The premier battery manufacturer, Exide Pakistan (PSX: EXIDE) was incorporated in 1953 in association with Chloride Group PLC of the United Kingdom and went public in 1982. The group at the time had associates worldwide across 35 destinations and was supported by Chloride Technical. Exide Pakistan operates in the manufacturing and sales of not only batteries but chemicals and acid as well, with its manufacturing facilities for batteries located at SITE Karachi and HUB Balochistan while its facilities for chemicals and acid located at SITE and Bin Qasim Karachi. In 1991, the company acquired Automotive Battery Company Limited, Furukawa Battery.
Exide is a renowned name in the industry and is a market leader in the battery business. It offers automotive, industrial and household solutions by providing a wide range of batteries for cars, tractors, rickshaws, SUVs, trucks, buses, marine transport, earth-moving equipments as well as off-the-road vehicles. In addition, the company manufactures special application industrial batteries for standby power, locomotive engine starting and train lighting systems. The batteries also have household applications, providing reliable power backup in case of load shedding and voltage fluctuations.
The company has outlets all over Pakistan with a spread out network of dealerships across the country. It supplies its products to the major automobile assembling companies-from those manufacturing passenger cars to those who assemble trucks and buses. The automotive sector in fact feeds into the demand for Exide and the two go hand in hand. Another major market for batteries is the after-sales market, which caters to the millions of vehicle already on the roads that require a replacement for existing batteries. Exide's primary competitors in the business of batteries are Atlas Battery and Volta batteries.
Holdings and investments Exide Battery's shares are primarily held by the Hashwani family with 20.5 percent shares each held by Sana and Zaver Hashwani while 16 percent are held by Hussain Hashwani and 18.2 percent held by Altaf Hashwani both of whom are part of the board of directors. Meanwhile, State life Insurance holds 5.5 percent of the company's shares while National Investment (Unit) Trust holds 6.68 percent of the company's shares as at March 2017.
Exide Pakistan has a wholly owned subsidiary Chloride Pakistan (Private) Limited, which was established in 1994. The subsidiary has not yet commenced production though it was intended to produce and market automotive batteries and industrial cells.
Chloride was incorporated to utilize the tax exemption offered by the government in Hattar. However, the exemption was taken away after the company's incorporation and so the company did not commence its operations.
The company set up a Sulphuric Acid manufacturing plant with an installed capacity of 50 metric tons of per day to diversify its product portfolio. The major production of the plant is supplied to Fauji Jordan Fertilizer Company Limited.
Financial and operational performance Exide has two manufacturing plants to cater to its two segments: battery and chemicals, where batteries constitute the bulk of the company's business (in terms of revenues and bottom-line). According to the company's annual reports, it is difficult to ascertain the capacity of the battery plant because production relies largely on the proportion of different types of batteries produced which varies in relation to the consumer demand, so the actual production for batteries followed market demand.
The installed capacity of the chemical plant however is 33,000 tons with actual production in 2017 at 29,305; 28,005 tons in 2016, 26,674 tons in 2015, 26,932 tons in 2014 and 28,668 in 2013. As it stands, the capacity utilization lies in-between 78-88 percent.
The company has managed to double its revenues since 2010 while margins have also improved (13% to 20% during 2010-17) with a focus on cutting down on costs and making batteries in a more efficient environment. In 2017, the company acquired an adjacent plot to improve the efficiencies of its manufacturing.
The automobile sector drives the growth of Exide and as more vehicles have been sold and as market size has grown in the automotive sector, Exide has also grown. During 2011, production was affected as a result of a major re-layout and shifting of machineries to streamline and improve production facilities. The company underwent expansion, installation of new facilities, training of manpower and improving technology during that period.
This led to a renewed growth path for Exide. During 2015, the company hired a new workforce and faced natural gas load shedding and low gas pressure that had to shift company's reliance on SNG based LPG, which substantially increased the fuel expenses. Despite these challenges, Exide managed to operate above the fray, keeping its market share within the industry. After-tax profits grew by a phenomenal 74 percent between 2016 and 2017.
Opportunities and threats The tides can turn fast. In the half year ending Sep 2017, the company's profits plummeted. Due to greater competition from enhanced capacity of battery players and the inflow of imported and smuggled batteries, the company gave trading discounts to customers to keep the market share and its leading position in the battery business. However, this resulted in substantially compromised revenues. This was despite higher sales of automotive, not just in the passenger cars market but also the commercial vehicle segment.
Higher competition from smuggled goods as well players like Atlas Battery remains a threat to the company's growth, even when the local automobile sector is expected to flourish. The commercial vehicle segment is growing, driven by greater demand in logistics sector as well as due to CPEC while new entrants in the passenger cars segment and higher purchasing power of people will push demand for cars and in turn battery demand upwards.
However, if the company continues to give discounts on its products just to keep market share, its bottom-line will continue to suffer no doubt. It should instead focus on improving its technology and cutting down on costs to grasp the opportunities in the sector that are flowing in.
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Exide Pakistan Half Year
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(000 Rs) 1H Sep-17 1H Sep-16 YoY
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Sales 6,636,507 7,337,143 -10%
Cost of Sales 5,943,875 5,718,759 4%
Gross Profit 692,632 1,618,384 -57%
Administrative 51,031 54,120 -6%
Distribution costs 427,618 803,765 -47%
Other operating expenses 17,534 17,368 1%
Finance cost 64,253 22,443 186%
Other income 5,064 3,430 48%
Profit before tax 127,505 674,153 -81%
Taxation 33,732 226,350 -85%
Net profit for the period 93,773 447,803 -79%
Earnings per share (Rs) 12.07 57.64 -79%
GP margin 10% 22% -53%
NP margin 1% 6% -77%
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Source: Company accounts
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Pattern of Shareholding (as on March 2017)
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Categories of Shareholders Share
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Directors and their spouse(s) and minor children 75.3%
Sana Arif Hashwani 20.5%
Zaver Hashwani 20.5%
Altaf Hashwani 18.2%
Hussain Hashwani 16.1%
NIT and ICP 6.7%
National Investment Trust 6.7%
Insurance Companies 7.9%
State Life Insurance Corporation 5.5%
Joint Stock Companies 0.2%
Charitable, Modrabas 0.008%
Banks, development finance institutions, insurance, non-banking
finance companies etc. 0.005%
Others 2.3%
Mutual Funds 2.0%
General Public 4.1%
Others 2.5%
Total 100%
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Source: Company accounts
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