Thal : Transmission of Quarter Report for the Period Ended March 31, 2022

Thal Limited

TABLE OF CONTENTS

Page No.

Directors' Review Report --------------------------------------------------------------------------------- 3

Unconsolidated Condensed Interim Financial Statements

Statement of Financial Position -------------------------------------------------------------- 7

Statement of Profit and Loss ----------------------------------------------------------------- 8

Statement of Comprehensive Income ------------------------------------------------------ 9

Statement of Changes in Equity ------------------------------------------------------------- 10

Statement of Cash Flows --------------------------------------------------------------------- 11

Notes to the Unconsolidated Condensed Interim Financial Statements ------------

Consolidated Condensed Interim Financial Statements

----1-2---------------------------------Statement of Financial Position -------------------------------------------------------------- 20

Statement of Profit and Loss ----------------------------------------------------------------- 21

Statement of Comprehensive Income ------------------------------------------------------ 22

Statement of Changes in Equity ------------------------------------------------------------- 23

Statement of Cash Flows --------------------------------------------------------------------- 24

Notes to the Consolidated Condensed Interim Financial Statements -------------------

Directors' Review Report in Urdu --------------------------------------------------------------------------2-5-----------------------------------35

Corporate Information --------------------------------------------------------------------------------------

42

Thal Limited

Directors' Review Report to the Shareholders

On behalf of the Board of Directors, we are pleased to share the Directors' Review Report along with unaudited condensed interim financial statements for the period ended March 31, 2022.

Financial Highlights

(PKR in millions) except earnings per share	Standalone	Consolidated
Nine months ended	Nine months ended
Mar 31, 2022	Mar 31, 2021	Mar 31, 2022	Mar 31, 2021
Sales	27,513	19,359	29,384	21,073
Profit Before Taxes	4,556	3,405	6,865	5,558
Profit After Taxes	3,425	2,589	5,166	4,376
Earnings Per Share (Rs.)	42.27	31.95	59.17	49.83

Performance Overview

For the nine months ended March 31, 2022, the Company posted sales revenue of Rs. 27.5 billion, up by Rs. 8.1 billion (42%), compared to Rs. 19.4 billion in the corresponding period last year. The basic & diluted earnings per share (EPS) for the current period was Rs. 42.27, compared to Rs. 31.95 in the corresponding prior period last year.

Business Brief - Engineering Segment

The Company's engineering segment is comprised of the thermal and engine components business and electric systems business. These businesses are primarily focused on parts manufacturing for the auto industry.

During the nine-month period ended March 31, 2022, the turnover of the engineering segment achieved highest ever sales of Rs. 17 billion, compared to Rs 11.6 billion during the same period last year, showing a remarkable growth of 47% from the same period last year. The growth in sales is largely attributable to an increase in automotive demand and selling prices. Consumer demand for automotive is likely to remain stable during last quarter of current fiscal year.

As global supply chain disruptions continue unabated, the businesses face challenges on account of shipping delays and surging freight costs. The management expects these disruptions to prevail for the foreseeable future, thus continues to focus on accurate supply chain planning and optimizing inventory levels.

As new players have entered the automotive market, the businesses are focused on broadening their customer base, increasing localization and diversification with a continuous focus on improving 5S, upholding health and safety standards and investing in environmental initiatives.

Business Brief - Building Material & Allied Product Segment

Sales revenue of the building material & allied product segment for the nine-month period ended March 31, 2022, was Rs. 10.4 billion, up by Rs. 2.7 billion (35%), compared to Rs. 7.7 billion during the same period last year.

Jute Operations

The jute business registered strong growth in comparison to the corresponding period of last year. The business faced considerable cost pressures from the depreciating Pakistan Rupee and rising cost of international freight which it plans to gradually pass on and offset through exports. Local demand for wheat bags remained strong due to lower carryover stocks and wheat shortage in the country as compared to last year. The business continues to focus on exports for growth, while maintaining its strong presence in the domestic market. Management will also maintain its focus on production efficiencies to ensure competitive advantage in both the local and export markets.

Presently, oil prices are volatile in the international market which may result in a further increase in energy costs to the business. Besides the ongoing geopolitical scenario and any further upward revision in SBP policy rates could adversely impact the industry.

The management will continue its focus on improving quality, health, safety and environment initiatives while enhancing cost efficiencies through continuous process improvement.

Papersack Business

During the period under review, revenue grew significantly versus corresponding period of last year. This is a challenging year where input costs specially our major raw material paper & polypropylene granules are on an upward trajectory on a quarterly basis due to adverse exchange parity, global supply shortages, increased e-commerce shipments and supply chain disruption. Rising coal and crude oil prices have also adversely affected demand for cement and cement bags. Volumes of other segments, food grade bags and industrial bags have however, positively increased owing to higher take-away orders and home deliveries by restaurants. Profitability of the business has improved in all business segments, which is mainly attributed to higher volumes, operational controls and efficient utilization of resources.

