Pakistan Cables Limited was established in 1953 in collaboration with BICC, UK. Over the years, the company has gained a position of being the market leader in cable manufacturing in the country. It has been listed on the Stock Exchange since 1955.
The Company has been involved in the manufacture of several products including conductors, wires and cables for transmission of electricity since 1953. In 1979, it started extrusion of Aluminium Rod from billets, which was advanced in 1984 to manufacture Anodised Aluminum Profile sections for architectural applications. Pakistan Cables has been manufacturing wires for the automobile industry since 2008.
The Company set up a high tech plant in 2006, to manufacture high conductivity Oxygen free Copper Rod. The production capacity of the plant is regularly revised owing to the increasing customer demand for the rods. To manufacture high quality electric cable grade PVC compound, the Company set up a PVC Compounding Plant in 2008. A 2-MW gas fired Tri-generation Power Plant was also set up to ensure uninterrupted supply of electricity. In 2010, General Cable Corporation, global leader in cable manufacturing invested in Pakistan Cables by taking up a 25 percent equity stake in the Company.
FINANCIAL ANALYSIS OF PAKISTAN CABLES LIMITED
Profitability Despite economic slowdown due to a host of reasons including political uncertainty, high inflation, acute energy shortage, currency depreciation and high interest rates, the Company achieved sales of Rs 3.4 billion in FY09, which is 12 percent lower than FY08 sales of Rs 3.8 billion. The decline in sale compared to last year was due to lower prices of the Company's products, a sharp decline in copper prices during the first half of the financial year, and reduction in demand as a result of the overall economic situation in Pakistan. The sales increased by 13 percent in the FY10, reaching Rs 3.8 billion. This was possible due to increase in the price of the product as well as better sales volume.
During FY11, in addition to the economic slowdown and poor law-and-order situation, the year had to face the floods. Despite this, Pakistan Cables was able to increase its sales by 7.8 percent from last year's figures and touched Rs 4.1 billion. Even with lower sales in the FY09, gross profit increased by 43.7 percent from FY08 values, reaching Rs 532 million. Better sales' mix, reduction in copper prices, productivity improvement and cost savings initiatives are the main reasons for this outcome.
In FY10, the gross profit figure fell to Rs 412.3 million, due to the expenses that could not be passed on to the customers. These include devaluation of rupee against the dollar (which increased the cost of inputs and copper prices) and taking orders at lower margins due to market competition. Improvement in productivity, better sales' mix, improved margins and operational efficiencies contributed to the rise in the gross profit for the FY11, which amounted to Rs 519.6 million.
The dedication of the Company's management in improving the efficiencies, controlling costs and making decisions for the optimum product mix resulted in the Company's Profit before Income Tax soaring to Rs 101.8 million in FY09 as compared to Rs 53.6 million in the previous year. This amount stood at Rs 146.7 million in FY11.
In FY09, normalisation of the tax expenses in the year affected the profit after tax figure, which fell from Rs 65.4 million in FY08 to Rs 63.9 million in FY09. The net profit value continued to fall despite lower interest expenses, and in FY10, the figure touched Rs 45.5 million. At the end of FY11, the profit after tax amounted to Rs 85.7 million, an increase of 88 percent from last year.
Liquidity The Company has been successful in maintaining an overall strong liquidity position. This is evident from the current ratio values, which have remained steady around 1 for the three years: from 1.10 in FY09, it moved to 1.00 in FY10 and later to 1.40 in FY11.
Debt Management Finance cost for FY09 almost doubled as compared to that in FY08 due to high interest rates, and with the Company's projects financed by long-term loans, this affected the profitability of the Company. Even though interest rates continued to remain high in FY10, the interest expense for the year fell to Rs 154.5 million. The Company was able to reduce this interest expense by availing import finance facilities offering lower interest rates.
The Company was able to reduce interest expense for the FY11, which amounted to Rs 95.9 million, due to the remittance from General Cables' investment, allowing the Company to pay down some of its more expensive debt. Pakistan Cables has been able reduce its long-term debt, which fell from Rs 364.2 million in FY09 to Rs 26.9 million in FY11.
Market Value Earnings per share of the Company reflect the profitability situation over the years. The EPS dropped from Rs 2.98 in FY09 to Rs 2.12 in FY10. With better profit generation in FY11, the EPS rose to Rs 3.34.
Future Prospects The Company gained from the healthy economic situation in the country up until 2007, after which the environment has become challenging. There is uncertainty in the demand for cables and this is expected to continue till the economy improves.
Going forward, the Company aims to focus on developing its core business and ensure returns from investments made by the company in several projects. There are plans of modernising and replacing some of the machines. There are, however, chances that the margins could come under pressure owing to the competition within the Pakistani wire and cable industry. The management of the Company plans to adopt an aggressive marketing strategy, ensure operational efficiency and adopt better controls to reduce costs.
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