During the week buying continued in blue chips, leading shares and second tire companies. The KSE-100 index gained 143 points and closed at 1670. The index is expected to cross 1700 points early next week if the buying euphoria continues. Saying this much, investors must keep in mind that technical corrections cannot be ruled out.

The recent past demand for cement scrips was witnessed at the back of potential of cement export to Afghanistan. Now it has been established that at least two companies have succeeded in exporting cement to Afghanistan and others may also get some orders. Export of cement is expected to improve capacity utilization and profit margin of the sector. Some of the cement units are working on shift from furnace oil to coal which will help them in optimizing cost of production and in turn improve their profitability.

Other industries must also aim at getting their share in the pie, the reconstruction programme of Afghanistan. The sectors which can immediately capitalize the opportunities are textiles, ghee, fertilizer, sugar — all having ample supplies at their disposal.

Despite lower production and sales, reducing profit after tax for the year ending December 31, 2001, the company improved its dividend pay out to 75 per cent. Last year 70 per cent dividend was paid at the back of record production of urea of 808,000 tonnes. Sales came down from Rs 8,394 million to Rs 8,220 million. Profit after tax was 5.5 per cent lower at Rs 1,064 million. The profit numbers were impacted by a number of unfavourable events. Though gains were made due to margin improvement and increase in dividend income from joint ventures. However, these were off set by absorption of GST on urea, lower production and sales, higher maintenance cost and start up loss of the new NPK fertilizer unit and seed business. The decision of Board of Directors, not to issue any bonus shares due to the recent levy of a 10 per cent withholding tax on bonus shares, should be an eye opener for the economic managers.

The bank has successfully completed its first year on December 31, 2001 under new management. It has achieved remarkable results in all areas of operations such as deposits, advances and foreign trade business. The deposits of bank increased by 79 per cent as compared to previous year and advances grew by 30 per cent. The export business exhibited a remarkable growth of 65 per cent and import business witnessed a growth of 26 per cent. All these factors contributed to tremendous improvement in profitability of the bank. The central bank has recently granted permission to add 22 new branches to its existing branch network of 20 branches. Out of these 8 branches would be opened in Sindh and Punjab each, 4 in NWFP and 2 in Balochistan. All the 22 branches would be established within year 2002.

The company has announced 10 per cent final dividend for the year ending December 31, 2001 making the total payout 85 per cent. There is an improvement by 5 per cent compared to previous year. Performance of company, reflected by an overall improvement, has been registered despite adverse fundamentals for the fertilizer sector (as mentioned above in the review of Engro Pakistan). However, some analysts termed final dividend below market expectations.

Lately the scrip has been in great demand. Over the last three weeks scrip gained almost 80 per cent, from Rs 6.6 to Rs 11.85 per share. Given the exogenous variable of the cement sector, the prices increase was a bit surprising to many analysts. However, the recent news that the company is exporting 250 tonnes cement per day to Afghanistan and plans to supply 20,000 tonnes initially. The quantum of dispatches are largely dependent on the disbursement of US$ 4.5 billion committed for reconstruction of Afghanistan. Lately IFC has completed debt restructuring of the company. This is the first restructuring of its type done by the IFC in Pakistan. This is expected to decrease financial cost of the company.

The company plans to issue Rs 300 million term finance certificates (TFCs) over a period of 36 months. The issue size of the first tranche is Rs 150 million. Out of this Rs 120 TFCs have been offered to institutional investors and remaining Rs 30 million will be offered to general public. It is the first issue of TFCs of year 2002 and its public subscription is on 6 and 7 February. The company has been performing very well for the past three years. Sales for the year 2000 were Rs 1,307 million as compared to that of Rs 800 million for the previous year. Dividend payout for the year 2000 was 42 per cent. The improvement in profit over the years has been due to efficient use of Hi-tech machinery.