Monday, August 20, 2012

Strong Earnings Propel Pak Shares Index to 4 Years High

A string of strong earnings announcements by Karachi Stock Exchange listed companies and the Central Bank's 1.5% rate cut have helped the KSE-100 index gain 32% year to date. In the week ended on August 16, the benchmark index surged by 238.59 points, or 1.61 percent, to 51-month high of 15,000.08 points. This was the highest close since April 30, 2008.

Strong Earnings:

Last week, KSE-listed Indus Motors announced 57% jump in profits on record sales of Toyota Corolla cars.  It was followed by Lucky Cement Ltd. (LUCK), Pakistan’s largest producer of the building material, announcing 71 percent surge in profits to a record as an increase in domestic sales offset a decline in exports. Pakistan Petroleum Limited (PPL), the country’s second largest oil and gas explorer, said its profits soared 30% to Rs40.9 billion in fiscal 2012. Strong earnings have also been reported by Unilever Foods and Bata shoes in the last few days.

Best Performing Market:

 So far in 2012 Pakistan is the best performing market in Asia surpassing the Philippines which was the top performer until June of this year.  Karachi stocks have also significantly outperformed all emerging stock smarket indexes, including Mumbai and Shanghai, in 2012.

 Rising Consumer Demand: 

 Meteoric rise of Engro Foods symbolizes strong consumer demand in growing package food sector. Its CEO Muhammad Afnan Ahsan has forecast 81% increase in net income in the current year ending December 31, 2012.  With a compound annual growth rate (CAGR) of 65 percent and a planned infrastructure investment in 2012 of eight billion rupees, Engro Foods has become the country's fastest growing local company catering to a wide range of consumers in Pakistan and overseas. 

Undeterred by the gloom and doom reports in the media, Pakistani consumers are continuing to spend and private consumption has now reached 75 percent of GDP. It rose 11.6% in real terms in 2011-12 compared with just 3.7% growth a year earlier , according to Economic Survey of Pakistan. In fact, many analysts believe that Pakistan's official GDP of  $220 billion is understated by as much as 50%, buttressing a recent claim by the head of Karachi Stock Exchange that Pakistan's real GDP is closer to $300 billion.

I believe that even a modest effort to increase tax collection can significantly improve Pakistan's state finances to support higher public sector investments in energy, education, health care and infrastructure.
 Related Links:

Haq's Musings

Pakistan's Underground Economy

 Pakistan Cement Sector Research Report

Tax Evasion Fosters Aid Dependence

Poll Finds Pakistanis Happier Than Neighbors

Pakistan's Rural Economy Booming

Pakistan Car Sales Up 61%

Resilient Pakistan Defies Doomsayers

Land For Landless Women in Pakistan


Hopewins said...

Dr. Haq,
This is a good article and serves as a good contrast to the "doom & gloom" in the "irresponsible, ill-informed and puerile" media.

However I should point to a fews items worthy of note:

1) You have provided a link to the "Highlights 2011-2012" file at This is good, but I think you should also provide a link to the "Growth & Stabilization" file at:

2) In the above-linked "G & S" file, if we take a look at the Table (Number 1.6) on page 13, we can see what the havoc that this current "consumption-led growth" is playing with our (a) Domestic Savings Rate and (b) Gross Fixed Investment Rate.

3) If we look at the trend over the last 4-5 years, we can see a collapse of our Domestic Savings levels and an implosion of our Gross Fixed Investment levels.

4) This is unsustainable. If we continue on this consumption-led growth (i.e. Consumption growth rates > GDP growth rate, implying reduction of savings & investments), simple common sense tells us that very soon we will have no savings at all.

5) Without savings, our economy will destabilize, wobble and collapse.

6) As a reference, I note that even in the US, which is a developed country that does not require very high domestic savings rates, people are still ringing alarm bells about the low savings rate when it is at about 11-12%.

7) A poor country like Pakistan, which wants to rapidly industrialize rapidly like the East Asian Tigers, must have a much, much higher savings rate than we have now.

8) Instead of increasing savings & investment rates (i.e. GDP growth rate > Consumption growth rate), we are doing exactly the opposite. We are eating our seed-corn even as you sing paens about how well we are dining.

9) We are now going down the wrong road. This road leads to a dead end.

10) We must save more. We must invest more. We have to re-orient our economic structure so that we get higher GDP growth rates that are driven more by productive investments. Yes, *excessive* savings & investment (> 40%) and low consumption would create a "lack of demand" problem, but a developing country like our needs savings & investment at least in the 25-35% range if we want to grow at 8-9% for a generation in South-Korean fashion.

Something to think about.

Thank you.

Riaz Haq said...

