November 2, 2020 (MLN): Recently listed Agha Steel Industries Limited (ASIL) has unveiled its financial results for 1QFY21, as per which the company’s net profits after tax surged by 60% YoY to Rs 509.37 million as opposed to the net profits of Rs 318 million reported in the same quarter last year.
This translated into company’s earnings per share which grew by 27% YoY to Rs 1.12 per share compared to Rs 0.88 per share in the same quarter of a year ago.
Agha Steel is a composite steel manufacturing company in Pakistan, with an initial melting and rolling capacity of 250k tpa and 150K tpa, respectively. During the quarter, company registered net turnover of Rs 5 billion, depicting a growth of 53% YoY compared to Rs 3.29 billion in the corresponding quarter last year. As a result, company’s gross profits surged by 39% YoY to Rs 1.1 billion despite 53% YoY increase in cost of sales.
The company has been an outdoer so far, with delivering solid profits over the last two or so years compared to its competitors who either posted loses or barely made any profits. The key competitive advantage of the company is its ability to generate grander margins against its peers, this is due to its state-of-the-art electric arc furnace (EAF) which enables it to manufacture re-bars at a significantly lower cost. During the quarter under review, company’s gross margins stood at 22%, down by 2ppts from 24%, largely due to increase in cost of sales, as its cost of sales per unit rise from 76% to 78%. Nevertheless, the margins were higher compared to its peers (MUGHAL’s margins for 1QFY21 stood at 11.15%).
On the cost side, despite the company observed 75% YoY increase in administrative cost and 36.8% YoY increase in selling and distribution cost, the impact of this was counterbalance by 43% YoY decline in finance cost due to cut in policy rate.
Consequently, the company managed to grow its operating profits significantly by 215.5% YoY, largely on the back of higher margins which came through its more efficient plant compared to competitors and strong presence in high margin institutional segment instead of retail, as the company generates its 80% of the topline from institutional sales.
On the tax front, the company paid Rs 149.5 million as tax payments against the tax reversal of Rs 84.4 million in the corresponding quarter of last year, which translates into effective tax rate of 23%.
|
Profit and Loss Account for the Quarter ended September 30th, 2020 ('000 Rupees) |
|||
|---|---|---|---|
|
|
Sep-20 |
Sep-19 |
% Change |
|
Turnover -gross |
5,890,123 |
3,854,674 |
52.80% |
|
Sales tax |
(855,830) |
(560,081) |
52.80% |
|
Turnover-net |
5,034,293 |
3,294,593 |
52.80% |
|
Cost of sales |
(3,925,851) |
(2,499,130) |
57.09% |
|
Gross profit |
1,108,442 |
795,463 |
39.35% |
|
Administrative expenses |
(87,896) |
(50,130) |
75.34% |
|
Selling and distribution expenses |
(76,312) |
(55,775) |
36.82% |
|
Finance Cost |
(270,250) |
(475,941) |
-43.22% |
|
Operating Profit/loss |
673,984 |
213,617 |
215.51% |
|
Other expenses |
(43,907) |
(25,404) |
72.83% |
|
Other income |
28,810 |
45,536 |
-36.73% |
|
Profit/Loss before taxation |
658,887 |
233,749 |
181.88% |
|
Taxation-net |
(149,512) |
84,429 |
– |
|
Profit after taxation |
509,375 |
318,178 |
60.09% |
|
Earnings per share – basic and diluted (Rupees) |
1.120 |
0.88 |
27.27% |
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