The financial results for the first quarter of fiscal year 2024 (1QFY24) show robust top-line growth for the company, with net sales increasing by 29.6% compared to the same period in the previous year. This increase in revenue is a positive indicator of the company’s ability to generate sales and expand its market presence.
However, the increase in sales was accompanied by a significant rise in the cost of sales, which surged by 32.7%. This resulted in a gross profit of Rs. 3,989 million, reflecting a more modest increase of 9.6% compared to the previous year. The decline in gross margin from 13% to 11% indicates that the company faced challenges in managing production costs relative to its increased sales.
Operating costs also saw a substantial increase of 29.7%, which impacted the operating profit. Nevertheless, the company managed to achieve a 13.0% increase in operating profit, demonstrating its ability to maintain operational efficiency despite rising costs.
The financial cost of the company more than doubled, soaring by 127.6%. Such a significant increase in finance costs is a concerning factor, as it can erode profitability. The rise in finance costs can be attributed to various factors, including potentially higher interest rates or increased borrowing.
While the company’s profit before taxation showed a year-on-year decline of 34.1%, the effective taxation rate surged from 19% to 47%. This substantial increase in the tax rate significantly impacted the bottom line. The profit after taxation dropped by 56.5% compared to the same quarter in the previous fiscal year.
Earnings per share (EPS) for the company in 1QFY24 decreased to Rs. 0.81, a significant drop of 56.5% from the previous year. A lower EPS indicates reduced profitability on a per-share basis.
The financial metrics suggest that while the company managed to achieve impressive top-line growth, its profitability suffered during the quarter. The gross margin and net margin both declined, indicating challenges in managing costs and increasing tax liabilities. The surge in finance costs and higher effective taxation rate have been major contributors to the decline in profitability.
In conclusion, the company’s performance in 1QFY24 has demonstrated its ability to drive sales growth, but it also highlights the importance of efficiently managing costs and financial liabilities to safeguard profitability in the face of rising expenses and taxes. The company may need to focus on strategies to control costs and optimize its financial structure to maintain its financial health and long-term sustainability.
| Rupees’ millions | 1QFY24 | 1QFY23 | YoY |
| Net Sales | 35,642 | 27,497 | 29.6% ▲ |
| Cost of Sales | 31,653 | 23,856 | 32.7% ▲ |
| Gross Profit | 3,989 | 3,641 | 9.6% ▲ |
| Operating Cost | 1,785 | 1,376 | 29.7% ▲ |
| Other Income | 504 | 132 | 482.6% ▼ |
| Operating Profit | 2,708 | 2,397 | 13.0% ▲ |
| Finance Cost | 1,590 | 699 | 127.6% ▲ |
| Profit Before Taxation | 1,118 | 1,698 | 34.1% ▼ |
| Taxation | 521 | 325 | 60.2% ▲ |
| Profit After Taxation | 597 | 1,372 | 56.5% ▼ |
| Earnings Per Share | 0.81 | 2. | 56.5% ▼ |
| Dividend | 0.00 | 0.00 | |
| Bonus | 0% | 0% | |
| Gross Margin | 11% | 13% | 2.0% ▼ |
| Operating Cost to Sales | 5% | 5% | 0.0% ▲ |
| Other Income to Sales | 1% | 1% | 0.9% ▲ |
| Effective Taxation | 47% | 19% | 27.5% ▲ |
| Net Margin | 1.70% | 5.00% | 3.3% ▼ |
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