The story of packaged milk

The history of packaged milk in Pakistan starts with its packaging. In 1956, the Wazir Ali Group set up a packaging
company – Packages Ltd – in collaboration with Tetra Pak, the Swedish packaging giant. Packages quickly became the
leading supplier of packaging material to Pakistan’s nascent packaged food industry.

In 1976, during a routine review of the company’s operations, the management found that one of their machines that
made packaging for beverages was underutilized. Rather than simply let the machine remain underutilized, or even
eliminating the business line entirely, Packages decided to invest in vertical integration by creating its own
downstream user of beverage packaging.

Thus was born Milkpak, a brand that remains one of the leading packaged milk brands in the country and one of the
most recognized overall. Milkpak Ltd was incorporated in 1979 and began production of its eponymous brand of
packaged milk in 1981. By 1984, the company expanded into the fruit juice market, acquiring the “Frost” branded line
of juices from its parent company Packages Ltd. The next year, Milkpak launched its brand of butter, and the year after
that, a line of packaged cream.

In 1988, Nestlé, the multinational food giant based in Switzerland, bought a controlling stake in Milkpak Ltd, and the
company came to be known as Nestlé Milkpak Ltd. The Nestlé acquisition brought significantly more resources – both
in terms of capital and technical expertise – to the packaged food industry in Pakistan, which sought to grow the share
of packaged food relative to unpackaged food in Pakistan.

For much of the 1990s and early 2000s, for instance, Packages Ltd, in collaboration with Nestlé Milkpak, ran long
informational advertisements on television (back then, there were only two state-owned channels), seeking to
educate the Pakistani middle class consumer on the safety features of packaged milk and the health benefits of
avoiding unpackaged foods. The strategy was clear: packaged food companies will all grow together if more people
realize that the product offering was better than that of unpackaged food.

The effort was less about creating an individual brand personality – though there was certainly some of that as well –
and much more about creating the perception of additional safety around the entire category of packaged foods.
Yet despite all of these developments, packaged milk remained a relatively small segment of the overall market for
milk in Pakistan, which itself is one of the largest categories of consumer spending by Pakistani households.

According to household spending data from the Pakistan Bureau of Statistics, the average Pakistani household spends
9.5% of its monthly consumption expenditures on milk and dairy products, the overwhelming bulk of which is spent
on milk alone. According to Profit’s analysis of that data, that amounts to approximately Rs3,373 per month per
household on milk in 2018.

That makes milk the single most valuable prize in the competition for share of the Pakistani consumer’s wallet. Small
wonder then that just when Nestlé began to gain significant traction in the Pakistani milk market, a well-financed
competitor entered the market.

In 2006, the Engro Corporation launched its first consumer-facing subsidiary, Engro Foods, and their very first product
was a line of packaged milk – under the brand name Olpers – that would be a direct competitor to Nestlé’s Milkpak.
But for the first six years of Engro Foods’ existence, far from being seen as a threat to Nestlé’s supremacy, Olpers
helped expand the market for packaged milk. In 2005, the year before Engro entered the market, packaged milk
accounted for just 3.0% of the total market for milk in Pakistan, by rupee value. By 2012, that share had jumped to
7.8% of the total market.

In other words, Engro and Nestlé were not taking market share from each other, they were both taking share from
the unpackaged milk market. And in public-facing statements, Nestlé’s management acknowledged that market share
within the packaged segment did not matter to them. “Take the example of yoghurt. We are 80% of the market when
it comes to packaged yoghurt. But that packaged segment is only 2% of the total market,” said Ian Donald, then the
managing director of Nestlé Pakistan, in a 2012 interview with The Express Tribune. “So it doesn’t really matter what
our market share is. We need to grow the whole packaged segment.”
Nestlé Pakistan and Engro Foods were never exactly friendly with each other, but in the period between 2006 and
2012, they did not think of each other as their primary competition. But then matters stalled. And that is when the
two companies started getting into a stiffer competition with each other.

