KSB Pumps Company Limited (PSX: KSBP) is a KSB group company incorporated in Pakistan in 1959. The company’s core business is manufacturing and selling industrial pumps, castings, valves, and related products for industrial, construction and business services, energy, water, and wastewater applications.
Besides catering to the needs of local market, KSBP has a significant export market in USA, UK, Canada, Australia, France, and Germany. KSBP is a subsidiary of KSB SE & Co. KGaA.
Pattern of Shareholding
As of December 31, 2024, KSBP has a total of 30.90 million shares outstanding which are held by 1760shareholders. Associated companies, undertakings, and related parties have the majority stake of 72.54 percent in the company, followed by the local general public holding 15.75 percent shares. Banks, DFIs, NBFIs account for 4.64 percent share of KSBP while Modarabas & Mutual funds hold 4.04 percent shares. The remaining shares are held by other categories of shareholders.
Financial Performance (2019-24)
The topline and bottomline of KSBP followed a downward trajectory until 2020. The next two years marked an upward trend for both topline and bottomline. Conversely, in 2023, while KSBP’s topline reasonably grew, its bottomline drastically fell. In 2024, the company’s topline ticked up marginally however its bottomline strengthened by manifold.The company’s margins portray an asymmetrical pattern over the years.
In 2019, gross and operating margins grew while net margin fell. This was followed by the contraction of all the margins in 2020. In 2021, gross and operating margins continued to shrink while net margin slightly recovered. In 2022, all the margins posted an uptick. Gross and operating margins continued to expand in 2023, while net margin fell to its lowest level in 2023. In 2024, KBBP’s margins slightly recovered.The detailed performance review of the period under consideration is given below.
In 2019, KSBP’s topline dipped by 24.18percent to clock in at Rs. 3,755.53 million. This wason the back of low public sector spending as there was a drastic cut in development budget. This could not be offset by significant business from oil marketing companies and uptick in export sales during the year. Cost of salestook 29.51 percent nosedive, resulting in 10.33 percent higher gross profit recorded by the company in 2019.
GP margin grew from 13.39 percent in 2018 to 19.5 percent in 2019. Operating expenses dipped by 7.55 percent year-on-year on the back of lower payroll expense, travelling & conveyance charges, forwarding expense, loss allowance as well as royalty &trademark charges. KSBP also booked lesser provisioning for WWF and WPPF in 2019. This resulted in a 142 percent year-on-year jump in the operating profit with OP margin clocking in at 5.11 percent in 2019 versus OP margin of 1.6 percent recorded in the previous year.
Finance costsdid not prove to be kind enough to buttress the bottomline and escalated by 213.11 percent year-on-year in 2019 due to the high discount rate coupled with elevated short-term borrowings during the year. Gearing ratio ticked up from 39 percent in 2018 to 41 percent in 2019. Other income also dipped by 57.87 percent year-on-year in 2019 principally because of high-base effect as the company recognized high sundry income and recorded reversals of provisions no longer considered necessary in the previous year.
Furthermore, KSBP received less income in 2019. This put a dent on the bottomline which shrank by 55.17 percent year-on-year to clock in at Rs. 87.88 million in 2019 with an NP margin of 2.34 percent versus NP margin of 3.96 percent registered in the previous year. EPS also marched down from Rs.14.85 in 2018 to Rs.6.66 in 2019.
2019 was followed by another slow year due to COVID-19 which not only affected KSBP’s local business but also turned down the growth prospects in its export business due to worldwide lockdowns and supply chain disruptions. The topline slid by 3.96 percent year-on-yearto clock in at Rs. 3606.70 million in 2020. This could have been worse had the water and general industry market area not provided reasonable growth in orders.
Cost of sales plunged by 0.38 percent in 2020 as lockdown and idle plant capacity did not allow for efficient absorption of fixed cost. Gross profit declined by 18.76 percent in 2020 with GP margin moving down to 16.49 percent. Operating expense dropped by 3.56 percent in 2020 on account of lower commission expense as well as travelling & commission charges incurred during the year.
KSBP recorded 61.54 percent lower operating profit in 2020 with OP margin falling to 2.05 percent. Other income did not buttress the bottomline either as KSBP did not record any exchange gain during the year along with significantly lower commission and sundry income.
