profitepaper pakistantoday 31st july, 2012

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Tuesday, 31 July, 2012

Not quite so lucky after all…

Leather uplift in the pipeline

Over $152m ICI deal casts doubts on Lucky’s ability to pay decent dividends to shareholders

Rs38.4m released to lay water pipeline for leather

KARACHI

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share after incorporating the dividend of ICI. “If the company goes with the first option i.e. with 50% leverage financing, we expect the existing dividend policy to be curtailed down as company will be financing 50% of acquisition cost from its own internal resources,” the analyst said. however, the analyst said if the company opted for financing the acquisition through 100 percent debt, the company would maintain its current payout policy which has stood average 34% payout during last three years.

Topline Research’s Farhan Mahmood, however, believes that while the ICI share price would rally that of Lucky may come under pressure on account of the latter’s consortium’s aggressive bidding for the ICI. “Investors may take opportunity to buy ICI to make money from the tender offer while they may offload Lucky amid fear of low dividend payout as it may divert funds for this acquisition,” he said.

The analyst said the Rs 8.4 billion transaction, including the tender offer, would be financed through 50 percent equity and 50 percent debt. Lucky Cement, backed by better margins amid high cement prices and decline in coal prices, may generate Rs 11-12 billion during FY13 and would thus be well positioned to retire a portion of the debt earlier.

The short-term cost and benefit for the cement giant would be as follows: Opportunity loss on its Rs4bn cash holdings amounts to after tax loss of Rs0.3bn (per share impact Rs0.95) assuming return of 12%.

ISMAIL DILAWAR

he market observers foresee some tough challenges ahead for the Lucky Cement a consortium which has acquired 76 percent shareholding in the ICI Pakistan from its Dutch owners at a cost of $ 152.5 million.

The deal was reached in Amsterdam on July 27 after a Share Purchase Agreement (SPA) was inked between the Yunus Brothers Group “YBG”, Pakistan’s leading conglomerate, and Omicron B.V., a subsidiary of AkzoNobel N.V. Netherland for the acquisition of 75.81 percent shareholding in ICI Pakistan Limited.

The YB Group companies participated in this transaction include Lucky Cement, Yunus Textile Mills, Gadoon Textile Mills, Lucky Textile Mills and YB Pakistan. Payable in equivalent Pak Rupees, the payment of $ 152.5 million would be subject to certain adjustments based on lock box mechanism for cash and indebtedness to be ascertained as per the terms of the agreement.

“This acquisition is a part of the Group’s strategy of diversification and entry into businesses that are integral to the economic fabric and opportunities in Pakistan,” said Lucky Cement Monday. It said the consortium was intent to invest in the existing businesses of ICI Pakistan for continued growth whilst evaluating additional opportunities to maintain its leadership position. The Group also intends to retain the existing experienced management of ICI Pakistan which it said was the “most critical component”

for the development of the company.

“With relatively less-leverage balance sheet, Lucky cement is planning to take benefit of gearing the transaction from debt side amid borrowing the major part from banks,” viewed InvestCap analyst Abdul Azeem.

About a possible impact of acquisition on the parties’ share price at stocks market, he said Lucky Cement, which is presently enjoying a debt-free balance sheet, was expected to seek loan to finance the acquisition of its 41 million shares (51perent of total acquisition) in ICI. Azeem said if the company financed the acquisition with 50 percent debt (while 50% from its internal sources) the financial cost would have an impact of Rs1.46 per share. “Incorporating the dividend income of ICI Pakistan to be followed in FY13, the net impact of the acquisition would stand at positive Rs0.49/share,” he added.

While in case the Lucky Cement financed the acquisition with 100 percent debt, the bottom line impact would stand at Rs2.92 per share, resulting the net impact of negative Rs0.97 per

KARACHI STAFF REPORT

Sindh Governor Dr Ishratul ebad Khan has released Rs38.4 million for laying of an exclusive water pipeline to the Tannery Zone of Korangi Industrial Area (KIA) to provide water to the export-oriented leather industries. The PC-I of the project has already been prepared by the Karachi Water and Sewerage Board (KWSB) and the contract for the project has been awarded to a local firm following tendering process.

