Shams ul Nisa

Waves Cooperation Limited experienced a significant decline in sales and net profits in the first half of the ongoing calendar year 2023 compared to the corresponding period of last year. The net sales of the company plummeted to Rs2.94 billion in 1HCY23 from Rs7.14 billion in 1HCY22. This decline is a result of a shortfall in raw material supply because of strict import measures imposed by the government to stem the outflow of dollars. The company thus switched to domestic resources, resulting in low production of goods.

During 1HCY23, the company’s gross profit, which is the difference between revenue and cost of goods sold, dropped to Rs760.9 million from Rs1.47 billion in 1HCY22, a fall of 48.5%. This decline shows that the company faced increased costs related to its core operations, such as increased prices of parts of appliances, that suppressed the growth in revenue. The company’s gross profit margin stood at 25.84% in 1HCY23 against 20.70% in 1HCY22.

Similarly, the net profit experienced a significant decline of 61.5% to Rs169.01 million in1HCY23 from Rs438.6 million in 1HCY22. This is attributed to the economic challenges and difficult financial environment that caused decline in both supply and demand of goods in the market. The net profit margin that measures the profit as a percentage of revenue fell to 5.74% in 1HCY23 from 6.14% in 1HCY22. This was caused by increased costs, taxes and market conditions. The company’s earnings per share (EPS) dropped from Rs1.56 in 1HCY22 to Rs0.6 in 1HCY23.

2QCY23 compared with 2QCY22

During the 2QCY23, the company’s sales and net profits declined compared to the same period last year. The net sales faced a downward growth of 58.3% in 2QCY23 to Rs1.6 billion from Rs3.8 billion in 2QCY22, indicating the company’s revenue generation strength declined during this period. As a result of import curbs on raw materials, the company faced a major decline of 43.8% in its gross profit as this profit declined to Rs418.2 million in 2QCY23 from Rs743.6 million in 2QCY22. The company had to switch to domestically-produced raw materials to make goods. The gross profit margin grew from 19.34% in 2QCY22 to Rs26.10% in 2QCY23. This shows that company managed better controls over cost of the goods sold during the period.

The company’s net profit significantly declined by 54.5% to Rs150.7 million in 2QCY23 from Rs331.1 million in 2QCY22.

The net profit margin rose slightly to 9.41% in 2QCY23 from 8.61% in 2QCY22.

The earning per share declined to Rs0.54 in 2QCY23 from Rs1.18 in 2QCY22.

EPS growth (%) analysis

The trend in percentage growth of earning per share of Waves Corporation Limited shows significant fluctuation from 2019 to 2022. The company’s profitability changed substantially during this time, resulting in notable changes in EPS growth. The EPS growth percentage stood at negative 31.86% in CY19, and steeply fell to negative 240.29% in CY20. This can be attributed to Covid-19 pandemic-induced lockdowns.

However, in the subsequent year (2021), the company’s EPS growth rebounded and stood at 83.59%, reflecting the outstanding economic management of its core activities to earn notable revenues. The company maintained the momentum as EPS growth had a massive jump to 296.88% in CY22.

Company’s profile

Waves Corporation was incorporated in Pakistan under the now repealed Companies Ordinance, 1984, as a public limited company. It was formerly known as Waves Singer Pakistan Limited. The firm is a manufacturer and assembler of domestic consumer appliances along with retailing and trading of the same and other light engineering products. The domestic appliances include air conditioners, deep freezers, microwave ovens, refrigerators, washing machines, sewing machines, water dispensers and water heaters.

Credit: INP-WealthPk