Corporate results: Nishat Group’s profits grow across the board

Largest contributor being the textile wing, followed by cement, power and banking divisions.

KARACHI:

The Nishat Group has announced its earnings on Monday, posting growth across the board with the highest contributors being its textile and cement wings. The power division also reported healthy growth, whereas MCB Bank, though still in profit, saw marginal growth in its bottom-line.

Textile wing

Nishat Mills – the Group’s flagship company – saw its consolidated profits grow 77% to touch Rs7.4 billion in the first nine months of fiscal 2013 as China continues to buy yarn at higher support prices from Pakistan amid depreciation in the rupee. Plus, significant improvement in volumetric sales in both low and high value-added segments supported profitability.

Nishat Mills has already surpassed its full-year fiscal 2012 profitability in the nine-month period under review.

Revenues grew 18.7% to Rs59.502 billion on the back of higher demand for yarn from China – the world’s largest cotton producer, consumer and importer – and volumetric sales of Nishat’s higher-margin products like home textile etcetera.

Apart from support from sales of higher-margin products, gross margins improved 140 basis points to 18.8% during the period based on Nishat Mills’ 2% year-on-year lower cotton procurement cost and fuel and power savings after the commencement of the company’s own six-megawatt coal-based power plant.

Other income clocked in 4.7 times higher at Rs4.06 billion on account of healthy payout from portfolio companies. On the contrary, finance costs shrunk to Rs2.9 billion from Rs3.48 billion owing to lower interest rates, providing further cushion to profitability.

Nishat Chunian doubled its consolidated profits to Rs2.99 billion in the first nine months of fiscal 2013 attributable to turnaround in core operations of the company led by stellar performance of spinning segment, where steady performance of value-added segment coupled with improved income from associates cemented its position in the textile sector.

Sales climbed 15.2% to Rs33.97 billion on the back of better cotton yarn prices, which were up 10%, 9% weaker rupee against dollar and steady sales in both low and high value-added segments, said Muhammad Ismail, analyst at BMA Capital.

Higher cotton to yarn spreads improved gross margins of the company marginally to 18.74%.

Profit from associates surged 13.8% to Rs284.73 million on account of better payout from Nishat Chunian Power.

Banking division

In a tough environment for the banking sector amidst shrinking banking spreads, MCB Bank managed modest growth in earnings as profits rose to Rs5.9 billion in the quarterly period ending March 31, 2013 – the only period for which the bank released its earnings. The bank also announced an interim cash payout of Rs3.5 per share.

MCB saw its net interest income decline 9% during the period due to stretched margins because it generated lower interest than it paid out to depositors. However, sizeable provisioning reversals allowed it to offset the reduction in its core income.

Non-interest income of the bank witnessed a 4% decline to Rs2.42 billion despite increase in earnings through sales of securities and other income – which climbed 14.6% to Rs102 million.

Much-needed support to bottom-line was provided from an unlikely source as the bank managed to cut its expenses by 3% due to sizeable PF write-backs, said Raza Jafri of AKD Securities.

Pre-tax share of profit from associates – primarily Adamjee Insurance Company – clocked in at Rs185 million, up 42%.

Power wing           

Nishat Chunian Power’s profits climbed to Rs2.02 billion, up 23.5%, in the nine-month period of fiscal 2013 on account of higher utilisation.

Nishat Power Limited, on the other hand, saw its profits grow a healthy 44.7% to Rs2.06 billion in the first nine months of fiscal 2013 also on account of higher utilisation. The results were not accompanied with any payouts.

Recall that in the second quarter of fiscal 2012, independent power producers signed a side-agreement with the government, which made utilisation as a function of payments made to the producers. This agreement resulted in a lower load factor during the period for both the companies.

Cement wing

DG Khan Cement doubled its profits in the nine-month of fiscal 2013 to Rs4.24 billion where higher cement prices coupled with better margins propelled profitability growth.

Published in The Express Tribune, April 30^th, 2013.

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