Companies resume plant operations.

Byline: Dilawar Hussain

Plants of more than 120 listed manufacturing companies had ground to a halt by early April. Notices that piled up in the offices of the Pakistan Stock Exchange (PSX) mentioned plausible re-commissioning dates. Some linked it to the lifting of the lockdown to prevent the spread of the pandemic while others made no promises as to when normal production activities could resume.

Meanwhile, hundreds of jobs were lost with endless squabbles between the government and entrepreneurs - the former insisting that the workers be paid wages despite factory closures and the latter saying no work, no pay.

The wheels of industry have started to turn as the complete shutdown turns into a smart lockdown. Automobile assemblers that for the first time could not sell a single car in an entire month have been the first to roll out cars from their assembly lines. Early last week, Indus Motor, Honda Atlas Cars and Atlas Honda Ltd announced the resumption of plant operations. Sazgar Engineering Works, producer of three-wheelers, has also announced the start of its plant. Agriautos, Dadex Eternit and ICI have resumed operations of their production faculties along with scores of other manufacturing concerns.

But the damage has been done. Recently released quarterly results for January-March already reflected the impact of the economic headwinds. Those bore just the initial effects of the coronavirus. Khurram Schehzad, CEO of the Karachi-based advisory firm Alfa Beta Core, suggested that corporate profitability would remain impaired until the cost of sales was aligned to cushion the effects of the decline in sales.

Many sectors have seen heavy plunges in their earnings, with 14 cement companies posting net losses of Rs3.5bn in the latest quarter

He said the four major elements of the cost of sales were energy, taxes, leverage and administrative expenses. The cost of utilities has to be pulled down, for energy alone contributes 30 per cent to the cost of sales. Interest rates have to be dragged down to 5pc or lower to provide relief to leveraged corporate entities as financial costs eat away a whopping 80pc of the operating profit.

'1pc change in the interest rate moves the economy by Rs330bn of which 23pc or Rs76bn is passed on to the private sector,' Mr Schehzad said. Private consumption, he said, will take some time to pick up pace. The sooner it does, the better it will be, he said, for 85pc of GDP is driven by private spending. 'For the...