August 26, 2020 (MLN): International Steels Limited (ISL) has unveiled a significant 81% YoY decline in its net profits after tax of the year ended on June 30th, 2020 to Rs 494.85 million. Last year, the company reported net profits of Rs 2.66 billion.
This has translated into company’s earnings per share which plummeted from Rs 6.12 to Rs 1.14.
The decline in profitability of the company is mainly attributable to the pandemic induced lockdowns and slow economic activity prior to that.
The topline of the company plunged by 16% YoY owing to lower sales volume amid Covid-19 related lockdown as the company went under complete shutdown and demand for the product went down due to slowness in automobile sales.
The Gross margins of the company during the period also shrank from 11.2% to 8.76% as scrap prices declined but Rupee devaluation hit price hard in 4Q, moreover, company’s high fixed cost also led into decreasing margins, a report by Darson Securities highlighted.
Among other major heads, company’s Admin Cost declined by 7.59% YoY, while its Selling & Distribution expenses jumped by 27.4% YoY. Moreover, considering high leveraged post recent expansion, the company’s finance cost witnessed a significant growth of 79.5% YoY from Rs 1.29 billion to Rs 2.3 billion.
In addition to this, the company also booked a tax reversal of Rs 52.68 million during the year which somewhat offset the impact of weak results.
Being the largest flat steel producer with a diversified customer base and operating in a near-duopoly industry structure amid weak threat from imports, ISL is an ideal steel play in Pakistan, another report by InterMarket Securities stated.
The company also plans to rebalance its sales base and penetrate further into various export regions that would allow it to hedge against any plunge in local demand in the future, the report added.
The report further underscored that the flat steel industry in Pakistan presently comprises only two major players. While the margins are governed mostly by global supply-demand, the industry is protected by large antidumping duties. There is a burgeoning threat of new entrants; however, ISL enjoys greater penetration in many local markets and has diverse product offerings.
|
Financial Results for the Year ended June30th, 2020 ('000 Rupees) |
|||
|---|---|---|---|
|
|
Jun-20 |
Jun-19 |
% Change |
|
Net Sales |
48,081,937 |
57,484,354 |
-16.36% |
|
Cost of Sales |
(43,869,080) |
(51,035,302) |
-14.04% |
|
Gross profit |
4,212,857 |
6,449,052 |
-34.67% |
|
Selling and distribution expenses |
(894,334) |
(701,827) |
27.43% |
|
Administrative expenses |
(262,811) |
(284,404) |
-7.59% |
|
|
(1,157,145) |
(986,231) |
17.33% |
|
Finance costs |
(2,314,807) |
(1,289,315) |
79.54% |
|
Other operating charges |
(334,257) |
(533,801) |
-37.38% |
|
|
(2,649,064) |
(1,823,116) |
45.30% |
|
Other income |
35,523 |
39,413 |
-9.87% |
|
Profit before taxation for the year |
442,171 |
3,679,118 |
-87.98% |
|
Taxation |
52,680 |
(1,014,745) |
|
|
Profit after taxation |
494,851 |
2,664,373 |
-81.43% |
|
Earnings per share – basic and diluted (Rupees) |
1.14 |
6.12 |
-81.37% |
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