Quarterly 96pc, to-date earnings 83pc down,
Experts see hard time ahead for company
M Jahangir Hayat
LAHORE: The General Tyre and Rubber Company of Pakistan Limited has post poor results as both quarterly and nine monthly earnings results showed steep declines of 96 percent and 83 percent respectively during the current financial year 2019-20, the quarterly report of the company indicated.
As per the documents available Daily The Business, The General Tyre and Rubber Company of Pakistan Limited’s net sales in terms of value for the nine months period under review was 7.49 billion as compared to Rs 8.77 billion in the same period last year, showing decline of 14 percent, the report said.
In December 2018 and January 2019 sales were depressed because of general slowdown of the economic activities, tightening of monetary policy, impact of restriction on non-filers to purchase vehicle and plant, the company believed.
However, from February sales have started to improve and in the recent supplementary budget the government had taken steps to improve business climate and support industrial activity in the country, the company observed.
Allowing non filers to purchase vehicles at higher tax rate and improve liquidity of farmers have supported your company interim of improve sales of tyres, the company said, adding that the gross profit for the period was Rs 1.06 billion, lower gross profit from last year is mainly due to significant devaluation of rupees, increasing utilities, raw-material and other manufacturing costs, the company highlighted.
Due to devaluation of rupees, the company incurred exchange loss of Rs 56 million for the nine months, the General Tyres and Rubber Company added, explaining the finance cost for the period under review was recorded Rs 390 million mainly due to increased investment in Capex and to meet working capital requirement.
Since December 2017, State Bank of Pakistan has increased discount rate by 475 basis points resulting in increase in borrowing cost of the company.
The company expected due to improve business sentiments, allowing non-filers to purchase vehicles and improve liquidity of farmers will translate in increased demand of your company’s tyres.
“Historically Q 4 is the best quarter of the company, due to seasonal factor in which farm tyre sales are always higher. The company is striving to maintain its sales volume improve profitability and go for leaner production, the company hopped, adding that export market is also being expanded and during the nine month period, exports sales were Rs 58 million, grew by 2.5 times as compared to same period last year.
The company is working hard to tap export market potential and is facing competition from undocumented sector which restricts the company to fully recover the impact of increased cost, the company indicated.
However, the experts keeping in the view the staggering declines in the sales and profit earnings of the company see hard time ahead.
“We appeal to the government to provide a level playing field to document the sector, which is not only paying their due share of taxes and duties but also saving precious foreign exchange and providing employment. The undocumented sector should be brought into the tax net and smuggling should be eliminated,” the company demanded.
When contacted the company for its version regional head Khawar and media person Asad Usmani declined to comment about the sharp decline in company’s profitability and sales. The management was also contacted by the email but there was no response.