Emerging successful from the pandemic hit year, ICI Pakistan Limited’s (PSX: ICI) financial performance continues to tell the company’s growth prospects. ICI Pakistan announced two times increase in earnings in FY21 where the increase in the company’s revenues was around 17 percent year-on-year. Revenue growth in the last quarter of FY21 (4QFY21) was strongest at around 56 percent year-on-year, which was also due to low base of 4QFY20 when the country was in lockdown. After two fold increase in consolidated earnings in FY21 - that includes its polyester, soda ash and chemicals, agri sciences, pharma and animal health business segments as well as its subsidiaries ICI Pakistan PowerGen and NutriCo Moringa (Private) Limited – ICI’s consolidated earnings for 1HFY22 were also seen rising at the same pace. In 1HFY22, ICI’s consolidated earnings were up by more than two times that of 1HFY21.

Increase in the company’s consolidated revenues was around 58 percent year-on-year in 2QFY22 and 53 percent year-on-year in 1HFY22 with growth coming from all business segments as well as subsidiaries, which supported the overall growth. Growth in the polyester business came from strong demand and improving dynamics, while pharma business performance was attributable to enhanced capacity utilization, manufacturing efficiencies as well as better sales mix. Animal health business segment also delivered growth, and chemical and agri business also recovered due to sharp rebound in demand. While the breakup for 1HFY22 is not available, the illustration shows the turnover breakup percentages for ICI over the past 6 years.

However, gross margins in 2QFY22 declined while they remained static in 1HFY22. While all segment’s brought in growth in revenues, the gross margins came under pressure due to higher energy cost, primarily from higher coal prices. Another blow to the bottom-line came from exchange losses during 2QFY22 and 1HFY22 versus corresponding period where the company posted exchange gains.

The consolidated net earnings and margins in 1HFY22 got a further boost from the consolidation of results of NutriCo Pakistan (Private) Limited, and a one-off net positive impact of Rs1,847 million resulting from the remeasurement of previously held equity interest of NutriCo Pakistan (Private) Limited. ICI Pakistan also announced a cash dividend of Rs20 per share.

Apart from growth in earnings and dividend, the company also has expansion plans that include expansion in the company’s soda ash manufacturing facility to 560,000 tons per annum from existing capacity of 425,000 tons per annum. At the same time, the prospects for its polyester, pharma and Agri-science business are also bright. A research note by Arif Habib Limited highlights the possibility of a joint venture of ICI Pakistan with TGIL to set up a green field state-of-the-art float-glass manufacturing facility having a production capacity of up to 1,000 ton/day.