Ahmed added that when an industry or company lost its pricing power, its profitability was negatively affected.
PHOTO:FILE
The company posted a profit of Rs4.3 billion for the year ended June 30, 2018 compared to last year’s earnings of Rs3 billion. The board of directors recommended a cash dividend of Rs3 per share. According to a Topline Securities’ report, the rise in profit came on the back of higher sales and lower effective tax rate.
Revenues of the company increased 41.17% from Rs33.7 billion last year to Rs47.6 billion in fiscal year 2018. The effective tax rate was 25% in FY18, which had been 34% in the previous year. The reduced tax rate also contributed to the significant hike in earnings.
The steel manufacturer reported a five-year high return on equity at 40%. In financial year 2017, it stood at 36%.
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However, gross margins dropped from 17.5% to 15.9% this year due to increase in hot-rolled coil (HRC) prices, an imported raw material in the steel industry, and rupee depreciation against the US dollar.
In the fourth quarter of FY18, the company reported earnings per share of Rs2.6, demonstrating an increase of 10% on a year-on-year basis as net sales increased 43%.
“We believe effective tax rate of the company during the quarter stayed around 12% due to availability of tax rebates on recent capital expenditures,” Topline Securities reported.
“Although the company has reported volumetric growth, it has been unable to translate it into similar gross margins, which has actually contracted,” Elixir Securities’ Sharoon Ahmed told The Express Tribune.
“The reason behind this is that the company has been unable to pass on the impact of cost increase to buyers by raising prices.”
Ahmed added that when an industry or company lost its pricing power, its profitability was negatively affected.
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Almost three million shares of International Steels were traded during the day at the Pakistan Stock Exchange, the highest in the sector, and its stock value fell 2.3%.
Published in The Express Tribune, August 16th, 2018.
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