KARACHI: Despite recording almost double sales, Amreli Steels Limited’s profit plunged 67.2% to Rs107.7 million in the second quarter ended December 31, 2018, according to a company notice sent to the Pakistan Stock Exchange.
The company had reported earnings of Rs328.6 million in the same period of previous year.
Earnings per share (EPS) of Amreli Steels came in at Rs0.36 in the Oct-Dec 2018 quarter against Rs1.11 in the quarter ended December 31, 2017. Sales stood at Rs6.4 billion in the second quarter of FY19, 1.8 times higher than Rs3.5 billion in the same quarter of 2017. Despite the handsome revenue, the company could not increase its profit.
“This was due to decrease in gross profit margins by 900 basis points year-on-year and increase in finance cost by 2.56 times year-on-year,” said Topline Securities.
The company’s stock closed at Rs45.56, down Rs2.39 with trading in 920,500 shares on Thursday. The KSE-100 index closed at 39,054.60 points, up 361.91 points.
The steel producer posted gross profit of Rs617 million in Oct-Dec 2018 against Rs654.8 million in the same period of previous year.
On a half-yearly basis, net profit remained almost flat at Rs516.3 million for the period ended December 31, 2018 against Rs524.4 million in the same period of 2017. EPS stood at Rs1.74 against Rs1.77 last year.
The company recently installed a new plant of 400,000 tons, which lifted its total production capacity to 600,000 tons due to which the output of Amreli Steels remained higher, according to Taurus Securities’ analyst Adnan Sami Sheikh.
“However, 32% rupee depreciation since December 2017 restricted the growth in its profit according to sales,” he said. “The steel industry imports scrap and other raw material, which comes in dollar and increases their financial cost.”
Last year was the election year, which helped companies increase their bottom line.
This year, the government has cut the Public Sector Development Programme (PSDP), which played an important role in bringing down profitability of the company, he said.
Published in The Express Tribune, March 1st, 2019.
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