July 27, 2026 (MLN): Fauji Foods Limited (PSX: FFL) recorded a 24% decline in its net profit for the half year ended June 30, 2026, with profit for the period falling to Rs559.87m from Rs734.33m in the corresponding period last year.

Showing this softer bottom-line, the company's earnings per share (EPS) contracted to Rs0.22 from Rs0.29 in 1HFY25.

The top-line showed healthy momentum, with net revenue from contracts with customers growing 13% year-on-year to Rs16.77bn from Rs14.88bn in the prior period.

However, cost of revenue rose at a faster pace of 15% to Rs13.93bn, outpacing revenue growth and causing gross profit to expand by a more modest 4% to Rs2.84bn from Rs2.74bn reflecting some margin compression at the gross level.

On the expenditure side, marketing and distribution expenses rose 9% to Rs1.49bn, while administrative expenses climbed at a sharper pace of 19% to Rs517.98m. These combined pressures pushed profit from operations down 11% to Rs834.06m from Rs941.44m last year.

Below the operating line, other income declined 25% to Rs199.82m, while other expenses fell 24% to Rs74.13m. Finance cost, however, moved in the wrong direction, rising 27% to Rs49.84m from Rs39.38m. Taken together, profit before levy and income tax declined 15% to Rs909.91m.

The development that compounded the earnings pressure was a massive spike in the levy charge. The levy surged to Rs60.48m from a negligible Rs1.84m in the same period last year an increase of nearly 33 times pulling profit before income tax down 21% to Rs849.43m from Rs1.07bn.

On a positive note, income tax declined 13% to Rs289.56m from Rs334.11m, providing partial relief. However, this tax saving was insufficient to offset the combined drag of higher costs, lower other income, rising finance cost, and the outsized levy charge, resulting in the 24% decline in bottom-line profit.