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By SHABBIR H. KAZMI
Updated Jun 19, 2000

Equities market witnessed recovery contrary to our forecast of expected selling pressure only due to the help rendered by the consortium. A positive point was active buying of textile scrips. This has come due to expectation of fiscal incentives for the industry in the forthcoming budget. The GoP has set an export target of US$ 14 billion, to be achieved over the years, and wishes to achieve this by enhancing textile exports substantially.

PAKISTAN STATE OIL

Lately the GoP has announced that the development surcharge, a major component of POL price, would be fixed at Rs 48 billion. Prices are to be adjusted quarterly. Any reduction in international oil prices will be passed on to consumers. Two possible scenario can emerge relating to oil price movement. Upward revision is most likely to happen due to higher international prices and depreciation of rupee against dollar. POL price are expected to be increased by up to 5 to 10 per cent. The GoP has increased the average prices of POL by 10 per cent on March 20 and then furnace oil price was increased by 10 per cent. Therefore, it will be more appropriate to reduce prices, at an average by 4 per cent. Looking at the GoP track record one can only expect price increase. With price adjusted upwards, oil marketing companies are expected to benefit. Or the GoP may reduce the price and increase the margin of oil companies. The earning driver for the oil marketing companies are volume and margin.

SAPPHIRE TEXTILE MILLS

Following regular BMR and expansion policy has been the reason for improvement in not only profitability of the Company but also in attracting customers who believe in quality and are also willing to pay a premium. For the six months period ending March 31, 2000 the Company has posted pre-tax profit of over Rs 300 million as compared to a profit of Rs 67.7 million for the corresponding period of last year. One of the factors responsible for higher profit was increase in net sales to Rs 2 billion from Rs 1.8 billion and reduction in financial charges to Rs 124.9 million from 164.2 million during this period. Gross sales and profitability for the full year ending September 31, 2000 and onwards is expected to be higher due to installation of 48 airjet looms and addition of another 6,000 spindles.

NISHAT MILLS

Despite uncertain domestic economic and market conditions the Company was able to post pre tax profit of Rs 439.7 million for the year ending September 30, 1999 as against a profit of Rs 412 million for the previous year. The Company's turnover increased from Rs 8.9 billion to Rs 9.4 billion during this period depicting an annualized growth rate of 5.8 per cent. The reason for the continued success of the Company is its marketing strategy. The largest volume of sales comes from exports. During the year export sales (gross) were Rs. 8.1 billion and local sales were Rs 1.3 billion. The Company announced 17.5 per cent cash dividend. The Company has undertaken an expansion programme to install a dyeing unit, add 120 looms and setting up a spinning unit of 21,672 spindles.

UMER FABRICS

Profit after tax for the six months period ending March 31, 2000 increased to Rs 113 million against Rs 18.3 million for the corresponding period of the previous year — a five fold increase. The revenue from export sales increased to Rs 675 million from Rs 488 million in the corresponding period — an increase of over 38 per cent. Earning per share for the current period has increased to Rs 4.71 from Rs 0.76 for the same period of the last year. The outstanding results are attributed to timely decision for purchase of cotton at lower prices, aggressive marketing strategy, strict financial controls and planned technological changes. It may by of some interest that many spinning units are switching over to production of blended yarn, the Company has installed equipment to enable its unit-2 to produce 100 per cent cotton.

HINOPAK MOTORS

The Company has changed its accounting year end to comply with the global requirements of Hino Motors and Toyota Tsusho Corporation Japan, from the year 2000 it would be from January to December. Despite adverse business environment, Hinopak has been able to post an operating profit of Rs 65 in six month period of 1999 as against an operating loss of Rs 89.75 million for twelve months period ending June 30, 1999. The gross profit for the half year was about Rs 100 million compared to the gross of Rs 6.7 million for 1998-99. The margins improved by 15 per cent — from negative 1 per cent to positive 14 per cent. The sales in second half were 466 chassis and 184 bodies compared to 305 chassis and 66 bodies in the first half of 1999. The total commercial vehicle sales in the country in the second half of 1999 increased to 1316 units from 1006 units in the financial year 1998-99 and the Company improved its market share in the medium to heavy segment by 16 percent to 56 per cent.

SCRIP

HIGH

LOW

TURNOVER (SHARE MN)

CLOSING PRICE

Sapphire Textile

75.00

15.10

1,500

75.00

Nishat Mills Motor

24.80

24.50

409,500

24.65

Umer Fabrics

16.25

15.50

43,500

16.25

Hinopak Motors

41.90

41.90

Pakistan State Oil

158.00

150.80

83,507,300

158.00