Though ICI's top line saw a double digit growth, the momentum did not result in an increase in the bottom line. ICI has four key business segments: life sciences, soda ash, chemicals, and polyester of which polyester and life sciences are the largest. While all businesses of ICI grew over the last quarter, it was the polyester segment and the life sciences segments that drove higher sales with 24 percent and 32 percent growth respectively.
The growth in the polyester segment comes as a surprise with higher prices of its key raw material PTA bringing down margins while international PSF prices dipped down slightly as well. However, there has been a growth in its downstream product of textiles on the back of which the polyester business grew by 105 percent. This helped offset somewhat the lower operating results of the soda ash business and the chemicals & agri business.
Life Sciences operating result grew by 33 percent which also helped assuage the drop in operating profits. Within life sciences it was the pharmaceuticals and animal health division that led growth. This is a continuation of previous quarter's trend during which life sciences had been the main driver of profitability. It appears that last fiscal year's investment in acquiring Cirin Pharmaceuticals (Pvt.) Limited, partnering with Ferrer and Smith & Nephew and acquisition of some assets and key brands of Wyeth Pakistan Limited has been paying off for arm of ICI.
The chemicals & agri business suffered due to the severe liquidity crunch experienced by farmers. The recording of provision of bad debts against receivables severely impacted the segment's profits. Despite being the smallest segment within ICI Pakistan, it contributed towards bringing down the company's overall profitability.
The devaluation of Pak Rupee created exchange losses which further eroded the bottom line. The devaluation adversely impacted the soda ash plant that has low margins and uses a coal mix ratio of 70:30 for imported and local coal respectively. The polyester plant uses imported coal entirely was relatively but it less impacted because of higher volumes. Furthermore, ICI Pakistan has a 40 percent stake in NutriCo Pakistan (Pvt) Ltd which manages the import of select Morinaga nutrition