After the completion of project the Tannery Zone would be getting three million gallons water per day. The Governor Sindh took this decision following a meeting of the delegation of Pakistan Tanners Association (SZ) led by its Chairman Khurshid Ahmed with the Governor, Managing Director KWSB Misbah Uddin Farid, Administrator KMC, Muhammad husain Syed and Commissioner KMC Matanat Ali Khan at Governor house recently. Khurshid Ahmed apprised the meeting that billion dollars leather industry was dying due to the water crisis and the over Rs40 billion’s exports have been threatened due to the drought like situation at Tannery Zone. he further said that PTA had sent many SOS to the KWSB high ups but to no avail. The KWSB MD, Misbah Uddin informed the Governor about shortage of funds for not laying a separate pipeline for Tannery Zone.

India wheats Afghan appetite To send 1.5lakh tonnes wheat to Kabul via Pakistan NEW DELHI

PROTECTION PRIVILEGES PERISH Auto industry protections to be abolished to reduce prices of locally made vehicles: PEW ISLAMABAD ONLINE

While expressing deep concerns over rising prices of locally made vehicles, the Pakistan economy Watch (PeW) has urged the government to abolish protections for smashing powerful lobby of auto industry in a bid to reduce prices of vehicles.

In a statement issued here on Monday, Pakistan economy Watch President Dr.Murtaza Mughal expressed dismay over government’s slow move to abolish protections extended to the auto industry in order to bring down the prices of locally madevehicles. he said the abolishment of protections extended to the auto industry was essential for smashing lobby of auto industry which was so powerful that even government appeared unable to make policy against their vested interests “Government should gradually reduce protection given to the auto industry by reducing the tariff on Completely Built Units (CBU) to ensure availability of imported substitutes for consumers at affordable prices,’ he said, adding that there was also need to rationalise tariffs applicable on Completely Knocked Down (CKD) units. he said the engineering Development Board (eDB) has proposed a reduction in the tariff on cars up to 1,000cc engine size, from the current 55 per cent to 40 percent for the next five years; from 60 per cent, to 50 per cent for 1,001cc to 1,500cc cars; and a 5 percent increase in the tariff of 1,501cc to 2,000cc cars from the current 75 percent. he said the eDB has also proposed withdrawal of the 50 percent regulatory duty on cars exceeding 1,800cc; which it believes is an impediment to the growth of this segment.

ONLINE

Go, Go, Go! Mine, mine, mine!

Pakistan can bring $50b investment through mining sector ISLAMABAD ONLINE

The mining sector has the potential to reshape the economy as it can bring $ 50 billion investment in the country by offering incentive to investors, sources said. According to the sources familiar with the development told “Online” that Afghanistan was getting around $30 billion through mining sector, compared to it Pakistan can get $40 to 50 billion investment by offering incentive to investors.

According to the sources most of the potential of mining sector in the country has remained untapped so far due to human capital, local expertise and capital and now government was making serous efforts to promote and bring investment in the mining sector by removing the barriers that discourage investment. “During current financial year 2012-2013, an area of about 3900 sq. km is planned to be mapped in different parts of the country,”

sources said, adding that around 300 samples would be collected and analyzed in the country.

The projects of up gradation and strengthening of Geosciences Advance Research laboratories, accelerated Geological mapping, Geo chemical exploration of the out crop areas and the project of review and updating of Mineral Policy would be carried out during current fiscal year. It is relevant to mention here that the mining industry of Pakistan holds great potential because of the vast unexplored resources of the country. Mining has provided the manufacturing and energy needs of the country in the past many years and has contributed to the enrichment of the world through industrial development.

Keeping up with its commitments to Kabul, India is all set to send another 1.5 lakh tonnes of wheat to Afghanistan through Karachi port. With the external affairs ministry setting up the new Development Projects Administration (DPA) wing solely to monitor India-aided projects, Afghanistan, Bangladesh, Myanmar and Sri Lanka have become New Delhi’s focus areas in the sub-continent, according to The hindustan Times.

Senior MeA officials said financial bids for the transportation of 1.5 lakh tonnes of wheat to Kandla will be finalised next week. Part of India’s commitment to supply 1.1 million tonnes of the food grain, the latest tranche will be lifted by ships hired by the Afghan government to Karachi port, and from there to Kabul for distribution.

