Shezan International : Transmission of Quarterly Report for the Period Ended 31 December 2022

HALF YEARLY REPORT

31 DECEMBER 2022

COMPANY INFORMATION

Board of Directors:

Mr. Muneer Nawaz	Chairman
Mr. Humayun A. Shahnawaz	Chief Executive
Mr. M. Naeem
Mr. Abid Nawaz
Mr. Rashed Amjad Khalid
Ms.Manahil Shahnawaz
Mr. Shahid Hussain Jatoi	(Independent Director)
Mr. Abdul Hamid Ahmed Dagia	(Independent Director)
Mr. Nauman Khalid	(Independent Director)

Chief Financial Officer:

Mr. Faisal Ahmad Nisar, FCA

Company Secretary:

Mr. Khurram Babar

Audit Committee:

Mr. Shahid Hussain Jatoi	Chairman
Mr. Muneer Nawaz	Member
Mr. M. Naeem	Member
Mr. Rashed Amjad Khalid	Member

Human Resource &

Remuneration Committee:

Mr. Nauman Khalid	Chairman
Mr. Muneer Nawaz	Member
Mr. M. Naeem	Member
Mr. Humayun A. Shahnawaz	Member

Registered Office / Head Office:

56 - Bund Road, Lahore-54500. Phones: [phone]-04.

Faxes: [phone] & 37466895.

E-mail: [e-mail]

Factories:

• 56 - Bund Road, Lahore - 54500. Phones: [phone]-04.
  Faxes: [phone] & 37466895.
  E-mail: [e-mail]
• Plot No. L-9, Block No. 22,
  Federal "B", Industrial Area, Karachi - 75950. Phones: [phone]-23.
  Fax: [phone].
  E-mail: [e-mail]
• Plot No. 33-34, Phase III,
  Hattar Industrial Estate, Hattar - 66210 Phones: [phone] & 617343.
  Fax: [phone].
  E-mail:[e-mail]

Website:

www.shezan.pk

Auditors:

EY Ford Rhodes, Chartered Accountants,

96-B-1, 4th Floor, Pace Mall Building, M. M. Alam Road, Gulberg II, Lahore.

Share Registrar:

Corplink (Private) Limited,

Wings Arcade, 1-K, Commercial,

Model Town, Lahore.

Legal Advisors:

Cornelius, Lane & Mufti,

Nawa-e-Waqt Building,

Shahrah-e-Fatima Jinnah, Lahore.

Bankers:

United Bank Limited.

MCB Bank Limited.

National Bank of Pakistan.

Bank Al-Habib Limited.

Habib Bank Limited.

Bank Alfalah Limited.

Allied Bank Limited.

HALF YEARLY REPORT JULY - DECEMBER | 2022

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Always farm fresh

DIRECTORS' REPORT

TO THE MEMBERS

On behalf of the Board of Directors of Shezan International Limited, we are pleased to present the Directors' Report together with condensed Interim Financial Statements (Un-audited) of the Company for the Six-month period ended 31 December 2022.

Pakistan has been stuck in an economic vortex for the last several months, caught between the sharply depreciating rupee, rising energy prices, and the backbreaking highest inflation rate in its history. The State Bank of Pakistan's reserves plunged to around three billion dollars, enough to cover only fifteen days worth of imports, which has sent a panic signal across the economy . With the massive increase in gas and electricity tarrifs, the prices of daily necessities have also increased significantly. The rise in fuel prices, combined with overall inflation, has become uncontrollable, and life has become miserable for common citizens. Internal political instability has further worsened this scenario. There is a significant external element to the crisis as well, with rising global food and fuel prices in the wake of Russia's war in Ukraine. The combination of all these factors has spelled perhaps the greatest economic challenge Pakistan has ever seen. Further, in its recent monetary policy announcement in January 2023, the State Bank of Pakistan raised the policy rate to 17%, the highest in two decades. The higher interest rates coupled with galloping inflation and an uncertain political environment have badly affected the overall business sentiments of the country.

