Corporate results: Nishat Chunian profits plummet

Registers a decline of 52% to Rs699m for fiscal year 2011-12.

KARACHI:

Nishat Chunian – the textile manufacturing company – profits plummeted 52% to Rs699 million for the fiscal year 2011-12 from Rs1.5 billion in the preceding year.

The decline in the spinning business margins was amid sharp fall in yarn prices and higher fuel costs during the year, according to analysts.

The company faced depressed margins throughout the three quarters of the fiscal year but rebounding cotton prices in the final quarter coupled with containment of the energy expenditure owing to improved supply of gas helped the firm back up. Fourth quarter earnings alone contributed approximately 50% to cumulative full-year earnings, according to JS Global Capital research report.

Cotton prices in the fiscal year 2011-12 averaged at Rs5,837 per maund compared to Rs8,991 per maund in fiscal 2011.

Net sales of the company tuned in at Rs18.6 billion in the period compared to Rs20.3 billion in the previous year, depicting a decline of 8.4%.

However, other income of the company rose 42% to Rs857 million during the period under review against Rs600 million in the same period last year. Dividend income from Nishat Chunian Power (NCPL) supported the bottom-line as Nishat Chunian earned Rs469 million in other incomes from NCPL during the period. The power subsidy of the Nishat Chunian Group announced an Rs2 per share cash dividend along with the announcements of its results. Similarly, falling finance cost on account of lower Karachi inter-bank offer rate (Kibor) during the year further shored up profitability.

Demand for cotton from China and approval of duty-free access to the European Union will continue supporting the bottom-line going ahead. Pakistan exported about $1.5 billion worth of cotton yarn to China in 2011, slightly more than 25% of China’s total imports from the rest of the world. Under the EU autonomous trade preferences Pakistan was allowed tariff-free export of 75 goods to the EU, which mostly includes textile products.

Other factors improving profitability include the interest rates cuts announced by State Bank of Pakistan, reduction in gas infrastructure development cess alongside prioritised gas supply and a steady dividend stream from NCPL. However, gas and power outages remain a risk for the company making it vulnerable to incurring higher fuel and energy costs on account of increased usage of furnace oil and diesel.

Meanwhile, Nishat Chunian Power profits depicted a 27% growth to Rs2.03 billion compared with Rs1.61 billion last year.

The company declared a cash dividend of Rs2 per ordinary share of Rs10 alongside an unexpected bonus issue of 10%, the first bonus issue in its history.

Published in The Express Tribune, October 5^th, 2012.