National Foods Limited ('National Foods' or 'the Company') is a public listed company, incorporated in 1970.

In 1970, Mr. Abdul Majeed (late) and Mr. Waqar Hasan (late) founded National Foods by acquiring National Foods Laboratories, with the aim of introducing branded and packaged spices. In 1986, the company expanded by setting up its second production facility in SITE. A third facility was established in Port Qasim in 2006. In 2013, National Foods ventured into the international market through its wholly owned subsidiary, National Foods DMCC (NFL DMCC), based in the UAE. Through this subsidiary, the company also invested in National Epicure Inc. (Canada). In 2015, a fourth production facility was opened in Gujranwala. Subsequently, National Epicure Inc. acquired a 60% stake in A-1 Cash & Carry, a Canadian company.

The Company is primarily engaged in manufacturing convenience food products with a portfolio of 13 categories in 300 different products. The production facilities are located in Port Qasim, Nooriabad, and M-3 Industrial City, Faisalabad. The Company is exporting products to ~ 40 countries across ~ 5 continents, through NF DMCC. During FY24, the Company’s production declined by 16.9% to 84.046MT (FY23: 101.083MT) as a result of ongoing expansion activities throughout the year. NFL’s calculated entry into the branded spice market has solidified its leadership in Pakistan’s food sector. NFL’s focus on creditworthiness and effective use of brand equity signifies adept navigation in both local and global markets. Despite the prevalence of unbranded products in Pakistan posing a credit risk, NFL’s shift towards branded goods suggests credit-positive potential. Globally, NFL’s proactive approach maintains its credit standing amidst intense competition, particularly in the condiment space against Indian entities. NFL’s dedication to fiscal prudence and market adaptability anchors its positive credit profile. Its Dubai-based subsidiary, NF-DMCC, along with NEI in Canada, caters to the Middle Eastern, North American and European markets, reflecting its international operational strength.

The majority of NFL’s ownership is held by its sponsors through the associate entity ATC Holdings (Pvt.) Limited, which owns approximately 34%, while the company’s directors and their family members hold around 39%. The general public also owns a significant portion, with about 11% of the shares. The remaining 16% is held by financial institutions and foreign companies.

National Foods Limited is family owned. Ownership of the Company seems stable as majority shareholding vests with the sponsoring family.

Mr. Zahid Majeed is the chairman  of ATC Holdings (Pvt.) Limited and National Foods Limited. He is heading Nazaria-e-Pakistan Trust, Sindh and Textile Institute of Pakistan as the Chairman and Chancellor respectively. He is also a member of the Board of Governors of National Textile University, Faisalabad. Today, the Company is a leading player in Pakistan's multi-category food segment. Mr. Abrar Hasan is the Global Chief Executive Officer (CEO) at National Foods Limited (NFL) and has been a Director on the Board of NFL since 2000. He is also a Director at National Foods DMCC (NFDMCC), a wholly owned subsidiary of NFL; a Director at National Epicure Inc. Canada (NEI) and National Foods Pakistan UK Ltd., and a Director at A-1 Bags & Supplies Inc. Canada, a subsidiary of NEI.

NFL is a sound Company that has diversified into various food segments. As at FY24, NFL has consolidated equity of PKR 14.1bln. Moreover, the group is managing an asset base of ~PKR 45.3bln. Through its diverse set of business, it is generating a turnover of ~PKR 86.4bln and posted a PAT of ~PKR 2.8bln.

The Board of Directors consists of seven members, including three Non-Executive Directors, two Executive Directors, and two Independent Directors. The Board is primarily led by the sponsoring family.Additionally, the presence of independent directors brings diversity to the board.

Mr. Zahid Majeed is Chairman of National Foods and ATC Holding's BoD since April 20, 2022. He has over 50 years of experience in textile and convenience food industry. All members of the BoD have significantly diversified experience and have been associated with the Company's BoD for a long span of time.

