IBL HeathCare Limited (PSX: IBLHL) was incorporated in Pakistan as a private limited company in 1997. The company changed its status into a public limited company in 2009. The company is engaged in the marketing, selling and distribution of healthcare products. IBLHL is a wholly owned subsidiary of The Searle Company Limited (PSX: TSCL).
Pattern of Shareholding
As of June 30, 2024, the company has a total of 85.675 million shares outstanding which are held by 5263 shareholders.
The Searle Company Limited (SEARL), which is the holding company of IBLHL accounts for 70.92 percent of its shares followed by local general public holding 16.30 percent shares of IBLHL. The remaining shares are held by other categories of shareholders.
Historical Performance (2019-24)
IBLHL’s topline rode an upward trajectory until 2023 followed by a decline in 2024. Its bottomline slid in 2019 and then picked up until 2023.
In 2024, the bottomline drastically fell. IBLHL’s margins portray an asymmetrical pattern over the period under review. In 2019, the margins plunged followed by a recovery of gross and net margins in 2020 while operating margin ticked down during the year. In 2021, IBLHL’s margins reached their optimum level.
In the following year, gross margins slightly picked up while operating and net margins slid. In 2023 and 2024, IBLHL’s margins notably dropped (see the graph of profitability ratios). The detailed performance review of the period under consideration is given below.
In 2019, IBLHL’s net revenue posted 16.69 percent year-on-year rise to clock in at Rs.1584.972 million. During the year, Pak Rupee witnessed drastic depreciation which multiplied the cost of sales of the company as its business is solely based on imported raw materials.
Increase in duties and other stringent rules imposed on formula milk and nutritional products also took its toll on the GP margin of the company which slid to 28 percent in 2019 from 31.5 percent in the previous year.
Gross profit, albeit, posted a marginal uptick of 3.60 percent during the year. Other income grew by 6.80 percent during the year mainly on the back of rental income from investment property.
However, the growth of operating expense on account of inflationary pressure squeezed the operating profit by 8.45 percent year-on-year in 2019. OP margin also dropped to 13.37 percent in 2019 from 17 percent in 2018. Other expense provided some breather as it plunged by 55.75 percent year-on-year in 2019 on the back of lesser exchange losses.
Finance cost grew by 264 percent during the year as the company availed short-term running finance facility during the year. High discount rate also drove up the finance cost. In absolute terms, finance cost clocked in at Rs.5.056 million in 2019 which was equivalent to 0.32 percent of the company’s topline.
IBLHL’s bottomline dropped by 18.73 percent year-on-year in 2019 to clock in at Rs.121.376 million with EPS of Rs.2.24 versus EPS of Rs.2.76 posted in 2018. NP margin stood at 7.66 percent in 2019 down from NP margin of 11 percent registered in the previous year.
In 2020 while many industries were grappling against the outbreak of COVID-19, most of the pharmaceutical companies enjoyed hefty sales and profit during the year. The topline of IBLHL tremendously grew by 68.12 percent year-on-year to clock in at Rs.2664.604 million in 2020. The robust revenue growth was driven by the addition of new portfolio along with the growth in existing business of the company.
The gross profit of the company registered 82.75 percent year-on-year growth during 2020 with GP margin climbing up to 30.45 percent. This was on account of addition of local high margin products in the company’s portfolio.
Distribution expense more than doubled during the year mainly on the back of sales promotion and marketing activities undertaken coupled with the rise in salaries and wages of sales force.
Administrative expense also multiplied by 9.47 percent in 2020 due to higher payroll expense as IBLHL expanded its workforce from 212 employees in 2019 to 262 employees in 2020.
Corporate service charges by the ultimate parent company also pushed up administrative expense in 2020. Other income grew by 13.64 percent year-on-year in 2020 on the back of higher interest income on loan to International Brands Limited.
