KARACHI: Pakistan's listed food companies reported 8% year-over-year revenue growth in the second quarter of 2026, even as elevated energy costs and inflationary pressures squeezed profit margins across the sector, according to a research note published Tuesday by JS Global.
The brokerage's review, based on cumulative figures from nine listed food companies, found that firms leaned heavily on volume growth to offset cost pressures, rolling out new products and flavor variants — including some aimed at "globally popular Gen-Z flavors", while ramping up marketing and distribution spending.
Most companies reported stable or slightly lower operating margins compared with both the prior year and the previous quarter. Fauji Foods Limited and Unilever Pakistan Foods Limited were exceptions, posting year-over-year margin gains. JS Global attributed the sector-wide pressure to commodity cost inflation, higher energy tariffs, increased marketing expenses and export disruptions tied to the Afghanistan border closure and unrest in the Middle East.
Unilever Pakistan Foods led peers in sales growth, posting a 32% year-over-year revenue increase driven by expansion in its noodles segment. FrieslandCampina Engro followed with 14% growth, supported by stronger dairy and ice cream volumes, while Matco Foods benefited from stronger rice exports.
On profitability, the sector's cumulative after-tax profit rose 13% year-over-year in the quarter. FrieslandCampina Engro posted the sharpest earnings jump, with profit rising elevenfold, while Unilever Pakistan Foods and Matco Foods grew profits 57% and 29%, respectively. Nestlé Pakistan, Ismail Industries and Fauji Foods all reported profit declines of 20%, 48% and 35%, respectively.
Despite the topline growth, the sector underperformed the broader market. JS Global said the food sector's combined market capitalization fell 9% calendar-year-to-date, compared with a 1.8% decline in the benchmark KSE-100 Index. The sector's price-to-sales and price-to-earnings multiples now stand at 1.4 times and 18 times, respectively, based on trailing four-quarter sales and earnings.
FrieslandCampina Engro was the best-performing stock in JS Global's food universe, gaining 69% calendar-year-to-date on an adjusted basis. The brokerage linked the rally to a more than threefold year-over-year jump in the company's first-half earnings per share, to 5.74 rupees, driven by market-share gains in UHT milk, new ice cream launches, and efficiency measures including a new 3.4-megawatt solar power plant. At the other end of the range, Matco Foods shares fell 36% calendar-year-to-date, the steepest decline in the sample.
Looking ahead, JS Global said investors should watch geopolitical developments that could affect energy prices and food inflation, warning that continued pressure on consumers' disposable incomes is likely to keep the operating environment challenging for food companies.
