The market was expecting the net profit of the company to decrease.
The company’s net profit increased 22.9 per cent to Rs1.16 billion in the first half of 2010 compared with last year’s Rs1.03 billion, according to a notice sent to the Karachi Stock Exchange.
The board of directors also approved an interim dividend of Rs5.5 per ordinary share of Rs10 for the financial year ending December 31, 2010.
Sales revenue increased 22.9 per cent to Rs17.1 billion on yearly basis.
“The increase is primarily on the back of 21 per cent increase in soda ash sales, rise in paint sales by 15 per cent and higher polyester staple fibre (PSF) prices during the period,” according to BMA Capital analyst Sana Bawani.
PSF prices have increased to Rs133 per kilogramme in the first half of 2010 against Rs100 per kilogramme in the same period last year.
Margins decline
Despite a growth in sales, gross margins for the company declined to 18 per cent in the first half compared with 19 per cent in the same period last year.
Gas curtailment at its production facility is likely to be the core reason for the drop, said Bawani.
The government in an energy summit earlier in the year had cut gas supply to the industry in order to keep maximum gas for power generation.
Furthermore, gross margins for the paints segment and PSF are expected to have declined owing to the same gas curtailment issue as experienced by soda ash in the first quarter leading to higher costs of energy, according to Bilwani.
Outlook
Recent floods in the country have also been found to have affected the roads leading to Khewra mines from where ICI sources its raw material requirements for soda ash.
This will likely disrupt supply for a while, however, demand and prices are expected to stay intact, according to Bilwani.
Additionally, higher cotton prices are also expected to keep demand for PSF intact at current levels, said Bilwani.
The company manufactures and sells products including polyester staple fibres, light and dense soda ash, sodium bicarbonate, paints and chemicals among others.
Published in The Express Tribune, August 27th, 2010.
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