ISLAMABAD - A wide range of performance and profitability was witnessed across many industrial and economic sectors, during the recent round of financial results, ranging from some highly profitable companies like United Bank Ltd. and OGDCL on the top end of the profitability spectrum, while others like Pakistan Tobacco, HUBCO and KAPCO lagging far below.
Oil and Gas Development Company Ltd (OGDC) has reported an astounding profit of more than Rs 90 billion, almost 10pc higher than that of the previous year. The high profitability of OGDC is attributed to increase in exploration area and in production and shift in exchange rates. Similarly United Bank Limited reported a whopping after-tax profit of more than Rs. 18 Billion in 2013, on the back of a substantial 22% quarter-on-quarter growth in profit demonstrated by the bank in the last leg of the year. According to analysts, the bank’s high earnings are attributed to its prudent improvement of its deposit mix, strong revenues from its fee and commission sector and exceptional performance of UBL Omni and commission from home remittances. It must be noted that in the recent rankings released by Federal Board of Revenue, OGDC stood out as the top corporate tax payer in the country on the back of these high profits, while UBL claimed 6th position on the same list. In contrast to these highly profitable companies, other corporate giants like Pakistan Tobacco Company, HUBCO and KAPCO posted modest profits. PTC, for instance, while contributing more than 60 billion rupees to the national exchequer, declared a meek profit of Rs. 3 billion. Tobacco sector is considered a major revenue contributor to the government and according to sources, the revenue from cigarette manufacturing has been steadily growing over the last few years, on account of excise duty, sales tax and income tax. PTC’s tax contribution grew by 20 percent in 2013 over last year, even exceeding company’s net turnover growth.
Besides high taxation imposed on the tobacco industry, the sector currently is also suffering from high levels of illegal trade, taking a severe toll on tobacco industry’s profitability and costing government more than Rs. 90 billion over the last five years. Similarly HUBCO and KAPCO demonstrated disappointing results in the first half of 2013-14 primarily owing to shutdown of plants for repair and overhaul work. HUBCO’s income for the first six months dropped by 38% to Rs2.936 billion as repair work on the plant affected sales. KAPCO, which has to carry out major overhauls of two of its gas turbines and one steam turbine during 2013, witnessed its earnings going down by 23% to Rs2.84 billion compared in the first half of 2013-14.
The year 2013 has been a harsh year for industry in general due to challenging economic conditions including high inflation, security concerns, power crisis and rupee devaluation. Besides these challenges, sectors like power and tobacco have had their fair share of industry-specific challenges. While the economy seems to be slightly improving, analysts believe that it will take more than that to making the sectors like tobacco and power truly profitable.