Global Rice News

Matco Foods Limited (PSX: MFL) was established in 1964 as Matco Rice Processing Private Limited. In 1990, it was incorporated as a private limited company in Pakistan. The company’s main focus is on processing and exporting various products, including rice, rice protein, rice glucose, pink salt, condiments and spices, dessert mixes, etc. MFL stands out as one of the largest rice exporters in Pakistan, with its flagship brand “Falak” being exported to more than 65 countries worldwide.

Shareholding Structure

As of June 30, 2023, MFL has a total of 122.4 million outstanding shares, which are held by 1768 shareholders. The majority stake, accounting for around 41.6 percent, is held by the company’s directors, their spouses, and minor children. The local general public holds 40.22 percent of the shares, while associated companies, undertakings, and related parties own 15 percent. The remaining shares are held by other categories of shareholders.

Financial Performance (2019-23)

MFL’s financial performance has been overall positive in the past five years, with a marginal dip in 2021. The company’s revenue has shown consistent growth since 2019, except for a decline in 2020 and 2021, followed by a recovery. On the other hand, its margins have been fluctuating, with a slight improvement in 2019 and a significant recovery in the subsequent years. Let’s take a closer look at each year’s performance:

– In 2019, MFL achieved a 17 percent year-on-year increase in revenue. The growth was mainly driven by higher export sales due to increased commodity prices in the international market and Pak Rupee depreciation. Despite a 6 percent year-on-year improvement in gross profit, the gross profit margin decreased due to high cost of sales. Distribution expenses grew marginally, while administrative expenses increased by 20 percent due to higher payroll expenses. Operating profit margin decreased slightly, impacted by higher finance costs. Nonetheless, the company’s net profit grew by 34 percent year-on-year, resulting in an improved EPS and net profit margin.

– The year 2020 presented challenges for MFL due to the COVID-19 pandemic. Sales to commercial industries were halted, but home-based consumption increased significantly. The company recorded a 44 percent year-on-year growth in revenue, driven by striking sales in the home-based industry. However, the cost of sales increased, leading to a decline in gross profit margin. Distribution expenses and administrative expenses also grew, impacting the operating profit margin. Finance costs increased, resulting in a significant decline in net profit and EPS.

– 2021 proved to be a gloomy year for MFL, with a decline in both revenue and net profit. Export sales were affected by high freight charges and restrictions on the movement of goods. The company experienced a 21 percent year-on-year drop in export sales volume, leading to a decline in gross profit margin. Despite lower expenses in distribution and administration, the operating profit margin eroded significantly. Finance costs decreased, and other income and exchange gain improved, but couldn’t compensate for the decline in profitability.

– In 2022, MFL bounced back with a 17 percent year-on-year growth in revenue. The company saw improvements in all margins, driven by increased export sales volume, inventory gains, and higher prices of rice glucose products. Despite higher distribution and administrative expenses, MFL achieved a significant increase in operating profit and net profit. Other income and exchange gain also contributed to the improved financial performance.

– The year 2023 witnessed remarkable growth for MFL, with a 61 percent year-on-year increase in revenue. The company benefited from Pak Rupee depreciation and higher export prices of rice. Gross profit margin reached its five-year highest value. Distribution and administrative expenses grew, driven by increased operations and higher payroll expenses. Finance costs surged due to a record high discount rate and increased borrowings. Other income and exchange gain performed well, but the impact of high finance costs somewhat diluted the bottomline growth.

Recent Performance (1QFY24)

In the first quarter of FY24, MFL continued its growth trajectory with a 128 percent year-on-year increase in revenue. Higher export volume and improved rice export prices contributed to the significant growth. However, the company’s gross profit margin decreased due to higher fuel, power, and electricity charges. Distribution and administrative expenses also increased, impacting the operating profit margin. Finance costs continued to rise, resulting in a thinner net profit compared to the same period last year.

Future Outlook

MFL’s products are expected to remain competitive in the export market, following the lifting of import bans by Russia and Mexico on Pakistani rice. Additionally, India’s minimum floor price for Basmati rice exports will create more growth opportunities for Pakistani rice exporters. These factors are likely to keep MFL’s revenue strong in the future. However, challenges such as higher cost of sales, freight charges, and finance costs may affect the company’s margins and profitability moving forward.

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