Pakistan PVC Limited

Pakistan PVC Limited (PSX: PPVC) was incorporated in Pakistan in 1963. The principal activity of the company is the manufacturing and sale of PVC pipes and fittings, PVC resin, PVC compound and caustic soda. The company also leases land, buildings and other infrastructures.

Pattern of Shareholding

As of June 30, 2024, PPVC has a total of 14.972 million shares outstanding which are held by 570 shareholders. Foreign companies have the majority stake of 66.60 percent in the company followed by local general public accounting for 20.65 percent shares.

Banks, DFIs and NBFIs hold 6.18 percent shares of PPVC while joint stock companies hold 3.54 percent shares. Around 2.83 percent of the company’s shares are held by its directors, CEO, their spouse and minor children. The remaining shares are held by other categories of shareholders.

Historical Performance (2020-24)

Except for year-on-year growth in 2021 and 2022, PPVC’s topline registered decline over the period under consideration. The company couldn’t post gross profit in any of the years, however, posted operating profit in 2021, 2022 and 2023 – thanks to robust other income. PPVC recorded net profit only in 2023. The detailed performance review of the period under consideration is given below.

In 2020, PPVC’s topline slid by 37.95 percent to clock in at Rs.5.52 million. This was on account of COVID-19 which resulted in halted production activities. During the year, the company’s Gharo plant remained closed while Islamabad plant also registered reduced production due to economic uncertainty and lower demand.

The production of PVC pipes at the Islamabad plant slumped by 49.43 percent to clock in at 114,004 meters in 2020. The excess capacity of the plant was used to process mineral water which increased by 4.38 percent to clock in at 57,645 gallons in 2020. Cost of sales slid by a considerably lower magnitude of 13.67 percent in 2020 due to fixed overhead cost. This resulted in a paltry 0.25 percent decline registered in gross loss which stood at Rs.16.04 million in 2020. Other income strengthened by 20.80 percent in 2020 due to higher rental income recognized during the year.

Distribution expense mounted by 15.17 percent in 2020 mainly on the back of higher donations distributed during the year. Administrative expense also surged by 16 percent in 2020 due to higher payroll expense as well as legal & professional charges incurred during the year. PPVC streamlined its workforce from 44 employees in 2019 to 30 employees in 2020.

Operating loss tapered off by 33.92 percent to clock in at Rs.4.61 million in 2020. Finance cost almost stayed intact at Rs.7.25 million during the year. PPVC’s current liabilities exceed its current assets by Rs.362.980 million as of June 30, 2020. Its accumulated loss stood at Rs.501.636 million.

Moreover, the company has not been able to obtain additional finances to stimulate its operations. Majority of the company’s loan is obtained from related parties and directors except for cash finance of Rs.15 million for which the bank has filed suit for recovery. PPVC’s net loss shrank by 9.84 percent to clock in at Rs.15.76 million in 2020. This translated into loss per share of Rs.1.05 in 2020 versus loss per share of Rs.1.17 recorded in 2019.

In 2021, PPVC’s net sales strengthened by 74.79 percent to clock in at Rs.9.64 million. During the year, the production of PVC pipes at the Islamabad plant increased by 71.79 percent to clock in at 195,851 meters. Mineral water processing dropped by 24.22 percent to clock in at 43,686 gallons in 2021.

Cost of sales surged by 13.38 percent in 2021 mainly on account of higher cost of raw and packaging material consumed during the year coupled with elevated fuel & power charges. This resulted in gross loss of Rs.14.80 million in 2021, down7.74 percent year-on-year. Other income picked up by 14 percent in 2021 due to higher rental income recognized during the year.

Distribution expense dwindled by 4 percent in 2021 due to lesser donations given out during the year. Administrative expense also fell by 11 percent in 2021 due to considerably lower legal & professional charges incurred during the year. PPVC recorded operating profit of Rs.0.27 million in 2021 with OP margin of 2.77 percent. Finance cost stayed intact during the year.

During the year, the company’s current liabilities exceed its current assets by Rs.369.292 million. Its accumulated loss clocked in at Rs.508.459 million in 2021. PPVC recorded net loss of Rs.11.56 million in 2021, down 26.66 percent year-on-year. This translated into loss per share of Rs.0.77 in 2021.

In 2022, PPVC’s topline registered year-on-year growth of 24.98 percent to clock in at Rs.12.05 million. The company produced 216,682 meters of PVC pipes in 2022, up 10.64 percent year-on-year. It also processed 49,050 gallons of water in 2022, up 12.28 percent year-on-year.

Cost of sales ticked up by 8.88 percent in 2022. This resulted in 1.62 percent downtick recorded in gross loss which stood at Rs.14.56 million in 2022. Other income improved by 14.71 percent in 2022 due to higher rental income. Elevated donations, vehicle running expenses as well as salaries of sales force translated into 25.55 percent growth recorded in distribution expense in 2022.

Administrative expense also surged by 14 percent in 2022 due to higher payroll expense as well as legal & professional charges incurred during the year. PPVC hired new employees to expand its workforce from 37 employees in 2021 to 43 employees in 2022.