HWJ: "We must save more. We must invest more. We have to re-orient our economic structure so that we get higher GDP growth rates that are driven more by productive investments. "

Consumption is pre-requisite to investment...both domestic and foreign.

Investments only flow to places where there is significant consumer demand to snap up products produced by manufacturers and builders etc.

Some investors are already taking notice of rising consumption as evidenced by foreign buying of Pak shares and recent increase in FDI in July 2012 as reported by Daily Times:

"The new financial year 2012-13 started with on a fairly positive note for the economy as foreign direct investment (FDI) and Foreign Portfolio Investment (FPI) inflows showed a growth of 28 percent in the months of July.

The State Bank of Pakistan (SBP) figures showed that overall FDI witnessed a handsome growth with constant inflows of FPI in the equity markets, showing a surge of 198 percent on yearly basis."\08\16\story_16-8-2012_pg5_1

Hopewins said...

You say:"Consumption is pre-requisite to investment...both domestic and foreign. Investments only flow to places where there is significant consumer demand to snap up products"

This is exactly what I said in the second Half of Point (10) in.

....Yes, *excessive* savings & investment (> 40%) and low consumption would create a "lack of demand" problem, but.....

Riaz Haq said...

Here's an NPR report on Chinese investments raising suspicions among Sindhi nationalists in Pakistan:

...Boost in Chinese investment has sparked resentment in southern Pakistan, where activists accuse China of trying to be a new colonial power. A bomb blast recently hit near the Chinese Consulate in Karachi — an ominous sign of the rising tensions.

When Bashir Qureshi, a politician in his late 40s, died unexpectedly last month, the medical examiner said it was a heart attack. But Qureshi's friends and family don't believe that. Instead they claim there's been a conspiracy, and that Qureshi was murdered. Poisoned, in fact — by China.
China and Pakistan have been allies for decades, and China recently pledged to greatly increase its investment in Pakistan, from $7 billion to $30 billion a year.

Maleeha Lodhi, a former Pakistani ambassador to the U.S. and Britain, says that money couldn't come at a better time. "Let's face it: Foreign direct investment into Pakistan has plunged to a historic low," she says. "In this environment, when you have China — the second-largest economy in the world — stepping up to the plate and saying, 'We're prepared to help you,' at a time when others are shy of coming into Pakistan, I think that more than offsets the fears that some may have."

The late Qureshi complained that China's big construction projects rely on Chinese workers and Pakistani migrants.

In recent years, China has faced similar criticisms when it has made large investments in other developing nations, including a number of African states...

Marghoob said...



Riaz Haq said...


Violence and corruption in different forms are part of the human condition to varying degrees everywhere in the world. These should not be used as excuses for lack of action.

Guns take 30,000 lives every year in the United States. There are over 20 mass shootings every year in America.

As to rampant corruption in US Congress, here's how former lobbyist Jack Abrams put it in a CBS 60 Minutes segment: "I think people are under the impression that the corruption only involves somebody handing over a check and getting a favor. And that's not the case. The corruption, the bribery, call it, because ultimately that's what it is. That's what the whole system is.";contentBody

While security and transparency can and should be improved, there is no place perfectly safe and free of corruption.

Pakistani media seems disconnected from the reality on the ground. Pak journalists are too busy repeating the worst 5% of the Pakistan story 95% of the time.

Hopewins said...

Dr. Haq,

Here is something to reflect upon as far as the underlying fundamentals of our Economy are concerned.

Bangladesh & India:

And now our Country:

Why is there this huge, visible and qualitative difference in the long-term trend?


For reference as comparison, here are the equivalents for the rapidly industrializing East-Asian Economies:

Note that all of them reflect trends resembling the trends in Bangladesh & India. None of them reflect the trend seen in our country.


And now here are the equivalents for some other countries with trends similar to our trend in Pakistan:


Where is Pakistan headed? Can Pakistan follow the East-Asian example of rapid industrialization?

Something to think about.

Thank you.

Riaz Haq said...

HWJ: "Where is Pakistan headed? Can Pakistan follow the East-Asian example of rapid industrialization?"

m2 is a money supply measure reported and controlled by central banks to manage inflation. It has absolutely nothing to do with rate of industrialization.

Hopewins said...

How about Bangladesh? Any news on their "net household financial savings"? Are they collapsing too?

Riaz Haq said...

HWJ: "How about Bangladesh? Any news on their "net household financial savings"? Are they collapsing too?"

