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Tariq Glass Industries (PSX: TGL) manufactures glass containers, opal glass, tableware and float glass. It was incorporated in 1978 and converted into a public limited company in 1980. Many of its glassware brands are household names such as "Omroc", and "Nova". It has a technical collaboration with Toyo Glass of Japan to ensure quality.
TGL's production capacity is about 300 tons of glass tableware per day with a wide range of products being manufactured such as mugs, plates, ash trays, goblets etc. It also offers decorating facilities with capability of printing six colours simultaneously.
Sector overview
Pakistan's glass sector was set up about four decades ago, manufacturing basic products such as mirrors and toughened glass. Premium varieties that are used for commercial and industrial purposes are imported due to limited demand and high manufacturing costs.
Pakistan is an exporter of some categories of glassware, which includes bottles, float glass and tableware. The sector is energy intensive with most manufacturers relying on natural gas. More than 50 percent of the glass industry has had to suspend activities due to gas supply issues as per a report by Pildat. Tariq Glass was identified as one of the biggest players in the market by the report.
Financial history
Over the last five years, TGL's sales have been rising steadily along with profits and margin. In FY11, an investment proposal of Rs 3.5 billion was passed by the board for a new float glass plant with a capacity of 550 tons per day. This plan began commercial operations in 2013 under the brand name "Tariq Float".
Similar to other companies in the sector such as Balochistan Glass, the company faced problems of power and gas shortages, which forced it to switch to expensive alternate fuels. That, along with high depreciation costs of new unit resulted in a hike in cost of production, pushing the gross profit margin down in FY13. The bottom line was also impacted by financial costs of long term loans and working capital financing facilities utilised by the new unit. Tax credit provisions however, allowed the company to post profit of $367 million in FY13.
Sales nearly doubled in FY14 but conversely, profit bottomed out into losses. Part of the reason was the aforementioned problems of energy shortages whereas competition also forced prices down. Selling and distribution costs nearly tripled along with a substantial increase in finance costs. Together these factors resulted in net loss for the first time in recent history.
While the top line grew sluggishly in FY15, improved sales prices of float glass products and lower oil prices especially that of furnace oil and diesel resulted the company pulling out of loss. A closure of one of the tableware producing furnaces for scheduled rebuild resulted in 20 percent decline in tableware sales whereas float glass sales rose by 26 percent.
TGL started manufacturing blue coloured and sand blasted float glass in addition to clear, green, bronze and mirror float glass in FY16. To ensure continuous supply of power, the company imported HFO based 3 units of gensets with a capacity of 10.5MW. To enter the value addition segment, the company also imported machines for jug making and toughening lehr for manufacture of light weight tempered plates and microwaveable bowls.
Robust domestic activities resulted in a 23 percent increase in sales in FY17 and profit rose by 55 percent. The company continued to work towards its Opal glass dinnerware project through which TGL hoped to contribute towards import substitution.
FY18 performance
The substantial growth in its top line was led through increase in volume, resulting in record sales. The company has been working towards effective marketing, promotional schemes and media campaigns to generate demand.
On the operational side, the commercial operations from the produce of Opal Glass furnace started earlier on this year. This allowed for higher inventories of glass products available for sale under the brand name "Rockware", which also aided towards volumetric growth of the top line.
Efficient monitoring and development of operating procedures along with slightly lower financial costs led to an increase in net profit as well as net profit margin despite the modest drop in gross profit.
TGL has purchased additional land adjacent to existing production facilities to enhance capacity by 500 tons per day. For this purpose it has sought long term financing of Rs 5.6 billion from various banks. The project is expected to take 18 months for completion.
Future outlook
It bodes well for Tariq Glass that it has been able to remain profitable in the face of gas shortages that have sunk others in the industry while there is tough competition within existing players. To circumvent competition and remain a market leader, the company is working towards increasing the range of products and as well as share of premium offerings in its mix.
As interest rates and monetary policy tightening is expected, the financing of its expansion project may become too expensive to remain feasible. Furthermore, economy's contraction trends result in lower demand for premium products that the company is investing in.
Already, the company is anticipating a higher import bill and finance costs along with pressure on prices and costs of sales due to competition. Though TGL has done well in FY18, it will be challenging for the company to continue on this trajectory.



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Pattern of shareholding (as at June 30, 2018)
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Categories No. %
========================================================================
Directors, CEO, their spouses and minor children 16,762,411 23
Associated companies, undertakings and related parties 27,325,468 37
NIP and ICP 18,500 0
Banks, development financial institutions, 4,227,849 6
& non-banking financial institutions
Insurance companies 2,100 0
Modarabas and mutual funds 11,011,224 15
General public
a) Local 9,477,023 13
b) Foreign 407,420 1
Others
a) Joint stock companies 3,466,451 5
b) Investment companies & cooperative socieities 98,254 0
c) pension fund, provident funds, etc 661,300 1
Shareholders holding 5% or more shares
Tariq Baig (late) 18,662,864 25
Omer Baig 14,669,676 20
Omer Glass Industries Limited 7,733,760 11
Summit Bank Limited 4,000,000 5
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Source: company accounts



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Tariq Glass Industries Limited
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Rs. (mn) FY18 FY17 YoY
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Sales 12,302 9,903 24%
Cost of sales -9978 -7885 27%
Gross profit 2324 2018 15%
Administrative expenses -213 -177 20%
Selling & distribution expenses -443 -349 27%
Other operating income 15 24 -38%
Other operating expenses -105 -82 28%
Operating profit 1579 1434 10%
Finance cost -153 -249 -39%
Profit before tax 1425 1185 20%
Tax -328 -425 -23%
Profit after tax 1097 760 44%
EPS 14.94 10.34 44%
Gross profit margin 19% 20% -7%
Net profit margin 9% 8% 16%
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Source: Company accounts
Copyright Business Recorder, 2018

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