Kapco’s net profit falls on rising costs

Kot Addu Power Company’s (Kapco) net profit dropped 11.7 per cent to Rs5.1 billion during fiscal year 2010 against last year’s Rs5.67 billion.

The company also announced a final cash dividend of Rs2.75 per share, taking the full year payout to Rs5 per share in fiscal year 2010.

The fall is mainly expected on the back of higher plant maintenance and overhaul costs incurred by the company, according to JS Global Capital.

The total plant’s overhaul and repair expenditure during surged 168 per cent to Rs1.2 billion during the first nine months of fiscal 2010, said JS Global Capital analyst Umer Ayaz.

Rupee depreciation of 6.4 per cent against the US dollar and an average 1.6 per cent growth in US inflation in fiscal year 2010 was not enough to offset the expected earnings decline, Ayaz said in the company report.

Net sales rose 23.9 per cent to Rs85 billion but were overshadowed by the 30 per cent increase in their cost. This resulted in the gross profit falling ten per cent to Rs9.9 billion from last year’s Rs11 billion.

Moreover, company’s heavy reliance on short term borrowings due to the prevailing circular debt is also likely to dent the net profit as the Power Purchase Agreement only covers for the repayment of long term loans of the power project, informed Ayaz.

The company is Pakistan’s largest Independent Power Producer (IPP) with a capacity of 1,600 megaawatt.

Published in The Express Tribune, September 3^rd, 2010.