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Rafhan Maize Q2 2026: Domestic Sales Accelerate as Margins and Cash Conversion Tighten

Rafhan Maize delivered stronger Q2 sales and higher profit, but gross-margin compression and heavy working-capital absorption made cash conversion the key weakness.

Sep 18, 2026

Company Name: Rafhan Maize Products Company Limited

Ticker: RMPL

Reporting period: Quarter and half year ended June 30, 2026

AlphaGen model outputs

  • Alpha QoQ Score: 77.00
  • TTM Performance Score: 17.00
  • 3Y Business Perf Score: 43.25
  • Sector Leadership Score: 54.00

These four scores are AlphaGen model outputs, not company-reported figures.

Basis: the June 2026 filing contains unaudited condensed interim financial statements. The six-month cumulative statements were subject to KPMG Taseer Hadi & Co.'s limited review under ISRE 2410; the separate three-month Q2 profit and comprehensive-income figures were not reviewed. This is not an audit opinion. Official half-year report.

Verdict

Rafhan Maize entered mid-2026 with a better top-line trajectory but a less comfortable earnings-quality picture than the headline profit growth suggests. Second-quarter net sales rose 9.6% year on year and profit after tax increased 8.9%, yet gross profit slipped 1.0% because cost of sales grew faster than revenue. The result therefore shows stronger demand and sales execution, but also clear cost pressure. The half-year view is steadier: sales rose 4.5%, operating profit 0.8% and PAT 6.4%. The larger concern is cash conversion. Working-capital absorption pushed operating cash flow to a Rs3.42bn outflow, while inventory, receivables and short-term financing all increased sharply. The June result looks like a stabilization in earnings after a weaker 2025, not a full restoration of historical margins. Official Q2/H1 financial results.

Results at a glance

  • Q2 net sales: Rs19.14bn, up 9.6% from Rs17.47bn.
  • Q2 gross profit: Rs3.73bn, down 1.0%; gross margin fell to 19.49% from 21.57%.
  • Q2 operating profit: Rs3.27bn, up 0.7%; operating margin eased to 17.10% from 18.61%.
  • Q2 PAT: Rs2.08bn, up 8.9%; EPS rose to Rs225.33 from Rs206.90.
  • H1 net sales: Rs38.19bn, up 4.5%; H1 PAT: Rs4.11bn, up 6.4%.
  • H1 finance cost fell 26.5% to Rs271.7m, but closing short-term financing rose 44.9% from December to Rs12.06bn.
  • Net cash used in operating activities widened to Rs3.42bn from Rs1.10bn.
  • The Board proposed a second interim cash dividend of Rs60 per share for the period ended June 30, 2026, after a first interim dividend of Rs94 per share. Half-year report.

What improved

The strongest improvement was revenue momentum. Q2 sales rose 9.6%, a clear acceleration from the 4.5% growth recorded for the first half as a whole. The company's business review says food-sector demand improved modestly across applications such as confectionery, ketchup, custards, mayonnaise, bakery and processed foods, while trade and personal-care remained robust. Animal-health performance also improved through product mix, quality, process improvements and disciplined pricing, with dairy and aquaculture showing better momentum. Management review.

The geographic mix reinforces the domestic-demand story. Gross domestic sales for H1 increased about 10.0% to Rs43.74bn, while gross exports fell about 27.1% to Rs4.09bn. In Q2 alone, gross domestic sales rose roughly 12.7%, whereas exports declined about 12.6%. Management linked export weakness to the suspension of trade with Afghanistan and disruption from the Middle East conflict, and said it was pursuing alternate international markets. That means the quarter's growth was driven primarily by Pakistan rather than exports. Revenue note and business review.

Profit after tax also grew faster than operating profit. Q2 PAT rose 8.9% despite operating profit increasing only 0.7%. The main bridge was below the operating line: taxation fell 11.4% to Rs1.07bn, while finance cost was broadly flat. Other income rose 25.8% in Q2 to Rs535.1m and helped offset pressure in the gross-profit line. The detailed half-year report shows that other income included bank/deposit income, foreign-exchange gains, gains on disposal of investments and a present-value adjustment related to RLNG tariff actualization. These items are economically different from core starch and sweetener manufacturing, so the PAT increase should not be treated as pure operating expansion. Result filing. Detailed report.

