Engro Corporation, Pakistan’s renowned and biggest business conglomerate, seems to take a U-turn from the road to growth to road to crisis with imminent severe challenges ahead after a leadership vacuum created with sudden departure of its top-brass members in the recent days.
The company Posts huge quarterly profit of Rs. 200 Crore
The leading corporation having a tremendous performance track record and successful history is feeling the pinch of energy crisis when the natural gas is not available to run its world’s biggest urea producing plant—Engro Fertilizers.
Engro Fertilizers, one of the biggest subsidiaries of corporation, has become major bone of contention among the leadership crisis as it made it extremely difficult for company’s board member to convince their investors regarding the slow production of the urea producing plants that has dragged the overall corporation into red zone.
The company huge quarterly profit of Rs. 2.054 billion (Rs 200 Crore) translated into loss of Rs 649 million (Rs 65 Crore) losses in the first quarter of 2012, showing a grim financial situation for the business conglomerate to maintain itself in the green zone going foward.
The revenue of the company stood at Rs. 22.9 billion for the first quarter 2012, as compared to Rs 21.8 billion in the same period last year.
Engro Fertilizers registered a decline of its market share to 8% as opposed to 20% in the same period last year due to lower sales volumes and high depreciation & financial costs.
Engro Fertilizers set up its new fertilizer plant in 2011, the world’s largest single train ammonia-urea plant, in Daharki with the huge investment of $1.1 billion (Pakistan Rs 99 Billion).
The vision was strong to be self-sufficient in Urea production at national level primarily and expanded corporation size in exploiting its expertise of the production of most essential ingredient in profitable sector of agriculture.
The plant could save $500 million of country on the account of Urea import and saves its foreign exchange on the other hand as Pakistan’s urea demand stands at approximately 6.2 million tons, whereas local production is approximately 5.2 million tons.
The plant’s production capacity of 1.3 million tons per annum enhanced Engro Fertilizer’s total annual urea production capacity to 2.3 million tons.
But unfortunately, the strong vision was vandalized and its execution was stagnant, when the subsidiary was supplied 140 days natural gas only in the 365 days of 2011, which was against the agreement between the corporation and the government.
Legal Battle and Government Talks
The company has filed a suite against Ministry of Petroleum and Natural Resources (MNPR) and Sui Northern Pipeline Gas Ltd (SNGPL) on the failure of 100 MMCFD uninterrupted supplies to its plant.
The legal action was taken by the corporation because the expansion of plant had been carried out on the back of transparent license bidding process for allocation of gas from Qadirpur gas field that ensures 100 MMCFD under Gas Supply and Purchase Agreement (GAS).
But different pressure groups comprising mainly of Punjab’s textile companies went to Supreme Court and now the hearing and verdict on the petition are pending.
The then CEO of Engro Corporation, Asad Umar, approached this matter to President Asif Ali Zardari but he was disappointed and it was reported that he was asked to pay millions on high level meeting.
Engro Internal Rift
The expansion was planned by the then President and CEO Engro, Asad Umar, but the whole corporation came into trouble after he and another board member and CEO of Engro Fertilizers Khaild Mansoor, who also resigned from his post recently, was under immense grilling of the fellow board members.
Asad Umar and Khalid Mansoor were reportedly at loggerhead on the issue of Engro Fertilizers slow production but both were also come under immense grilling of fellow board members.
Few of them said that the expansion plan was a failed plan and it proved to be complete disasters to entire corporation because the legal battle seems to be delayed for longer period and gas supplies will be volatile and uninterrupted for the fertilizers plant.
“Asad Umar found it opportunity to leave the company in the situation, which is though not very bad at present but it will be worse in future. So, Asad prevented himself from facing all blame in coming months,” a friend of Asad said on the condition of anonymity.
On the other hand, Khalid Mansoor, who was CEO of Engro Fertilizers and Sindh Engro Coal Mining Company, tendered his resignation when Aliuddin Ansari, a relatively junior board member, was made CEO of the corporation.
The departure of two key board members has left Engro in trouble because these were the executives who closed associated with projects and its legal and operational affairs.
