Ghani Glass Limited (PSX: GHGL) was incorporated in Pakistan as a limited liability company in 1992. GHGL is a company of the Ghani Group which carries over 50 years of rich experience in the local and global markets. The company’s principal business is the manufacturing and sale of glass containers, float glass, and value-added glass. GHGL caters to the needs of diverse industries such as pharmaceuticals, food and beverages, R&D, and other value-added industries. Besides catering to the needs of the local market, GHGL exports to over 26 countries globally.
Pattern of Shareholding
As of June 30, 2024, the company has a total of 999.715 million shares outstanding which are held by 4787 shareholders. Directors, CEO, their spouses, and minor children have the majority stake of 49.27 percent in the company followed by the local general public holding 42.56 percent shares. Other companies account for 5.82 percent shares of GHGL while joint stock companies hold 1.38 percent shares. The remaining shares are held by other categories of shareholders.
Historical Performance (2019-24)
Over the period under consideration, GHGL’s topline posted a marginal dip only in 2020. Conversely, its bottom line plunged in 2020 and 2024. GHGL’s margins contracted in 2019 and 2020 followed by a significant rebound in 2021 and 2022. In the subsequent year, operating margins receded, while gross and net margins continued their uphill ride. In 2024, all the margins dropped. The detailed performance review of the period under consideration is given below.
In 2019, GHGL attained 21.62 percent year-on-year growth in its net revenue which clocked in at Rs.17, 248.13 million. However, the high cost of sales particularly raw materials consumed as well as fuel, gas, and electricity charges took its toll on the GP margin which shrank to 25.38 percent in 2019 from 28.22 percent in the previous year. Operating expenses also grew in line with inflation and increase in operational activities during the year. The main contributors behind elevated operating expenses were high payroll expenses, charity & donations as well as sales promotion. Other income contracted by 27.48 percent year-on-year in 2019 due to the high-base effect as there was a surplus on the sale of fixed assets in the previous year. Due to a surge in operating expenses as well as a contraction in other income, GHGL could post a meager 4.2 percent year-on-year rise in its operating profit in 2019 with OP margin slipping down from 21.24 percent in 2018 to 18.20 percent in 2019. One striking fact about the company is that it is operating on a 0:100 debt-to-equity ratio. The company receives advances from its associated undertakings for the supply of goods and interest-free loans from the sponsor directors to meet the working capital requirements. Hence, the finance cost of the company was very thin i.e. Rs.12.5 million in 2019 which mainly comprised of bank charges. During the year, the share of profit from an associate company grew by a tremendous 117.39 percent year-on-year. This buttressed the bottom line which grew by 9.68 percent year-on-year to clock in at Rs.3143.52 million in 2019 with EPS of Rs.5.98 versus EPS of Rs.5.6 posted in 2018. NP margin nosedived to 18.23 percent in 2019 versus the NP margin of 20.21 percent registered in the previous year.
2020 was characterized by stunted economic activity – both locally and globally - on the back of COVID-19. GHGL also had to shut down its operations to comply with the lockdown requirements imposed by the government. During the year, not only did the local market show lackluster demand, but exports were also disrupted due to restrictions on the movement of goods and people in many export markets of the company. This resulted in inventory buildup and higher fixed costs during the year. The sales of the company posted a meager 0.88 percent year-on-year dip in 2020 to clock in at Rs.17,096.24 million. However, a 12.60 percent higher cost of sales squeezed the gross profit by 40.49 percent year-on-year in 2020 with GP margin sliding down to 15.24 percent. The company kept a strict eye on its administrative and selling expenses which nosedived by 14.63 percent and 22 percent respectively in 2020. Provision on receivables from trade debts grew significantly from Rs.3.97 million in 2019 to Rs.113.75 million in 2020 due to static business activities on the customers’ front which reduced the chances of recovery. Other income also thinned down by 40.44 percent year-on-year in 2020 on the back of low exchange gains as export sales remained lackluster during the year. Operating profit eroded by 53.81 percent in 2020 with OP margin slipping to 8.48 percent. Finance cost grew by 171.33 percent in 2020 on account of the unwinding of liability against the right-of-use asset. The much-needed support to the bottom line was provided by a share of the profit of associates which grew by 79.11 percent year-on-year in 2020. Yet the bottom line plunged by 51.87 percent year-on-year in 2020 to clock in at Rs. 1513.08 million with EPS of Rs.2.02 and NP margin of 8.85 percent.
