KARACHI, April 22: The previous Friday, Tri-Pack Films Limited—manufacturers of Biaxially Oriented Polypropylene (BOPP)— unveiled financial figures for the first quarter ended March 31, 2003. The company posted 30 per cent growth in net sales and 23 per cent improvement in after-tax profit, over the corresponding period of the previous year.

The significant feature for the current year is that starting June 2003, profits would begin to be taxed at the normal corporate tax rate of 35 per cent. Commercial production had begun on June 1, 1995, and the company would have exhausted the eight-year income tax shelter enjoyed for its location in Hattar.

Tri-Pack Films Limited is a joint venture between Mitsubishi Corporation of Japan and the Packages Limited. Registered office of the company is situated in Karachi, head office is in Islamabad and the plant is located in Hattar Industrial Estate, NWFP.

With a huge operational capacity to produce finished BOPP, the project is the largest in Pakistan. BOPP as a packaging material is widely used in the consumer goods industry, such as biscuits and cigarette packaging, food products, medicines, confectionery, adhesive tape, metalizing, lamination, soap, detergent, processed foods, garments, hosiery, tobacco and the Ice cream industries.

Gross turnover for first-quarter (Q12003) increased 31 per cent to Rs447 million, from Rs341.7 million in the similar period of the previous year. Net sales for the Jan-March 2003 period rose 30 per cent to Rs370.1 million, from Rs283.2 million in the same period of 2002. Profit after taxation increased 23 per cent to Rs58.9 million for the quarter under review, from Rs48 million in the same time last year.

“The increase in sales and profit is due to an increase of 24 per cent in capacity from 8,700 tons per annum to 10,800 tons per annum,” analysts at brokerage, Taurus Securities said. Other analysts at InvestCap observed that the company’s Q1 net sales had increased, inspite of low local prices of BOPP, which they said was largely due to increasing demand from fast moving consumer goods (FMCGs), cigarette and other food related companies.

Operating profit for the quarter under review amounted to Rs83.7 million, 27 per cent higher than Rs66.2 million in the same period last year. Financial charges stood reduced by 45 per cent to Rs8.7 million, from Rs15.9 million, which Taurus Securities attributed to the company policy of internal growth, i.e, the company was financing its growth through its own earnings.

Going forward, InvestCap expects sales and profit to be impacted due to low BOPP prices and narrow margins between imported and the local finished BOPP.

Taurus Securities observed that the company was likely to pay the remaining long-term loan of Rs275 million this year, as it had retired Rs242 million last year. “The company has, therefore, a high level of financial flexibility i.e, it can finance growth through profits, as it has more than Rs450 million in general reserves, which can be used to expand capacity,” analysts at Taurus said.

IP Securities review on Q1 results noted that Tri-Pack’s performance in the last three years, was a depiction of consistent growth pattern. The brokerage said that on the financial year 2003 expected earnings of Rs290-300 million, the company was trading on a price-to-earnings (p/e) ratio of 5.5x. The company had distributed cash dividend at 30 per cent for each of the last two years. Taking last year’s payout ratio, analysts at IP Securities expect the company to announce payout of Rs4 per share in FY03, which would be mere 7 per cent of cash yield.

In the previous six years, the price of stock in Tri-Pack has taken a huge leap forward. One recalls that the scrip was trading at the discounted price of Rs8 in 1997, but rose to Rs32 in the two years following and continued to galvanise to Rs55. A positive feature of the stock is probably its relatively high liquidity. Close to a million shares were traded at the KSE in the first three months of the current calendar year.