Lotte Pakistan PTAs EPS of Re.0.10 per share in 1QCY12 relative to Rs1.64 in the same period of last year is a surprise despite its meagerness. Analysts had been expecting the Company to report a loss this quarter, as the PTA industry has entered into a "lean period", rightfully pointed out by Zeeshan Afzal of Top line securities.
What is the reason for the Industrys apparent leanness? An over-supply scenario in the region without much impetus from the demand side has put significant downward pressure on PTA prices.
Consequently, the 16 percent year-on-year decrease in revenues for LOTPTA in 1QCY12 was not unanticipated, being led by the decrease in PTA prices, while the cost of sales continued to increase.
Resilient prices of Px; raw material for PTA, explained much of the hefty cost of sales for Lotte Pakistan PTA. Compared to $310 per ton in 1QCY11, PTA-Px margins have slid by around 66 percent this quarter on a year-on-year basis.
Therefore, the shriveled gross margin of 2 percent in 1QCY12, relative to over 24 percent in 1QCY11, does not cause any raised brows.
Distribution and selling expenses, meanwhile, showed an uptick in the period under review, relative to the same period of last year, mainly due to higher export sales. The effect was a sharper dent on the operating margins, netting at about a percent for the quarter gone by.
Yet, helped by lower financial charges and finance income; which decreased to roughly half of the levels seen in 1QCY11, the profit after tax for the Company ended up higher than the operating profit. The decline in finance income came on the heels of lower average cash surplus because of lower cash generation during the period.
Going forward, sketchy PTA-Px margins dim prospects for LOTPTA, making the possibility of a robust CY12 very far-fetched.
Comments
Comments are closed for this article.