Until now, India has supplied 600,000 tonnes of wheat to Afghanistan, of which 500,000 tonnes was in the form of fortified biscuits. While New Delhi is exploring opportunities to send wheat and other goods through Chahbahar port in Iran, the last wheat shipment went through Karachi port as part of the bilateral agreement between Pakistan and Afghanistan. The DPA, which revived the Salma Dam project in herat, has approached the finance ministry to approve cost escalation emanating from security problems posed by Taliban insurgents, and certain vested interests in Pakistan.

Don’t be too hard on the little ones!

ISLAMABAD APP

National Assembly (NA) Standing Committee on Textile Industries here on Monday directed the Federal Board of Revenue (FBR) to exempt sales tax on the sizing, weaving and warping industry including power looms.

The Committee which met here with haji Muhammad Akram Ansari in the chair also directed for the postponement notices of recovery already sent to sector till the issuance of new SRO in this regard.

The small units of textile industry should be given relaxation for their survival and large units of textile sector should be taxed properly, he remarked.

The FBR representative, Abdul Sattar Aora told the committee that the government introduced a regime of zero rating and reduced rate of sales tax on inputs, intermediate and final products of five exports oriented sectors including Textile, Carpets, Leather, Sports and Surgical.

The sizing, weaving and warping industry includ-

NA body directs FBR to exempt sales tax on small textile units

ing power looms are also required to charge sales tax at the rate of 5 per cent on account of services charged in lieu of services of warping, weaving and sizing rendered to their unregistered clients, he added. he further said, all this was done to eliminate any undue benefits to the unregistered operators in the sectors.

The committee also directed the Ministry of Textile Industry (MoTI) to release funds worth Rs.11.2 billion to textile sector collected by Ministry of Finance (MoF) under export Development Fund (eDF).

Besides, the committee recommended that the MoTI Secretary should brief the committee on gas distribution for textile industry.

Member of committee, Abdul Rashid Godil said that the export was decreased by 8 per cent not 26 per cent as quoted by exporters, as saying there were so many reasons including shortage of gas and electricity.

Moreover, the difference of rates of commodities by 50 per cent also caused a decline in the export and rate of commodities in international markets are fluctuating all the time, he added.

The meeting was attended by MNAs Amir Ali Shah, Chaudary Iftikhar Nazir, Mahmood hayat Khan Tochi Khan, Syed Akhonzada Chitan, Tasneem Siddiqui, Abdul Rashid Godil and Munwer Lal.

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Business 02 Oil up in Asia ahead of Europe, US policy moves SINGAPORE AGENCIES

Oil rose in Asian trade Monday but prices were under pressure as investors await further measures by policymakers to boost the ailing eurozone and US economy, analysts said. New York’s main contract, light sweet crude for September delivery was up 46 cents to $90.59 a barrel in the afternoon, while Brent North Sea crude, also for delivery in the same month, was 26 cents higher at $106.73. German Chancellor Angela Merkel and French President Francois hollande have vowed to preserve the euro project while investors are cautiously hopeful the US Federal Reserve will unleash a fresh stimulus this week to bolster US growth, analysts said.

“With the main focus this week being the central bank meetings out of europe and the US, and much Qe (quantitative easing) potentially already priced in to the market, there seems to be a fairly large amount of downside risk for most asset classes this week,” said Jason hughes from IG Markets Singapore.

Siemens Pak reports higher profit KARACHI APP

BEAR INSECURITY edges out bull tenacity KARACHI

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N Monday the Karachi share market shed 15 points on the back of, what the market observers viewed as investors’ concern for uncertain macroeconomic and a poor law and order situation in the city in the wake of country wide protests against power outrages.

First working day of the week saw share trading at the Karachi Stock exchange (KSe) remained thin despite strong corporate earnings outlook and recovery in global stocks and commodities. “(The) stocks closed lower on investors’ concerns for uncertain macroeconomic situation and security concerns in the city on country wide protests for power outrages,” said Ahsan Mehanti, a senior stocks analyst and director at Arif habib Securities.

The benchmark 100-share index slid by 14.87 points or 0.10 percent to close at 14,511.54 points against Friday’s 14,526.41.

The intraday high and low stood, respectively, at 14,560.01 and 14,492.73

points.

