Hubco cashed in on the crisis despite rising fuel costs

Hubco has done it again what it does best: treat investors. Announcing a 35 percent increase in full-year net profits in FY09, the firm declared a cash dividend of Rs 2 per share, beating market expectations by far. In FY09 the power producer offered a healthy dividend yield of 7 percent.
The firms gross profits increased by 28 percent, mainly due to load factor as power shortage in the country continued to increase dependence on the IPPs. This came despite a 33-percent hike in cost of sales on account of rising fuel costs, a pass-through item for power producers. The top-line also benefited from the indexation factor between US-CPI and PKR depreciation last year where PKR weakened by 23 percent during FY09.
This growth was clipped a bit owing to a 5-percent rise in financial cost mainly driven by the circular debt that eroded the firms liquidity - forcing it to rely on short-term borrowing to bridge its working capital gap. However, Hubcos other rising income came to its aid - up 32 percent during the period - on account of mark-up earned on overdue receivables from WAPDA. Going forward, with Hubco will likely stabilise as PKR is unlikely to weaken further while inflation is also seen tapering off this fiscal year.

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HUBCO P&L

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RS (MN)            CY09         CY08    ()%

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Sales            82,784       62,435       33%

COGS             76,687       57,685       33%

Gross profit      6,097        4,750       28%

Gross Margin          7%           8%      -3%

Other Income        139          105       32%

Finance cost      2,095        1,986        5%

PAT               3,781        2,801       35%

EPS(Rs)            3.27         2.25       45%

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