IBLHL’s operating profit was able to muster 66.46 percent year-on-year growth during 2020. However, OP margin slightly ticked down to clock in at 13.24 percent. Finance cost multiplied by 513 percent in 2020 to clock in at Rs. 31 million owing to high discount rate in most of the months of FY20 coupled with an increase in short-term running finance. IBLHL’s debt-to-equity ratio increased from 50 percent in 2019 to 58 percent in 2020.
The bottomline posted 81.28 percent year-on-year rise to clock in at Rs.220.03 million in 2020. EPS stood at Rs.4.07 in 2020 while NP margin picked up to 8.26 percent.
In 2021, local as well as global economy hadn’t recovered from the shocks of COVID-19 which provided the pharmaceutical companies another year of robust sales growth.
During the year, IBLHL added pharma and consumer products to its product portfolio which coupled with the existing portfolio mustered 12.73 percent year-on-year growth in topline which was recorded at Rs.3003.909 million.
The sale of high margin pharma products as well as the exemption of duties on nutrition and medical disposables resulted in a considerable 26 percent year-on-year growth in the gross profit of IBLHL during 2020. GP margin also climbed up to 34 percent during the year.
Other income slid by 39.80 percent year-on-year in 2020 owing to lesser rental income on investment property and lesser interest income on loan to International Brands Limited. Operating expenses kept growing mainly on the heels of increased sales promotion and marketing drives as well as increase in salaries and wages.
Induction of additional human resources drove up IBLHL’s workforce to 281 employees in 2021 from 262 employees in the previous year.
The company boasted 26.19 percent year-on-year growth in operating profit in 2021. OP margin grew to 14.82 percent in 2021. The company obtained long-term financing under refinance scheme initiated by the SBP for the payment of wages and salaries. Moreover, running finances also grew during the period.
However, low discount rate kept finance cost in check which dropped by 3.41 percent year-on-year in 2021. The bottomline improved by 36.57 percent year-on-year in 2021 to clock in at Rs.300.488 million with EPS of Rs. 4.63. NP margin clocked in at 10 percent in 2021.
In 2022, the company attained 21.55 percent year-on-year growth in topline which clocked in at Rs. 3651.125 million. This was mainly driven by the disposable business and nutrition portfolio. Despite sharp currency depreciation which increased the cost of sales for the company, better sales mix and revised pricing pushed its GP margin slightly up to clock in at 34.41 percent in 2022.
Gross profit multiplied by 22.86 percent in 2022. The company made “other loss” worth Rs.60.105 million in 2022 as against “other income” posted in the previous years. This was mainly on account of exchange losses made during the year on the back of Pak Rupee depreciation.
Inflationary pressure pushed operating expense up in 2022. Bigger workforce of 304 employees also resulted in higher payroll expense. Operating profit managed to post 16.62 percent year-on-year growth in 2022, however, OP margin marginally slid to 14.22 percent.
Finance cost shrank during the year despite soaring discount rate as the company repaid the long-term loan obtained in 2021 under refinance scheme. The imposition of super tax enormously increased the tax expense for IBLHL and resulted in a paltry 0.79 percent growth in its bottomline in 2022. The net profit of the company stood at Rs.302.859 million in 2022 with NP margin slipping to 8.3 percent. EPS clocked in at Rs.4.24 in 2022.
IBLHL’s topline grew by 10.32 percent year-on-year in 2023 to clock in at Rs.4027.874 million. This was on the back of improved performance of medical devices and nutritional business.
High cost of sales on the back of increase in supplier prices, Pak Rupee depreciation, elevated energy charges and high inflation pushed up cost of sales by 12.22 percent in 2023. Gross profit inched up by 6.70 percent in 2023, however, GP margin ticked down to 33.28 percent.
The company’s other loss multiplied by 41.60 percent in 2023 due to higher exchange loss. Marketing expense grew by 8.43 percent year-on-year in 2023 on the back of higher payroll expense of sales force. The company didn’t enhance its sales promotion and marketing budget during the year.
