Morning Call about – 1HFY14 Result Preview – Arif Habib Limited

Karachi, January 22, 2014 (PPI-OT): ACPL and POL

ACPL: 2QFY14 earnings to clock in at PKR 4.31/share, 17% up QoQ

We preview 1HFY14 financial result for Attock Cement Pakistan Limited (ACPL) scheduled to be announced today.

According to Arif Habib Limited, they expect the company to post a healthy 17% QoQ growth in 2QFY14 to PKR 493mn (EPS: PKR 4.31) compared to PKR 423mn (EPS: PKR 3.69) a quarter back. This healthy profitability growth is expected mainly on account of a 4% QoQ growth in total dispatches and a 3% QoQ improvement in cement prices, yielding a 6% QoQ top line growth and improving gross margin to 31% in 2QFY14 compared to 29% in the 1QFY14. For 1HFY14 however, Arif Habib Limited foresees bottom line posting a mild 4% YoY drop to PKR 916mn (EPS: PKR 8.0) due to ~60% jump in power tariff and higher effective tax rate (25% in 1HFY14 vs 20% in 1HFY13).

Arif Habib Limited expects the board to declare an interim cash dividend of PKR 5/share along with the result.

ACPL Financial Highlights
PKR mn                 2QFY14      1QFY14   QoQ    1HFY14   1HFY13    YoY
Net Sales               3,108       2,922    6%     6,030    5,169    17%
Cost of Sales           2,141       2,067    4%     4,209    3,556    18%
Gross profit              967         855   13%     1,821    1,613    13%
Admin expenses             78          75    4%       153      126    22%
Selling expenses          237         228    4%       465      335    39%
Operating Profit          652         552   18%     1,203    1,152     4%
Profit after tax          493         423   17%       916      958    -4%
Earnings per share (PKR)  4.31       3.69            8.00     8.37
Sources: Company financials and AHL Research

POL: Strong oil production to shape 30% YoY higher profitability
The Board of Pakistan Oilfields Limited (POL) is meeting today to approve the 1HFY14 financial results, where Arif Habib Limited expects the company to post net profit of PKR 7.4bn (EPS: PKR 31.1), a healthy 30% YoY rise, when compared with PKR 5.7bn (EPS: PKR 23.94) in the corresponding period last year. This healthy profitability growth mainly stems from a 32% and 4% YoY jump in oil and gas production, respectively.

Further support to the top line is expected to come from a steep 10% YoY PKR depreciation against the green back, sourcing a 30% YoY improvement in the top line. In addition to this, higher dividend income from associates is expected to improve other income by 23% YoY to PKR 1.7bn. For 2QFY14 alone, Arif Habib Limited expects a modest 4% QoQ improvement in the profitability to PKR 3.8bn (EPS: PKR 15.85) compared to PKR 3.6bn (EPS: PKR 15.25) a quarter back. A modest 1% and 4% QoQ drop in oil and gas production, respectively and a 63% QoQ expected decline in other income (POL booked dividends from associates in 1QFY14) are the major contributors towards subdued QoQ earnings growth.

Arif Habib Limited expects the board to declare an interim dividend of PKR 25/share along with the result.

Financial Highlights
PKR mn                2QFY14     1QFY14   QoQ     1HFY14    1HFY13    YoY
Net Sales              9,024      8,864    2%     17,888    13,744    30%
Operating Costs        1,929      1,914    1%      3,844     3,468    11%
Exploration Costs        288        249   16%        538       719   -25%
Financial Charges        180        611  -70%        791       376   110%
Other Income             449      1,229  -63%      1,678     1,363    23%
Profit after tax       3,750      3,606    4%      7,356     5,663    30%
EPS (PKR)              15.85      15.25    4%       31.1     23.94    30%
DPS (PKR)                 25          -     -         25        20      -
Sources: Company Accounts & AHL Research