PABC reports strong earnings for 2023
Pakistan Aluminium Beverage Can Ltd (PABC) recently held a corporate briefing to discuss its financial results for the calendar year 2023 (CY23) and the outlook for the future. Here are the key points from the session.
Significant Earnings Growth
PABC reported impressive net earnings of Rs13.90 per share for CY23, marking an 86% year-on-year increase.
Production and Capacity Utilization
In CY23, PABC saw its can production volumes rise by 12% year-on-year, reaching 812 million cans. This increased production brought the company’s capacity utilization up to 95%.
With the completion of a capacity expansion in January 2024, PABC’s total production capacity now stands at 1.2 billion cans. This expansion positions the company to meet the high demand anticipated during the peak summer season, both locally and regionally.
Sales Volume and Revenue Projections
The company’s overall sales volume grew by 8% year-on-year, totaling 780 million cans in CY23. However, the management expects a 4% decline in sales volume this year, assuming local demand remains weak.
For CY24, PABC projects a sales volume of around 750 million cans, which is expected to generate revenues of approximately Rs18 billion, based on the current exchange rate.
Export and Competition
PABC exported around 60% of its volumes to regional markets. However, competitive pricing in these markets led to a significant decline in margins, from 39% in the fourth quarter of CY23 to 32% in the first quarter of CY24.
The company faces competition from can suppliers in India, Sri Lanka, and the UAE when exporting to Bangladesh. Despite this, PABC remains the sole supplier to the Kabul market in Afghanistan, covering 70% of the total demand via the Torkhum border.
Domestic Market Challenges
PABC anticipates domestic demand to remain weak in the near term due to macroeconomic challenges and pressure on sales from major soft drink producers, Pepsi and Coca Cola. Nonetheless, the company is engaging with other local brands for can packaging solutions.
Risks and Long-Term Prospects
The management highlighted several risks to profitability, including high inflation, rising interest rates, adverse currency fluctuations, declining aluminum prices, and increasing regional competition. Despite these challenges, the management remains optimistic about the long-term demand for can-packed beverages in Pakistan and Afghanistan, driven by low market penetration and a potential shift in consumer preferences towards can packaging.
Summary Table
| Metric | CY23 | CY24 (Projected) |
|---|---|---|
| Net Earnings | Rs13.90/share (up 86% YoY) | – |
| Production Volumes | 812 million cans (up 12%) | – |
| Capacity Utilization | 95% | – |
| Sales Volumes | 780 million cans (up 8%) | 750 million cans |
| Revenue Target | – | Rs18 billion |
| Export Volume | 60% | – |
| Margin Decline (4QCY23 to 1QCY24) | 39% to 32% | – |
PABC: Key Statistics
| Metric | CY23 | CY24E | CY25F |
|---|---|---|---|
| Sales (Rs mn) | 19,736 | 22,757 | 29,470 |
| Sales Growth | 39% | 15% | 30% |
| Gross Margin | 40% | 35% | 32% |
| PAT (Rs mn) | 5,018 | 5,254 | 6,305 |
| EPS (Rs) | 13.90 | 14.55 | 17.46 |
| EPS Growth | 86% | 5% | 20% |
| DPS (Rs) | 3.50 | 7.00 | 7.50 |
| P/E (x) | 4.93 | 4.71 | 3.92 |
| D/Y | 5% | 10% | 11% |
Disclaimer:
The information in this article is based on research by JS Research. All efforts have been made to ensure the data represented in this article is as per the research report. This report should not be considered investment advice. Readers are encouraged to consult a qualified financial advisor before making any investment decisions.
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