Though as an exemplary corporate company, the leadership may not issue for Engro Corporation but the abrupt dramatic situation may lead to more challenges for the company to face a tough time for maintaining its profitability in future.
Aliuddin Ansar has been one of the board members of Engro Corporation since 2009 and must have served company’s interest CEO of Dewan but he has not headed any of the subsidiaries of Engro. Meanwhile, no person has been promoted or appointed in the place of Khalid Mansoor so far for heading two companies– Engro Fertilizers and Sindh Engro Coal Mining Company.
Engro Foods, its subsidiary, has kept the balance sheet of company at quite stable situation. The foods business turnover grew by 54 percent to Rs. 9.9 billion in the first quarter of 2012 as compared to Rs. 6.4 billion for the corresponding period last year. In addition, the Engro Foods investment in the Halal Foods business in Canada, Al Safa, also achieved sizable sales revenue of Canadian $ 2.5 million in the first quarter of 2012.
Engro Corporation comprises of six subsidiaries- Engro Fertilizers, Engro Foods, Engro Polymer and Chemicals, Engro Powergen, Engro Eximp and Engro Vopak.
Despite five subsidiaries in businesses, the whole corporation came in great trouble owing to its major organ, Engro Fertilizers.
Mariam Agha is a good-looking career woman and possessing an intelligent mind in dealing corporate affairs and the provocative press has joined Bank Alflaha Limited recently as spokesperson.
Mariam Agha is drawing around One million Rupees expectedly, she availed with all fringe benefits including imported car and personal guards.
She has left Faysal Bank after serving one and half year as Head of Marketing and Corporate Affairs.
This is her fourth organization in banking industry in the past six years as she had been associated with foreign banks such as Royal Bank of Scotland (RBS), Saudi Pak Bank.
Miss Agha came in the limelight when RBS planned to wind up its operation in Pakistan. She was the lady tactfully tackled the media with all marketing tools and public relation skills.
After Faysal Bank acquired 99 percent share of RBS, She had been given position of the same portfolio in the organization, which she performed well.
She is considered a most talented lady in the industry it is one of the reasons that she has also possessed a rich background in media buying and advertisement companies where she spent nearly five years.
A soft spoken, professionally sound with reserved and bold personality have brought her successful career and achievement, which has been rarely seen in the whole banking industry. And this is why she has proven her capabilities to get a renowned name and preferred choice of employer.
Drawing salary around million of rupees expectedly, she availed with all fringe benefits including imported car and personal guards.
She is so fortunate to join a new organization after Faysal Bank has been slapped a pretty hard penalty by Security of Exchange Commission of Pakistan (SECP) on manipulation in shares’ market.
Now at the helm of affairs, Miss Agha will be steering media and marketing at times Bank Alflaha has indulged in different expansion projects such as acquisition of IGI Investment Limited and Dhabi Group project of Branchless Bank.
United Bank Limited, another group bank of Abu Dhabi Group, posts a whopping Rs 497 Crore in profits in just three months of 2012, a growth of almost 50% from same Quarter of previous year.
According to the financial statements released by the bank, its making Rs 5.5 Crore every day and Rs 6.5 Million in every working hour. It would be interesting to add that UBL introduced a controversial employee share bonus scheme worth Rs 25 Crore last month to intact its key and top performing bankers.
This is not something new to banking industry when all the major banks are performing extraordinarily well and these jumps in profits was triggered by the jump in non-interest income and a drop in band loans.
Although in case of UBL – these results even beats analysts’ expectation who were expecting a profit of Rs 420 Crore previously. The unexpected deviation results from higher than expected other income and lower than expected provisioning.
The result could not help the stock close in the green as all 23 listed banks closed in the red following news of prime minister’s conviction in the contempt of court case.
Earlier this week, Habib Bank and Allied Bank profits grew by 22% during the same period of January to March 2012. UBL, on other hand, alone shows growth of 50%.
UBL produced better dividend income from treasury and trading related led overall growth in non-interest income to Rs 410 Crore. The banking industry’s focus has recently shifted towards government securities rather than private sector dealing.
