Archroma Pakistan: Will it Shine Again?

June 02, 2025 (MLN): Once a Gem to investors for its strong earnings and consistent dividend payouts, Archroma Pakistan turned into a Dime with reporting substantial loss in 2024.

In fact, the share price began to decline following the company’s announcement of a first-quarter loss of Rs. 3.01 per share. This initial setback was compounded by recurring quarterly losses, the absence of a dividend in 2023, and minimal prospects of a payout in 2024 as well—all of which weighed heavily on investor sentiment, and the share price fell sharply from its peak Rs. 454 to Rs. 270 by the end of October 2024, a steep decline of Rs. 184 per share in just 11 months.

Then came the first-quarter result for 2025, earnings of Rs. 10 per share compared to a loss of Rs. (3.04) per share in the same period last year. The strong start signaled for a remarkable turnaround in the company in days to come, thus reignited investor interest in company’s share.

Interestingly, the share price began its recovery well before the official release of the Q1 2025 results. It seems that astute investors may have detected subtle signs of improvement beneath the surface, prompting them to act ahead of the broader market.

Although first-quarter 2025 results justified the rise in the share price, the significant earnings jump—contrary to expectations—did not stem from topline growth. In fact, flat revenue, coupled with the devaluation of the PKR against the USD and other major currencies, should have negatively impacted profitability.

Yet, this was no coincidence—it resulted from a well-considered strategy driven by a strong internal locus of control. The acquisition of Huntsman Textile Effects by Archroma serves as a compelling example, demonstrating how strategic acquisitions, when paired with operational efficiency, can drive a company’s turnaround. The matrix below highlights how product diversification and market expansion contributed to broadening the revenue base, improving profit margins, and controlling operational costs.

Real Challenge to Archroma Pakistan:

“Profitable through Operational Efficiency” — the strategy proved its effectiveness by delivering strong first-quarter results for 2025. However, this does not guarantee the sustainability of this performance. It remains vulnerable to currency fluctuations for the reason that 80% of raw materials sourced internationally. And a sharp devaluation of the Pakistani Rupee against major currencies may potentially erode the gains achieved through operational efficiency.

This raises question:

“How resilient is the strategy, having internal locus of control, in offsetting the adverse impact of currency volatility on profitability?”

Given the limited access to the company’s internal affairs, the only viable way to assess the resilience of its strategy against the risk of currency fluctuation is to evaluate its effectiveness from publicly disclosed management initiatives. In this context, the acquisition of Huntsman Textile Effects stands out as particularly noteworthy. The following content outlines how this acquisition is likely to enhance the company’s ability to manage exchange rate volatility.

Product Diversification:

The acquisition has significantly broadened Archroma Pakistan’s product portfolio, thereby enhancing the company’s overall market offerings. With a more diversified range of products, Archroma is better positioned to:

• Tap into new export markets, driving export growth. Increased earnings in foreign exchange can serve as a natural hedge against currency fluctuations.
• Serve a wider customer base with varied needs, particularly in the textile and construction sectors. Higher sales volumes can provide an additional buffer to absorb potential exchange losses.

It is to be noted that Archroma Pakistan has a long-established history of exporting its products and currently supplies markets across Asia, Europe, and the Americas. Its expansive export network highlights its strong global presence and ability to cater to diverse industrial needs.

Archroma’s longstanding reputation and deep integration into international markets suggest that the company is well-positioned to sustain its export operations—generating revenue in foreign currencies, which serves as a natural hedge against exchange rate risk.

Product Integration to its own Portfolio:

The acquisition has also helped reduce Archroma Pakistan’s dependency on foreign currency in two key ways:

• Reduction in Dependence on Imports of Finished Products:
  By internalizing Huntsman’s product portfolio, Archroma Pakistan has lessened its reliance on external suppliers for certain finished goods. This shift has reduced the company’s need to source these products from abroad, thereby lowering need for foreign currency, thus insulating the company from currency fluctuations to some extent.
• Import Substitution of Raw Materials:
  Huntsman’s advanced technologies and proprietary formulations may enable Archroma to manufacture, within Pakistan, certain chemicals or textile auxiliaries that were previously imported. This move toward local production can significantly reduce the company’s need for foreign currency to procure raw materials, thus mitigating its overall exposure to exchange rate risk.

While exchange rate fluctuations will continue to pose a challenge, Archroma Pakistan’s acquisition of Huntsman Textile Effects demonstrates that the management is proactively implementing strategies to strengthen resilience against currency volatility. This initiative complements broader efforts in diversification, operational efficiency, financial restructuring, and market expansion—all aimed at sustaining the company’s growth trajectory. Together, these strategic pillars indicate that Archroma Pakistan is on the right path to navigating external risks while securing long-term profitability and stability.

The Final Thought:

Archroma Pakistan’s journey from a dividend-yielding blue-chip to a loss-making concern and now a potentially resurging stock illustrates a strategic shift in response to adversity.

The company’s acquisition of Huntsman Textile Effects has been a game-changing move, enabling it to drive a turnaround not through topline growth but through operational efficiency, product diversification, and market expansion.

While the company remains exposed to currency risk due to its import-heavy raw material base, its enhanced export capabilities, import substitution initiatives, and broader product portfolio offer a credible buffer.

Overall, Archroma Pakistan appears to be on a cautiously optimistic path toward recovery, with the potential to reclaim its former standing—provided it continues executing its strategy with agility and A detailed review of the Profit & Loss Statement, Balance Sheet, and the CEO’s report revealed that the earnings turnaround foresight.

Danish Philosopher “Seren Kierkegaard” rightly said that:

“Life can only be understood backwards-but it must be lived forwards.”

Therefore, the write-up is an attempt to answer the question:

“Will Stock of Archroma Pakistan Shine Again?”

By peeking into the future of the company from its past.