The post-2012 stagnation

Since 2012, the market for packaged milk has seen much slower growth, and the numbers show it. First, it is important
to acknowledge that packaged milk has continued to make strides in Pakistan’s dairy market. According to Profit’s
analysis of data from the Pakistan Bureau of Statistics, between 2002 and 2018, the market for milk and dairy products
in Pakistan grew by 15.1% per year (inflation during that time averaged 8.4% per year). Spending on packaged milk
has grown by 25.7% during that same period. As a result, the share of consumer spending on packaged milk relative
to total spending on dairy products has risen from 2.5% to 7.3% between 2002 and 2018.

However, there is a considerable difference between the years between 2006 and 2012 and the years between 2012
and 2018. Between 2006 and 2012, total consumer spending on milk and dairy products grew by 20.8% per year.
Spending on packaged milk during that time grew by an astonishing 36.3% per year (inflation during this period
averaged 11.8% per year).

As a result of this tremendous industry growth, both Nestlé Pakistan and Engro Foods did very well. During this period,
Nestlé Pakistan grew its revenue by a compound annualized growth rate (CAGR) of 23.7% per year, taking is annual
revenue from Rs22.0 billion in the calendar year 2006 to Rs79.1 billion in 2012. Engro Foods did even better during
that time, growing its revenue at a CAGR of 72.4%, from Rs1.5 billion to Rs39.5 billion.

The overall packaged food industry continued to take share from the unpackaged industry, rising from 4.2% of
consumer spending on milk in 2006 to 7.8% in 2012. At that point, however, matters began to stall. The dairy market
as a whole grew more slowly during that period, at about 9.5% per year (inflation during that time averaged 5.2% per
year). However, what is interesting is that unpackaged milk appears to have made somewhat of a comeback, growing
at a slightly faster average of 9.6% per year, while packaged milk grew at an average of just 8.8% per year during that
same period. As a result, between 2012 and 2018, the packaged industry’s share of the milk market went down from
that 7.8% to 7.3%.

It is not entirely clear exactly why the packaged industry started retreating in terms of market share after so many
years of gains, especially since the economy did not materially deteriorate during the years between 2012 and 2018,
at least in the early part of that period. What is abundantly clear, however, is that the impact of that retreat was not
uniform on the two big players in the industry. Nestlé Pakistan saw a dramatic slowdown in its revenue growth, which
went from a CAGR of 23.7% in the six years before 2012 to 8.1% in the six years since 2012 (through the end of the
third quarter of 2018, the latest period for which data is available).

Engro Foods, however, saw a sharp drop in overall revenue growth, going from a CAGR 72.4% in the six years prior to
2012 to -3.9% in the years since then. The decline has been even more dramatic since 2015, the last full year during
which Engro Corporation was the majority shareholder of Engro Foods. Revenue has declined 36.4% since then.
This differential fate is at least in part due to the fact that Nestlé Pakistan has a larger stable of brands and products
that it sells compared to Engro Foods, and thus has a more diversified revenue stream that is not quite as strictly
dependent on the milk and dairy sector as its smaller rival. What that means is that Engro Foods feels the urgency of
creating and marketing new products as a means of not just catching up with its larger competitor, but also of
diversifying its business and mitigating the risk of its significant revenue decline repeating itself in the future.

The ad wars begin

Between 2006 and 2012, Nestlé had watched Engro Foods growing its revenue and market share in many of the
markets in which it competed, and for most of that period, it did not feel threatened. Yes, the relative numbers were
moving in Engro’s favour, but the absolute numbers for both companies were growing. In 2013, however, came the
first absolute revenue decline for both companies, followed by a year of relatively slower growth in 2014, and
suddenly, it appeared that Nestlé Pakistan would have to rethink its corporate strategy if it was going to retain the
title of the largest food company in Pakistan.
The strategy Nestlé chose was a dramatic uptick in its advertising spending, a near doubling that saw the company’s
total advertising expenses jump from Rs5.3 billion in 2014 to Rs9.5 billion in 2015. The company invested heavily in
promoting its brands and building up a greater brand equity in the minds of the Pakistani public. (For those of you
wondering, this increase does not appear directly related to Nescafe Basement, the music show sponsored by Nestlé
Pakistan. That show started in 2012, and its costs show up in the form of a marketing expenses increase in that year’s
financial statements.)

