November 11, 2001	Sunday	Shaba’an 24, 1422

KARACHI, Nov 10: On Saturday, the company convened its annual general meeting at its registered office in Karachi. Several speakers from the minority shareholders rose to appreciate the growth in sales/ profit and a stepped up dividend.

The year ended June 30, 2001 was the first with Abrar Hasan as the chief executive; the post having passed on by the father to the son. In the 30 years since inception, the former test cricketer- turned-industrialist, has raised the edifice of National Foods to rank among the leading producers of spices, jams, jellies, ketchup. The year ended June 30, 2001 saw the company set a new record of Rs1 billion in local sales alone; Last year, it had boasted achieving that much in gross sales—local and export combined.

Export sales during the year grew 26.9 per cent to Rs152 million during the year under review. Chairman A.Majeed, said he was pleased with the efforts of entire team and the business partners (dealers & shop keepers), but he reminded them that the company had yet miles to go.

Pretax profit spurted by 39.5 per cent to Rs35.7 million for the year under review, from a year ago pretax profit at Rs25.6 million. After-tax profit was up 47 per cent to Rs27.2 million from Rs18.5 million.

The Board passed on the benefit of higher earnings to the shareholders in the form of improved cash dividend to Rs3 per share, from Rs2.15 per share paid last year. The price of the 10-rupee share in National Foods is Rs32.50 (inclusive of dividend), which works out at over 30 per cent premium to its book value of Rs24.73. With the earnings per share being Rs6.41, the stock is currently trading at price-to-earnings ratio of under 5x.

National Foods has been selling ‘masalas’ and the like for over a quarter of a century, but it was only a little while ago that it added jam, jellies and tomato ketchup to its products. The company now has a range of more than 60 items—it claims market leadership in spices, salt and pickles; ranks second in ketchup and third in jam, jellies. Being a single ingredient-dependent product (on chilies), margin in ‘masala’ sales is wafer thin- at around 2 per cent and the dependence is on increasing turnover. A favourable crop/prices of chilies and mango leads to increased leverage.

The important development conveyed to the shareholders on Saturday, was that the company had acquired a new plot of 10 acres at Port Qasim Industrial Area. Management said that the land would serve as the expansion ground for all ‘Modern Food Technology’ projects. The company was said to be currently looking at expansion in the areas of new Sauce Manufacturing Plant. The total cost of the project was yet to be worked out, after which the company would decide the modes of financing:

Right issues, TFCs and outside borrowings, would all be given a careful look.

But the policy of balanced distribution and retention has enabled the company to build up its reserves, which, at Rs 62.6 million exceeds the paid-up capital of Rs 42.5 million. It is thus that the balance sheet is almost free of long term debts while borrowings for current needs also declined to Rs93 million at the end of review year, from Rs110.9 million same time in 2000. The Debt/Equity ratio improved to 13.14 from 15.68 per cent. Other ratios were: Return on assets 8.72 per cent, from 6.60 per cent and return on equity at 27.82 per cent, from 21.53 per cent.

The strategic alliances the company entered into include a contract with an Australian Food Company to develop, manufacture and package food products for the multiple segments in the mainstream market; cooperation with UNICEF for iodised salt; alliance with ‘Cerebos’, which develops a range of Indian pastes, sauces and chutneys and ‘Oriental Merchants’ for Raj Masala for North Indian meal solutions.

Company chairman is a great believer in Adult Literacy. He has gone a step forward to launch special Adult Literacy programme in National Foods. During the year under review, literacy was raised from 88 to 92 per cent; the company hoping to achieve 100 per cent literacy rate by 2002.