The board comprises of Audit Committee and Human Resource & Remuneration Committee. Board minutes are formally documented.

The company has appointed KPMG Taseer Hadi as its external auditors. The firm has issued an unqualified opinion on the company’s financial statements for the year ending June 2023. KPMG Taseer Hadi has been serving as the company’s auditor since 2017.

The Company’s organizational structure reflects clear reporting lines and is split between the production site and head office. The Company operates through eight main departments: Finance, HR & Industrial Relations, Supply Chain, Marketing, Sales, Innovation and R&D, IT, and Internal Audit. All functional heads report to the Company's CEO, who then reports to the BoD. However, Head of Internal Audit and HR administratively reports to the CEO and functionally to the Board Audit and HR & Remuneration Committee, respectively.

Mr. Abrar Hasan, CEO of the Company, has an overall experience of more than three decades. He is also on the BoD of multiple other companies and holds membership of key associations. Mr. Zahid Majeed, Chairman of NFL heads the international operations and is associated with the Company since 1987. Mr. Majeed studied Philosophy, Politics and Economics at Magdalen College, Oxford University, UK, and later studied Textile Technology from the University of New South Wales, Australia. He is a Certified Director from the Institute of Directors. 

The company’s management ensures effectiveness through its Management Committee, which meets regularly to oversee the company’s performance. The minutes of these meetings are thoroughly documented.

The company has recently transitioned to S/4 HANA for the generation of MIS and operational reports, updating from the previous ERP software, SAP ECC6.

The Company has Halal certification and all products are ISO 22000 certified. The Company has a robust internal audit function which is co-sourced to EY Ford Rhodes which enhances riskmanagement, control, and governance processes, while driving continuous business improvements through thedevelopment of Standard Operating Procedures (SOPs). Additionally, the Company holds several prestigious certifications, including Halal, ISO 22000, ISO 45001, ISO9001, ISO 14001 , BRC and SEDEX certified along with SAP Business demonstrating its strong commitment to adhering to the highest industry standards of quality, safety, and compliance.

In Pakistan, the domestic convenience food market is growing, with a 4.2% CAGR forecast for 2025-2033. Distribution meets international standards in cities, but expansion opportunities exist in smaller areas. Retail is fragmented; however, large chains are emerging, potentially changing consumer habits. The CPI’s year-on-year increase is 23.06% as of February 2024, signaling a slowdown in inflation. This impacts consumer spending, especially on convenience foods, as price hikes in essentials continue. Companies must adapt to these economic shifts to maintain market share. The Condiments & Spices category in Urban and Rural inflation levels contributed ~9.6% and ~9.2%, respectively, as of 5MFY25.

The Company has high brand recognition in recipe mixes/spices & ingredients, ketchups, pickles, salt and jellies as they are the market leader. Although, National Foods holds a strong position in the dessert segment, it is yet to establish a notable presence in the product category of Snacks. National Foods is the top player in this segment that enjoy brand loyalty from their customers. Condiments segment largely comprises of unorganized players, while the share of organized players is significantly low.

The Company has maintained its growth trajectory in revenues since commencing operations in 1970. NFL sources its revenue mainly from six product categories, namely, i) Recipe Mixes, ii) Ketchups, iii) Pickles, iv) Salt, v) Desserts and vi) Spices & Ingredients, with recipe mixes dominating turnover. The Company sells over 250 different products, the majority of which are sold locally, across 13 categories. Currently, the Company is selling its products in 40 countries across 5 continents. Revenue stream of NFL is fairly concentrated as top 6 product categories account for ~84% of total revenue in FY24. During FY24, revenue from export sales reflected a growth of 30%. Meanwhile, revenue from local sales in FY24 grew by 26%. The growth in both local and export sales was driven by an increase in the quantity of sales in FY24 compared to FY23. However, local sales as a percentage of total sales stood at 135.1% during FY24 (FY23: 135.5%), reflecting a decline of 0.4% compared to FY23. In contrast, revenue from export sales as a percentage of total sales reached 8.5% in FY24 (FY23: 8.2%). This indicates that the growth in revenue during FY24 was primarily driven by the increase in export sales.