No, it's not collapsing but it's down. Recent World Bank update on Bangladesh says that national savings rate is down from 26 percent of GDP in FY11 to 25.2 percent in FY12. This reflected a decline in both private and public saving rates. Private savings rate declined from 22.6 percent of GDP in FY11 to 22.1 percent in FY12 while public savings declined from 3.4 percent of GDP to 3.1 percent. Private savings may have been hit by slower growth in real disposable income and the stock market debacle which hurt small investors generally. Slower revenue growth and large increases in subsidies contributed to the decline in public savings

Hopewins said...

"No, it's not collapsing but it's down. Recent World Bank update on Bangladesh says that national savings rate is down from 26 percent of GDP in FY11 to 25.2 percent in FY12..."

A 0.8 percentage-point drop. Ouch. That must hurt...

In any case, do you have any idea as to what the corresponding figures for our country for the same period (i.e. FY11 & FY12) are?

Did we also see a drop? If so, from what figure and to what figure? What was the magnitude of the drop for our country? Did we do better than the Bangalees?

Page 13, Table 1.6

Hopewins said...

Dr. Haq,

There is a ominous sign in the following 2010 data for our country. It has something to do with our tradition of having extremely low savings-rates which necessitate the continuance of light-industry (i.e. low ICOR) based growth.

Can you spot the ominous sign?


Pakistan Oil Trade 2010 Million USD

Petroleum Crude $4,006
Processed Petro Products $8,311

Petroleum Crude $0
Processed Petro Products $1,706

NET Petroleum: $10,611

Population: 190 Million
Per Capita NET Petro: $55.8 USD


India Oil Trade 2010 Million USD

Petroleum Crude $106,000
Processed Petro Products $0

Petroleum Crude $0
Processed Petro Products $41,918

NET Petroleum: $64,082

Population: 1,200 Million
Per Capita NET Petro: $53.4 USD


Thank you.

Riaz Haq said...

HWJ: "Can you spot the ominous sign?"

Pakistanis use natural gas as the primary fuel and Pakistan has a much bigger infrastructure for it. Pakistan also has the world's largest fleet of CNG vehicles. Here's a report from 2008 about India significantly lagging Pakistan in clean energy and CNG usage:

India is way behind Pakistan in terms of its gas pipeline network, with the neighboring country’s network stretching around 56,400 km against its 10,500 km, connecting only 20 cities compared to Pakistan’s 1,050, industry body Assocham said.

Pakistan’s pipeline density, at present is 1044 km/mmscmd (million metric standard cubic meter per day) per day compared to 116 km/mmscmd of India, Assocham said in its paper on gas sector "A Comparison between India and Pakistan".

The neighbouring country has created a 31,000 km distribution network to serve its domestic and commercial consumers in large locations, against the 11,000 km network that have so far been build in India to serve the needs of its consumers in limited pockets, the report said.

While Pakistan has nearly 1,600 CNG stations, India has 380. The gas throughput in Pakistan is 38 mmscmd per day as against 8.5 mmscmd gas in India.

The number of gas customers and vehicles running on CNG in Pakistan is about 19 lakh and 15.6 lakh respectively, while in India the number is 5.50 lakh and 4.60 lakh.

“The gas availability in Pakistan is undoubtedly quite large, compared to India but given the imports of gas and even its domestic availability in India, its pipeline network is extremely poor and the main reason attributed for the low and limited pipeline network in India is because this sector has been thoroughly regulated which has now been opened for competition,” Assocham president Venugopal Dhoot said.

The paper added that since the pipeline network in India does not reach out to most of the potential demand centres, a number of industrial projects, which would ideally run on gas, have to depend on much more costlier and more polluting alternative fuels.

“Thus the unmet gas demand in India is probably much higher than what is reported,” he said, adding India, “at present has only one major cross country pipeline in the form of Hizira-Bijaipur-Jagdishpur pipeline and there is estimated to be considerable unmet demand even in the states serviced by this pipeline”.

With the increased availability of gas, the country needs to gear up quickly to meet the increased requirement of cross country as well as regional and local downstream gas distribution networks, he said. — PTI

As ti=o savings rate, all your graphs say is that Pak savings rate fluctuates with GDP growth rates.

Hopewins said...

"Pakistanis use natural gas as the primary fuel..."

Pak Per Capita NET Petro: $55.8 USD

Ind Per Capita NET Petro: $53.4 USD

Pak Usage 4.5% greater than Ind.

Riaz Haq said...

HWJ: "Pak Usage 4.5% greater than Ind."

What's your source?

Here's what Nationmaster has:

India: 2.41 barrels per 1000 people

Pak: 2.17 barrels per 1000 people

Riaz Haq said...

Here's Reuters on KSE-100 continuing to climb higher:

Pakistani stocks ended higher on Monday after the Supreme Court gave the prime minister breathing space in a case that could see him charged with contempt of court and disqualified.

