Karachi: Sazgar Engineering Works (SAZEW) reported a significant increase in its fiscal year 2025 earnings, with profits reaching Rs16.3 billion, marking a 2.06 times growth year-over-year. However, the results fell short of industry expectations due to lower-than-anticipated gross margins.
During the fourth quarter of FY25, SAZEW recorded a profit of Rs3.5 billion, with earnings per share (EPS) of Rs57.58, remaining relatively unchanged year-over-year but down 44% quarter-over-quarter. The gross margin decreased to 25.1% from 29.1% in the same quarter of the previous year and 32.6% in the preceding quarter, impacting the overall annual gross margin, which stood at 29.1%.
In conjunction with the financial results, the company declared a dividend of Rs20 per share for the fourth quarter, bringing the total dividend for FY25 to Rs52 per share, reflecting a payout ratio of 18%.
Net sales for the fourth quarter surged 18% year-over-year to Rs27.3 billion but experienced a 26% decline quarter-over-quarter. This trend was primarily driven by the performance of the four-wheeler segment, which saw a 28% increase year-over-year but a 24% decrease quarter-over-quarter. Similarly, three-wheeler sales rose 25% year-over-year but declined 24% quarter-over-quarter.
The company noted a 16% year-over-year increase in distribution expenses, although these fell by 15% quarter-over-quarter. Administrative and other expenses decreased both year-over-year and quarter-over-quarter. Other income declined 33% year-over-year but showed a 7% increase quarter-over-quarter.
Sazgar Engineering's effective tax rate for the fourth quarter was 39%, consistent with the previous quarter but slightly lower than the 40% recorded in the fourth quarter of the previous fiscal year.
In a strategic move, the company's board announced the discontinuation of its Home Appliances business effective September 1, 2025, to concentrate on its core, profitable segments. This decision is not expected to affect the company's net sales or profitability.
SAZEW is currently trading at a projected price-to-earnings ratio of 5.4 for FY26 and 7.2 for FY27.