Pakistan chemical sector profitability on the rise

The chemical sector’s profitability jumped up by 4.7x YoY during 4QFY21. The rise in profitability is triggered by higher gross margins due to higher PVC and PTA margins.

EPCL: During 2QCY21 the company posted a profit after tax (PAT) of PKR 3,122mn (EPS: PKR 3.44), up by 105x YoY compared to PKR 30mn (EPS: PKR 0.03) during SPLY. On QoQ basis, earnings declined by 25%. During 1HCY21, the earnings reached PKR 7,265mn (EPS: PKR 7.99), up by 33x YoY. Net sales witnessed an increase of 155% YoY to settle at PKR 14.8bn during 2QCY21, which is mainly attributable to low base of production during 2QCY20, while PVC prices are up 55% YoY. Gross margins of the company went up by 25pps YoY to 35.2%. The rise in gross margins is witnessed due to 115% YoY rise in international PVC margins.

LOTCHEM: During 2QCY21, the company posted a profit after tax (PAT) of PKR 963mn (EPS: PKR 0.64), up by 48x YoY compared to PKR 20mn (EPS: PKR 0.01) during SPLY. On a QoQ basis, earnings went down by 41%. This takes 1HCY21 earnings to PKR 2,602mn, (EPS: PKR 1.72) compared with loss of PKR 83mn (LPS: PKR 0.06) during 1HCY20. Net sales went up by 268% YoY to PKR 16.3bn, which is mainly attributable 165% higher production to 133K tons, while PTA prices were also 64% higher than last year same period. Gross profit margins of the company stood at 10.1% compared to a loss during 2QCY20. The rise in gross margins is witnessed due to 17% YoY rise in PTA margins. Other income went up by 11% YoY to PKR 309mn during 2QCY21 due to higher levels of short term investments.

ICI: During 4QFY21 the company posted a profit after tax (PAT) of PKR 990mn (EPS: PKR 10.72), up by 4.6x YoY compared to PKR 215mn (EPS: PKR 2.33) during SPLY. This surge in profitability is due to the government provided special incentives to industries in terms of construction package, reduction in financing rates to kick start economic activity and strong financial support by central banks helped economic activity to came on growth track. On a QoQ basis, earnings decreased by 50%. During 4QFY21, net sales increased by 56% YoY to PKR 16,681mn (-6% QoQ), on the back of higher sales across all segments. Gross margins of the company went up by 237bps YoY to 21% during 4QFY21, while on QoQ basis they went down by 470bps. Higher gross margins were owed to better performance of Polyester, Pharmaceutical and Animal Health segments. While on QoQ basis, lower margins were witnessed due to 16% QoQ rise in coal prices to an average of USD 104/ton. Finance costs of the company went down by 48% YoY to PKR 234mn due to lower interest rates.

Profitability of COLG and ARPL also went up by 8% YoY and 671x YoY during 4QFY21, respectively. Higher profitability is attributed to lockdown during the same period last year.

Courtesy – AHL Research

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