Another firm suspends operations

As Pakistan continues to count its economic casualties amid the non-availability of foreign financing to import raw material, Diamond Industries has suspended production until the “availability of raw material”.

“Due to adverse economic conditions in the country and the non-availability of imported raw material, the company has suspended its manufacturing operations for a short term with effect from Tuesday, January 10, 2023 until further notice, subject to availability of raw material in the country,” Diamond Industries Company Secretary Zahoor Ahmad said in a notification sent to the Pakistan Stock Exchange (PSX) on Tuesday.

Diamond Industries, the manufacturer of a popular brand of foam, claims to own over 25% of the total market share among 20 recognised and unrecognised foam manufacturers.

“The installed capacity of the plant is over 12,000M tonnes per annum,” it posted. The principal activity of the company is to manufacture and sell foam products and PVA products consumed in the industry and domestically.

After remaining closed for quite a long period due to court litigation, the company resumed its core manufacturing operations on May 1, 2021. The management of the company was planning to expand its business operations and was in the process of arranging “new financing facilities” for the company. According to the company’s 2022 Annual Report, published only three-months ago in October 2022, the company was taking necessary measures to expand its market share by stretching its business operations to maximise its shareholders’ wealth.

The sharp devaluation of the Pakistani rupee against the US dollar price, and the sharp increase in the price of power and fuel, has forced the company to square its profit margins in future.

In the quarter ended on September 30, 2022, the company had earned a net profit of Rs12.64 million compared to Rs9.15 million earned in the same quarter of the previous year.

Pakistan’s foreign exchange reserves have depleted to mere 25-day import cover at $4.56 billion at present, compared to $20 billion some 17 months ago in August 2021. The lack of foreign exchange has forced the government to limit its imports to essential goods like foods, medicines and energy.

In the middle of this, however, the government has reportedly approved the import of 165 high-end cars – at a time when major industrial units are reporting closures one after the other. Industrialists have decried the fact that they are not being facilitated with even $5,000 worth of imports.

Pakistan’s financial health is declining fast amid a suspension of the International Monetary Fund (IMF) loan programme. While the government has sought some moderations in the tough conditions placed on the country by the lender – the lending institution has, however, asked the country to stick to the plans agreed upon.

Published in The Express Tribune, January 11^th, 2023.

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