The Karachi Stock Exchange (KSE) benchmark 100-share index ended 0.88 percent, or 132.48 points, higher at 15,171.66, on volume of 14.84 million shares.

Prime Minister Raja Pervez Ashraf appeared in court over his failure to comply with orders to reopen corruption cases against President Asif Ali Zardari.

The case has fuelled tension in a long-running standoff between the government and increasingly assertive judiciary. The court adjourned proceedings until Sept. 18.

It said Ashraf must ensure a letter is written to Swiss authorities asking them to reopen corruption cases against Zardari. Justice Asif Khosa said Ashraf did not have to write the letter himself. He could nominate someone else to write it.

"Markets have improved because the Supreme Court has given another few weeks to the prime minister. Investors believe this time may help in resolving the ongoing issue with the judiciary," said Mohammad Sohail, chief executive at Topline Securities.

Pakistan Telecommunications Company Limited was the biggest winner in terms of volume, gaining 6.54 percent to close at 16.29 rupees.

In the currency market, the Pakistani rupee ended slightly higher at 94.80/94.85 to the dollar, compared to Friday's close of 94.87/93.

Overnight rates in the money market ended at 7.5 percent, compared with 9.5 percent on Friday.

Hopewins said...

"What's your source?

Here's what Nationmaster has.."


Pakistan Consumption 2010: 410,000 barrels per day


Pakistan Population 2010: 169 Million



Pakistan PER CAPITA Consumption: 0.89 Barrels PER YEAR


India Consumption 2010: 3,100,000 barrels per day.


India Population 2010: 1210 Million



India PER CAPITA Consumption: 0.94 Barrels PER YEAR


Difference is 5 percent. Not statistically significant. Within margin of reporting & estimating errors in Oil trade and population, these are about the same.

Also note that India's "consumption" figure also includes the "Strategic Oil Reserve" (SOR) imports that are not actually "consumption", but really inventory. At this time, our country does not have any plans of creating a SOR, so a correction for this should ideally be made.

Riaz Haq said...

PTCL income up 36% on strength of broadband business, reports Businessweek:

Pakistan Telecommunication Co. (PTC), the country’s biggest phone service provider, reported a 36 percent rise in annual net income because of higher revenue from broadband services.

Net income rose to 11.4 billion rupees ($120 million) or 2.24 rupees a share in the 12 months ended June 30, from 8.41 billion rupees or 1.65 rupees a year earlier, the Islamabad- based company said in a statement to the stock exchange today. Revenue increased 8 percent to 110.8 billion rupees.

“Their broadband business grew this year because they offered more products,” said Ayub Ansari, a research analyst at AKD Securities Ltd. in Karachi.

The company’s focus on high-speed Internet and television services has helped boost broadband customers to almost one million contributing about 20 percent to total sales, Walid Irshaid, chief executive, said in October. Pakistan Telecommunications has faced competition from telecom providers including Telenor ASA and China Mobile Communications Ltd. since 2004 when the government allowed the entry of private operators, ending a monopoly.

The company’s broadband business grew 44 percent from a year earlier, Ansari said.

Pakistan Telecommunication’s shares fell by the daily limit of 5 percent to 18.63 rupees because the company skipped a dividend payment for the first time since the year ended June 2008, Ansari said. The shares have risen 81 percent this year compared with a 38 percent gain in the benchmark KSE100 index.

Emirates Telecommunications Corp., the United Arab Emirates state-owned phone company, won management control of Pakistan Telecom in April 2006 after buying a 26 percent stake in the company for $2.6 billion.

Riaz Haq said...

In addition to adding $500 million to Google's revenue, young Pakistanis are making significant voluntary contributions to Google offerings like Google Maps. This has attracted the attention of Google bosses like Eric Schmidt who recently visited Pakistan and described Pakistan's young demographics as a great asset.

Here's an ET report on Google in Pakistan:

Google earns an estimated $500 million in revenues from its users in Pakistan, about 1.3% of the firm’s global total, according executives at Google Pakistan, who held their first ever public event in the country to highlight the technology giant’s interest in the country.

“Pakistan is Google’s next big market in the region,” Google’s head of Emerging Market Development, Southeast Asia, Jana Levene told a gathering of IT experts, bloggers, businessmen and selected journalists at Pearl Continental hotel in Karachi on Monday.

The gathering comes after Google’s executive chairman Eric Schmidt visited Pakistan in June to meet with the country’s politicians and businessmen. “It was just a regular visit. He wanted to find out how important the use of technology for the country’s leadership and businessmen is,” said Badar Khushnood, Google’s consultant in Pakistan.

