KARACHI, Aug 7: A day ahead of ICI Pakistan’s half-term results announcements, analysts on Wednesday were issuing almost a consensus forecast of around Rs200 million in net earnings for the company.

The board of directors of ICI is scheduled to meet on Thursday at 10 in the morning to announce financial figures for second quarter (April-June 2002). Market players are generally not expecting the company to declare an interim dividend — though an interim at 20 per cent had been paid for the same time last year.

But even the earnings forecasts would look pretty optimistic in the face of a net loss of Rs131 million that ICI had suffered in the corresponding six months of the previous year. In the first quarter (Jan-March 2002) the company had returned to the black but made a smaller profit of Rs25 million. Analysts said they had reason to believe that the company may have made sharply higher profit in the second quarter of the current year.

The loss of Rs131 million in the first half last year was due mainly to foreign exchange losses incurred on foreign currency loans. That would have been averted this time, due to a stable rupee/dollar parity. Also the reason for a tiny Rs25 million profit in the first quarter this year, was due to an operating loss in the PSF business; the unit had made loss at gross level amounting to Rs46 million.

Analysts at Taurus Securities said that the domestic PSF prices had started to appreciate from mid-March 2002, in line with the international trend. ICI’s PSF capacity expansion also geared into commercial production in the second quarter of the year.

“However, due to excess market supply and high consumer inventories, domestic prices remained at a discount of Rs2-4 per kg to international prices,” Taurus said, but added that the quarter would, nonetheless, show a marked improvement over the first three months. The brokerage house believes that the import of cheaper soda ash from China by small traders may have impacted ICI’s first half performance (of the soda ash division). “These imports have prevented ICI from controlling output prices, justifying our view that, in spite of a dominant 80 per cent domestic market share, the company’s pricing power is limited by imports, and hence it will remain a price taker,” Taurus said; it forecast after tax profit of Rs211 million, equivalent to earnings per share of Rs1.52 for the half-year.

Analyst Khalid Iqbal Siddiqui at InvestCap was looking at after-tax profit at ICI for the half year to fall in the region of Rs190 to Rs210 million. He observed that the company’s PSF business, which was a victim of extremely pressurized margins in first quarter 2002 owing to a worldwide recession, was expected to have returned to profitability during second quarter; though the half year operating profit of PSF would be lower than the Rs234 million that the company earned in the same period last year.

According to Khalid, the recovery of PSF business could mainly be due to the “short-lived spurt in worldwide PSF, PTA, and MEG prices, which were constantly on the rise during second quarter 2002, enabling the inventory gains phenomenon to occur”. He said that the domestic PSF prices had improved to Rs64 per kg during second quarter, from Rs51 per kg in March (excluding GST).

And brokerage, First Capital Securities said in its report on Wednesday that it estimated ICI to post net profit of Rs228 million for first half. The brokerage stated that improvement in results was expected to be “driven by better inventory management of the PSF business and higher sales from expansion of soda ash plant”. First Capital observed that the PSF margins during second quarter were 32 per cent lower than the first quarter, averaging at around 100 dollars per ton as against 144 dollars per ton in the previous quarter. “However, in our opinion, the company is likely to have made the chunk of its raw material purchases during the first two months of second quarter,” First Capital said, and added that lower inventory level depicted on the company balance sheet on March 31, 2002 further strengthened their view.