Engro Foods, being a smaller company, did not have the capacity to keep pace with that massive increase in advertising
spending by Nestlé Pakistan. Nonetheless, the company did catch its rival’s advertising spending rise and responded
by raising its own spending by about a third to Rs2.4 billion in 2015.

Since that year, however, the decline in revenues has meant that Engro Foods has had fewer resources available to
invest in its marketing and brand building initiatives.

The “safaidi” controversy

At the heart of the controversy between Engro Foods and Nestlé Pakistan is the differences between the two products.
“Olper’s Full Cream Milk Powder is produced by removing the moisture content (water) from natural, full-cream milk
and by adding some extra nutrients like vitamins and calcium. Once water is added back, it becomes Full-Cream Milk,
enriched with calcium & vitamins,” said Engro Foods’ corporate relations department, in a statement issued to Profit.
Nido Fortigrow, which has a market share of more than 90% in the powdered milk category, includes milk solid non-
fat (MSNF), milk fat, vegetable fat, emulsifier, vitamins, minerals, and soya lecithin in its ingredients. On its package,
it says on the front of the package that it is ‘milk powder with milk and vegetable fat’.

Both brands have similar ingredients, are powder-based, ultra-heat treated, and contain additives which add to the
milk component, implying that both are milk products enhanced with other ingredients.

Nestlé Pakistan believes the Engro Foods advertisement is “factually inaccurate”, according to a company
spokesperson. For its part, Engro Foods categorically states that it did not target Nido or any other actual competitor
brand in its target. In a statement issued to Profit, Engro Foods spokesperson Nagin Rizvi said: “The communication
never mentioned a competitor brand. The ad shows an imaginary brand called “Ye Qudrati Dhoodh Nahi” which
represents all the brands that consumers perceive as milk but they are actually powders mixed with vegetable oil. We
would urge consumers to read the judicial ruling on powders mixed with vegetable oil. Even the judiciary has ruled
that such products are not milk and ordered companies that produce powders mixed with vegetable oil to put a
warning on the packaging in a clear and legible way.”

Olpers is promoting itself as ‘full cream milk’, while Nido promotes itself as ‘milk powder with vegetable fat’. Nido,
like Olpers is also made from natural milk, claims Abdul Sabhoor, Nido’s Business Head at Ogilvy & Mather. However
after its fortification with a high standard fatty acid/vegetable fat, it cannot be claimed as ‘real milk,’ he adds.

This is not the first time competitive advertisement has been used in Pakistan. Coca Cola launched its ‘Zaalima Coca
Cola pila de, chai ko thand kara de’ (“Give me a Coca Cola, cool it with the tea”) campaign featuring Maya Ali and Ahad
Raza Mir last year. The punch line, ‘chai ko thand kara de’, targeted the country’s leading tea brands, Unilever
Pakistan’s Lipton and the independently owned Tapal.

Lipton responded with its own digital campaign, posting a cup of tea on digital and social media platforms that said,
“Pakistanis love chai zaalima…nice try’, with a caption that said, ‘Pakistanis have no doubt when it comes to chai’.
Lipton also started using the hashtag ‘#Pakistan’sBestBeverage’ to counter the onslaught by Coca Cola. Lipton came
up with its ‘Tum, mein aur aik cup zaalima chai’ campaign with a hashtag that said, ‘TapalDanedarZalimChaiBanaye’.
Following this, even Nestle joined in the party by showing a chilled glass of Coke with a person dipping in a biscuit –
the ad read, ‘Dunk now Zaalima’ and a caption that said, ‘It’s not even a question of choice, #ZaalimaChaiPilaDe’.
Zeban Syed, Business Director at Ogilvy & Mather says, “Brands often use various tactics to viciously compete with
each other. Whether this practice is right or wrong is another debate since there are no hard and fast laws governing
these practices and so, for television channels and agencies, it’s mostly about the business that their clients are
bringing in. Clients, on the other hand, should take more responsibility when they make certain advertisements and
use their competition”.
There are, however, at least some laws that govern corporate behaviour when it comes to advertising practices. The
Competition Commission of Pakistan (CCP), under Section 10 of the 2010 Competition Act, defines “deceptive
marketing practices” as “the distribution of false or misleading information that is capable of harming the business
interests of another undertaking, false or misleading comparison of goods in the process of advertising; or fraudulent
use of another’s trademark, firm name, or product labeling or packaging.”

