Earnings Preview: Lower volumetric sales likely to depress ISL’s margins

January 24, 2019 (MLN): The Board meeting of International Steels Limited (ISL) is scheduled to take place on Friday, January 25, 2019 to announce its financial results for 1HFY19.

The Company is expected to face a plunge in earnings, and the communal reasons that analysts are embracing is the lower volumetric sales and higher finance cost.

Based on market expectations, the consensus on ISL’s profit after tax for 1HFY19 turns out to be locked in between Rs.1,688 million to Rs.1,779 million with EPS ranging from Rs.3.9 to Rs.4.1.  Meanwhile in 2QFY19, the company is likely to post a profit between Rs.817 million to Rs.938 million with EPS ranging from Rs.1.88 to Rs.2.16.

Listed below are the forecasts of the various research houses:

Mr. Ajay Kumar, at Ismail Iqbal Securitas told Mettis Link News that the expected lower sales, high finance cost this quarter and PKR depreciation which the company wasn't able to pass on to the customers in full, are the major reasons behind the company’s low profitability.

Elaborating further, Mr. Taimoor Asif at Pearl Securities says that the considerable decline in earnings is expected on the back of lower gross profit, moreover, competing with imported products the company was offering discounts which will contribute to decline in company’s profit margins.

Moreover, the revenue of the company is expected to increase by 11% YoY, mainly due to higher selling prices during 1HFY19.

Meanwhile, Mr. Sharoon Ahmed at Elixir Securities says that the anticipated decline in ISL’s earning is mainly due to the expected decline in dispatches, higher international HRC prices, PKR/USD depreciation, and higher finance cost due to higher interest rate and debt for both expansion and working capital.

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