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Equities resist decline.

The stock market during the month under review depicted an upturn. It touched the highest on January 14, at 168.89 with aggregate market capitalisation of Rs. 208.711 billion and the lowest at 160.08 on December 16 with aggregate market capitalisation of Rs. 194.631 billion. The monthly turnover of shares increased from 72.256 million in November 1992 to 103.107 million in December 1992.
 General Market
 Index Capitalisation
 (Rs. in billion)
16.12.92 160.08 194.631
24.12.92 165.65 202.959
31.12.92 164.44 203.501
07.01.93 165.57 203.948
14.01.93 168.89 208.711
20.01.93 166.81 205.770


Several companies skipped dividend. These include Neelom Nylon, Fazal Vegetable Ghee, Idrees Textile, English Leasing, Babri Cotton. Handsome dividend was declared by Babri Cotton and Bannu Woollen. Mohib Exports received a total subscription of Rs. 302.170 million against its public offer. Pak Suzuki has received consent order from Controller of Capital Issues to issue right shares valuing Rs. 122.828 million equal to 100% at a premium of Rs. 15 per share. Modarabas are likely to pay handsome return as they are understood to have performed well last year. Foreign funds are still active. However, they are reported to be concentrating on low priced MNCs instead of overvalued ones.

Inflow of capital to Pakistan was to the tune of $279 million during 1991-92 was a stabilising factor in the market. The inflow is being continued as a result of the liberalisation policy of the government.

Textile Shares are under strain. The high price of cotton has eroded the competitive edge of the spinning mills in foreign markets. The cotton crop this season is estimated below nine million bales which would hardly suffice local mills requirements. There is growing demand for import of raw cotton from the Central Asian States to meet the shortfall. The sugar outlook appears to be bright with record production of 2.30 million tonnes of sugar during the year under review.

Domestic production of automobile has declined substantially from 140,000 vehicles in 1990-91 to 99,000 vehicles in 1991-92. Automobile experts predict that once the privatisation process is completed and consolidated, domestic production will start picking up in the related categories as evidenced in the post privatisation production programme of Millat Tractors.

Islamabad Stock Exchange in its pre-budget proposals made the following recommendations.

1. Exemption of capital gains tax for five more years so that investment climate gets promoted in the country.

2. Exemption from tax on bonus shares already in place till 1993 be extended till 1998.

3. Ten per cent tax on dividend income be deducted on the net income after deduction of Zakat instead of deducting the tax on gross dividend amount including Zakat.

4. Tax credit incentive available under section 107 of the Income Tax Ordinance 1979 may be restored.

5. The tax on Modarabas should be withdrawn or alternatively an exemption for 2 years may be extended to 5 years.
Dividend Announcements
 Bonus Book
 Dividend Right Closing
Bannu Woollen Mills 10 30B 18.03.93
Burewala Textile 55 -- 21.03.93
General Tyre & Rubber 25(i) -- 01.02.93
Glaxo Laboratories 10(i) -- 09.04.93
Hoechst Pakistan 20 -- 22.03.93
M. Farooq Textile Mills (*)5(i) -- 22.02.93
Sh. Fazal Rehman -- 15B 16.02.93
Trust Modaraba -- 30B --
Siemens Engg. +5(F) -- 10.02.93
*Second Interim

Corporate Briefs

PIAC: Addressing the 36th Annual General Meeting, Mr. Anwar Zahid, Chairman PIAC today told the shareholders that the airline earned a record revenue of over Rs. 20 billion and unprecedented operating income of Rs. 1.58 billion during the financial year 1991-92. Operating revenues showed an impressive 21.3 per cent improvement over the revenues of the previous financial year while the expenses registered a relatively moderate increase of 11.3 per cent compared to last year. The airline during the year carried a record number of passengers. The figures stood at 5584 thousand registering an increase of about 11 per cent over the passengers carried in the last fiscal year. Revenue passenger kilometre increased by 10.3 per cent while the overall revenue on kilometre were 6.2 per cent above the previous year.

Chairman PIAC in his speech presented the highlights of the financial and operational results of the airline for the year under review before the shareholders.

The Chairman PIAC informed the shareholders that in spite of global recession in the industry PIA achieved a financial turn-around and succeeded in recording a healthy profit. This was achieved in spite of the major capital investment of Rs. 7.5 billion on purchase of four new Airbus A310-300s and related spare parts which resulted in a big spurt in interest and depreciation cost during the year.

The PIAC Chairman explained to the shareholders that various measures are being taken by the airline management to further expand its operation, upgrade and modernize the fleet and improve passenger services. He said that four new Airbus A310-300s have been inducted into the airline fleet while one more such aircraft is expected in December 1993. The Airline fleet plan for the Nineteen envisages replacement of Fokker F-27s and Boeing 747s. These replacements will be financed on highly competitive terms similar to those worked out for the new airbuses.

Concluding his address Mr. Anwar Zahid said that the earlier period of uncertainly is now over and the airline is set for further expansion and growth. While other carriers are saddled with excess capacity, PIA plans to acquire additional aircraft to over-come the present capacity constraints. Airline's audited accounts for the financial year 1991-92 were approved by the shareholders at the Annual General Meeting. In view of the improved profitability, the AGM also approved issuing of bonus shares @ 12.5 per cent as dividend for the shareholders.

