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A weekly review of fundamentals enjoyed by the blue chips

By SHABBIR H. KAZMI
Updated Nov 27, 2000

While looking at daily trading volume and active scrips it often said that efforts should be made to reduce number of listing companies, Lately the concept of voluntary de-listing has gained some momentum. It may be true that some of the companies seeking de-listing may not be offering attractive price, but if minority shareholders join their hands and also seek help of brokerage houses in analyzing financial reports they would be able to solicit better price.

As a result of curb imposed on 'blank trading' by Securities and Exchange Commission of Pakistan (SECP), daily turnover may come down. However, it will be better and help in curbing price manipulation by a few. There is a need to check and control short selling. Yet another desired step by SECP is elimination of insiders trading.

FECTO CEMENT

The Company has released financial results for the year ending June 30, 2000. It has posted Rs 131 million profit before tax for the year 2000 as compared to a profit of Rs 4.85 million for the previous year. This was possible mainly due to improvement in gross profit from 11.5 per cent for the year 1999 to 19.6 per cent for the year under review. While there was increase in sales, a stringent control on cost of goods sold was the major reason for improvement in gross margin. The Company posted Rs 83 million profit after tax and has declared 10 per cent dividend. However, Rs 100 million was written back from general reserve to wipe out accumulated loss of over Rs 98 million.

MAPLE LEAF CEMENT

The Company has posted Rs 451.5 million gross profit for the year ending June 30, 2000 as against a loss of Rs 58 million for the previous year. However, the benefit was completely eroded by financial charges amounting to over Rs 465 million though the amount was lower as compared to previous year. In order to reduce the amount of loss carried forward Rs 750 million was written back from general reserve. Many analysts believe strongly that financial charges are out of proportion and unless efforts are made to restructure the debt of the Company it will not be able to post profit.

LUCKY CEMENT

The improvement in gross profit improved operating profit of the Company for the year ending June 30, 2000. Gross profit increased from Rs 262.6 million for the year 1999 to Rs 437.3 million for the year under review. It is important to note that while there was increase in administrative, selling and distribution expenses the Company was able to contain financial charges which came down to Rs 124 million for the year 2000 as compared to Rs 152.8 million for the previous year. A profit after tax of Rs 226 million has completely wiped out an accumulated loss of over Rs 90 million. While the Company did not declare any dividend for the year 2000, despite making a profit of over 226 million, it is expected that in the following years it should be able to pay dividend to shareholders who have not received any benefit in last two years.

SIEMENS PAKISTAN ENGINEERING

The Company has declared 150 per cent dividend (Rs 117.395 million) for the year ending June 30, 2000. It had paid a total sum of Rs 111.525 million dividend for the previous year. This was possible mainly due to reduction in financial charges, from Rs 149 million for the year 1999 to Rs 50 million for the year under review. Profit before tax for the year 2000 came to Rs 421 million as compared to a profit of about Rs 300 million for the previous year. Alongwith higher payment to shareholders the Company transferred Rs 75 million to asset replacement reserve and Rs 74 million to general reserve out of profit for the year 2000.

BALUCHISTAN WHEELS

The Company has declared 17.5 per cent final dividend, it had already paid 15 per cent interim dividend totalling to 32.5 per cent. It had paid 30 per cent dividend for the previous year. The factors responsible for improving profit are: better control on cost of goods sold, reduction in financial charges and improvement in other income. Provision for tax for the year 2000 was Rs 13.8 million as compared to Rs 19.6 million for the previous year. There are signs of overall improvement in operations of the Company in last couple of years.

GENERTECH PAKISTAN

The Company has posted Rs 11 million profit before tax for the year ending June 30, 2000 as opposed to a profit of Rs 81.5 million posted for the previous year. While there was increase in administrative and general expenses, the real cause for decline in profit was cost of sales. Gross profit came down from Rs 149.5 million for the year 1999 to Rs 82 million for the year under review. However, it is worth noting that the Company has declared 5 per cent dividend for the year 2000. While the Company had posted Rs 82 million profit for the previous year, it chose to transfer Rs 45 million to general reserve and distributed Rs 36 million among the shareholders. Out of the earnings of Rs 20 million for the year 2000, the Board of Directors have decided to write back Rs 10 million from general reserve, issue bonus shares worth Rs 18 million and distribute Rs 9 million among shareholders.