Verdict
Leiner Pak Gelatine Limited’s audited year ended 30 June 2026 was a near break-even result, not a healthy earnings year. Net sales were almost unchanged at PKR 1.626 billion, but gross profit fell 28.8% to PKR 194.53 million as production costs absorbed more of each sales rupee. Profit after tax collapsed to PKR 0.29 million from PKR 15.82 million, leaving earnings of only PKR 0.04 per share.
The most important issue is liquidity rather than the tiny accounting profit. Operating activities used PKR 47.01 million of cash, short-term borrowings rose, and the auditor highlighted a material uncertainty that may cast significant doubt on the company’s ability to continue as a going concern. The audit opinion itself was unmodified, but the going-concern paragraph is a decision-relevant warning and should not be treated as boilerplate.
There are offsets. Sales held up, local revenue grew, finance cost declined, inventory fell, the company retained overseas customers, and management says confirmed export orders remain in hand. Directors and sponsors also provided interest-free funding. These supports buy time, but a durable improvement requires better plant utilisation, recovery in gross margin and operating cash flow that is positive after interest and taxes.
Results at a glance
- Reporting basis: audited financial statements of Leiner Pak Gelatine Limited for the year ended 30 June 2026, presented in Pakistan rupees.
- Net sales: PKR 1.626 billion, down 0.1% from PKR 1.629 billion.
- Gross profit: PKR 194.53 million, down 28.8% from PKR 273.32 million.
- Gross margin: 12.0%, down from 16.8%, a contraction of about 4.8 percentage points.
- Calculated operating subtotal: PKR 65.27 million versus PKR 111.30 million, down 41.4%. This is calculated from disclosed operating lines and is not a separately reported subtotal.
- Finance cost: PKR 56.52 million, down 23.0% from PKR 73.43 million.
- Profit after tax: PKR 0.29 million versus PKR 15.82 million, down 98.1%.
- EPS: PKR 0.04 versus PKR 2.11.
- Dividend: none.
- Net operating cash flow: PKR 47.01 million outflow versus PKR 1.94 million inflow.
- Auditor: unmodified opinion, with a material-uncertainty paragraph related to going concern.
AlphaGen model scores
These are AlphaGen model outputs, not company-reported figures: Alpha QoQ Score 9.92; TTM Performance Score 5.31; 3Y Business Perf Score 12.99; Sector Leadership Score 20.88.
What improved
Revenue stability was the clearest positive. Total sales slipped by only PKR 2.18 million despite management describing difficult export markets, geopolitical disruption and cautious inventory management by overseas buyers. Local sales increased 7.8% to PKR 754.79 million, partly offsetting a 6.1% decline in export sales to PKR 871.65 million.
The mix also broadened modestly. Gelatine remained the core product at 71.85% of revenue, while di-calcium phosphate contributed 26.78% and ossein 1.37%. Ossein generated sales in FY2026 after contributing nothing in the prior-year product split. This diversification is small, but it provides an additional outlet from the bone-processing chain.
Finance cost declined by PKR 16.91 million to PKR 56.52 million. The reduction helped cushion the operating deterioration, although finance charges still consumed 86.6% of the calculated operating subtotal. That ratio shows why lower funding cost alone cannot restore a meaningful bottom line while margins remain compressed.
Inventory declined to PKR 874.54 million from PKR 906.47 million. Within cost of sales, raw material consumed fell to PKR 846.50 million from PKR 1.024 billion. Management also points to retained overseas customers and confirmed purchase orders as support for the going-concern basis. These are useful signs, but the financial statements do not quantify the timing, value or profitability of those orders.
What weakened / needs attention
The core weakness was gross margin. Cost of sales rose 5.7% to PKR 1.432 billion even though revenue was flat. Fuel and power increased to PKR 366.32 million from PKR 342.14 million, while salaries and wages within production also rose. Management attributes the squeeze to higher energy, logistics and raw-material prices, including crushed animal bones purchased at export-parity rates. The filing does not provide a price-volume-cost bridge, so the exact contribution of each driver cannot be separated.
Production data are consistent with the margin pressure. Gelatine output fell 38.1% to 532 metric tons, only 26.6% of the plant’s estimated 2,000-ton capacity. Di-calcium phosphate production fell 15.3% to 3,018 tons, or 33.5% of 9,000-ton capacity. Management cites demand conditions, the energy crisis and exports of crushed bone from Pakistan as reasons for under-utilisation. Lower throughput can leave fixed manufacturing costs spread over fewer units.
The final quarter was particularly weak. The annual figures less the reported nine-month cumulative data imply June-quarter sales of about PKR 590.69 million, gross profit of PKR 27.82 million and a net loss of PKR 4.83 million. The implied gross margin was only 4.7%, compared with 17.7% in the March quarter. This arithmetic is reproducible from the annual and nine-month statements, but it should be read as an implied discrete quarter rather than a separately published quarterly result.
