Shezan International Limited closed FY2026 with a genuinely stronger earnings profile: modest revenue growth translated into much faster growth in gross profit, operating profit and net income. The central positive is margin recovery, not a sudden acceleration in the top line. The central caution is equally clear: reported profit did not convert into cash, because receivables and inventories rose while supplier financing fell.
Results at a glance
The audited company financial statements cover the year ended 30 June 2026 and are presented in Pakistani rupees. Net revenue rose 4.9% to Rs9.634 billion from Rs9.183 billion. Gross profit increased 20.0% to Rs2.701 billion as cost of revenue was essentially flat at Rs6.933 billion. Gross margin therefore expanded to 28.04% from 24.52%, an improvement of about 352 basis points.
Issuer-defined operating profit rose 58.1% to Rs661.7 million from Rs418.4 million, lifting the operating margin to 6.87% from 4.56%. This is the operating-profit line reported in the audited statement after distribution, administrative and other operating expenses. It should not be confused with a calculated subtotal that excludes some of those costs.
Profit before levy and taxation almost doubled to Rs565.7 million from Rs285.9 million. After a Rs123.3 million levy and Rs87.8 million of taxation, profit for the year reached Rs354.6 million, up 117.5%. Earnings per share increased to Rs36.69 from Rs16.87. The company’s six-year review shows a dividend of Rs13.50 per share for FY2026, compared with Rs7.00 for FY2025.
The fourth quarter was strong, although Shezan did not publish it as a separate audited period. Subtracting the published nine-month numbers from the audited full year gives Q4 revenue of about Rs3.129 billion, up 2.5% year on year; gross profit of Rs965.8 million, up 15.7%; operating profit of Rs350.6 million, up 47.2%; and profit after tax of Rs216.4 million, up 35.1%. The derived Q4 gross margin was 30.87% versus 27.35%, while the operating margin was 11.20% versus 7.81%.
AlphaGen model readings
The four approved AlphaGen model outputs for this period are: Alpha QoQ Score 99.55; TTM Performance Score 99.55; 3Y Business Perf Score 93.29; and Sector Leadership Score 60.98. These are AlphaGen model scores, not figures reported by Shezan and not investment recommendations.
What improved
Gross profit did most of the heavy lifting. Revenue added Rs451.5 million, but gross profit added Rs449.6 million because cost of revenue was almost unchanged. That arithmetic explains the 352-basis-point gross-margin gain. Management says improved sales volumes, stronger distributor and customer relationships, better product availability, procurement discipline and tighter coordination across production, sales and supply-chain functions supported the result.
The full-year result also shows that the improvement survived the peak selling season. Shezan had described the April–June period as its seasonal high point. On the derived Q4 numbers, revenue grew only 2.5%, yet gross profit rose 15.7% and operating profit rose 47.2%. This suggests that product economics and cost control mattered more than volume alone. The filing does not disclose a clean price, volume and mix bridge, so the precise contribution of each cannot be quantified.
Operating leverage was positive even after higher selling and administrative spending. Distribution expense increased 9.5% to Rs1.372 billion and administrative expense rose 16.9% to Rs502.9 million, but gross-profit growth was large enough to absorb both. Other operating expense rose 9.4% to Rs164.5 million. The net result was a Rs243.3 million increase in reported operating profit.
Below operating profit, other income increased to Rs87.6 million from Rs57.5 million, while finance cost eased to Rs183.6 million from Rs190.0 million. Management attributes the financing improvement to a better interest-rate environment, prudent financial management and attention to working capital. The reduction was useful, but it was small relative to the operating-profit uplift; the recovery was fundamentally operational.
The levy and tax presentation matters. Profit before levy and taxation was Rs565.7 million. The levy absorbed Rs123.3 million, leaving Rs442.4 million before income tax; taxation then consumed Rs87.8 million. Combined levy and tax equalled about 37.3% of pre-levy profit, down from about 43.0% in FY2025. The tax line was unusually low in the prior year, so the doubling of net profit should be read alongside the cleaner 58% rise in operating profit.
What weakened / needs attention
Cash conversion was the weak point. Operating profit before working-capital changes improved to Rs1.006 billion from Rs729.2 million, but working capital absorbed Rs729.1 million. Stock-in-trade used Rs141.8 million, trade receivables used Rs151.7 million, loans and advances used Rs137.0 million, and lower trade and other payables used another Rs262.4 million. After finance costs, tax, levy and other operating payments, net cash used in operations was Rs183.4 million, compared with Rs423.1 million generated a year earlier.