In the subsequent years post-COVID-19, the company regained its lost growth momentum. The topline magnified by 25.59 percent and 43.58 percent year-on-year in 2021 and 2022 respectively with GP margin touching 22.44 percent and 29.25 percent respectively in 2021 and 2022. It is to be noted that the operating expenses which slid in 2020 have started popping up in 2021 and 2022, particularly on the back of freight and forwarding charges, payroll expenses as well as sales promotion expenses. Other expenses also grew on account of higher provisioning done for WWF and WPFF. The company, however, made net exchange losses during both years. Other income did exceptionally well in both 2021 and 2022 mainly on the back of profit on Islamic saving accounts and scrap sales. While the company booked a reversal on credit loss against trade debts in 2021, it again booked a provision worth Rs. 96.53 million in 2022 which mainly accounts for the expected credit loss charged on the balance due from Ghani Value Glass Limited, a related party of GHGL. The share of profit from its associate company RAK Ghani also dropped in both years. The finance cost of GHGL amplified in 2021 by over 300 percent year-on-year and then dropped by 13 percent year-on-year in 2022. The hefty increase in finance costs in 2021 was due to the unwinding effect of GIDC payable to SNGPL. The bottom line of GHCL grew by a stunning 106.53 percent and 93.44 percent year-on-year to clock in at Rs.3.12 billion and Rs.6.04 billion respectively in 2021 and 2022. EPS clocked in at Rs.3.83 in 2021 and Rs.6.05 in 2022. NP margin also staggeringly spiraled to clock in at 14.55 percent and 19.61 percent in 2021 and 2022 respectively.
In 2023, GHGL posted a 33.12 percent year-on-year rise in its topline which clocked in at Rs.41,038.48 million. This came on the back of both higher local and export sales recorded during the year. During the year, the company faced various challenges owing to political and economic upheaval in the country. The devastating floods at the onset of the year added to the ado, creating immense supply chain disruptions for the company as it mostly sources its raw materials locally. GHGL passed on the impact of high indigenous inflation and high fuel and power charges to its consumers, resulting in a GP margin of 30.79 percent in 2023. In absolute terms, gross profit strengthened by 40.16 percent in 2023. Administrative expenses surged by 98.38 percent in 2023 due to the expansion of GHGL’s workforce from 2480 employees in 2022 to 2962 employees in 2023 which drove up the payroll expense. The company also engaged in bigger CSR initiatives and donated generously to the Ghani Foundation Trust which also greatly contributed to driving up its administrative expenses in 2023. Distribution expense magnified by 63.44 percent in 2023 on the back of elevated freight & forwarding charges, payroll expenses, commission expenses as well as sales promotion charges incurred during the year. The company made a hefty exchange gain on its export sales in 2023 due to the Pak Rupee depreciation. This resulted in 14.17 percent lower other expenses recorded in 2023 despite higher profit-related provisioning done during the year. Lower scrap sales and profit on saving accounts culminated into 5.1 percent thinner other income recorded by the company in 2023. Operating profit multiplied by 27.4 percent in 2023, however, OP margin leveled down to 19.69 percent. The lower unwinding effect of GIDC resulted in 4.25 percent lower finance costs incurred by GHGL in 2023. Furthermore, the share of profit from an associated company, RAK Ghani Glass LLC magnified by 2758 percent in 2023. This resulted in a 33.95 percent escalation in GHGL’s net profit which clocked in at Rs.8096.95 million in 2023 with EPS of Rs.8.1 and NP margin of 19.73 percent.
