Balochistan Glass Limited (PSX: BGL) was incorporated in Pakistan as a public limited company in 1980. The principal activity of the company is the manufacturing and sale of glass containers, glass table wares, and plastic shells. BGL has three manufacturing facilities, one of which is located in Hub Balochistan while the other two are located in Sheikhupura, Lahore.
Pattern of Shareholding
As of June 30, 2024, BGL has a total of 261.6 million shares outstanding which are held by 3219 shareholders. MMM Holding (Private) Limited, the parent company of BGL has an 84.34 percent stake in the company followed by the local general public holding 12.64 percent shares of BGL. Joint stock companies account for 2.74 percent of the outstanding shares of BGL. The remaining ownership is distributed among other categories of shareholders.
Financial Performance (2019-24)
Among all the years under consideration, BGL’s topline slid in 2021, 2023 and 2024. The company has recorded a positive bottom line only in 2021. Its margins also stood in the negative territory in all the years under consideration except for 2021. The detailed performance review of the period under consideration is given below.
In 2019, the hefty topline growth of 135.91 percent was the result of the start of pharmaceutical operations at the Hub plant. Both local and export sales of BGL more than doubled during the year. However, a 79.67 percent year-on-year rise in cost particularly utilities didn’t allow the company to cherish the tremendous sales growth. The company recorded a gross loss of Rs.103.91 million in 2019, down 49.73 percent year-on-year. Administrative & selling expenses also expanded by a whopping 114.27 percent in 2019, particularly on the back of freight, handling, and forwarding expenses incurred on local sales. The much-needed support was provided by other income which grew by a massive 533 percent in 2019 on the back of markup and liabilities from financial institutions written back during the year. While the company still made an operating loss of Rs.61.27 million in 2019, however, it was 74 percent less than the operating loss recorded in 2018. Finance cost magnified by 54.36 percent year-on-year in 2019 on the back of increased discount rates as well as more short-term borrowings obtained during the year. The result was a net loss worth Rs.135.62 million, signifying a dip of 52.25 percent from the net loss posted in 2018. Loss per share stood at Rs.0.52 in 2019 as against loss per share of Rs.1.64 recorded in 2018.
2020 appears to be telling the same tale as 2019 as the company couldn’t make any profit despite a sizeable 33.2 percent year-on-year growth in topline. The topline growth is mainly attributable to the tableware glass division which performed exceptionally well during the year. The high cost of sales kept daunting BGL’s financial performance, however, the gross loss of Rs.44.45 million recorded in 2020 was 57.22 percent less than the gross loss recorded in 2019. Selling & Administrative expenses escalated by 18.18 percent year-on-year in 2020 on account of promotional discounts and incentives provided by the company during the year. What made BGL’s bottom line even more pitiable than last year was an enormous 4413.68 percent spike in other expenses coupled with a significant 98.62 percent drop in other income. Other expenses grew on the back of the provision for the GIDC balance. Other income dropped as huge amounts of liabilities and markup written back in 2018 created a high-base effect. Consequently, operating loss grew massively by 443.93 percent in 2020 to clock in at Rs.333.28 million. To make it worse, finance costs surged by 37.69 percent year-on-year in 2020 due to a high discount rate during the first three quarters of 2020 coupled with increased short-term borrowings during the year. The net loss of BGL magnified by 242.28 percent in 2020 to clock in at Rs.464.21 million. Loss per share climbed up to Rs. 1.77 in 2020.
