EMCO Industries : Transmission of Quarterly Report for the Period Ended 31.12.2022

CONTENTS
EMCO Industries Limited	Page #
Company Information	2
Directors' Report	3-7
Independent Auditor's Review Report	8
Condensed Interim Statement of Financial Position	9-10
Condensed Interim Statement of Profit or Loss	11
Condensed Interim Statement of Comprehensive Income	12
Condensed Interim Statement of Changes in Equity	13
Condensed Interim Statement of Cash Flows	14-15
Selected Notes to and Forming Part of
Condensed Interim Financial Statment	16-22

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COMPANY INFORMATION

Board of Directors

Mr. Javaid Shafiq Siddiqi	Chairman / Non-Executive Director
Mr. Tariq Rehman	Chief Executive / Executive Director
Mr. Pervaiz Shafiq Siddiqi	Non-Executive Director
Mr. Usman Haq	Non-Executive Director
Mr. Salem Rehman	Executive Director
Mr. Ahsan Suhail Mannan	Executive Director / Company Secretary
Mr. Awais Noorani	Non-Executive Director
Mrs. Ayesha Mussadaque Hamid	Independent Director
Ch. Imran Ali	Independent Director
Syed Muhammad Mohsin	Independent Director
Mr. Osman Hameed Chaudhri	Independent Director
Chief Financial Officer
Mr. Riaz Ahmad
Company Secretary
Mr. Ahsan Suhail Mannan
Audit Committee
Ch. Imran Ali	Chairman
Syed Muhammad Mohsin	Member
Mr. Javaid Shafiq Siddiqi	Member
Mr. Usman Haq	Member

Mr. Ahsan Suhail Mannan

Is the Committee Secretary as required by the

Chapter IX, 27 (1) (iv) of Code of Corporate Governance, Regulations 2019.

HR Committee
Mrs. Ayesha Mussadaque Hamid	Chairman
Mr. Pervaiz Shafiq Siddiqi	Member
Mr. Ahsan Suhail Mannan	Member / Committee Secretary
Mr. Awais Noorani	Member
Risk Management Committee
Syed Muhammad Mohsin	Chairman
Mr. Tariq Rehman	Member
Mr. Salem Rehman	Member / Committee Secretary
Mr. Javaid Shafiq Siddiqi	Member
Nomination Committee
Ch. Imran Ali	Chairman
Mr. Ahsan Suhail Mannan	Member / Committee Secretary
Mr. Salem Rehman	Member
Mr. Pervaiz Shafiq Siddiqi	Member

External Auditors

M/s. Crowe Hussain Chaudhury & Co.,

Chartered Accountants, Lahore.

Internal Auditors

M/s. Zeeshan & Co.

Chartered Accountants, Lahore.

Legal Advisers

Cornelious Lane & Mufti

Chaudhary Associates Law Inn

Rizvi & Company

Asad Ullah Khan

Bankers

Habib Bank Limited

National Bank of Pakistan

Standard Chartered Bank (Pakistan) Limited

The Bank of Punjab

The Bank of Khyber

Silk Bank Limited

Askari Bank Limited

BUSINESS ITEMS

Porcelain Insulators

• Tension Insulator
• Suspension Insulator
• Pin Insulator
• Line Post Insulator
• Cap and pin Insulator
• Station Post Insulator
• Insulator for Railway Electrification
• Telephone Insulator
• Low Voltage Insulator
• Dropout Cutout Insulator
• HT & LT Bushings

Switchgear

• Disconnect Switch upto 245 kv
• Metal Oxide Surge Arresters upto 245 kv

RTV Coating

• Room Temperature Vulcanised
• Silicone Rubber Coating

Chemical Porcelain

• Acid Proof Wares and Bricks
• Rasching Ring and Saddles
• Acid Proof Porcelain Pipes and Fitting
• Acid Proof Cement

Special Porcelain

• High Alumina Porcelain
• Lining Special Refractories & Grinding Media

Share Registrar

Corplink (Pvt) Limited

Wings Arcade. I-K , Commercial,

Model Town, Lahore.

Registered Office

4th Floor, National Tower, 28-Egerton Road, Lahore.

