Ghani Glass Limited

Ghani Glass Limited (PSX: GHGL) was established as a limited liability in 1992, under the Companies Ordinance, 1984 (now Companies Act 2017). It manufactures and sells glass containers and float glass. The company is part of the bigger Ghani Group of Companies, that functions in various sectors such as construction, mining, automobiles, etc.

Shareholding pattern

As at June 30, 2021, nearly 53 percent of shares are with the directors, CEO, their spouses, and minor children. Within this category, major shareholders are Mr. Aftab Ahmad Khan, Mr. Imtiaz Ahmad Khan, and Mr. Anwaar Ahmad Khan that hold 8 percent and close to 5 percent each, respectively. Over 36 percent shares are with the local general public, followed by almost 7 percent in other companies. The remaining about 4 percent shares are with the rest of the shareholder categories.

Historical operational performance

In the last six years specifically, the topline of the company has been rising except for in FY20 when it contracted by less than 1 percent. Profit margins, on the other hand, have been on a decline until FY20, before improving again in FY21.

In FY17, topline registered a 12 percent rise, crossing Rs 13 billion, whereas the cost of production reached an all-time low of over 67 percent of revenue; previously costs had always been beyond the 70 percent mark. Production cost in FY17 reduced as the company undertook BMR activities while also trying to curtail costs in other areas; there was a decline in expenditure particularly in the “manufacturing expenses” category. Thus, the gross margin increased to 32.8 percent. However, the net margin increased marginally to 17.4 percent, from last year’s 16.7 percent, due to a higher tax expense in FY17.

The country’s economy, in general, was performing better as GDP growth stood at 5.8 percent. Agriculture grew by 3.8 percent while Large Scale Manufacturing (LSM) reached its highest seen in the last decade. The company's topline continued to improve in FY18, as it grew by 7.3 percent, crossing Rs 14 billion in value terms. During the year, the company commenced commercial production on a new project at the Lahore plant that allowed the production capacity to increase by 450 tons per day. But the cost of production neared 72 percent of production, squeezing the gross margin to 28.2 percent. However, operating margin was supported largely by other income that came from profit on savings accounts combined with a drop in distribution expense that occurred due to the transportation and handling costs. This also trickled down to the net margin that further improved to 20 percent due to a significantly lower tax expense.

The company witnessed the highest growth in revenue at 21.6 percent, with revenue recorded at over Rs 17 billion. But it came with more than the corresponding rise in costs; production cost grew to nearly 75 percent of revenue, which brought the gross margin down to 25 percent. The majority of the increase in expenses was associated with raw material and fuel expenses. With other factors of the financial statements remaining more or less similar as a share in revenue, the net margin was recorded at over 18 percent for the year.

After rising consecutively for five years, revenue in FY20 contracted by less than 1 percent. The performance during the year was attributed to the challenges brought about by the Covid-19 pandemic that resulted in lockdowns, production, and trade halts. Production cost, as a share in revenue, reached an all-time high of nearly 85 percent, which reduced the gross margin to 15 percent- the lowest seen since FY12. Given the existence of Covid-19, the company also made a bigger than usual provision for loss on trade debtors, which further shrunk profitability. With some support coming from the share of profit of associate, net margin clocked in at 8.8 percent for the year, which was considerably lower than over 18 percent seen in FY19.

Recent results and future outlook

Pakistan fared comparatively better in containing the spread of the virus as is reflected by the 3.94 percent GDP growth during FY21. The Large Scale Manufacturing sector also recovered with sectors exhibiting substantial improvement. The company posted revenue growth of 25.6 percent, the highest seen thus far, with revenue crossing Rs 21 billion. As a result, the cost of production also made a lower share in revenue at 77 percent, which allowed gross margin to improve year on year, to 22.6 percent. However, operating expenses made a larger share in revenue primarily due to salaries expense, and a general inflationary pressure that raised expenses for categories such as stationery and supplies. Despite this, the net margin was better at nearly 15 percent.

In the next financial year, the company plans to launch another segment of tableware glass in order to expand and diversify its product portfolio. The company plans to finance it through its own internal sources. On the other hand, some of the challenges for the company, as well as the general economy, is the rising expense of inputs, particularly fuel and energy prices, for which it hopes to gain government support and incentives for the industry, as a whole.