Corporate results: HUBCO achieves 59% growth in profitability YoY

Profits increase after company’s Narowal plant comes online.

KARACHI:

The Hub Power Company (Hubco) announced its financial results for the first half of fiscal 2013 on Wednesday, beating analyst estimates to post earnings of Rs4.77 billion (Rs4.12 earned per share). The profit announced is 59% higher than the Rs3 billion the company earned in the first half of fiscal 2012. On a quarterly basis, the company posted earnings of Rs2.63 billion. Along with the result, the company has announced an interim dividend of Rs3.5 per share, also contrary to some market rumours.

Hubco is engaged in the electric utilities industry. The company owns an oil-fired power station with an installed net capacity of 1,200 megawatts (MW) at Mouza Kund, Hub, in Balochistan; and a 214 MW net capacity oil-fired power station at Mouza Poong, Narowal, in Punjab. The company also has a 75% controlling interest in Laraib Energy, a subsidiary that is developing an 84 MW hydel power plant.

Major highlights of the result statement include a 13% year-on-year (YoY) increase in turnover, which was achieved after a Hubco power plant in Narowal was brought online, says Global Research’s analyst Arif Shaikh.

An earlier result preview issued by Arif Habib analyst Taseer Abbas said the growth in topline will be as average plant utilisation has been around 75% compared with 69% in the same period last year. Similarly, he said the gross profit is also expected rise due to growing indexation factors, particularly the 5% YoY depreciation in the rupee/dollar parity in the second half of the 2013 fiscal year.

Analysts pointed out that the company realises a generation bonus in the first half of every fiscal year, which propels earnings in the second quarter. “We believe the company realised Rs417 million as a generation bonus in the first half of fiscal 2013 (1HFY13),” Shaikh said. In the second quarter of every fiscal year, Hubco receives generation bonus for attaining higher utilisation levels (above 65%) of its old Hub plant. This bonus is calculated on the basis of calendar year generation numbers.

The company saw finance costs decline 7% in the December quarter over the preceding quarter as the National Transmission and Despatch Company and the Water and Power Development Authority made timely payments for their purchase of power from Hubco.

Outlook

“Going forward, Hubco’s next leg of growth is to come from the Laraib hydel plant, which is scheduled to come online in fiscal 2014,” said Shaikh.

Laraib will be the first 84 MW independent hydroelectric power plant in Pakistan. The project is expected to be completed within the scheduled time, Shaikh added.

The country faced a massive blackout on February 24, 2013. “Based on our discussion with the management, we do not foresee any significant capital expenditure to be done by Hubco, as the plant remains in perfect working condition. Moreover, the management signals no downside on commercial availability of the power plant (as capacity payment receipts are linked to plant’s availability for power generation). Therefore, we rule out any near term negative impact of this event on Hubco’s profitability,” said Abbas.

Published in The Express Tribune, February 28^th, 2013.

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