The company recorded operating profit of Rs.2.37 million in 2022, up 788 percent year-on-year. This translated into OP margin of 19.65 percent in 2022. Finance cost clocked in at Rs.7.25 million in 2022, almost same as last year. PPVC’s current liabilities exceed its current assets by Rs.374.632 million as of June 30, 2022.

Accumulated loss at the end of the year was recorded at Rs.514.479 million. The company recorded net loss of Rs.10.28 million in 2022, down 11 percent year-on-year. This resulted in loss per share of Rs.0.69 in 2022.

PPVC recorded topline slide of 6.62 percent in 2023. Its net sales were recorded at Rs.11.25 million in 2023. The production volume of PVC pipes increased by 32.90 percent to clock in at 287,973 meters in 2023. Similarly, mineral water processing also increased by 1.70 percent to clock in at 49,884 gallons.

Sales volume also rose accordingly; however, the company couldn’t increase the prices because of thinner demand and stiff competition. This resulted in 35.41 percent spike recorded in the company’s gross loss which clocked in at Rs.19.71 million in 2023. What turned the tables for PPVC in 2023 was 404.13 percent year-on-year growth recorded in the company’s other income. This was the result of mark-up reversed against bank settlement. During the year, the company made out of court settlement with the external lender (UBL Bank).

Under the agreement, it was decided that if the company pays the principal amount before December 28, 2022, the bank will waive the accrued mark-up of Rs.106.964 million.

Distribution expense escalated by 16.34 percent in 2023 due to higher donation, vehicle running expense and salaries of sales force incurred during the year. Administrative expense recorded 17 percent spike in 2023 due to higher payroll expense, legal & professional charges as well as utility charges incurred during the year. The company squeezed its workforce to 41 employees in 2023.

Due to one-off boost recorded in other income, PPVC posted operating profit of Rs.104.22 million in 2023, up 4301.27 percent year-on-year. This translated into OP margin of 926.34 percent in 2023. Finance cost fell by 49.77 percent in 2023 as the company discharged its external short-term liability worth Rs.15 million pertaining to UBL bank.

At the end of the year, PPVC’s current liabilities exceeded its current assets by Rs.270.050 million. Accumulated loss was recorded at Rs.410.490 million in 2023. PPVC was able to post net profit of Rs.88.714 million in 2023. This translated into EPS of Rs.5.93 and NP margin of 788.50 percent.

In 2024, PPVC’s net sales declined by 22 percent to clock in at Rs.8.77 million. During the year, the production of both PVC pipes and mineral water declined to clock in at 133,462 meters and 41,200 gallons respectively.

Cost of sales continued to mount to the tune of 6.26 percent in 2024. This was due to fixed overhead charges incurred during the year. Gross loss magnified by 22.42 percent to clock in at Rs.24.13 million in 2024. Other income dipped by 76 percent due to one off mark-up reversal against bank settlement recorded in the previous year. Distribution expense recorded 19.96 percent hike in 2024 due to elevated vehicle running expense and salaries of sales force incurred during the year.

Administrative expense also surged by 13.48 percent in 2024 due to increased utility charges and payroll expense incurred during the year. Number of employees stayed intact at 41 in 2024. PPVC recorded operating loss of Rs.5.21 million in 2024. This was after three years that the company was unable to post any operating profit. Finance cost largely stayed at the last year level.

Current liabilities exceed current assets by Rs. 279.588 million as of June 30, 2024. Accumulated loss at the end of 2024 was recorded at Rs. 420.320 million. The company posted net loss of Rs.4.823 million in 2024 with loss per share of Rs.0.32.

Recent Performance (9MFY25)

During 9MFY25, PPVC’s net sales tapered off by 13.41 percent to clock in at Rs.5.5 million. Idle capacity resulted in lesser absorption of fixed cost during the period. This translated into 3.26 percent uptick recorded in cost of sales in 9MFY25 with gross loss mounting by 8.76 percent to clock in at Rs.20.92 million. Other income strengthened by 14.24 percent due to higher rental income recognized during the year.

Distribution expense posted 10.32 percent uptick in 9MFY25 probably due to increased salaries of sales force as well as vehicle running expense incurred during the year.

Conversely, administrative expense dipped by 5.82 percent in 9MFY25 apparently due to lower payroll expense as the company might have streamlined its workforce due to lesser production activities. Operating loss tumbled by 29.42 percent to clock in at Rs.3.86 million in 9MFY25. Finance cost clocked in at Rs.2.73 million during the period – same at the last year level.

PPVC’s current liabilities exceed it current assets by Rs.279.605 million as of March 31, 2025. Accumulated loss at the end of the period was recorded at Rs.422.118 million with negative equity of Rs.30.072 million. PPVC recorded net loss of Rs.4.69 million with loss per share of Rs.0.31 in 9MFY25. This was against net profit of Rs.0.438 and EPS of Rs.0.03 recorded in 9MFY24.

Future Outlook

Improved macroeconomic conditions in the local market warrants demand recovery for PVC pipes due to gradual recovery seen in the construction activity.

However, with negative equity and negative working capital, the company has not been able to obtain external financing to revive its operations. PPVC needs to alter its financing mix and kick start its operations with full vigor to grab the market share and make the most of the improved macroeconomic backdrop.