February 11, 2021 (MLN): Amreli Steels Limited on Wednesday held its Corporate Briefing session, wherein the management discussed the recent financial performance as well as future endeavors of the company.
The company recently reported earnings of Rs. 423 million (EPS: 1.42) for the half-year ended December 31, 2020, as opposed to the losses of Rs. 313.4 million (LPS: 1.06) reported in the same period of last year. The improvement in financial performance was credited to a recovery in sales volumes amid higher development activities and higher prices of rebars.
Similarly, the gross profit went up by 49.6% due to swift pass over of cost burden to consumers via price increases, better utilization of fixed costs amid improved volumes. Further respite was drawn from a 31% drop in finance costs due to a reduction in interest rates, as well as the presence of tax credit amounting to Rs. 70.3 million.
According to the management, while the company greatly benefited from higher prices and volumetric growth, the impact of it was limited by higher scrap and power costs. Furthermore, the prices of rebars remained constant in October, grew negligibly in November, and then significantly in December, which means higher prices did not exactly help in pushing the margins up. Since then, the prices have come down by Rs. 5,000 per ton, and are likely to decline further by up to Rs. 2,000 per ton.
A report by Arif Habib has stated that while the company has booked scrap between USD 450-500 per ton in January 2020, next quarter margins may remain stagnant given inventory gain (higher rebar prices). The impact will be muted though as thus far 3Q has shown some slowness (buyers await further cuts in prices). However, margins may be slashed in the following quarter due to significantly higher scrap prices.
With regard to future endeavors, the management stated it has no plans to expand or avail TERF offered by the State Bank of Pakistan but is focusing on improving utilization to boost the sale of rebars.
The company is also all set to witness another cost increase by up to Rs. 1,500 per ton, owing to a likely surge in electricity tariff by Rs. 1.95 per KwH, the notification for which is still awaited.
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