Spinning ahead: Nishat Mills books Rs3.85b profit

Earnings spur company’s plans for diversification and expansion.

KARACHI:

Nishat Mills Limited (NML) has posted a strong net profit of Rs3.85 billion for the six-month period ending on December 31, 2013, up 35% compared to Rs2.85 billion in the corresponding period of the previous year.

Earnings per share (EPS) increased to Rs10.96 against EPS of Rs8.13 in the same period the previous year.

In 2QFY14, the company registered a profit after tax (PAT) of Rs2.3 (EPS of Rs6.29), up 45% year on year (YoY) and 27% quarter on quarter (QoQ) respectively.

In line with market expectations, NML’s sales grew by 7% YoY to Rs28.1 billion in 1HFY14 mainly due to the rupee depreciating against the dollar, leading to higher gross margins of 18.6% compared to 16.7% in the corresponding period of the last year.

The company also received support from higher other income that jumped significantly by 39% YoY, while its finance cost remain almost flat.

However, the increase in administration and distribution expenses, which rose by 13%, curtailed the growth of the company.

When asked, JS Global Capital analyst Bilal Qamar said that NML has more exports to the United States (US) compared to Europe, so its exports may not get a big boost under the European Union’s (EU) GSP Plus scheme.

Pakistan was one of 10 countries to be allowed access to the GSP Plus market by the EU, which will result in increased exports especially for the textile sector.

BMA Research reported on Friday that the sharp growth in NML’s profitability is primarily attributable to robust rebound in core operations led by 10% depreciation in rupee against the dollar.

With its results, the company also announced that it will establish a new wholly owned subsidiary, namely Nishat Spinning (Pvt) Limited, with an authorised capital of Rs10 million divided into 1 million ordinary shares.

The company is also increasing its investment in its associate MCB Bank and Nishat Hotels and Properties Limited to the tune of Rs2.6 billion (within a period of three years) and Rs1 billion respectively.

NML has also proposed a loan of Rs1.5 billion to Nishat Power Limited (NPL) when requested and required by the latter.

This loan will provide NML a return of not less than three-month KIBOR plus 200 basis points (bps) and will be repayable within three years period starting from the date of approval by shareholders.

Lastly, NML is also to submit a Pre Qualification Document (PQD) to participate in the bid (as a consortium with other group companies that are subject to board approvals) in Punjab Power Development Board’s coal based Thermal Power Project of 660MW.

Published in The Express Tribune, February 15^th, 2014.

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