UBL is one of those only banks who are planning to aggressively pursue branchless banking through its’ UBL Omni and they recently takeover Khushhali Bank for this purpose.
One of the leading Energy company and in recent months one of the most troubled Energy company due to its fight with Apex Tax authority, FBR, Hubco successfully made Rs 500 Crore in last 9 months.
HUBCO Major Shareholder is also Planning to get Rid and sold its stake
Hubco, which has been in court fight with Federal Board of Revenues for a Rs 200 Crore tax case which even results in its bank accounts to be freezed, posted its results yesterday which reflects a growth of 16%.
Net profit stood at Rs 497 Crore during July 2011 to March 2012 against Rs 428 in the same period last year, according to a notice sent issued on Thursday.
Revenues grew by 55% primarily due to pass through of higher furnace oil prices and the start of Narowal project.
The Project Company Equity (PCE) guarantees an uptick in tariff by 5% in the second half of the financial year, according to analysts. Under the power purchase agreement, the company electricity tariff increase every year for the remaining project life. In addition, other factors behind bottom-line growth are the rupee depreciation against the US dollar and inflation index. Hubco’s tariff payments are dollar-based, hence the depreciating rupee is an added advantage to the investors.
SAP Pakistan has announced the appointment of Darren Rush worth as Executive Managing Director of SAP Pakistan and the Emerging Markets.
Tim Moylan, SAP Southeast Asia president, said Rushworth will oversee the sales efforts and operations of SAP Pakistan and the Emerging Markets that include Cambodia and Laos among others, “to help raise the group to the next level of amazing growth.
“Darren has lived in Asia for 16 years and has extensive experience in Sales, Marketing, Strategic Alliance and Management. Before joining SAP, Rush worth was the Managing Director and the Vice President of a software company in Asia Pacific for more than 20 years.
Darren has been in the information technology industry for over 20 years, the past 16 based in Asia. He is very experienced in doing business in Pakistan and the adjoining region and has been involved in initiatives and promoting private-public partnerships through academic programs across the expanse.
On the occasion of the announcement, Rushworth said, “I am excited to be part of SAP Pakistan and the Emerging Markets as the region is poised to grow further. We are also confident that we can meet this year’s targets and effectively address the company’s 4 points, namely technology innovation, SME solutions, ecosystems and cloud computing.”
Hassan Jamal is the Country Liaison Manager, SAP Pakistan and he will now be responsible in executing SAP Pakistan’ over-all go-to-market strategies for various industries and line-of-business solutions. Hassan is a seasoned SAP veteran.
Moylan expressed confidence that Rush worth’s “extensive experience in the IT industry and his in-depth knowledge of the APJ (Asia Pacific Japan) markets, will bring SAP Pakistan and the Emerging Markets to the next level.”
Allied Bank, one of the top 5 banks of Pakistan according to their size, already made Rs 300 Crore in fist quarter of 2012, translating Rs 100 Crore per month in profits. This is almost 3 times of what Unilever Pakistan, a consumer giant with 50 leading brands, made in three months.
While on one hand, Allied Asset Asset Management lost Rs 1,800 Crore only in March and tagged as the worst investment management company and on other Allied Bank’s results surprised analysts as they had forecast net profit to stand around the Rs2.79 billion mark (Rs 279 Crore).
It would be interesting to note that Allied bank also announced its interest in conducting due diligence on HSBC Pakistan operations, potentially leading to an acquisition bid.
Dividend income jumped five folds to Rs 172 Crore against Rs 33 Crore in the same period last year.
The result also contained a negative surprise in the form of a sharp decline of 21% in net interest income to Rs 487 Crore. On a more positive note, the bank also announced a surprise interim dividend of Rs2.00 per share
Pakistan Telecommunications Company Limited (PTCL) has gained net profit of Rs 140 Crore in its third quarter earnings for FY2011-12 for the period ending March 31, 2012, while also showing a growth of 11.3% in revenue.
