Updated Nov 29, 2002


The market came under selling pressure due to political uncertainty and the US allegation holding Pakistan responsible for collaborating with North Korea. While the first issue is expected to subside with the passage of time, the second issue is expected to prevail for some time. Some analysts forecast that after Iraq, Saudi Arabia and Pakistan are the potential targets. The hype is being created 


against Saudi Arabia by Western media and the campaign against Pakistan is fully supported by India.

The politicians have been demanding restoration of democracy in the country. However, it took exceptionally long to elect the new leader of the house. No sooner did the Prime Minister took the oath, some factions started their campaign against him. It is not the question of prevailing of PML(Q) government but survival of democracy in the country. Politicians are supporting, by their acts, the perception that democracy cannot prevail in Pakistan.


According to a report by AKD Securities, the company has demonstrated revenue growth with improved capacity utilization. The prospects for improved margins for the year 2002 are assured. Beyond December, pulp prices seem to be headed towards new low as predicted by declining 3-month forward price of Northern Board Soft Kraft (NBSK). Packages imports pulp for higher-grade products. With improved capacity utilization, decline in pulp price and appreciation of Pak rupee, the nine-months profit has improved as compared to the corresponding period of last year. Lower raw material cost will help in bringing down working capital requirement. Coupled with this, lower interest rates will further improve the bottom line.


According to a report by IP Securities, the economic fundamentals for the company have changed drastically. International economic slow down, squeezed selling margins, diminution in the value of investments and termination of a 10-year tax holiday period have all together pushed the company's earning base down to a groveling level. In the wake of a rebound of textile production in the US, Canada and Far East, the company has the potential to improve its bottom line by focusing on value-added exports. Yarn export contributed about 40% towards total sales of the company for the year 2001. For the year 2002, the company is expected to post Rs 191 million profit after tax, which will be about 22% lower than the previous year's level. Keeping in view the company's payout policy, the analysts forecast a 35% dividend for the year 2002.


The company has posted Rs 3.376 million profit before tax for the year ending June 30, 2002 as compared to a profit of Rs 15.365 million for the previous year. Though the company managed to improve sales, the out of proportion increase in cost of goods sold plunged the profit. Increase in selling and administrative expenses and financial charges, coupled with decrease in other income were responsible for reducing the profit to one third level. Sales improved from Rs 60 million to Rs 68 million. As against this, cost of sales went up from Rs 43.5 million to Rs 59.2 million. Administrative and selling expenses hiked from Rs 3.4 million to over Rs 5 million. Other income came down from Rs 3 million to slightly more than Rs 1.2 million. Financial expenses more than doubles, from Rs 0.644 million to Rs 1.375 million.


A better control on cost of goods sold and lower financial charges have helped the company in posting profit for the year ending June 30, 2002. The company has posted about Rs 32 million profit after tax for the year 2002 as compared to a loss after tax amounting to Rs 89 million for the previous year. Sales improved from Rs 725.4 million to Rs 732.9 million. Cost of goods sold came down from Rs 749 million to Rs 684 million. The most remarkable feature was the reduction in financial charges, from Rs 52.5 million to Rs 0.692 million. The results would have been still better had there was not nearly 50% decline in other income, a plunge from Rs 9 million to Rs 6.7 million. However, huge accumulated losses remains the biggest concern. Accumulated losses as at June 30, 2002 amounted to Rs 469 million. The company will take years to wipe out these losses.


The company has not only posted profit but also declared 22.5% dividend for the year ending August 31, 2002. Sales went up from Rs 115 million to Rs 266 million. Cost of sales hiked from Rs 117 million to Rs 257 million. Administrative and selling expenses went up from Rs 1.96 million to Rs 2.45 million. The company has a very low paid-up capital of Rs 2.3 million. It is very difficult to find any rationale for the listing of such companies on Karachi Stock Exchange. These companies may be of some benefit for the sponsors, but are of no consequence for the investors.