Shams ul Nisa

Archroma Pakistan Limited recorded a growth of 19.3% in its net sales but its profitability fell substantially by 34% during the financial year 2022-23 compared to the earlier fiscal. The company effectively managed its core operations despite lower production and capacity utilisation. Its sales increased because of growth in paper, packaging and coatings business. As a result, the company registered its highest-ever sales of Rs30 billion in FY23 compared to Rs25.15 billion in FY22. A net profit of Rs1.244 billion was registered in FY23 compared to Rs1.88 billion in FY22. The factors that drove this decline in profit were the high borrowing costs, currency devaluation and increase in taxation.

The gross profit inched up by 3.43% to Rs7.467 billion in FY23 from Rs7.22 billion in FY22. However, the gross margin dropped to 24.88% in FY23 compared to 28.71% the previous year. The company attributed the decline in gross profit margin to the significant devaluation of Pakistani currency and increasing raw material prices. On the expense side, the company saw an increment of 18.15% in distribution and marketing expenses and 22.36% in administrative expenses during the period under review. Profit-before-taxation dropped to Rs2.24 billion in FY23 from Rs3.13 billion in FY22, indicating a decline of 28.57%. Similarly, the net profit margin stood at 4.15% in FY23 against 7.49% in FY22. The earnings per share (EPS) of the company dropped to Rs36.47 in FY23 from Rs55.25 in FY22.

Historic analysis

Archroma Pakistan Limited’s sales have kept increasing over the years. The sales rose from Rs15.038 billion in 2020 to the highest of Rs30.012 billion in 2023. The profit-after-tax rose to Rs2.309 billion in 2021 from Rs1.169 billion in 2020 and then declined to Rs1.885 billion in 2022 and to Rs1.244 billion in 2023. A similar pattern was followed by earnings per share, which registered the highest value of Rs67.69 in 2021 and the lowest of Rs34.27 in 2020.

Profitability margins

In 2022, Archroma Pakistan Limited posted the highest gross profit margin of 31.1% and the lowest of 24.88% in 2023. The company witnessed the highest net profit margin of 11.62% in 2021, and the lowest of 4.15% in 2023. During 2020, 2022, and 2023, the company’s earnings per share growth remained negative at -32.11%, -18.38%, and -33.99%, respectively. Only in 2021, the company registered a positive EPS growth of 97.52%. Similarly, price-earnings growth ratio stood at -0.52 in 2020 and -0.54 in 2022.

Liquidity ratio analysis

The company’s current ratio remained above 1.2 over the years, indicating a positive liquidity position. This means that the company could easily cover its current liabilities using current assets. The quick ratio was quite stable over the period, ranging from 0.74 to 1.26. The company’s cash-to-current liabilities ratio varied over the years, fluctuating between 0.01 and 0.23.

Credit: INP-WealthPk