PIBTL: The tide is turning

April 13, 2021 (MLN): After having a bumpy ride for a couple of years, tides have turned in favor of Pakistan International Bulk Terminal (PIBTL)- the Country’s first terminal for handling Coal, Clinker, and Cement BOT basis at Port Qasim Authority as it has achieved a utilization level of around 80% in nine months of FY21.

This has paved the way for capacity expansion as the company is expected to achieve a utilization level of over 95% in the two years due to the strong demand from the local cement and power industry.

“It would be no surprise for us if the company go ahead with the expansion plan to enhance its handling capacity by 4.0Mn to 16.0Mn tons given the increased demand from the cement industry,” Syed Ali Ahmed Zaidi, Senior Analyst at BMA Capital said.

In 2QFY21, the company was able to achieve a utilization level of 98%, however, higher imports in 1HFY21, given the expected rise in coal prices amid supply chain disruption, led to the decline in cargo handling in 3QFY21.

Going by the BMA’s report, the expansion should cost around Rs8.5 billion ($50 million for 10-acre land and $6 million for equipment) and may be financed through a combination of 50% debt and 50% equity due to the higher debt to equity ratio of 85%

With respect to the financial performance of the company, the report projected that the exchange gain of Rs323 million on US-denominated debt amid Rupee appreciation would support PIBTL’s earnings in 3QFY21 as this would compensate for the decline in cargo handling during the said quarter.

The gross margins of the company are likely to remain subdued on account of USD denominated handling charges and the overall decline in handling cargoes.

Going forward, the company will be benefitted from the resumption in economic activities and dividend initiation post repayment of long-term. Moreover, in the near term, the decline in both domestic and international borrowing rates due to the outbreak of COVID-19 would likely keep PIBTL’s profitability intact.

On the other hand, suspension of a court order which restricts coal handling at KPT and delay in expansion would be a threat to the company’s profitability, the report cited.

In addition, dollar depreciation post repayment of the foreign debt would remain the downside risk to PIBTL as it would dent its revenue due to USD denominated handling charges.

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