Karachi: Interloop Ltd. (ILP) revealed a significant downturn in its financial performance for the first quarter of fiscal year 2025, with earnings plummeting by 96% compared to the same period last year. The substantial drop in profitability reflects challenges including shrinking gross margins and escalating costs.

According to AKD Securities Limited, Interloop’s earnings fell to PkR222 million, with earnings per share at PkR0.2, down from PkR6.0 billion and PkR4.3 respectively in the same period last year. The sharp decline was attributed to several factors: the rupee’s devaluation, higher finance costs, and increased taxation following adjustments in the FY25 budget.

Revenues for the quarter increased by 8% year-over-year to PkR41.6 billion, although they showed a 4% quarter-over-quarter decline, largely due to reduced export volumes. The contraction in gross margins to 18.6% from 33.1% was primarily due to a 5% devaluation of the rupee against the dollar and a drop in export prices.

Furthermore, distribution expenses rose by 33% year-over-year to PkR1.8 billion, fueled by an annual increase in export volumes. Administrative expenses also grew by 12% to PkR2.3 billion due to inflationary pressures. The finance cost surged by 29% to PkR2.8 billion, driven by higher borrowing amid increased working capital needs and expansion projects.

Taxation for the quarter stood at PkR648 million, with the effective tax rate reaching 74%, exacerbated by a 2% tax on exports, reflecting the company’s lower profitability.