This was another week during which market continued to move sideways and the same may continue for next couple of weeks. Most of the news and/or rumour having the potential to move the market in either direction have been fully discounted. Even the news that the IMF has released second tranche under the PRGF could not induce investors to take new positions.

With the suspension of oil supply by Iraq and in anticipation of similar decisions by Iran and Libya, crude prices have moved up. However, analysts term this only a temporary. The latest Israel-Palestine flare up has to be defused by the US administration due to growing pressure by the European Union members and other countries.

On the domestic front, the Referendum is expected to be carried out smoothly. The presence of General is deemed necessary for the continuity of the various structural reforms that his government has initiated. Even his critics believe that the General holds the Gold Card of 21st Century international politics. It is believed that politically Pakistan is likely to remain stale for the short to medium term.

As regards forthcoming budget, it will likely contain measures to provide necessary stimulus to local industries. Therefore, performance of economy in general and listed companies in particular would have a positive impact on the market.

The other factor expected to keep the market buoyant is speedy and swift progress on privatization front. After receiving a clear indication, from the lenders to contain losses of public sector enterprises, efforts for the sale of strategic stake in KESC and corporatize units of WAPDA seems certain.

With the demerger of PTA business, effective from August 2001, the company has been able to regain its momentum in the chemical sector. It has posted Rs 566 million net profit for the year ending December 31, 2001 as compared to a mammoth loss of Rs 1.75 billion for the previous year. The company has been able to perform well due to three main factors: 1) demerger of PTA business, 2) de-bottlenecking of CP spinning unit and 3) de-bottlenecking and automation at soda ash plant. As a result the company was able to announce 20 per cent dividend after a gap of four years. The PSF industry may not register significant increase in demand due to low cotton prices, persisting recession in global textile trade and over supply once Ibrahim Fibres commence production at expansion project. As opposed to this, soda ash demand may remain robust. Over bearish sentiments for chemical industry makes the company a strong contender to fight against many odds.

Alongwith financial results management of the company has announced successful completion of increasing stack heights — design of the grid — to meet the local environment standards. The bottom line remained in the red due to rising financial charges, the company has posted Rs 187 million loss. It was mainly attributed to financial charges which absorbed over 36 per cent of the revenue. The company has finalized repayment arrangement of its syndicated loans. Most of the members of syndicated loan have already signed the restructuring agreement. However, the real impact of this restructuring would be visible in year 2003. With the confirmation of commercial operations by WAPDA, the revamping of its loan remains the only obstacle to a positive bottom line.

Gross profit of the company for the year ending September 30, 2001 improved due to increase in sales. However, the advantage was eroded due to increase in operating expenses and financial and other charges. Despite a slight reduction in profit after tax the Board of Directors approved distribution of 7.5 per cent dividend among the shareholders for the year 2001 as compared to a payout of 12.5 per cent for the previous year. The company is involved in value addition but seems to have failed in capitalizing its edge.

It seems that the sponsors do not like to share profit with the general public who has invested in the company. At the face value this statement may look absurd because the Board of Directors approved distribution of 60 per cent dividend for the year ending September 30, 2001. They had also distributed 70 per cent dividend last year. Financial charges for the year 2001 amounted to Rs 124 million. It is difficult to swallow the bitter pill that if company is so cash rich that it can afford to also pay dividend at such high rates, why does the need for borrowing arise? As the phenomena of merger is going on in textile industry, the same is also being followed by the sponsors of this company. It is yet to be seen if they would succeed in achieving synergy.