Since the last two quarters, ICI continues its trend of double digit top line growth, with 31 percent increase (YoY) in its polyester business’s sales contributing to its increase in turnover. ICI’s Life Sciences business, which grew by 29 percent and Chemicals & Agri Sciences Businesses, which grew by 25 percent, also contributed to the substantial increase in turnover.
Though ICI saw a rise in turnover, its Polyester Staple Fibre (PSF) gross margins were squeezed due to higher cost of raw materials for polyester. September this year saw a decline in petrochemical margins with Polyester Staple Fibre (PSF) in particular being hit by higher feed stock prices. The decline in PSF margins by 3 percent on a MoM basis (11 percent decline YoY basis) was due to higher MEG and PTA prices, as per research by Arif Habib Limited. Strong buying in China, higher upstream cost and tight regional product availability drove the higher MEG prices. Similarly, PTA prices were a result of a higher demand for PET and polyester.
Dumping of PSF by China has been an issue faced by the industry for some time. It is one of the reasons because of which ICI’s polyester business continues to face losses. However the levy of anti- dumping duty on Chinese PSF imports have enabled ICI to enjoy a higher demand which has contributed to 82 percent reduction in losses in the polyester business. The polyester business remains the biggest contributor to ICI’s turnover.
The main contributor of the ICI’s improved operating result was the Life Sciences Business which performed well in its pharmaceuticals and animal health divisions. As a whole, the Life Sciences Business resulted in a 53 percent increase in operating profit compared to the same period last year.
In the last financial year, ICI acquired Cirin Pharmaceuticals (Pvt.) Limited which diversified ICI product portfolio and enhanced its manufacturing capabilities. The growth of the pharmaceutical division indicates that ICI’s focus on capitalizing the manufacturing capacity of Cirin and leveraging its sales network and marketing capabilities is paying off.
Other investments in the pharmaceutical division made last financial year include ICI’s partnership with Ferrer and Smith & Nephew and the acquisition of some assets and key brands of Wyeth Pakistan Limited. However, exchange rate losses eroded margins particularly in the Life Sciences Business where prices of pharmaceutical products are capped by the Ministry of Health.
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