Islamabad: The food sector experienced a contraction in earnings for the second quarter of 2024, despite a recovery in topline revenue and stabilized margins, as recent budgetary measures and rising financial charges pose new challenges.

According to JS Global, the sector witnessed a 5% year-on-year increase in revenue, based on data from eight listed food companies, yet net earnings fell by 10% due to higher financial costs. The research highlights that while the gross margins have remained steady at 27% for the third consecutive quarter, operating expenses have climbed, impacting the overall profitability of companies within the sector.

Notably, companies like FFL and NATF demonstrated significant revenue growth; however, NATF’s earnings were particularly affected by increased financial charges. FCEPL reported a remarkable 75% growth in profitability year-on-year, attributed to a higher tax base last year, though its profit before tax dipped by 8% in the quarter. The sector continues to grapple with external pressures such as weakened consumer purchasing power, rising energy costs, and increasing distribution expenses, which are eroding pricing power and margin strength. In contrast, companies like UPFL and FFL saw quarter-over-quarter improvements in operating margins due to enhanced product mixes.