Abdul Saboor, Head of Nido at Ogilvy & Mather says, “In Pakistan, people or organizations don’t take institutions such
as the CCP seriously. We need to empower all our institutions so that they can take strict action against those who are
not obeying the rules/ laws. In this case, Engro maliciously started this campaign which is factually incorrect and
untrue. Organizations like the CCP need to take direct action against such companies who violate their laws.”

Asfandyar Khattak, the director of media and advocacy at the Competition Commission says, “The laws are clear. We
have a set of regulations which govern advertising practices in the country, and we work towards maintaining that
these practices are followed. Under our laws, specifically Section 10, we are very clear that brands cannot fraudulently
use another competitors’ name or packaging in advertisements. However, if it is done fairly, then we have no issues.”
Engro Foods states that it believes its advertising content was not a violation of the law. “We are fully compliant with
CCP rules,” said the Engro Foods spokesperson. “Having a full cream milk powder brand vis a vis a powder which is
mixed with vegetable oil is a genuine advantage.”

Gaining share, ignoring the gorilla in the room

In the powdered milk category. Engro’s market share is estimated to be smaller than that of Nido according to analysts
who track both companies. The powdered milk category was originally meant to be just a tea whitener, with Tarang by

Engro Foods and Everyday by Nestle.

However, in their efforts to go after the unpackaged milk category, both companies have been seeking to create a
product that has a lower price point, which often means adding ingredients that are cheaper, and thus change the
product from being actual milk to being some sort of beverage that can at best be described as dairy-derived, but not
actually milk.

Indeed, orders from the Punjab Food Authority prohibit companies from calling such beverages “milk”. Engro Foods
brands its product “Omung” a beverage that is an alternative to unpackaged milk, but does not call it milk itself.
However, in seeking to create these “milk-adjacent” products that are meant to capture market share from the
unpackaged milk sold at dairy shops throughout the country, the packaged milk companies – both Engro Foods and
Nestle Pakistan, as well as their smaller competitors – are forgoing the brand advantage that they have spent decades
building: that theirs is a purer, healthier, more hygienic milk.

If they can no longer even legally call it milk, how are they now any different from the neighbourhood gawala (dairy
shop owner) who they spent the better part of the 1990s accusing of “adulteration” of milk, going so far as to say:
“the reality is that the gawala does not add water to his milk, he adds a little milk to water.”

Some consumers, particularly those in upper income neighbourhoods that were the early adopters of packaged milk,
have already started abandoning these brands in favour of locally sourced milk from dairy shops and delivery services
that are pricier than even the packaged milk brands, but provide their consumers with greater confidence in the
quality and purity of the milk they produce.

In their effort to compete with the gawala, the packaged milk companies have become exactly what they criticised
about the gawala and in turn are already beginning to lose their first customers.

Rather than focusing on competing with each other for basis points of market share, these companies might be better
served sticking to the strategy that initially built their businesses: gain the consumer’s confidence that they offer a
higher quality product that is worth paying a little extra for.
Pakistan is one of the top five milk producing countries in the world with an annual production worth a mammoth Rs
1700 billion with most of its being consumed domestically. That makes milk, without a doubt, an integral part of
everyday life of an average Pakistani. Given the issues that currently plague the country's dairy sector, the most
important question on every consumer's mind, rightly so, remains that how can they can be sure that the milk they
are buying is wholesome in every sense of the word.

