Day: August 9, 2021

Despite a 40 percent hike in the power tariff since the incumbent government came to power, international donors remain dissatisfied with the government failing to increase the electricity tariff to counter the rising circular debt.

According to a report by Business Recorder, the World Bank (WB) has communicated to the Government of Pakistan that it has serious reservations about govt’s failure to increase the electricity tariff according to the February 2021 agreement.

The government had entered into an undertaking with the WB and the International Monetary Fund (IMF) in February to increase the base tariff by Rs. 3.34 per unit in two stages.

An increase of Rs. 1.95 per unit had been notified in the same month but the remaining increase of Rs. 1.39 per unit that was supposed to be implemented by 1 June 2021 had been postponed. Both the Prime Minister (PM) and the Minister for Finance had stated that the domestic and industrial consumers will not be able to bear the additional burden.

A delegation of the WB led by the Vice President for South Asia, Hartwig Schafer, had met PM Imran Khan; the Minister for Finance, Shaukat Tarin; the Minister for Energy, Hammad Azhar; the Minister for Economic Affairs, Umar Ayub Khan; and other concerned authorities last week to discuss the electricity tariff, the fuel cost adjustment (FCA), and other issues in the energy sector.

The current base tariff is already high at Rs. 2.17 per unit, and the WB is demanding another increase in it. This is a tough decision for the government as there is a political cost attached to the hike. Despite this, the adjustments in quarterly tariff monthly FCAs will continue, the news report added.

According to the initial Circular Debt Management Plan (CDMP), the government had promised the global lenders that the tariff would be increased by nearly Rs. 5 per unit by 2022. With the clear refusal of going through with this plan, now the projections of the CDMP 2021 have also derailed. This is not sitting well with the WB and the IMF.

The WB has asked Pakistan for a new CDMP, which is also not yet finalized as the Ministry for Finance has only provided an estimated figure of subsidy and an increase in the base tariff, the news report added.

Source: Pro Pakistani

Local manufacturers of pottery and ceramic products have reacted strongly to the recent increase in the gas tariff, stating that it will make their products uncompetitive, reported a national daily.

The industry players have launched a strong protest on the basis that gas is the basic fuel for their industry and that an increase in its price will put Pakistan’s products at the risk of being driven out of the international market by Chinese companies.

The President of the Pakistan Pottery Manufacturers Association (PPMA), Chaudhary Zuman, said that the doubled tariff has shocked the local industry, and that the Gujrat-based pottery units are primarily domestic cottage industry.

He said that the recent decline in the economic conditions has led to the closing down of several such businesses and that some local glass factories had already been closed due to the high cost of doing business. “Now, the new gas tariff could result in the closure of the cottage industry as well,” he stated.

Zuman added that if the hike is not withdrawn, the PPMA will stage a sit-in outside the Parliament House.

The General Secretary of the PPMA, Raja Waqas Ahmed, said that the increase in the price of gas had compelled the manufacturers to increase the rates of their products but the local industry may not survive the competition by Chinese products in terms of prices.

Gujrat’s pottery and ceramic industry has over 150 pottery manufacturing units and employs nearly 25,000 workers in addition to hundreds more from the affiliated industries.

Source: Pro Pakistani

Lucky Cement Limited has announced its financial results for the year that ended on 30 June 2021.

The company reported a consolidated highest-ever profit after a tax of Rs. 28.22 billion, up by 286 percent or 2.86x as compared to Rs. 7.31 billion during the same period last year. This translates into earnings per share (EPS) of Rs. 70.69 per share as compared to Rs. 18.96 per share that was reported during the same period last year.

On a consolidated basis, the company has achieved net sales of Rs. 207.15 billion, which is 67.40 percent higher than the net sales of Rs. 123.76 billion recorded in the same period last year.

Alongside the result, the company did not announce any dividend with the FY21 results against expectations of a final dividend.

