The consumer companies (discretionary, pharmaceuticals and staples) have registered an increase in profitability by 86 percent in third quarter of 2020 compared to negative 15 percent growth in second quarter of 2020. Nestle posted the highest increase in profits in absolute terms in third quarter.

According to a research report issued by Topline Securities, category wise, consumer discretionary firms posted a significant 206 percent year on year improvement in profitability, followed by 75 percent year on year increase in consumer staples and 48 percent year on year basis rise in pharmaceuticals earnings. In discretionary, highest growth in profits was seen in THAL Limited.

With the easing of COVID-19 lockdown, sales of overall consumer firms increased by 29 percent year-on-year (vs -26 percent in 2Q 2020), while overall gross margins nominally increased by 0.72 ppts year-on-year to 21.1 percent in 3Q of 2020 from 20.4 percent in 3Q 2019, where a stable value of Pak rupee also helped.


These firms took the lead where revenues were up 39 percent year-on-year (vs -64 percent year on year in 2Q 2020) mainly due to increase in volumetric sales given (1) pent-up demand from previous quarter amidst COVID-19 lockdown and (2) low interest rates. Total Car and PAEL’s appliances sales increased by 8 percent year-on-year & 30 percent year-on-year, respectively in 3Q of 2020.

The overall gross margins for this segment increased by 1.98 ppts year-on-year to 8.1percent, led by PSMC (+6.06ppts) and followed by THALL (+5.39ppts). Margins of all others in this segment were down in the range of 0.2ppts year-on-year to 3.63 ppts year-on-year.


Sales of pharmaceuticals’ segment witnessed improvement of 26 percent year-on-year mainly due to resumption in OPDs and regular health care services, which were halted due to risk of patients getting infected by COVID-19. GSKCH (+35percent year-on-year) and GLAXO (+32 percent year-on-year) led sales increase.

All our sample companies in pharmaceuticals segment reported decline in gross margins, with the exception of ABOT, which reported increase of 10.7ppts year-on-year to 35 percent from 25 percent mainly due to better sales mix i.e. increase in high margin nutrition segment sales.

Notable decline in gross margins within pharmaceuticals’ were witnessed in (1) GSKCH (-4.9 ppts year-on-year) due to adverse sales mix and procurement of raw material at higher prices and (2) AGP (-4.8ppts year-on-year) amid one-off provisioning  of COVID-19 testing kits.


The sales for this segment increased by 23 percent year-on-year. All companies within the staples segment, reported increase in sales except for BATA (-13 percent year-on-year) due to lower volumetric sales as educational institutions opened after September 15, 2020 in phased manner. Notable increase in sales was witnessed in UNITY (+176 percent year-on-year) due to addition of new product lines along with capacity expansion.

Gross margins of consumer staple companies were up by 0.86ppts year-on-year to 27.8 percent during 3Q 2020.

Overall profitability of consumer companies was up by 41 percent QoQ led by consumer discretionary firms again which turned in profits of Rs 4,105mn in 3Q 2020 vs. losses of Rs1,479mn in 2Q 2020.

Overall sales during 3Q 2020 increase by 37percent QoQ mainly due to increase in revenues of Consumer Discretionary (+144percent QoQ) amid higher volumetric sales driven by pent-up demand and low interest rates.

Turnover of pharmaceuticals’ and consumer staples firms were also up by 14 percent QoQ and 7percent QoQ, respectively.

The overall gross margins were down by 3.7ppts QoQ to 21.1 percent amidst Pak rupee devaluation by 2percent QoQ which the companies were unable to immediately pass on to the final consumers.

Hamza Habib is a senior journalist and former editor of who has previously worked for leading newspapers and TV networks of the country. He mainly writes on the economy and political issues.


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