In FY23, the Company’s profitability experienced a substantial decline, dropping by 34% to PKR 136.406 million (EPS: PKR 10.23), compared to PKR 208.238 million (EPS: PKR 15.62) in SPLY. This decline in net income can be attributed to several factors, including reduced demand for automobiles due to higher prices, an interest rate hike, and the shortening of financing terms mandated by SBP.
The top-line performance of Baluchistan Wheels also suffered, with a 40% decrease in revenue, falling to PKR 1.675 billion in FY23 from PKR 2.778 billion in the corresponding period of the previous year.
Gross profit for FY23 was reported at PKR 325.932 million, marking a 47% YoY decrease compared to PKR 611.652 million in SPLY. The Company’s finance costs rose to PKR 5.559 million, reflecting a 40% increase over the same period in the previous year.
Throughout FY23, BWHL’s product sales consisted of car wheels (81.2%), tractor wheels (14.9%), and truck/bus wheels (3.9%), with production shares of 82.6%, 14.3%, and 3%, respectively, during the same period. Unfortunately, the sale of passenger cars fell by 55%, trucks by 41%, and tractors by 48%, resulting in an overall decline in total vehicle sales of 50% to 161,656 units in FY23, compared to 344,692 units in SPLY.
The management pointed out three main factors contributing to the lower sales of automobiles: (i) restrictions on LC opening, (ii) PKR devaluation, and (iii) reduced purchasing power among customers.
In terms of sales composition, local sales accounted for 94% (PKR 1.577 billion) of the total sales, while exports represented a mere 0.2% (PKR 2.9 million), and scrap sales contributed 5.71% (PKR 95.7 million) in FY23.
The Company operated at only 39% capacity utilization during FY23, compared to 76% in the corresponding period the previous year.
The acquisition of Baluchistan Wheels is contingent on regulatory approvals, and any updates on this matter will be communicated to shareholders.
Going forward, BWHL anticipates that the demand for automobiles will continue to face pressure in FY24. However, there is potential for improvement in demand if SBP lifts restrictions on the import of CKD Kits and if the rupee appreciates in the long term.
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