According to the company’s financial statement that was submitted to the Pakistan Stock Exchange (PSX), the increase in net profit was attributable to an increase in the profitability of all the group companies. The profit after tax of the cement segment had grown by 3.21x to Rs. 14.07 billion during the year due to improved margins and sales volumes as compared to Rs. 3.34 billion recorded in the same period last year.

The increase in the sales volumes was due to the availability of the newly commissioned increased capacity line 1 for the full year versus six months during the corresponding period and the growth of the demand for cement in the local market on the back of an increase in construction activities.

While commenting on the results, the AVP JS Global, M. Waqas Ghani, said that the increase in the profit was due to better retention prices, an increase in volumetric sales, and a reduction in FED by Rs. 25 per bag. A heavy dividend income from Lucky Motors Corporation, ICI, and Yunus Energy was another reason for this accretion in the earnings during the year.

He added that the increase in the consolidated net profit was also supported by a considerable increase in the profits of Lucky Motor Corporation (71 percent holding of LUCK) in addition to the profits from other foreign subsidiaries with the Samawah facility that is also in the picture now (online since early March 2021).

On a standalone basis, the company’s overall sales volumes posted a double-digit growth of 30.7 percent to reach 9.96 million tons during FY 2020-21. The local sales volumes had grown by 38.3 percent to reach 7.56 million tons in comparison to 5.46 million tons during the last year. Also, the export sales volumes of the company had increased by 11.3 percent to 2.41 million tons as compared to 2.16 million tons during the last year.

Furthermore, regarding the company’s standalone financial performance, the gross sales revenue had increased by 41.8 percent to Rs. 88.36 billion as compared to Rs. 62.30 billion that was reported last year. The per ton cost of sales had also decreased mainly due to better absorption of fixed cost as a result of the increase in volumes and efficiencies achieved from the new production line in the north.

Despite the impacts of the COVID-19 pandemic situation, the 1.2 MTPA Greenfield cement production facility in Samawah, Iraq had successfully completed its trial production on 10 March 2021.

The company also reported that its 1 X 660 MW supercritical coal-based power project at Port Qasim had achieved a completion status of approximately 98.7 percent by 30 June 2021. Based on the current level of readiness by the NTDC for the provision of an interconnection facility and the government’s support, the company aims to commence commercial operations by October 2021.

At the time of filing this report, LUCK’s scrip at the bourse was trading at Rs. 866, down by Rs. 6.62 or 0.76 percent, with a turnover of 69,223 shares on Monday.

Outlook

Regarding the outlook, the company has reported that while the COVID-19 cases in Pakistan had subsided in the past, the fourth wave of the pandemic has started to pose new challenges. With the government’s focus on getting the majority population vaccinated and curtailing the spread of the virus through smart lockdowns, it is optimistically expected that the economy, in general, will continue the growth momentum as seen in the current year. The increased surge in economic activity that triggered a healthy demand for cement both in the northern and southern regions during FY 2021 is expected to continue.

Several initiatives of the Government include the construction package, the focus on low-cost housing schemes, and the reallocation of liquidity available with the local banks towards the construction and housing sector, the construction of dams and water reservoirs, and CPEC-related activities are expected to continue strengthening the demand.

However, the intense hike in the global commodity prices (particularly the coal and furnace oil prices) after the ease of the pandemic-induced lockdowns is expected to put pressure on the margins. It further reported that the export sales are anticipated to remain stable, but the prices will remain competitive due to a surplus of the capacities that are available in the region.

Source: Pro Pakistani

The Pakistan Institute of Development Economics (PIDE) has conducted a study into private housing societies in the country and their legality. While this debate is not new, it has recently garnered more attention than usual in popular media.

Consider just Islamabad for a moment — according to the estimates shared by the Capital Development Authority (CDA) there are nearly 140 illegal housing societies within the capital city alone.

CDA published a list of 64 “authorized” societies, with the aim of informing and warning the public of potential scams involving investing in illicit societies.

