Corporate earnings: Profits grow all around

Habib Bank profit beats expectations, Nishat Mills profit doubles.

Habib Bank profit beats expectations

Habib Bank Limited’s net profit surged by 27 per cent to Rs17 billion in 2010, beating analysts’ expectation by a long margin.

The board of directors in its meeting also recommended a cash dividend of Rs6.5 for every Rs10 share along with a bonus in proportion of 10 shares for every 100 shares, according to a notice sent to the Karachi Stock Exchange on Friday. The profit beat market expectation as analysts had expected the bank to see a profit increase of not more than 20 per cent.

Net interest income of the bank jumped to Rs81 billion in 2010 against Rs76 billion posted in the preceding year.

An estimated 10-basis-point expansion in average net interest margins to 6.5 per cent is the key driver behind revenue growth, said IGI Securities analyst Ahmed Khan.

Since the bank had booked higher provisions last year amid decrease of Rs1.8 billion in investment on behalf of PHB bank (Nigeria), cumulative provisions are projected to decline this year, the analyst said.

Loan write-offs decreased by 17 per cent to Rs7.76 billion against Rs9.3 billion in the preceding year. Last week, banking counterpart MCB Bank reported an increase of nine per cent in net profit to Rs16.9 billion in 2010.

Kapco profit soars

Net profit of Kot Addu Power Company, the largest independent power producer in the country, rose 42 per cent to Rs3.85 billion in the first half of 2010-11 compared with Rs2.72 billion posted in the preceding year.

The growth in the company’s bottom line is mainly attributed to rupee depreciation against the dollar and increase in US inflation, said JS Global Capital analyst Umer Ayaz. Payments to the power company are made in dollars, making the two fluctuations important factors in determining the profitability.

The company also declared an interim cash dividend of Rs3 for every Rs10 share, according to a communique sent to the Karachi Stock Exchange on Friday.

Maintenance of the 1,600-megawatt plant and overhaul expenses remained low as the plant remained non-operational for half of the period under review.

Circular debt continues to haunt

Receivables from Water and Power Development Authority (Wapda) reached record levels of Rs50 billion while payables to Pakistan State Oil stood at Rs20 billion in September, which caused an increase in short-term borrowing to Rs17.5 billion in the first quarter of fiscal 2011.

Hence, financial charges of the power producer doubled to Rs4.2 billion during July to December 2010 compared with Rs2.2 billion in the corresponding period of 2009.

Other income tripled to Rs4.37 billion from Rs1.39 billion mainly led by interest earned on overdue receivables from Wapda and Pakistan Electric Power Company.

KESC losses fall

Losses of the Karachi Electric Supply Company more than halved to Rs3.12 billion during July to December 2010 against Rs8.89 billion posted in the corresponding period of the previous year.

However, a positive for the company was that it switched to gross profit of Rs1.69 billion in the first half of fiscal 2011 from a loss of Rs2.54 billion.

The company’s revenue rose 30 per cent to Rs61.3 billion on the back of increase in units billed and tariff increases, according to a statement issued by the company on Friday.

Cost of fuel and power purchase increased by 16.15 per cent which was mainly attributable to reduced supply of gas and corresponding increase in furnace oil consumption.

The company consumed 84 per cent more furnace oil during the period due to reduction in gas supply for catering to increasing electricity demand of the city.

Nishat Mills profit doubles

Nishat Mills Limited’s profit doubled in a span of 12 months on the back of increase in profit from the spinning segment, which contributes about 30 per cent to revenues.

Net profit stood at Rs2 billion in the first half of fiscal 2010-11 compared with Rs1 billion posted in fiscal 2010, according to unconsolidated results sent to the Karachi Stock Exchange on Friday.

Yarn prices averaged at Rs282 per kg in the domestic market during the period under review, 87 per cent higher than Rs151 per kg in the same period of fiscal 2010.

Higher selling prices, particularly in export markets, are expected to push up the spinning segment’s revenues.

Nishat Mills’ investments in group companies act as a source of income for the company. Dividend income from MCB Bank and Nishat Chunian Limited was expected to contribute Rs173 million, according to BMA Capital.

AES Power Projects were also projected to yield dividend income of Rs207 million during the period under review, said BMA Capital analyst Sana Bawani.

Other income, which includes income from portfolio companies, more than tripled to Rs1.21 billion from the preceding year’s Rs336 million. Cotton price has surged to a record high of Rs11,800 per maund, propelled by the Indian act of stopping export to Pakistan and other countries. Mills purchasing cotton at such high levels in addition to greater imports from countries other than India, are expected to put pressure on margins in coming months, said Bawani.

Published in The Express Tribune, February 19^th, 2011