Hub Power falls short in returns

KARACHI: The Hub Power Company Limited (PSX: HUBC) announced its consolidated FY17 financial result yesterday, reporting a lacklustre performance by the company in its bottom-line. Even though the consolidated revenues of the firm saw an increase of over 10 percent, year-on-year, 15 percent rise in the operating cost resulted in gross profits to slide by seven percent, year-on-year. Gross margins too came down significantly from 20.29 percent in FY16 to 17.06 percent in FY17.
The key factor behind lower gross profits was the overhauling expenditure at HUBC’s Narowal plant which led to a higher operating expenditure in FY17 as compared to the previous year. Higher furnace oil prices also affected the gross profits. Narowal has been demerged as a separate entity from 4QFY17 onwards.
Other depressing factors for the bottom-line were the higher general and administrative expenses and lower other income. The IPP’s finance cost saw a marginal decrease of 1.3 percent whereas the share of loss from associates went up by 9.8 percent. Resultantly, the company posted a decline of 9.2 percent year-on-year in its profit for FY17. However, the market expects that the firm’s earnings will see a rise in FY18 as the company takes off from a smaller base.
HUBC announced a final cash dividend of Rs2.5 per share making total payout for FY17 Rs7.5 per share. The lower dividends are the evidence that the IPP is increasing equity injections into associate ventures like Thar Energy Limited (TEL) and China Power Hub Generation Company (CPHGC), and this trend is likely to continue till the IPP fulfils the required equity