National Foods Limited: performance and outlook

National Foods Limited (PSX: NATF) was incorporated in Pakistan as a private limited company in 1971 and was subsequently converted into a public limited company. The principal activity of the company is the manufacturing and sale of convenience based food products. The company has a diverse portfolio of 250 products pertaining to 12 broad categories. It has a global footprint in 40 countries across 5 continents. ATC Holdings (Private) limited is the ultimate holding company of NATF. Pattern of Shareholding As of June 30, 2025, NATF has a total of 233. 115 million shares outstanding which are held by 5860 shareholders. Associated companies, undertakings & related parties have the majority stake of 59. 53 percent in the company followed by the company’s directors, CEO, their spouse & minor children holding around 18. 96 percent of the company’s shares. Local general public accounts for 10. 66 percent of the outstanding shares of NATF while Modarabas & Mutual Funds hold 3. 74 percent shares. Around 1. 66 percent of the company’s shares are held by foreign companies. The remaining ownership is distributed among other categories of shareholders. Financial Performance (2021-25) NATF has consistently improved its financial performance as evident by its topline and bottomline growing stronge each year. Over the period under consideration, NATF’s bottomline only dipped in 2024. Notably, the company’s margins have followed a cyclical pattern. After a three-year decline, gross margin rebounded in 2022 and 2023 followed by a dip in 2024. Conversely, operating and net margins declined in 2021. For the next two years, the operating and net margins strengthened followed by a plunge in 2024. In 2025, all the margins rebounded. The detailed performance review of the period under consideration is given below. In 2021, NATF recorded 20 percent year-on-year improvement in its topline which clocked in at Rs. 23, 115. 80 million. As the economy started recovering after COVID-19 and with the resumption of HORECA industry, educational institutions, offices and businesses, the demand of NATF products started picking up. With 5 percent year-on-year increase, the company production volume stood at 105, 071 MT in 2021. Both local and export sales performed well during the year. Cost of sales grew by 22. 28 percent year-on-year in 2021 resulting in 15 percent year-on-year growth in gross profit; however, GP margin marched down to 30. 44 percent from 31. 72 percent in 2020. Distribution expense expanded by 16. 33 percent year-on-year in 2021 which was the effect of focused sales promotion drives to boost market share and also because of increased freight and handling charges on account of higher sales volume. Administrative expense also ticked up by 11. 75 percent year-on-year in 2021 as the number of employees grew to 788 in 2021 which drove the payroll expense up. NATF posted net other expense of Rs. 32. 88 million in 2021 on account of 51 percent year-on-year drop in other income and 14 percent year-on-year hike in other expense. This was mainly due to exchange loss incurred during the year. Operating profit posted a meager 5. 59 percent year-on-year rise in 2021 with OP margin slipping to 8 percent from 9. 10 percent in 2020. Finance cost eased by 17 percent year-on-year in 2021 due to lower discount rate despite increased short-term borrowings. This translated into 14. 55 percent year-on-year progress in net profit which stood at Rs. 1265. 19 million in 2021 with NP margin of 5. 47 percent. EPS slid to Rs. 5. 43 in 2021 due to issuance of bonus shares during the year. This was against the EPS of Rs. 5. 92 and NP margin of 5. 74 percent recorded in 2020. Despite myriad economic challenges including high inflation and discount rate, Pak Rupee depreciation, hike in electricity tariff etc, NATF’s topline continued to post 16. 12 percent year-on-year escalation to clock in at Rs. 26, 843. 06 million in 2022. The production grew by a mere 3 percent in 2022 to clock in at 108, 104 MT which gives a clear indication that the growth in net sales was primarily driven by portfolio rationalization, price revisions and also because of translation gain on export sales. Export volume remained depressed during the year owing to shipping constraints. The company undertook cost transformation measures and took strategic buying decisions. This kept a check on its cost of sales which grew by 11. 