Similar to past trends, ICI's top-line was led by the polyester division which increased by 27 percent and soda ash business which grew by 43 percent YoY. However growth was partially offset by lower revenues in life sciences and chemicals & agri science businesses that together dragged down the bottom line.
Higher unit margins led to polyester divisions profits increasing by 993 percent. Local demand has been increasing lately as textile sector improves while restricted regional supply for PSF led to its manifold increase in profitability.
Soda ash business registered a 25 percent increase in profitability on the back of plant expansion in the third quarter last year which enhanced volume by 75,000 tons. Increase in capacity also allows the company to export surplus but at relatively lower margins in the global market. Currency devaluation should help increase its exports as well.
Delays in awarding of government tenders as well as in the launch of new products and registrations led to a decline in life sciences division, though it had led top-line growth last quarter. Stock shortages further aggravated its lower profitability, possibly because of raw material challenges as 95 percent of its raw material is imported.
Recombinant Bovine Growth Hormone (RBST) is an injection that induces cows to produce more milk and is a significant proportion of ICI's animal health portfolio. Since Supreme Court of Pakistan banned its imports and marketing at the start of this calendar year, ICI animal health portfolio under its life sciences business has been adversely affected.
The chemicals and agri sciences division faced challenges on multiple fronts. On one hand there was margin volatility at the chemicals side and on the other hand lower sales of textile processing chemicals adversely impacted the division. Furthermore, downward price pressure led to de-stocking by customers and affected the polyurethane segment.
ICI converted its LCs from usance to on-sight to reduce affects of exchange rate losses. Thus net debt increased by 117 percent to finance payables. Higher debt levels and interest rates resulted in finance costs increasing for the period.
The soda ash plant expansion has led to tax credit during the same period last year which resulted in higher taxation expenses this year. While higher dividends from NurtiCo Pakistan (Pvt) Limited and ICI Pakistan PowerGen Limited were received this year, the drop in bottom-line could not be assuaged. Thus together the performance of life sciences, chemical and agri sciences, tax and finance costs resulted in net profit decreasing by 11 percent.