NML in its FY19 results reported NPAT of PkR5,859mn (EPS: PkR16.66) vs. PkR4,097mn (EPS: PkR11.65) in FY18, up 43%YoY. The earnings growth was driven by both i) other income (+26%YoY) beefed up by one-off exchange gains and ii) core earnings (+2.4xYoY) though it remained below our expectations. 

Key highlights of FY19 result:

·         Topline grew by solid 18%YoY driven by both higher realized prices in PkR terms and higher volumes

·         Margin at gross level jumped 173bpsYoY, benefiting from the up cycle tailwinds.

·         Below the line expenses remained well under control (S&A as % of sales: 6.1% in FY19 vs. 6.5% in FY18).

·         Other income soared 26%YoY primarily on account of one-off exchange gains, though payouts from portfolio companies were 10%YoY lower.

·         Finance cost jumped 68%YoY driven both by interest rate hikes and higher working capital needs.

In 4QFY19, NML posted NPAT of PkR1,722mn (EPS: 4.90) vs. PkR1,332mn (EPS: PkR3.79) in 4QFY18, up 29%YoY. The earnings jump was primarily on account of higher other income, up 90%YoY, which was driven by higher materialization of dividend income and one-off exchange gains. Core textile earnings were poor during the quarter, with the company posting net loss of PkR0.5/sh vs. net profit of PkR0.95/sh at core level.

Key highlights of 4QFY19 result:

·         Topline registered a growth of 8%YoY on account of higher realized prices in PkR terms

·         Margin at gross level declined 178bpsYoY – likely hit by margin contraction in lower value added segments

·         Finance cost jumped 90%YoY driven both by interest rate hikes and higher working capital needs.

Accompanying results, the company announced a final cash dividend of PkR4/sh, which was below our expectation of PkR5.5/sh. This is likely due to higher financing needs (both CAPEX and WC), as evident from today’s announcement of PkR4.09bn.