The answer to consumers' questions pertaining to the purity therein lies solely with packaged milk. Packaged milk,
over the years, has gained massive popularity in Pakistan and continues to do so primarily because of shifting
perceptions and realizations of consumers of the assured purity it offers. With rapid developments in processing
technologies, packaged milk is and always has been the healthier choice. Early pasteurization and UHT treatment of
milk destroys disease-causing bacteria, and helps maintain milk's natural taste with a prolonged shelf life. The
packaged milk is taken as safe, high-quality hygienic milk because this is produced through predefined globally
accepted procedures and systems recognized by both international and the domestic quality control bodies and
medical circles. Packed milk is processed through international standards which, as a result, produces the best quality
milk, dissimilar to those of the substandard local dairy farms that have no quality control over milk production and
processing.

Under the banner of purity, the producers of packaged milk collect milk from the dairy farms through a fully automated
milking facility. From the dairy farms, after thorough quality checks, the milk is then transported to state-of-the-art
processing facilities that are in close proximity to the dairy farms to ensure that the milk stays pure, highly
standardized, unpolluted and preservative free. This well-processed and packaged milk is then delivered in the market
in well-equipped trucks, thus consumers ultimately receive purity and quality all together.

Quite recently, there has been an addition in the ranks of packaged milk brands in Pakistan. Endorsed by the renowned
ALS Global Labs and a leading nutritionist, this packaged milk brand has the highest levels of added Vitamin A and D
unequivocally making it the most nutritious milk available in the country. Thus, in conclusion, Pakistan's packaged milk
market share is increasing at a phenomenal pace due to increased awareness and knowledge amongst the general
public of quality standards and hygiene in general.
SFPL is a public limited company set up by the Crescent Group with the objective to diversify its
business activities. The group has been conducting business in the region for over 100 years and
has a varied industry portfolio in sugar, textile, steel and farming. Its head office is located at
Lahore, Pakistan while the production plants are in central Punjab – the main fruit growing and
milk supplying region of the country. The company is professionally run by experienced
management. The CEO of the company is also the serving Chairman of the Pakistan Dairy
Association. SFPL’s human resource has a vast experience in the dairy and food industries.
Continuous development and skill enhancement are an integral part of the employee
development programmed at Shakarganj. Shakarganj is working hand in hand with the Dairy
Industry of Pakistan to improve milk productivity and animal health.

Competitors
There are many competitors who provide milk like Nestle, gourmet milk, loose milk, Haleeb, Dairy
milk.

Mission and Vision statement

Shakarganj Food Products Limited strives to be among the leading companies in the food industry
and is committed to manufacturing and selling consistent, high quality world class products.

SWOT Analysis
Strengths
The strengths of Shakarganj Good Milk according to their marketing plan are:

Premium Positioning:
They have position their product very well. They are positioning their product with clear message
so that’s why they are attracting more customers towards them by telling them their exact needs
and wants.

Available Everywhere:
They have very much strong distribution channels through which they can make available their
product at everywhere.

Convenient: the product is easy to use. The packs of Good Milk have a closure for the handiness to
the customers.

PR with farmers
This company has operating with other variants as well so they have very strong contact with their
farmers and they are very happy with their deals they actually engage for giving them good
advices for fertilize their land that’s why gaining a good reputation over the year. So we can say
that we have an advantage over others. They have long term relationships with farmers that’s why
farmers always wants’ to give milk to them.

Strong consumer & product research

Good milk always has done research specially before launching the product and after launching as
well they have very strong consumer and product research. This act can give them exact figures of
the behavior of their customers and help them to develop their portfolio for future concerns. They
also have global research partners such as JWT Asiatic and Mars marketing and some of other
marketing and advertising agencies.

Technology:
Their biggest strength is their plants they have almost latest technology to process the milk and
give best to their customers.

Weaknesses:
The weaknesses of Shakarganj Good Milk according to their market plan are:

Low Quality Milk

As the company doesn’t have their own dairy farms so they are collecting milk from different
sources so sometimes they face the problem of low quality milk.

Milk collection Cost

In the above section as it is mentioned that they are processing the milk by collecting it from other
sources so obviously this will cost them a lot so this could be their weakness that they have to
bear the cost of collection as well. On the other hand if they have their own dairy form near to
processing centers then they can cut their this kind of cost.

