Corporate results: K-Electric’s three-month profit surges to over Rs12 billion

Company reports earnings of Rs12.45b during Oct-Dec, up 23% YoY.

KARACHI:

Beating market expectations, K-Electric boosted its net earnings by one-fifth to more than Rs12 billion during the quarter ended December 31, the company’s financial results revealed on Tuesday.

The company reported a net profit of Rs12.45 billion or Rs0.45 per share in the October-December quarter of 2015, up 23% compared to Rs10.13 billion or Rs0.37 per share it earned in the same quarter of 2014.

The result was above street consensus, say market analysts.

Following the results, KE’s share price ended Rs0.08 or 1.18% higher to close at Rs6.82 at the end of trade on Tuesday, with as many as 17,331,000 shares changing hands.

“We believe the company’s efforts to reduce Transmission & Distribution (T&D) losses, like installation of Aerial Bundled Cables (ABC) in high loss areas, are paying off which allows for greater sale of electricity,” Topline Securities said in a report.

The company’s sales for the quarter under review clocked in at Rs40.35 billion, up 22% compared to Rs33 billion of the corresponding period of 2014.

Topline Securities further said that lower cost of furnace oil - whose average prices declined 46% in the quarter following a slump in international oil prices - resulted in 57% year-on-year drop in tariff adjustment to Rs5.1 billion, the report said. The utility company was able to purchase electricity from the grid at a cheaper rate owing to fall in power tariff because of declining fuel costs, which is why electricity purchases dropped 18% Y-o-Y to Rs14 billion, it added.

However, despite a falling trend in fuel costs, consumption of fuel increased by 9% to Rs12.8 billion, the report said. “We believe this is due to a tilt towards relatively more expensive fuel mix in the second quarter,” it added noting the fuel consumption fell by 11% to Rs29.6 billion during July-December period of the year.

“Due to aforementioned reasons, KE’s gross profit improved 11% Y-o-Y to Rs13.3 billion in the in the second quarter of fiscal year 2016,” the analyst report said. A 53% YoY reduction in finance cost, which amounted to Rs1.3 billion added support to the bottom-line, it added - the company paid off relatively expensive foreign and local currency loans by issuing ‘Azm Sukuk’ last year at cheaper rates, which attributed to drop in finance cost.

The company recognised a tax benefit of Rs6.8 billion, which accounted for approximately 55% of the company’s profit for the quarter under review, the report said.

Published in The Express Tribune, February 24^th, 2016.

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