The key shareholder of Shezan International Limited is the local general public owning 39.2 percent followed by directors, CEO, their spouse and minor children holding approximately 32 percent of the shares in the company. Modarabas and mutual funds are next in the category owning almost 22 percent of which Trustee National Investment (UNIT) Trust is the prime shareholder. Lastly, Tundra Pakistan Fund is another key shareholder in the company.
Historical performance
Shezan International Limited's top-line is mostly comprised of domestic sales although it does sell in the global market as well; the company's revenues have consistently been on a rise, but the growth rate saw a decline in FY19, whereby the sales rose by 2.68 percent year-on-year as opposed to 4.81 percent year-on-year in FY18. Along with the sales, the cost of sales have also increased by 14 percent in FY19, causing gross profit margin to reduce considerably, especially in FY19, where they saw a decline from an almost 28 percent in FY18 to approximately 20 percent in FY19. One can assume that in the face of rising interest rates and tax rate in addition to the rupee depreciation, the cost of doing business has evidently increased and profitability has been adversely affected across the sector. This also explains the sudden jump in finance costs by 74 percent, year-on-year.
The fall in financial performance is also reflected in the earnings per share figures which dropped significantly from 49.44 in FY18 to a mere 12.87 in FY19. The declining current ratio too is reflective of the non-conducive business environment, although it is still somewhat in the healthy ratio range.
Latest financial performance
The recent quarter shows similar business performance with the increase in cost exceeding the increase in revenue, not allowing the bottom-line to exhibit similar increment. The rise in interest rates has increased the cost of borrowing by almost five times than was the case previously. In addition, the company also attempted to rebrand one of its products the 'All Pure' juice range. However, despite the change in branding, the company was unable to bring about the expected increase in volume of sales.
In addition to the economic instability which poses a risk to the company's profitability, Shezan International also faces the risk of a water charge being imposed upon using surface and ground water of Rs1 per liter, which will further add to their cost of doing business.
Stock performance
Shezan's stock performance has remained above the market most of the times, especially from the period April through October 2019. While other companies, during the same period performed poorly, Shezan International Limited's stock performance has remained above par.
Future outlook
The current business environment has not been very kind; a lot of the companies were unable to stand to the challenges posed by the economic instability, causing them to incur losses and face liquidity crunch. The large scale manufacturing (LSM) sector observed a growth rate of 2.93 percent in 2019 shrinking from 6.33 percent recorded in the previous year. Furthermore, food and beverages sector declined in 2019 by a larger extent of 4.7 percent as compared to a decline of 0.76 percent in 2018. In addition, the cost of borrowing, rising tax rates and cost of raw materials were not very helpful. With such an environment and stiff competition in the local industry, it is commendable that Shezan managed to remain afloat with positive cash flows through the years.