Amreli Steels Limited (ASTL) announced its 3QFY19 financial result on Monday where the company posted a loss after tax (LAT) of PKR 293mn (LPS: PKR 0.99), compared to last year’s profitability of PKR 473mn (EPS: PKR 1.59). This took the 9MFY19 bottom-line to PKR 224mn (EPS: PKR 0.75), down by 78% YoY.
Topline in 3QFY19 witnessed a massive growth of 38% YoY. This can be owed to improved utilization although, we await guidance from the management to quantify the jump – along with higher rebar prices (PKR 97,800 vis-à-vis PKR 91,000 in SPLY). During 9MFY19, volumetric growth amid commencement of commercial operations at Dhabeji, tagged with improvement in retail prices aided revenue growth of 72% YoY.
Gross margins at 4.9% in 3QFY19 compare starkly to 21.2% in 3QFY18, down by 16ppts YoY. Although we expected higher margins during the quarter under review, we believe higher scrap prices and PKR depreciation against USD were the main culprits along with one-off expenses such as consultancy fees that dragged down margins. In 9MFY19, margins have halved to 10% vs. 20% in 9MFY18 for aforementioned reasons.
Financial charges arrived at PKR 370mn (up by 3x YoY) in 3QFY19 led by increased borrowing in lieu of longer working capital period given competition in the market, as well as rising interest rates.
The company booked a tax credit of PKR 52mn in 3QFY19 in contrast to a tax charge of 23% in SPLY.