The investors’ interest remained low during the week due to the Referendum, May Day and one day strike. The market continued its sideways movement. The scrip specific activity was common during the last week, mainly due to quarterly results of some of the volume leaders. The Referendum passed without any upheaval, but not without a few bomb blast on the following days.

The key factors likely to steer the market in future are: general elections, Federal Budget 2002-2003 and privatization. With the upcoming elections in October, investors are likely to keenly watch developments on the political front. The transition towards democracy is likely to be smooth. The President is expected to remain in the background with the National Security Council having a stronger say in the formation of country’s economic policies ensuring that the reforms introduced by the current regime continue. The budget is expected to focus growth with specific attention to agriculture and manufacturing. Poverty reduction will be the focal point, in line with the ongoing PRGF programme. On the privatization front, PSO will be the main attraction. Sale of strategic share with transfer of management of PTCL seems a remote possibility in the absence of interest by first tier global telecommunication companies.

ICI PAKISTAN

The company has posted Rs 38.4 million profit before tax for Jan-March 2002 quarter as compared to a loss of Rs 66.6 million for the corresponding period of previous year. This was possible only because of a reduction in financial and other charges, from Rs 375 million to Rs 167 million. Otherwise, gross profit came down from Rs 485 million to Rs 392 million and operating expenses went up from Rs 248 million to Rs 258 million.

PAKISTAN PTA

The first quarter results indicate decline in PSF sale compared with corresponding period of previous year. There are indications that the core profitability of the company deteriorated during the period. However, the company was able to contain its selling, general and administrative expenses. Financial charges have been lumped with other charges, making it difficult to say whether there has been increase or decrease. Saying this, there is a probability that interest expense has come down. The company plans to issue Rs 6 billion right shares to repay inter-company loans. With the right issue, EPS may go down further. Should the company go ahead with right issue, financial expenses are expected to go down significantly.

ADAMJEE INSURANCE COMPANY

The market was desperately awaiting Jan-March 2002 results due to a loss of nearly half a billion rupee for the year 2001. AIC’s overall topline declined by 14 per cent. Net premium declined from Rs 794 million to Rs 681 million. The company has registered decline in all the segments except miscellaneous segment. The largest decline, 20 per cent, being in motor segment. Marine segment registered an erosion of 6 per cent mainly due to lower international trade volume. Fire segment reflected a decline of 19 per cent. This segment is highly dependent on macro level activities being the most vulnerable to economic swings. Miscellaneous segment posted a growth of 23 per cent. Claims paid increased by 28 per cent, from Rs 463 million to Rs 593 million. It is unfortunate that none of the segments were able to curtail the claims growth. The management seriously needs to reassess its risk management strategy to avoid underwriting losses getting out of control.

PAKISTAN STATE OIL COMPANY

The results, on a nine-month basis, showed a decline of over 16 per cent in gross profit and a 38 per cent reduction in operating profit over the corresponding period of last year. Despite this the company announced 20 per cent interim dividend. The reduction in profit can be attributed to the losses that PSO suffered during first half due to sharply reduced POL prices and losses on inventory. Last year was the first time that PSO incurred losses due to POL price revisions due to the new pricing mechanism introduced by the government in an attempt to deregulate the oil sector completely. Even though the cumulative results were not very promising, the rise of over 484 per cent in other income was one factor, which took the investors by surprise. The fundamentals for the company have improved considerably due to revision of margin and rising prices of POL products.

FFC-JORDAN FERTILIZER

During Jan-March period the company was able to contain its losses due to lower cost of goods sold, selling and administrative expenses and financial charges. Loss before tax amounted to Rs 596 million as compared to a loss of over Rs 822 million for the corresponding period of last year. A point of concern is accumulated losses amounting to Rs 7,250 million. It is yet to be seen how and when the management would be able to wipe out this loss.