Pakistan Cables Limited (PCAL) was established in 1953 as a joint venture with BICC. Over the course of the past six decades it has become the market leader as a premier cable manufacturer in Pakistan. Pakistan Cables is part of the Chinoy Group of Companies, which includes International Industries (IIL) and International Steels Limited (ISL)
In 2010, General Cable Corporation which is a Fortune 500 company and among the largest cable producers in the world acquired a 24.6 percent stake through its subsidiary GK Technologies Inc., USA in PCAL. The affiliation with General Cable provides PCAL an edge over its competitors, which allows it to source almost any type of cable for customers, access to cutting edge technology, technical support and procurement advantages and export opportunities.
Its product portfolio includes cables and wires, copper rods, Alumax as well as PVC compound. The company has a state-of-the-art manufacturing facility dedicated to manufacturing wires for the automobile industry. It also manufactures telephone, intercom, coaxial and numerous types of special cables. Pakistan Cables is ISO 9001:2008, ISO 14001:2004 and OHSAS 18001:2007 certified company. The company also has its cables type tested by the world-renowned KEMA Laboratory in Netherlands.
Historical financial performance
PCAL's product portfolio is used across a variety of sectors such as construction, maintenance, engineering, infrastructure, petrochemical fertilizer and textile. The company has faced increasingly tough competition from the huge quantum of low-quality cable imports from China and other informal players. According to industry sources, the cable market has a large grey market presence with almost half the share being unreported.
This grey market has a significant effect on house wiring and some low-voltage segments which are being supplied by low tech informal backyard manufactures mainly using low-quality raw material or scrap in their production. PCAL is also sensitive to the fluctuations in the prices of metals, particularly of copper and aluminum, which has a great impact on the bottom line of the company.
The company witnessed an increase in the sales during FY14. It achieved a top line of Rs 6.6 billion which was 7 percent higher than compared to Rs 6.2 billion of FY13. Pakistan Cable took advantage of the rising demand in the housing sector and commercial projects that attributed to low-interest rates, low inflation and growing demands for housing by the middle class in the country.
Thanks to decent growth in top line and reasonable increase in costs, the cable and wire giant increased its profit margins in FY14. With a significant 29 percent increase in its net profits, this reached to Rs 222.3 million during FY14, compared to Rs 172.9 million in FY13.
During FY15 the company managed to procure large orders from the projects segment as well as tenders from utility companies and significant export orders. The Alumax segment witnessed a positive growth trajectory with new business being brought in from various project sectors. However, local as well as international competition remained tough.
The company's revenue showed mediocre growth while the bottom line also presented a lacklustre picture. PCAL recorded 5 percent growth in revenue during the year while gross profit for the year took a dip from 13.3 in FY14 to 12.5 percent in during the year. The lower gross profit was attributed to intense competition in the market which has kept the margins under pressure.
PCAL's top line fell marginally in FY16 with a drop of 2 percent in revenue as compared to the previous year. Falling international copper prices were primarily behind the fall. The increased competition from domestic as well as Chinese competitors also played a role in this revenue dip. However, during FY16 PCAL was able to boost its EPS to Rs 9.29 from Rs 6.65 in FY15 due to an improved sales mix, better margins and higher volumes.
In FY17 PCAL recorded its highest ever revenue marks while on a year-on-year basis and the company registered an 18 percent increase in its top line. The growth came on account of the strong performance across its wire and cable product portfolio. Gross profitability margins showed negligible change as compared to FY16.
Snapshot 9MFY18
PCAL witnessed a 10 percent increase in its top line as compared to 9MFY17 but the company's gross profit margins remained under pressure owing to competition from both Chinese manufacturers and informal players. The company also attributed the pressure on profitability to rising input costs. PCAL's administrative expenses increased by 15 percent but the finance cost is what dragged the bottom line down. The finance cost almost doubled to finance working capital requirements and due to the exchange loss on dollar denominated borrowing. PCAL's bottom line contracted by 28 percent in 9MFY18 as compared to the same period last year while its EPS fell from Rs 11 to Rs 7.94.
Future outlook
Positive triggers for PCAL are the plethora of power sector up gradation projects by transmission companies as well as DISCOs. Expansion in cement sector might also see an increase in demand for the company's products. There has been a downward trend of international copper prices which recently touched their lowest level since July 2017. This will impact the company's bottom line going forward.
But the increased competition from international players' especially Chinese counterparts as well as domestic suppliers continues put downward pressure on PCAL's margins. The company is fighting back with aggressive investment in improving its operational efficiency. Capacity expansion has also been undertaken along with introduction and PCAL has also introduced new technology by an American company.
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Pakistan Cables Limited
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Rs (Mn) 9MFY18 9MFY17 YoY Chnge
Net sales 6829 6219 10%
Cost of sales 5927 5240 13%
Gross profit 902 980 -8%
Selling and distribution 329 314 5%
Administrative expenses 194 168 15%
Finance costs 99 50 98%
Other expenses 26 37 -30%
Other income 29 34 -15%
PBT 294 453 -35%
Taxation 68 140 -51%
PAT 226 313 -28%
EPS 7.94 11 -28%
Gross margin 13.2% 15.8% down 255 bps
Net margin 3.31% 5.03% down 172 bps
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Source: Company accounts
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Pakistan Cables Limited: Pattern of shareholding Percentage
share held
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Directors, CEO & their spouse/minor children 41.09
Associated Companies and Related Parties 8.52
Banks, DFI's, NBFIs, insurance/takaful firms & 0.52
Modarabas and pension funds
Mutual Funds 8.65
Shareholders having 5 percent or more voting right 24.22
General public 15.75
Others 0.73
Total 100
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Source: Company accounts
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Pakistan Cables Limited (PCAL)
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Rs (Mn) FY12 FY13 FY14 FY15 FY16 FY17
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Net Sales 5,345 6,165 6,600 6,957 6,850 8,084
Gross profit 688 703 877 869 1,083 1,268
PAT 140 173 222 189 264 479
EPS (Rs/share) 4.92 6.08 7.81 6.65 9.29 17
Gross margin % 12.9 11.4 13.3 12.5 15.8 15.7
Net margin % 2.6 2.8 3.4 2.7 3.8 5.9
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Source: Company Accounts