Pakistan International Bulk Terminal

Pakistan International Bulk Terminal (PSX: PIBTL) was set up in 2010 as a private limited company under the repealed Companies Ordinance, 1984. It entered into a Built Operate Transfer (BOT) contract with Port Qasim Authority (PQA) to construct, develop, operate and manage coal and clinker/cement terminal at Port Muhammad Bin Qasim for thirty years. At the end of the contract, PIBTL will transfer all concession assets to PQA.

Shareholding pattern

As at June 30, 2020, over 50 percent shares are held by the associated companies, undertakings and related parties. Of this, at 43 percent, majority of the shares are owned by Premier Mercantile Services (Private) Limited. The directors, CEO, their spouses and minor children collectively hold nearly 6 percent shares in the company. Of this, 2 percent of the total shares are owned by Capt. Haleem A. Siddiqui, the chairman of the company. over 10 percent shares are held in foreign entities followed by 27 percent with the local general public. The remaining about 6 percent shares is with the rest of the shareholder categories.

Historical operational performance

The company has not seen topline pouring in until FY18; it did, however, earn other income. In some years, the company did record a positive bottomline owing to other sources of income.

In CY17, the company handled 251,340 tons of coal cargo during the testing and commissioning phase. Given that coal has a 40 percent share globally as the cheapest fuel for power generation, there is immense potential for its demand to increase in the country since Pakistan has a small share in power generation through coal fired power plants. On the costs side, administrative cost is major expense that has been rising year on year for the last four years. Major components of the administrative expense are salaries, rent and liquidated damages; the latter was only present in the current year. However, the support from other income coming largely through profit on savings accounts- conventional, kept the company profitable with bottomline recorded at close to Rs 27 million.

FY18 began with the company completing its project - a terminal for handling bulk cargo vessels at Port Qasim- and began operations. It posted a topline of nearly Rs 2 billion, handling 2,648,678 tons of coal and 96,370 of clinker with 54 vessels. The company is expecting increase in demand for coal for power generation since a lot of the sectors have moved to medium to high quality coal which is not available indigenously and therefore has to be imported. On the other hand, since the company is its nascent stage of operations, it has notable fixed costs that it was unable to cover, hence cost of services exceeded the revenue. Other income also provided lesser contribution to the bottomline. In addition, finance cost was also substantial due to cash flow issues and delay in repayment. Thus, the company posted a loss of Rs 2.6 billion.

Revenue in FY19 picked up four times year on year, crossing Rs 8 billion. The company handled 8,553,410 tons of cargo during the period, compared to 2,745,048 tons seen last year. After the general elections, the new government focused on increasing economic growth through construction, power projects, motorways, housing schemes, etc. This indirectly meant that the demand for cement would rise. Moreover, the government’s strategy to curb imports in order to reduce the trade deficit did not affect the company as such given that it caters to the energy and cement sectors, that has seen growth. During the year, the company was able to cover its cost of services, therefore it posted a gross margin of nearly 28 percent. But the significant exchange loss coupled with the escalating finance expense kept the company from earning a positive net margin; thus, the company incurred a loss of Rs 2.4 billion.

Revenue increased by a further 18 percent during FY20, crossing Rs 9.4 billion. The company handled 8,630,523 tons of cargo. In the second half of FY20, the country was gripped with the Covid-19 pandemic; but the company was allowed to continue to function being termed as essential services. On the other hand, the loss in FY19 was largely attributed to “currency devaluation on USD denominated foreign loans” among other factors. With exchange rate somewhat stabilizing, other expenses, that was primarily a result of net exchange loss, reduced, along with finance expense. Thus, the company posted a net profit for the first time since commencement of project, at Rs 1.1 billion.

Quarterly results and future outlook

The first quarter of FY21 saw revenue higher by 11.4 percent; tons of cargo handled was also higher at 2,320,006 as business activities resumed domestically as well as globally. Although gross margin was lower in 1QFY21, the bottomline was supported by a net exchange gain. The second quarter also saw higher revenue by 26 percent, with notable contribution made by exchange gain. The third quarter also saw a similar trend with exchange gain significantly supporting bottomline. Finance expense for nine months ended of FY21 was also lower year on year due to lower interest rates. Thus, net margin for 9MFY21 improved to 20.8 percent compared to 9.5 percent in 9MFY20. Given that cost of services has been more or less flat, it is the currency fluctuation that is impacting the company. A major changes in exchange rate will vastly affect the profitability of Pakistan International Bulk Terminal