Sind Alkalis Declares 20 pc Dividend: The Sind Alkalis Ltd. at its 2nd Annual General Meeting declared a cash dividend of 20 per cent and also approved issuance of bonus shares at the rate of 12.5 per cent in the ratio of 1:8 in order to improve the company's financial base for future expansion programme. Sind Alkalis, which is one of the major producers of soda ash and sodium bicarbonate, has now come out very boldly after a decade of recession by achieving the highest ever sales during 1991-92 raising it to Rs. 325.57 million from Rs. 298.22 million; a jump of 9.17 per cent. This achievement could be made possible because of improved capacity utilization of 101.3 per cent as against 97.43 per cent of 1990-91. It was mainly due to availability of more working days made possible by a shorter annual shutdown for plant maintenance and also because of extra contribution in the production of soda ash by 1,769 metric tonnes on account of newly installed salt upgradation. Despite higher sales, gross profit being up by 15.28 per cent (from Rs. 65.90 million to Rs. 75.97 million), the net profit of the company came down from Rs. 34.06 million to Rs. 33.62 million. It were the operating expenses which dried out the benefit of gross income.

Tri Star's Expansion Plan: Tri-Star Polyester Ltd., a polyester filament yarn manufacturing unit has undertaken massive expansion of its capacity from 1,820 tonnes to 7,280 tonnes of polyester filament yarn per annum. The Unit is already in production and the expansion will be carried out in two phases. The first phase will increase the capacity by 1,820 tonnes per annum for which contract for import of machinery has already been signed and will be self financed. The second phase will increase the capacity by 3,640 tonnes per annum making a total of 7,280 tonnes per annum. The financial arrangement for the second expansion are in the final stages of approval.

Security Papers Production up by 7.1 pc: Despite increase in cost of production, the Security Papers Ltd. manufactured 93 tonnes of more paper than the previous year's output of 1299 tonnes, showing a net rise of 7.1 per cent. The company announced a dividend of 7.5 per cent, and issued Bonus share in the proportion of 3:8; which is equivalent to 45 per cent of the paid-up capital. This substantial increase in sales, however was absorbed by huge administrative and general expenses, mainly on accounts of salaries, wages and other benefits; which had to be complied with in accordance with the Pakistan Security Printing Corporation's directives. This resulted into decline of profit from Rs. 31.5 million in 1991 to Rs. 31.21 million in 1992. Owing to minor modifications in the existing plant, the company produced this year 1197 tonnes banknote paper and 195 tonnes of non-banknote paper as compared to the corresponding year's output of 11524 tonnes and 147 tonnes respectively.

Quaidabad Woollen Mills: The Management and the ownership rights of Quaidabad Woollen Mills Ltd. were transferred to Schon Group by Pakistan Industrial Development Corporation (PIDC). Quaidabad Woollen Mills Ltd., is the biggest carpet manufacturing mills of Pakistan acquired by Schon Group from the Government under privatisation scheme for Rs. 80 million.

Balochistan Glass: This Habib Group unit at Hub earned in 1992 a net profit of Rs. 30.13 million; recording a rise of 125 per cent over 1991 earnings of Rs. 13.386 million against increased sale by 37.51 per cent to a value of Rs. 231.28 million as compared to Rs. 168.19 million in the previous year. The management also announced distribution of 25 per cent dividend. The company which produces glass containers for use in filling cold drinks, syrups, Jams/Jellies is also busy in exporting its products; and here the performance was 63.86 per cent higher than 1991; with local sales showing a rise of nearly half of the exports. The performance in exports entailed a rise of 158 per cent amounting Rs. 9.72 million as against Rs. 3.77 million on account of selling and distribution expenses.

Supporting to improved sales was recorded as 102 per cent utilisation of the existing capacity of 26,400 mt. tons with a production of 27.010mt. The Plant operated for 10 months only in 1991 because of change over work in furnace refractory, which resulted into reduced production of 21,920 mt. To meet the increasing demand of the market, wherein BGL claims to share 50 per cent of the market, an expansion plan is in hand involving a capital outlay of Rs. 70 million. Electric booster for increasing furnace melting capacity has already been installed, whereas the third line of production is likely to come into commercial production by early 1994. The loans of US dollar 3.66 million and Dutch Guilders of 2.12 million taken in 1990 for the purchase of imported machinery were fully utilized in 1990-91. Increased commitment for capital expenditure of Rs. 5.47 million (1991: Rs. 3.36 million) has also been fully met.

Gatron's Pretax Profit Rises to Rs. 177.593 Million: Gatron Industries pretax profit during 1991-92 rose to Rs. 177.593 million against the profit to Rs. 163.153 million in the preceding year. The achievement was made in spite of an increase of over Rs. 6 million in the administration and marketing expenses. The increase in profit was achieved by a combination of factors including overall reduction in cost of goods and substantial reduction in financial charges. Gatron's results for the financial year 1991-92 reflect the full scale effort to position the company's business for a profitable and long term growth. As reported in the prospectus of the Company the implementation of expansion project is in progress as planned. Also the small capacity expansion of 875 tonnes per annum arranged out of Company's own resources has commenced production in end June 1992. The company, now with a good resource base after public floatation has made some additions in its expansion plans which would allow achieving a production capacity of 10,000 tonnes per year from the expansion project.

In order to provide the company a broad national base the company had offered shares to the general public both resident and non-resident Pakistanis in February 1992 and accordingly has been listed in the Karachi and Lahore Stock Exchanges. The public reposed an overwhelming confidence in the management of the company which is evident from the fact that the subscription of shares was over subscribed by 9-1/2 times in spite of the fact that the shares were issued at a premium of Rs. 20.
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Author:Haidari, Iqbal
Publication:Economic Review
Date:Jan 1, 1993
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