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Balochistan Glass Limited (PSX: BGL) was set up in 1980 as a public limited company under the repealed Companies Act, 1913 (now, Companies Act, 2017). The company manufactures and sells glass containers, glass table wares and plastic shells.

Shareholding pattern

As at June 30, 2020, 68 percent shares of the company are owned by the directors, CEO, their spouses and minor children. Of this, over 67 percent shares are held by Mr. Muhammad Tauseef Paracha, the Chairman of the company. A little over 10 percent shares are held under the associated companies, undertakings and related parties. This category solely includes Pak HY-Oils Limited, that functions in the oil refining industry. Some 12.6 percent shares are with the local general public; nearly 6 percent in foreign companies. The remaining roughly 3 percent shares are with the rest of the shareholder categories.

Historical operational performance

Topline contracted from FY14 till FY18, before increasing again in FY19 and FY20. Profit margins declined and reached an all time low in FY17, before rising again till FY19, and falling yet again in FY20.

In FY17, Balochistan Glass Limited saw the largest decline in its revenue, at nearly 55 percent. During the year, the company shut down two units, Unit 1 and 2 due to operational difficulties, such as a limited profit margin and continuously increasing energy costs. The production facilities from Unit 1 in particular were transferred to Unit 3, that has been achieving its target. With the obvious decline in income, cost of production could not be covered. Thus, the company incurred a loss of Rs 491 million for the period.

In FY18, the company shut down operations at Unit 1 and 2 primarily with the intention of reopening them on a profitable basis. Production of Pharma Glass Products was transferred to Unit 3 with the target of remaining present in the market, and also the supply of Regasified Liquefied Natural Gas (RLNG) and under-utilized capacity. Moreover, while operations were shut down at Unit 1, the unit underwent Balancing, Modernization and Replacement (BMR) activities in order to make it more efficient. Although the target to resume operations at Unit 1 was by June 2018, the company was able to make it operative a month later, by mid- July 2018. So, although the company continued to post a loss for another year at Rs 284 million, it was notably more contained year on year.

The company’s revenue recovered somewhat in FY19 as it more than doubled year on year, crossing Rs 1 billion in value terms. This was primarily due to pharmaceutical operations resuming at Unit 1 after undergoing BMR. In addition, it also started to produce Flint glass products at Unit 1 in order to align with the industry customer demands. At Unit 3, Balochistan Glass Limited resumed its production of Tableware glass products. The company had faced complaints from customers, but after rectifying those, it worked towards expanding its clientele and improving quality. Thus, it was able to build a reasonable market share in the Tableware industry. Despite the rise in revenue, costs still exceeded revenue, therefore the company incurred a loss of Rs 136 million, witnessing a decline in negative margins year on year. The loss incurred was relatively lower due to substantial support from other income; this was derived from “liabilities and mark up written back on settlement with financial institutions.

The company saw the highest growth in revenue during FY20 since FY14, at 33 percent. this was attributed to a combination of factors including the Tableware glass division at Unit 3 remaining operative throughout the year, along with pharmaceutical glass operations at Unit 1. Together, these two Units contributed towards the topline. However, with the outbreak of the Covid-19 pandemic, the company was not able to achieve its sales target. It instead used the lock down period to repair the running furnace that would reduce energy consumption going forward. Moreover, the company also used furnace oil for energy that helped to reduce the burden of energy costs. Despite the growth in revenue, losses escalated in FY20 to Rs 464 million due to other expenses increasing abnormally. This, in turn, was due to provision for balance GIDC.

Quarterly results and future outlook

Revenue was lower by nearly 22 percent year on year during the first quarter of FY21. This was due to the company discontinuing pharmaceutical operations at Unit 1. Despite this, profitability was higher in 1QFY21 since costs were contained; unlike in 1QFY20, cost of production did not exceed revenue, therefore the company posted a profit of Rs 4 million in 1QFY21 as compared to the loss of nearly Rs 56 million in 1QFY20.

Revenue in the second quarter of FY21 also remained subdued due to operations shut down at Units 1 and 2. Unit 3 remained operational profitable. Moreover, the company is constantly looking to enhance capacity by refurbishing the second furnace at Unit 3. With costs being covered, and an additional almost Rs 33 million brought in through other income, 2QFY21 saw a net margin of nearly 16 percent, relative to a loss of almost Rs 99 million in the same period last year. Similar continued in the third quarter of FY21 with Units 1and 2 remaining shut while revenue and profits were generated through Unit 3. Cumulatively too, profitability was better year on year. The company plans to complete the expansion activities at Unit 3 by the last quarter of FY21 and launch a new range of products. Therefore, FY21 is likely to end in profits, while the challenges of the third wave of Covid-19 continue to exist.

© Copyright Business Recorder, 2021

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