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Buxly Paints 9MFY26: Financing Relief Cannot Offset a Weaker Operating Core

Buxly eliminated short-term bank borrowing, but weaker gross margins and a heavier overhead base pushed 9MFY26 into a Rs20.2 million loss.

Sep 20, 2026BUXLShare price, results & dividends

Verdict

Buxly Paints Limited’s 9MFY26 result shows a business that has materially reduced bank-financing pressure but has not repaired its core operating economics. Nine-month sales fell 6.5% to Rs425.1 million, gross margin narrowed to 17.90% from 18.95%, and combined distribution and administrative expenses rose 27.7%. That pushed the paint business from a Rs10.0 million operating surplus before other income to a Rs21.1 million operating loss. Finance cost fell 83.0% and short-term borrowing was fully repaid by March, but those gains were not enough to offset weaker gross profit and a much heavier overhead base. The more important cash-flow lesson is that positive operating cash was supported by a large increase in trade and other payables. Buxly has therefore shifted away from bank debt, but it has not yet demonstrated self-funded operating recovery.

Company Name: Buxly Paints Limited

Ticker: BUXL

Reporting period: Nine months and third quarter ended March 31, 2026

Reporting basis: Standalone company-level unaudited condensed interim financial statements. The filing says they were prepared under approved accounting standards applicable in Pakistan and the Companies Act, 2017; the quarterly package does not contain an external auditor review report.

Alpha QoQ Score: 18.61

TTM Performance Score: 4.5

3Y Business Perf Score: 11.19

Sector Leadership Score: 14.34

These four scores are AlphaGen model outputs, not company-reported figures.

Results at a glance

  • 9MFY26 sales were Rs425.1 million, down 6.5% from Rs454.6 million.
  • Nine-month gross profit fell 11.7% to Rs76.1 million and gross margin declined about 106 basis points to 17.90%.
  • Distribution and selling expense rose 17.4% to Rs52.0 million, while administrative expense rose 42.0% to Rs45.2 million. Combined operating expenses increased 27.7%.
  • The operating result before other income swung from a Rs10.0 million profit to a Rs21.1 million loss.
  • Other income increased to Rs7.3 million from Rs2.7 million, while finance cost fell 83.0% to Rs1.1 million.
  • After Rs5.3 million of levies, Buxly reported a Rs20.2 million nine-month net loss versus a Rs0.4 million profit a year earlier. Loss per share was Rs14.03.
  • Q3 sales fell 4.2% to Rs140.9 million, but gross profit fell 14.0%, taking quarterly gross margin to 16.88% from 18.80%.
  • Net cash generated from operations improved to Rs77.1 million from an Rs11.3 million outflow, but the improvement depended heavily on a Rs126.3 million increase in trade and other payables.
  • Short-term borrowing fell to zero from Rs83.9 million at June 2025, while the current ratio weakened to about 0.93x from 0.97x.

What improved

The clearest improvement is financing. Nine-month finance cost fell to Rs1.1 million from Rs6.2 million, and Q3 finance cost was almost eliminated at only Rs22,000 versus Rs1.6 million a year earlier. The balance sheet explains the direction: Buxly had no short-term borrowing at March 31, compared with Rs83.9 million at June 2025. The cash-flow statement shows the company repaid Rs83.9 million of secured short-term borrowing during the nine months.

This is meaningful because Buxly’s operating margins are thin. When finance expense absorbs less of the income statement, management has more room to convert operating profit into bottom-line earnings. The problem this period is that the core business deteriorated faster than financing costs improved.

Reported operating cash flow also improved sharply. Cash generated from operations after tax and finance payments was Rs77.1 million, compared with an Rs11.3 million outflow in the comparable period. Cash finance payments fell to Rs2.6 million from Rs9.6 million, and the working-capital drag from receivables was smaller than a year earlier.

There was also some relief in inventory discipline. Stock-in-trade at March was Rs82.8 million, broadly flat with June 2025, compared with the much larger inventory build seen in the prior comparable nine-month period. That prevented inventory from becoming another major cash absorber.

What weakened / needs attention

The central weakness is operating margin conversion. Revenue fell 6.5%, but gross profit fell 11.7%, which means the company earned less gross profit from each rupee of sales. Nine-month gross margin declined to 17.90% from 18.95%. The March quarter was weaker still: sales declined 4.2%, gross profit fell 14.0%, and gross margin fell to 16.88% from 18.80%.

