2010
sales 37890688 40168919 29859226 20944943
total assests 24045553 22188685 16639184 12460064
substractcurrentassets 612067 863018 25787 0
substractnon currentassets 596151 863018 0 0
adjusted total assets 22837335 20462649 16613397 12460064
total assests turnove 1.575787756 1.81033347 1.79451264 1.6809659
adjusted total assets turnoverrate 1.659155414 1.96303612 1.797298048 1.6809659