17 percent year-on-year and trickled down into 27. 45 percent year-on-year rise in gross profit. GP margin which was going downhill until 2021 recoiled to 33. 41 percent in 2022. Distribution expense registered a massive 31. 98 percent year-on-year spike in 2022 which was on account of aggressive marketing campaigns launched during the year. In 2022, NATF revamped the packaging of its complete range of recipe mixes, launched a new variant in the ketchup category coupled with several other digital, BTL and PR campaigns. Administrative expense grew by 13. 71 percent year-on-year on account of inflation and also because of increased employee count to 850 on account of capacity enhancement particularly in the ketchup line. In 2022, the company added 27. 5 million ketchup pouches to the annual capacity of the plant. As against net other expense posted in the previous year, NATF recorded a tremendous net other income of Rs. 378. 69 million in 2022. This was due to a staggering 526 percent year-on-year growth in other income on the back of massive exchange gain. Operating profit posted a splendid 49. 28 percent year-on-year growth in 2022 with OP margin jumping up to 10. 30 percent. Finance cost magnified by 32. 56 percent year-on-year in 2022 on account of successive rounds of monetary tightening coupled with huge short-term borrowings particularly running finance to meet working capital requirements. The bottomline posted 55. 32 percent year-on-year growth in 2022 to clock in at Rs. 1965. 08 million with NP margin of 7. 32 percent and EPS of Rs. 8. 43. NATF registered 10. 28 percent year-on-year growth in its net sales which clocked in at Rs. 29, 602. 88 million in 2023. This was the consequence of 9 percent improvement in local sales and 77 percent enhancement in export sales in 2023. Production volume slumped by 6 percent to clock in at 101, 083 M tons due to lower demand. Cost optimization measures and translation gain resulted in 14. 21 percent year-on-year enhancement in gross profit in 2023 with GP margin touching an unprecedented level of 34. 60 percent. Distribution and administrative expense escalated by 8. 67 percent and 35 percent respectively, signifying high inflation and soaring freight charges due to an uptick in the prices of POL products. During the year, the company curtailed its workforce to 808 employees. NATF posted net other income of Rs. 606. 50 million in 2023, boasting 60 percent year-on-year rebound. This was primarily the consequence of translation of foreign currency balances in 2023. Other factors which contributed in driving up other income in 2023 were higher dividend income and no demurrage cost incurred during the year. Operating profit picked up by 20. 34 percent year-on-year in 2023 with OP margin climbing up to 11. 23 percent. Finance cost mounted by 244. 63 percent year-on-year in 2023 due to elevated discount rate and increased borrowings obtained from financial institutions. Net profit picked up by 11. 35 percent year-on-year to clock in at Rs. 2188. 04 million in 2023 with NP margin of 7. 40 percent and EPS of Rs. 9. 23. In 2024, NATF posted 26. 26 percent year-on-year growth in its topline which clocked in at Rs. 37, 377. 25 million. Production volume slid by 17 percent during the year to clock in at 84, 046 M tons, however, on account of improved economic fundamentals, demand started showing improvement towards the end of the year. Cost of sales mounted by 31. 92 percent in 2024 on account of elevated energy tariff and inflationary pressure. Amidst lower demand for most part of the year, the company couldn’t pass on the impact of cost hike to its consumers, resulting in GP margin dipping to 31. 67 percent in 2024. In absolute terms, gross profit improved by 15. 56 percent in 2024. Distribution expense multiplied by 13. 61 percent in 2024 mainly on account of higher advertising & sales promotion activities undertaken during the year. Administrative expense mounted by 37. 79 percent in 2024 due to higher payroll expense. This was the result of inflationary pressure and induction of more employees as the company inaugurated its Faisalabad plant during the year. Number of employees stood at 825 in 2024. Net other income declined by 84 percent to clock in at Rs. 95. 63 million in 2024 due to provision booked on property plant and equipment and exchange loss incurred during the year. This resulted in 11 percent nosedive in operating profit in 2024 with OP margin falling down to 7. 91 percent. Finance cost surged by 152. 