NCL company posted a Loss of PkR1.7bn

Nishat Chunian Limited (NCL) posted its 2QFY23 financial result earlier today, wherein the company posted a Loss of PkR1.7bn (LPS: PkR7.1)—substantially lower than our estimates of a loss of PkR0.19/sh. For 1HFY23, the company posted a loss of PkR1.8bn or PkR7.7/sh.

·         The lower than estimated earnings during the quarter can be attributed to the substantial drop in gross margins in 2QFY23, clocking in at 2%, compared to 11.2%/22.7% in 1QFY23/2QFY22, respectively. This is likely being driven by the procurement of cotton at higher rates during the quarter.

·         Net Sales for the quarter clocked in at PkR14.4bn, lower by 5%QoQ. The sequential dip in sales was expected as a result of the lower export orders garnered during the three-month period, as evident by the 9.8%QoQ dip in textile exports as reported by the PBS.

·         Earnings were further dented by the higher-than-anticipated finance costs, which increased by 47%QoQ to PkR1.4bn in 2QFY23. This can be attributed to increased interest rates in the country, along with increased short-term borrowing requirements for working capital needs.

·         The company was able to keep its overheads in check, with the distribution and admin expenses dropping from 3.7% of net sales in 1QFY23 to 3.2% of net sales in 2QFY23.

·         NCL posted an operating loss of PkR118mn for the quarter, compared to the earlier quarter’s profit of PkR993mn.

Courtesy – AKD Research

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