The balance sheet confirms that pressure. Inventory rose 8.2% to Rs1.876 billion and trade receivables rose 23.3% to Rs672.2 million. At the same time, trade and other payables fell 16.1% to Rs1.158 billion. Those movements are not automatically signs of poor-quality earnings—seasonality, procurement and supplier settlements can move them—but they explain why FY2026 accounting profit did not arrive as operating cash.
Capital expenditure added another call on liquidity. Shezan spent Rs209.6 million on property, plant and equipment and received Rs31.2 million from asset disposals, producing net investing outflow of Rs178.4 million. With both operating and investing cash flows negative, the company relied on Rs300.1 million of net financing inflow. Cash and bank balances consequently declined to Rs101.2 million from Rs162.8 million.
Interest-bearing and lease obligations increased. Short-term borrowings rose to Rs1.213 billion from Rs1.015 billion; long-term loans were Rs33.3 million; lease liabilities were Rs38.8 million; and the current portion of non-current liabilities increased to Rs153.6 million. Together, these items were about Rs1.439 billion, versus roughly Rs1.071 billion a year earlier. Equity still grew 18.5% to Rs1.866 billion, and current assets of Rs3.440 billion exceeded current liabilities of roughly Rs2.676 billion, so the immediate issue is cash discipline rather than an accounting solvency deficit.
The Q4 profit comparison also needs care. The derived quarter included an income-tax benefit because full-year tax expense was lower than the amount recorded through nine months. The prior-year derived Q4 also contained a larger tax benefit. That makes operating profit and pre-levy profit better gauges of the quarter’s underlying improvement than net income alone.
A recovery from the FY2024 trough
The longer view is encouraging but still cyclical. Revenue moved from Rs8.155 billion in FY2024 to Rs9.183 billion in FY2025 and Rs9.634 billion in FY2026. Profit after tax moved from a Rs462.8 million loss in FY2024 to Rs163.1 million profit in FY2025 and Rs354.6 million in FY2026. Gross margin recovered from 19.75% in FY2024 to 24.52% and then 28.04%. Two consecutive years of improvement make the turnaround more credible, but the FY2026 cash-flow reversal argues against treating the new earnings level as fully de-risked.
Management’s explanation is broadly consistent with the financial statements. It says the company focused on cost rationalisation, stronger distribution, improved availability and procurement efficiency, while maintaining domestic and export-market development. It also identifies sugar, fruit pulp, packaging, energy, freight and agricultural supply as continuing cost risks. Those are company-stated risk factors; the accounts do not provide enough detail to assign the margin gain to any single commodity or geography.
What to monitor next
First, gross-margin durability. FY2026’s 28.04% margin and the derived Q4 margin above 30% were the core earnings drivers. A useful next result should show whether those gains persist after the seasonal peak and whether procurement discipline can offset sugar, fruit-pulp, packaging, freight and energy volatility.
Second, working-capital normalisation. Receivables, inventory and reduced payables drove the operating cash deficit. The next balance sheet should show whether collections improve, inventory growth moderates and supplier balances stabilise without hurting production. Positive earnings with another large operating cash outflow would materially weaken the quality of the recovery.
Third, debt and finance cost. Finance cost edged lower despite higher year-end borrowings, which helped earnings. That benefit will be durable only if short-term borrowing stops rising or interest rates fall enough to offset a larger funding base.
Fourth, the balance between domestic execution and exports. Management says distribution reach, product availability and selective international expansion remain priorities. The annual report does not disclose a sufficiently granular current-year price-volume-mix or geographic profit bridge, so future revenue growth should be tested against margins and cash rather than taken at face value.
Finally, capital efficiency. The company refers to a planned solar installation at the Lahore facility and continued operational improvements. These initiatives may lower energy intensity over time, but the next disclosures should be checked for actual spending, commissioning progress and measurable savings rather than assumed benefits.
Verdict
FY2026 was Shezan’s strongest earnings year since the FY2024 loss: margins rebuilt, operating profit rose 58%, pre-levy profit nearly doubled, and EPS more than doubled. The result passes the core quality test because the audited annual statement, the interim comparator and the arithmetic reconcile. The limitation is cash conversion. Until working capital releases cash and borrowing growth moderates, the appropriate conclusion is a strong margin-led recovery with a meaningful balance-sheet watchpoint—not a complete all-clear.
Sources and calculation notes
Primary sources: PSX FY2026 financial-result notice; Shezan FY2026 annual report; Shezan nine-month FY2026 report; and the issuer investor-information page.
All rupee figures are taken from the issuer’s audited FY2026 statements unless stated otherwise. Growth rates and margins are calculated from reported figures. Q4 figures are derived as audited FY2026 minus the published unaudited nine-month period ended 31 March 2026; rounding may create small differences. No standalone quarterly cash-flow statement was used.