Why sales growth did not translate into gross-profit growth

The quarter's central tension is simple: sales grew, but cost of sales grew faster. Q2 cost of sales increased 12.5% against 9.6% revenue growth, pulling gross margin down by about 208 basis points to 19.49%. The detailed cost note shows freight and distribution costs within cost of sales rising to about Rs645.6m from Rs428.1m, an increase of roughly 51%. Management also described the operating environment as one of elevated food raw-material and energy costs. Cost note and management commentary.

It would be too strong to attribute the entire margin decline to freight or any single input. Rafhan Maize processes maize into industrial starches, liquid glucose, dextrose, dextrin and gluten meals across many end markets, and the public filing does not provide a complete price-volume-input bridge. The defensible conclusion is narrower: the quarter combined stronger domestic sales with a less favorable cost equation. This matters because margin pressure was already visible before 2026. For full-year 2025, sales increased 4.9% to Rs73.36bn, but gross margin fell to 18.83% from 20.92% in 2024 and PAT declined 12.6%. H1 2026 therefore represents stabilization, but Q2's gross-margin compression shows that the recovery is not complete. PSX company financials and business description.

End-market conditions remain mixed

Rafhan's end markets are unusually diversified, which makes a single demand explanation insufficient. Management described food as modestly improving, trade and personal care as robust, and dairy/aquaculture as improving. By contrast, textiles remained stagnant because of weak domestic and international demand and high input costs; paper and corrugation also remained challenging. Animal nutrition faced pressure from lower-priced alternative feed ingredients and a slowdown in poultry, even as animal health improved. The macro backdrop was better than the prior year but not uniformly strong: Pakistan Bureau of Statistics estimated FY2025-26 GDP growth at 3.70%. The useful read-through for the next quarter is therefore not headline GDP alone, but whether food, personal care and dairy can keep offsetting weakness in industrial applications. Company sector commentary. PBS national accounts.

Cash conversion is the biggest weakness

The income statement improved modestly; cash flow did not. Net cash used in operating activities widened to Rs3.42bn in H1 2026 from Rs1.10bn a year earlier. Before taxes, operating activities used Rs609m of cash versus generating Rs1.58bn in H1 2025. The working-capital bridge explains most of the gap. Inventory absorbed roughly Rs4.05bn of cash, receivables absorbed about Rs1.57bn, and the movement in trade and other payables absorbed another Rs1.67bn. In the comparable period, payables had released almost Rs3.95bn of cash. Cash-flow statement and note.

At June 30, stock-in-trade stood at Rs33.31bn, up 14.2% from December; trade debts were Rs4.93bn, up 46.9%; and cash and bank balances had fallen 60.4% to Rs1.64bn. A particularly large timing item was corn in transit, which the detailed report shows at about Rs5.47bn at June 30 versus only about Rs64m at December. That does not by itself indicate deterioration—inventory can rise because of procurement timing or supply-chain decisions—but it shows how much cash was tied up in raw material moving through the system. For the next result cycle, normalization of inventory and receivables matters more to earnings quality than another small increase in accounting profit. Balance sheet. Inventory detail.

Funding became more short-term

The balance sheet remained solvent and equity increased 6.4% to Rs31.04bn, but the funding mix became more working-capital intensive. Current assets rose 9.4% from December, while current liabilities rose 11.3%. Short-term financing increased 44.9% to Rs12.06bn, while trade and other payables fell 10.7% to Rs15.74bn. The current ratio consequently edged down to about 1.66 from 1.69. H1 finance cost fell 26.5% to Rs271.7m, but that favorable comparison should not be extrapolated mechanically: closing short-term financing is much higher, and SBP raised the policy rate to 11.5% effective April 28, 2026. The combination makes financing cost a more important H2 sensitivity. Balance-sheet figures. SBP rate decision.

