KARACHI - KAPCO recorded Profit After Tax of Rs7,966 million in FY08, showing an improvement of 60 per cent over last years Profit After Tax of Rs4,991 million. KAPCO recorded an impressive top line growth of 51 percent Year-on-Year mainly due to Pak Rupee devaluation (13.4 percent - FY08) and US inflation (5 percent - FY08) - tariff structure indexed to the exchange rate and US inflation and higher fuel prices and an increased dependence on expensive alternates to compensate for the shortage of gas - fuel cost being a pass through item. The company incurred an average of Rs4.96 as fuel cost for each kilowatt produced compared to Rs3.13 in FY07 (59 percent Year-on-Year increase). However, as the Capacity Purchase Price component of the revenue did not increase in line (2 percent Year-on-Year increase) with the Energy Purchase Price component (71 percent Year-on-Year increase), the top line growth had little impact on gross profit which grew by a modest 7 percent Year-on-Year. KAPCO registered a 185 percent Year-on-Year increase in other income, which contributed Rs1.48/sh to earnings before tax, representing a sizable 16% of PBT. This atypical increase was caused by a phenomenal rise of 347 percent Year-on-Year in interest on late payments from WAPDA; a penal mark up (SBP discount rate + 4%) that WAPDA is charged on amounts unpaid within due dates. However, non-payment of dues by WAPDA influenced more than just the operating income as the company turned to short term financing, leading to a 66 percent Year-on-Year increase in financial charges. Moreover, it is expected that if the company continues to face such liquidity problems in the future, it might affect the response to its GDR issue as well as KAPCO's ability to payout dividends thus reducing the attractiveness it holds for long-term shareholders, analyst observed. KAPCO's bottom line grew by an astonishing 60 percent over last year despite a nominal 6 percent Year-on-Year increase in PBT owing to capitalization of deferred taxation (initial tax adjustments based on higher tax depreciation), as a result of which the effective tax rate was recorded at 1.2 percent for FY08 compared to 34.2 percent in FY07 (-33pps YoY).