Amreli Steels’ profit surges 17%

Amounts to Rs256m during Oct-Dec

KARACHI: Amreli Steels Limited (ASTL) has posted net earnings of Rs256 million in the second quarter of the ongoing fiscal year, up 17% compared with Rs218 million in the same period of the previous year, according to the company notice sent to the Pakistan Stock Exchange (PSX).

Earnings per share (EPS) during the October-December period slightly declined to Rs0.86 from an EPS of Rs0.88 in the period under review.

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According to a AKD Securities report, the earnings were above expectations of Rs144 million (or an EPS of Rs0.49) owing to better than expected topline (likely due to improved dispatches) and gross margins (likely due to lower than expected average scrap prices and higher than expected re-bars prices).

This took the first-half (Jul-Dec) earnings to Rs482 million (an EPS of Rs1.62), down 12% year-on -year.

ASTL share price closed at Rs83.80, down 1.7% on Thursday while KSE-100 index closed at 49,665, up 210 points or 0.42%.

The company revenue jumped by 65% year-on-year to Rs3.34 billion in the second quarter of 2016-17 owing to improved dispatches during the period where the dispatches in the second quarter of 2016-17 remained dismal due to no cut in re-bars prices amid significant pressures from cheaper Chinese re-bars imports, the report added.

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However, change in pricing strategy to be more competitive caused gross margin to contract by 13.65 percentage points year-on-year to 17.23% in the second quarter of fiscal year 2016-17.

This resulted in gross profit to go down by 8% year-on-year to Rs576 million in the in the second quarter of 2016-17.

However, a 52% year-on-year reduction in finance cost to Rs55 million (owing to debt repayments) lifted pre-tax/after-tax earnings by 13% year-on-year/18% year-on-year to Rs330 million/Rs256 million in the second quarter of 2016-17.

Sequentially, topline improved by 4% year-on-year likely due to surge in dispatches where GM went up 2.79 percentage points quarter-on-quarter due to likely absence of trading re-bars (low margin segment), resulting in gross profit going up 24% quarter-on-quarter.