Chemical maker Archroma Pakistan Limited's (APL) net sales increased by 8.3% to Rs21 billion in the nine months ending on June 30, 2023 from Rs19.4 billion over the same period of the previous year. The company’s fiscal year ends in September. The firm attributed this increase to the rise in textile effects sales and paper, packaging and coating revenue. However, the profit-after-tax fell 38.4% to Rs903 million during the period under review from Rs1.46 billion previously. This was due to the increased cost of borrowings, foreign exchange losses, and high taxes imposed on the corporate sector by the government. Consequently, the net profit margin diminished to 4.29% from 7.56% earlier. Despite the increase in sales, the company’s gross profit contracted slightly to Rs5.43 billion from Rs5.59 billion during the two comparable periods. This was due to rising cost of energy and high commodity prices. Additionally, the severe devaluation of the local currency caused raw material import prices to increase, pushing the company’s gross profit margin down to 25.83% from 28.79% earlier.

During this period, the company’s distribution and marketing costs stood at Rs2.17 billion, 8.62% greater than Rs1.99 billion over the same period last year. The main factors behind this surge included prevailing macroeconomic challenges and increased prices due to the Ukraine crisis and devastating floods at home. Similarly, the administrative expenses increased by 30.28% from Rs4.53 million to Rs5.91 million. Hence, the company’s profit-before-tax shrank by 39.71% from Rs2.58 billion to Rs1.55 billion. The earnings per share stood at Rs26.47 compared to Rs43 previously.

Assets analysis

APL’s non-current assets showed a marginal decline of 0.66% from Rs1.967 billion in September 2022 to Rs1.954 billion in June 2023. However, the company saw a remarkable growth of 61.07% in current assets, which reached Rs16.79 billion in June 2023 against Rs10.4 billion in September 2022. This significant rise is because of an increase in stock in trade, trade receivables, trade deposits, and short-term prepayments. This increase in current assets offset the decrease in non-current assets and pushed total assets to Rs18.75 billion in June 2023, which was 51.27% higher than Rs12.39 billion in September 2022, indicating the company is financially healthy.

Equity and liabilities analysis

As of June 2023, the company’s non-current liabilities stood at Rs346.4 million as compared to Rs290.06 million in September 2022, reflecting a rise of 19.43%. This is because the company witnessed a rise in lease liabilities and liabilities against diminishing Musharika financing during the period under review. Similarly, the company declared a growth of 72.94% in current liabilities, which jumped to Rs14.4 billion mainly driven by significant expansion in trade and other payables and short-term borrowings. Thus, the company’s total equity and liabilities stood at Rs18.75 billion at the end of June 2023, which is 51.27% higher than Rs12.39 billion in September 2022.

Historical trend

The company’s net sales followed an upward trajectory from Rs15 billion in 2020 to Rs30 billion in 2023. However, the gross profit margin grew from 27.96% in 2020 to 31.1% in 2021, but declined in the following years, reaching 24.88% in 2023. Similarly, the net profit recorded the highest value of Rs2.3 billion in 2021 and the lowest of Rs1.16 in 2020. The net profit margin declined to 4.15% in 2023 from 7.77% in 2020.

Credit: Independent News Pakistan (INP)