Air Link CEO says things ‘back on track’ as LC restrictions ease

KARACHI: The International Monetary Fund (IMF) programme together with further foreign exchange inflows seemed to have put Air Link back on track as the CEO said capacity utilisation at its plant in Kot Lakhpat, Lahore has improved, and expected to grow in the coming months.

“We faced severe supply-chain issues due to the restrictions on letters of credit as soon as we began manufacturing last year,” Air Link Communication CEO Muzzaffar Hayat Piracha told Business Recorder in a recent interview. “However, after the IMF programme, we are now producing more cellphones than we were making before restriction started.”

Piracha’s comments come after Pakistan saw an upgraded version of the IMF programme with the lender’s board approval coming in July and paving way for the inflow of nearly $1.2 billion. The green signal also earned Pakistan inflows from Saudi Arabia and the UAE, easing the foreign exchange reserves’ situation that had earlier put the country in a crisis and forced the government to restrict the flow of imports.

Air Link, which relies on imports of cellphone parts for its plant in Punjab, was one of many businesses that saw sales dwindle.

Its revenue during January-March quarter fell from Rs11.16 billion in 2022 to Rs3.96 billion in 2023, with earnings suffering a decline from Rs405.8 million to a meagre Rs102.4 million in the three-month period.

Its nine-month profit (July-March) was cut from Rs1.43 billion to Rs775.3 million. The share price suffered a similar ordeal, falling from around Rs39 to under Rs19 before the IMF programme was revived. It is currently hovering around the Rs23 mark.

Piracha, however, said things are looking up.

“We are now making 300,000 phones monthly – working at almost 70% of our capacity at the moment, which we expect to increase in months to come,” he added.

The Lahore plant’s assembling capacity has been planned for 400,000 mobile sets per month which is expandable according to market demand, it says in the company’s latest quarterly report.

In a notice to the Pakistan Stock Exchange (PSX) last year, the company had announced that it would commence operations at its Device Manufacturing Facility for the production of Xiaomi handsets in Pakistan from March, 2022 at Quaid-e-Azam Industrial Estate, Kot Lakhpat, Lahore. At the time, the company said that the initiative is expected to generate a sales volume of $550 million per year while creating thousands of jobs in Pakistan.

However, with Pakistan unable to revive its Extended Fund Facility with the IMF – the programme eventually expired – Air Link saw its plans disrupted.

The company, which is the sole manufacturer of Xiaomi phones in Pakistan and one of the two manufacturers of Tecno phones, is the official partner of global brands that include Samsung, Huawei, TCL, Alcatel, iTel and Apple’s authorised reseller.

It remains the only cellphone company listed in the country and has one of the largest smartphone distributors, manufacturers, and retailers in Pakistan. The company has a nationwide network linked with over 16 hub regional offices, over 1,100 wholesalers and 4,000 retailers with after-sales support service centers in all major cities of Pakistan.

The company has around 20%-22% market share in Pakistan’s cellphone industry.

“The local industry caters to 95% of the total market demand in Pakistan,” Piracha added.

With restrictions on imports, supply has been unable to keep pace with demand that has remained pent up despite higher prices, and taxation.

Industry sources indicated the gap was filled by smuggled and imported cellphones, which were sold at a premium.

“The market is dry at the moment. There’s immense demand because last year there was an acute shortage. Dealers are now getting supply from companies. The volumes will continue to increase,” Piracha indicated.

“Prices are stabilising, and supply-side issues are improving.”

However, Muhammad Rizwan, President of Karachi Electronics Dealers Association, said there is still a shortage of supply of cellphones and dealers are still selling at a ‘premium’.

“There’s still a shortage in the market. Supply is not matching demand,” Rizwan told Business Recorder, stressing that smuggled phones are making their way into the market to meet the need.

Copyright Business Recorder, 2023