NPL benefitting from lower utilisation

Nishat Power Limited (PSX: NPL) is among the power plants that have been facing lower utilisation levels because of their place in the merit order. The furnace oil plant has definitely lost on the days when power generation was largely generated from furnace oil.

However, it can be seen that while revenues have fallen for the IPP because of lower generation and dispatch levels, the company’s profitability has remained buoyed as costs have come down staggeringly – especially the operating costs. NPL’s revenues in the latest quarter i.e. 1QFY20 slipped by 15 percent year-on-year, but the cost of sales decline by more than 30 percent where the fuel cost is the largest portion. This resulted in a 37 percent year-on-year increase in gross profits and an upward stride in gross margins.

The same was seen in FY19 financial performance by NPL where turnover slowed down by 8 percent, year-on-year but the gross profits improved by 18 percent year-on-year. However, where FY19 was plagued by higher exchange losses as well as one-off loss on the disposal of operating fixed assets, 1QFY20 saw miniscule other expenses as currency didn’t depreciate further. Despite finance cost increase by 53 percent year-on-year, NPL’s earnings for 1QFY20 grew by 36 percent year-on-year.

NPL continued to not announce any cash dividend for due to the liquidity issues amid the rising receivables and piling circular debt. According to the company, the NTDCL continues to default on its payment obligations