Rupali Polyester : Transmissionof Quarterly Report for the Period ended 31 December 2022

Half Yearly Report

31 December 2022

2 Rupali Polyester Limited

Directors' Review

We are pleased to present the Company's un-audited financial statements for the second quarter and the half-year period ended 31 December 2022, duly reviewed by the external auditors.

Overview

The Company faced multiple challenges in the first half of the financial year 2022-23 due to political and economic turmoil in the country.

Unprecedented devaluation of Pakistan Rupee, strict restrictions imposed by SBP for opening foreign LCs to import necessary raw materials because of foreign exchange shortage, exceptional increase in raw material prices, conversion and financial costs along with energy supply crisis reversed the Company's growth momentum and profits. Markup rates crossed 16% threshold and additional tax in the name of 'super tax' imposed on the Company, putting pressure on its cash flows. The increase in product sale price was much lower than cost expansion due to contraction in downstream consumers' demand. The downstream industry was also adversely affected by the severe flooding as it resulted in overall slowdown of product lifting. The Company earned losses at both operational and overall level during the period under review.

Economic activity across the country has significantly slowed down because of foreign exchange liquidity crunch and resulting tightened monetary and fiscal measures taken by the Government.

Polyester Market Conditions

Country's economic condition impacted the industry across the board and the demand from our downstream consumers remained sluggish during the first half of the financial year 2022-23.

Energy Tariffs

In present times, to revive the IMF programme for Pakistan in the wake of the nation's economic turmoil, the Government is expected to authorize the removal of 'Regionally Competitive Energy Tariff (RCET)' of electricity at a rate of Rs. 19.90 per unit and a gas pricing of 9 cents per MMBTU for five export-oriented sectors (EOS) beginning on 1 March 2023. This plan, if adopted, will only exacerbate the country's foreign currency liquidity crisis by decreasing the competitiveness of exports in the international market.

Regulatory Duty on Polyester Filament Yarn

After continuing efforts of the domestic PFY industry, Government has re-imposed the regulatory duty on the import of PFY @ 5% on 21st December 2022.

Financial Results

Sales revenue for the first half of FY 2022-23 ended 31 December 2022 decreased because of reduced sale volumes of both PSF and DTY. Company earned gross losses during the period under review, mainly attributed to high material and power costs. Finance costs are also increased due to maximum utilization of financing facilities and high mark-up rates thereon, increased by 8% on average. In nutshell, Company earned loss after tax amounting to Rs. 412 million as compared to profit after tax of Rs. 732 million in same period of last year.

Half Yearly Financial Statements 2022 3

Earnings per share

Earnings per share of the Company converted to loss of Rs. 12.09 per share for the half year ended 31 December 2022 from profit of Rs. 21.49 per share earned for the half year ended 31 December 2021.

Future Outlook

Government's efforts to manage the foreign exchange liquidity crunch are expected to be successful and revive the economic activities in the country. The demand of PSF and PFY is expected to grow in the coming years and there is still a huge gap in domestic demand vs domestic supply. With the promised protection of the government to grow local production, we are increasing our production capacities through addition of new machines of latest technology. For expansion and capital investment, there is a need to formulate stable, long-term economic policies by the Government for protection of this industry. PFY & PSF industry should be developed as a major driver of import substitution to save country's huge foreign exchange spent on import these products through dumping.

Auditors' Review Report

M/s. RSM Avais Hyder Liaquat Nauman, Chartered Accountants, the Company's external auditors, have issued an unqualified Review Report to the Board members of the Company on condensed interim financial statements for the half year ended 31 December 2022.

Board of Directors

During the period, there is no change in the composition of the Board of Directors of the Company.

A Note of Gratitude

The Directors express their appreciation for the cooperation extended by the Ministries of Finance, Industries and Production, Commerce, Communication and Information Technology and Textile Industry. We would also like to convey our gratitude to the Federal Board of Revenue, Departments of Customs and Central Excise and the Government of the Punjab for their cooperation. We appreciate the patronage and confidence placed in the Company by the Development Financial Institutions and Commercial Banks. We are thankful to our valued customers and expect growing business relationships with them. To our stakeholders, we are grateful for their faith in the Company. We value their trust and appreciate the continued hard work by the management and staff of the Company.

On behalf of the Board

Nooruddin Feerasta	Zeeshan Feerasta
Chief Executive Officer	Director
Lahore
23 February 2023