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Ghani Glass Limited (GGL) is grappling with major financial challenges driven by rising taxes and an overall economic slowdown, reports WealthPK.

Pakistan's economy is under significant strain from soaring energy costs, reduced industrial activity, and an increasing tax burden. The recent removal of tax credits for industries has further compounded the difficulties for companies like GGL, highlighting the mounting obstacles faced by businesses across the country.

In the first quarter of the fiscal year 2024-25, GGL experienced a notable decline in financial performance, with net revenue dropping to Rs8.9 billion from Rs11.8 billion in the same period of the previous year. This decline reflects a troubling trend of decreasing sales and profitability, threatening the company's operational sustainability.

Furthermore, GGL grappled with significant financial pressures as its gross profit for the quarter dropped from Rs2.9 billion to Rs2.2 billion, while net profit fell from Rs1.4 billion in 1QFY24 to Rs928 million in 1QFY25. Additionally, earnings per share decreased from Rs1.40 to Rs0.93 during the period under review. These figures highlight the mounting challenges GGL faces in managing escalating costs and maintaining profitability amidst an increasingly unfavourable economic climate.

Additionally, challenging tax environment continues to strain businesses in the country, with GGL facing the impact acutely. The company's management has warned that the steep rise in taxes, coupled with the removal of key tax incentives, has made the business model increasingly unsustainable for industries like glass manufacturing. The GGL's effective tax rate has surged, significantly denting its profitability and curtailing its capacity to reinvest in growth and innovation.

In addition to its tax-related challenges, GGL is facing several operational hurdles that are further straining its financial position. Rising energy costs have driven up production expenses, squeezing already tight profit margins. The slowdown in industrial activity has also weakened demand for glass products, making it harder for the company to sustain revenue levels. These combined challenges have created a tough environment for GGL, making it increasingly difficult to maintain profitability.

However, GGL is implementing strategic measures to tackle the challenges posed by rising costs, declining revenues, and an increasingly unfavourable tax environment. The company is focusing on cost reduction, operational efficiency and diversification of its product portfolio to reduce reliance on traditional glass products and tap into new markets. GGL is also advocating for industry-friendly tax reforms to support sustainable growth.

While management remains cautiously optimistic about recovery, the company continues to face significant hurdles. GGL's challenges in the broader context of the difficulties confronting the manufacturing industry highlight the urgent need for strategic adjustments and timely policy support to ensure its survival and growth.

Credit: INP-WealthPk