Hubco Q1 profit down 13 percent

KARACHI (October 25 2003): Hub Power net profit in the first quarter ended September 30, 2003, fell 13 percent to Rs 1.276 billion because of increase in hydro power generation and drop in other income.

Hubco announced its first quarter 2003-04 results on Friday, posting a net profit of Rs 1.276 billion, from Rs 1.473 billion. There was no dividend announcement along with the results.

Zaheeruddin Khalid, head of research of Elixir Securities, said that the decline in profits was due to 80 percent decline in other income, mainly comprising interest income.

This can be attributed to 502 basis points lower average on 6-month T-bill rates in first quarter of FY04 as compared to 1QFY03.

Moreover, lower operating and maintenance (O&M) costs during first quarter of the preceding year due to a one-time adjustment had been one of the reasons for higher profit in 1QFY03. This time, in absence of any such adjustments, the O&M costs are at the normalised level.

The company reported 15 percent decline in sales due to lower thermal power demand in the country during the period.

Improved water availability during the period meant higher production of hydro power and hence lower off-take from independent power producers (IPPs).

About 19 percent decline in financial charges was on account of lower debt levels as Hubco has started repayment of debt. “Going forward, a significant decline in debt balances, and consequently financial charges, is expected.

Hubco has got the approval from the executive committee of National Economic Council (Ecnec) for the link-up to the KESC system. Once the project is completed, Hubco would be supplying power to KESC as well. While this would improve capacity utilisation, going forward, it would not impact the earnings or pay-out of the company as this sale of power would be under the same PPA.

“We maintain our dividend forecasts of Rs 4.25 per share for FY04. At current levels, the scrip is offering 12.28 percent dividend yield.”

The company said that after the heavy monsoon rainfall and filling of the Hub Dam to its maximum capacity, the company along with its operator, International Power, closely monitored the flood situation round the clock and took measures to secure the plant structures from flooding which would become a permanent feature.

During the quarter, the power plant generated 203 gigawatt per hour of electricity resulting in load factor of 8 percent with availability of 76 percent.

The lower load factor is mainly due to better than expected rainfall during the monsoon season resulting in high availability of hydel power in the country, the company said.

Following is the company's earnings report of the first-quarter ended September 30, in millions of rupees:

===========================================================                          2003          2002          Change                        July-Sept    July-Sept           (%) ----------------------------------------------------------- Sales                    3,295        3,878             -15 Operating costs          1,406        1,752             -19 Other income                20          115             -80 Financing costs            579          718             -19 Net Profit               1,276        1,473             -13 ===========================================================

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