Ghani Glass Limited

Ghani Glass Limited (PSX: GHGL) was set up in 1992 as a limited liability under the Companies Ordinance, 1984 (now Companies Act, 2017). It is part of the Ghani Group of companies that has firms in a range of sectors such as construction, mining, automobiles, etc. Ghani Glass manufactures and sells glass containers and float glass.

Shareholding pattern

As at June 30, 2022, close to 53 percent shares are held by the directors, CEO, their spouses and minor children, within which Mr. Aftab Ahmad Khan is a major shareholder. The local general public has around 37 percent shares followed by over 6 percent held under “other companies”. The remaining 4 percent shares are with the rest of the shareholder categories.

Historical operational performance

The company has mostly seen a growing topline since FY12, with the exception of a few years. Profit margins in the last six years declined between FY17 to FY20, before rising again until FY22.

In FY19, topline registered the highest growth seen thus far, at over 21 percent to cross Rs 17 billion in value terms. However, this did not translate into higher profitability has production cost grew to consume almost 75 percent of revenue, compared to almost 72 percent in the previous year. The increase was mostly a result of a rise in raw material and fuel expenses. Thus, gross margin reduced to over 25 percent, compared to 28.2 percent seen in FY18. This also reflected in the net margin that was also down to 18.2 percent, from last year’s 20.2 percent. In value terms, though, bottomline was recorded at its highest thus far at over Rs 3 billion.

Revenue contracted in FY20, although only marginally, by less than 1 percent. This was primarily attributed to the outbreak of the Covid-19 pandemic and the resultant lockdowns, halts in trade and production processes, and supply chain disruptions. Cost of production escalated to nearly 85 percent of revenue, thereby shrinking gross margin to 15 percent. Moreover, the company made a significant provision for loss on trade debtors due to Covid-19 pandemic that had an adverse impact on businesses and their financials. Thus, net margin also had a prominent decrease from last year’s 18.2 percent, to 8.8 percent.

In FY21, the company posted the highest growth rate seen thus far, at over 25 percent, with topline crossing Rs 21 billion. This also reflected in the gross margin that was recorded at 22.4 percent for the year. But owing to the general inflationary pressures in the economy, coupled with higher salaries expense, operating expenses for the company increased as a share in revenue. However, it was offset by the gain in topline. Thus, net margin also improved to almost 15 percent, with bottomline posted at Rs 3.2 billion. Generally, the economy had recovered fairly after the outbreak of the Covid-19 pandemic, as is seen by the GDP growth rate at 3.94 percent for the period.

Revenue growth in FY22 stood at an all-time high of over 43 percent with topline recorded at Rs 30.8 billion, as the impact of Covid-19 pandemic gradually receded and business activities returned to normal. The higher revenue resulted in higher gross margin that was recorded at a five-year high of over 29 percent. With little changes in other factors as a share in revenue, this also trickled to the net margin that was posted at 19.6 percent. Bottomline reached an all-time high of Rs 6 billion. During the year, the company also began work on new segment of tableware glass.

Quarterly results and future outlook

Growth momentum of topline continued in the first quarter of FY23 as it was higher by over 43 percent year on year. With a marginal change in cost of production, gross margin remained more or less flat year on year at around 25 percent. But due to a notable increase in selling and distribution expense as a share in revenue, operating and net margin was lower compared to the same period last year. Selling and distribution expense has been consuming a larger share in revenue for the past two years, largely due to freight charges that have been on a rise.Net margin stood at 14.5 percent for the period, compared to nearly 17 percent in the first quarter of FY22. However, bottomline, in value terms, was slightly higher in 1QFY23 at Rs 1.1 billion, versus Rs 932 million in 1QFY22.

With the current economic environment noted by currency devaluation, rising inflation, uncertainty on the geopolitical front, as well as political instability within the country, business sentiments have been negatively affected. Costs have also risen, particularly for sectors that are reliant on imports for their raw material and other inputs. Although Ghani Global claims to focus on sourcing raw materials indigenously, yet it faces rising costs due to inflationary pressures. Globally as well, demand has been impacted and purchasing power has reduced. The company has been investing in innovating and upgrading. Production from its tableware project has commenced, while production from Figured Glass segment is expected to begin in the second quarter.