Packaging
As we know that they are selling tetra pack milk so they must have their own tetra pack plant but
in the mean while they are dependent on tetra pack company because that is the only option
avaible to them if in case they increase the price then they have to increase their price for ultimate
consumer which is their weakness that they always depend on tetra pack for their packaging.

Opportunities
Large Potential Market
According to the market research, 80% of the total market is using Open Milk which is more
beneficial according to them. Shakarganj Good Milk has a large potential market which is the
opportunity to grow their business.

Support by Government
Previously Government has decided to support farmers because of the growth in this industry so
this could be opportunity for this company that they can get benefit from the government
schemes. They must be providing cheap products to the industry to sustain the growth.

Awareness among consumers:

Have better opportunity to give best to consumer this time because people are becoming
dissatisfied as they getting aware of the side effects for loose milk its hygiene and health issues.

Threats
The threats for Shakarganj Good Milk are as follows:
Competition
There is always having threat from competitors same like good milk having the treat from their
competitors because they are stronger in terms of finance and everything. Competition always
creates a threat because everyone wants to be a market leader and to get maximum shares.
Others brands are serving in the market from so long so they have more market share as compare
to good milk. Good milk is facing strong competition which is the biggest threat to them.

Price Differentials
As we know that other companies are very strong so they have strong influence in the market like
they can provide goods in cheap rates then good milk because big corporations having more
leverage in terms of profit.

Consumer preferences
As this is a not so big company so obviously they cannot invest huge more capital but on the
other hand consumer’s preferences changing over the time. Sometimes consumers purchasing
power get lower and sometime they need some different taste so company has to cope with every
situation.

PEST Analysis
Political Factor:
Political environment always influencing the organizations same is the case with good milk
political condition in Pakistan is not constant. They keep on changing every day so it’s directly
influencing the matters of company. Due to unstable government there is no law and order
regarding consumer rights and the tax structure is not defined in well manner so ultimately
consumer is effecting from this conditions.

Economic Factor:
As we all know that economic crises going on, in the world so economic conditions in Pakistan are
not fruitful as well. Banks increase their interest rates so company is getting loans with high
interest rates so ultimately they will be serving with high rates in market. Un-employment is also
increasing day by day and the purchasing power of consumer going down so company have to
sell their products with affordable price where as on the other hand cost is increasing because of
high rate of inflation.

Social Factors
Population of Pakistan is increasing so company has more opportunity to sell their products
because milk is the basic necessity of life. In Pakistan most people prefer to buy fresh milk rather
than pasteurize milk. There is no specific choice for consumers that they want to buy foreign
product or not but still high income level community wants to buy foreign or some renowned
brand and low one’s go for the cheaper and affordable products.

Technological Factors
Technology factors always impact on the success of the organization. Technology enables the
product innovation and makes services at good standard. This factor decreases the chances of
unhygienic milk and provides better quality of milk. Good milk can store milk for long term with
the help of modern nutrition machines and fresh milk will be available for consumer. Through
technology organization can easy communicate directly and indirectly with consumers and within
the organization. Organization can increase the dairy milk process and dry milk process
technology.

Conclusion

In the net shell we can say that company is having strong position but as compare to other
companies their financial position is lower than others so they should increase their financial
position by doing more investments to increase earnings. Company having more opportunities for
the market because market is expending so they have more market space. Company should
overcome their weakness and make them strength in future so that they can cope with market
every time.

Refrences
http://www.shakarganj.com.pk/foods/foods_bro.pdf
http://marketingteacher.com/lesson-store/lesson-swot.html
http://marketingteacher.com/lesson-store/lesson-pest.html
Starting out as Shakarganj Mills Limited, which was devoted to the production and sale of sugar, the company has
diversified into a wide range of operations.

Apart from sugar — which still remains the mainstay and contributes more than three quarters to net sales —
Shakarganj has ventured into the business of food products, textiles, bio-power, building materials and farming.