The business has currently invested over Rs. 1.7 billion in a woven polypropylene bag manufacturing facility to tap demand for polypropylene bags in cement and non-cement sectors. The project is at last stage of completion and has started commercial production of conventional bags whereas, production of cement bags will be started in Q4. The business also upgraded its cement paper bag manufacturing plant in the north region, which has expanded the capacity by an additional 48 million bags per annum and will service our customers in central & north regions. As a part of our sustainability initiatives, the business has also invested in a total of 1.75 MW solar power installation at its plants in Hub and Gadoon and 1 MV has been energized.

The outlook for coming quarter is challenging due to its increasing costs & supply chain issues, despite demand growth. The management continues to focus on cost efficiencies, tapping increasing market demand including export markets and HSE.

Laminates Operations

The laminates business operates under the brand name "Formite" in three major segments - High Pressure Laminates ("HPL"), Compact Laminates and Laminated Boards. The brand is known for its quality and adherence to corporate values.

During the period under review, market stabilized and the business remained profitable. In addition, the burden of the increased costs from currency devaluation and rising freight costs was also partially passed onto customers. On the supply-side, rising input costs, owing to increased freight costs and rupee devaluation, continued to be a challenge.

Furthermore, constant load-shedding of natural gas in Hub district created a challenge in smooth production. However, some countermeasures have been put in place and we expect gas shortages to reduce during the remaining fiscal year.

Increased shipping times due to port congestion still remains a constant challenge. Some of the port operations have been shut down in China due to increase in COVID-19 cases, resulting in further delays in shipments from China. The business will maintain efforts in the next quarter to pass on the cost increase to customers due to devaluation.

The business has also initiated some key projects to increase plant efficiency, enhance production and to make operations more streamlined and sustainable. With the completion of projects and initiatives and resulting increase in production efficiency, we expect the business to be sustainable for the foreseeable future.

Subsidiaries

Thal Boshoku Pakistan (Private) Limited ("TBPK")

With the increase in volume prices, and product diversification, the business has been able to improve its presence in the market, and the high-quality seats manufactured have been recognized by the customers. The business is also actively involved in new business development and is planning to invest in the expansion of the facility to increase its current capacity and capability.

On the operations side, all customer supplies requirements were met in time with zero defects, and the customers rated the business in the "green zone" throughout the year. Focus remained on improving production efficiency, kaizen and towards providing a healthy and safe working environment to the team members.

Outlook for the future of the business looks challenging due to continued pressure on the local economy. However, the automotive sector has seen a resurgence in demand from the OEMs. In addition, the new OEM entrants have started local production which has created further opportunities to diversify the customer base.

Habib METRO Pakistan (Private) Limited ("HMPL")

The main business of HMPL is to own and manage properties. Thal Limited holds 60% shareholding in HMPL while 40% is held by Metro Cash & Carry International Holding B.V. The Company is exploring various business opportunities to complement the cash & carry retail rental business and to enhance enterprise value from its store locations.

During the quarter, HMPL approved an interim dividend of Rs. 174 million for payment to Thal Limited.

Makro-Habib Pakistan Limited ("MHPL")

Makro Habib Pakistan Limited ("MHPL") is a wholly owned subsidiary of Thal Limited that owns the Makro Saddar Store, which land had been obtained on lease from Army Welfare Trust ("AWT"). The Honorable Supreme Court of Pakistan ("SC") dismissed MHPL's Review Petition for the Saddar store and as a consequence, the Saddar store was closed down on September 11, 2015.

Subsequently, in December 2015 the SC accepted the request of AWT for restoration of its review petition. In the hearing held on February 2, 2016, the Honorable Chief Justice commented while reviewing AWT's review petition, that both MHPL and Ministry of Defense will also get a chance to argue their points on merit as they are respondents in AWT's petition.

AWT's review petition was fixed for hearing on October 17, 2017 before a new bench. However, there were no proceedings during the hearing on account of adjournment filed by counsel representing Shehri & KWSB.

As mentioned above, AWT's review petition is pending adjudication before the SC, however the SC's judgment dated December 18, 2009, directing demolition of the Makro store is still in the field. In compliance with the SC's orders and various notices since received, the business has commenced the demolition of the premises of the Saddar store and is expected to be completed in the near future.

Investment in Power Sector

Sindh Engro Coal Mining Company Limited ("SECMC")

The Company owns 11.9% of the ordinary shareholding in SECMC. SECMC is a joint venture between the Government of Sindh, Thal Limited, Engro Energy Limited, The Hub Power Company Limited, Habib Bank Limited, CMEC Thar Mining Investments Limited and SPI Mengdong. It is engaged in developing Pakistan's first open pit mining project at Thar Coal Block II.

SECMC achieved a commercial operations date for 3.8 million tonnes per annum ("MTPA") capacity mine (Phase I) on July 10, 2019. Phase I of the Thar mining is to supply coal to a 2x330MW power generation plant set up by Engro Powergen Thar (Private) Limited which is already supplying power to the national grid.