Nishat Mills profit more than doubles

KARACHI (December 01 2003): Nishat Mills Ltd, Pakistan's largest textile factory, has said its full year profit has more than doubled, after exports to the US and European Union boosted.

Net profit rose to Rs 410 million ($7.1 million) in the year ended on September 30, 2003, from Rs 201 million in the previous year, the Lahore-based company said in a statement to Karachi Stock Exchange. Sales rose 10.5 percent, to Rs 13.2 billion.

Pakistan textile makers shipped more as they won preferential market access for textiles in return for the country's support of the US-led war in Afghanistan. Pakistan's textile exports rose to $2.6 billion in the four months to October 31 from $ 2.25 billion a year ago.

It was not the first time in its operating history that Nishat Mills financial results had depicted a major disappointment with the FY03 profit after taxation at Rs 411 million significantly below the Rs 500 million plus consensus expectations, said a report of Jahangir Siddiqui Capital Market.

Though overall profitability was doubled, this is largely attributable to last year's low base effect. Nishat Mills earnings for the nine months ended June 2003 amounted to Rs 350 million.

This implies that during 4Q/FY03 (July – September 2003), the company's net income stood at just Rs 60 million.

The cash dividend pay-out at Rs 1.5 per share also falls short of investors' expectations.

Revenue growth stood at 10.6 percent to Rs 13,209 million. This portrays a slowdown compared to the 14 percent growth during the first nine months attributable to the strengthening trend of the rupee.

Gross margins as expected showed a 270 basis points decline ensuing from higher cotton procurement costs. Gross profits were thus down 7 percent to Rs 1,888 million.

Nishat Mills other income depicts a 61 percent increment to Rs 152 million compared to Rs 94 million last year. This is the result of handsome dividend receipts from investee companies.

Nishat Mills has sizeable investments mostly in associated concerns. As on September 30, 2002, the company's holdings constituted 53 million shares of DG Khan Cement, 5.4 million shares of Umer Fabrics, 0.7 million shares of Nishat Chunian and 11.2 million shares of MCB (adjusted for subsequent bonus issues).

The soaring stock market has also resulted in massive revaluation gains on the company's investments.

Following the applicability of IAS-39, the company's investments are marked-to-market on every balance sheet date with the unrealised gain or loss transferred to shareholders' equity.

Financial charges were down 35 percent on lower borrowing costs on the back of the soft domestic interest rate environment.

During FY04, we expect Nishat Mills to emerge as one of the better performing textile sector plays.

Despite the recent surge in cotton prices, the impact on Nishat Mills is to be mitigated on the considerable share of blended and value-added products and expansion driven revenue growth.

The following table shows the company's full-year earnings in millions of rupees.

=======================================================                       Oct-Sept    Oct-Sept    Change(%)                       2002-03     2001-02 ------------------------------------------------------- Sales                  1,320       1,194             11 Cost of goods sold     1,182         991             19 Administrative Exp.      831         796              5 Net Profit               410         201            104 =======================================================

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