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NML - FY23 Analyst Briefing Takeaways, (AKD Off the Analyst's Desk Nov 24, 2023)

Nishat Mills Limited (NML) held its analyst briefing session today to inform investors and analysts about the company’s performance in FY23 and highlight the future outlook. Some key takeaways from the call are as follows:

 

• In FY23, the company achieved total sales of PkR141.7 billion, marking a significant increase from PkR115.7 billion in the previous year. Out of the total increase of PkR26 billion in sales (↑ ~22.4%), PkR18 billion came from exports, with the remaining amount attributed to local sales. This increase was marked by the increase in export sales volumes. Moreober the management expects the export sales to grow ~10-15% during the current FY.
• Furthermore, the reported PAT for FY23 stood at PkR12.1bn (EPS: 34.6/sh) versus PkR10.3bn (EPS: 29.3/sh) last year. This increase is attributable to the increase in other income flowing in through dividend income, interest income (from subsidiaries/associates) and exchange gain, amounting to PkR10.2bn (↑ ~83.1%)
• The management explained that the substantial rise in finance costs (↑ ~3x) was primarily attributed to the withdrawal of sectoral subsidies by the SBP, resulting in a cost escalation of PkR4.7bn.
• The company relied on RLNG (31%), Dual fuel stand by generators (28%), WAPDA (18%), FO (10%), and Solar (3%) to meet its energy requirements for FY23, whereby the (WACOE) stood at Pkr30/Kwh and (WACOG) rate PkR2.3K/mmbtu. Additionally, the management informed that the current rate of WACOE stands at 43/Kwh and WACOG at PkR3k/mmbtu
• Regarding the challenges posed by the rising Short-Term Borrowings (STB), the management clarified that the predominant reason for the increase was the growing WC needs of the company, driven by the expanding sales volumes.
• The company currently holds cotton that can provide coverage till the end of May’24. According to the management ~30% of the yarn produced by spinning is consumed internally, while the rest is sold externally. Usually, the company maintains a backlog of orders spanning from 90 to 200 days.
• The company's capital work in progress is elevated because of substantial investments in denim, expansion in terry, and a rise in work-wear production.
• Furthermore, following the successful acquisition, NML has seamlessly integrated Wernerfelt A/S into its portfolio.
• The management has also announced the successful completion of commissioning for Solar Power Projects with a capacity of 9.86 MW, which is fully operational for current FY.