OPERATIONAL OVERVIEW

The Company's performance during the six-month period under review is summarized below:

	2022	2021
Particulars	Rupees in thousand
Revenue from contracts with customers - net	4,105,680	3,221,416
Gross profit	916,818	612,030
Profit before taxation	22,097	8,453
Net profit after tax for the period	14,289	3,032
Earnings per share (Rs.)	1.48	0.31

On the operational side, we would like to apprise our shareholders that October -December is our leanest quarter due to seasonal nature of our products. Commodity costs remained very high in the six-month period ended due to high inflation. Some factors like slowness in the market, a record increase in the prices of mango pulp, tomato paste, Tetrapak paper, glass bottles (major raw and packing materials for our products), high payroll expenses because of increase in minimum wages in the fiscal budget 2022-2023, heavy urban and rural flood turmoil in the country, shortage of various crops of fruits and vegetables due to flood disaster, continuous increase in the prices of oil, gas, and electricity, inflated cost of locally available raw and packaging materials and sky-high import cost due to devaluation of Pak Rupee against the U.S dollar, have adversely affected the profitability of the Company. Despite this hostile economic environment our Company, however, depicted satisfactory financial performance and achieved a reasonable growth of 27% in the turnover. Our main product juices (in tetra packaging) are an impulse buy, have shown positive sales trends. Consumer acceptance of our juice products is growing reasonably and contribution from these products to the sales has made a substantial impact on the profitability. However, keeping in view the inflationary trends, we had to enforce the price rationalization of our products to offset the impact of higher input costs. Still, we had to absorb a big component of hiked input costs as we could not pass on the full impact to end consumers due to the intense competitive environment and day-by-day deteriorating buying power of the consumers.

We upheld our progress momentum in exports by achieving a significant volumetric growth of 48% during the six month period under review. Our cooked food range, Juicepak, bottled juices, and ketchup are the main contributors to export sales.

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The finance cost of the working capital component has increased significantly due to the upward revision of 325 basis points in policy rates by the State Bank of Pakistan during the six-month period ended bringing it to a cumulative of 1700 basis points. The average utilization of working capital limits during the period remained on the higher side. These working capital borrowings were made to stock the seasonal fruits, pulps, and packaging materials to fulfill the annual sales demand of our products.

FUTURE PROSPECTS

The remaining quarters ahead of the financial period again will be challenging for the Company as the economic conditions do not appear to be favourable in near future. The urban and rural flooding in the country, the devastation of agricultural crops resulting in a shortage of the availability of fruits and vegetables, upside risks from potential food-price shocks, adverse future agriculture conditions due to flood water, supply chain disruption, gas and electricity load shedding, sky-high inflation, declining consumer's buying power, sharp devaluation of Pak Rupee, continuous rising interest rates and political instability, are the key factors which will definitely adversely affect the future performance and profitability of the Company. The oil prices are further expected to mount due to some levies proposed to be imposed, this will further exacerbate the energy/oil crises in the country and resultantly for the Company.

It is evident that after IMF's bailout package, petroleum prices, energy costs, raw materials (local and imported) and packaging costs (specially Tetra Pak paper and plastic material), and freight costs are further expected to increase tremendously in the near future. The finance cost is also expected to increase as the Company will have to spend more on expensive inventory buying for uninterrupted supply of its products.

The Government has imposed 10% Federal Excise Duty on sugary fruit juices in its recently promulgated Finance (Supplementary) Act, 2023. This may have a negative impact on our sales of juices, squashes and syrups in coming months and consequently on bottom line as well.

Despite the above challenges the Company is closely monitoring the situation and has rightly positioned itself to capitalize on whatever business opportunities arise out of the current economic situation. Management will utilize its best potential towards increasing the Company's market share in all its sales segments. The Company is trying to focus and uplift its export sales in the coming quarters as well to gain reasonable profitability. The management contemplates that a handsome increase in the export size is one of the much-needed solutions to overcome the current economic crises for the country as well as the Company. The Company will strive to attain volumetric growth from its existing customers and will continue to explore local markets. The Company's focus on research and development will further strengthen its product portfolio, enabling sustainable growth in the future.

VOTE OF THANKS

We take this opportunity to thank our shareholders for their confidence, valued customers for the trust they continue to place in us, the management team for its sincere efforts, the employees for their commendable services, the Board of Directors for their continuous guidance, and all stakeholders - bankers, dealers, vendors, and associates.

For and on behalf of the Board

Muneer Nawaz	Shahid Hussain Jatoi
Chairman	Director
Lahore:
24 February 2023.

HALF YEARLY REPORT JULY - DECEMBER | 2022

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