By: Ismail Iqbal Securities (Pvt) Limited
International Steels Limited (ISL) posted 1QFY16 result on Tuesday, 20th of October. The company posted a dismal first quarter loss of PKR –0.47/share, down from EPS of PKR 0.01 in the same period last year. The key points regarding the result are:
Earnings down mainly due to strong fall in topline. ISL’s net sales declined by 28% YoY and 44% QoQ in 1QFY16 to PKR 2.86bn. Consequently, the gross margins also dropped sharply from 8.8% in 1QFY15 to 4.5% in 1QFY16.
As per our discussion with the management, the lower sales are due to a shutdown in its production plant in the month of August for the completion of their expansion project. The company expects their sales to rebound to normal levels from the second quarter onwards.
ISL faced a major relief from a hefty reduction in finance costs; from PKR 359mn in 1QFY15 to PKR 225mn in 1QFY16, a fall of around 37% YoY. The fall in interest expenses can be attributed to the prevailing low discount rates in the country and also due to decline in its short term borrowing from PKR 6.5bn in 3QFY15 to PKR 4.1bn in 4QFY15.
Going forward, we expect the company’s topline to rebound to PKR 7.1bn in 2QFY16 with its full year 2016 EPS expected to be around PKR 1.11, an increase of 139% YoY.