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Published 27 Sep, 2014 06:13am

Engro Foods to sell North American business

KARACHI: Engro Foods Limited — the listed subsidiary of the Engro Corporation — declared on Friday that the company had decided to sell its North American business, including Engro Foods Canada Limited.

In a filing at the stock exchange, the company secretary reminded: “Engro Foods Limited holds 100pc shares in Engro Foods Netherlands B.V, which in turn is the 100pc shareholder of Engro Foods Canada Limited.”

The statement went on to inform that Engro Foods Netherlands had entered into a Share Purchase Agreement with a Canadian registered company for the sale of its North American businesses, which included Engro Foods Canada Limited.

“Subject to satisfaction of all conditions precedent as set out in the Share Purchase Agreement, it is expected that the transaction shall complete on or around Oct 31, 2014,” Secretary Engro Foods said and added that as a result of such sale, the pre-tax loss that would be recorded and reflected in Engro Foods Limited’s financial statement during the third quarter will be approximately Rs475m.

Commenting on the development, Zoya Ahmed, Investment Analyst at AKD Securities, said: “EFoods has decided to exit from its Canadian halal meat business. Recall that Engro Foods Canada (EFC) ran the Al-Safa halal meat brand in the North American market.”

The analyst pointed out that in CY13, EFoods had booked impairment of Rs671m primarily on its Al-Safa stake through Engro Foods Netherland (EFN).

Analyst Zoya thought that the divestment at a loss would result in another poor year for EFoods (full-year CY14F earning per share may clock in at Rs0.60). However, the step was viewed as a long-term positive for Al-Safa was a loss-making entity.

Besides, EFoods is stated to be focusing on the core dairy potential in Pakistan.

“Although the stock is likely to trend downwards in the near-term, we retain belief that the company is poised for fast-track growth from CY15F onwards. We are currently in the process of reviewing our investment case for EFoods and will formally update investors shortly,” analyst at AKD said.

Meanwhile, Zeeshan Afzal, analyst at Topline Securities, observed that as per the notice, EFoods expected pre-tax loss of Rs475m in 3Q2014 results.

He reminded that Engro Foods Canada posted loss of CAD0.67m (Rs61.2m) in 1H2014. As a result of the proposed sale, analyst Afzal expected EFoods to post one-time loss of Rs236m (Rs0.31 per share) in 3Q2014 assuming after tax loss of Rs475m from Engro Foods Canada sell-off.

Published in Dawn, September 27th, 2014

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