Shams ul Nisa

Agha Steel Industries Limited experienced a notable 18.3% decline in net profit, which dropped to Rs125.238 million during the first quarter (July-September) of the current fiscal year 2023-24 from Rs153.322 million in 1QFY23. Exchange rate fluctuations, record high inflation, high interest rates and energy prices dented the firm’s profitability. However, during the period under review, the net turnover increased to Rs5.25 billion, 11.7% higher than Rs4.7 billion registered in the same period last year.

Similarly, the gross profit expanded by 18.68% to Rs1.209 billion in 1QFY24 from Rs1.018 billion in 1QFY23. As a result of increased turnover and gross profit, the company’s gross profit margin moved up to 23.02% in 1QFY24 from 21.66% over the corresponding period of FY23.

However, the company’s administrative expenses and operating profit went down substantially by 14.77% and 44.11% during the period under review. Import restrictions resulted in raw material shortages, forcing the company to scale down operations and in turn leading to lower production volumes and sales. Consequently, the profit-before-tax contracted 14.22% to Rs160.78 million in 1QFY24 from Rs187.45 million in 1QFY23. The company registered an earnings per share of Rs0.21 in 1QFY24 as compared to Rs0.25 in the corresponding period last year.

Historical trend

The company’s sales showed an upward trajectory from 2020 to 2022. However, in 2023, the sales plunged to Rs20.58 billion from Rs25.64 billion in 2022. The company posted the highest profit-after-tax of Rs2.035 billion in 2021 and the lowest of Rs903.89 million in 2023. Similarly, the company posted the highest EPS of Rs3.62 in 2021 and the lowest of Rs1.5 in 2023.

Profitability ratios analysis

In 2020, Agha Steel Industries Limited posted the highest 25.3% gross profit margin, which was mainly on account of higher sales. However, its gross margin reduced to 22.67% in 2021 and further to 21.41% in 2022, but increased to 23.42% in 2023. The net profit margin increased to 10.25% in 2021 from 9.2% in 2020, but fell to 7.23% in 2022 and further to 4.4% in 2023.

The company’s EPS growth remained negative at -15.19% and -51.14% in 2022 and 2023, respectively, despite gaining a value of 22.3% 2021. Price-earnings growth followed a similar pattern with a positive value of 0.42 in 2021 and negative values in 2022 and 2023.

Credit: INP-WealthPk