“Concerns for rising circular debt in the country’s energy sector, revenue loss to fertilizer sector on gas supply worries and pending Capital Gains Tax (CGT) collection issues played a catalyst role in bearish sentiment at KSe,” Mehanti said. The trading turnover marked improvement to stand at 81.83 million shares compared to 58.33 million of the previous trading session. In value terms, too, the share trading set in green zone and rose to Rs 3.15 billion from Rs 2.11 billion of the previous day.

The market capitalization ended up in negative and shrank to Rs 3.707 trillion as against Rs 3.708 trillion of last week.

The free-float KSe-30 index also closed lower at 12,567.47 points against the previous 12,581.70 points, loosing 14.23 points. Bank Alfalah appeared as a volume leader by counting its traded shares at 19.440 million each priced at Rs 18.06 in the opening and Rs 18.89 in closing. Other nine well-performing scrips included DG Khan Cement, Lucky Cement, Maple Leaf Cement, Arif habib Corp, Jahangir Siddiqui Company, Fatima Fertilizer, PTCL, engro Foods and Nishat Mills Limited. In future contracts, the trading volumes nosedived to 7.6 million from 19.4 million of the previous session.

Siemens Pakistan engineering Ltd has posted a higher profit after tax of Rs 519.050 million during nine months ending June 30, 2012.

According to financial results of the company despatched to Karachi Stock exchange here Monday, the pre-tax profit surged to Rs 621.983 million compared to Rs 298.758 million in the same period last year.

The earning per share also improved to Rs 62.94 during the period under review over last year’s Rs 17.21

KARACHI: Indus Motor Company staying true to its vision of “Customer first” is introducing partial payment scheme on all of its Toyota variants. PRESS RELEASE

CLOSE 7728.00 688.00 330.94 519.71 238.50

CHANGE TURNOVER 368.00 120 32.69 200 15.75 2,400 12.71 42,300 11.02 4,700

Rafhan Maize SPOT 3710.00 Bata (Pak) Limited 700.00 Unilever Food 2850.00 Nestle Pakistan Ltd. 4091.15 Lucky Cement 129.29

3525.00 709.00 2825.00 4140.00 128.50

3525.00 665.00 2825.00 4025.00 123.01

3525.00 675.00 2825.00 4085.42 123.85

-185.00 20 -25.00 200 -25.00 20 -5.73 8,360 -5.44 6,787,000

Volume Leaders Bank Al-Falah D.G.K.Cement Lucky Cement Maple Leaf Cement Arif Habib Corp.

18.06 45.90 129.29 6.25 33.48

19.00 47.15 128.50 6.62 34.09

18.05 45.51 123.01 6.15 33.26

18.89 46.32 123.85 6.52 33.70

0.83 19,440,000 0.42 10,041,000 -5.44 6,787,000 0.27 5,070,000 0.22 3,461,500

Interbank Rates US Dollar UK Pound Japanese Yen euro

94.6726 148.5318 1.2111 116.0402

Dollar East BUY US Dollar Euro Great Britain Pound Japanese Yen Canadian Dollar Hong Kong Dollar UAE Dirham Saudi Riyal Australian Dollar

94.30 114.81 147.19 1.1965 93.19 11.99 25.61 25.11 98.09

SELL 95.10 115.90 148.55 1.2074 94.56 12.17 25.82 25.27 100.45

Eurozone economic sentiment slid in July: EU

Celebrators distribute billions of rupees ’Eidi’ every year g Banks issued over Rs111bn last year for three-day festival KARACHI KARACHI: The Consul General of the Switzerland Mr.Didier Boschung, hosted a reception to celebrate 721st National day at a local hotel.

Depilex Institute is equipped with internationally qualified staff and is the only beauty institute in Pakistan that has foreign affiliations with The British Association of Beauty Therapy and Cosmetology, City of Sunderland College in the United Kingdom to name a few and is also ISO certified.

