Synthetic Products Enterprises Limited: performance and outlook

Synthetic Products Enterprises Limited (PSX: SPEL) was incorporated in Pakistan as a private limited company in 1982. The company changed its status into a public limited company in 2008. The principal activity of the company is the manufacturing and sale of plastic auto parts, plastic packaging for food and FMCG industry as well as moulds and dies. Pattern of Shareholding As of June 30, 2025, SPEL has a total of 199. 736 million shares outstanding which are held by 5287 shareholders. Directors, CEO, their spouse and minor children have the majority stake of 58. 78 percent in the company followed by Local general public holding 31. 30 percent shares. Foreign general public accounts for 2. 07 percent shares of SPEL while Modarabas & Mutual funds hold 1. 54 percent shares. The remaining shares are held by other categories of shareholders. Financial Performance (2021-26) Except for a plunge in 2026, the topline of SPEL made positive strides over the period under consideration. Conversely, its bottomline plunged in 2023 and 2026. The margins of the company significantly grew in 2021. In 2022, SPEL’s margins eroded. In 2023, gross margin and operating margin improved while net margin continued to slide. Conversely, in 2024, gross and operating margins plummeted while net margin picked up. SPEL’s margins attained their optimum level in 2025 followed by a downtick in 2026. The detailed performance review of the period under consideration is given below. In 2021, the company initiated its new production facility in Karachi to cater to the demand recovery. As economic activity began to stabilize, topline grew tremendously by 34. 66 percent year-on-year in 2021 which was the result of improved performance in both local and export markets in auto as well as food & packaging division. Rising raw materials cost, fuel and electricity charges as well as elevated repair and maintenance of fixed assets pushed the cost of sales up by 29. 62 percent in 2021, yet gross profit was able to boast 56. 85 percent improvement over last year. GP margin clocked in at 21. 55 percent in 2021 versus 18. 50 percent in the previous year. Operating expense also grew by 12. 46 percent year-on-year in 2021 on the back of inflationary pressure as well as improved sales volume and instigation of a new production facility during the year. Operating profit boasted a stunning 77. 19 percent year-on-year growth in 2021 with OP margin clocking in at 16. 69 percent versus 12. 69 percent in 2020. While SPEL secured increased long-term borrowings to finance various capital expenditures, short-term financing considerably reduced during the year which resulted in 37. 38 percent slippage in finance cost in 2021. The bottomline grew by a striking 77. 82 percent year-on-year in 2021 to clock in at Rs. 460. 24 million with NP margin of 11 percent as against 8. 36 percent in 2020. EPS dropped from Rs. 2. 92 in 2020 to Rs. 2. 30 in 2021 as the company issued 4. 5 percent right shares during the year to finance the setup of its new manufacturing facility. 2022 brought along myriad new challenges for the company. The political and economic instability coupled with increase in the prices of raw materials and imposition of super tax wreaked havoc on the margins of the company. The topline achieved a significant 51. 24 percent rise in 2022 mainly on the back of a fabulous 78 percent growth in auto segment sales. Food and packing division also grew by 40 percent during the year. Inflation, high discount rate, Pak Rupee depreciation and increase in energy tariff and raw material prices drove up the cost of sales in 2022. SPEL attained 38. 49 percent year-on-year rise in its gross profit during 2022, however, GP margin slid to 19. 73 percent during the year. Operating expense posted a massive jump of 36. 55 percent during the year. The main culprits behind the elevated operating expense were the market induced increase in salaries, travelling expense and depreciation on fixed assets. Operating profit expanded by 39 percent year-on-year in 2022, however, OP margin plummeted to 15. 35 percent. Other income grew by 13. 48 percent in 2022 on the back of scrap sales made during the year coupled with amortization of deferred grant and reversal of provisions for doubtful debts. Conversely, other expense grew by 14. 11 percent in 2022 on account of increased provisioning done for WWF and WPFF during the year. Finance cost gave a major hit to the bottomline as it magnified by 122. 85 percent during the year due to high discount rate coupled with a drastic rise in both short-term and long-term borrowings during the year. The imposition of super tax further squeezed the bottomline growth. SPEL’s net profit grew by 17. 10 percent to clock in at Rs. 538. 93 million in 2022. NP margin dropped to 8. 54 percent while EPS clocked in at Rs. 2. 7 during 2022. In 2023, the auto segment sales came under pressure owing to import restrictions. Hence, the company focused on its food and packaging segment and was able to muster 1. 94 percent year-on-year growth in topline in 2023. During the year, SPEL faced increased raw material prices, currency depreciation and exorbitant fuel and energy prices; however, its ability to invest in technology up-gradation and automation as well as renewable energy restricted its cost of sales. Gross profit rebounded by 5. 52 percent in 2023 with GP margin mounting to 20. 42 percent. Administrative and selling expense also collectively grew by 12. 52 percent in 2023 mainly on account of heightened payroll expense, travelling expense as well as advertisement expense incurred during the year. It is to be noted that the company considerably streamlined its workforce to 550 employees in 2023 from 653 employees in the previous year. Operating profit marched up by 3. 52 percent in 2023 with a marginal uptick in OP margin which stood at 15. 58 percent. Other income built up by 26. 