Siddiqsons Tin Plate Limited (PSX: STPL) was incorporated in Pakistan as a public limited company in 1996. The company is engaged in the manufacturing and sale of tin plates, cans, and other steel products for the packaging of cooking oil, fruits, vegetables, seafood, lubricants, etc.
Pattern of Shareholding
As of June 30, 2023, STPL has 229.279 million shares outstanding which are held by 5526 shareholders. Directors, Sponsors, CEO & children and senior management have the highest stake of 37.31 percent in STPL followed by local general public holding 36.88 percent of its shares. Associated companies which include Siddiqsons Limited and Siddiqsons Denim Mills limited hold 15.50 percent shares of STPL. Foreign general public accounts for 7.41 percent shares of the company. The remaining shares are held by other categories of shareholders.
Performance Trail (2019-23)
STPL’s topline which had been on the rise until 2021 started falling thereafter. Except for 2019 and 2021, STPL’s bottomline had been sliding in all other years under consideration with net loss in 2020. The margins depicted a mixed pattern over the period. After a considerable recovery in 2019, the margins hit the rock bottom in 2020 followed by a rebound in 2021. In the subsequent years, STPL’s margins started eroding.
In 2019, STPL’s topline posted a healthy 28.81 percent year-on-year growth, however, the growth came on the back of upward revisions in price while the quantity sold plunged by 2.5 percent during the year. The cost of sales grew by 24 percent year-on-year due to increase in the price of raw materials as the government imposed protection measures to support the local flat steel industry which not only affected the supply chain of the company but also increased the cost. Yet gross profit improved by 102 percent in 2019 with GP margin inching up from 6.26 percent in 2018 to 9.82 percent in 2019. Distribution cost inched down by 4 percent year-on-year in 2019 due to lesser volumetric off-take which called for lesser transportation charges as well as export expenses. Administrative expense and other expense posted a moderate growth in 2019 which signifies the market induced increase in salaries and wages as well as higher legal and professional and statutory expenses. Other income posted a tremendous year-on-year growth of over 330 percent in 2019 which came on the back of a massive rise in profit of bank deposits due to upward revision in discount rate during the year. Moreover, exchange gain on export sales also provided growth impetus to other income. Operating profit boasted a stunning year-on-year growth of 231.93 percent in 2019 with OP margin clocking in at 8.97 percent up from 3.48 percent in 2018. Finance cost gave a major blow to the bottomline as it enlarged by 33.22 percent during 2019 due to increase in discount rate and short-term borrowings. The company was able to push its bottomline out of loss zone in 2019 and posted net profit of Rs.86.69 million as against a net loss of Rs. 67.73 million in 2018. NP margin stood at 2.55 percent in 2019. EPS for 2019 was recorded at Rs.0.39 versus loss per share of Rs.0.65 in 2018.
2020 was harsh for STPL as it was for the majority of other industries locally and globally due to outbreak of COVID-19. The global pandemic not only disrupted the business activity due to supply chain impediments but also resulted in unprecedented low level of demand. While STPL declared itself as an essential business and got exemption from non-operation during the lockdown period, its topline could only muster a 4.33 percent year-on-year growth in 2020 which came on the back of an exponential growth in export sales, however, overall, STPL’s sales volume was 5 percent lower than the last year due to tamed demand owing to economic slowdown. The cost of sales posted increase of 10 percent year-on-year due to a rise in the price of Tin Mill Black Plate during the year. As the demand was already very low, the company couldn’t pass on the price increase to its customers resulting in 46 percent year-on-year slump in gross profit. GP margin clocked in at 5 percent in 2020. While administrative sales posted a moderate year-on-year growth of 6.7 percent, distribution cost jumped up by 117 percent due to high freight charges as export sales greatly improved during the year. Other expense posted a drop of 59.38 percent year-on-year due to lower provisioning for WPPF. Other income also posted a plunge of 14.27 percent due to lesser profit on bank deposits. Operating profit crashed by 61.93 percent year-on-year in 2019 with OP margin of 3.27 percent. Discount rate was high for the first three quarters of FY20 and the company also availed SBP refinance facility for the payment of salaries and wages which built up its long-term loan portfolio. However, finance cost shrank by 49 percent year-on-year in 2020 due to healthy exchange gain earned on its borrowings during the year owing to Pak Rupee depreciation. The relief provided by the finance cost drop couldn’t help the bottom line as it posted net loss of Rs.23.14 million in 2020 with loss per share of Rs.0.10.
After a rough year, STPL heaved a sigh of relief as 2021 proved to be an exceptional year for the company. Its topline boasted the highest ever year-on-year growth of 64.43 percent in 2021 which came on the back of 37 percent and 78 percent rise in local and export off-take during the year. In 2021, the export sales reached 25 percent of the overall revenue of STPL up from 18 percent in 2020. While cost of sales escalated by 49.45 percent year-on-year in 2021 due to high price of Tin Mill Black Plate, the company was able to pass on the impact of price increase and Pak Rupee depreciation to its customers which resulted in a 343.66 percent year-on-year growth in gross profit. GP margin also reached its highest mark of 13.74 percent in 2021. Administrative expense almost doubled during the year due to legal and regulatory fee paid on the increase of authorized capital. Distribution cost also grew by 84 percent year-on-year due to high freight charges which are directly proportional to high export sales. Other expense multiplied by a massive 1680 percent during 2021 as the company incurred exchange loss on the import of its raw materials due to depreciation of Pak Rupee coupled with high provisioning for WPPF on the back of high profits made during 2021. Other income shrank by around 79 percent during 2021 due to lower profit on bank deposit on account of low discount rate. Despite massive rise in operating and other expenses and a contraction in other income, operating profit grew by 352.35 percent during 2021 with OP margin of 9 percent. Finance cost grew by 39 percent during the year despite discount rate cuts due to exchange loss on borrowings. STPL made a record net profit of Rs.322.16 million in 2021 with NP margin of 5.51 percent. EPS stood at Rs.1.41 in 2021.
