Corporate results: KAPCO profits decline on circular debt woes
High short-term borrowing and gas shortage haunts the country’s largest independent power producer.
KARACHI:
Kot Addu Power Company Limited (Kapco), the country’s largest independent power producer (IPP), profits declined 7% to Rs6.07 billion primarily due to the circular debt in fiscal 2012.
This decline in profitability is attributable to cost paid on short-term financing and augmenting levels of outstanding payables amidst haunting circular debt, said BMA Capital analyst Nurali Barkatali.
Along with the result, the board of directors in a meeting held on Tuesday also declared a final cash dividend of Rs3.15 per share, taking cumulative full year 2012 dividend to Rs6.9 per share, according to a notice sent to the Karachi Stock Exchange on Wednesday.
Overall performance seems to be improving. The company’s profits rose 35% to Rs1.7 billion in the final quarter (April to June 2012) of the financial year.
The result was in line with market estimate and hence the power producer’s stock price rose 1.5% to close at Rs49.04 during trade at the Karachi Stock Exchange on Wednesday.
Net sales increased by 35% due to generation on expensive fuel furnace oil which stood at 97% in fiscal 2012 as compared to 89.5% in fiscal 2012, said Global Securities analyst Arif Shaikh. Increasing gas shortage has compelled power producers to rely on the expensive furnace.
The impact did leave a mark. Finance cost went up by 12% to Rs9.9 billion due to higher working capital requirements after generation on furnace oil and also rising payables to Pakistan State Oil.
Liquidity injection is likely to improve generation; however, the company received no gas during January to March 2011 and operated on furnace oil.
The company’s receivables from the Water and Power Development Authority are forcing the company to rely heavily on borrowing from the financial institutions. With the announcement from the government to issue TFCs worth Rs140 billion to curtail circular debt, the company has received Rs35 billion. It is expected to provide much needed relief to the company, which in effect is expected to lower the company’s financial charges in the near future.
Taxation rate decline by 24% on a yearly basis due capital expenditure of Rs1 billion that brought down the effective tax rate to 30% against corporate tax rate of 35%, added Shaikh. Capital expenditure of Rs1 billion in fiscal 2012 on three turbines, which was expected to increase efficiency by 0.16%, will translate into fuel saving and could be a possible earnings trigger for the company.
Published in The Express Tribune, August 30th, 2012.
Kot Addu Power Company Limited (Kapco), the country’s largest independent power producer (IPP), profits declined 7% to Rs6.07 billion primarily due to the circular debt in fiscal 2012.
This decline in profitability is attributable to cost paid on short-term financing and augmenting levels of outstanding payables amidst haunting circular debt, said BMA Capital analyst Nurali Barkatali.
Along with the result, the board of directors in a meeting held on Tuesday also declared a final cash dividend of Rs3.15 per share, taking cumulative full year 2012 dividend to Rs6.9 per share, according to a notice sent to the Karachi Stock Exchange on Wednesday.
Overall performance seems to be improving. The company’s profits rose 35% to Rs1.7 billion in the final quarter (April to June 2012) of the financial year.
The result was in line with market estimate and hence the power producer’s stock price rose 1.5% to close at Rs49.04 during trade at the Karachi Stock Exchange on Wednesday.
Net sales increased by 35% due to generation on expensive fuel furnace oil which stood at 97% in fiscal 2012 as compared to 89.5% in fiscal 2012, said Global Securities analyst Arif Shaikh. Increasing gas shortage has compelled power producers to rely on the expensive furnace.
The impact did leave a mark. Finance cost went up by 12% to Rs9.9 billion due to higher working capital requirements after generation on furnace oil and also rising payables to Pakistan State Oil.
Liquidity injection is likely to improve generation; however, the company received no gas during January to March 2011 and operated on furnace oil.
The company’s receivables from the Water and Power Development Authority are forcing the company to rely heavily on borrowing from the financial institutions. With the announcement from the government to issue TFCs worth Rs140 billion to curtail circular debt, the company has received Rs35 billion. It is expected to provide much needed relief to the company, which in effect is expected to lower the company’s financial charges in the near future.
Taxation rate decline by 24% on a yearly basis due capital expenditure of Rs1 billion that brought down the effective tax rate to 30% against corporate tax rate of 35%, added Shaikh. Capital expenditure of Rs1 billion in fiscal 2012 on three turbines, which was expected to increase efficiency by 0.16%, will translate into fuel saving and could be a possible earnings trigger for the company.
Published in The Express Tribune, August 30th, 2012.