Operating profit ticked up by 1 percent in 2023 with OP margin falling down to 13 percent. Finance cost surged by 140.66 percent in 2023 due to unprecedented level of discount rate coupled with increased short-term borrowings obtained during the year.
IBLHL’s bet-to-equity ratio surged to 69 percent in 2023 from 57 percent in 2022. Net profit grew by 2 percent year-on-year in 2023 to clock in at Rs.308.963 million with EPS of Rs.3.610 and NP margin of 7.67 percent.
In 2024, IBLHL’s net sales plunged by 10.54 percent to clock in at Rs.3603.359 million. Due to high cost of sales on account of inflationary pressure, Pak Rupee depreciation and elevated energy tariff, the company had to revise the prices of its nutritional and infant portfolios. This considerably squeezed the sales volume in these two categories.
Cost of sales slid by only 1.34 percent in 2024, resulting in 29 percent slump recorded in gross profit. GP margin descended to its lowest level of 26.41 percent in 2024. Unlike past two years, in 2024, the company posted other income to the tune of Rs.32.84 million. This was on account of exchange gain recorded during the year as against exchange loss recorded in the previous year. Rental income from investment property also rebounded in 2024.
Selling expense mounted by 9.88 percent in 2024 due to higher budget allocated for sales promotion activities coupled with increased salaries of sales force as well as higher freight & cartage charges incurred during the year.
Administrative expense escalated by 5.34 percent in 2024. While the payroll expense dropped during the year as the company streamlined its workforce from 311 employees in 2023 to 292 employees in 2024, higher administrative expense was the result of elevated IT support & maintenance charges incurred during the year.
IBLHL’s operating profit deteriorated by 64.51 percent in 2024 with OP margin slipping to 5.17 percent. Finance cost ticked up by 2.52 percent in 2024 due to higher discount rate. This was despite the fact that the company paid off a huge portion of its short-term liabilities during the year which squeezed its debt-to-equity ratio to 57 percent in 2024.
Net profit dwindled by a massive 97.55 percent to clock in at Rs.7.555 million in 2024. This translated into EPS of Rs.0.09 and NP margin of 0.21 percent.
Recent Performance (9MFY25)
During 9MFY25, IBLHL’s net sales shrank by 1.17 percent to clock in at Rs.3144.700 million. Higher prices of raw materials took its toll on the nutritional portfolio of the company. Cost of sales mounted by 3.93 percent during the period resulting in 10.73 percent decline recorded in gross profit. GP margin also fell from 34.79 percent in 9MFY24 to 31.42 percent in 9MFY25.
The company recorded other loss of Rs.1.378 million in 9MFY25 versus other income of Rs.32.917 million recorded in 9MFY24. This was due to exchange loss recorded during the period. Lower sales volume resulted in 20.49 percent dip in distribution expense in 9MFY25. Conversely, administrative expense hiked by 31.70 percent during the period on account of inflationary pressure.
IBLHL recorded 8.26 percent thinner operating profit in 9MFY25 with OP margin sliding down to 9.58 percent versus OP margin of 10.32 percent recorded in 9MFY24. Finance cost slid by 9.75 percent in 9MFY25 due to lower discount rate.
IBLHL recorded 25.56 percent erosion in its net profit which clocked in at Rs.135.468 million in 9MFY25. This translated into EPS of Rs.1.58 in 9MFY25 versus EPS of Rs.2.12 recorded in 9MFY24. NP margin plummeted from 5.72 percent in 9MFY24 to 4.31 percent in 9MFY25.
Future Outlook
Soaring inflation has considerably reduced the purchasing power of consumers which has severely affected the sales of IBLHL’s nutrition and health & wellness products. To make up for the curtailed contribution from the aforementioned segments, the company has been actively focusing on its pharmaceutical and medical disposables segments. The company is also undertaking localization to reduce its cost.
Copyright Business Recorder, 2025