KARACHI, March 24: Multinational companies who have established themselves in Pakistan are doing a roaring business with huge returns on their investment and profit/capital. And what is more all of that is repatriable without a let or hindrance. Among them, pharmaceutical firms with overseas parents, perhaps stand out as a shinning example.
The thought comes to mind as one glances through the financial figures of Wyeth Pakistan Limited —- the multinational pharmaceutical company -— that were released on Monday. The company posted 112 per cent growth in profit after tax to Rs226.7 million for the year ended December 31, 2005, from Rs107.0 million the pervious year. Top line growth stood at 71 per cent to Rs1.8 billion, from a year ago net sales at Rs1.7 billion.
The board, which met on Monday also proposed cash dividend for the stockholders at 60 per cent. The interesting aspect was the share of profit (dividend) received by the parent company which amounted to Rs163.5 million — equivalent to 72 per cent of all the after tax profit of Rs226 million earned during the year. Other equity holders were shown to have earned Rs63 million.
This is not to criticize the multinational companies for making and taking away profits, but just a handy example of the fabulous returns that Pakistan offers in established profitable businesses. There are no ready figures available, but foreign firms operating in various other businesses including engineering and the oil & gas sector are probably doing even better.
The paid-up capital of Wyeth Pakistan Limited stands at Rs142.2 million in shares of Rs50 each. Of course, the balance sheet must carry enormously huge reserves, but only taking paid-up capital as the base —- of which 75 per cent or Rs107 per share would be held by the overseas parent company — it looks like the sponsors have made more money in one year than their investment in paid-up capital.
Again, no one is grudging the hefty dividends that the company’s parents secured. But if the country offers so huge returns on foreign investment, it needs to be more forcefully projected abroad. The fly in the ointment as far as multinational pharmaceutical firms are concerned, is perhaps the high pricing of medicines/drugs and the issue of transfer pricing, which have continued to surface now and then, and remains debatable. Foreign direct investment at the cost of local industry or an unbearable burden on consumers would of course have to be resented.
But back to Wyeth. The 50-rupee share in the company currently trades at the staggering price of Rs1,999. On the earning per share of Rs159.48, the stock is doing at around the market price-to-earnings multiple of 13x. The trouble though with all multinational, especially pharmaceutical firms, is that there is very small free float so that trading hardly takes place at the stock exchanges. In the two months Jan-Feb, just 9,360 shares changed hands at the bourses. A larger free float of countless more profitable companies would give the stock market much needed depth. Can the regulators persuade sponsors to release more of the stock in the market, from their frozen blocks?
