Nimir Resins Limited (PSX: NRSL) was incorporated in Pakistan in 1964 as a public limited company and then converted into a public limited company in 1991. The company is engaged in the manufacturing of coating resins, composite resins (UPR), textile auxiliaries, optical brightener and paper surface sizing agents.
Pattern of Shareholding
As of June 30, 2024, NRSL has a total of 141.32 million shares outstanding which are held by 4944 shareholders. Local general public has the majority stake of 57.95 percent in the company followed by directors, CEO, their spouse and minor children holding 36.11 percent shares of the company.
Associated companies, undertakings and related parties account for 3.03 percent shares of NRSL while joint stock companies hold 2.58 percent shares. The remaining ownership is distributed among other categories of shareholders.
Financial Performance (2019-24)
Except for a dip in 2020 and 2024, NRSL’s topline and bottomline rode an upward trajectory over the period under consideration. Its gross and operating margins inclined until 2022 followed by a marginal dip in 2023.
In 2024, NRSL’s gross margin ticked up to attain its highest level while operating margin continued to slide. Conversely, net margin took a slide in 2020, rebounded in 2021 and then began to erode since 2022. The detailed performance review of each of the years under consideration is given below.
In 2019, NRSL’s topline grew by 36.4 percent year-on-year to clock in at Rs.4,883.24 million. This was on the back of both increased prices and volumes of its products. In order to meet the rising demand, the company also increased its total capacity from 39,000 MT in 2018 to 42,000 MT in 2019 and utilized 69.6 percent of its capacity versus 67 percent capacity utilization in 2018.
Cost of sales hiked by 34.85 percent year-on-year in 2019 mainly on the back of rising inflation, higher energy prices and Pak Rupee depreciation. NRSL was able to conveniently pass on the onus of cost hike to its customers, resulting in 51.66 percent higher gross profit recorded in 2019 and GP margin rising from 9.21 percent in 2018 to 10.24 percent in 2019.
Distribution cost escalated by 23.82 percent year-on-year in 2019 on account of higher packing charges, carriage and forwarding charges, increased salaries of sales staff and a considerable spike in sales commission. Administrative expense also surged by 11.34 percent year-on-year in 2019 on account of higher payroll expense as the workforce tally increased from 125 in 2018 to 133 in 2019.
Operating profit registered 64.96 percent year-on-year growth in 2019 with OP margin rising from 6.6 percent in 2018 to 7.96 percent in 2019. While the company incurred higher exchange loss in 2019 due to depreciation in the value of local currency, lesser loss allowance booked for the year resulted in 16.35 percent year-on-year plunge in other expense in 2019.
As against to other expense, finance cost soared by 123.12 percent year-on-year in 2019 on account of higher discount rate and increased working capital related borrowings obtained during the year. Net profit strengthened by 49.37 percent year-on-year in 2019 to clock in at Rs.154.02 million. EPS grew from Rs.0.36 in 2018 to Rs.0.54 in 2019.
NRSL registered 7.87 percent year-on-year slide in its topline which clocked in at Rs. 4499.11 million in 2020. This was the consequence of COVID-19 which plagued the local and global economy. While the demand of its products greatly reduced due to lockdown, NRSL continued to sell some of the essential items from its portfolio to minimize the impact of the global pandemic on its sales.
The break-up of the company’s sales reveal that while sales of coating, emulsion and blending nosedived during the year, there was an uptick in the sales of textile, paper and other products. Owing to reduced demand, NRSL utilized 61.6 percent of its installed capacity in 2020 and produced 25,877 MT of its products.
Cost of sales plummeted by 8.9 percent year-on-year in 2020, resulting in 1.16 percent rise in gross profit, however GP margin improved by 100 bps to clock in at 11.24 percent during the year.
Distribution expense dropped by 11.48 percent year-on-year in 2020 on account of reduced packing, carriage and forwarding charges as sales volume eroded during the year. Administration expense, however, mounted by 17.20 percent year-on-year in 2020 due to higher payroll expense despite reduction in the number of employees to 127.
Operating profit marginally grew by 1.32 percent year-on-year in 2020; however, OP margin rose to 8.76 percent. Other expense registered a slump of 48.81 percent in 2020 as NRSL booked lesser loss allowance and also because of significant reduction in exchange loss during the year.
Finance cost inched up by 10.46 percent year-on-year in 2020 as discount rate was high for most part of the year and also because NRSL’s long-term financing climbed up from 2.1 million in 2019 to 21.096 million in 2020 which largely includes loan obtained under SBP Refinance scheme for the payment of salaries and wages.
