Nimir Industrial Chemicals Limited (PSX: NICL), is engaged in manufacturing and sale of industrial chemical products. Among the chemical industry in Pakistan, it is known as a pioneer in establishing Oleo chemicals business in the country. The Company from its humble begging in 1994 has become a major player in the chemical industry of Pakistan. NICL was listed on nation's stock exchanges in 1996.
In the year 1997, Nimir Chemicals Company Limited, a Bermuda-registered company, took over the management of the company in 1997 and consequently the name of the business was changed to Nimir Industrial Chemicals Limited in 1998. In 2004 due to internal restructuring, the name of the parent company was changed to Knightsbridge Chemicals Limited.
In 2011, the senior management of NICL created a SPV under the name of ZM Associates (Pvt) Limited and it acquired the majority shareholding of the company from KCL. Currently, NICL is still under their management. Over the years, the company has successfully developed the downstream market for their products in the country. The primary products of NICL consist of Palm Bright, Stearic Acid, Glycerine, Caustic Soda, Sodium Hypochlorite and Hydrochloric Acid. NICL's factory is located in District Sheikhupura along with its registered office.
Historical financial performance The performance of Nimir Industrial Chemicals Limited's top-line in the last five years has been quite steady. But; the bottom-line of the company has given mix results and stayed largely below par except in FY11. Despite the higher inflation, floods in the country and weak GDP growth in FY11, Nimir gave its best performance in its history. During the financial year the company has beaten most of its previous record and all the benchmarks for production, volumes, turnover, and margins came out better than all of its previous years. Also, the firm marginally exported its product during this period. Similarly, in FY11 Nimir also changed its identity and become a new company with the change in its shareholding structure.
The FY12 proved to be a challenging year for the company; during the period, Pakistan was suffering its worst energy crisis and NICL suffered quite a lot because of it. Similarly, the company faced problems with the depreciation of Pak rupee. The sales revenue grew only by 10 percent and the profit after tax dropped to 71 percent in the year-on-year analysis. The company initiated the expansion plans during the financial year which would double the current capacity of NICL.
After witnessing decline in its bottom-line in FY13, Nimir showed an outstanding profit growth of close to 54 percent in FY14.The Company performs well despite showing operational stress in fourth quarter of FY14.The improvement in the top-line during the period was primarily driven by greater LSM activity along with the tightening of non-core operational costs. The firm has also finished the expansion of its fatty acid and soap noodles plant. The company was somewhat late in completing the expansion, but the scope of expansion was quite big. The development has increased the capacity to 26,000 tons per year, an increase of 85 percent over the previous capacity of 14,000 tons per year.
The start of FY15 was not according to the expectations; due to severe shortage of energy during the winter months, the firm suffered a top-line loss. However, things improved towards the end of the financial year and sales grew by 10 percent year-on-year. The improvement came on the back of higher Oleo chemical volumes after the expansions in the capacity. The operating expenses during the year stayed broadly put. But the financial cost increased significantly due to interest on additional borrowing for the expansion of the new plants. NICL has also decided to build its coal fire boiler plant to offset energy issues.
Recent Performance The all new multiple plant expansions along with better distribution channels have helped the Chemical Company to pump up its top-line growth for the first three months of FY16. The firm saw its net revenue rally 32 percent in the period to Rs 1,279 million, year-on-year. However, the core cost for period has also seemed to increase quite a bit and showed an increase of 28 percent year-on-year. In any case, NICL has posted a hefty increase in its profits and almost double its net profit during the quarter while comparing with the last year.
Future Outlook Historically Nimir Industrial Chemicals Limited has been known for its strong fundamentals among its competitors. After its current expansion in Oleo chemical plant and setting up new soap finishing facility the company has become a powerhouse to its peers.
But, the firm is still facing energy issues. Besides installing the coal fire boiler plant, the firm is also looking to further its investment in alternative energy during FY16 as per the company sources. This investment would indeed provide the edge NICL needs on its competitors. In the coming times NICL should focus on optimising production capacities in the most cost effective manner, and focus should be on its higher operating cost to achieve higher growth in its profits.
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Nimir Industrial Chemicals Limited
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Rs (Million) 1QFY15 1QFY16 YoY
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Sales - Net 966 1,279 32%
Cost of sales 820 1,052 28%
Gross profit 146 226 55%
Distribution costs 18 28 56%
Administrative expenses 20 23 15%
Operating profit 109 175 61%
Other expenses 5 10 100%
Other income 282 224 -21%
Finance costs 24 21 -13%
Profit before taxation 74 128 73%
Taxation 27 39 44%
Profit after taxation 46 90 96%
EPS 0.42 0.81 ?
Gross margin 15% 18% Up 300 BPS
Operating margin 11% 14% Up 300 BPS
Net Profit margin 5% 7% Up 200 BPS
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