Packages returns to profitability

Packages is back to profitability - much thanks to the helping hand that came from the investment income, without which the income statement would have been bathed in red.
Packages domestic sales crossed Rs6 billion in 1QCY11, posting a 12 percent year-on-year growth, led by the companys packaging division owing to higher demand from its clientele which includes multinationals as well.
Company sources believe that the packaging market is set to expand in current economic environment which is forcing a majority of households to change their spending pattern from high value consumer items to low value, high volume goods.
Gross margins improved to 8 percent in the quarter, an increase of 1 percentage point compared to the corresponding period last year. Company sources say that Packages is utilizing its capacity at an optimum level and is experiencing greater efficiency in terms of raw material consumption, which reflected in the improved margins.
The improvement in gross margins is despite the gas shortage, as the company had to rely on furnace oil at much higher rates.
Finance cost increased during the quarter, mainly on account of servicing of a loan taken up by the company for the Bulleh Shah Paper Mill. Company sources claim that finance costs will decrease once the loan repayments begin in 2012.
The investment income though, 13 percent lower than the same period last year; proved to be the saviour and provided a much needed breather to the bottom line. The company has investments in Nestle Pakistan, Tri-pack and IGI insurance, and the dividend income from these helped consolidate the gains made in operating performance.

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PKGS P&L                                   chg

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(Rs mn)                  1QCY11      YoY      QoQ

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Net Sales                 5,192       3%      24%

Cost of Sales             4,769       1%      13%

Gross Profit                422      21%       NM

Gross Margin                 8%      17%       NM

Administrative Expenses     143      24%       3%

Distribution & Marketing    141      -2%      11%

Operating Profit            141      69%     153%

Finance Cost                350      17%      13%

Investment income           643     -14%     512%

PAT                         126     -61%       NM

EPS (Rs)                    1.5

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Source: KSE Notice