Baluchistan Glass Limited (BGL)

Since its establishment, Baluchistan Glass Limited (BGL) has been a serious contender in the glass industry of Pakistan. BGL was incorporated in 1983 and is headquartered in Lahore. In 1999, it was acquired by the Gharibwal Group. Presently BGL has three units or manufacturing facilities. Manufacturing units of the company are situated in Hub and on Lahore-Sheikhupura Road in Punjab. The total capabilities of BGL's units are 36,000 tons, 75,000 tons and 22000 tons per annum respectively, and they produce various types of narrow and wide-neck glass containers for soft drinks, juices, food, pharmaceuticals, and breweries in flint, green and amber glass.
Beside these, the company offers glass tableware products comprising tumblers, mugs, ice cream cups, plungers, fruit sets and bowls, ashtrays, decorated glass products, cake sets and plates, jugs, goblets, cups and saucers, and jars, as well as plastic shells. Its glass containers are used for beverages, pharmaceuticals, and food products. The company also exports its products to Bangladesh, Maldives, Sri Lanka, Iran, Kuwait, Lebanon, Nigeria, the United Arab Emirates, and Yemen. It was additionally the first glass manufacturer in the country to gain the approval of a quality assurance board. BGL is ISO 9001:2000 certified company.
Historical financial performance
The glass industry in Pakistan has largely performed well in last five years. But, Baluchistan Glass Limited (BGL) is having none of it. The top line of the glass company seems to have shown mix performance but in last five years, it mainly stayed below par. Beside low sales the Company has also incurred heavy operational losses which are primarily because of low capacity utilisation due to the shortage of natural gas. The lack of growth in the top line of BGL has put the bottom line of the glass company in red during the last five years.
In FY10 and FY11 the sales of the company is almost stayed flat but in FY11 retention is on the higher side during the year which helped the Company to maintain the sales level despite the decrease in the production. However, operating loss during FY11 reduced as compared to FY10.
In FY13, all three units of the company remained operational which enabled the Company to meet its customer demands and production targets. That helped the Company to report its highest sale in the history. During the year, the top line increased by Rs753,449 million which is 38.43 percent higher than the previous year. Besides the plant efficiency, the higher sales figures are mainly due to increase in sale prices.
However, despite achieving better efficiencies, BGL still incurred a substantial loss during the year. The director's report of FY13 attributed the heavy loss to the policies of SNGPL in distribution of gas supply among the glass manufacturing companies. BGL's unit II and III faced severe gas curtailment in summer as well as in winter season due to which not only their production suffered badly as well as they have to use alternative fuels which increased the cost of production. No availability of gas is the key reason for a rise in the operational loss and low production than expectations. It is worth noticing here that BGL has stated that SNGPL had given smooth gas supply to other companies in the related industry and the same vicinity whereas BGL suffered not only because of load management as well as due to low gas pressure than the required one.
FY15 was once again a problematic year for the glass company. The top line declined by 2700 bps but the core cost for the year was under control and resultantly gross profit loss reduced as compared to FY14. The Company is, however, able to control its operating expenses quite a bit in the financial year under discussion that's why the operating loss has reduced by 36 percent year-on-year.
BGL in FY15 saw the closure of Unit-II and one out of two furnaces at Unit-III. The Company has again complained the non-availability of steady gas supply at BGL's Unit-III, which pushed the Company to consume other alternative expensive fuels. The company in FY15 also faced the uncertainty, and it has again blamed the discrimination in the supply of gas in Punjab the main reason for the closure of BGL Unit-II and BGL-III and the overall failure of its fortunes.
Recent performance
For the first quarter of FY16, Baluchistan Glass Limited (BGL) took off to a good start if that's what one can call it. Sales were up by six percent year-on-year, and core cost stayed put. The Company received some help from the increase in quantum of production and reduction in oil prices to reduce the cost of production.
During the first quarter of FY16 BGL Unit-II remained shut down since the Company was installing and enhancing dits tableware production facilities which were started in the last quarter of FY15. BGL has introduced a new brand during the first quarter of FY16 to penetrate further into tableware product market. According to the management, the new brand Pearl in tableware market has obtained the encouraging response of the market so far.
Outlook
The glass sector in Pakistan is performing quite well. Ghani Glass Limited is a good example for that matter which has in recent years has improved their production capacity. Without a doubt, the natural gas shortage has played havoc with the industries in Punjab. But that's not the excuse for the underperforming of BGL.
However, it seems that the Company has started to refocus its energy towards what it does best.
The decision of enhancement its tableware manufacturing capacity would help them to meet the growing demand of local and export market both in the short run and over the long term.
BGL's Marimax brand has also performed remarkably well in past few years and now it is introducing a new brand in tableware to cater the market demand, and that is an excellent step.

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Balochistan Glass Limited

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Rs (Million)                           1QFY15   1QFY16      YoY

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Sales                                     424      450       6%

Cost of sales                             473      464      -2%

Gross profit/Loss                         -48      -14     -71%

Administrative and selling expenses        13       17      31%

Other Income                                ?       90      N/A

Operating Profit/ loss                    -61      -31     -49%

Financial charges                          59       60       2%

Profit/Loss  before tax                  -120      -91     -24%

Taxation                                    3        3       0%

Profit/loss for the year                 -123      -94     -24%

Gross Margin                             -11%      -3%        -

Net Margin                               -29%     -21%        -

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