Corporate results: Nishat Chunian profits nosedive

After posting a loss of Rs86 million in the first quarter of fiscal 2012 margins improve slightly.

KARACHI: Nishat Chunian, the textile manufacturing company, profits plummeted 91% to Rs48 million in the first half of fiscal 2012.

The decline in the spinning business margins was expected amid sharp fall in yarn prices, which took down gross profit levels for the period from July to December 2011, according to analysts.

After posting a loss of Rs86 million in the first quarter of fiscal 2012 amid declining spinning and power division margins, the company returned to profitability in the second quarter on the back of slightly better gross margins, says a JS Global Capital research note.

Expensive leftover inventory carried forward from financial year 2011 deteriorated Nishat Chunian’s gross margin as the company incurred inventory losses.

Net sales eased by 2.6% to Rs8.3 billion in the first half of fiscal 2012 against Rs8.5 billion in the same period last year.

However, other operating income almost doubled to Rs410 million during the period under review against Rs207 million in the same period last year. Dividend income from Nishat Chunian Power (NCPL) supported the bottom-line as the power subsidiary of the Nishat Chunian Group announced a Re1 per share cash dividend that would add Rs176 million to the other income.

Availability of cotton at cheaper rates is expected to improve the bottom-line of the company as the company is expected to shed all the previously bought expensive cotton inventory that was purchased at Rs8,500 per maund.

Meanwhile, Nishat Chunian Power profits depicted a 12% growth to Rs1.02 billion compared with Rs914 million in the same period last year.

The company declared an interim dividend of Rs1.5 per ordinary share of Rs10 on the back of easing liquidity following the conversion of circular debt to Term Finance Certificates.

Published in The Express Tribune, February 29^th, 2012.