Shabbir Tiles and Ceramics Limited (STCL) held its corporate briefing session yesterday to discuss its financial results for the year ended June 30, 2020, and future roadmap. To recall, the company reported loss of PKR 0.33Bn (LPS: PKR 1.36) in FY20, as against profit of 0.23Bn (EPS: PKR 0.98) in FY19.
As per the management, total market size during FY20 was estimated to be around 57.0Mn SQM with STCL having a market share of 14% (8.0Mn SQM), and other local competitors having a market share of 74% (42.0Mn SQM). On the other hand, imports and smuggled tiles formed 12% (7.0Mn SQM) of the total market share.
The company recorded production of 8.11Mn SQM during FY20 as opposed to 10.35MN SQM in FY19, down by 21.64% YoY. The decline in production was mainly on account of plant shutdown due to COVID-19 related lockdown.
Net revenue witnessed a decline of 6.62% YoY to clock-in at PKR 6.47Bn. Broadly, the company is engaged in manufacturing of 3 types of tiles: 1) Ceramic tiles, 2) Porcelain tiles and 3) Vitrified tiles. Ceramics tiles form the largest segment with 80% contribution to the total revenue.
The decline in profitability was primarily on the back of rise in gas tariff by 31% YoY and upsurge in freight cost due to axle load restrictions. As a result of these cost pressures, gross margins witnessed a decline of around 6.31ppts to 16.94% during FY20.
Additionally, the company is also taking a hit due to changes in sales tax regime with the inclusion of ceramic tiles in the third schedule of Sales Tax Act 1990.
During 1QFY21, the company posted a turnaround in profitability with PAT of PKR 0.15Bn (EPS: 0.61) as against LAT of PKR 0.21Bn (LPS: PKR 0.87). Net Revenue during the period improved by 2.56x times to PKR 2.31Bn.
Going forward, the company mentioned that with the announcement of construction package, the company is expecting a growth of 15% in the coming year. Key risks include the shortage of gas during winter season and impact on demand with resurgence in COVID-19 cases.
(BMA Capital Management Ltd).