Interloop: Higher revenues, Margin boost net income by 95% in 1QFY22

October 15, 2021 (MLN): Interloop Limited (PSX: ILP) announced profit-after-tax (PAT) for 1QFY22 at Rs2.69 billion (earnings per share at Rs3.08), depicting a whopping year-on-year increase of 95%, from Rs1.38bn a year earlier on the back of higher-than-expected revenues and gross margin.

The Company is primarily engaged in the manufacturing of Hosiery segment which contributes 76% to overall topline. In addition, the production line is also extended to denim, yarn, Knitwear, and seamless activewear.

During the quarter, ILP posted revenue of Rs19.3bn, increased by approximately 50% on a YoY basis. The growth is primarily attributable to addition of new machineries in its hosiery division aiding volumetric sales of the company. In addition, utilization of hosiery division nearly at 100% post revival of economic activity and excess exports orders given order log book is full till Jun’22.

Furthermore, higher utilization of denim plant given addition of new customers, and depreciation of PKR against USD by 6.5% QoQ also supported topline of the company, a report by Arif Habib Limited cited.

The gross margin of the company improved to 29% from 24% in SPLY majorly accredited to depreciation of PKR on average basis coupled with better economies of scale and addition of state of the art
machinery adding efficiencies to the plant

On the expense side, the administrative expense jumped by 48.5% YoY while distribution cost swelled 31% YoY due to excess export orders and addition of new machineries in knitwear and denim division.

Among other line items, the other operating expenses of the company surged by 178% YoY to Rs580mn due to higher charge of WPPF, while income from other sources plunged by 80% to Rs4.7mn.

Despite lower interest rates, finance costs increased by 60% YoY to Rs360mn in 1QFY22 on account of higher reliance on borrowings to meet capex requirement.

On the tax front, the company’s effective tax rate stood at 6% compared to 5% in 1QFY21.

Overall, the company posted strong results due to persistently high revenues. According to a report by Intermarket Securities, ILP has fully booked orders for the year, which should continue the present growth momentum, especially with completion of Hosiery Plant V (expected in the next quarter). Improvements in Denim margins along with positive Apparel segment penetration will further reinforce company’s profitability.

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