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KARACHI:Despite the global economic crisis, Pakistan's agriculture industry had strong growth in the first quarter of 2023, fueled by price hikes and recovering gross margins.

In 1QCY23, the food sector continued to perform well, with topline growth of 47% year-over-year (YoY), according to a JS Research research.

Amreen Soorani, a JS Global analyst, stated in an interview with The Express Tribune that 11 listed food firms were used as a proxy for the research of the performance of the food sector during 1QCY23.

Nestle Pakistan, FrieslandCampina Engro Pakistan, PREMA of At Tahour, and Fauji Foods, four firms that mostly make milk, made up the majority of the contribution. Other companies featured a mix of confectionary, ready-made food items, and other food segments.

Soorani attributed the hike to the continuous increased food inflation, with limited or negative economic development, and said that the analysis showed that the topline gain was driven more by unit price increases and less by volumetric expansion.

AHL Research reports that the Consumer Price Index (CPI) for April 2023 was up 2.4% month-over-month and 36.4% YoY, the greatest YoY inflation since the data was recorded in July 1965.

As a result, the average inflation rate for the first ten months of the fiscal year 2022–23 has increased from 11.04% to 28.23%.

The sector was able to more than pass on the cost to end-consumers despite inflationary pressures and increased commodity prices as gross margins recovered to 26%, up five percentage points quarter-on-quarter (QoQ) and two percentage points year-over-year (YoY).

Additionally, the industry was able to significantly increase its operating margins to 17%, the greatest level in recent memory. Greater efficiency in selling and distribution costs was seen in larger organizations, which helped to drive up margins.

In a conversation with The Express Tribune, Muhammad Ali, an analyst at AKD Research, said that prices had climbed dramatically over the previous six to eight months, giving Pakistani food producers a profit margin.

Additionally, he added, "prices of many commodities, including seeds and vegetable oil, have decreased on the international market, which has also contributed to the increased margins."

The food industry, along with the banking and IT industries, enjoyed growth in the present economic climate, despite the fact that the food business lost money the previous year. This is despite the increasing dollar having a detrimental influence on the margins of food companies. Other industries, meanwhile, were experiencing a decrease.

When compared to other manufacturing sectors, a high interest coverage ratio of seven times further favored the sector's constrained increase in expenses under the ongoing high interest rate scenario.