Food Sector Sees Marginal Growth Amid Market Challenges

Karachi: The food sector in Pakistan showed modest growth for the first quarter of 2025, with an increase in sales revenue and improved margins, according to a recent analysis. However, the sector continues to lag behind the broader KSE100 Index, despite notable performances by a few companies.

Sales revenue for nine listed food companies rose by 5% compared to the same period last year and by 11% from the previous quarter. This growth was attributed to softer inflation and an improved product mix, leading to a 2 percentage point increase in gross margins and a 4 percentage point rise in operating margins.

Despite these gains, the sector’s market capitalization increased by just 2.1% in 2025 to date, underperforming the KSE100 Index. Notably, NATF and UPFL emerged as strong performers, with NATF’s earnings growth driven by expansion and UPFL benefiting from better payouts.

The sector’s price-to-sales and price-to-earnings ratios are now at 1.3x and 20x, respectively, based on the last four quarters’ sales and net profit figures. However, future growth may face challenges as the upcoming fiscal year 2026 budget is unlikely to offer tax relief to the food sector.

The anticipated increase in taxes on ultra-processed foods, including instant food products, sauces, sugary drinks, ice creams, confectionery, and frozen meat products, may impact sales volumes in these segments. The sector will need to navigate these potential tax changes as it plans for future growth.