Shams ul Nisa

Shabbir Tiles & Ceramics Limited (STCL) reported a 19.2% increase in revenue for the fiscal year 2023. The company earned Rs14.18 billion, compared to Rs11.89 billion in the previous year.The company attributed this increase in revenue to the transition towards higher-margin products and the adoption of cost-effective strategies. Despite the uptick in revenue, the gross profit of the company fell slightly by 0.26% to Rs2.98 billion in FY23 from Rs2.99 billion in FY22. Throughout the fiscal year, the supply of natural gas fluctuated and a significant upturn in diesel prices caused the surge in the cost of production. As a result, the gross profit margin declined to 21.06% in FY23 from 25.17% in FY22.

The restrictions on imported raw material and spiraling inflation increased the administrative expenses to Rs386.6 million in FY23, which was 15.14% higher than Rs335.8 million in FY22. During this period the company closed its core operations of tiles manufacturing, which curtailed its production. Consequently, the operating profit dropped  to Rs648.2 million in FY23, a substantial 46.80% decline from Rs1.2 billion in FY22. During this period, the floods in August 2022 caused widespread damage, the Russia-Ukraine war crisis drove up commodity prices, and the lack of external and domestic financing constrained the economic recovery.. That had also a bearing on the company’s profit-before-tax, which plunged to Rs304.5 million in FY23 from Rs1 billion in FY22, posting a negative growth of 69.75%.

Similarly, the net profit plunged by 92.4% to Rs37.6 million in FY23 from Rs497.3 million in FY22. This is because of multiple factors such as the limited production of tiles and ceramics, increased manufacturing and freight costs because of devaluation of the home currency and reliance on expensive fuels due to reduced gas supply. Hence, Shabbir Tiles & Ceramics’ net profit margin fell to 0.27% in FY23 from 4.18% in FY22.   Earnings per share dropped from Rs2.08 in FY22 to Rs0.16 in FY23.

Assets analysis

Despite the decline in profitability, Shabbir Tiles & Ceramics managed to invest in current and non-current assets during FY23. The company saw a marginal rise of 0.73% in its non-current assets, but a robust 32.89% growth in current assets. In FY23, the company’s total assets stood at Rs8.85 billion, which was 17.07% higher than Rs7.56 billion in the previous fiscal year.

Equity and liabilities analysis

During FY23, the company’s shared capital and reserves stood at Rs2.7 billion, which was 5% lower than the Rs2.8 billion in FY22. The company’s non-current liabilities inched up to Rs884.9 million in 2023 from Rs832.2 million in 2022, posting a growth of 6.33%. The company surged by 35.50% in current liabilities, which went up to Rs5.26 billion in FY23 from Rs3.88 billion in FY22. This shows that the company’s borrowing increased during the period to finance its core operations. Thus, the company observed an increase of 17.07% in total equity and liabilities.

Historical analysis

The company’s net turnover grew from Rs5.7 billion in 2018 to Rs6.9 billion in 2019, but fell slightly to Rs6.4 billion in 2020. However, it increased to Rs9.9 billion in 2021, to Rs11.8 billion in 2022, and to Rs14.1 billion in 2023. The gross profit fluctuated over the years, but grew overall from Rs1.25 billion in 2018 to Rs2.98 billion in 2023. Whereas, administrative expenses followed an upward trajectory over the years. The company's profit-before-tax increased from Rs247.1 million in 2018 to Rs304.5 million in 2023. However, in 2020 a loss of Rs280.8 million was recorded. The highest pre-tax profit of Rs1.44 billion was recorded in 2021. The net profit declined substantially from Rs194.4 million in 2018 to Rs37.6 million in 2023.

Credit: INP-WealthPk