Ayesha Mudassar

Pak Elektron Limited (PAEL) witnessed a decline of 21% and 36.9% in before-and-after-tax profits, respectively, during the first nine months of the last calendar year (9MCY23) compared to the corresponding period of the previous year, reports WealthPK. As per the company's third quarterly report, PAEL posted a pre-tax profit of Rs1.7 billion and a post-tax profit of Rs946 million in 9MCY23.

The lower profit was mainly due to challenging and adverse economic conditions caused by higher raw materials costs, local currency depreciation, a rapid interest rate increase, and high inflation. The company's sales stood at Rs30.6 billion in 9MCY23 as compared to Rs43.3 billion in 9MCY22, representing a 29.3% decline. Furthermore, the cost of sales also declined by 35.5% during the 9MCY23. On the expense side, the company observed a rise in administrative costs primarily due to an upsurge in absolute freight cost amid higher sales volumes in the appliances division. Moreover, the finance cost jumped by 26.7% to Rs2.8 billion on account of higher short-term borrowings.

Quarterly analysis

In the first quarter (January-March) of 2023, PAEL sales decreased 35.7% compared to the corresponding period of CY22. The company's revenue was recorded at Rs8.1 billion in 1QCY23 against Rs12.6 billion in the corresponding period of the previous year. Furthermore, the company experienced a decline of 20.9% and 88% in gross and after-tax profit, respectively, in 1QFY23.

During the quarter under review, the company's operations remained under pressure mainly due to growing inflationary trends, weakening local currency and rising policy rates.

2QCY22 vs 2QCY23

In comparison to 2QCY22, PAEL's financial performance worsened in the second quarter of CY23. The company reported net revenue of Rs12.5 billion, a 32.3% decline compared to the same period last year. The loss in revenue was mainly attributable to import restrictions curtailing the supply side, high inflationary pressures and lower disposable income. PAEL witnessed a decline in profitability mainly due to higher finance costs linked with constant increases in interest rates.

3QCY22 vs 3QCY23

During the third quarter of CY23, the company achieved revenue of Rs9.9 billion as compared to Rs12.07 billion in 3QCY22, representing a decline of 17.8%. However, the gross profit, profit-before-tax and profit-after-tax increased by 18.7%, 44% and 18.1%, respectively, as compared with 3QCY22. Moreover, the company posted earnings per share of Rs0.48 in 3QCY23 as compared to Rs0.46 in 3QCY22.

About the company

Pak Elektron was incorporated in Pakistan as a public limited company in 1956. The company is engaged in the manufacturing and sale of domestic appliances and electrical capital goods. It operates through power and appliances divisions. The power division manufactures and sells transformers, switchgear, and energy meters, as well as engages in engineering, procurement and construction contracting activities. The appliances division manufactures, assembles and distributes refrigerators, deep freezers, air-conditioners, microwave ovens, LED televisions, washing machines, water dispensers and other home appliances.

Credit: INP-WealthPk