Air Link Communication Limited (PSX: AIRLINK) reported a 44.6% decrease in its profit after tax for the first quarter of FY25, earning Rs351.76 million [EPS: Rs0.89] compared to Rs634.83 million [EPS: Rs1.66] in the same period last year (SPLY). The company faced increased expenses that weighed heavily on its profitability, despite cost-cutting efforts in other areas.
Revenue and Gross Profit
The company’s revenue fell 6.9% year-over-year to Rs13.14 billion in Q1 FY25, down from Rs14.12 billion in SPLY. However, a 7.5% reduction in the cost of sales helped improve the gross profit, which rose slightly by 0.4% to Rs1.11 billion, boosting gross margins from 7.8% in SPLY to 8.4% in Q1 FY25.
| Metric | Q1 FY25 vs. Q1 FY24 |
|---|---|
| Revenue | Rs13,138,457 vs. Rs14,115,311 |
| Gross Profit | Rs1,109,857 vs. Rs1,105,253 |
| Gross Margin | 8.4% vs. 7.8% |
Significant Increase in Other Income
Other income surged by 473.0%, reaching Rs85.03 million in Q1 FY25 compared to Rs14.84 million in SPLY. This increase provided some relief against the rising operational expenses but could not fully offset the impact on net profit.
| Metric | Q1 FY25 vs. Q1 FY24 |
|---|---|
| Other Income | Rs85,026 vs. Rs14,838 |
Rising Operational Expenses and Finance Cost
Air Link’s administrative expenses increased by 30.3% to Rs264.02 million, while selling and distribution expenses saw a sharp rise of 95.6% to Rs92.46 million. Additionally, other operating expenses rose to Rs32.09 million, further pressuring overall profitability.
The company’s finance cost increased by 73.1% to Rs347.87 million, driven primarily by higher interest rates, which amplified the impact of rising expenses on profits.
| Metric | Q1 FY25 vs. Q1 FY24 |
|---|---|
| Administrative Expenses | Rs264,019 vs. Rs202,620 |
| Selling and Distribution Expenses | Rs92,460 vs. Rs47,263 |
| Finance Cost | Rs347,866 vs. Rs200,938 |
Taxation and Effective Tax Rate
The company faced a substantial increase in tax expenses, paying Rs106.68 million in Q1 FY25 as compared to Rs34.44 million in SPLY, an increase of 209.8%. This resulted in a higher effective tax rate of 23.3% compared to just 5.1% in the previous year.
| Metric | Q1 FY25 vs. Q1 FY24 |
|---|---|
| Taxation | Rs106,684 vs. Rs34,440 |
| Effective Tax Rate | 23.3% vs. 5.1% |
Conclusion: Profitability Pressured by Rising Costs and Taxation
Air Link Communication Limited’s financial performance in Q1 FY25 reflects a challenging environment marked by falling revenue, significantly higher operational costs, and increased tax expenses. While a boost in other income provided temporary relief, the company’s future profitability may depend on managing expenses and mitigating the impact of higher finance costs.