Finance cost provided a breather as it slid by 20.86 percent in 2020 due to discount rate cut during the year coupled with a drop in short-term finances secured during the year. This squeezed KSBP’s gearing ratio to 37 percent in 2020. The bottomline plunged by 81.26 percent year-on-year to clock in at Rs.16.47 million with EPS of Rs. 1.24 and NP margin of 0.46 percent.
In 2021, the company’s business activity geared up with topline growth of 20.18 percent year-on-year. KSBP’s net sales were recorded at Rs. 4334.46 million in 2021. Although economic activity remained weak in the 1HCY21, sound recovery in the second half of the year spoke for itself.
The primary areas which propelled KSBP’s growth in 2021 were general industry, petrochemicals, building services, foundry business and intercompany export business. There were significant price pressures and supply disruptions during the year.
The company was able to partially pass on the price increase to the customers, however, gross profit slipped by 0.04 percent in 2021 with GP margin falling to 13.71 percent. Operating expenses grew in line with inflationary pressure, however, operating profit slid by 49.15 percent year-on-year with OP margin hovering around 0.87 percent in 2021.
Other income provided much needed support to the bottomline as it grew by 21.25 percent in 2021 on account of exchange gain, commission income, sale of scrap, recognition of deferred government grant as well as reversal of doubtful debts.
Finance costs slumped by 19.46 percent in 2021 due to lower discount rate. Short-term finance significantly grew in 2021 which drove the gearing ratio up to 48 percent. Net profit grew by 65.67 percent year-on-year in 2021 to clock in at Rs. 27.29 million with EPS of Rs.2.07 and NP margin of 0.63 percent.
2022 also proved to be a momentous year for KSBP despite all the economic headwinds. Sales revenue grew by 14.55 percent year-on-year to clock in at Rs.4965.06 million. This was on the back of superior export sales strategy whereby the company sold its products to its mother company in Germany and sister companies in Saudi Arabia, South Africa, and Türkiye. Focusing on marine industry in Karachi also bore positive results for the company in 2022.
Supply of reverse engineering products locally as well as in the Middle East, African and Russian markets by inaugurating a new furnace also proved to be a good omen for KSBP. The main contributors were general industry, petrochemicals and building services. High inflation, Pak Rupee depreciation and escalating energy tariffs resulted in 12 percent hike in cost. However, with revised price strategy, market, and product diversification, KSBP was able to achieve 30.35 percent higher gross profit in 2022 with GP margin moving up to 15.60 percent. Operating expense mounted by 10.79 percent in 2022 on account of higher forwarding expense, travelling & conveyance charges as well as repairs & maintenance. KSBP registered 350.52 percent higher operating profit in 2022 with OP margin climbing up to 3.18 percent. Other income improved by 64.91 percent in 2022 due to superior exchange gain, scrap sales and interest on long-term deposits. However, this was offset by 134 percent higher finance cost incurred by the company in 2022. Elevated finance cost was the result of monetary tightening. Gearing ratio slipped to 45 percent in 2022. KSBP posted net profit of Rs.43.34 million in 2022, up 58.82 percent year-on-year with EPS of Rs.3.28 and NP margin of 0.87 percent.
In 2023, KSBP’s net sales grew by 15.91 percent to clock in at Rs.5755.04 million. This was on account of a robust inter-company export business. Besides, water, general industry, petrochemicals and building services also proved to be the major revenue drivers in 2023. Sharp price hikes due to inflation and Pak Rupee depreciation and supply chain disruptions on account of import restrictions increased the cost; however, KSBP was able to pass on the impact of cost hike to its consumers. This resulted in 51.50 percent higher gross profit in 2023 with GP margin jumping up to 20.39 percent. Operating expense multiplied by 42.70 percent in 2023. This was on account of elevated payroll expense, forwarding charges, royalty & trademark charges, travelling & conveyance, IT related charges as well as higher advertising budget. KSBP streamlined its workforce from 306 employees in 2022 to 285 employees in 2023. The company also booked higher net impairment loss on financial assets in 2023 which also drove up its operating expense. Despite the taller operating expense, KSBP recorded 85.80 percent higher operating profit in 2023 with OP margin of 5.10 percent. Other incomes drastically fell by 46.25 percent in 2023 as the company did not record any exchange gain and interest on long-term deposits in 2023. Finance cost surged by 46.36 percent in 2023 on account of the unprecedented level of discount rate and increased borrowings which drove up its gearing ratio to 47 percent. Consequently, net profit slumped by 98 percent to clock in at Rs.0.84 million with EPS of Rs.0.06 and NP margin of 0.01 percent – the lowest level ever witnessed by the company.
