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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 (2019-25) Despite adverse economic conditions, NATF has consistently improved its financial performance since 2019 as evident by its topline and bottomline growing strong each year. Over the period under consideration, NATF’s bottomline only dipped in 2024. Notably, the company's margins have followed a cyclical pattern (see graph of profitability ratios). After a three-year decline, the gross margin rebounded in 2022 and 2023 followed by a dip in 2024. Conversely, operating and net margins increased in 2019 and then declined in 2020 and 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 2019, NATF’s topline posted a marginal 2.62 percent year-on-year rise to clock in at Rs.16,602.21 million. Spike in inflation and depreciation of Pak Rupee resulted in shrunken pockets of consumers, leading to tamed local demand. Due to sluggish demand, the company produced 6 percent less products in 2019 (refer to the graph of actual production). The topline growth was primarily the result of changes in sales mix as well as upward price revisions as the macroeconomic challenges not only suppressed the demand but also drove up the cost of sales by 6.30 percent year-on-year in 2019. This translated into 4.39 percent smaller gross profit recorded in 2019 with GP margin falling down from 34.39 percent in 2018 to 32 percent in 2019. 13 percent less distribution expense incurred in 2019 was primarily the effect of curtailed advertising and promotion expense. Administrative expense grew by 31.13 percent year-on-year in 2019 mainly on account of higher payroll expense as the number of employees grew from 694 in 2018 to 753 in 2019. This was the consequence of capacity enhancements at various plants of the company including recipe line extension as well as addition to the product portfolio in the paste section. Furthermore, there was an increase in the packaging capacity during the year which also required more human resources. The company recognized tremendous exchange gain from export sales which culminated into 372.30 percent improvement in its other income during 2019. Operating profit increased by 29.76 percent year-on-year in 2019 with OP margin climbing up from 7.24 percent in 2018 to 9.15 percent in 2019. 44.91 percent year-on-year escalation in finance cost was the result of higher discount rate coupled with increased borrowings, particularly long-term financing to undertake capacity enhancements during the year. Net profit picked up by 15.24 percent to clock in at Rs.1090.86 million in 2019 with EPS of Rs.7.31. NP margin improved from 5.85 percent in 2018 to 6.57 percent in 2019. In 2020, when many other industries were grappling against the economic meltdown owing to COVID-19, NATF, being categorized as essentials services business, continued to sustain and posted a reasonable 16 percent year-on-year growth in its net sales which were recorded at Rs.19,258.72 million. NATF production volume stood at 100,414 MT, which was 6 percent higher than the previous year. The depreciation of local currency fared well for the company and translated into significant exchange gain. The company also increased its ketchup manufacturing capacity from 10,000 MT in 2019 to 20,000 MT in 2020. Besides, the installation and commissioning of universal multilane machine, cold room and online salt brine cleaning and charging mechanism greatly improved the productivity. Hike in the cost of raw and packaging materials and fuel as well as local currency depreciation pushed cost of sales up by 16.55 percent year-on-year in 2020. Gross profit grew by 14.84 percent year-on-year in 2020; however, GP margin posted a downtick to clock in at 31.72 percent. Distribution expense posted 15.72 percent year-on-year hike in 2020 which was the effect of rigorous advertising and sales promotion drives launched during the year coupled with elevated freight and handling charges not only because of robust sales volume but also because of a hike in the prices of POL products. Administrative expense grew by 8 percent year-on-year in 2020 because of higher payroll expense despite a dropin the HR count to 722 in 2020. NATF posted net other income of Rs.95.32 million in 2020, down 35 percent year-on-year. Operating profit improved by 15.29 percent year-on-year in 2020 with OP margin slightly ticking down to 9.10 percent. Finance cost registered a marginal 4.34 percent year-on-year hike in 2020 despite significant reduction in external financing. This was because the discount rate was high for the most part of the year in 2020. This coupled with higher effective tax rate on account of tax effect of permanent differences resulted in a skimpy 1.25 percent year-on-year growth in bottomline. NATF’s net profit for 2020 stood at Rs.1104.50 million with NP margin of 5.74 percent. EPS slid to Rs.5.92 on account of issuance of bonus shares during the year. 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. 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. Finance cost came down 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. 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. 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 the cost of sales, which grew by 11.17 percent year-on-year and trickled down to a 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 particularlyrunning 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 withGP 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 to 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 withNP 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 increasedto 31.92 percent in 2024 on account of elevated energy tariff and inflationary pressure. Amidst lower demand for most 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 growth year-on-year 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 increased 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 (1QFY26) During the first quarter of the ongoing fiscal year, NATF posted year-on-year growth of 14.34 percent in its topline which clocked in at Rs.10,038.78 million. This was driven by improvement in both local and export sales during the period. Despite increased sales, the company was able to cut its cost by 0.42 percent in 1QFY26 due to operational efficiency from its Faisalabad plant. This enabled NATF to record 50.66 percent higher gross profit in 1QFY26 with GP margin clocking in at 38 percent versus GP margin of 28.89 percent recorded during the same period last year. Distribution and administrative expenses ticked up by 7.24 percent and 5.54 percent respectively during 1QFY26 due to increased demand and capacity utilization which would have resulted in higher freight charges and payroll expense. Lower interest income due to monetary easing resulted in 56.56 percent deterioration in other income in 1QFY26. Other expense surged from Rs.0.80 million in 1QFY25 to Rs.90.96 million in 1QFY26 probably due to increased provisioning done for WWF and WPPF. NATF’s operating profit mounted by 225.19 percent to clock in at Rs.1390.71 million in 1QFY26. This translated into OP margin of 13.85 percent in 1QFY26 versus OP margin of 4.87 percent recorded in 1QFY25. Finance cost dropped by 51.16 percent in 1QFY26 due to monetary easing and lower debt level. The company posted net profit of Rs.1046.797 million in 1QFY26 versus net loss of Rs.78.605 recorded in 1QFY25. EPS stood at Rs.4.49 in 1QFY26 versus loss per share of Rs.0.34 recorded in 1QFY25. NP margin clocked in at 10.43 percent in 1QFY26. Future Outlook The company is not only optimizing its product mix and geographical mix but has also been working to source its materials from local stakeholders. These factors coupled with a downtick in inflation and discount rate will ease the cost pressure and place NATF in a better position to price its products competitively and attract greater sales.
