Daily Times

The economy is still upbeat, as big business makes big profits. General business slowdown, yes. But, after all, it is not that bad. Many big business annual reports announce big profits — again. This is despite the three year-old global financial crisis, a credit squeeze-generated slump in demand, stagnating exports, the July floods and ongoing energy crunch, topped by bad governance of the present government, which had impacted the business volumes, leading to the overall economic slowdown. All of it may not have been wiped out from the balance sheets, but the latest corporate reports are quite cheery.

Big turnovers and volumes and expansion of the services sector are largely back in business, and making good money. Together with the banks, the traditional money spinners, several other sectors ranging from autos to fertilisers, telecom and IT, food, beverages, pharmaceuticals, commodities, and the entire energy group, electricity, natural gas, and oil marketing, to flag only some, are reaping good profits according to their annual reports for 2010.

The season of annual reports has just concluded. Higher dividends emerged out of expanding domestic and export demand for a range of products and services. There is an overall positive performance and high dividend yields in the whole of calendar year (CY) 2010 for most businesses, but some of the corporates have come out with still better performance in the second half — July-December — of CY2010.

Eleven percent net profit, totalling Rs 31.6 billion was earned by the government’s Oil & Gas Development Company (OGDC) in July-December, 2010, up from Rs 28.5 billion in the like period of 2009. It is attributed to higher oil and gas prices and gas output rising to 981 million cubic feet a day.

Pakistan Refinery Limited (PRL) earned Rs 905 million profit in the last quarter — October-December of CY2010, which is a remarkable performance on the back of higher prices, compared to a loss of Rs 1.024 billion in the like period of 2009.

Pakistan State Oil (PSO) reports a net profit of Rs 7.13 billion, or 40 percent up in July-December 2010, due to higher prices, compared to Rs 5.08 billion in the like period of 2009.

The consumer goods international giant Uniliver’s net profit rose 7.0 percent to Rs 3.27 billion in 2010 on its expanded turnover of products ranging from home and personal care items to ice cream.

The chemicals and fertilisers sector, as a whole, netted high profits. Fertiliser maker Engro Corporation netted a 73 percent profit to total Rs 6.44 billion in 2010, stemming from higher output, compared to 2009. Engro was closely followed by Fauji Fertiliser Bin Qasim netting a 72 percent profit of Rs 6.51 billion.

Power generation companies report a good profitable year. Kot Addu Power Company (Kapco) reports a net profit of 42 percent to Rs 3.85 billion in the half year to December 2010, up from Rs 2.72 billion in the like period of 2009, due to higher prices and exchange rate gains.

However, Hubco made a net profit of Rs 2.843 billion during July-December, 2010, slightly lower than Rs 2.855 billion in the like period of 2009 due to higher financial costs.

The big money maker, the banks, as a sector, report that profits rose 17 percent in 2010 compared to 2009, on the back of smaller loan losses and high net interest income.

Out of the Big-5 banks, four reported higher profits, as their interest income was up, recovery of old loans improved, secure and profitable government borrowing was high, private sector demand for credit rose, increase in non-performing loans slowed, profit paid to depositors stayed low, and the spread rose to as high as 7.57 percent.

Pakistan’s Big-5, which share 90 percent of the entire banking sector, received 93 percent of the sector’s profits in 2010. Habib Bank reported a 27 percent increase in net profit to Rs 17 billion in 2010 compared to 2009. United Bank profit rose 21 percent to Rs 11.2 billion. Allied Bank earned a 16 percent profit to Rs 8.2 billion. MCB profit was up 9.0 percent to Rs 16.87 billion. National Bank alone, among the Big-5, reported no change in its net profit of Rs 17.5 billon in 2010 — the same as 2009.

UAE-Based Bank Alfalah reported a Rs 968 million profit after tax in CY2010, up eight percent from Rs 897 million in CY2009. Meezan Bank, an Islamic bank, said its after tax profit was up 61 percent totalling Rs 1.65 billion in 2010, up from Rs 1.025 billion in the previous year. The bank also met its minimum capital requirement of Rs 8.0 billion, set for 2011, in 2010. How did it happen? “Instead of taking a cash dividend, the sponsors have decided to strengthen the bank’s capital,” Irfan Siddiqui, president of Meezan Bank says.

The central bank has reported that profit and dividend income totalling $ 338.2 million was repatriated by foreign investors during the seven months to January 2011. The payments made against Foreign Direct Investment (FDI) were $ 262.8 million. Repatriation of profit and dividends against portfolio investment were $ 75.4 million, the SBP reported.

The writer is an Islamabad-based journalist and former Director General of APP