Corporate results: KESC sinks deeper into losses

Distributor projects to make a profit after five years in fiscal 2012.

KARACHI:

Karachi Electric Supply Company losses swelled 24% in the first quarter of financial year 2012, a year the new management Abraaj Capital projects to make their first profit since takeover.

Net losses widened to Rs2.2 billion during July to September 2011 against Rs1.8 billion posted in the same period last year, according to a notice sent to the Karachi Stock Exchange.

Increasing customer service and administrative expense coupled with financial costs crippled the company’s profits, said Topline Securities analyst Nauman Khan.

Dubai-based Abraaj Capital took over management controls of the city’s sole power producer in October 2008.

Low bill recovery due to labour strikes during start of the quarter was a reason for the drop in losses, says a KESC official who requested anonymity. The strikes hampered distribution network of the country’s sole power distributor till such an extent that bills were not delivered on time and consumer had to download their bills from KESC’s official website.

Gross profit increased more than Rs700 million to Rs1.7 billion during the period under review but this was eaten up by increasing expenses, added Khan.

Finance cost rose 38% to Rs1.7 billion while administrative expense gained 30% to Rs3 billion.

KESC’s stock price rose Rs0.09 to close at Rs1.69 during trade at the Karachi Stock Exchange. Only 85 stocks declined from total 328 companies traded at the bourse as benchmark 100-share index surged 278 points.

Ending the drought

The company projected, at the start of the financial year, to switch back to a profit regime in financial year 2012 after a gap of five years. Despite all problems surrounding the company, a profit of Rs2.15 billion is estimated, more than the amount the company made in the last ten financial years.

“A lot has changed since the projection was made,” said KESC official, adding that gas levels have fallen that has resulted in increased production from furnace oil.

The power distributor witnessed a profit only twice in the last twelve years.

Published in The Express Tribune, October 29^th, 2011.