Moreover, Google has intensified its operations by getting involved in a lot of projects – especially with the Punjab government – in the country recently. “Innovation Punjab” is one example where Google has partnered with Punjab Information Technology Board. It has launched a social innovation fund – in collaboration with Pakistan Software Houses association, also their partner for the event – to support young entrepreneurs struggling to get their ideas public.

Google’s increased interest in the country, Schmidt’s visit of Pakistan and now this event sends very strong signals to the country – the giant may consider opening an office in Pakistan. Khusnood denied if Google was opening its first office in the country anytime soon but added it couldn’t be ruled out. Google’s representatives attributed Pakistan’s growing importance to multiple factors.

“To enter a market, the first thing we look at is its demographics – number of internet users in that country,” Jana Levene said, explaining why Google is interested in Pakistan. “Twenty-two million internet users is a huge number. It’s more than Australia’s whole population. That’s why we are here,” she said.

The second thing Google is interested in, Levene said, is the size of the market. “Pakistan is a $400 to $500 million market for Google,” she said. Currently, four of the top 10 most popular websites in Pakistan are Google’s sites.
But the key takeaway from the event was not the information, but the fact that it was addressed by six senior Google executives, a strong indication that the technology giant wants to expand further in the Pakistani market.

“We are calling you to help us bring more Pakistanis online,” Jana Levene said addressing country’s leadership as well as the technology sector. “Tell the world Pakistan is economically viable. It’s a safe place to do business,” Levene said.

Hopewins said...

A helping hand--

(1a) India cut itself off from the world economy for 40 of its 50 years of independence-- NO LONGER TRUE

(1b) whereas Pakistan remained relatively open-- HAS INVERTED COMPLETELY
India's Trade has gone up to 55% of GDP, ours is still only 28%

(2a) Pakistan had constant balance-of-payments crises-- STILL TRUE

(2b) whereas India was a rare suppliant at the IMF-- STILL TRUE

(3a) India poured money into heavy industry, developing huge steel and refining industries-- STILL TRUE

(3b) Pakistan has little industry worth mentioning--STILL TRUE

(4) Nonetheless its economy outgrew India’s--REVERSED COMPLETELY

(5) And its GDP per head is a good 20% higher-- REVERSED COMPLETELY

Something to reflect upon.


The Economist (1999):

QUOTES from the 1999 Article:

(1a) India cut itself off from the world economy for 40 of its 50 years of independence,
(1b) whereas Pakistan remained relatively open.
(2a) Pakistan had constant balance-of-payments crises,
(2b) whereas India was a rare suppliant at the IMF.
(3a) India poured money into heavy industry, developing huge steel and refining industries.
(3b) Pakistan has little industry worth mentioning.
(4) Nonetheless its economy outgrew India’s until recently,
(5) And its GDP per head is a good 20% higher


How many of these things are true today? And how many have changed?

How many of these trends have magnified since 1999? And how many diminished?

Riaz Haq said...

HWJ: "(3b) Pakistan has little industry worth mentioning--STILL TRUE"

It just shows your misguided yardstick is volume of exports rather than domestic production and consumption of everything from autos to cement to food and beverage.

In your view of the world, the fact that India has higher levels of poverty, hunger and disease and worse sanitation than Pakistan matters little...nor does the fact that over 200,000 Indian farmers have killed themselves in the last ten years.

Riaz Haq said...

Pakistan steel production to get a boost by two new players...Al Twariqi and Santex.

Here's Daily Times on Al-Twariqi:

Al-Tuwairqi Holding Company is establishing Tuwairqi Steel Mills Limited at Port Qasim, Karachi, having capacity of 1.28 million tonnes based on the latest technology and the total cost of the project is $260 million out of which US $ 225 million has so far been invested. The mill is going into production soon.

Tuwairqi also said that AL-Tuwairqi and POSCO of South Korea would sign a joint venture agreement in a ceremony to be held in Karachi today, September 2011. Tuwairqi said that he wanted to dispel the impression by setting the example that Pakistan was an ideal country for investment. He said that his venture would send a strong message to mega companies of the world that the country offered them competitive edge of doing business. “I am investing in my country to create jobs for the young people who otherwise may be misled by the enemy of my country,” he said.\09\10\story_10-9-2011_pg5_13

Here's Daily Times on Czech Santex plans:

A Czech Group prepares to launch Euro 600 million steel venture in Pakistan.

An announcement here on Sunday said that a delegation of Santex Pakistan Limited (SPL) apprised Murad Ali Shah, Sindh Finance Minister, and Muhammad Zubair Motiwala, Chairman Sindh Board of Investment (SBI), about the establishment of steel billets making plant of 1.2 million tonnes capacity per annum and 300 MW coal-fired power plant during a meeting at the Sindh Board of Investment.