29 percent in 2024 due to higher discount rate and increased long-term borrowings for the establishment of Faisalabad plant. Higher finance cost dampened the bottomline of NATF in 2024 which stood at Rs. 1268. 57 million, down 42 percent year-on-year. EPS fell to Rs. 5. 44 in 2024 while NP margin clocked in at 3. 39 percent. In 2025, NATF recorded 19. 29 percent year-on-year growth in its topline which clocked in at Rs. 44, 587. 46 million. This was driven by 18. 76 percent enhancement in local sales and 47. 81 percent growth in export sales in 2025. Local sales growth was driven by the launch of strategic pack sizes and price point activations. In export arena, the company kept optimizing its market presence in North America, Europe and Afghanistan. Production volume grew by 10 percent to clock in at 92, 285 metric tons in 2025. Cost of sales surged by 12. 57 percent in 2025 due to heightened energy tariff and food inflation. However, with sales mix optimization and upward revision in the prices, NATF was able to achieve 33. 79 percent improvement in its gross profit in 2025 with GP margin attaining its optimum level of 35. 52 percent. Distribution expense surged by 24. 18 percent in 2025 due to increased advertising & promotion budget, higher salaries of sales force and elevated outward freight & handling charges incurred during the year. Administrative expense mounted by 17. 63 percent in 2025 due to higher payroll expense as the company enhanced its workforce from 825 employees in 2024 to 867 employees in 2025. Net other income improved by 37 percent in 2025 due to exchange gain, higher return on bank accounts, export rebate, rental income, scrap sales and dividend from subsidiary. NATF recorded 69. 18 percent higher operating profit in 2025 with OP margin picking up to 11. 21 percent. Finance cost slid by 19. 41 percent in 2025 due to monetary easing and lesser outstanding borrowings at the end of the year. Gearing ratio clocked in at 43 percent in 2025 versus 44 percent in the previous year. NATF net profit grew by 150. 79 percent to clock in at Rs. 3181. 40 million in 2025. This translated into EPS of Rs. 13. 65 and NP margin of 7. 14 percent in 2025. Recent Performance (9MFY26) During the nine-month period of the ongoing fiscal year, NATF posted year-on-year growth of 12. 96 percent in its topline which clocked in at Rs. 38, 135. 14 million. This was driven by improvement in both local and export sales during the period. Due to operational efficiency from its Faisalabad plant, cost increased by a lower magnitude of 6. 93 percent during 9MFY26. This enabled NATF to record 23. 97 percent higher gross profit in 9MFY26 with GP margin clocking in at 38. 85 percent versus GP margin of 35. 40 percent recorded during the same period last year. Distribution and administrative expenses ticked up by 11. 52 percent and 5. 75 percent respectively during 9MFY26 due to increased demand and capacity utilization which resulted in higher freight charges and payroll expense. Other income strengthened by 40. 71 percent in 9MFY26 seemingly due to gain recognized on the sale of short-term investment. Other income was offset by other expense of Rs. 481. 49 million recorded in 9MFY26, up 78. 89 percent year-on-year. This was due to increased provisioning done for WWF and WPPF during the period. NATF’s operating profit mounted by 47. 63 percent to clock in at Rs. 6237. 88 million in 9MY26. This translated into OP margin of 16. 36 percent in 9MFY26 versus OP margin of 12. 52 percent recorded in 9MFY25. Finance cost dropped by 30. 39 percent in 9MFY26 due to monetary easing. Conversely, debt level heightened during the period. The company posted net profit of Rs. 5198. 209 million in 9MFY26, up 82. 12 percent year-on-year. This translated into EPS of Rs. 22. 30 and NP margin of 13. 63 percent in 9MFY26 versus EPS of Rs. 12. 24 and NP margin of 8. 45 percent recorded in 9MFY25. Future Outlook NATF is not only optimizing its product mix and geographical mix but has also been working to source its materials from local stakeholders. These factors will ease the cost pressure and place NATF in a better position to price its products competitively and attract greater sales. In order to expand its global footprint without having to face supply chain impediments, the company’s wholly owned subsidiary named National Foods FZCO based in Dubai has set up another subsidiary named National Foods Gulf (FZE) in Sharjah.

Read full story on Business Recorder