The bliss enjoyed by the STPL in 2021 didn’t last longer as 2022 proved to be full of challenges. Record high discount rate, Pak Rupee depreciation, import restrictions and global commodity super cycle not only lowered the demand but also put a pressure on the margins. The topline plummeted by 19.24 percent year-on-year as sales volume dropped by 47 percent during 2021. While the company increased its prices by 54 percent year-on-year, it still couldn’t save its topline from shrinking. As the company operated on a curtailed capacity, cost of sales also dropped by 19 percent year-on-year in 2022. Gross profit shrank by 22.92 percent year-on-year with a downtick in GP margin which clocked in at 13.11 percent in 2022. Distribution expense almost halved in 2022 due to lesser export expenses. Admin expenses also plunged due to lesser legal and regulatory fee. The company booked massive provision against doubtful advances which could’ve increased other expenses but lower provisioning for WPPF and lesser exchange loss counterbalanced it resulting in a 33 percent year-on-year drop in other expenses in 2022. Other income boasted a 113 percent growth in 2022 as a massive decline in the value of local currency provided tremendous exchange gain on export sales. Moreover, high discount rate also drove up the profit on bank deposits. Despite lower expenses, operating profit slipped by 19 percent year-on-year in 2022 while OP margin remained intact at 9 percent. 35 percent year-on-year growth in finance cost and imposition of super tax resulted in a bottom line slide of 37.53 percent year-on-year to clock in at Rs.201.27 million in 2022 with an NP margin of 4.26 percent. EPS for 2022 stood at Rs.0.88.
In 2023, STPL’s topline further eroded by 6.97 percent. This was due to a 7 percent lower sales volume recorded during the year. While STPL increased its prices by 15 percent during the year, it couldn’t completely pass on the onus of cost hike which came on the back of extreme fluctuations in global commodity prices coupled with Pak Rupee depreciation, to its customers. Consequently, gross profit tumbled by 35.41 percent in 2023 with GP margin sliding down to 9.10 percent. Distribution expense leveled down by 33.61 percent in 2023 on account of considerably lower export expenses and payroll expenses incurred during the year. Administrative expense multiplied by 14.81 percent in 2023 due to increased payroll expense in line with inflationary trend as well as increased provision for doubtful debt. Lower profit-related provisioning, no provision against advances as well as no exchange loss culminated into an 89.62 percent decline in other expenses in 2023. On the positive front, other income mounted by 135.11 percent in 2023 primarily due to hefty profit earned on bank deposits and exchange gain earned on foreign trade receivables. Despite keeping a check on operating expenses and a considerable improvement in other sources of income, operating profit slumped by 37.56 percent in 2023 with OP margin shrinking to 6.06 percent. STPL’s finance cost mounted by 27.85 percent in 2023 due to the unprecedented level of the discount rate. This translated into a 98.47 percent year-on-year decline in STPL’s net profit which clocked in at Rs.3.08 million in 2023 with EPS of Rs.0.01 and NP margin of 0.07 percent.
Recent Performance (1QFY24)
STPL managed to attain an 8.20 percent year-on-year rise in its net revenues in 1QFY24. The growth was the result of upward revision in prices while demand continued to shrink due to the high prices of tin plates compared to other modes of packaging. Besides, lackluster demand and non-availability of raw materials from the local vendors also impeded the company from attaining the desired level of capacity utilization in 1QFY24. Idle capacity resulted in lower absorption of fixed cost which combined with high inflation, Pak Rupee depreciation and the spike in global commodity prices drove up the cost of sales by 23 percent in 1QFY24. Consequently, gross profit contracted by 64 percent during the period with GP margin sliding down to 5.67 percent in 1QFY24 from 17.08 percent in 1QFY23. Distribution expense inched up by 6.15 percent due to higher petroleum prices. Administrative expenses escalated by a massive 45.74 percent signifying the impact of inflation and allegedly higher provisions against doubtful debt. Other income improved by 25 percent during 1QFY24 apparently on the back of higher profit on bank deposits and exchange gain on foreign trade receivables. Operating profit eroded by 72.23 percent year-on-year in 1QFY24 with OP margin descending to 4 percent versus 15.66 percent during the same period last year. Finance costs spiraled by 21.22 percent in 1QFY24 on account of higher discount rates and elevated short-term borrowings obtained during the period. STPL registered a net loss of Rs. 99.64 million in 1QFY24 with a loss per share of Rs. 0.43 versus EPS of Rs.0.16 in 1QFY23.
Future Outlook
The local market doesn’t seem promising for STPL as higher commodity prices coupled with Pak Rupee depreciation have amplified the prices of raw materials. STPL is not able to pass on the entire cost to its customers who are already moving to other modes of packaging. Finance cost is another Achilles heel for the company and warrants reconsideration of capital structure. STPL is actively exploring export avenues in the GCC and the US to counterbalance sluggish demand in the home market.
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