Karachi: National Foods Limited (NATF) reported its fourth-quarter financial results for fiscal year 2026, revealing a significant 19% year-over-year increase in earnings per share (EPS) to Rs2.76. However, the company's EPS declined by 76% on a quarter-over-quarter basis. National Foods' consolidated earnings for the year reached Rs25.9 billion, marking a 7.5-fold increase compared to the previous year.
According to JS Global, the year-over-year profitability for the fourth quarter was primarily driven by a substantial increase in other income, which rose by 251% to Rs806 million. This increase is attributed to interest earned from short-term investments following the divestment of the Cash & Carry business. Despite this boost, the company's quarterly profitability was affected by lower sales and reduced gross margins.
The company's full-year earnings surged to Rs111.4 per share, a 7.5-fold increase from the previous year, largely due to a one-off gain from the aforementioned divestment. Excluding this gain, recurring earnings were reported at Rs25.4 per share, showing a threefold increase year-over-year.
Net sales for the fourth quarter rose by 6% year-over-year to Rs11.7 billion, though they fell by 6% from the previous quarter, reflecting a seasonal impact. For the fiscal year, total sales increased by 14% to Rs50.6 billion. However, gross margins shrank to 33% in the fourth quarter, compared to 38% in the same quarter last year and 40% in the preceding quarter, due to higher raw material costs amid global commodity market uncertainty. Nonetheless, annual gross margins improved to 38% from 36% the previous year.
The company's selling and distribution costs decreased by 4% year-over-year and 11% quarter-over-quarter to Rs2.5 billion, attributed to reduced marketing efforts. Annual expenses increased by 6% to Rs9.3 billion. Finance costs were consistent with expectations, rising by 12% year-over-year and 1% quarter-over-quarter to Rs276 million, with the full-year cost decreasing by 22% to Rs1.1 billion.
National Foods also reported a minor tax reversal of Rs28 million in the fourth quarter, with an effective tax rate of 2% for the year, down from 12% the previous year. The company declared a cash dividend of Rs5.0 per share for the fourth quarter, bringing the total annual payout to Rs30.0 per share, as anticipated.
In addition, National Foods announced that its board has approved a 5:1 stock split, with the effective date to be determined. The company maintains a positive outlook, recommending a "BUY" stance with a projected FY27E price-to-earnings ratio of 9.8x.