ISLAMABAD: The higher education Commission (heC) has extended the last date for receipt of applications for indigenous PhD fellowship for 5000 scholars- Phase-II” till 7th August 2012. The main purpose of the extension of the date is to facilitate the candidates especially from the far flung areas of the country. PRESS RELEASE

IMC to facilitate customers

LOW 7500.00 688.00 327.00 508.50 234.66

g

NBP increases social media presence

HEC indigenous scholarship 2012-date extended

HIGH 7728.00 688.00 330.94 523.00 238.85

EIDI: EUPHEMISM FOR SPLURGING BILLIONS

The Designers Multi-brand Store celebrates Ramadan in Dubai with a 3 day fashion extravaganza

KARACHI: In a span of ten months NBP’s official facebook fan page has registered more than 13000 members. The reason for such significant growth is mainly due to the fact that not just official information on NBP’s operations, services and products is given but also the fan page offers coverage to positive news and developments taking place in the country. PRESS RELEASE

OPEN 7360.00 655.31 315.19 507.00 227.48

BRUSSELS: Business and consumer confidence in europe slid in July, with Germany suffering the biggest fall as the eurozone debt crisis threatened Spain, the european Union said on Monday. The economic Sentiment Indicator produced by the european Commission fell to 87.9 points across the eurozone, down about two points on the previous month, the data showed.

That marked a fourth consecutive monthly fall and Londonbased analyst howard Archer of IhS Global Insight said a 35-month low for the headline figure, taken together with weak survey data from purchasing managers, indicated “further clear GDP contraction” for the third quarter of the year. AGENCIES

CORPORATE CORNER

KARACHI: With the opening of the first ever multibrand store exhibiting solely Pakistani designers in the UAe, renowned fashion retailer Asad Tareen has launched a new dimension in the expansion of Pakistani fashion abroad. Now, residents of UAe can enjoy high end Pakistani designer wear at their doorstep and have access to latest designs by top designers such as Rizwan Beyg, Umar Sayeed, Nomi Ansari, Karma, Mehdi and others. PRESS RELEASE

COMPANY UniLever Pak Siemens Pakistan Mithchells Fruit Millat Tractors Shezan Inter.

Major Losers

Macroeconomic, security uncertainties down KSE by 15 points STAFF REPORT

Major Gainers

Pakistan Squash Federation President Air Chief Marshal Tahir Rafique Butt, awarding cash prizes to Pakistan Squash team, on winning silver medal during the Men World Junior Squash Championship 2012, in a ceremony held at Air Headquarters, Islamabad.

ISMAIL DILAWAR

Otherwise inflation-stricken Pakistanis, some 79 million or 43 percent of which an independent survey suggests live under poverty line, appear to be extravagantly bounteous on religious festivities like eid-ul-Fitr.

During the three-day annual festival, which is celebrated on the first day of Shawwal to mark the end of the holy fasting month of Ramazan, the Muslims across Pakistan distribute billions of rupees among the children as what is locally called “‘eidi’.

According to official banking sources, last year the eid celebrators gave away ‘eidi’ worth over Rs 111 billion. Traditionally, the ‘eidi’ is given in fresh currency notes that are specially arranged by the central bank every year.

“We had issued fresh currency notes worth over Rs 111 billion during last Ramazan,” Syed Wasimuddin, chief spokesman of the State Bank of Pakistan, told Pakistan Today.

The SBP spokesman had, however, no idea what would be the volume of fresh banknotes, to be distributed as ‘‘eidi’’, this year. “It varies from year to year,” he said.

The new currency notes are issued through a large network of over 10,000 branches of commercial banks which on Monday were notified by the State Bank to facilitate the general public in obtaining fresh currency notes during the holy month.

The distributable bank notes are usually of

small denominations ranging from Rs 10 to Rs 100.

The SBP Banking Services Corporation (SBP BSC) has made elaborate arrangements for the supply of adequate quantity of fresh currency notes to commercial banks depending upon their branch network.

According to the central bank, the bank branches would issue only one packet each of Rs 10 and Rs 20 per person to the visiting general public and their account holders.

The notes would be handed to masses from August 1 till the last working day before the eid or until the exhaustion of bank’s currency stock.

Those wanting the notes would have to present their original Computerized National Identity Card along with a photocopy of it for record.

The corporate clients of the banks, however, would be allowed to get a maximum of 5 packets each of Rs 10 and Rs 20 denomination fresh notes. The clients would have to show a formal request on their company’s letter head duly signed by the authorized representative.

Tuesday, 31 July, 2012