However, the PIDE’s research revealed that only 22 of these listed societies have obtained no objection certificates (NOCs) from the government. “This puts legal societies at 10 percent of the total,” the PIDE report revealed.

According to a government report dated 2019, the CDA has not launched any new residential sectors over the last 20 years, despite the rising demand for housing in Islamabad. Instead, the private sector was encouraged and provided incentives to operate in the housing market.

While the CDA might have stayed away from launching new projects, it continues to have an extensive regulatory regime governing the development of private housing societies in Zones 2, 4, and 5 of the Islamabad Capital Territory (ICT).

A sponsor needs to go through over two dozen steps to register a housing society. The report revealed that the average time taken by the CDA to approve an NOC is two-and-a-half years, as well as at least a decade (extendable to two decades) for the construction and development that follows the issuance of the NOC.

Despite such a comprehensive set of rules, the actual regulation standards by CDA show a bleak picture. Furthermore, the process of seeking and obtaining permissions and NOCs is so complicated and time-demanding that many sponsors choose to avoid it altogether.

Despite such comprehensive set of rules, the actual regulation standards by CDA show a bleak picture. Furthermore, the process of seeking and obtaining permissions and NOCs is so complicated and time-demanding that many sponsors choose to avoid it altogether

2] Neither are these 140 societies are registered with the Securities & Exchange Commission of Pakistan (SECP), nor have they approached the CDA for the approval of the LOP and the issuance of NOCs.

In 2017, the Auditor General of Pakistan (AGP) conducted a special audit of the Housing Societies Directorate of the CDA for 2011-16. The audit uncovered serious irregularities and non-compliance in issuing of NOCs, including the issuance of an NOC on fake documents, or without proof of ownership of land, or for areas outside of the ICT.

The report also showed that the internal audit system was weak and could not identify the financial irregularities within the department. It also shows that a lack of checks and balances meant that there was no fixing of the responsibility for the losses that innocent investors incurred.

“The Housing Directorate of CDA is neither adequately equipped to inspect the area for illegal construction nor has the powers for demolishing illegal constructions,” PIDE report said.

The CDA had issued only 22 NOCs over the last 30 years in Zones 2, 4, and 5; but these schemes cover only 6.8 percent of the total land of these zones.

A major chunk of the land being sold under the garb of housing societies – total of 1.26 million kanals – is under illegal possession. On top of that, 99 percent of these illegal societies are incomplete.

Another factor highlighting the inefficiency of the regulatory body is that 90 percent of the land in the above-mentioned zones is not even under the CDA’s influence or control.

People have lost their hard-earned money – to the tune of Rs. 5,200 billion (AGP, 2017) – in these illegal societies, the audit report revealed.

Source: Pro Pakistani

United Bank Limited (UBL) exhibited an outstanding financial performance as its profitability grew by 31 percent Year-on-Year in the first half of 2021.

According to its financial statement, the bank made a profit of Rs. 14.9 billion during January-June 2021 as compared to a profit of Rs. 11.4 billion during the corresponding period last year. This is UBL’s highest-ever half-year profit.

Its interest income had declined to Rs. 35 billion from Rs. 39 billion of the last year by the end of the first half owing to a drop in the policy rates that also negatively impacted its revenue streams on the account of markup.

However, its non-interest income had surged to Rs. 11.4 billion from Rs. 8.9 billion last year. The major margins were driven through the gain on securities, which is the profit earned from the investment of the government’s papers.

The bank’s expenses had also increased to Rs. 20.7 billion between January and July 2021 from Rs. 19.8 billion between January and July 2020.

Under Shahzad Dada, UBL is being transformed with the new policies, including the focus of branch banking. The business is being progressive at the local level, whereas the global operations remain challenging despite the bank working to reduce its non-performing loans.

It is operating more than 1356 branches across the country, including 100 branches dedicated to Islamic banking.

UBL’s earnings per share also surged to Rs. 12.25 from Rs. 9.31, and it announced an interim dividend of Rs. 4 per share for the shareholders.

Source: Pro Pakistani