KEL electrifies earnings for 1HFY15

Even amid the deciding times for the 650MW of electricity from the nation grid, K-Electric’s financial performance for 1HFY15 was a marked improvement on year-on-year basis. The power company’s earnings for the first six months of FY15 jumped by more than 2.8 times that of 1HFY14, while the increase in earnings for second quarter alone was thrice that of 2QFY14.
Aside from the increase of five percent year-on-year increase on top line, where net sales of energy corresponded to nine percent year-on-year rise, the improvement in gross margins is also attributable to lower cost of fuel and oil due to falling international crude oil prices.
What is of prime importance in the financial statements is the mammoth increase in the firm’s net margins. With tepid growth in generation, transmission and distribution expenses and a decline in finance cost, growth in the bottom line was still exuberant when looking at the earnings before deferred taxes. Moreover, the continuous decline in T&D losses is expected to have continued.
K-Electric’s share price has been taking a roller coaster ride relative to KSE100 index. While its plans for coal conversion of its two 210MW plants have met with delays, the firm has proposed a listed, rated and secured 7-year Sukuk issue of Rs22 billion, benefiting from the low interest rate environment. Reuters has reported it to be Pakistan’s largest corporate Sukuk up till now. The purpose of the issue will be to fund the prepayment of loans amounting to nearly Rs18 billion to senior lenders which include International Finance Corporation (IFC) and Asian Development Bank (ADB).
As for the 650MW of power from the grid, the decision still hangs in limbo even after 22days post the expiration of the five-year contract.

===============================================================================

K-Electric Limited (KEL)

===============================================================================

Rs(mn)                      1HFY15    1HFY14     YoY    2QFY15    2QFY14    YoY

===============================================================================

Revenue                    100,805    95,601      5%    44,944    46,334    -3%

Expenses

Cost-fuel & oil             37,873    40,065     -5%    17,163    21,227   -19%

Purchase of electricity     33,278    32,959      1%    11,825    13,145   -10%

Generation, T&D              7,774     7,354      6%     3,959     3,485    14%

Gross profit                21,880    15,223     44%    11,998     8,476    42%

Consumer service & admin    10,298     7,289     41%     5,201     3,993    30%

Operating profit            13,447    10,060     34%     7,805     5,691    37%

Financial charges            5,439     5,827     -7%     2,702     2,962    -9%

Profit after tax            13,275     4,718    181%    10,129     2,971   241%

EPS (Rs/share)                0.48      0.17    182%      0.37      0.11   236%

Gross margin                 21.7%     15.9%             26.7%     18.3%

Operating margin             13.3%     10.5%             17.4%     12.3%

Net margin                   13.2%      4.9%             22.5%      6.4%

========================================================================

Source: KSE Announcement