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Karachi: DIAMER BHASHA DAM CONSTRUCTION COMMENCED…FCCL TO BENEFIT
The long awaited Diamer Bhasha dam which was to bring prosperity to the cement companies, especially Fauji Cement Company (FCCL), has commenced.
According to Standard Capital, the project with a value of Rs12bn, with around 5mn tons cement requirements, is expected to increase domestic sales of the cement companies, earning them higher revenues. Standard Capital expects FCCL to be the biggest beneficiary of this project on account of its close proximity to the dam. It would increase FCCL’s local dispatches thereby increasing its total revenue to a large extent.
However, for FY12 Standard Capital does not expect FCCL to report an attractive EPS ostensibly owing to the huge amount of loans that it has taken for which interest and principal payments begin in FY12, hence declining FCCL’s net profit drastically, yielding approximately a loss per share.
| P and L A/C Rs ‘000 | FY09 | FY10 | FY11 | FYE12 |
| Net sales | 5,314,538 | 3,808,455 | 4,742,593 | 11,058,000 |
| Cost of sales | (3,627,110) | (3,292,871) | (3,919,540) | (8,846,255) |
| GP | 1,687,428 | 515,584 | 823,053 | 2,211,745 |
| Distribution cost | (50,260) | (47,737) | (74,149) | (96,568) |
| Administrative expenses | (103,186) | (103,490) | (147,938) | (175,897) |
| PBIT | 1,533,982 | 364,357 | 600,966 | 1,939,280 |
| Other income | 190,424 | 27,220 | 28,053 | 32,203 |
| Other operating expenses | (78,173) | (25,460) | (36,944) | (86,268) |
| Finance cost | (224,716) | (41,206) | (103,922) | (1,685,150) |
| PBT | 1,421,517 | 324,911 | 488,153 | 200,064 |
| Taxation | (413,894) | (74,732) | (62,492) | (26,008) |
| PAT | 1,007,623 | 250,179 | 425,661 | 174,056 |
| EPS | 1.43 | 0.31 | 0.52 | 0.18 |
| DEPS | 1.36 | 0.30 | 0.34 | 0.12 |
| Source: Standard Capital Research | ||||
FCCL as evident from its increasing sales is largely benefiting from its new German cement plant whose quality is giving it an edge over other cement companies as well as helping it to compete with some strong contenders such as Lucky Cement.
However, the company is expected to yield high profits only after this burden of finance cost is reduced as the cause of the steeping EPS is solely the excessively high interest expense as a result of the following loans:
|
Rs ‘000 |
|
| Syndicate Finance | 3,700,000 |
| The Royal Bank of Scotland N.V. | 7,547,961 |
| National Bank of Pakistan | 1,500,000 |
| Faysal Bank Ltd. | 500,000 |
| Habib Bank Ltd. | 384,000 |
On the basis of this high finance cost Standard Capital has a ‘SELL‘stance on FCCL.
COURT CASE WON 100MMSCFD OF GAS TO ENVEN RESUMED
According to latest news Engro Fertilizers Ltd. had filed a Writ Petition in the Sindh High Court against the curtailment of gas supplies to EnVen and has won the case, with SNGPL directed to supply the guaranteed quantity of 100MMSCFD of gas to EnVen in accordance with the contract dated April 11, 2007.