Short-term borrowings dropped during the year due to curtailed operations on account of COVID-19. While profit-before-tax grew by 14.4 percent year-on-year in 2020, higher taxation squeezed net profit by 17.4 percent year-on-year in 2020 to clock in at Rs.127.22 million. EPS dropped to Rs.0.45 and NP margin inched down to 2.83 percent in 2020.
NRSL’s net sales which weakened in 2020 rebounded by a robust 39.53 percent year-on-year to clock in at Rs.6277.70 million in 2021. This not only came on the back of higher volumes but also windfall gains as the company purchased huge stocks of inventory before the lockdown period at lower prices which was sold afterwards at significantly higher prices.
During the year, the company increased its production capacity to 45,600 MT and achieved capacity utilization of 73 percent. Gross profit leaped by 57 percent year-on-year in 2021 with GP margin inclining to 12.65 percent.
Distribution expense magnified by 29.51 percent year-on-year in 2021 due to higher salaries as well as increased packing, carriage and forwarding charges incurred during the year on account of higher volumes as well as hike in freight rates as shipments which were held back due to COVID-19 started clearing.
Administrative expense also escalated by 24.10 percent year-on-year in 2021 on account of higher payroll expense, although number of employees was same as last year. Operating profit enlarged by 65.56 percent year-on-year in 2021 with OP margin registering considerable rise to clock in at 10.4 percent.
Other expense mounted by 48.18 percent year-on-year in 2021 due to increased profit related provisioning as well as provisioning for ECL and obsolescence of stock booked during the year. Finance cost slipped during the year by 39.12 percent year-on-year in 2021 due to monetary easing.
This was despite the fact that NRSL’s long-term borrowings significantly increased during the year for CAPEX as well as for the disbursement of salaries & wages under SBP Refinance Scheme. NRSL’s net profit grew by 182 percent year-on-year in 2021 to clock in at Rs.358.75 million with EPS of Rs.2.54 and NP margin of 5.71 percent – the highest NP margin achieved during the period under consideration.
Another positive development that took place during the year was 20 percent increase in the net worth of the company to clock in at Rs.2070 million. Moreover, accumulated losses were completely wiped off creating room for future dividend payments.
In 2022, NRSL recorded 31.76 percent year-on-year rise in its topline which clocked in at Rs.8271.38 million. Significant increase in the prices of global commodities particularly feedstock prices drastically increased the cost of sales, however, NRSL’s competitive prices pushed gross profit up by 35.36 percent year-on-year in 2022. GP margin also improved to clock in at 13 percent in 2022.
During the year, NRSL’s capacity utilization slipped to 66.88 percent. Distribution expense escalated by 20.36 percent year-on-year in 2022 on account of higher payroll expense as well as packing, carriage and forwarding charges. Administrative expense also signifies high inflation as it hiked by 18.41 percent year-on-year in 2022 on account of higher payroll expense.
Operating profit ticked up by 38.82 percent year-on-year in 2022 with OP margin rising up to 10.95 percent. A considerable hike of 109.16 percent in other expense in 2022 was the consequence of higher exchange loss as well as provisioning related to profit, ECL and inventory obsolescence.
Finance cost surged by 89.68 percent year-on-year in 2022 on the back of high discount rate as well as momentous increase in long-term and short-term borrowings obtained during the year. This, coupled with the imposition of 10 percent super tax by the government greatly diluted the bottomline growth.
Net profit grew by a mere 2.27 percent year-on-year in 2022 to clock in at Rs.366.87 million with EPS of Rs.2.6 and NP margin of 4.44 percent. In 2023, NRSL’s topline posted a subdued 13.29 percent year-on-year growth to clock in at Rs.9370.91 million. Capacity utilization inched down to 57.4 percent due to supply chain impediments on account of import restriction as well as reduced demand due to restricted business activity across the sectors.
Cost of sales hiked by 13.43 percent year-on-year in 2023 due to drastic hike in the international prices of raw materials which was further worsened by Pak Rupee depreciation.
The company was able to revise its prices accordingly which is evident from its GP margin which remained largely intact during the year. Gross profit also enlarged by 12.35 percent year-on-year in absolute terms in 2023.
Distribution expense registered a massive 31.12 percent year-on-year growth in 2023 as higher prices of POL products took its toll on freight as well as travelling and conveyance expense incurred during the year.
Administrative expense multiplied by 22.78 percent year-on-year in 2023 due to higher payroll expense as the number of employees grew from 125 in 2022 to 135 in 2023 which inflated the payroll expense. Operating profit grew by 9.58 percent year-on-year in 2023 with OP margin slightly inching down to 10.6 percent.
