Decades of Resilience: A Comprehensive Overview of Nimir Resins Limited's Financial Evolution

The ultimate parent firm of NRSL is Nimir Industrial Chemicals Limited, whereas it is a subsidiary of Nimir Management (Private) Limited. The company produces coating resins, optical brighteners, textile auxiliaries, composite resins (UPR), and paper surface sizing agents.

Pattern of Ownership

4326 stockholders owned 141.32 million of the 141.32 million outstanding shares of NRSL as of June 30, 2023. The majority ownership of the company, at 67.19 percent, is held by associated companies, undertakings, and linked parties, such as Nimir Management (Private) Limited and Nimir Industrial Chemicals Limited. The local general public, which owns 24.58 percent of NRSL, comes next. A total of 2.75 percent of the company's shares are held by Moradabas & Mutual funds, with the remaining 3.7 percent held by the company's directors, CEO, spouse, and minor children. Other categories of shareholders split up the remaining ownership.

Economic Outcomes (2019–23)

NRSL's top and bottom lines have been rising over the years under review, with the exception of a little decline in 2020. Additionally, until 2022, its gross and operating margins rise, with a slight decline in 2023. On the other hand, net margin declined in 2020, increased in 2021, and then started to decline from 2020 onward. 

The top line of NRSL climbed by 36% in 2019 compared to the previous year, which can be attributed to higher product volumes and prices. The company also boosted its overall capacity from 39,000 MT in 2018 to 42,000 MT in 2019 in order to satisfy the growing demand, and it utilized 69.6% of its capacity in 2019 as opposed to 67 percent in 2018. In 2019, the cost of sales increased by 35 percent yearly, primarily due to growing inflation, increased energy prices, and the depreciation of the Pakistan Rupee. Because NRSL was able to easily transfer the cost increase onto its clients, the company's gross profit increased by 52% in 2019 and its GP margin increased from 9.21% to 10.24%. 2019 saw a 24% annual increase in distribution costs due to greater packaging, carriage, and forwarding costs brought on by higher sales volume, higher sales personnel compensation, and a significant increase in sales commission. As a result of increasing operations, the personnel increased from 125 in 2018 to 133 in 2019, resulting in an 11% year-over-year increase in administrative expenses. With OP margin increasing from 6.6 percent in 2018 to 8 percent in 2019, operating profit saw a 65 percent year-over-year increase in 2019. Even though the company's exchange loss increased in 2019 as a result of the local currency's decline in value, a lower loss allowance recorded for the year led to a 16 percent decrease in other expenses compared to the same period last year. In contrast to other expenses, finance costs climbed by 123 percent in 2019 due to higher discount rates and more borrowings connected to working capital that were taken out during the year. In 2019, net profit increased by 49% over the previous year to a total of Rs. 154.02 million. From Rs. 0.36 in 2018 to Rs. 0.54 in 2019, EPS increased.

In 2020, the NRSL had an 8% decline in its topline year over year. This was the result of COVID-19, which crippled the regional and worldwide economies and stopped normal economic activity. In order to lessen the impact of the global pandemic on its revenues, NRSL continued to sell some of the key things from its portfolio even though the lockdown significantly reduced the demand for its products. The company's sales breakdown shows that although coating, emulsion, and blending sales plummeted during the year, sales of textile, paper, and other products increased. In 2020, NRSL produced 25,877 MT of its goods, using 61.6 percent of its installed capacity due to decreased demand. 2020 saw a 9% year-over-year decline in cost of sales, which translated into a 1% increase in gross profit. Nevertheless, GP margin increased by 100 basis points to 11.24 percent for the year. 2020 saw an 11% annual decrease in distribution expenses due to lower packing, transportation, and forwarding costs as sales volume declined. Despite the fact that there were only 127 employees, administration costs increased by 17% in 2020 as a result of increased payroll costs.

In 2020, operating profit increased by just 1% year over year; nevertheless, an increase in operating margin to 8.8% was supported by a control on operating expenses. In 2020, other expenses experienced a 49% decline as NRSL recorded a lower loss allowance and a notable decrease in exchange loss during the year. Due to a high discount rate for the majority of the year and the fact that NRSL's long-term financing increased from 2.1 million in 2019 to 21.096 million in 2020—which mostly consists of loans obtained under the SBP Refinance scheme for the payment of salaries and wages—financial costs increased by 10% year over year in 2020. Short-term borrowing decreased during the year as a result of COVID-19-related operations limitations. Although profit-before-tax increased by 14% in 2020, net profit decreased by 17% in 2020 to Rs. 127.22 million due to increased taxation. In 2020, the NP margin barely increased to 2.83 percent and the EPS fell to Rs. 0.45.

