By SHABBIR H.
Jun 05 - Jun 11, 2000
This week witnessed auction of the card of a member in Karachi and
suspension of cards of six members in Lahore. This should not be surprising for any one as
we have been expressing our apprehensions and warning about the bubble. It was the logical
conclusion of events that had been going on. No one, among the regulators of the financial
sector, i.e. the Security and Exchange Commission of Pakistan, the central bank and the
three stock exchanges took a note. By the time Karachi Stock Exchange started looking and
enforcing members' exposure limit the bubble had already busted. Though, the efforts were
made to save the investors from the adverse consequences of default of members
estimated to be more than a dozen, the members of Lahore Stock Exchange are still not
happy with the attitude of the management of Karachi Stock Exchange. Contrary to this, one
may say that defaulting members should have not been given that kind of a sympathetic
Most of the favourites and volume leaders have witnessed decline in
share prices. Since this decline was without any change in economic fundamentals, it will
be good to talk about some of those companies which may have small capital but enjoy
enormous potential for growth. A review of some of the key players from textile and sugar
industries have posted real good results. Textile industry was able to post good results
mainly due to enhanced availability of cotton and its modest price improving the
capacity utilization of most of the units.
SAIF TEXTILE MILLS
The Company is located in Gadoon Amazai. Since the various exemptions
and incentives for the area have lapsed, management have chalked out a complete plan to be
more competitive and maintain its profitability. It is evident from the increase in net
sales revenue and earnings per share for six months period ending March 31, 2000 over the
corresponding period of the previous year. While net sale increased by Rs 40 million and
gross profit enhanced by Rs 24 million, the gross profit margin increased from 9 per cent
to over 13.2 per cent. This translated into an increase in earnings per share from Rs 1.59
to Rs 2.41.
DEWAN MUSHTAQ TEXTILE MILLS
The Company needs to be looked at more minutely by other sponsors of
textile mills. Its net sale increased from 70 million in first half of the pervious year
to Rs 372 million for the six-months period ending March 31, 2000. The net result was
profit before tax jumped from Rs 1.9 million to Rs 28 million. The other two textile
companies belonging to the group have also performed better during this period. The
management has attributed excellent results to improved availability of inputs and their
prices. They have also expressed the hope that better availability of inputs can have an
overall better impact on the spinning sector of the country.
DEWAN SUGAR MILLS
The adverse impact of poor sugarcane availability and its higher prices
and higher incidence of excise duty and sales are evident when one looks at the half
yearly accounts of the Company. Despite an increase in gross sales from Rs 716 million in
1999 to Rs 1,015 million for the period ending March 31, 2000, operating profit increased
from Rs 80 million to Rs 108 million during the corresponding period. However, profit
after tax improved from Rs 20 million to Rs 30 million during this period mainly due to
significant increase in financial cost.
HASEEB WAQAS SUGAR MILLS
While the number of days crushing was done were almost the same the
quantity of sugarcane crushed came down from 804,195 tonnes to 489,252 tonnes. This caused
in reduction in sugar produced from 60,090 tonnes to 36,798 tonnes. The availability of
sugarcane was 30 per cent lower this season which compelled the management to close down
the mills at least 30 days earlier than the normal season of 160 days. The average sugar
recovery was 7.62 per cent during the season.
According to some sugar sector experts sugar mills located in Punjab
despite having higher crushing capacity cannot earn good profit due to much lower sugar
recovery percentage as compared to Sindh. This is due to unfavourable climatic condition
of Punjab high temperature and low humidity. Sugarcane demands high temperature
with high humidity. That is the reason that average sugar recovery in Punjab is around 8
per cent whereas it is as high as 11 per cent in Sindh.
RAFHAN BEST FOODS
The Company has declared 20 per cent interim cash dividend based on
half yearly results for the period ending March 31, 2000. During this period the Company
had registered 22 per cent increase in net sales and 19 per cent growth in profit after
tax. This translated into earning per share of over Rs 8.08 as compared to that of Rs 6.81
for the corresponding period of the previous year.