PIBTL – Monetary easing to save the year?

July 30, 2020 (MLN): Pakistan International Bulk Terminal Limited (PIBTL) is all set to reveal its financial performance for the Financial Year 2020, with fairly high chances of meeting the favorable expectations of market analysts.

Going by the projections made by Insight Securities, the company is likely to post positive earnings for the year, as opposed to the losses reported in the previous year, despite the fact that it suffered from flat terminal utilization.

The earnings of the company remained suppressed for most part of the year due to higher interest rates and incessant rupee devaluation, which had shaken the core of the company’s balance sheet, which largely comprises of both international as well as local loans.

The recovery prospects only got better when the State Bank decided to go for monetary easing, thereby slashing the policy rate by a cumulative 625 basis points in five meetings between mid-March to end-June 2020, from 13.25% to 7%, after taking into consideration the impact of COVID-19 pandemic on the economy.

Moreover, the risks that the company was being exposed to as a result of continuous depreciation in PKR receded after an increase in the reserves of the State Bank along with improvement in the current account deficit.

The company also benefitted from the relief package announced by the Government to combat the impact of COVID-19 pandemic. According to the findings of Insight, PIBTL is said to have received a loan deferral facility from local as well as international lenders. As a result, the company might opt for a loan deferral of Rs. 750 million for June 2020 repayment.

These are just some of the economic factors that have worked in favor of the company. Insight Securities has also put forth company-specific elements, which are likely to contribute to the earnings recovery. These include an increase in demand for coal by power and cement sector, lower exchange loss on foreign debts, better tariff utilization in rupee term due to depreciation of the local currency, and average terminal utilization of 72% despite a country-wide lockdown.

In spite of the above-stated prospects, the company still faces risks that are either uncertain or uncontrollable in the short term. Some of these adverse factors entail lower than estimated tariff utilization, reduced demand for coal, rise in the interest rates, risks of competition from new bulk cargo terminal, and an adverse decision by the competition commission.

Keeping in view the aforementioned factors, the company’s revenue is likely to see a surge of 17% on the back of higher realized PKR/USD during the year. However, the quarterly figures are most likely to witness a decline owing to lower volumes handled, which in turn is an outcome of suspension of cement plant operations during the lockdown phase.

Stability observed in the exchange rate of USD and PKR is also likely to result in a decline in other expenses by around 94%, whereas the finance costs are expected to decline by 22% on account of the loans repaid by the company.

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Posted on: 2020-07-30T17:54:00+05:00