Uninspiring corporate result season in Pakistan.


Byline: Shabbir Kazmi

Engro Corporation (ENGRO) posted 2QCY19 earnings of Rs2.87 billion (EPS: Rs4.97), up 37%YoY but down 29%QoQ. This takes the 1HCY19 profit after tax to Rs6.87 billion (EPS: Rs11.92), up 3%YoY. The sequential decline in earnings can be attributed to: 1) a 191%QoQ higher operating expenses - EPCL recorded 673%QoQ higher operating expense due to IFRS 16 implementation and exchange losses, 2) a 107%QoQ higher financial cost amid 200bps interest rate hike, and 3) higher effective tax rate of 50% during the quarter as against 31% for 1QCY19 (EFERT reversed tax credit recorded in 2QCY18).

ENGRO also announced second interim cash dividend of Rs8.0/share, taking the 1HCY19 payout to Rs15.0/share as compared to Rs12.0/share for 1HCY18. However, the sustainability of payouts is contingent upon progress on potential ventures, where ENGRO has announced feasibility study on polypropylene facility.

Bank of Punjab (BOP) reported earnings of Rs0.78/share for 2Q2019, up 7%YoY, in line with market expectations. NII of BOP for 1Q2019 depicted outstanding growth of 70%YoY amid hike in policy rate. However, higher provisions capped the increase. Cumulative earnings of the Bank grew to Rs4.0 billion (EPS: Rs1.52), from Rs3.8 billion (EPS: Rs1.46) for the corresponding period last year.

Nonamarkup income during the outgoing quarter grew due to higher fees and commission and gains on securities, amounting to Rs19 million, from a loss of Rs7.8 million during the same period last year. Nonamarkup expenses on the other hand were up 11%YoY mainly on the back of higher operating expenses up by 11%YoY to Rs3.5 billion. During the outgoing year bank has recorded hefty net provision of Rs774 million as against a massive reversal of Rs895 million during the same period last year. Effective tax rate of the Bank was marginally down to 39% as compared to 40%. The key risks facing the Bank include: 1) significant impact of IFRS-9, an accounting regulation, 2) slow down in advances growth, and 3) deterioration of Pakistan macros.

Pak Elektron (PAEL) announced its 2Q2019 results, posting earnings at Rs393 million (EPS: Rs0.77) down by 42%YoY mainly on the back of lower gross margins, high admin expense and higher financial charges. Discounts during the outgoing quarter increased to 29.8%, from 26.5% during the same period last year.

This led to decline in net sales by 2%YoY. Gross margins during the 2Q2019 year remained under pressure owing to significant...

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