Operating expenses then moved in the opposite direction. Distribution and selling expense rose 17.4% over nine months and administrative expense rose 42.0%. Together, they increased by Rs21.1 million while gross profit fell by Rs10.1 million. Economically, that is the main reason the business crossed from operating profit into operating loss before other income.

Q3 makes this even clearer. Combined distribution and administrative costs rose 21.3% to Rs32.3 million on lower sales. The operating result before other income moved from a Rs1.0 million profit to an Rs8.5 million loss. Finance cost relief could not rescue the quarter because the weakness had already occurred at gross profit and overhead level. The quarterly net loss widened to Rs7.7 million from Rs1.6 million.

Why the nine-month loss widened

The nine-month result is not primarily an interest-rate story and it is not dominated by a disclosed exceptional charge. Buxly actually benefited from much lower finance cost. The deterioration came from ordinary operating lines: lower sales, lower gross margin and substantially higher selling and administrative expenditure.

Other income provided some cushion, rising to Rs7.3 million from Rs2.7 million. The related-party note shows rental income involving Berger Paints Pakistan Limited of Rs7.15 million versus Rs2.70 million in the comparable period, which explains most of the reported other-income line. That income is economically separate from selling paint: it is not a disposal gain or a large one-off, but it should not be confused with improvement in the core product margin.

Levies were another pressure point. Buxly recorded Rs5.3 million of levies versus Rs3.9 million a year earlier. The filing does not give a detailed levy bridge, so it would be inappropriate to infer a more specific tax mechanism than the accounts disclose. There was no income-tax charge in the current nine-month statement after the levy line.

Cash flow improved, but the quality is mixed

The cash-flow statement is more encouraging than the profit and loss account, but only after examining where the cash came from. Before working-capital movements, operating cash generation was negative Rs12.3 million, compared with positive Rs12.6 million a year earlier. Trade receivables absorbed Rs22.3 million and inventory absorbed Rs0.6 million.

The decisive offset was trade and other payables, which released Rs126.3 million of cash, more than double the Rs52.6 million contribution in the comparable period. That lifted cash generated from operating activities before tax and finance payments to Rs92.1 million. After tax and finance payments, net operating cash was Rs77.1 million.

This means the headline cash improvement was not driven by stronger underlying earnings. Economically, suppliers and other payables financed a larger part of the working-capital cycle. That is not inherently negative—supplier credit can be an efficient source of financing—but it becomes important when liquidity is already tight and when the operating business is loss-making.

Balance sheet: bank debt down, supplier credit up

At March 31, current assets were Rs447.5 million against current liabilities of Rs483.5 million, giving a current ratio of about 0.93x. That is weaker than roughly 0.97x at June 2025. Trade debts rose 7.2% to Rs293.3 million, cash fell 27.8% to Rs34.0 million, and trade and other payables rose 35.4% to Rs483.1 million.

Short-term borrowing, however, fell from Rs83.9 million to zero. In practical terms, the working-capital funding mix changed materially: bank borrowing was retired, while payables increased by Rs126.3 million. The filing does not disclose which counterparties drove that payable increase, so it should not automatically be attributed to Berger or any individual supplier.

Equity fell 11.0% from June to Rs163.1 million because the accumulated loss increased. Net working capital remained negative. The combination of no bank borrowing but a sub-1x current ratio is therefore important: leverage through banks improved, but the balance sheet still relies heavily on timely collection of receivables and continued supplier/payment terms.

The Berger relationship matters to the economics

Buxly’s business model is unusual for a listed paint company because its notes describe a toll-manufacturing arrangement with Berger Paints Pakistan Limited. Buxly supplies materials, packing and other components, while Berger processes and packs the products for delivery to Buxly or its designated customers. The March filing reports Rs275.3 million of purchases from Berger and Rs32.0 million of toll-manufacturing expense for the nine months.

That arrangement matters when interpreting capacity and utilization. The quarterly report does not disclose Buxly production volume, plant utilization or a unit-volume bridge, and its manufacturing economics are partly embedded in the toll arrangement. It would therefore be misleading to invent a utilization rate or attribute the sales decline to a specific production bottleneck.

