Nishat Chunian profit surges over nine times

Net profit of NCL surges more than nine times to Rs931 million during fiscal year 2010.

KARACHI: Net profit of Nishat Chunian Limited (NCL) surged more than nine times to Rs931 million during fiscal year 2010 on the back of increasing revenues against last year’s Rs103 million.

The spinning segment is the predominant driver behind this impressive growth in profitability as high yarn prices both in the international and local markets helped it to cash in on extraordinary margins, according to BMA Capital.

Along with the result, the company also announced a final cash dividend of Rs1.5 per ordinary share of Rs10, according to a communiqué sent to the stock exchange on Friday.

The consensus of two research firms missed the target marginally by 2.59 per cent as they predicted the profit to be around Rs907.5 million.

Overall, net sales rose 33.9 per cent to Rs13.3 billion on a yearly basis against Rs9.96 billion posted last year owing to higher yarn prices and consistent rupee depreciation against the dollar. This was mainly driven by the spinning segment which contributed around 70 per cent to the company’s revenues, according JS Global Capital.

Spinning leads the way

Nishat Chunian flourished in fiscal year 2010 primarily on the back of a healthy improvement in its revenues and profitability from the spinning segment, said BMA Capital analyst Sana Bawani. The company derives 50 per cent of its revenues from yarn sales most of which is exported, added Bawani in the company research report.

Yarn prices skyrocketed during the third quarter and continued to move upwards till the end of fiscal year 2010 while exporters including NCL had low-cost inventories available till August.

The company had procured cotton for around Rs4,000 per maund while the commodity crossed the Rs7,000 per maund mark in July 2010, according to BMA Capital.

Cotton arrivals are expected to stand at 11.5 to 11.7 million bales for fiscal year 2011 and hence 3 to 3.5 million bales will need to be imported to meet the industry demand, concluded Tariq.

Published in The Express Tribune, October 9^th, 2010.