Capital expenditure also accelerated. Cash spending on property, plant and equipment was about Rs1.11bn versus Rs321m in H1 2025, while capital work in progress stood near Rs2.92bn. Rafhan's financing notes also include a long-term facility under the State Bank's renewable-energy scheme for a 6 MW solar system. The investment program can support efficiency, but it raises the importance of converting operating earnings back into cash. Capex and financing notes.

Ownership changed, but that is a governance development—not an H1 earnings driver

A major corporate event occurred at the period end. Rafhan's half-year report states that the Nishat Group and associated acquirers collectively held 73.97% of the company after the transaction became effective on June 30, 2026, while Ingredion's stake fell to 20%. The Competition Commission of Pakistan had approved the proposed acquisition in May after a Phase-I review, finding no substantial lessening of competition. Company disclosure. CCP approval.

The transaction is strategically important because it changes the controlling shareholder and governance context. It should not, however, be used to explain H1 operating performance: the ownership transfer became effective at the very end of the reporting period. Any changes in sourcing, capital allocation, distribution, strategy or commercial relationships under the new ownership structure need to be demonstrated in subsequent disclosures rather than assumed. PSX now lists Hasan Mansha as chairman and Humair Ijaz as CEO. PSX company profile and announcements.

Recurring versus less repeatable earnings drivers

The more recurring elements are the domestic sales improvement, the price-mix and distribution effort described by management, exposure to food and industrial demand, and the company's ability to manage maize, energy and freight costs. These determine whether gross margin can recover sustainably. The less repeatable or more variable elements include parts of other income, the tax-rate movement and period-specific working-capital timing. Q2 other income included investment-disposal gains and an RLNG-related present-value adjustment, while the tax charge fell materially year on year. Those contributions are legitimate earnings, but they should be separated from the economics of manufacturing and selling maize-derived products. Detailed notes.

The same distinction applies to cash. A large inventory build can unwind in a future quarter, especially if it reflects procurement timing, but until it does, the cash outflow is real. The next result needs to show whether higher inventories and receivables convert into sales and collections or remain a persistent funding requirement.

Dividend and capital allocation

The Board proposed a second interim cash dividend of Rs60 per share for the period ended June 30, 2026. The company had already declared a first interim dividend of Rs94 per share during 2026. The half-year accounts also reflect the Rs150-per-share final dividend for 2025. Rafhan has historically returned significant cash to shareholders, but H1 2026 combines dividends with elevated working-capital needs, higher short-term borrowing and faster capital spending. That does not make the payout unsustainable by itself; it means dividend capacity should be assessed alongside operating cash flow rather than PAT alone. Dividend and equity disclosures.

What weakened / needs attention

  • Q2 gross margin fell about 208 basis points year on year even as revenue grew 9.6%.
  • Export sales remained weak, with H1 gross exports down about 27%, partly because of Afghanistan trade suspension and Middle East disruption.
  • Operating cash flow remained deeply negative because inventory, receivables and payables absorbed cash.
  • Trade receivables rose almost 47% from December, much faster than H1 revenue growth.
  • Short-term financing increased roughly 45%, increasing sensitivity to financing conditions.
  • The controlling-shareholder transition introduces strategic uncertainty until the new ownership's operating priorities are evidenced in formal disclosures.

What to monitor next

  • Gross margin: whether maize, energy and freight pressure eases enough for sales growth to translate into gross-profit growth.
  • Domestic mix: whether food, personal care, dairy and animal-health demand remains strong enough to offset textiles, paper and animal-nutrition weakness.
  • Exports: any normalization in Afghanistan trade and Middle East logistics, or meaningful progress in alternate markets.
  • Working capital: inventory, corn in transit, receivables and payables, with particular focus on whether operating cash flow returns toward profit.
  • Short-term financing and finance cost after the late-FY2026 policy-rate increase.
  • Capital spending and commissioning benefits from ongoing projects, including renewable-energy investments.
  • The new ownership structure: concrete strategic, governance or capital-allocation changes under Nishat control, without assuming synergies before they are disclosed.
  • Earnings quality: the split between recurring operating profit, other income and tax effects.

Sources

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