It said that the project would be launched at Bin Qasim close to Pakistan Steel Mills.

Santex Pakistan Limited is a subsidiary of Santex Group based in Czech Republic. The meeting was chaired by Sindh Finance Minister along with Chairman SBI and was attended by Secretary Finance, Secretary Coal and Energy Department, Secretary Energy, DG SBI and other government officials.\09\24\story_24-9-2012_pg7_12

Riaz Haq said...

Here's BMI report on vehicle sales in Pakistan:

Pakistan’s auto industry suffered mixed fortunes over FY12, which ended in June 2012. Passenger carsales and production were both up strongly, while the commercial vehicles sector continued to lag. EndFY12 sales figures released by the Pakistan Automotive Manufacturers Association (PAMA) showed thatpassenger car sales were up by 23% y-o-y, to reach 157,325 CBUs. Jeep and pick-up sales were up by17.6%, at 21,472 CBUs. This was slightly ahead of BMI’s forecasts and reflected the robust nature ofdemand in the new car market. The past year also saw a one-off boost to sales from the Punjab Province’s‘Yellow Cab’ taxi purchasing scheme, which saw Pak Suzuki deliver some 20,000 Bolan and Mehranmodels. Total vehicle sales for FY12 stood at 231,545 units, an increase of 6% year-on-year (y-o-y).

Breaking down the headline figure, sales of passenger cars with engine size less than 1000cc increased by41.6% y-o-y, to 61,528 CBUs. Mid-size engine cars (1,000-1,300cc) saw sales growth of 28.3% overFY12, to reach 29,981 CBUs, with larger engine cars (1,300cc+) showing the smallest growth, up just7.6%, at 65,816 CBUs.

Over FY12, long-time market leader Pak Suzuki retained its dominance of the Pakistani new passengercar and pick-up sales market, selling 112,166 units for a market share of 62.7%. Indus Motor retained itsposition as the second most-important player in the local market, with sales of 54,477 CBUs over FY12,up by 9.9%, for a market share of 30.5%, with Honda Atlas suffering a 22.2% annual decline in sales,down to just 12,119 CBUs, for a market share of 6.8%.

Turning to commercial vehicles sales, sales of trucks were down by 18.6%, at 2,394 units, while bus saleswere up by 13.1%, at 609 units. The worst performing sub-segment of the industry over FY12 was farmtractors, whose sales fell by 28.1% y-o-y, to just 49,745 units. This reflected the collapse in demandduring H1FY12, following the government’s decision to implement a 16% general sales tax on tractorpurchases, which was later reduced to 5% as of January 2012. Since this time, tractor sales haverebounded strongly, from a year-low of just 369 tractors sold in January 2012, back up to 8,368 tractorssold in June 2012. However, with the government still planning to increase GST on tractors to 10% in2013 and then to 16% in 2014, it remains to be seen what effect these staggered tax hikes will have ontractor sales over the medium term.

Turning to production, passenger car production stood at 154,255 CBUs for FY12, an increase of 15.1%y-o-y. This was a strong performance, given the disruption to supplies suffered by Honda Atlas over theend of 2011 and the start of 2012. Indeed, Honda did not produce any cars in Pakistan between December2011 and February 2012. Pak Suzuki remained the dominant producer, producing 107,736 passenger carsand pick-ups. In second place was Indus Motor, on 54,917 passenger cars and pick-ups, with Honda Atlasin third place, on 12,484 passenger cars (Civic and City models).

Looking forward, BMI is targeting new vehicle sales growth of 3% for FY13, to reach 238,491 units,with production set to increase by 5%, to reach 235,689 units.

Riaz Haq said...

Here are latest cement sector profit reports in The Nation of KSE listed firms:

