Pak Elektron (PAEL) announced 4Q2016 consolidated earnings of Rs 1.3/share. The earnings were supported significantly by lower input cost (steel, aluminium and copper) during the period. The result announced exceeded expectations. The result also accompanied a final cash dividend of Rs1.75/share, taking the annual payout to 40pc.
Gross revenues of PAEL were down by 5pc YoY during 4Q2016, owing to product mix alignment and price rationalisation. While the cost of sales posted a major decline of 42pc YoY due to lower commodity prices in the global market, sources at the company stated. Thus, gross margins increased significantly by 13ppts to 34pc in 4Q2016.
Profit from operations jumped by 31pc YoY for 4Q2016, even though sales declined over the period. The bottom-line posted a growth due to the restricted cost of sales and distribution costs which posted a decline 42pc YoY and 11pc YoY, respectively. Onwards, lower finance cost of Rs299mn (down 13pc YoY) due to prevailing interest rate scenario and tax reversal of Rs53mn (Rs124mn tax expense for 4Q2015) positively impacted the bottom-line.
During 2016, bottom-line earnings of the company increased by 27pc YoY to Rs3.7bn, mainly due to volumetric growth, lower input costs in the latter half of 2016 and a decline in the taxation expense by 29pc YoY.
The company recognises the following key risks:
- greater than expected PKR devaluation against US$
- a sharp increase in commodity prices
- greater competition due to new entrants in the form of higher discounts from competitors.