“PTCL’s profits and revenue growth during third quarter of FY2011-12 is a strong indicator of our dynamic corporate direction as well as our customers’ continued satisfaction and trust,” said PTCL CEO & President, Walid Irshaid, following a meeting of the company’s Board of Directors held on Wednesday, which announced the Company’s nine-months financial results for the period ending March 31, 2012.
“Through optimal use of resource, we want to achieve enhanced revenue, greater levels of customer satisfaction, as well as improve our shareholders’ value,” said Mr. Irshaid.
According to the PTCL BoD announcement, PTCL’s group revenue stood at Rs 2,830 Crore during the period under review, showing a growth of 9.7% over FY2010-2011. Of this, PTCL’s revenue was Rs 1,480 Crore.
Despite the economic challenges faced by Pakistan, PTCL has remained strong throughout 2011-2012 in emerging segments of Broadband in Wire-line as well as Wireless, and other corporate services.
PTCL was declared the leading operator in Pakistan by PTA’s 2011 Quality of Service survey for providing the highest quality Broadband Internet service to consumers. PTCL was declared the ‘Best South Asian Telecom Operator 2011’ by the global telecommunications forum, SAMENA.
“We are constantly innovating and improving our customer experience,” said Mr. Irshaid, while recounting the successes of PTCL’s most recent business offerings. “We strongly believe that PTCL will remain the market leader and a service provider of choice throughout Pakistan for providing cutting-edge integrated telecom solutions to our customers.”
Abu Dhabi Group’s star child Bank Alfalah, a mid size bank, is planning to acquire IGI Investment Bank, sources close to matter told EconomyAge.
Bank Alfalah and IGI Investment Bank are in negotiations for a possible takeover of IGI Investment Bank along with two wholly owned subsidiaries.
Bank Alfalah’s officials confirms that the possible takeover would be implemented by way of merger in terms of a scheme amalgamation under Section 48 of Banking Companies Ordinance, 1962.
According to Bank Alfalah, they will soon start due diligence process of IGI Investment Bank. Although it should be kept in mind that this possible takeover deal is subject to, of course, due diligence results and regulatory approvals from State Bank of Pakistan.
Talking to EconomyAge, Bank Alfalah also mentioned that the consideration of this possible takeover deal might involve swap ratio of shares.
IGI Investment Bank was incorporated in 1990 as a joint venture of the Packages Group, American Express Bank and the International Finance Corporation (IFC).
In 2006, IGI Insurance took over the shareholding of American Express, thus becoming a major shareholder in IGI Investment Bank.
Habib Bank posted stellar earnings growth to Rs 600 Crore in the quarter ended March 31 from last year’s Rs 500 Crore, according to its consolidated results.
The bank was the only of the three top banks (including MCB Banka and Allied Bank) to witness an upside in net interest income by 7% to Rs 2,660 Crore despite expected contraction in margins due to higher earning assets. The growth is likely on the back of balance sheet expansion, according to a Burj Research. Analysts are still estimating the core reasons as detailed account have yet to be released.
In another upside, the bank witnessed a sizeable decline of 55% in provisioning expense. Surprisingly, operating expenses have dropped sharply by 12% on a quarterly basis.
HBL did not declared any cash payouts alongside the result.
The strong results are announced at times when there are news in market that Habib Bank’s visionary Leader Zakir Mehmood is planning to left, although there has been no official announcement yet.
By Imran Hussain Minhas
Imran Hussain Minhas is certified Islamic Microfinance Manager and Joint Director, Modaraba Companies and Modarabas, at Securities and Exchange Commission of Pakistan. He is professionally a banker and also serves in the visiting faculty of International Islamic University, Islamabad as Associate Professor (Banking and Finance).
He can be reached at: email@example.com.
Islamic Banking and Finance (IBF) is the value system based on Shari’ah Principles and Islamic values which prohibit riba and ensure profit sharing mechanism in financial world. It operates with the objectives to implement and materialize the economic and financial ideology of Islamic Shariah, in addition to the conventional good governance and risk management rules.
The local Council of Islamic Ideology (CII), consisting panelists of bankers and economists, was set up on September 29, 1977 who prepared the blueprint of interest free economic system and submitted their report, highlighting details for eliminating the interest from the economy, in February 1980. Resultantly the Government of Pakistan (GoP) first time in its history started journey towards Islamic Finance by promulgating the Modaraba Companies & Modaraba (Floatation & Control) Ordinance, 1980 through presidential orders.