Lucky Cement Limited declared a profit after tax of Rs2,014 million for the quarter ending 30th September 2012. The Earnings per Share (EPS) of the company increased to Rs6.23 per share versus Rs4.66 per share achieved in the same period last year.Gross profit for Lucky Cement, which is Pakistan’s largest cement manufacturer increased by 32.87pc during quarter as its net sales revenue improved by 18.09pc to Rs 8,852 million against Rs. 7,496 million of the same period last year. Higher sales volume in the domestic markets in line with the company’s strategy attributed to the increased profits.The local sales volume during the quarter under review registered a growth of 5pc that rose to 0.86 million tons sold as compared to 0.82 million tons sold during the same period last year. However, the export sales volume declined by 9pc from 0.62 million tons to 0.56 million tons during the first quarter ending 30th September 2012. This was mainly due to intentional focus on the domestic markets, which contributed in increasing the overall profitability of the company. The company also managed to decrease its financing cost by 76pc during the quarter under review as compared to the same period last year.Meanwhile, Nishat Chunian Limited (NCL) has announced an impressive 1QFY13 result, posting a PAT of Rs375m (diluted EPS: Rs2.06) compared to a loss of Rs86m (diluted loss per share: Rs0.47). Main reason for the growth in bottom line was high gross margins of 17.6pc compared to 8.7pc in 1QFY12. Meanwhile, 1) other income of Rs70m (up 19pc YoY) and lower finance cost of Rs302m (down 5pc YoY) further supported the growth in core operations. Note that QoQ EPS is down 6pc sequentially. This is primarily due to lower other income mainly due to exchange gains. On the margins front gross margins are up 480bps. Meanwhile, Nishat Mills Limited (NML) announced its 1QFY13 result. As expected, the company posted a growth of 3pc YoY in its bottom-line to Rs1.1b (EPS: Rs3.02). Higher gross margin in 1QFY13 was the major reason behind this growth. Recall that margins during last year came under pressure as the company had booked expensive inventory of the previous year.

Other than the core operations, lower finance cost and healthy dividend income continued to lend support to cumulative profits of the company. Although, dividend income in 1QFY13 was on the lower side due to lower payout of Pakgen Power, it still provided support to the bottom line.

Riaz Haq said...

Here's an excerpt of a report on Bangladesh cement consumption:

Bangladesh cement industry is the 40th largest market in the world. Currently capacity of the industry is about 20 mn tonnes (MT). Top 13 players are alone controlling over 78% of the total industry capacity. However, the balance capacity still remains quite fragmented.
Per capita consumption remains poor when compared with the world average; only 65 kg (FY2009) while our neighboring countries, India and Pakistan, have per capita consumption of 135kg and 130kg respectively. This underlines tremendous scope for growth in the Bangladesh cement industry in the long term....,%20April%2005,2011.pdf

Here's an except of a report in The Hindu on India cement consumption:

The per capita cement consumption in India stands at 156 kg against the world average of 356 kg. Rising against the odds and seeking relief to allow the sector to expand to its potential, Vinita Singhania, Managing Director, JK Lakshmi Cement, and President, Cement Manufacturers' Association (CMA), in a chat with Sujay Mehdudia, unfolds her vision, plans and investments for the future.

Riaz Haq said...

Here's a News report on Lucky Cement's expansion plans in Middle East and Africa:

KARACHI: Lucky Cement, which claims to be the largest manufacturer of cement in Pakistan, has entered into a couple of joint ventures for making investment in international projects, besides expending and diversifying its business locally, according to a notification of the company to the Karachi Stock Exchange (KSE) on Thursday.

Muhammad Abid Ganatara, secretary of Lucky Cement, said that the company has entered into joint ventures in cement plants in DR Congo, Africa, and Iraq.

“The plant and machinery for the project [in Africa] has been negotiated and finalised with a renowned European supplier and the terms of the project financing are under process of negotiations with the development financial institutions and multilateral agencies,” the notice said.

Besides, the company has also entered into joint venture investment in cement grinding facility in Iraq.

“The contract for the supply of plant and machinery for this project has been signed and the project team, as well as civil contractors, have been mobilised at the project site,” it said.

An industry source said that the demand for Pakistani cement is on the higher side in Africa and Lucky Cement aimed at capturing that opportunity. The project would also help the company save logistic cost of cement exports to the African countries, said source.

“The logistic cost of cement exports remained one of the major hurdles in increasing such exports from Pakistan,” said another industry source, on the condition of anonymity.

“The cost factor is causing continuous decline in exports for the last several quarters.”

Moreover, Iraq has been destructed due to the war on terror and it needs to be reconstructed. Therefore, making investment in cement plant in Iraq would also help the company realise higher earnings. Besides, the company could also export cement to nearby countries such as Qatar and other GCC countries, he said.

Lucky Cement also reported to investment equity in an associated company for 50MW wind farm project. “The power generation licence and the requisite approval from the authority concerned for the acceptance of upfront tariff have been obtained.

The project team is actively engaged in negotiations of concession documents and financing close with the stipulated timeframe,” according to the company notice.

The company also reported successful supply of uninterrupted electricity to Hyderabad Electric Supply Company (HESCO) with effect from July 1, averaging a supply of over 20MW per hour during the quarter ended September 30.

Riaz Haq said...

Here's an ET report on KSE-100 hitting a new high today:


As investors shrugged off lethargy from the long Eidul Azha weekend, the stock market rebounded amid greater investor participation to close at a new historic high.