2021 is the only year after 2016 where BGL posted net profit. The adverse effects of COVID-19 which began in 2020 continued to cripple the operations of the company which is evident from the topline slide of 16.19 percent year-on-year recorded in 2021. Both local and export sales witnessed a dip during the year owing to restricted movement of people and goods on account of the global pandemic. Low sales volume was also the result of the closure of pharmaceutical operations during the year which couldn’t be offset by the expansion of the tableware glass project during the year. However, lesser sales also meant a controlled cost of sales. This resulted in BGL making a gross profit of Rs.117.50 million in 2021 as against a gross loss of Rs.44.45 million posted in the previous year.GP margin stood at 9.38 percent in 2021. Administrative and selling expenses as well as other expenses also behaved favorably during the year owing to lesser freight, handling, and forwarding charges and the absence of provision for GIDC balance respectively. Other income increased by over 3879.93 percent in 2021 owing to the unwinding of the discount on GIDC payable and the reversal of the provision for default surcharge on taxation. This culminated in an operating profit of Rs.121.77 million in 2021 with an OP margin of 9.72 percent. Finance costs also slid by 23.51 percent during the year on the back of low discount rates as well as lower borrowings during the year. The company also received a share of the profit from its investment in Paidar Hong Glass (Private) Limited (PHGPL). As a consequence, BGL posted a net profit of Rs.25.46 million in 2021 with an NP margin of 2 percent. EPS stood at Rs. 0.10 in 2021.
In 2022, BGL posted a marginal topline growth of 7.49 percent as the curtailment of gas supply during the year didn’t allow BGL to attain its targeted production levels during the year. The company also didn’t make any export sales during the year which also affected its topline growth. High inflationary pressure particularly incremental gas prices as well as depreciation of the Pak Rupee drove up the cost of sales and resulted in a gross loss of Rs.170.58 million in 2022. Operating expenses also grew by 21.40 percent in 2022 on the back of inflation which drove up the payroll expense despite massive reduction in the number of employees from 268 in 2021 to 120 in 2022. Higher freight and forwarding as well as traveling & conveyance expenses due to escalated prices of POL products also pushed the operating expense up during the year. Other expenses gave another blow to the company as it grew by 122.93 percent in 2022 on the back of higher provisioning for doubtful trade balances. Other income provided much-needed support as it grew by 41.37 percent year-on-year in 2022 on the back of markup written back on a settlement with the bank and other associates. Yet BGL failed to record any operating profit during 2022. Operating loss stood at Rs.158.56 million in 2022. Finance costs grew by 21 percent in 2022 on the back of a high discount rate during the year coupled with higher short-term borrowings during the year. The share of profit from the associate company, PHGPL also dropped during the year. All the downbeat factors culminated in a net loss of Rs.269.44 million during the year with a loss per share of Rs.1.03 in 2022.
In 2023, BGL’e net sales drastically dropped to the tune of 86.18 percent year-on-year. This was on account of the closure of the company’s table glassware division in May 2022 to overcome the operational and financial vulnerabilities faced by the company. As of June 30, 2023, BGL had an accumulated loss of around Rs.6118 million due to net losses registered by the company for many years. Cost of sales slipped by 74.96 percent year-on-year in 2023. Gross loss hiked by 13.55 percent year-on-year to clock in at Rs.193.69 million in 2023. Administrative and selling expenses slumped by 66.71 percent year-on-year in 2023 due to significantly lower payroll expenses incurred during the year as the company downsized its workforce from 120 in 2022 to just 6 in 2023. Lower traveling & conveyance and freight charges also contributed to driving down the operating expense in 2023. Considerable reduction in provisioning for doubtful trade debts trimmed down other expenses by 37.26 percent in 2023. Other income also gave some breather as liabilities no longer payable were written back during the year resulting in a 128.68 percent rise in other income in 2023. Thanks to other income, BGL was able to post an operating profit of Rs.5.35 million in 2023 with an OP margin of 2.87 percent. However, operating profit couldn’t trickle down to produce a positive bottom line in the presence of a 39.79 percent hike in finance cost on the back of the high discount rate. BGL posted a net loss of Rs.135.06 million in 2023, down 49.88 percent year-on-year. Loss per share also toppled to Rs.0.52 in 2023.
