KARACHI, Oct 27 (Focus Pakistan) – National Foods Limited (PSX: NATF) has reported a 32% plunge in quarterly earnings per share despite higher sales, exposing growing pressure on the packaged food maker as inflation squeezes consumers and rising production costs eat into its margins.
The Karachi-based company posted consolidated profit of Rs888 million for July–September, or Rs3.81 a share. The EPS drop, however, overstates the damage. Last year’s EPS included earnings from A1 Cash & Carry, the Canadian business the company has since sold and now reports as discontinued operations. On a like-for-like basis, profit from continuing operations rose 11 percent from Rs801 million.
The real trouble sits further up the income statement. Operating profit, the earnings from the core food business, fell 21 percent to Rs939 million even as sales grew.
Revenue rose 9 percent from a year earlier to Rs11.1 billion. The quarter-on-quarter view looks worse. Sales slipped 6 percent from the previous three months. Topline Securities attributed the drop to lower volumes amid inflation, and management told shareholders at the annual general meeting that inflation may keep weighing on volumes.
That warning comes a day after the State Bank of Pakistan raised its policy rate to 12 percent, citing oil above $100 a barrel and rising wheat prices. Headline inflation stood at 10.3 percent in September.
Margins Under Pressure
Gross margin fell to 36 percent from 39 percent a year earlier. It did recover from 33 percent in the April–June quarter. Gross profit slipped 1 percent to Rs3.95 billion while the cost of sales climbed 15 percent.
Packaging did much of the damage. The year-on-year squeeze mainly to higher packaging costs, which it linked to war-driven inflation.
Selling and distribution expenses climbed 15 percent from a year earlier to Rs2.0 billion, though they dropped 18 percent from the previous quarter.
The Canada Windfall
The bank account tells a different story. In October 2025, National Foods sold 50.5 percent of A1 Cash & Carry, an Ontario food-service wholesaler, to US private equity firm CCMP Growth Advisors. That sale came out of its 60 percent holding and left it with a 9.5 percent stake.
The company bought into A1 in 2017. At the time of the sale the deal valued the business at likely more than C$100 million, against an initial investment of about C$6 million.
National Foods parked the proceeds in short-term investments, and the returns now show up in its income statement. Other income surged 6.5 times to Rs421 million. That pre-tax figure equals 47 percent of the quarter’s after-tax profit.
Analysts puts the company’s cash and cash equivalents at Rs20.1 billion at the end of September, or Rs86.3 a share. That gives National Foods a substantial financial cushion despite weaker operating margins.
Borrowing Despite the Cash
Here’s the puzzle. National Foods’ liquid resources run roughly twice its debt, yet it still carries more borrowing than a year ago. Debt stood at Rs10.3 billion in September, up from Rs8.6 billion in September 2025. Finance costs rose 34 percent to Rs325 million.
Monday’s rate hike could cut both ways. Higher rates may lift returns on the cash pile and raise the cost of debt, but the net effect depends on how the company has structured its investments and loans.
Taxes also eased. Combined income tax and final tax charges stood at approximately Rs57 million, compared with Rs108 million in the corresponding quarter last year. That puts the effective tax rate, including final taxes, at about 6 percent, against 12 percent a year earlier.
Dividend Holds
Shareholders still get paid. Alongside the quarterly results, the board declared an interim cash dividend of Rs3.00 a share, matching expectations and equal to nearly four-fifths of the quarter’s EPS.
For now, National Foods has ample liquidity. But shrinking margins and weaker quarterly volumes raise a harder question: can its core food business turn rising sales into stronger profits?