In 2024, GHGL posted 16.45 percent year-on-year growth in its topline which clocked in at Rs.47,790.46 million. Due to lower demand and shutdown of the plant on account of scheduled repair & maintenance, the company’s production dropped by 10 percent in 2024 (see the graph of installed capacity versus actual production). Cost of sales mounted by 22 percent in 2024 on the back of elevated cost of energy and other raw materials. Gross profit ticked up by 3.93 percent in 2024, however, GP margin ticked down to 27.48 percent. Administrative expenses surged by 13.83 percent in 2024 due to higher payroll expenses as well as hefty donations granted during the year. Distribution expense surged by 23.22 percent in 2024 mainly due to higher freight & forwarding as well as traveling & conveyance charges incurred during the year. Other expenses multiplied by 50.45 percent due to higher profit-related provisioning and no exchange gain recorded during the year. Other income also dipped by 42.91 percent in 2024 due to lower profit on saving accounts, lesser scrap sales, and no reversal booked on provisioning done for obsolete stock-in-trade during the year. Operating profit eroded by 8.35 percent in 2024 with OP margin ticking down to 15.49 percent. Finance cost surged by 75.63 percent in 2024 which mainly comprised of bank charges and exchange loss incurred during the year. The share of profit of an associate company, RAK Ghani Glass LLC, also surged by 62 percent in 2024. Nevertheless, GHGL posted a 16.63 percent year-on-year plunge in its bottom line which clocked in at Rs.6750.22 million in 2024. This translated into EPS of Rs.6.75 and NP margin of 14.12 percent.
Recent Performance (1HFY25)
In the first half of the ongoing fiscal year, GHGL’s topline slid by 10.46 percent to clock in at Rs.21,957.96 million. The decline mainly came on the back of lower export sales of float glass. In the local market, the tableware division proved to be the underperformer with float glass also posting a marginal dip. The cost of sales dropped by 11.69 percent in 1HFY25. While gross profit slumped by 7 percent in absolute terms, GP margin improved from 26.73 percent in 1HFY24 to 27.73 percent in 1HFY25. Lower sales volume resulted in a 6.58 percent slide in distribution expense in 1HFY25. Conversely, administrative expenses ticked up by 5.74 percent in 1HFY25 due to inflationary pressure. Lesser profit-related provisioning appears to be the reason behind the 10.71 percent decline in other expenses in 1HFY25. Exchange loss tumbled by a significant 51.22 percent in 1HFY25. Other income also tapered off by 29.46 percent in 1HFY25 apparently on the back of lower profit on saving accounts due to monetary easing. GHGL posted 10.82 percent erosion in its operating profit in 1HFY25 with OP margin clocking in at 14.52 percent versus OP margin of 14.58 percent recorded in 1HFY24. Finance cost surged by 32.75 percent in 1HFY25, however, it mainly comprised bank charges. The share of profit of an associate company, RAK Ghani Glass LLC dwindled by 37 percent in 1HFY25. GHGL’s net profit shrank by 14.85 percent to clock in at Rs.2739.68 million in 1HFY25. This translated into EPS of Rs.2.74 in 1HFY25 versus EPS of Rs.3.22 posted in 1HFY24. NP margin dipped from 13.12 percent in 1HFY24 to 12.48 percent in 1HFY25.
Future Outlook
The company is striving to achieve operational efficiency in order to reduce its cost and improve its margins and profitability. The upgrading of its furnace to attain narrow neck press and blow (NNPB) production of glass bottles in the future is a step in the right direction. This will not only lead to increased production speed, lesser energy utilization, lesser raw material, and other cost per unit but will greatly add value to its customers by improving the quality of products. This is expected to result in demand recovery amid improvement in the macroeconomic backdrop.
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