Amreli Steels Limited posted a loss of Rs313 million for the six months ended December 31, 2019 (LPS: Rs1.06), largely because of lower rebar prices, high scrap rates, and rupee deprecation.
A statement said the company earned had Rs516 million with EPS of Rs1.74 in the corresponding period of a year earlier.
Analysts at Arif Habib Limited said the company’s revenue jumped up 18 percent year-on-year in 2QFY20 owing to a surge in the off-take (sales estimated to be around 78,000 tons in 2QFY20 vs 62,000 tons in same period last year) since prices were effectively lower post implementation of a 17 percent Federal Excise Duty in FY20 budget.
In 1HFY20, the steelmakers’ topline increased 11 percent year-on-year led by improved offtake, while gross margins reached 7.9 percent in the quarter under review (2QFY19: 9.7 percent), down by 2ppts year-on-year, 3ppts quarter-on-quarter.
“Although we expected higher margins during 2QFY20; however, we believe possible utilisation of existing scrap inventory at higher prices, lower rebar prices, and rupee depreciation were the main culprits behind the compressed gross profitability,” the brokerage said adding, “Albeit, we await clarity from the management.
On a cumulative basis, margins in 1HFY20 retracted by 3ppts year-on-year to 9.3 percent given aforementioned reasons.
Jump in Amreli Steel’s financial charges at Rs667 million (up two times year-on-year) in 2QFY20 remained in line with higher borrowings undertaken by the company alongside rate hikes by the State Bank of Pakistan.