Dung-Free Milk Sees Demand in Pakistan (Bloomberg, June 26, 2014)
Engro Foods Ltd., Pakistan’s second-largest dairy company, expects sales to increase 20 percent this year
as an expanding middle class boosts demand for processed milk products in a nation where most people
still buy the liquid raw and boil it.
Engro is seeking to almost quadruple annual revenue to 150 billion rupees ($1.52 billion) in seven years
by adding higher-margin products such as infant formula and yogurt to cater to the world’s sixth-largest
population, Chief Executive Officer Sarfaraz Ahmed Rehman said in an interview.
In a country where 95 percent of dairy products are sold unprocessed, Karachi-based Engro expects the
growth of the middle class and its desire to buy products free of contaminants including flies and dung to
drive revenue. Billionaire Mian Muhammad Mansha and the Fauji Foundation, a business group run by
retired military officers, are seeking to enter the market dominated by Engro and Nestle Pakistan Ltd.
“I think the market will open up again, and there will be some growth coming through,” Rehman, 56,
said. “Some of it might mean new competitors.”
Engro Foods shares rose 1.6 percent to 104.2 rupees at 9:35 a.m. in Karachi. They have declined 1
percent this year, valuing the company at 79.4 billion rupees. The KSE-100 Index has gained 15 percent.
Pakistan’s middle class has doubled to 70 million people in the past decade, driven by booms in
agriculture and residential property, as well as jobs in telecom and media, according to Sakib Sherani,
chief executive officer at Macroeconomic Insights in Islamabad. South Asia’s second-largest economy
has a population of about 196 million.
Top Four
The country is the world’s fourth-largest combined producer of liquid cow and buffalo milk, according to
the U.S. Department of Agriculture. However, it is ranked bottom among the 20 largest milk-producing
nations for the amount of the fluid that reaches processing companies, according to Kiel, Germany-based
dairy research firm IFCN.
Engro Foods is controlled by Engro Corp. a holding company with eight different businesses that has its
origins in fertilizer manufacturing. Engro Corp. is controlled by Chairman Hussain Dawood, one of
Pakistan’s most prominent businesspeople. Engro Foods started operating in 2006.
Among Engro Food’s most-popular products are liquid tea whitener Tarang and UHT milk Olpers. It also
sells juice, ice cream and lassi, a flavored milk drink. Since February, the company has manufactured
powdered milk. Engro may collaborate with global consumer companies in the future, Rehman said.
Highest P/E Ratio
“They have gained market share massively despite competing with global food players including Nestle,
and that’s a big achievement,” said Khurram Schehzad, chief investment officer at Karachi-based Lakson
Investments, which oversees about $150 million and holds shares in Engro Corp. “They have had some
issues with distributors, but being a new company, such things happen.”
A loss of distributors affected Engro Foods’ performance last year, when net income fell 66 percent to
870 million rupees, the lowest in three years. Sales declined 6 percent to 37.9 billion rupees in 2013.
That’s contributed to Engro Foods having the highest quarterly price-earnings ratio, about 193, in the
KSE-100, compared with an index average of 11.
“The valuation is too high,” said Tahir Abbas, an analyst at Arif Habib Ltd. in Karachi. “The pilot project
selling fresh milk in Karachi and the launch of powdered milk to consumers will be crucial for them.”
Consumer Spending
The company has about a dozen shops in Karachi under the Mabrook brand that sell pasteurized fresh
milk.
The growth of Engro Foods and the prospects for greater sales of processed dairy products have drawn
major Pakistani business groups to announce plans to enter the sector.
Consumer spending in Pakistan has increased at a 9.4 percent average annual pace in the last three years,
compared with 4.3 percent for the Asia-Pacific region, according to Euromonitor International.
In addition to the planned dairy investments by billionaire Mansha and Fauji, Prime Minister Nawaz
Sharif’s business group has said it will start to make cheese and butter and import Australian buffaloes.
