LAHORE - The week opened on a bearish note as political uncertainty weighed heavily on the minds of investors, resulting in the benchmark KSE 100-index falling sharply by 4.5% on Monday. Although investor qualms about political environment in the country remains unresolved, however, by mid-week investor sentiment witnessed some improvement on optimism linked to resolution of the current crises. Meanwhile, corporate result season also stirred market activity.

Engro Fertilizers announced 1H2014 profit of Rs3.4b translating into EPS of Rs2.56 as compared to profit of Rs1.4b (EPS Rs1.1) in the same period last year. This translates into EPS contribution of Rs5.7 as against EPS contribution of Rs2.4 in 1H2013 to parent Engro Corp (ENGRO).

During the period, revenues increased by 35% to Rs27.7b mainly due to estimated 35% higher sale volumes to 842k tons. To recall, EFERT faced low capacity utilization in 1Q2013 due to non-availability of gas. During 1H2014, company’s both plants were operational, thanks to 60mmcfd gas supply diverted from Guddu power plant. However, gross margins reduced to 36% compared to 41% in 1H2013 owing to higher gas prices after imposition of GIDC.

Further impetus to the profits was provided by low finance cost and higher net other income. During 1H2014, finance cost declined by 32% to Rs3.1b because of lower debt levels and PKR appreciation. Net other income (other income less other expenses) increased to Rs444m compared to net expense of Rs121mn in 1H2013. Improvement is mainly attributed to higher return on cash balances and one-off adjustment related to IFC loan.

On quarterly basis, sales of EFERT declined by 14% due to 13% lower urea offtake to 450k tons. Further, gross margins dipped from 38% in 1Q2014 to 33% in 2Q2014. However, profit growth came from abnormally high net other income to Rs1.2b against net expense of Rs789m in 1Q2014. As a result, profits of the company improved by 33% to Rs1.5 per share.

Pakistan Oilfields Limited posted FY14 EPS of Rs54.48, up 19% from FY13 EPS of Rs45.78. In 4QFY14 alone, company posted EPS of Rs11.77, up 26% versus Rs9.32 in 4QFY13. Growth in earnings primarily stems from 25% growth in net sales during the period.

Corporate results stirred market activity. Consequently, KSE-100 Index plunged by only 463 points (-1.6%WoW) this week to close at 28,918 level. Average volumes traded on the other hand increased by 30%WoW to 169mn shares.

During the last week, political activities took another twist when in spite of numerous obstructions and police crackdown against PAT workers, cleric-turned-politician Tahirul Qadri managed to muster a significant crowd in Lahore, Pakistan’s second biggest city, to commemorate killing of a dozen PAT supporters. But contrary to expectations that this would be last day of Qadri’s emotional politics, he announced a rally on Aug 14 to coincide with Imran Khan’s PTI long march/sit-in in Islamabad.

Experts said that with active media and judiciary, military intervention seems difficult. Looking at Pakistan’s past record, military takeover may not be completely ruled out. Ironically, in Pakistan’s 67-year history, democratic has been derailed every time the nation demanded bringing in ‘real democracy’, allowing military leadership to step in at the height of political and constitutional crisis. With military active in fighting terrorism in Northern Pakistan, such an unconstitutional step may not be suitable. All major political parties including PTI are against the military rule.