ICL venturing into new global markets

Karachi, June 16, 2022: The Ittehad Chemicals Limited (ICL) is expanding its exports by venturing into 5 new markets namely Uzbekistan, Kazakhstan, Russia, Africa and the UAE.

The company is also working on up-gradation of its engines to increase its fuel efficiency and expects the work to be completed by the end of 2022.

The ICL held its Analyst Briefing on Wednesday where the management discussed key highlights of the financial results and future outlook of the company.

While net sales for 3QFY22 increased by 15% QoQ to Rs 4.1 billion owing to higher sales volume, PAT remained largely stable on a sequential basis (EPS: Rs1.91) as margins of the company eroded amid rising fuel and raw material costs.

3Q margin erosion limits bottom-line growth

The company posted an EPS of Rs1.91 during 3QFY22, as against Rs1.92 during previous quarter. For 9MFY22, net sales grew by 32% YoY to Rs10.9bn driven by increase in volumes witnessed growth in both segments whereas PAT dropped by 28% YoY to Rs374mn (EPS: Rs3.74) owing to higher fuel costs and financial charges.

Fuel costs drive margin decline

The company operates two key segments (1) Chlor Alkali segment (2) LABSA segment.

Chlor Alkali segment: Caustic Soda, the main product under this segment, finds its primary use in the textile sector as a bleaching agent. Despite double-digit growth in demand for textile products during the period, volumes for Caustic Soda production grew by 6% YoY clocking in at 74,968MT.

Moreover, as the production process for Caustic Soda is highly fuel intensive, for which the company utilizes a mix of RLNG and grid connection with LESCO, the steep rise in respective fuel costs contributed in the decline in company’s gross margins to 13% as compared to 19% during the SPLY.

LABSA segment: Sales for LABSA are primarily generated from the detergent and soap industry which has seen a rapid rise in demand post COVID-19. During 9MFY22, production volumes for the segment grew by 14% YoY to 15,238MT driving sales growth in the company. The company achieved CoD for its capacity expansion under this segment during first week of May-2022, which increased the segments total capacity from 24KT to now 70KT.

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