Karachi: Friesland Campina Engro Pakistan Limited (FCEPL) reported a notable decline in revenue for the first half of the calendar year 2025, with figures dropping to PKR 52.5 billion from PKR 55 billion in the same period last year. This 4.6% year-on-year decrease was primarily attributed to a downturn in the dairy segment, which saw sales fall by 7.4% to PKR 45.2 billion. The decline is largely due to the imposition of a sales tax on UHT milk, as revealed during the company's recent corporate briefing session.

Despite the decrease in overall revenue, FCEPL's gross margin showed improvement, rising to 18.6% from 17.2% in the corresponding period last year. This was achieved through a strategic shift towards a better product mix and effective cost optimization measures. Earnings for the first half of 2025 were reported at PKR 1.3 billion, marking a slight increase of 5.1% from the previous year, aided by a significant 58.4% reduction in finance costs due to declining interest rates.

However, the second quarter of the year painted a less optimistic picture, with profitability plummeting by 60.5% year-on-year to PKR 232 million, primarily due to increased taxation. On a positive note, FCEPL has expanded its export footprint by entering Central Asian markets, while intensifying efforts to source raw materials locally to alleviate foreign exchange pressures.

The management highlighted the challenges posed by the 18% sales tax on packaged milk, which creates an uneven price gap with loose milk. This discrepancy hampers the transition to safer, packaged milk options, with packaged milk maintaining an approximately 8% market share. In response, the company has been proactive in consumer engagement and trade promotions to bolster sales and enhance brand visibility.

FCEPL has also committed to ensuring widespread product availability while implementing cost-saving strategies through renegotiations with vendors and improving operational efficiencies. Looking ahead, the management anticipates that continued cost optimization and favorable interest rates will bolster profitability.