The year 2001 closed with KSE-100 index at 1,273 points and the new year has started with a positive movement of index. This week KSE-100 index closed at 1,362 points in the backdrop of enhanced buying interest and punters forecast of inching towards 1,400. The clouds of war progressively clearing in the backdrop of hectic diplomatic moves to keep cool both the countries having nuclear arsenal at their disposal.

Future direction will largely be guided by the outcome of the SAARC summit. Saying this much, it is necessary to add that investors have learnt to work within the framework of typical Indo-Pak psyche.

At this juncture it is necessary to bring to the attention of the stock exchanges that they should work more vigilantly. There are apprehensions that some market manipulators have once again become active. Investors are anxiously awaiting the report of the committee appointed by the SECP to investigate HUBCO dividend fiasco. Some punters believe that it is not difficult to find out the culprits because ample evidences are available with Karachi Stock Exchange.

The company has slashed installation charges for new connections to Rs 1,850 and reduced the national and international call rates from January 1, 2002. Lately, the state owned monopoly had increased line rent, which was resented widely, but no reduction has been announced. It seems that there has been a shift in strategy to beat the competition posed by mobile telephone companies. As compared to total population the number of land-line subscribers is very low and there is a need to increase capacity of exchanges throughout the country.

The company has posted Rs 815 million gross profit for the year ending June 30, 2001 as compared to a profit of Rs 706 million for the previous year. Despite this profit after tax declined from Rs 198.7 million for the year 2000 to Rs 191.59 million. This reduction is attributed to increase in other operating expenses and financial charges. Other income also declined. However, the company was able to maintain its dividend payout at 22.5 per cent.

The company was among the recipients of the top 25 companies award for the year 2000. Dividend for the year was as high as 400 per cent. The company announced 200 per cent profit for the year ending June 30, 2001. The company has been able to pay such a high dividend only because it has a small capital base. While paid up capital is slightly more than Rs 16, total of revenue reserve and un-appropriated profit as at June 30, 2001 amounted to Rs 184.5 million.

The modaraba witnessed a complete reversal of fortune during the year ending June 30, 2001. This was mainly due to a colossal increase in provision for doubtful debts — from 21.6 million for the year 2000 to Rs 147.4 million for the year under review. This clearly indicate that either the modaraba did not make sufficient provisions in the previous years or had witnessed some extra ordinary circumstances. As such if one looks at the profit and loss statement of last two years, it is evident that income was too meager to take care of operating expenses and financial charges. Earning per certificate which was as low as Rs 0.15 for the previous year plunged to a negative Rs 4.45 for the year 2001.

The company has posted Rs 524.42 million loss after tax for the year ending June 30, 2001. It had posted Rs 236.37 loss for the previous year. The accumulated losses as at June 30, 2001 amounted to Rs 984.75 million as against a paid-up capital of Rs 168.76 million and general reserve of Rs 332 million, resulting in a negative equity of Rs 483.98 million. Sales amounting to Rs 1,422.73 million were not enough to cover cost of goods sold valued at Rs 1,514.65 million, resulting in gross loss of nearly Rs 92 million. The major contributor to persistent huge losses has been financial charges. Since the company has been taken over by a new management and fundamentals for cement industry are expected to improve with commencement of reconstruction activities in Afghanistan, it is expected that new management would be able to overcome the existing problems.

The company has posted Rs 3.4 million loss after tax for the year ending June 30, 2001 as compared to a profit of Rs 6.6 million for the previous year. Sales came down from Rs 169.8 million to Rs 158.7 million. There was reduction in operating expenses and financial charges but gross profit was not sufficient. Since the basic raw material was imported rupee depreciation has an adverse impact on cost. The purchases by food department and PASSCO were also lower as compared to previous year. Another important factor pointed out is the dispute with a local commercial bank leading to the central bank reporting a default unilaterally.