November 4, 2001	Sunday	Shaba’an 17, 1422

KARACHI, Nov 3: The pre-tax corporate profits posted a robust growth during fiscal 2000, building on the trend observed in the previous year.

Financial analysis of published audited accounts of 603 companies of the 800 listed on the Karachi Stock Exchange (KSE) shows that profit before tax (PBT) shot up by 17 per cent for all listed companies under review. However, aggregate net profits on after tax (NPAT) shrank by 18 per cent.

The 603 companies, picked up on the basis of availability of three years’ accounts, represented 75 per cent of the all listed companies on KSE from 27 sectors.

Of the 27 sectors in the sample survey, only three went into losses during 2000 compared to nine in 1998 and four in 1999. Sectors that moved into profit from a position of losses in 1999 were: cement, engineering and construction. Tobacco slipped into loss.

A study on “trends in corporate profitability” by a leading foreign bank, ABN-Amro, reveals that the growth in pre-tax profits for all firms covered is up by 17 per cent (including loss-making units) but the PBT soars to 26 per cent exclusively for profitable firms.

Both financials and non-financials recorded strong increases in PBT. The rate of growth slackened for the financials while doubling for the non-financials, primarily because of a boost in profitability of the textile sector.

The loss of Rs7 billion of Hubco and Rs12.9 billion of the KESC have impacted heavily on the overall numbers.

Excluding these two, PBT increased 56 per cent over 1999, from Rs49 billion to Rs76 billion and the aggregate after-tax profits of the remaining companies rose 36 per cent from Rs36 billion to Rs49 billion.

If all the loss-making firms are excluded, PBT soars to Rs82.5 billion while net profits after tax records a more subdued rise of 6 per cent to an aggregate of Rs56 billion.

Though aggregate losses have shot up by 54 per cent, the number of losing companies have declined from 246 in 1998 (41 per cent of the sample covered) to 135 in 2000 (22 per cent of the sample). And the financial analysts at the ABN-Amro point out “this reflects, both a wider dispersion of companies making profits as well as the higher magnitude of losses of a few large corporates during 2000, principally Hubco and the KESC.

Textiles appeared to be the primary driver of substantial improvement in overall corporate profits, spinning and composite units recording bulk of the rise.

But excluding textiles, the growth rates for both pre-tax and after tax profits move into negative territory, with after-tax profits plummeting almost by one-half. This does not, however, represent the true picture.

If the textile sector and the market heavyweights like Hubco, the KESC and the PTCL are excluded, for the remaining 428 companies in the sample, PBT and NPAT, rose by almost 40 per cent each. These 428 companies represent 71 per cent of the sample and 54 per cent of all listed firms on the KSE.

Aggregate PBT for this sub-sample totalled Rs40.6 billion in 2000 and NPAT amounted to Rs25.4billion. In comparison pre and after-tax profits in 1999 were Rs30 billion and Rs18 billion respectively.

The financials improved their pre-profits from Rs5.5 billion to Rs8.3 billion while the PBT of non-financials improved from Rs38.2 billion to Rs47.8 billion. As a result of reforms and reduction of corporate tax on reforms, NPAT of the financials may improve in 2001.

The loss-making sectors in 2000 were: Vanaspati and Allied, fuel and energy and tobacco.

The highest profits, made by transport and telecommunication, were Rs22.3 billion, followed by chemical and

pharmaceutical firms, Rs9 billion; textile spinning, Rs7.38 billion, investment companies/ securities Rs5.5 billion and textile composite mills Rs4.46 billion.