Other income also deserves scrutiny. It rose to PKR 20.02 million, of which PKR 19.85 million came from liabilities no longer required being written back. Without this non-operating support, the calculated operating cushion would have been materially smaller. The write-back is recognised income, but it is not a recurring sales or manufacturing driver.
Tax presentation further explains the near-zero bottom line. Profit before minimum tax and income tax was PKR 8.74 million. Minimum tax of PKR 15.64 million pushed the result to a PKR 6.89 million loss before income tax. A net income-tax credit of PKR 7.19 million, driven by deferred tax, then produced the final PKR 0.29 million profit. The reported profit therefore depends on tax accounting as well as operating performance.
Cash flow and working capital
Cash generated before interest and statutory payments was PKR 65.44 million, down from PKR 133.20 million. After PKR 52.19 million of finance cost paid and PKR 56.29 million of levies and taxes, operating cash flow turned negative by PKR 47.01 million. Capital expenditure of PKR 24.00 million increased the cash requirement further.
Working-capital movements show where pressure accumulated. Trade debts rose 96.3% to PKR 272.78 million and advances almost tripled to PKR 179.82 million. Stores and spares increased by PKR 67.62 million. These outflows were partly financed by a PKR 278.54 million increase in trade and other payables, while stock-in-trade released PKR 31.93 million.
Receivable concentration is significant. An associated Malaysian company accounted for 52.47% of total sales and PKR 236.73 million of year-end trade debts. Another named Pakistani customer accounted for 8.95% of sales. Together, the two represented 61.42% of annual revenue. The Malaysian associated company also had a PKR 273.18 million contract liability for advance receipts, which partly offsets the relationship’s funding exposure but does not remove concentration risk.
Inventory remains the largest operating asset and was identified as a key audit matter. At PKR 874.54 million, stock-in-trade represented 34.5% of total assets. The auditor focused on existence and valuation because allocation of factory overhead and estimates of net realisable value can materially affect the reported amount.
Balance sheet and funding
Current assets were PKR 1.531 billion and current liabilities PKR 1.418 billion, giving a narrow current ratio of about 1.08 times. Cash was only PKR 11.52 million. That means headline current-asset coverage depends heavily on converting inventory, receivables and advances into cash on time.
Total borrowing increased to PKR 503.33 million from PKR 422.06 million. Net debt reached PKR 491.81 million and the company’s disclosed gearing ratio rose to 30.66% from 27.01%. Short-term secured finance included running finance, export refinance and a new PKR 49.80 million Istisna-cum-Wakala balance.
Directors and close relatives supplied PKR 27.88 million of additional interest-free short-term loans, taking that balance to PKR 83.90 million. A separate PKR 82.50 million interest-free sponsor loan remained classified within equity and is repayable at the company’s discretion. Management says sponsors have committed further funds if required. This support reduces immediate funding stress, but it also shows that operations are not yet self-financing.
What to monitor next
First, gross margin needs to recover without relying on liability write-backs or deferred-tax credits. The most useful evidence will be lower energy and raw-material cost per unit, higher production volume and an operating subtotal that covers finance cost with room to spare.
Second, cash conversion matters more than a marginal accounting profit. Watch trade debts, advances, related-party balances and whether trade payables keep growing. Positive cash generated before finance cost is insufficient if interest and taxes continue to turn the final operating cash flow negative.
Third, capacity utilisation is a practical test of the recovery story. Gelatine utilisation of 26.6% and DCP utilisation of 33.5% leave substantial headroom, but unused capacity only creates value when profitable orders and reliable raw-material supply are available.
Fourth, export quality matters as much as export volume. Malaysia generated 52.56% of geographic sales and the associated customer dominated both revenue and receivables. A broader customer base, timely collections and disclosed repeat orders would make the overseas demand claim more resilient.
Finally, the going-concern uncertainty must be resolved through recurring cash generation, not merely sponsor support. The next annual or interim filing should be checked for positive operating cash flow after finance cost and taxes, lower short-term borrowing, improved liquidity and whether the auditor retains or removes the material-uncertainty paragraph.
Evidence coverage and limitations
The official audited annual report establishes the company, period, reporting basis, audit opinion, financial statements, capacity, customer concentration and management’s stated drivers. The report does not quantify sales price, product mix and input-cost effects separately, and it does not disclose the value or delivery schedule of confirmed export orders. Those conclusions are therefore limited to the arithmetic transmission visible in the statements. The implied final-quarter figures are calculated from published cumulative periods and are labelled accordingly.
Primary sources
• Leiner Pak Gelatine FY2026 audited annual report (PSX).
• Leiner Pak Gelatine annual reports page.
• Leiner Pak Gelatine company profile (PSX).
• PSX-linked FY2026 filing summary.
This article analyses reported results and does not provide investment advice.