KARACHI: Food companies listed on the Pakistan Stock Exchange outperformed the benchmark index by 15.3 per cent in the last 12 months, with the latest ratios depicting “more potential for upside”.

A research report by JS Global, which reviewed a sample size of 11 companies as a proxy to the listed food sector, concluded that a spike in commodity prices, increase in consumption patterns, economic activity and higher inflation have most likely helped the sector’s “trailing annual revenue” expand 21pc on a year-on-year basis.

“On the other hand, the passing on of higher manufacturing costs and controlled fixed costs led the (companies’) bottom line to rise by 29pc year-on-year,” it said.

Despite rising input costs, the listed food sector managed to maintain its gross margin at 24pc for the January-March quarter, higher on a quarterly basis but flattish on an annual basis.

The sector’s margins came under some pressure in the previous few quarters as food manufacturers struggled to completely pass on the impact of an unprecedented increase in commodity prices along with a surge in fixed costs to the end consumer, it added.

Controlling the selling and administrative expenses helped sustain the sector’s operating margins over the quarters and, in fact, led to an improvement in the first quarter of 2022. “Moreover, with improved interest coverage and a relatively lower effective tax rate, the sector’s profitability during the January-March quarter improved by 16pc year-on-year,” it said.

Published in Dawn, May 18th, 2022