Karachi September 2, 2021: The copper prices started to ease off in the month of June and closed at USD 9,385/ton on 30th June 2021, as per information shared by Pakistan Cables. The decrease in prices of copper will increase the profitability of the company.
Copper Prices on London Metal Exchange rallied to a record high of USD 10,724/t in May 2021 surpassing its previous peak set in 2011 as the world economy recovers from COVID-19 slump, surging demand for renewables and a global supply deficit.
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The financial year 2021 has been a challenging year for Pakistan’s economy. The COVID-19 pandemic has been a source of stress and adversity, the world over. Pakistan economy showed its resilience and braced the negative impacts of the global pandemic far better than expected. Market demand started to rebound as a result of the ongoing construction activity due to various policy initiatives undertaken by the government including the Construction Package and activity centered around investment in new plant and equipment through SBPs Temporary Economic Refinance Facility. Furthermore, the State Bank of Pakistan (SBP) kept the Policy Rate unchanged at 7% p.a. throughout the year to provide impetus to the economy.
Commercial activity and industrial demand for Pakistan Cables products continued to remain upbeat during the year on the back of the Construction Package announced by the government. The Company’s top line has shown a remarkable growth of 45% with sales of Rs. 13.1 billion. This is the highest ever sale in the history of the Company. The growth in sales compared to last year is mainly due to higher sales volumes and is also a function of rationalization of prices of our products attributed to the sharp rise in copper prices during the year, which had a spiraling effect on our revenues. Strong sales performance was witnessed in all the segments of wire and cable business.
Gross profit for the year amounted to Rs. 1,526.4 million (11.6 % of sales), compared to last year’s gross profit of Rs. 860.3 million (9.5% of sales). The higher gross profit is attributed mainly due to volume growth and productivity improvement. Marketing, selling and distribution cost for the year amounted to Rs. 519.8 million as compared to Rs. 435.1 million in the last year. The increase is mainly on account of higher carriage and forwarding expenses. Finance cost for the year are Rs. 192.5 million compared to Rs. 283.3 million in the last year. The decrease is due to lower interest rates during the year as compared to last year.
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As a result of the above factors, the Company earned a record profit after tax of Rs. 553.6 million. This resulted in earnings per share of Rs. 15.56 in the current year.
The Company purchased a plot of land in Nooriabad, SITE for the purposes of establishing new manufacturing facilities. Currently work and planning is underway to design and build the new factory in a manner that is environmentally sustainable. The new facility will enable the Company to operate with improved efficiencies and adopt lean approach in its operations.
The scope of Nooriabad project increased post COVID. The Board approved the budget of PKR 6.55 billion out of which PKR 2.2 billion has been incurred
As can be seen from the results of your Company for the outgoing year, the demand for wire and cable has grown post the rebound from the initial COVID shock. The Government of Pakistan has taken several steps to support the growth of the construction industry and the impact of these steps in expected to remain positive going forward. The Company anticipates demand for its products to remain reasonably strong due to ongoing activity in the construction sector, continued interest in renewable energy - in particular solar and the electrification demand for new equipment being purchased by industrial concerns under the Temporary Economic Refinance Facility (TERF). Moreover, as utilities work towards enhancing their grid capabilities, the cable industry should benefit. There is, however, a concern that with a surging fourth wave of COVID, lockdowns and other measures undertaken by the Government could result in a suppression of demand.
The volatility in metals pricing coupled with fluctuations in the value of the rupee against international currencies also creates uncertainty. To a large extent, the Company has been able to pass on the rising prices of copper and the weakening rupee to customers. However, major fluctuations may have an impact on margins going forward.