Other expense shed 35.23 percent in 2023 due to lower provisioning as well as no exchange loss incurred during the year. Finance cost multiplied by a whopping 76 percent year-on-year in 2023 due to monetary tightening. This was despite the fact that the company paid off a huge portion of its liabilities during the year which is evident from its gearing ratio considerably falling down to 23 percent in 2023 from 53 percent in 2022 (see the graph of gearing ratio & finance cost).
NRSL posted 5.18 percent year-on-year rise in its net profit in 2023 which clocked in at Rs.385.88 million with EPS of Rs.2.73 and NP margin of 4.12 percent.
NRSL posted 8.39 percent decline in its net sales which were recorded at Rs.8584.74 million in 2024. This was due to lower market demand. The company increased its rated capacity from 45,600 MT in 2023 to 46,560 MT in 2024.
However, the company was able to utilize 51.96 percent of its capacity as against 57.42 percent capacity utilization attained in the previous year. Cost of sales dropped by 9.11 percent in 2024, resulting in 3.51 percent shrinkage recorded in gross profit.
Conversely, GP margin attained its highest level of 13.57 percent in 2024. Distribution expense mounted by 17.34 percent in 2024 due to higher salaries expense as well as packing, carriage & forwarding charges incurred during the year.
Administrative expense spiked by 42.89 percent in 2024 on account of higher payroll expense as well as fee & subscription charges incurred during the year. The company squeezed its workforce from 135 employees in 2023 to 131 employees in 2024.
High fee & subscription charges incurred during the year, was the result of a scheme of arrangement entered into by the company during the year. Under this scheme, the company’s shareholding was exchanged among owners/sponsors.
As a result, Nimir Management (Private) Limited and Nimir Industrial Chemicals Limited are no longer the parent company and the ultimate parent company of NRSL respectively. NRSL’s operating profit dipped by 10.57 percent in 2024 with its OP margin ticking down to 10.34 percent.
Other expense dropped by 25.48 percent in 2024 due to lower provisioning booked for ECL and WPPF. Finance cost grew by 18.27 percent in 2024 due to increased short-term borrowings obtained during the year. This drove the gearing ratio up to 36.46 percent in 2024 from 22.62 percent in 2023.
Other income enlarged by 43.72 percent in 2024 due to hefty foreign exchange gain and gain on sale of fixed assets recognized during the year. NRSL’s bottomline slumped by 29.93 percent in 2024 to clock in at Rs.270.38 million with EPS of Rs.1.91 and NP margin of 3.15 percent.
Recent Performance (1HFY25)
In the first half of the ongoing fiscal year, NRSL’s topline ticked up by 3.65 percent to clock in at Rs.4767.372 million. This was due to a rebound in the economic activity on account of improved macroeconomic indicators. Cost of sales mounted by 4.95 percent in 1HFY25 due to fluctuations in the international commodity prices coupled with elevated energy tariff.
This squeezed the gross profit by 5.59 percent in 1HFY25 with GP margin ticking down to 11 percent from GP margin of 12.12 percent recorded in 1HFY24. Distribution expense moved up by 12.71 percent in 1HFY25 on account of improvement in sales volume which pushed up freight charges and salaries of sales force.
Administrative expense inched down by 4.13 percent in 1HFY25 probably on the back of streamlining of workforce and lower fee & subscription charges.
The company incurred high fee & subscription charges in 2024 due to a scheme of arrangement explained above.
Operating profit weakened by 8.64 percent in 1HFY25 with OP margin slipping to 8 percent versus OP margin of 9.10 percent recorded in 1HFY24. Increase in profit related provisioning appears to be the result of 8 percent higher other expense incurred in 1HFY25.
Conversely, other income fell by 47.92 percent in 1HFY25 may be due to high-base effect as the company recognized gain on sale of fixed assets in 2024.
Finance cost dropped by 13.19 percent in 1HFY25 due to monetary easing and decrease in outstanding borrowings during the period. NRSL’s bottomline grew by 6.39 percent to clock in at Rs.134.453 million in 1HFY25. This translated into EPS of Rs.0.95 in 1HFY25 versus EPS of Rs.0.89 in 1HFY24. NP margin slightly improved from 2.75 percent in 1HFY24 to 2.85 percent in 1HFY25.
Future Outlook
NRSL’s diversified product portfolio and its ability to pass on its cost to its customers will keep its financial performance buoyant. Stability in the international commodity prices coupled with the improved macroeconomic environment in the home market will also buttress the company’s performance in the coming months.
On December 31, 2024, Rudilf Pakistan (Private) Limited made a public offer to acquire 21.42 percent (30,276,302) ordinary shares of NRSL at a price of Rs.25.85 per share (subject to minimum acceptance level of 7.49 percent). The process was finalized in February 2025 with the acquisition of 20.83 million shares.
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