By SHABBIR H. KAZMI
Updated Dec 15, 2001

The week was marked by holiday mode of participants as well as investors who were not ready to take positions. Approval of the PRFG has been termed a positive point and some major activity is expected in the new year.

Election of the Board of Directors of Karachi Stock Exchange for the year 2002 will be held on December 26, 2001. Two nominations have been filed for the office of Chairman and four nominations for the position of Vice Chairman. For eight vacancies of Directors 18 nominations have been filed.

The year 2000-2001 financial result of most of the leasing companies have been announced showing more or less a stable performance. While Askari, Pak Gulf and Pacific failed to announce any dividend for the year, Union leasing provided a pleasant surprise with a 15 per cent payout after four years. Other companies which declared dividend are Orix, NDLC, Grays, Paramount, Pak Apex, Pak Saudi and Sigma.

The first quarter results indicate 7.3 increase, to Rs 15.7 billion, in first quarter of 2002 as compared to Rs 14.7 billion for the corresponding period of previous year. The increase in other income by 41 per cent and a decline in financial charges by 47.3 per cent contributed to the improvement in core profitability. The increased in profit was driven from additional access of lines. On tends to believe that management is making efforts to put the company in a position that its value in the impending strategic sale may be maximized. If the company is able to expand its capacity, the revenue is expected to grow. The Company has not shown spectacular improved margins, it is obvious that core profitability has been improved.

The company has announced financial results for the year ending June 30, 2001, the first complete year of operations since the takeover by the new management and restart of factory in January 2000. During the year, margins remained under pressure due to over capacity, increase in raw material cost and ever increasing cost of fuel and power. Despite these pressures the company was able to achieve better results by effective cost controls and improved plant efficiency. The company issued additional 11 million shares to foreign investment companies. A BMR programme is being implemented at an estimated cost of Rs 150 million, being financed through TFCs. According to conservative estimate a growth rate of 10 per cent for the glass industry is expected. However, even with enhanced profit, the company would not be in a position to declare any dividend for a few years due to accumulated losses of Rs 49 million.

On a profit after tax of Rs 50.5 million, the Board of Directors have recommended 50 per cent dividend for the year ending June 30, 2001, as compared to a profit of Rs 29.6 million for the previous year. Net sales increased by 18. 2 per cent. Segment-wise analysis indicate that razor blades sales grew by 16.3 per cent, soap sales by 8.41 per cent and exports by 37 per cent over the last year. The improved performance can be attributed to growth in sales, cost optimization and effective cashflow management. Financial charges came down from Rs 13.6 million in year 2000 to Rs 5.4 million for the year under review. Treet Corporation is the only manufacturer of razor blades in Pakistan. It has been facing hard times due to unchecked and large scale smuggling of blades into Pakistan. The government must stop this.

As expected the bottomline of the company was severely flattened by the increase in its financial charges. Profit after tax for the year ending on June 30, 2001 came to Rs 630.6 million. The takeover of Dhan Fibres by Dewan in year 2000 was perhaps the first high profile takeover in Pakistan's corporate history. A lot has been said about the post-merger synergy, but an investment perspective, the company has little attraction as it would take some time for these synergistic benefits to actually pass to the stockholders. Dewan is now under a huge debt obligation which is reflected from 198 per cent increase in financial and other charges in year 2001. Chances of decent payout look dismal for next couple of years.

The company has posted Rs 97 million profit after tax for the year ending June 30, 2001, as against a profit of Rs 84.9 million for the previous year. The Board of Directors have approved 17.5 per cent dividend, whereas the payout for year 2000 was 10 per cent. Production of both PSF and polyester chips improved and capacity utilization was 94 per cent. Sales were higher as compared to previous year due to increase in sales volume and higher selling price of PSF. Input cost went up due to rupee depreciation and rise in gas tariff. In Report of the Directors, apprehensions have been expressed about the fallout of the September 11 incident on Pakistan's economy.