17 percent in 2023 due to hefty profit earned on bank deposits as well as amortization of deferred grant. Other expense escalated by 10. 97 percent in 2023 mainly on account of higher profit related provisioning. Finance cost spiraled by 31. 71 percent in 2023 due to unprecedented level of discount rate as well as higher short-term borrowings. Towering finance cost coupled with the retrospective imposition of 10 percent super tax translated into 8. 87 percent thinner bottomline in 2023. SPEL’s net profit stood at Rs. 491. 097 million in 2023 with EPS of Rs. 2. 47 and NP margin of 7. 64 percent. In 2024, SPEL’s net sales grew by 8. 31 percent. This mainly came on the back of local sales which grew by 5. 17 percent to clock in at Rs. 6. 71 billion in 2024. During the year, the company also enhanced its footprint in the international market. This led to 392 percent growth in export sales which clocked in at Rs. 256 million in 2024. In terms of segment, FMCG sector contributed 78. 43 percent to the total sales mix of SPEL in 2024 versus 77. 61 percent contribution in 2023. Auto sector contributed 21. 57 percent to the total revenue of SPEL in 2024, down from its share of 22. 39 percent in 2023. Cost of sales grew by 10. 26 percent in 2024 due to massive hike in electricity, fuel and water charges. This was despite the fact that the company added 1. 32 MW of solar power to its operations. Gross profit inched up by only 0. 67 percent in 2024 with GP margin dropping to 18. 98 percent. Operating expense escalated by 23. 48 percent in 2024 due to a spike in directors’ remuneration, payroll expense, travelling expense, fee & subscription charges as well as advertisement & sales promotion expense incurred during the year. SPEL streamlined its workforce from 550 employees in 2023 to 539 employees in 2024. Operating profit eroded by 6. 41 percent in 2024 with OP margin falling down to 13. 47 percent. Other income posted a staggering 206. 54 percent growth in 2024 due to gain recognized on the disposal of property, plant & equipment coupled with greater profit on bank deposits. Other expense rose by 20. 12 percent in 2024 due to increased profit related provisioning, higher ECL charge for the year as well as loss incurred on foreign currency transactions. Finance cost slid by 1. 63 percent in 2024 due to a considerable decline in outstanding borrowings. This resulted in gearing ratio of 17 percent in 2024 versus gearing ratio of 20. 76 percent recorded in 2023. Net profit strengthened by 30. 52 percent to clock in at Rs. 640. 97 million in 2024. This translated into EPS of Rs. 3. 36 and NP margin of 9. 2 percent. In 2025, SPEL’s net sales posted a staggering 38. 31 percent year-on-year growth to clock in at Rs. 9633. 22 million. This came on the back of an increasing customer base, exponential growth in export sales particularly to the UK region as well as improved indigenous politico-economic backdrop providing strong impetus to local sales. Food & personal care products packaging continued to grab the greatest share of the company’s sales mix by yielding Rs. 7623. 79 million in sales in 2025, up 39. 56 percent year-on-year. Cost of sales surged by 24. 85 percent in 2025. Improved sales volume, shift to solar energy, better absorption of fixed cost due to high capacity utilization and shift of export shipments from air to sea routes resulted in 95. 75 percent growth in gross profit in 2025. GP margin also jumped up to 26. 86 percent in 2025. Operating expense escalated by 27. 65 percent in 2025 due to increased payroll expense, travelling expense, fee & subscription charges as well as advertisement & promotion expense incurred during the year. Operating profit registered 120. 19 percent enhancement in 2025 with OP margin clocking in at 21. 44 percent. Other income rose by 25 percent in 2025 mainly due to gain on foreign currency transactions. Other income was nearly offset by 120. 92 percent spike in other expense in 2025 which came on the back of greater provisioning done for WWF, WPPF and ECL as well as loss incurred on the disposal of fixed assets during the year. Finance cost tumbled by 4. 30 percent in 2025 due to monetary easing and lesser outstanding liabilities at the end of the year. Net profit increased by 95. 50 percent to clock in at Rs. 1253. 12 million in 2025. This translated into EPS of Rs. 6. 60 and NP margin of 13 percent in 2025. Recent Performance (2026) In 2026, SPEL’s net sales tapered off by 2. 33 percent to clock in at Rs. 9408. 87 million. This was due to demand destruction in the local market on the back of ongoing crisis in the Middle Eastern region which took its toll on the cost of essential raw materials. This also resulted in 4. 51 percent diminution in gross profit in 2026 with GP margin slightly dropping to 26. 27 percent. Operating expense surged by 12. 89 percent in 2026 due to inflationary pressure and spike in fuel prices in the later part of the year due to geopolitical tensions. Operating profit deteriorated by 6. 24 percent in 2026 with OP margin falling down to 20. 58 percent. Lesser provisioning done for WWF and WPPF appears to be the cause of 17. 31 percent lesser other expense incurred in 2026. Other income also deteriorated by 35. 95 percent in 2026 likely due to thinner gain on foreign currency transactions. Monetary easing for the major part of the year resulted in 36. 18 percent decline in finance cost in 2026 despite massive increase in short-term borrowings. SPEL registered net profit of Rs. 1136. 32 million in 2026, down 9. 32 percent year-on-year. This translated into EPS of Rs. 5. 99 and NP margin of 12 percent in 2026. Future Outlook SPEL plans to explore new export markets and undertake product innovation to diversify its sales mix. This coupled with demand recovery from FMCG and auto sectors in the home market will provide further growth momentum. Operational excellence, technological advancements and enhanced focus on the usage of renewable energy will result in cost optimization and improved margins.

Read full story on Business Recorder