Corporate results: Kot Addu Power Company’s profits grow despite shrinking top-line

Earn Rs7.35b in fiscal 2013 as efficiency gains, falling rupee support bottom-line, announces dividend of Rs4.5/share.

KARACHI:

Kot Addu Power Company (Kapco) – the country’s largest independent power producer – announced 35% higher profits of Rs7.35 billion in fiscal 2013, compared to Rs5.68 billion it earned in fiscal 2012.

According to a notice sent to the Karachi Stock Exchange, the earnings announcement was accompanied by cash payout of Rs4.5 per share, taking full-year dividend payout to Rs7.5 per share.

Even though the power producer’s revenue fell 3% during the year, Kapco managed to earn a higher gross profit and recorded a higher net profit for the period – an achievement in the present shape of the country’s energy sector. Revenues clocked in at Rs97.71 billion in fiscal 2013, compared to Rs100.5 billion in fiscal 2012 on the back of 9% lower utilisation in the period under review, said Arif Shaikh, analyst at Global Securities.

However despite a shrinking top-line, Kapco’s gross profit climbed an impressive 15% to Rs13.56 billion. The IPPs revenues are dollar-denominated, so whenever the rupee depreciates it results in gains for the company. Furthermore, utilisation above 60% also allows the IPPs to gain benefits from the government.

Arif Habib Corporation estimates that Kapco’s dispatch level witnessed a slight decline of five percentage points as during the period load factor would have been 47% leading to a fall in sales. However, depreciation in rupee’s value against dollar by 8% during the fiscal year has supported profitability.

Kapco’s results also have the effect of Rs82 billion term finance certificates in September 2012 as other operating in income and finance costs shrunk 23% and 18%, respectively.

In the last quarter alone, finance costs surge 124% to Rs3.07 billion due to short-term borrowings and payables to Pakistan State Oil (PSO), according to Shaikh of Global Securities. In July, the company retired Rs17.2 billon payables to PSO after injection of Rs503 billion by government to contain the circular debt. Kapco realised a benefit to the tune of Rs41.4 billion from the injection.

Furthermore, the effective tax rate in the last quarter clocked in at 29%, thus effective tax rate stood at 33% for the full-year period.

Published in The Express Tribune, August 29^th, 2013.

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