Karachi, August 23, 2024 – Nestle Pakistan Limited has expressed concerns that the new taxes introduced in the recent federal budget 2024-25 could significantly impact its growth trajectory.
In its half-year financial report ending June 30, 2024, the company revealed that the latest Finance Bill contains several tax provisions that could affect its operational dynamics.
“We are currently evaluating the impact on our business performance and future growth,” the company stated, underscoring the uncertainty surrounding the new fiscal measures. The announcement reflects growing apprehension within the corporate sector as businesses brace for potential cost pressures stemming from tax hikes.
Nestle Pakistan also warned that elevated commodity and input costs are expected to persist throughout the year, posing additional challenges. “Given these factors, we maintain a cautious outlook and will take necessary measures to manage this challenging environment,” the company added. The statement highlights the dual pressures of rising costs and heightened tax burdens that are likely to weigh on profitability and growth.
According to Nestle Pakistan’s half-yearly financial results, sales for the six-month period ending June 30, 2024, reached PKR 107.7 billion. This represents a 6.2% growth compared to the same period last year. The increase in revenue is attributed to broad-based growth across Nestle’s brand portfolio, bolstered by demand-generating activities and a favorable product mix.
However, despite the increase in sales, the company reported a decline in gross profit margins due to rising commodity and energy prices. Nestle Pakistan noted that these cost pressures, along with increased investment in brand development and marketing, have negatively impacted its operating profit. This suggests that the company’s efforts to drive growth through brand investment are being offset by external cost factors and the anticipated tax burden.
The company’s cautious outlook reflects broader concerns within the industry about the potential impact of new taxes on profitability and growth. Analysts have noted that the combination of persistent inflationary pressures and increased taxation could dampen consumer spending and slow down economic recovery.
As Nestle Pakistan navigates this uncertain landscape, it is likely to focus on optimizing its operations to mitigate the effects of rising costs and taxes. The company’s strategy may involve adjusting its product pricing, enhancing operational efficiencies, and exploring new revenue streams to sustain growth momentum.
The impact of the new taxes on Nestle Pakistan and other major corporations will be closely watched in the coming months, as businesses and consumers alike adapt to the evolving economic environment.
