Karachi September 6 2021: Natural Gas is a crucial input for the operations of EMCO on account of the high-temperature combustion process of its kilns. Under the current pricing regime of using RLNG as the basis for Industrial Natural Gas tariff, fluctuations in the underlying crude oil price and USD to PKR exchange rate has caused significant fluctuations to the Company's Natural Gas input costs. Over the course of the year, the overall upward trend in this cost has exerted a nominal negative pressure on the gross margin during the year.
The Oil & Gas Regulatory Authority (OGRA) set weighted average price of RLNG at USD 13.21 per million British thermal unit (MMBTU) for the month of August 2021 compared to USD 6.4 per MMBTU in the same period last year.
Stock rallied approximately 40 percent since the beginning of the year on improving profitability
During FY21, the Company has made a pretax profit of PKR 279.77 Million and an after tax profit of PKR 201.93 Million. This is the sixth year in continuation that your Company has made profits, despite challenges on account of the continued COVID-19 pandemic. Under the prevailing investment horizon foreseen for the Energy Sector, the current trajectory is expected to be maintained.
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EMCO has been able to achieve its targets effectively. Production of Insulator was recorded at 4,794 tons (96% capacity utilization) during this year as compared to 4,198 tons during last year. During the previous year, production was compromised on account of Federal Government mandated lockdown due to COVID-19.
The market demand for the Insulators continues on a positive trajectory. This trend may be attributed to the Government of Pakistan's efforts to augment and rehabilitate the electricity transmission and distribution network to bring about more efficiency in order to reduce the circular debt. The current orders in hand are more than 5 months of production capacity.
Whilst your Company has undertaken some BMR activity to streamline production, capacity constraints and growing demand has led to delay penalties of over PKR 41.87 Million for the year. We are constantly improving our efficiencies to achieve higher production levels and higher sales volumes. Considering the increasing demand in the energy sector, the Company is planning to invest in additional machinery and to develop new products to add to its portfolio, which would further enhance profitability in the future.
Company has executed a 982kWp Grid tied PV solar power facility that came online in May 2021, which is a testament to the Company's vision for reducing its carbon footprint whilst reducing production power costs by 25%. EMCO is recipient of a substantial grant given by UNIDO for the deployment of this PV solar system. The system is yielding excellent results.
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Direct export sales stood at PKR 34.36 Million in the period under review, including sales to Qatar, UAE, Afghanistan & Turkey. Management is fully committed to enhancing the export base through a push into the further regional and international markets.
EMCO relationships with all banks are current and we are meeting our obligations on time as per agreements.
The Company's contribution to the exchequer in the year under review is PKR 467 Million (PKR 342 Million in last year) in the shape of import duty, sales tax, income tax and other government levies.
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