Consumer sector earns higher profits

Out of the total 6 sample companies (Nestle, UniLever, Pak Foods, Engro Foods, Rafhan Maize and National Foods) continued to excel, posting a combined solid growth of 30% YoY during 9MCY11 owing to rise in food inflation (average 15% for 9MCY11), which fueled the top line of the sector, as the sector holds strong ability to pass-on the price to final consumer.However, due to slightly greater rise in the input costs during 9MCY11, sector’s gross margins went down by 68bps to stand at 27.8%. Despite decline in gross margins, core profitability growth remained in the vicinity of the top line growth as sector’s bottom line blossomed by 28% YoY. However, on a QoQ basis, sector’s bottomline grew by only 13%, amid low topline growth (slower growth in prices with stable volumes).