The related-party note also records Rs17.5 million of payments for extended credits, up from Rs5.8 million, plus the rental income discussed above. These disclosures reinforce how closely working-capital economics and related-party operating arrangements are connected, while still leaving the exact composition of the closing payable balance undisclosed.

Sector context: the economy improved, but Buxly did not keep pace

Buxly’s November 2025 corporate briefing identified slow GDP growth, slow construction activity and intense competition as key challenges. By the March-quarter report, management again described the paint industry as highly competitive and said it was targeting previously underserved industries and project segments while navigating economic, geopolitical and supply-chain pressures.

The broader macro data are not uniformly weak. Pakistan Bureau of Statistics reported large-scale manufacturing growth of 6.48% during July–March FY2026, while the Pakistan Economic Survey later estimated construction-sector growth of 5.73% for FY2026. Those numbers do not measure Buxly’s addressable paint demand directly, but they make it difficult to explain Buxly’s sales decline simply as a collapse in the overall industrial or construction economy.

Peer evidence points in the same direction, with an important caveat. Berger Paints Pakistan—Buxly’s toll-manufacturing counterparty and a shareholder, not a clean independent peer—reported Q3 FY2026 standalone sales of Rs2.171 billion versus Rs2.144 billion a year earlier, a roughly 1.3% increase, while Buxly’s quarterly sales fell 4.2%. Because the two companies are commercially linked and differ greatly in scale, this is not a like-for-like performance ranking. It does, however, support the conclusion that Buxly’s weakness was not obviously an industry-wide volume collapse.

Input-cost evidence is also mixed. PBS’s March 2026 wholesale-price report showed wholesale chemical prices rising 2.12% month on month. That supports management’s caution about supply-chain and cost pressure, but it cannot be mapped directly to Buxly’s realized raw-material basket. The company does not provide a quantified bridge for pigment, resin, solvent, packaging, freight, FX, pricing or product mix, so any precise attribution of the gross-margin decline would be speculation.

Historical pattern: FY2025 margin recovery has reversed

The current result also weakens the margin improvement Buxly achieved in FY2025. PSX data show FY2025 sales fell 5.8% from FY2024, but gross margin improved to 19.06% from 17.23%. Even with that margin recovery, FY2025 ended in a Rs4.1 million loss because below-gross-profit costs remained heavy.

Nine-month FY2026 gross margin of 17.90% has now moved back below the FY2025 full-year level and below the 18.95% recorded in the comparable nine months. The March quarter at 16.88% is weaker again. That makes cost control and product/customer mix more important than simply restoring a few percentage points of sales growth.

What to monitor next

  • Gross margin: whether the Q3 level of 16.88% recovers toward the prior-year range.
  • Operating expenses: whether distribution and administrative costs can grow more slowly than sales after rising 27.7% over nine months.
  • Receivables and payables: whether cash conversion becomes less dependent on supplier/payable financing.
  • Liquidity: whether the current ratio can move back above 1x while keeping bank borrowing low.
  • Customer and segment expansion: whether management’s push into underserved industries and project business produces measurable revenue growth.
  • Toll-manufacturing economics: whether related-party manufacturing, purchase and credit terms become more or less favorable.
  • Input costs: whether chemicals, freight and other supply-chain costs stabilize enough to protect gross margin.
  • Volume and mix disclosure: whether future filings provide clearer evidence on units, pricing, product mix or segment performance.

Bottom line

Buxly Paints’ 9MFY26 result contains one real balance-sheet achievement: short-term bank borrowing was eliminated and finance cost fell sharply. But the operating business moved the other way. Lower sales, a 106-basis-point decline in nine-month gross margin and a 27.7% increase in operating expenses turned an operating surplus into a loss. Positive cash flow came largely from higher payables rather than stronger pre-working-capital earnings, and liquidity remained below 1x.

The next result cycle therefore has a straightforward test. Buxly needs the financing improvement to persist while gross margin and overhead discipline recover at the same time. If sales growth returns without better margin conversion, or if cash continues to depend on larger payable balances, the business will remain fragile. If management can translate its project and industrial customer strategy into higher revenue while holding the lower bank-debt burden, the earnings structure can improve—but the March result does not yet show that outcome.

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