Corporate results: Nishat Chunian earns Rs2.27b in fiscal 2013

Expanding margins, sliding rupee help company grow bottom-line 225%.

KARACHI:

Nishat Chunian (NCL) reported a strong year on Friday, posting a profit of Rs2.27 billion in the fiscal year 2012-13, compared to Rs699 million on a standalone-basis, reflecting exponential growth of 225%, according to a notice sent by the company to the Karachi Stock Exchange.

The tripe-digit growth was attributable to margin expansion caused by the procurement of cotton at favourable rates.

The earnings announcement was in-line with street estimates of Rs2.25 billion projected for the year.

According to a review of the results by AKD Securities, the brokerage house says that Nishat Chunian disappointed its shareholders by announcing a cash payout of Rs2 per share in addition to a bonus share issue of 10%, which was below market talk.



For the fourth quarter of fiscal year 2013, NCL’s earned Rs553 million, which was also in-line with estimates of Rs536 million.

Sales of the textile giant witnessed a growth of 11% to Rs5.93 billion, while gross margins expanded as the company managed to get hold of cotton at favourable prices and rupee depreciation – NCL’s revenues are dollar-denominated as it exports most of its production, hence weakening of rupee against the greenback helps to boost earnings.

Falling finance costs also helped NCL in propelling its bottom-line as cost on borrowings fell 21% in the fiscal year 2012-13 owing to the State Bank of Pakistan’s policy of continuously slashing interest rates. Average three-month Karachi interbank offer rates in fiscal 2013 fell to 9.73%, compared to 12.21% in fiscal 2012.



Going forward, AKD Securities predicts NCL’s earnings will touch Rs2.96 billion, a growth of 30%, led by capacity expansion of 69,000 spindles in the spinning division. The spindles are expected to become operational by the end of the first half of fiscal year 2013-14. Moreover, the sliding rupee will also continue to propel earnings.

On the cost side, Global Securities expects NCL’s interest cost to dip further in the next quarter as the company received Rs6.86 billion on account of the Rs503 billion circular debt transaction paid by the government.

The Global Securities report went on to say that the payment will substantially decrease the company’s payables and short-term borrowings.

The brokerage house estimates that NCL’s short-term borrowings of Rs6.1 billion as at March 31, 2013, will be fully retired post-circular debt transaction.

Published in The Express Tribune, October 5^th, 2013.

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