The Sapphire Dairies (Pvt.) Limited ("the Company" or "SDPL") is a private limited company and registered under the Companies Ordinance, 1984 (Repealed with the enactment of the Companies Act, 2017).

SDPL was incorporated on January 31, 2008, as part of the sponsors' strategy to expand their footprint in the dairy sector to augment business diversity, with the vision that corporate farming can enhance dairy economics and hygiene standards.

SDPL's principal activity is the production and processing of milk and dairy products at its dairy farm, which is located on Manga Raiwind Road in District Kasur. The Company produced 14.8mln gross liters of milk in 9MFY25. At present, the farm has 2,000 lactating cows, which constitutes 45% of the total herd size. The head office/registered office is situated at 7 A-K, Main Boulevard, Gulberg, Lahore, facilitating streamlined production and distribution processes.

The Company is a subsidiary of Diamond Fabrics Limited, which owns a 53.75% stake in the Company. Additionally, Sapphire Textile Mills Limited and Sapphire Fibres Limited hold 12.946%  & 5.509% respectively. The rest of the shareholding lies with other group Companies.

The Company's onwership is expected to remain stable in the foreseeable future due to the Company's long-term association with the Sapphire Group. 

The sponsors possess deep industry knowledge supported by an extensive experience across multiple sectors of the country's economy, including textiles, power, dairy, and retail. During the preceding years, the Company underwent several economic cycles but the growth remained intact. The sponsoring group continued to flourish under the strategic direction and visionary leadership of the sponsors.

The financial strength of SDPL emerges from the robust financial muscle of the sponsors. During FY24, the group's annual turnover clocked at ~PKR 1.35bln USD, reflecting the sponsors strong finacial capacity to support the Company if needed. 

The Board comprises five members, all belonging to the sponsoring group. It functions primarily in an advisory capacity, supported by professional management. The inclusion of an independent director would further strengthen the Company’s governance framework.

Mr. Mian Mohammad Abdullah is the Chairman and Founder of the Sapphire Group of Companies. He has been honored twice with Pakistan’s top civilian award, Sitara-e-Imtiaz, for his contributions to business. All board members have had a long-standing association with the Group and bring extensive experience to their roles. Mr. Amer Abdullah holds an MBA degree from the United States. He joined the Group in 1990 and has served as a director in various group companies. He is currently serving as the CEO of Diamond Fabrics Limited and Sapphire Dairies (Private) Limited. Mr. Shahid Abdullah holds a bachelor's degree in commerce from the University of Karachi and has been associated with the Sapphire Group since 1980. He is serving as the CEO of Sapphire Fibres Limited, Amer Cotton Mills (Pvt.) Limited and Sapphire Electric Company Limited. Mr. Nadeem Abdullah graduated from McGill University, Canada. He has been the CEO of Sapphire Textile Mills Limited for the past 16 years and also serves as CEO of Sapphire Wind Power Company Limited. Mr. Yousuf Abdullah holds an MBA degree from the UK. He is the CEO of Sapphire Finishing Mills Limited and also serves on the boards of other group businesses. He became a director in various Sapphire Group Companies in 1995. Mr. Abdul Sattar Arain is a Fellow Member of ICAP and holds a Master’s degree in Commerce. He has been with the Sapphire Group of Companies since 1981 and has served in key managerial positions.

No board committees have been established. Board meetings are conducted, and financial results are presented to the board for evaluation of the Company's performance. Minutes of meetings are recorded and maintained. The sponsors play an active executive role and provide guidance to management in the Company's operations.

M/s ShineWing Hameed Chaudhri & Co. Chartered Accountants serve as the external auditors for the Company. They have issued an unqualified opinion on the financial reports for the year ended June 30,2024.

The Company's organizational structure includes business units and shared services. The business units include SDL Farm and SDL Processing, which cumulatively manage calf care, feeding, health, parlor, breeding, production, quality control, and warehousing. Shared services support functions such as engineering, IT, accounts, MIS, HR, administration, internal audit, tax, supply chain, and finance.

The management team at SDPL consists of seasoned professionals with diverse experience. Mr. Amer Abdullah serves as the Company's CEO, leading its strategic direction and having been instrumental in spearheading textile expansion projects and diversifying the dairy business. The Company's financial operations are overseen by Mr. Arslan Ahmad, Deputy General Manager of Accounts & Finance, while Mr. Faizan Elahi, the Business Unit Head since 2014, is responsible for leading operational strategies and growth initiatives.