After the Ordinance the Modarabas as pioneering Islamic Financial Institutions took the role of torch bearer of Islamic Finance in Pakistan. The concept of Modaraba financing transformed into an Islamic Financial Institution and the Modarabas are allowed to operate as corporate entities under the regulatory framework of SECP.
Modaraba is a unique model of its kind as no such example exists in rest of the
world. The Modaraba companies are the management companies (MMC) of the
Modarabas, who contributes only 10% towards total paid up funds of the Modaraba, and operate as “Modarib” whereas the Certificate holders of the Modaraba, who are the “Rab-ul-Maal”, provide 90% funds to the Modaraba.
The Modarabas are allowed to offer any financial product based on Islamic concept provided it is approved by the Religious Board, constituted by the GoP for the purpose of Modarabas. Modarabas are providing Islamic financial services (IFS) with no mixture of conventional banking and finance.
Modarabas can invest in stock markets, trading of halal commodities, project financing activities and act as special purpose vehicle (SPV). The Modaraba can raise deposits in the form of Certificates of Modaraba/ Musharakah and can also float Musharakah based TFCs. To encourage Islamic Finance (IF) the GoP exempted the Modarabas from Income Tax provided they distribute 90% of their profits to the Certificate (Share) holders.
The Main Challenges faced by the Modarabas in Pakistan are:
1- Absence of Islamic Money Market/Liquidity Instruments – Pakistani market lacks Islamic money market and instruments which could be utilized either to cover liquidity shortages or to manage excess liquidity by the IFIs.
2- Lack of Awareness – Despite the growth of IB over the last 30 years, many
people in the Muslim and non-Muslim world do not understand what Islamic
finance actually is. Proper media campaigns, awareness programs, road shows
and seminars are required to educate business communities and general public
about Islamic Finance and Modarabas.
3- Lack of Research and Development – There are no proper research and development institutes for the Islamic finance. Islamic financial institutions need research and training forums in order to prompt entrepreneurship amongst their clients.
4- Financial Reporting Standards – The regulatory financial reporting
framework for the IFIs consists of International Financial Reporting Standards
(IFRS), and various reporting standards. Presently Murabahah and Ijara
standards have been notified and implemented by the SECP. But still standards
for distribution of profit to PLS depositors, Diminishing Musharakah and
Musharakah and other interest free modes of financing and investments are
required to be introduced according to Islam.
5- Network Issues – The Modarabas have only 50 branches which are based in the three big cities of Pakistan. Bigger branch net work down to the rural areas can increase the business and size of the Modarabas due to it ethical and
religious roots of Islamic finance among the people.
Developments in the Modaraba sector
SECP has realized the problems of Modaraba sector and focused on the various
issues of the Modaraba sector, which remained neglected since last 30 years. To implement the true Islamic finance has issued Shari’ah compliance and audit mechanism for Modarabas to ensure that business of the Modarabas is free from non-shari’ah compliant income.
The mechanism underlines processes of shares screening, dividend purification and management of charity etc. It also prescribes qualification and procedure for appointment of Shari’ah Advisors and Internal Shari’ah auditors.
For the better monitoring of the Modaraba sector the Government in the last week of March 2012 has approved some amendments in the Modaraba Ordinance. For the improved skill set training programs for the staff working in the Modarabas have been arranged in coordination with the NBFI and Modaraba Association of Pakistan.
Even after the recent global financial meltdown the growth in the Islamic finance remained in double digits and higher than the conventional banking. Islamic finance has proved a vital potential to be substituted against conventional banking system in many countries of the world.
Modaraba sector has a great potential that we need to tap by media campaign,
publication, education of the clients and motivating the Modarabas to penetrate in the small cities and target the small segment of the society.
SECP is also focusing on the development of new fund raising products. For the
business and risk management friendly regulations a Reform Committee has also been constituted to review the existing regulatory regime and best world’s best practices.
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