NML profits down by 78 percent

Nishat Mills Limited posted nearly a 3 percent drop in core earnings for the year ended June 2009, as higher financial charges offset the impact of increased sales and higher gross margins. Net earnings slumped by 78 percent to Rs 1.2 billion on year-on-year basis owing to absence of gain on sale of investments - an account in which more Rs 5 billion was booked last year.
NMLs earnings per share stood at Rs 6.81 per share, with 20 percent cash dividend to satisfy investors. The composite giant saw revenues surge 22 percent during the period as its overseas sales - 85 percent of the total - benefited from high-realised prices in Pak Rupee terms due to depreciation of domestic currency.
The firms other income dropped 20 percent mainly due to decline in dividend income in FY08 from its associated firm DGKC. Although the NMLs finance cost rose 52 percent last year, the firm looks set to benefit from declining interest rates, which will improve liquidity and lower its cost of borrowing. In addition, the firm is also expected to reap fruits from the Textile Policy - being the main beneficiary - owing to its business size and government support via policy execution, while sliding cotton prices bode well for its profit margins.

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NML P&L

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RS(MN)                   FY 09    FY 08   (+/-)%

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Sales                   23,870   19,590      22%

COGS                    19,519   16,778      16%

Gross profit             4,352    2,812      55%

Gross Margin               18%      14%      27%

Total Expenses           1,942    1,551      25%

Other Income               599      748     -20%

Gain on investment           -    5,060        -

Finance cost             1,447      951      52%

PAT                      1,268    5,858     -78%

EPS (Rs)                  6.81    36.86        -

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