KARACHI, Jan 7: Pakistan Cables Limited — the producers of copper rod, wires, cables and conductors and aluminium profiles — swung back to an after tax profit of Rs4.1 million for the first quarter ended September 30, 2002 (Q1), from loss of Rs1.2 million in the corresponding period of the previous year. Pre-tax profit stood at Rs6.1 million for Q1, against loss of Rs0.3 million in the same time of 2001.

Net sales for the quarter under review stood 11 per cent higher to Rs200.2 million, from Rs179.6 million in the first quarter of 2001. Directors said that the increase in sales was mainly due to higher sales to the commercial market segment. Cost of sales increased by 8.8 per cent to Rs173.5 million, from Rs159.8 million and the gross profit improved 34.3 per cent to Rs26.6 million, from Rs19.8 million. Gross margin was better at 13.3 per cent compared with 11 per cent in the same time of 2001.

Chairman Towfiq H. Chinoy says: “As a result of higher sales, a favourable sales mix and better financial management, the company ended the first quarter with profit after tax of Rs4.1 million, compared with loss of Rs1.2 million in the corresponding period of last year.”

Financial charges for the period under review amounted to Rs4.6 million, which were substantially lower than Rs6.6 million in the corresponding period of the previous year. “The savings in financial charges were attributed to borrowing of short-term loans at low rates and better control of working capital,” said the chairman, adding that the savings in financial charges had also improved the liquidity position of the company.

Around a thousand small investors who hold 28 per cent stake in the company, should have little to complain for there has been an uninterrupted flow of cash dividends for as far back as one could see. The board had paid cash dividend at Rs3 (30 per cent) per share for 2002; 20 per cent for 2001 and 30 per cent for 2000. The board has, however, avoided a bonus issue for all of the past decade — since the last bonus issue at 7.5 per cent in 1992. The company’s reserves, which amount to Rs95.6 million, are now overflowing at three times the paid-up capital of Rs31.2 million, which some would say, reflect a distinct bonus pregnancy. But whether a bonus is feasible is, doubtless, the board’s prerogative to decide and directors may have other things on their mind, such as conservation of cash to cut down on borrowings. Larger capital base would require more funds to maintain the same rate of dividend.

The company’s principle customers are KESC and Wapda. But the directors were grumbling last year that KESC had not placed any major order during the year, though some business could be secured from Wapda. Overall, commercial activity and industrial demand during 2001 had also remained low, which did not allow a big boost in net sales. Besides the poor health of the big clients (KESC and Wapda), the major concerns for the company were the high taxation on the industry. In their Q1 report, directors hoped that the new government would build on the positive outcomes of the previous government, including the structural reforms.

With the shareholders’ equity at Rs126.8 million at end- September 2002, the break-up value of the 10-rupee share worked out at Rs40.69. On a historical perspective the stock had perhaps hit its highest price of Rs88 in 1992. The current price tag is Rs27.05 and the earning per share for Q1 works out to Rs1.31. The stock is now trading at 5.1 times the Q1 annualized earnings of Rs5.24. The scrip is pretty illiquid as about one per cent of the total outstanding shares in the company came up for trading at the KSE during all of the year 2002.

A note to the accounts stated that in accordance with the requirements of international Accounting Standard 34 “Interim Financial Reporting”, the comparative figures in the balance sheet reflected the end of immediately preceding financial year whereas the comparative figures in the profit and loss account and cash flow reflected figures of the corresponding period of prior year.

Including the operating assets at Rs57.5 million, total assets at Pakistan Cables stood at the book value of Rs476 million at end-September 2002.