Siddiqsons Tin Plate Limited

Siddiqsons Tin Plate Limited (PSX: STPL) was set up in collaboration with SOLLAC of France and MITSUBISHI CORPORATION of Japan in 1999. It manufactures and sells tin plates, cans and other steel products. The company’s products are used in packaging of products such as cooking oil, fruits, foods, vegetables, sea foods, beverages, lubricant oil, etc.

Shareholding pattern

As at June 30, 2022, the directors, CEO, their spouses, minor children and senior management own close to 37 percent shares. Within this category, a major chunk of shares is held by the chairman, Mr. Tariq Rafi. The local general public owns over 37 percent shares, followed by 15 percent held in associated companies. The latter primarily includes Siddiqsons Limited. The remaining roughly 11 percent shares are with the rest of the shareholder categories.

Historical operational performance

Both topline and profit margins have been fluctuating over the years. However, between the period FY17 and FY21 topline has seen consistent growth, but profit margins continued to vary.

In FY19, revenue posted a growth of almost 29 percent, crossing Rs 3 billion in value terms. This was the highest growth the company had seen thus far. While local sales exhibited a growth of 26.3 percent, export sales registered an increase of 53 percent. It must be noted though, that local sales are the major contributor to total revenue. The double-digit rise in topline is attributed to an increase demand in global tinplate packaging market. The latter was a result of increased consumption of canned vegetables and foods, alongside growth in pharmaceuticals and cosmetics industry, etc. With cost of production reduced to 90 percent, gross margin improved to almost 10 percent, compared to 6.2 percent in the previous year. This also reflected in the net margin that increased to 2.5 percent, compared to last year’s loss. During the year, the company earned significantly higher other income owing to profit on bank deposits.

Topline growth in FY20 stood at 4.3 percent. Majority of this growth came from export sales that grew from Rs 147 million in the previous year to Rs 651 million in the current period, whereas local sales fell by 11 percent, although it continued to be the major contributor to total revenue in value terms. The slow business was attributed to a general economic slowdown in the country, in addition to the impact of the Covid-19 pandemic that resulted in strict lockdowns. With cost of production escalating to 95 percent of revenue, gross margin fell to 5 percent. The impact also trickled to the bottomline that was recorded at a net loss of Rs 23 million.

The company witnessed the highest growth in topline in FY21 at over 64 percent, to reach Rs 5.8 billion in value terms, which was also the highest seen. Export sales escalated to Rs 1.4 billion, from Rs 651 million in the previous year. Local sales also inclined by over 49 percent, making up the major share of total revenue. This was attributed to an improvement in demand as outdoor activities, and large gatherings and events resumed in addition to reopening of restaurants that resulted in 45 percent higher sales volumes. Coupled with diversified procurement of raw materials and inventory management, gross margin elevated to 13.75 percent. This also reflected in the net margin that was recorded at a 13-year high of 5.5 percent.

Topline decline in FY22 by over 19 percent, with revenue falling to Rs 4.7 billion. This can be attributed to the drop in export sales as they went from Rs 1.4 billion in the previous year, to Rs 250 million in the current period. Local sales, on the other hand, continued on its growth trajectory to reach Rs 5.2 billion. There was an overall decline of 47 percent in sales volumes. Production volumes were also lower year on year due to delayed shipments of raw material, unavailability of vessels and quality issues with local manufacturers of CRC. Moreover, the high prices forced end users to shift to alternate packaging solutions. With a slight incline in cost of production as a share in revenue, gross margin reduced marginally to 13 percent. This also reflected in net margin that was also marginally lower at 4.26 percent.

Quarterly results and future outlook

Topline in the first quarter of FY23 was 12 percent lower year on year. This was attributed to a general economic slowdown, that in turn, was a result of a numerous of factors. The unprecedented rains during the year resulted in significant loss with regards to infrastructure. This led to demand suppression. Moreover, commodity prices began to decline as the world moved into a recession with lower demand. On the other hand, the lower prices are expected to encourage demand. But this is again dependent on exchange rate. With lower revenue, and significantly higher finance expense year on year, net margin fell considerably from 12.57 percent in 1QFY22 to 3.3 percent in 1QFY23.

The devastation brought about by floods and its resultant impact has been seen in the first quarter, a similar trend is expected to continue in the domestic market with suppressed demand. Combined with exchange rate fluctuation, high interest rates and inflation, economic activity is expected to be dampened. For the company, the reducing prices of Palm Oil and steel are expected to increase demand of tinplate.