Posting a non-existent top line growth, Packages Limited is set to mark out another poor year as the third quarter on, and the beleaguered packaging giant continues to struggle against the tides.
With margins continuously whittling away on account of rising input costs and operational in-efficiencies, the firm has posted a loss of Rs2 billion at the close of the third quarter and there is little indication of things picking up in the next three months.
With no marked improvement either quarter-on-quarter or year-on-year, the firms nine month performance so far has been dull on account of miserable sales volumes which are not plumping up in any sustainable manner.
Sales for the aforementioned quarter have remained in a rut, with overall volume picking up very slightly on account of higher export sales vis-à-vis last year. However, while the export volume has jumped up to reach Rs24 million, local sales have plummeted by three percent mainly due to the performance of the firms struggling Packages and Boards division which has failed to improve volumes, despite an enhanced capacity.
Additionally, a steep increase in the prices of imported wood pulp and local waste paper, which the firm uses for the manufacture of its packaging material, has meant that prices for a number of paper products have been adjusted accordingly.
Consequently, Packages products have become expensive in comparison with the imported paper being sold in the market at dumping prices.
Overall, the firms rapidly shrinking margins remain a high concern. Gaining some respite last quarter, they have gone down once again, slipping by 0.18 percentage points, threatened greatly by the firms inability to come to terms with rising input costs and develop long-term solutions to its operational issues.
Moreover, the incident that befell the firms consumer products division has meant that the company is still struggling with additional costs that have been accrued on account of outsourcing from third-party vendors and re-purchase of essential machinery.
Nonetheless, margin erosion is still largely off the back of sales volumes that refuse to go up in direct proportion to the hiking input costs.
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Indus Motors Company
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Rupees in thousands 1QFY13 1QFY12 chg
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Sales 13,474,596 17,146,293 -21%
Gross profit 1,156,033 1,255,155 -8%
Other operating income 302,011 543,486 -44%
Profit from operations 1,027,313 1,423,148 -28%
Finance Cost 3,913 15,822 -75%
PBT 1,023,400 1,407,326 -27%
PAT 690,771 937,484 -26%
EPS (Rs) 8.79 11.93 -26%
Gross Margin (%) 8.58% 7.32%
Operating Margin (%) 7.62% 8.30%
Net profit Margin (%) 5.13% 5.47%
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Source: KSE Notice