KARACHI, March 6: When it comes to trading in the ICI Pakistan stock, it is possible to spot more bears than bulls. But that possibly is because investors are scrambling for the highest amount of profit from equities in the shortest possible time. By that standard, ICI did underperform the market year-on-year. The gap, albeit has been all but small.

The KSE-100 index has gained 99.7 per cent between March 5, 2003 and the same date this year. A year ago on March 5, the share in ICI stood quoted at Rs44.25; this Friday (March 5) it traded at Rs82.05, representing year-on-year gain of 85 per cent. Earning per share (eps) for FY03 works out at Rs5.52 on 139 million shares outstanding.

On the current price level the ICI scrip offers a dividend yield of four per cent and is trading on price-to-earnings (p/e) multiple of 14x. The KSE-100 index (based on 2003 earnings) offers earning yield of 10.21 per cent and cash yield of 7 per cent. Overall p/e ratio works out at 9.8x.

For the year ended December 31, 2003, ICI Pakistan posted profit after tax in the sum of Rs766 million, which represented 59 per cent drop from after tax profit amounting to Rs1,825 million in the corresponding period of the previous year. But the decline in taxed profit for the year under review was mainly due to deferred tax provision of Rs1,193 million made last year, which had boosted company's after tax earnings that year. The board also announced final cash dividend at Rs2.50 per share, which was higher than the payout at Rs2.25 declared last year.

At the pre-tax level, ICI Pakistan posted strong growth of 11.5 per cent to Rs807 million, from Rs723 million the year ago. The increase in pre-tax profit for FY03 was mainly on the back of a huge 48 per cent growth in sales revenue and a big cut of 38 per cent in financial charges, as the company was able to restructure debts in low interest rate environment. Paints, general chemicals and "other" segments of the ICI Pakistan's business had posted strong performance, but the company's core businesses i.e PSF and soda ash lagged behind.

Gross sales for the year under review amounted to Rs22,156 million, which reflected a 47 per cent increase from Rs15,074 million the earlier year. After deducting sales tax and commission in the sum of Rs4,029 million for the year under review and Rs2,855 million in FY02, net sales were up 48 per cent to Rs18,127 million, from the previous year's net sales at Rs12,219 million. Increase in net sales had been driven mainly due to ICI Pakistan's entry into the furnace oil business in the year under review. The furnace oil business had been suspended in the last quarter of the year due to ban on its imports.

"Other income" decreased by 43 per cent to Rs187 million for the year under review, from Rs329 million the previous year, which was due to the settlement of loans by the associate company PPTA. Mark-up on those loans was a major contributor to the "other income" segment.

The recent increase in price of coke - a by-product for several industries - by Pakistan Steel is a worrisome news for most industries, including perhaps ICI Pakistan. The per ton price of coke has been increased by 45 per cent in just a span of 2-3 months. Three months back, the price of coke was Rs8,300 per ton, which is now being sold by Pakistan Steel at Rs12,000 per ton. Coke is a by-product derived from the kiln after the melting process.

The prognosis for ICI Pakistan do not look to be stunning bright. Furnace oil consumption has more than halved in the country and the segment is not likely to make much contribution to ICI Pakistan's earnings going forward.

In soda ash, budgetary impact of 10 per cent decrease - from 20 to 10 per cent - in import tariffs would be felt and the company's venture into the PTA business became a victim of extremely pressurized margins. But for all that, it is heartening to see that the management remains undaunted. Recent reports suggests that ICI Pakistan holds plans to market POL products in the country. The company is believed to be one of the applicants for a licence as oil marketing company.