In 2024, BGL’s net sales eroded by 13.26 percent year-on-year. This was the result of a sustained halt of glass production owing to the management’s decision to cope with exorbitant production costs by undertaking measures to improve operational efficiency. Inconsistent gas supply, elevated energy costs, and hikes in the prices of raw materials made it difficult for the company to continue its operations. As of June 30, 2024, BGL’s accumulated loss stood at Rs.6615.27 million versus an accumulated loss of Rs.6117.596 million recorded at the end of the last financial year. The majority of the company’s long-term and short-term loans are obtained for its holding company, associated companies, directors, and ex-directors. The company had written back its accrued markup and liabilities in the previous year as a result of a settlement with banks and waiver received from associated parties. Despite the topline slide, BGL’s cost of sales escalated by 18 percent in 2024. This was the result of higher utility charges and inventory purchased during the year. In 2024, BGL signed a supply agreement with Tariq Glass Industries Limited (TGL), an associated company, whereby the latter will facilitate the procurement of essential raw materials, machinery, stores & spares as well as refractory components under the arm’s length pricing principle which was in accordance with Section 208 of the Companies Act, 2017. This step was taken to rehabilitate and optimize BGL’s operating lines. TGL and Gharibwal Cement Limited (GCL), the associated companies, also provided corporate guarantees of Rs.3371.536 million on behalf of BGL in favor of banking companies for obtaining financial facilities. During the year, BGL recorded a gross loss of Rs.286.68 million, up 48 percent year-on-year. Operating expenses dropped by 4.36 percent in 2024 due to lower payroll expenses as well as traveling & conveyance charges incurred during the year. To kickstart its halted operations, BGL initiated human resource induction. Its workforce stood at 162 employees in 2024 versus 6 employees in 2023. Other expenses grew by 9.33 percent in 2024 due to allowance booked for doubtful balances. Conversely, the company made a petite other income of Rs.0.03 million in 2024, down 99.9 percent year-on-year as unlike last year, there were no liabilities written back during the year. BGL posted an operating loss of Rs.321.57 million in 2024. Finance cost surged by 29.23 percent in 2024 due to markup incurred on additional loans acquired from related parties as well as bank & guarantee commission charges incurred during the year. The company incurred a net loss of Rs.508.72 million in 2024, up 276.68 percent year-on-year. Loss per share stood at Rs.1.94 in 2024.
Recent Performance (1QFY25)
As a result of the rehabilitation drive initiated by the company in 2024 with the facilitation of TGL, its topline boasted a massive year-on-year growth of 6234.92 percent in 1QFY25 to clock in at Rs.409.046 million. Cost of sales surged by 839.24 percent in 1QFY25, mainly on account of escalating power & fuel charges. This resulted in a gross loss of Rs.129.484 million recorded in 1QFY25, up 154.49 percent year-on-year. Administrative & selling expenses spiked by a massive 881.26 percent in 1QFY25 most likely on account of higher payroll expenses as the company made widespread hiring during the last year to resume its operations. Operating loss mounted by 193.10 percent in 1QFY25 to clock in at Rs.157.62 million. Finance costs surged by 80.48 percent during the quarter as the company’s outstanding borrowings grew during the year, particularly working capital-related borrowings. BGL incurred a net loss of Rs.231.96 million in 1QFY25, up 145.37 percent year-on-year. This translated into a loss per share of Rs.0.89 in 1QFY25 versus a loss per share of Rs.0.36 recorded during the same period last year.
Future Outlook
In 2023, TGL signed a share purchase agreement to acquire 50 percent shares of MMM Holdings (Private) Limited which holds 84.34 percent shares of BGL. The involvement and supervision of the experts of TGL will help BGL overcome its operational challenges and will also provide a strong market presence to the company.
The two companies have also signed a contract purchase agreement whereby BGL will produce certain glassware products under TGL’s brand name and to meet the specific customer requirements. Since TGL is a prominent player in the glass industry, its involvement will result in better management control which is likely to produce a positive impact on the future performance of BGL.
TGL and BGL have also signed an agreement whereby the former will provide access to short-term financing of up to Rs.1 billion and a corporate guarantee of up to Rs. 3 billion. For the settlement of existing loans, MMM Holdings (Private) Limited is providing long-term loans of up to Rs.1.7 billion convertible into equity. The company has also received approval from the majority shareholders for an increase in the company’s authorized capital to overcome its financial limitations.
All these steps show that the company is aggressively working to optimize its operations and attain financial stability with perseverance.