The gross profit margin has declined despite the increase in revenue, primarily due to a rise in the cost of sales which is clearly indicated by the percentage increase in cost of sales which is 32% compared to percentage increase in sales which is 26%. The factors behind the increase of the cost of sales is higher raw material costs which increased by 27%. The company’s increased cost of sales reflects its strategic investment in employee development and training to enhance long-term productivity and service quality which is reflected in increased salaries and wages costs which amounted an increase of 41%.  As a result the gross profit margin declined and stood at 31.7% in FY24 (FY23: 34.6%, 6MFY25 32.3%). The Company’s net profit witnessed a decrease of ~41% and stood at ~PKR 1.27bln (FY23: ~PKR 2.15bln 6MFY25: 0.682bln). There has been a significant decrease in net profit margin by 41%, stood at 3.4% (FY23: 7.3%, 6MFY25: 3.6%), primarily driven by a substantial 152% increase in finance costs. This rise in finance costs is attributed to the higher long-term debt incurred to finance the Faisalabad plant project.

National Food Limited’s (NFL) strategic maneuvers reflect a forward-thinking approach that aligns with long-term financial stability and growth. The investment in a state-of-the-art facility in Faisalabad is indicative of NFL’s commitment to enhancing its production capabilities and also serves as a catalyst for synergy enhancement , which is likely to improve its competitive edge and market share. The establishment of facility in Faisalabad is set to enhance the logistics infrastructure within the Punjab region, streamlining distribution networks and facilitating swifter, more efficient delivery of goods.

The Company’s working capital requirements are a function of its inventory, trade receivables and trade payables, which are financed through internal cash generation and short-term borrowings. In FY24, the average inventory days slightly improved, reducing to 89 days in FY24 from 101 days in FY23, indicating efficient inventory management and optimized stock levels to balance demand with minimal holding costs. Receivable days posted an improvement in FY24 to 14 days from 22 days in FY23. This led to improved Gross working capital days at 103 days (FY23: 123 days). Trade payable days posted an improvement of 21 days in FY24 (FY23:15 days) due to revision in credit terms. As a result, the company’s net working capital days posted an increase in FY24 and stood at 82 days (FY23: 108 days). Overall, the results suggest that the Company has made progress in streamliningits working capital, although there remain areas for continued improvement in managing payables and receivablesmore efficiently.

NFL’s coverages are a function of free cashflows and finance costs incurred. FCFO stood at ~PKR 3.21bln in FY24 (FY23: ~PKR 3.27bln, 6MFY25: 1.73bln), with a decrease of ~2% in FY24. Finance cost increased by 2.5 times to PKR 1.57bln (FY23: PKR 0.621bln, 6MFY25: 0.785bln) on the back of higher interest rates. Subsequently, interest cover abated to 2.1x (FY23: 5.6x, 6MFY25:2.3x). ‘FCFO / Finance Cost+CMLTB+Excess STB’ posted a drop and stood at (FY24: 2.0x each, FY23: 4.8x each) due to higher interest rates.

NFL has National Foods has a moderately leveraged capital structure with a debt-to-equity ratio of ~55.2% (FY23: ~52.7%). As of FY24, the Company’s total borrowings consist of both short-term and long-term debt, primarily utilized for working capital management and expansion purposes. In FY24, total debt stood at ~PKR 9.3bln (FY23: ~PKR 8.1bln), comprising major increase in long term debt (FY24: PKR 6,180mln, FY23: PKR3,098mln). However, short term borrowings, which comprise of borrowing from financial institutions and SBP has been decreased by 37% which has posted positive impact. During FY24, short term borrowing as a percentage of total borrowing has fallen to 33.0% (FY23:60.5%).