There are no management committees in place, and the management meets informally to discuss pertinent matters.

The Company implemented the SAP B1 system on January 17, 2018, in partnership with ABACUS. This enterprise resource planning (ERP) solution was adopted to streamline core business processes, improve financial management, and provide real-time insights for more informed decision-making. As per the agreement, the system is updated every December.

Foreign veterinary experts and comprehensive vaccination protocols are employed to uphold the health and vitality of the herd and prevent disease outbreaks. Environmental and nutritional management practices are implemented to ensure a stress-free environment and a nutritionally balanced diet for livestock. Herd size is carefully regulated in accordance with stocking density standards to ensure good care and to strive to keep mortality rates low. Optimizing breeding helps to ensure lactation yield remains within feasible levels for the farm.

Pakistan is the world's 3rd largest milk producer, with total production reaching 72.3mln MT in FY25. This is supported by a large total livestock population of 237.7mln. However, the country faces a major challenge in low productivity, as the average milk yield per cow, at just 12-14 liters per day, is significantly below international standards of 45-55 liters. The sector is dominated by loose milk, with the packaged industry holding a very small market share. This is primarily due to a fragmented supply chain, poor infrastructure, seasonal yield fluctuations, and consumer price sensitivity.

The Company owns a state-of-the-art dairy farm that adheres to international standards, maintaining a herd size of over ~ 4479 cows which reflects its good position in the market.

The Company's revenues have shown a consistent upward trajectory over the years. In FY24, the Company's net revenue surged to PKR 4.4bln, reflecting a 32% increase from PKR 3.4bln in FY23. This growth is primarily driven by the Company's diverse portfolio of dairy products, including skimmed milk, raw cream, and cheese, among others. Nestle Pakistan Limited remains the Company's primary customer. At the inception of FY25, SDPL commenced the export of its fruit drink. During 9MFY25, the revenue of the Company was recorded at PKR 3.5bln, including export revenue of PKR 41mln.

The Company's gross profit margin slightly improved, reaching 8.7% in 9MFY25 (9MFY24: 7.6%; FY24: 7.2%). This enhancement in profitability is primarily attributed to a reduction in energy and  feed costs. Consequently, these factors also supported enhanced net profitability, with the net profit margin strengthening to 3.1% compared to 1.1% in 9MFY24.

The Management remains focused on aligning performance with financial projections through strategic initiatives. These include adopting advanced genetic improvement practices for dairy breeds, enhancing milk yield across the herd, and initiating a fattening farm project. Following a successful trial with 23 animals yielding a net profit of PKR 1.6mln through local sales, the fattening farm will now focus exclusively on exports. Furthermore, having commenced exports in FY25, the Company has diversified into international markets with juices and traditional ghee, and will commence exports to China soon.

The Company's net cash cycle has consistently exhibited a negative trajectory, which is a reflection of its efficient working capital management and rapid inventory turnover. This favorable trend, however, experienced a reversal in 9MFY25, with the net working capital days turning positive at 3 days (from -8 days in FY24). This shift is primarily attributable to an increase in trade receivable days from 11 to 17 days and a reduction in trade payable days from 22 to 16 days over the period. The Company effectively manages its working capital requirements by utilizing a mix of internal cash flows and short-term borrowings.

The Company's shortfall in core income has led to a depletion in its FCFO and coverage metrics. FCFO improved from PKR 178mln to PKR 298mln in FY24 and dropped to PKR 180mln in 9MFY25. Similarly, the Company's coverage ratios showed a minute improvement, with the interest coverage ratio rising to 0.9x from a concerning 0.8x in FY23. However, in 9MFY25, the interest coverage ratio turned back to 0.8x.

The Company maintained a moderately leveraged capital structure, with its leverage ratio increasing to 41.1% as of 9MFY25 (from 35.8% in FY24). This was primarily due to an increase in total borrowings to PKR 2.7bln, which included PKR 1.4 bln in short-term and PKR 0.9 bln in long-term debt. The Company's equity base was reported at PKR 3.9bln, with unappropriated profits making up PKR 2.0bln of that total. The sustainability of this equity base relative to the Company's debt remains a significant factor.