By SHABBIR H. KAZMI
Updated Jan 29, 2001

The market is expected to remain under selling pressure despite an approaching reconciliation with the SECP, accepting the Commission directive. While the move by the SECP is expected to bring greater transparency it is bound to continue selling pressure. The prices are attractive, Badla rates are low and liquidity crunch has eased, but retail investors and institutional investors prefer to stay taking fresh positions.

The full year (year ends in September) results of textile mills have started appearing. The overall feeling is that the year ending September 30, 2000 was a good year, both in terms of higher volume and better profit margins. As the better performing company are going through BMR, mostly financed by internal sources, profitability in the following years is expected to improve provided prices of cotton remain at a modest level.

ISLAND TEXTILE MILLS

The profit for the year ending September 30, 2000, helped the Company to declare 50 per cent dividend. The payout for the previous year was 25 per cent. The reason for this was gross profit of over Rs 100.4 million for the year 2000 as compared to that of Rs 42.4 million for the previous year. Profit before tax for the year increased from Rs 18 million for the year 1999 to Rs 60.6 million for the year under review. However, accumulated loss as at September 30, 2000 was about Rs 28 million, though coming down from Rs 64 million as at September 30, 1999. An important observation was that tax paid by the Company increased from Rs 6.4 million to Rs 20.8 million during this period.

TATA TEXTILE MILLS

The Company has posted Rs 143 million profit before tax for the year ending September 30, 2000 as compared to a profit of Rs 36.6 million for the previous year. The turning point was that while sales increased the cost of sales for the year 2000 came down. Profit of this magnitude allowed the Company to not only announce 20 per cent dividend but post accumulated profit of Rs 21.7 million. The Company had paid 12.5 per cent dividend for the previous year.

SALFI TEXTILE MILLS

The Company posted Rs 31.4 million profit before tax for the year ending September 30, 2000 but preferred to skip paying any dividend. It seems to be part of the management strategy to wipeout its accumulated loss of Rs 72.4 million as at September 30, 1999. Still the Company has a burden of accumulated loss of nearly Rs 50 million. It seems that low profit is an outcome of high financial charges., amounting to Rs 43 million for the year 2000. Unless efforts are made to contain financial charges, profitability of the Company is expected to remain under severe pressure.

POLYRON

Polyron is yet another company victim of out of proportion financial charges. The Company posted operating profit of Rs 20 million and financial charges were about Rs 46 million. Accumulated loss as at June 30, 2000 was Rs 429 million. It may not be wrong to say that this Company could never come out of red and pay any dividend to its shareholders. Therefore, the best option is to liquidate this company.

FFC-JORDAN

The plant, capable of producing urea and DAP fertilizers, established near Karachi has not been able to overcome its operational problems. Added to this was crash of DAP price in the global markets. The Company's request to impose regulatory duty was turned down. All these factors have been affecting its cash flow and in turn rendering the Company unable to meet its debt servicing obligation. While the efforts by Fauji Foundation/Fauji Fertilizer to ensure adequate cashflow failed the Company has finally asked the lenders to reschedule/restructure its debts. Profitability of the Company may be dependent on a number of internal and external factors, but the economic viability of DAP plant has become questionable. While it may be true that the sponsors had made an incorrect decision, for setting up a DAP plant, the issue is to find a long-term and sustainable solution. However, the GoP must keep in mind that imposition of regulatory duty on imported DAP would be the worst option to exercise.

PAKISTAN TELECOM. COMPANY

The monopoly has registered 17 per cent decline for the July-December 2000 period as compared to the profit for the corresponding period of the previous year. While one may say that the profit was much below market expectation, an analysts say, "My other colleagues did not take into account other factors which are responsible for the decline." The single factor mainly responsible for the decline was reduction in tariff on international calls. Another reason for the decline was higher financial charges. The scrip is expected to witness large scale selling in the coming weeks. Now all eyes are at the launch of mobile phone service by the PTCL subsidiary which has been delayed for months. According to an analysts the PTCL may fuel competition in mobile phones business by offering low tariff.

MOVEMENT AT A GLANCE
SCRIP	HIGH (Rs.)	LOW (Rs.)	CLOSING  PRICE	TURNOVER  (SHARE MN)
PTCL	22.05	19.85	20.05	281,013,000
HUBCO	19.85	19.00	19.05	174,649,500
ICI	9.85	8.95	9.05	61,989,000
Fauji Fertilizer	47.85	46.50	46.80	1,127,700
Tata Textile	15.75	14.50	14.85	112,500
Polyron Textile	2.30	2.00	2.25	8,500
Island Textile	45.00	42.00	45.00	1,500
Salfi Textile	10.00	10.00	10.00	—
Source: Invest Capital & Securities