After declining in 2020, NRSL's net sales increased by a strong 40% in 2021. This resulted from both increased volumes and windfall profits, since the business bought large quantities of inventory at discounted prices prior to the shutdown and then sold it at markedly higher prices. The company raised production to 45,600 MT during the year, and it attained 73 percent capacity utilization. In 2021, gross profit increased by 57% year over year, with a GP margin that leaned toward 12.65%. Due to increased salaries, higher packing, carriage, and forwarding costs incurred during the year due to higher volumes, as well as an increase in freight rates as shipments that were delayed due to COVID-19 started clearing, distribution expenses increased by 30% in 2021 year over year. Despite the same number of employees as the previous year, administrative expenses increased by 24% in 2021 due to increased payroll costs. Operating profit increased by 66% in 2021 compared to the previous year, while operating profit margin increased significantly to 10.4%. In 2021, other expenses grew by 48% year over year as a result of higher profit-related provisioning, ECL provisioning, and stock obsolescence from bookings made during the year. Monetary easing caused finance costs to decrease by 39% year over year during the year. This was true even though NRSL's long-term borrowings for CAPEX and the payment of salaries and wages under the SBP Refinance Scheme increased dramatically during the course of the year. In 2021, NRSL's net profit increased by 182 percent year over year to reach Rs. 358.75 million, the greatest amount among the years examined, with an EPS of Rs. 2.54 and an NP margin of 5.71 percent. An additional encouraging development of the year was the company's net worth increasing by 20% to a total of Rs. 2070 million. Additionally, all accrued losses were erased, making space for additional dividend payments.

The NRSL saw a 32% increase in revenue year over year in 2022. Significant increases in the cost of sales were caused by the price of global commodities, especially feedstock. Nevertheless, in 2022, gross profit climbed by 35% year over year due to NRSL's competitive pricing. Additionally, the GP margin increased, reaching 13 percent in 2022. NRSL's capacity utilization decreased to 66.88 percent throughout the course of the year. In 2022, distribution expenses increased by 20 percent year over year due to increased payroll costs and additional charges for packing, shipping, and forwarding. High inflation is also indicated by administrative expense, which increased by 18% annually in 2022 due to increased payroll costs. In 2022, operating profit increased somewhat year over year by 39%, with an increase in operating profit margin to 10.95%. Higher exchange loss and provisioning for profit, ECL, and obsolescent inventory resulted in a significant increase in other expenses in 2022 of 109 percent. 2022 saw a ninety percent annual increase in finance costs due to a rise in the discount rate and a significant rise in both short- and long-term borrowings taken out during the year. This significantly reduced the bottom line growth, along with the government's introduction of a 10 percent super tax. In 2022, net profit increased by a meager 2 percent year over year to reach Rs. 366.87 million, with an NP margin of 4.44 percent and an EPS of Rs. 2.6.

The NRSL's top line increased by a muted 13% in 2023 compared to the previous year. Due to supply chain disruptions brought on by import restrictions and decreased demand as a result of a reduction in business activity across all industries due to rising inflation that pinched consumer budgets, capacity utilization barely registered at 57.4%. Due to a sharp increase in raw material prices in 2023—exacerbated further by the depreciation of the Pakistani rupee—cost of sales also increased by 13 percent on an annual basis. The company's GP margin, which decreased little to 12.89 percent in 2023, shows that it was able to adjust its prices properly. In 2023, gross profit increased by 12% annually as well. In 2023, distribution expenses experienced a staggering 31% annual increase due to the impact of increased POL product prices on freight, transit, and conveyance costs incurred during the year. As the number of employees increased from 125 in 2022 to 135 in 2023, administrative expenses also increased by 23% annually, driving up payroll costs in the face of strong inflation. In 2023, operating profit may increase by 10% annually, but OP margin may marginally decline to 10.6%. Because there was no exchange loss experienced in 2023 and there was less provisioning, other expenses decreased by 35%. Due to financial constraints, finance costs increased by an astounding 76% in 2023 compared to the previous year. This was the case even though the corporation paid off a sizable percentage of its debt over the year, as seen by the sharp decline in its gearing ratio from 53% in 2022 to 23% in 2023. In 2023, NRSL reported a 5% increase in net profit year over year, totaling Rs. 385.88 million, with an EPS of Rs. 2.73 and an NP margin of 4.12%.

Current Results (1QFY24)

NRSL began 2024 on a very positive note, marked by a startling increase in its margins and bottom line. Its top line increased by 16 percent annually, primarily as a result of higher price modifications made to reflect cost increases. The company performed exceptionally well, as evidenced by a 46% year-over-year increase in gross profit in 1QFY24 and a GP margin increase from 8.9 percent in 1QFY23 to 11.23 percent in 1QFY24. In 1QFY24, distribution and administrative expenses climbed by 20% and 60%, respectively. These increases were attributed to inflation, rising freight, transportation, and utility costs during that time. The company's operational performance was unaffected by higher operating expenses, as evidenced by the 48 percent increase in operating profit in 1QFY24 and the increase in OP margin from 6.77 percent in 1QFY23 to 8.67 percent in 1QFY24.

Due to its effective use of its short-term borrowing lines, the company was also able to reduce its financing costs by 19 percent year over year in 1QFY24, despite an increase in interest rates. In 1QFY24, NRSL reported a staggering 372 percent year-over-year increase in its bottom line, which came to Rs. 81.18 million. From Rs. 0.12 in 1QFY23 to Rs. 0.57 in 1QFY24, EPS increased as well. The net profit margin increased from 0.75 percent in 1QFY23 to 3.04 percent in 1QFY24.

Future Prognosis

NRSL will maintain a strong financial performance even in the face of economic challenges thanks to its wide range of products and ability to transfer cost savings down to customers. Nonetheless, the recent downward trend in global commodity prices could have an effect on the business's profitability.