Dawood Lawrencepur Limited (PSX: DLL) was set up as a public limited company in 2004 as a result of an amalgamation between Dawood Cotton Mills Limited (DCM), Dilon Limited (DL), Burewala Textile Mills Limited (BTM) and Lawrencepur Woollen and Textile Mills Limited (LWTM).
The company trades and markets renewable energy solutions to commercial and industrial consumers, in addition to its textile business. It entered the energy sector when it acquired a wind power project in 2008.
Shareholding pattern
As at December 31, 2020, 66 percent of the company shares are held by the associated companies, undertakings and related parties. Within this, majority are held by Dawood Corporation (Pvt) Limited. The ‘residents’ category under the general public holds 20 percent shares while over 7 percent are held in foreign companies. The directors, CEO, their spouses and minor children own close to 4 percent shares. The remaining roughly 10 percent shares are held by the rest of the shareholder categories.
Historical operational performance
The company’s historical consolidated financial statements depict a growing topline since CY17, with the highest seen in CY19. Profit margins, however, have mostly been stable with the only anomalies observed in net margin peaking in CY15, and operating margin dipping in CY13.
CY17 saw revenue rising exorbitantly year on year, growing from Rs 520 million in CY16 to Rs 2.5 billion in CY17. On a standalone basis, the revenue of the company had halved as the company transferred its renewable energy business to a wholly owned subsidiary. Moreover, the company’s focus shifted from textile to energy after the closure of its woolen and textile unit. Therefore, the brand image of “Lawrencepur” also started depleting. On the other hand, the sudden jump in revenue in consolidated statements was due to revenue from ‘alternate energy’ of Rs 2.4 billion that included unbilled revenue amount. This helped to raise gross margin to 50 percent, that also trickled down to the bottomline. However, because the company earned an abnormally high profit from associates at Rs 4 billion in CY16, it took net margin of CY16 to beyond 100 percent. Therefore, in comparison, the net margin of 16 percent in CY17 seemed lower.
Revenue in CY18 crossed Rs 3 billion as it grew by over 21 percent, while revenue on a standalone basis continued to decline from nearly Rs 59 million to in CY17 to Rs 7.8 million in CY18. Costs rose slightly, making up over 50 percent of the revenue therefore reducing gross margin only marginally; it hovered around 50 percent. This also reflected in the operating margin, but net margin was drastically impacted by the share of profit from associates that was recorded at Rs 2.3 billion. Thus, bottomline grew to over Rs 2 billion compared to Rs 402 million in CY17, and net margin jumped to 74 percent for the year.
Revenue again increased by several folds in CY19 as it crossed Rs 7 billion in value terms as large-scale industrial customers and telecom operators placed orders. The solar renewable market is gradually gaining traction in Pakistan. The increase in energy prices by 30 percent for both on grid and off grid consumers along with the advent of Electric Vehicles in the transport sector encouraged the demand for Solar PV. Costs, however, made a larger share in revenue, majority of it coming from purchases and related expenses. Therefore, gross margin reduced to 36 percent; this also reflected in the operating margin. But as share of profit from associate, that was abnormally high in the previous year causing net margin to be more pronounced, reduced in CY19 to Rs 915 million. Thus, net margin at 25 percent was lower in comparison of 75 percent seen in CY18.
Revenue fell for the first time in CY20, by over 22 percent, bringing topline down to Rs 5.6 billion in value terms. As Covid-19 struck the global economy, demand for energy reduced as lock downs ensued. In Pakistan however, the ballooning circular debt kept the power sector distressed. But as lockdowns eased, demand for solar PV from both the industrial and residential picked up. Costs remained roughly the same, at around 63 percent, keeping gross margin also more or less stable at 36 percent. Net margin improved to 32 percent on the back of a reduction in finance expense owing to lower borrowing rates, and an increase in the share of profit from associate that crossed Rs 1 billion.
Quarterly results and future outlook
Revenue in the first quarter of CY21 was higher by 18 percent as the company saw inflow of revenue due to the spillover deals made in CY20. During the period, the company also procured “its first international contract for the design and construction of 5.3 MW solar system for the Lusail Bus Depot in Qatar”. On the other hand, gross and operating margin were better in the first quarter of CY20, net margin, at over 16 percent, was better in CY21 on the back of share of profit from associate.
As energy prices continue to spiral upwards, demand for renewable energy sources continue to grow; demand for renewable sources is also further encouraged in order to mitigate climate change globally. But the uncertainty of the ongoing pandemic remains as to what its implications are for the industry, trade and investment in the country.
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