In 2024, KSBP recorded net sales of Rs.5775.53 million, up 0.36 percent year-on-year. During the year, the company expanded its business in key export areas as well as Supreme SERV (spare parts business) in 2024. Export sales constituted 26 percent of the company’s sales in 2024 which majorly comprised of sales made to KSB Group in Germany followed by export sales made to Chile, South Africa, and Spain. Supreme SERV contributed around 14.16 percent to the total sales mix of KSBP in 2024. In 2024, the water market area proved to be the key revenue driver. Cost of sales inched up by 0.27 percent in 2024 as the company is focusing on alternate sources of energy by installing 2.019 MW of solar power plant which is squeezing its energy cost. This enabled KSBP to attain 0.69 percent higher gross profit in 2024 with GP margin jumping up to its highest level of 20.46 percent. Operating expense dipped by 0.22 percent in 2024 particularly because the company booked a net impairment gain of Rs.4.819 million on its financial assets in 2024 versus net impairment loss of Rs.110.874 recorded in the previous year. Conversely, distribution expense and administrative expense continued to hike on the back of higher payroll expense as well as travelling & conveyance charges incurred during the year. Profit related provisioning also increased in 2024. Operating profit ticked up by 3.40 percent in 2024 with OP margin slightly increasing to 5.25 percent. Other income provided considerable support to KSBP’s bottomline in 2024 as it picked up by 47.35 percent on the back of superior scrap sales, sundry income, commission, exchange gain and profit on bank deposits. KSBP was able to cut down its finance cost by 20.73 percent in 2024 due to the onset of monetary easing in the latter half of the year as well as easing off its debt burden through the issuance of 17.70 million right shares during the year. This took the company’s outstanding share capital to 30.90 million shares as of December 31, 2024. KSBP’s net profit was recorded at Rs.55.91 million in 2024, up 6532.62 percent year-on-year. This translated into EPS of Rs.2.85 and NP margin of 0.97 percent in 2024.
Recent Performance (1QCY25)
During the first half of the ongoing calendar year, KSBP recorded 29.19 percent growth in its net sales, which clocked in at Rs.1592.437 million. Export sales were recorded at Rs.540 million, contributing 33.92 percent to the overall sales mix of KSBP in 1QCY25. The main growth driver of export sales was intercompany sales activities. Locally, water and general industry was the key performer. Cost of sales grew by 23.63 percent in 1QCY25. This resulted in 53 percent higher gross profit recorded in 1QCY25, signifying cost optimization, better sales mix, increased sales volume, and price optimization. GP margin was recorded at 22.43 percent in 1QCY25 versus GP margin of 18.94 percent recorded during the same period last year. Operating expense spiked by 45.48 percent in 1QCY25 due to higher payroll expense, travelling & conveyance charges as well provisioning done for WWF and WPPF. KSBP was able to drive its operating profit up by 106.88 percent in 1QCY25 with OP margin recorded at 3.72 percent versus OP margin of 2.32 percent registered in 1QCY24. The other income dipped by 56.82 percent in 1QCY25,due to lower exchange gain and profit on bank deposits recognized during the period. Finance cost also dwindled by 97 percent during the period under review due to the lower discount rate. KSBP posted a net profit of Rs.60.15 million in 1QCY25 versus net loss of Rs.99.61 posted in 1QCY24. EPS stood at Rs.1.95 in 1QCY25 versus loss per share of Rs.7.55 recorded in the previous period. KSBP’s NP margin clocked in at 3.78 percent in 1QCY25.
Outlook
With the political dust settled, public sector development activities are expected to gain pace particularly in the water market area. This may increase the demand for KSBP products. The company is also making efforts to grab bigger ADB/PSDP funded development projects and WASA projects in 2025. Gradual developments in steel, sugar, fertilizer, and auto sectors will also strengthen the business outlook of KSBP in the ongoing year. The company’s sound presence and an urge to continuously expand in the reverse engineering and spare parts business will also yield positive results in the future.