The company has a 49.2pc stake (74.65m shares) in Shakarganj Food Products limited (SFPL), which, according to
market sources, is the fifth largest company in Pakistan in the UHT milk segment. Its brand ‘good milk’ is in
competition with products of Engro Foods, Nestle Pak, Unilever Pak and Fauji Foods.

Besides milk, the company has a diverse food portfolio in dairy, fruit and juice

Besides milk, the company has a diverse food portfolio in dairy, fruit and juice. It has two manufacturing facilities in
Jhang district.

Shakarganj operates under the fold of the Crescent group. At last count, on Sept 30, 2015, associated companies,
undertakings and related parties held 41.35pc of the company stock—21.93pc was vested in Crescent Steel and
Allied Products Ltd, followed by 21.90pc shares held by the general public.

“The company is concentrating on the country’s fast growing consumer sector, which has made its dairy associated
unit—Shakarganj Food Products Limited (SFPL) one of the fastest growing companies in the dairy business over the
last four years (2012-2015), wherein SFPL has almost doubled its revenues”, says analyst Chander Kumar at Sherman
Securities.

A company official explained that the firm transforms renewable crops such as sugarcane and cotton into value
added products, which comprise of refined sugar, textiles, bio fuel and building material, in addition to generating
bio power from biogas.

In the building material segment, the company makes particle boards of varying thickness.

The textile segment consists of a spinning unit that produces carded cotton yarns.

In farming and allied business, the company cultivates on 1,336 acres of land; crops such as sugarcane, wheat, gram,
maize, fodder and seasonal vegetables. A dairy farm located at Jhang has been developed, with a herd of 150
milking and fattening cattle.

The last released interim financial figures of the company for the nine months ended June 30, 2016, posted sales at
Rs 4.15bn, down from Rs6.44bn in the same period of earlier year.

Sugar prices during this period were better than last year but at the same time the cost of production also went up
due to increased price competition for the limited sugarcane crop.

During the nine-months to June, the performance of the Bio-Fuel Division was affected due to the low level of
crushing. The Bio-Power Division was not operated during the period and due to depressed selling prices of particle
board, that division did not operate either.

“With the help of share of profit from associated companies, the company was able to post Rs168.05m profit before
tax as compared to Rs275m profits before tax in the corresponding period and despite all the challenges, a positive
bottom line helped the company to manage affairs within range.”, says Anjum Muhammad Saleem, the company’s
Chief Executive Officer in the directors’’ report.
The annual accounts for the year ended Sept 30, 2016 are likely to be released soon.

Meanwhile at the close of the last nine-months to June 30, 2016, the company’s reserves amounted to Rs0.933m
against staggering accumulated losses at Rs1.966bn.

There was however an item ‘Surplus on revaluation of property, plant and equipment amounting to R5.01bn’, which
made things look a bit less bleak.

Total assets of the company at June 30, 2016 stood at Rs10.9bn. Paid up capital of the company amounted to
Rs1.10bn in 110m shares of Rs10 each.

The Shakarganj share on the Pakistan Stock Exchange was quoted at Rs37.47 at the close of trading last Wednesday,
which produced the company’s market capitalisation at Rs4.13bn.

Besides SFPL, Shakarganj Limited also has a 1.02pc equity interest of Rs70m in the stock market, listed as Crescent
Steel and Allied Products Limited; and Rs3m in an unquoted associated company: Crescent Standard
Telecommunications Ltd.

The CEO Anjum M Saleem reiterated thatShakarganj Limited has been in a tight liquidity position since 2009.

Subsequent to the year ended Sept 30, 2015, the company again requested its lenders for working capital lines for
operations financing in fiscal year 2016.

“Negotiations are also in process for long term financing with one of the company lenders and hopefully this will be
finalised soon”, he affirmed.

Keeping in view the financials of the company, further equity amounting to Rs404.76m was injected through
issuance of right shares and the proceeds were utilised for redemption of preference shares and outstanding
preference dividend.

Directors told shareholders that the company had also entered into agreement for sale of carbon dioxide (CO2),
produced as a by-product of the bio fuel manufacturing process, and which could help generate additional liquidity.

Published in Dawn, Business & Finance weekly, January 9th, 2017

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