Treet Battery Limited (TBL) has delivered a notable turnaround in its financial performance for the half-year ended December 31, 2025, reporting a profit after tax of PKR 19.46 million compared to a substantial loss in the prior year. This return to the black, particularly strong in the second quarter, was primarily driven by improved gross margins and a sharp reduction in finance costs, offering a glimmer of hope to investors. However, the results also reveal a continued decline in revenue and a significant negative shift in operating cash flows, raising questions about the sustainability of this recovery.
Financial Performance
Revenue for the half-year declined by approximately 16% year-on-year, settling at PKR 3.52 billion compared to PKR 4.20 billion in the same period last year. The second quarter also saw a revenue dip of about 10.6% compared to the prior year's quarter, indicating a challenging sales environment for the company.
Despite lower sales, TBL achieved a significant improvement in its gross profit margin, which rose to 22.17% for the half-year from 20.45% previously. This positive trend was even more pronounced in the second quarter, where gross margin impressively reached 29.38% compared to 20.93% in the corresponding quarter last year. This suggests effective cost management or a favorable shift in product mix.
However, profit from operations for the half-year decreased by 30% to PKR 276.85 million, primarily due to increased selling, administrative, and other operating expenses. The most impactful change was a substantial 53% reduction in finance costs for the half-year, from PKR 555 million to PKR 261 million. This drastic cut in borrowing expenses was crucial in swinging the company from a pre-tax loss of PKR 141.79 million last year to a pre-tax profit of PKR 19.74 million this year.
Consequently, TBL reported a net profit of PKR 19.46 million, translating to an Earnings Per Share (EPS) of PKR 0.02, a stark contrast to the loss of PKR 142.09 million (EPS of -PKR 0.16) in the same period last year. Notably, the second quarter alone contributed PKR 137.45 million to the profit, showing strong momentum towards the end of the half-year.
On the balance sheet, total assets saw a slight increase. However, short-term borrowings increased by approximately 12% or PKR 675 million since June 2025, reaching PKR 6.22 billion. This indicates a continued reliance on debt. A major concern arises from the cash flow statement: operating activities generated a significant negative cash flow of PKR 1.01 billion, a deterioration from a positive PKR 205 million last year. This was largely due to a substantial increase in inventory and trade receivables, coupled with a reduction in trade payables. The positive cash balance at period-end was largely supported by a PKR 670 million loan from a director and new short-term borrowings.
Key Drivers & Segments
The primary drivers for TBL's return to profitability were:
- A sharp reduction in finance costs, likely due to lower interest rates or successful debt restructuring efforts.
- Improved gross margins, suggesting effective cost control measures or a favorable shift in product pricing/mix within the battery segment, despite declining revenue.
The significant increase in inventory (PKR 542 million) and trade receivables (PKR 182 million), alongside a decrease in trade payables (PKR 593 million), indicates a strategic decision to build stock or extend credit, which has, however, negatively impacted operating cash flow.
Management Actions & Strategic Signals
The increase in short-term borrowings and the substantial loan from a director (PKR 670 million) highlight the company's ongoing need for working capital and liquidity management. Capital expenditure saw an increase to PKR 51 million for the half-year, indicating some level of investment in property, plant, and equipment.
The company did not announce any cash dividend, bonus shares, or right shares for the period. This reflects a continued focus on retaining earnings for operations, debt servicing, or strengthening the balance sheet rather than immediate shareholder payouts.
Investor Takeaway
The return to profitability and positive EPS are encouraging signals for TBL, particularly the strong performance in the second quarter. The improved gross margins and significantly reduced finance costs are key positives that suggest operational efficiencies and better financial management.
However, investors should closely monitor revenue trends, as the continued decline is a concern. The significant negative operating cash flow, largely funded by increased debt and a director's loan, indicates underlying liquidity pressures that need to be addressed for sustainable growth. While finance costs are down, the overall increase in short-term borrowings remains a critical factor. Future interest rate movements and the company's ability to manage its debt profile will be crucial.
Future quarters will need to demonstrate sustained revenue growth, improved operating cash flow, and continued prudent debt management to solidify this turnaround. The absence of dividends suggests a focus on strengthening the balance sheet, which is a rational step given the current financial dynamics.