KARACHI, July 24: On Wednesday, Ibrahim Fibres Limited announced financial figures for the nine-months ended June 30, 2003. The company posted 64 per cent growth in net sales to Rs7,725 million, from Rs4,707 million in the corresponding period of the previous year. The benefit, however, did not travel down to the bottomline and the net profit after tax improved just about 5 per cent to Rs414 million, from Rs394 million in the three-quarters of the financial year 2002.

At the stock market the share in Ibrahim Fibres shed 80 paisa on Thursday to close at Rs27.25, but the scrip still stood to have gained nearly 41 per cent this year. The share was quoted at Rs19.25 on January 1. Much of the rise in the stock price noted in the last three months. Earning per share (eps) for the nine months worked out at Rs1.33, which on the annualized earnings of Rs1.77, placed the share on the price-to-earnings (p/e) multiple of 15.4x. Owing to a huge equity base (311 million shares outstanding) the Ibrahim Fibre stock is extremely liquid. Around 75 million shares changed hands during Jan-June six months of the current year.

Ibrahim Fibres is a flagship unit of the Ibrahim Group. The group holds interests in textiles, captive power, modaraba, leasing and commodity trading. Although the group’s involvement in spinning, weaving ad trading of yarn spans over last three decades, it had entered the Polyester Staple Fibre (PSF) market only at the fag end of the last decade. The plant was brought into operation on December 25, 1996 and the commercial production began from April 1, 1997. The company nonetheless ranks among the largest PSF producers in the country. Ibrahim Fibres was listed at the stock exchanges in 1995; the company had disbursed cash dividend at 15 per cent for each of the last two years: 2001 and 2002. Early last year, the units of the Ibrahim group: A.A. Textile; Zainab Textile; Ibrahim Energy and Ibrahim Textile were merged into the Ibrahim Fibres.

But back to the accounts. Operating profit of the company for the nine-months under review stood at Rs741 million, up 39 per cent from Rs533 million in the same time last year. Operating margin declined to 9.6 per cent, from 11.3 per cent. For the third quarter ended June, net sales had increased to Rs2,387 million, from Rs1,581 million in the same time last year. But the gross profit declined to Rs209 million, from Rs274 million and the operating profit decreased to Rs155 million, from Rs219 million. Muhammad Owais, synthetic sector analyst at brokerage Taurus Securities commented that the increase of 64 per cent in sales during the nine months under review, was due to the capacity expansion from 70,000 tons per annum to 204,600 tons per annum. The third quarter after tax profit of the company was observed to have declined by 48 per cent to Rs90 million, from taxed profit of Rs173 million in the similar quarter of 2002, whereas sales had recorded 51 per cent jump in the same period.

“As per our expectation, the company suffered from the supply glut in PSF, which kept gross margins at a very low level”, said the analyst. Gross margins slipped to 11.8 per cent for the three-quarters under review, from 14.6 per cent in the similar period of 2002, a contributing factor for which was unfavourable price changes in PTA and MEG during the third quarter. Also due to extraordinary increase in short-term borrowings, financial charges for the nine-months rose by a staggering 180 per cent to Rs264 million, from Rs94 million.

Reviewing the nine months performance of Ibrahim Fibres, Tanvir Abid, head of research at brokerage, Jahangir Siddiqui & Co. Ltd, stated that the gross margins had come under sever pressure following the reversal in petrochemical upward price trend following the end of conflict in Iraq. “Nevertheless, sales volumes have picked up on the back of growth in demand from the downstream textile industry along with improved performance of the company’s own textile units”, analyst said, who thought that going forward, profitability of the company could depict subdued trend, in spite of substantial growth in sales, due to deteriorating margins.