“With renewed buying interest from institutional clients and foreign fund managers, the market closed at yet another historic high,” said Topline Securities equity dealer Samar Iqbal. “Investors anticipate lower inflation figures for the month of October, due [to be announced] tomorrow. Bullish sentiments were further augmented after better-than-expected result announcements from Pakistan Petroleum and the Hub Power Company.”

The Karachi Stock Exchange’s (KSE) benchmark 100-share index gained 0.72% or 114.18 points to end at the 15,910.11 points level. Trade volumes surged to 136 million shares compared with Tuesday’s tally of 85 million shares. The value of shares traded during the day was Rs4.96 billion.

“Pakistan stocks closed at their highest-ever, led by oil and cement stocks, as global commodities and stocks rally in the aftermath of Hurricane Sandy,” commented Arif Habib Corp analyst Ahsan Mehanti. He also attributed the market’s optimism to the positive current account balance for the first quarter of the fiscal year, and speculation that the State Bank might announce yet another cut in its policy rate next month.

“Major activity was again seen in the cement sector with DG Khan Cement and Lucky Cement gaining 2.0% and 3.1% respectively,” reported JS Global analyst Shakir Padela. “This is likely on the back of October cement dispatch numbers due to be announced in the coming days.”

DG Khan Cement was the volume leader with 14.98 million shares gaining Rs1.04 to finish at Rs52.91. It was followed by Azgard Nine with 9.00 million shares gaining Rs0.46 to close at Rs6.97 and Askari Bank with 7.73 million shares losing Rs0.07 to close at Rs16.57.

“The Oil and Gas Development Company also managed to close the day up by 2.2% on the back of foreign buying in the script,” added Padela.

Foreign institutional investors were net buyers of Rs264.33 million, according to data maintained by the National Clearing Company of Pakistan Limited.

Hopewins said...

^^^HWJ: "Can you spot the ominous sign?"
^^^RH responded on AUGUST 26, 2012:
"Pakistanis use natural gas as the primary fuel and Pakistan has a much bigger infrastructure for it. Pakistan also has the world's largest fleet of CNG vehicles. Here's a report from 2008 about India significantly lagging Pakistan in clean energy and CNG usage.."

NOVEMBER 28, 2012 News Article:

"The government has planned to gradually phase out CNG stations as they cause heavy losses to Pakistan’s economy, Advisor to the Prime Minister on Petroleum Dr Asim Hussain told the National Assembly’s Standing Committee on Petroleum and Natural Resources here Wednesday.

Dr Asim Hussain said CNG stations were causing heavy losses by wasting gas, a valuable commodity, which should instead be used for the purpose of industrialization, investment and domestic use.

He said that in the transport sector, CNG should only be utilised by public transport vehicles and the rest of the vehicles should be discouraged"


Riaz Haq said...

Here's Fiber2fashion on Pakistan's rising textile exports:

Pakistan’s textile exports grew to US$ 5.4 billion during first five months of the current Pakistani fiscal year that began on July 1, 2012, showing a year-on-year rise of 7.81 percent, Pakistan Bureau of Statistics (PBS) data showed.

Pakistan exported textiles worth US$ 5.009 billion during same period of last fiscal.

Product-wise, the items that depicted positive year-on-year export growth during July- November this year, include cotton yarn which grew by 38 percent year-on-year, yarn increased by 62.73 percent, cotton cloth by 12.31 percent, towels by 10.98 percent, readymade garments by 14.26 percent, tents by 25.49 percent and other textile materials by 70 percent.

On the negative side were raw cotton, exports of which declined by 44.35 percent year-on-year, cotton carded by 86 percent, knitwear by 2.02 percent, bed wear by 9.61 percent, art silk and synthetic textiles by 18.1 percent and made-up articles by 2.14 percent.

Riaz Haq said...

Pakistan's energy giant the Oil and Gas Development Company Limited has earned record after-tax profit of Rs 124 billion in the last financial year, registering 36 per cent growth.

The 17th annual general meeting of Oil and Gas Development Company Limited (OGDCL) was informed yesterday that the company's sales revenue grew by 15 per cent to Rs 257 billion, state-run Associated Press of Pakistan reported.

The meeting also reviewed company's performance during the last financial year and was informed that earnings per share had gone up to Rs 28.81.

The national oil and gas company of Pakistan also contributed Rs 132.26 billion to the national exchequer on account of corporate tax, dividend, royalty, general sales tax and excise duty.

Chairman Zahid Muzaffar told the meeting that OGDCL has continued to deliver robust financial results coupled with steady operational performance.

The company acquired 29 new exploratory blocks and the current concession portfolio consists of 62 owned and operated joint venture exploration licences along with holding working interest in six blocks operated by other E&P companies.