ICI Pakistan Ltd. plans to buy 40 percent of the Pakistani distribution rights for fortified infant formula
made by Japan’s Morinaga Milk Industry Company Ltd. from Unibrands Pvt. for 960 million rupees. The
company expects to complete the deal in the next few weeks.
“There is huge potential,” ICI Pakistan CEO Asif Jooma said in an interview in Karachi on June 24. “I
think we have just touched the tip of the iceberg.”
Tapal, a Pakistani manufacturer of tea products, may enter the dairy business, said Arfa Khatoon, a
spokeswoman for Tapal in Karachi.
“In the end, all these consumer businesses are function of volume, you get enough volume, you’ll get
profits way above,” said Rehman, who used to be the Pakistan country head for PepsiCo Inc. “Grab
volume. That’s what I have grown up with.”
To contact the reporter on this story: Faseeh Mangi in Karachi at fmangi@bloomberg.net
To contact the editors responsible for this story: Naween A. Mangi at nmangi1@bloomberg.net;
Stephanie Wong at swong139@bloomberg.net Dick Schumacher, Garry Smith
Pakistan has potential to boost meat export (The Nation, June 25, 2014)
Lahore - Mr. Shah Faisal Afridi, President Pak China Joint Chamber of Commerce and industry has
initiated a special move to boost export of Meat from Pakistan to China.
For this purpose, he held a meeting with Mr. George Sun, Chairman, Jinan Kemp international Trading
company and Mr. Wang Zihai, President all Pakistan Chinese Companies in Pakistan to explore the
possibilities of exporting meat from Pakistan to china.
Mr. Shah Faisal Afridi observed that there was a big gap in world meat trade to be fulfilled and Pakistan
had the potential to increase its export and earn foreign exchange by promoting Pakistan’s high quality
meat worldwide.
He said that Pakistan has the 4th largest Livestock population in the world -180 million animals growing
at 4.2% annually moreover there are above four dozens breeds of sheep and goats that have helped
Pakistan become second largest goat meat producing country.
JETRO to help Pakistan improve business environment for foreign investors (Brecorder, June 25,
2014)
ISLAMABAD: Karou Shiraishi, Country Director Osamu Hisaki JETRO called on Special Assistant to
Prime Minister / Chairman Board of Investment (BoI) Dr Miftah Ismail and discussed matters relating to
trade and investments in the country.
Karou Shiraishi, JETRO's newly appointed director briefed the Chairman BoI that his his organization
ranked Pakistan second in the world in terms of business growth in a survey done by Japan External
Trade Organization (JETRO).
He further said that JETRO was striving hard to promote trade, investment, technical cooperation and
other bilateral economic relations between Japan and Pakistan by providing technical assistance and
guidance in the field of marketing, business management, enhancing the capacity building of SMEs,
providing on the job training and advisory services to business people.
Dr Miftah Ismail said that to encourage foreign investment in Pakistan, the government had announced
that income rates for companies with more than 50 per cent foreign equity would be reduced from 35
percent to 30 percent for the next five years.
Additionally, he said further tax incentives had been announced for companies investing in Balochistan,
Gilgit-Baltistan and Kohat, while a total tax exemption on inputs would be given to companies in FATA.
He invited the Japanese investors to start economic zones in Pakistan and desired to make the economic
zone of Japan as a model zone for the rest of the foreign investors.
CGGC shows keen interest in Pakistan Textile City (Daily time, June 26, 2014)
ISLAMABAD: Textile Ministry at all cost will facilitate foreign investment as it guarantees development
and prosperity of the country.
Minister for Textile Industry Abbas Khan Afridi meeting with members of a Chinese company-China
Gezhouba Group Corporation (CCGC) said Pakistan Textile City an industrial zone was dedicated to the
textile processing and related industry.
It will offer textile industry state of the art environment to achieve cost effective productivity. Currently
speedy work is under process at the site and it will cater uninterrupted power supply, clean continuous
water supply, gas supply and efficient transportation system.
The representatives of CGGC showed keen interest in investment in Pakistan Textile City Karachi.
Financial assistance, joint venture and infrastructure development at Textile City remained the main focus
of the discussion.