PACL is essentially a manufacturer of conductors, wires, and cables of transmission and distribution of electricity. In addition to the aforementioned its product portfolio, ALUMEX, which is used for architectural and structural applications, copper rod, and PVC compounds. A new product, namely ACCC conductor which has a high current capacity, has also been introduced, with the purpose of minimizing energy loss.
The company has continuously been adding to their plant facilities to cater the ever increasing customer demand. Aiming to be self-reliant for its energy requirement, Pakistan Cable also set up a 2-MW gas-fired tri-generation power plant. In 2019, PACL, with the aim of being more efficient and enhancing manufacturing facilities, has began development of a new factory in Nooriabad, Sindh.
Shareholding pattern
PACL is primarily owned by the directors, CEO and their spouses, which constitutes 33.33 percent of the total shares. International Industries Limited holds over 17 percent shares, whereas the general public accounts for approximately 21 percent.
However, along with the topline, the cost of sales has also seen a rise, causing only a negligible move in the gross profit margin; in fact, the gross profit margins have seen a downward trend from 15.7 percent in 2017 to approximately 12 percent in 2018 and 2019. A major contributing factor to the rise in cost of sales is the devaluation of the rupee.
The pricing of the products of the cable industry is largely dependent on the global markets for copper and aluminium. Since both the metals are traded on the London Metal Exchange, the prices of the aforementioned are determined there. Evidently, any volatility and variation in copper and aluminium prices directly impacts the pricing of PACL's products. However, the adverse economic conditions in the country did not allow for the rising cost of inputs to be passed on to the consumer, hence the staggering profits.
1QFY20 Performance
Comparing the quarter July to September 2019 to that of the previous year, the net sales commanded a 23 percent year-on-year growth from Rs1.8 billion in 1QFY19 to Rs2.2 billion in 1QFY20; a 27 percent year-on-year rise in cost of sales, however, offset the increase in net sales, allowing gross profit to only grow marginally by 2 percent.
The administrative, selling and distribution costs, in addition to impairment loss on doubtful trade reduced by 16 percent year-on-year because of a curtailment in advertising expenses. Finance costs, on the other hand, grew by over 2.5 times year-on-year due to rising interest rates.
Stock performance: PACL stock also seems to be quite volatile; when the market dipped slightly between March 2019 and June 2019, PACL stock saw a much significant decline in its stock performance. Similarly, when the market exhibited an upward trend in June 2019, PACL's stock shot up considerably.
Future outlook: The general economic slowdown and increasing unpredictability, has caused a reduction in the construction activity, In addition, the government has cut down public development expenditure which has further reduced the demand for construction material, mainly cables and wires. PCAL is attempting to minimize the cost of production which has been negatively affected by rupee devaluation, and increase productivity.