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DS Industries Limited’s net sales and profit continued to grow over the first three quarters of the last fiscal year 2022-23 thanks to the reduction in both direct and indirect business costs. In the first quarter (July-September) of FY23, the company posted moderate sales of Rs736,607, which translated into a gross loss of Rs39,232. During this quarter, the operating profit, profit-before-taxation and net profit stood at Rs1.2 million, Rs1.039 million and Rs827,023, respectively.

The company attributed this positive growth in profits to the reduction in both direct and indirect business costs. DS Industries is a public limited company and is part of DS Group. The company's principal activity is manufacturing and selling yarn.

In the second quarter (October-December), the company’s net sales jumped to Rs6.7 million. During this quarter, the company posted a gross profit of Rs3.17 million, operating profit of Rs3.4 million and profit-before-tax of Rs2.4 million. DS Industries’ net profit stood at Rs1.86 million in 2QFY23. In the third quarter (January-March), the company’s net sales further increased to Rs9.35 million. During this quarter, the company’s gross and operating profits, however, decreased to Rs2.69 million and Rs2.44 million compared to the previous quarter.

The before-tax profit witnessed a slight increase to Rs2.6 million and net profit surged to Rs2.2 million. The company observed a rise in earnings per share from Rs0.01 in 1QFY23 to Rs0.02 in 2QFY23 and to Rs0.03 in 3QFY23.

Asset analysis

As of June 2022, the company’s non-current assets totalled Rs189.16 million, which marginally decreased to Rs187.8 million on March 2023, posting a negative growth of 0.72%. This slight reduction is due to currency depreciation during the period.

DS Industries’ current assets decreased significantly by 18.37%  from Rs166.8 million on June 2022 to Rs136.2 million on March 2023. This decrease in non-current and current assets resulted in a decline of 8.99% in total assets.

Equity and liabilities analysis

The company’s non-current liabilities stood at Rs245,344 on March 2023 compared to Rs592,891 million on June 2022, constituting a significant decline of 58.62%. This reduction indicated that the company paid off its long-term obligations.

Similarly, current liabilities, total equity and liabilities reduced by 23.77% and 8.99%, respectively, showing the company had less liquidity and faced financial risks.

Cash flow analysis

The company’s cash used for operating activities increased significantly from Rs9.4 million in March 2022 to Rs24.97 million in March 2023. This shows that the company’s cost of operations increased over the period because of the rising inflation and currency depreciation.

In March 2023, the company used Rs50,000 cash in investing activities compared to Rs4.16 million generated from investing activities in March 2022. Likewise, cash flow of Rs18.5 million was recorded in March 2023 for financing activities compared to Rs8.9 million generated from financing activities during March 2022. The company recorded a big net increase in cash and cash equivalent as it rose to Rs86.24 million on March 2023 from just Rs856,235 on March 2022.

Historical analysis (net sales)

From FY19 to FY22, DS Industries exhibited a decreasing trend in net sales except for FY21. In FY19, the net sales of Rs581.7 million were the highest. The lowest net sales of Rs15.9 million were recorded in FY22. In FY20 and FY21, the net sales stood at Rs117.7 million and Rs133.97 million.

On the other hand, DS Industries managed to bring down the net losses considerably from FY19 to FY21 and eventually recorded a net profit of Rs28.6 million in FY22. From FY19 to FY21, the company recorded net losses of Rs81.53 million, Rs33.48 million and Rs9.67 million.

Credit: INP-WealthPk