KARACHI: Engro Foods (EFoods) on Friday announced consolidated profit after tax at Rs870.4 million for CY2013, translating into earnings per share (eps) at Rs1.14, which stood lower by 60 per cent over the earlier year’s PAT at Rs2.6 billion (eps Rs3.4).

The results were generally below the consensus market forecasts, yet the price of the EFoods stock in the market on Friday hit the ‘upper circuit’ with gain of Rs5.14 to close at Rs108. Zeeshan Afzal, analyst at Topline Securities attributed the decline in earnings to 6pc fall in sales revenue to Rs38bn in 2013 in addition to 4bps dip in gross margins to 21.6pc.

It also included onetime charge of Rs208m (Re0.3 per share) relating to sales tax payable for the period (13 June to 18 July 2013) when FBR temporarily removed zero rating of dairy products. Excluding onetime charge, company consolidated profit would have stood at Rs1.30 per share.

Depressed sales were mainly on account of distribution issues being faced by the company and overall slowdown in UHT milk market while price competition with ‘Nestle’ caused margins to fall.

On the other side, finance cost reduced by 13pc to Rs785m due to low interest rates while ongoing capital expenditure (capex) resulted in decline in effective tax rate to 26pc, from 34pc in 2012.

Analyst Naveed Tehsin at JS Global stated that EFOODS announced disappointing full-year 2013 results on the back of weak sales (-6pc YoY, margin compression of 410bp YoY and a couple of one-time charges.

In 4Q alone, EFoods booked a loss both on a reported and recurring basis primarily attributable to (1) depressed gross margin of 13pc in 4Q2013, (2) losses attributable to Engro Foods Canada business and (3) charge related to sales tax during the period when FBR removed zero rating status of dairy products amounting to Rs208m.

On a consolidated basis (including Engro Foods Netherlands B.V), EFoods posted 2013 earnings of Rs870m (EPS of Rs1.14), down 66pcYoY where losses from the Canadian business was estimated at Rs29m.