Factory

19-Kilometre,

Lahore Sheikhupura Road, Lahore.

HALF YEARLY REPORT 2023| 2

DIRECTORS' REPORT

Dear Shareholders

On behalf of the Board of Directors we pleased to present the performance review of your Company together with the un-audited financial statements for the half-year ended December 31, 2022.

Operations and Sales Review

The Company produced 2,717 tons during the period under review (July-December 2022) as compared to 2,736 tons of the corresponding period of last year. On Account of high demand for its products, EMCO has been aggressively investing in BMR activities of its core equipment to improve the output and continuously increasing plant rated capacity. Alhamdolillah, a significant capacity enhancement has been achieved with effect from November 2022.

During the period, the Company sold 2,489 tons during the period under review (July December 2022) as compared to 2,811 tons of the corresponding period of last year. Owing to the long production process, the results of enhanced output and the corresponding sales was temporarily affected, and it is expected to stabilize in upcoming periods to reduce the buildup in inventory. Net sales of the Company recorded as Rs.1,817.01 million for the period under review (July- December 2022) as compared to Rs. 1,274.58 million of the corresponding period of last year, thereby registering a growth of 42.6%. This increase is primarily on account of producing higher value added products and an increase in prices to address the heavy inflationary trends on the costing side.

Financial Performance

For the period under review (July-December 2022), the Company posted gross profit of Rs. 484.54 million compared to Rs. 299.30 million of the corresponding period of last year. The net operating profit for the period under review (July-December 2022) is recorded at Rs. 388.03 million as compared to Rs. 222.78 million of the corresponding period of last year. As noted above, the Company produced and sold higher value products that resulted in significant improvement in Gross Margin as well as Operating Profit despite macroeconomic challenges. Similarly, S&D expenses increased to Rs. 96.51 million mainly on account of higher sales and increase in Freight Charges due to a sharp rise in POL prices.

Finance cost for the period under review (July-December 2022) has been recorded at Rs.

106.79 million as compared to Rs. 45.07 million of the corresponding period of last year. This may be broadly attributable to the significant increase in the policy lending rate by the State Bank of Pakistan, and to an overall increase in bank borrowings to achieve higher production and sales targets.

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After taking into account financial charges, Profit Before Tax increased to Rs. 220.68 million as compared to Profit Before Tax of Rs. 143.38 million for the corresponding period of last year.

After accounting for tax, the Company has made a Net Profit of Rs. 149.51 million for the period under review as compared to a Net Profit of Rs. 104.24 million for the corresponding period of last year.

During the period under review, the Company has paid Rs. 66.79 million toward Long Term Loans and there is no overdue against any loans.

Macroeconomic Challenges

During the period under review, the Company's businesses continued to face macroeconomic challenges, including a severe costing pressure due to the impact of higher oil prices, devaluation of the Pak Rupee against the US Dollar, business-specific import restrictions, tax regime changes and volatility in global commodity prices. Monetary tightening measures that were introduced at the start of the current fiscal year have further intensified in this quarter, causing a significant slowdown in economic activity across the country. With forex reserves plummeting to an alarmingly low level, industries are struggling to secure supplies of imported components and machinery spares for uninterrupted business operations. These combined with higher energy costs, rising inflation, higher borrowing costs and devaluation of the local currency resulted in significant impact on the manufacturing sector in general. We continue to pray for an early recovery from these challenges.

Earnings per Share

The basic earnings per share is reported at Rs. 4.27 as compared to basic earnings per share of Rs. 2.98 of the comparable period of last year. There is no dilution effect on the earnings per share for the period under review and corresponding period of last year.

Near Term Outlook

Pakistan's economy faces mounting pressures on account of the global situation, affected by high inflation, aggressive monetary tightening, and uncertainties resulting from the Russia-Ukraine conflict, coupled with a highly fragile domestic scenario, with forex reserves barely covering one month of imports, looming external debt repayments and a delay in the resumption of its loan program with the IMF. Challenges resulting from depleting foreign reserves, high-interest rates, and inflation, coupled with continuing trade deficit further compounded the aftershocks of the unprecedented monsoon flooding.

HALF YEARLY REPORT 2023| 4