Nishat Mills Limited (NML) posted almost a six percent decline in net earnings on year-on-year basis owing to subdued top line performance due to sluggish demand for cotton yarn in the Chinese market, in consort with feebler yarn margins. The benefits of the award of the GSP+ at the beginning of the year were significantly dwarfed as a result of the 10 percent appreciation of rupee against the dollar in the FY14 period.
Operating costs have climbed considerably in the past year. Increase in minimum wage rate coupled with rising fuel costs, in spite of the fact that NML has its own captive power plant, possibly will just be some of the cost pressures on the company that are likely to remain with NML and the economy in the near future.
However, an increase in other income on the back of dividend received from NPL, Lalpir Power Limited, MCB and Pakgen Power Limited year offered a breather to the bottom line, whereas financial charges continued to be stable around Rs1.6 billion.
The future outlook for the group stays robust, regardless of supply side pressures on the firms core business. The investments in associated firms especially the power division and banking are expected to retain the balance sheet rock-solid.
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Nishat Mills Limited
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Rs (mn) FY13 FY14 chg
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Net Sales 52,426 54,444 4%
Cost of sales 43,382 46,580 7%
Gross profit 9,044 7,864 -13%
Distribution and marketing expenses 2,529 2,554 1%
Administrative expenses 870 1,032 19%
Profit for the period 5,847 5,513 -6%
EPS (Rs) 10.29 6.61
Gross profit margin 17.3% 14.4%
Operating profit margin 10.8% 7.9%
Net profit margin 11.2% 10.1%
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Source: KSE notice
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