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Thursday, 26 July, 2012 LAHORE ONLINE In first half of year 2012 all SnGPL based plants that include Agritech, DH Fertilizers, Pakarab and Engro’s new plant faced a collective loss of Rs. 5.5 bil- lion in terms of revenue. The total urea sales by SnGPL based plants stood at 150KT, 166KT less than 316KT urea sold in 1H of 2011 showing a decline of 52% and revenue loss of Rs.5.5 billion. The total urea production by SnGPL based plants in first half of 2011 stood at 297KT which declined by 33% to 198 KT in 1H of 2012. SnGPL based plants were only operated at 18% of their capacity in 1H 2012 vs 25% last year. During 1H 2012 SnGPL based fertilizer plants faced an estimated gas curtailment of 82% in which Agritech and Pak Arab got gas for 63 days each while Engro Enven and DH Fertilizers got gas for 33 days of opera- tions in first 6 months of 2012. In first quarter of year 2012 all SnGPL based plants that include Agritech, DH Fertil- izers, Pakarab, Engro’s new plant as well as SSGC based FFBL faced a loss of rev- enue by 53% compared with 1Q of 2011, generating Rs. 8.16 billion revenue in 1Q 2012 compared to last years’ Rs. 17.29 billion rupees. In 2012, SnGPL based four plants as well as SSGC based FFBL lost profitability by 125% and made a collective loss of Rs 1.076 Billion, whereas the same plants had made profit of Rs. 4.3 billion in first Quarter of 2011. According to fertilizer sector offi- cial, SnGPL based plants are facing the worst-ever crisis of their history as 82% gas curtailment was never witnessed be- fore 2012. He said that despite making an in- vestment of US$ 2.3 Billion in last 4 years on new production capacity, mak- ing Pakistan world’s 7th largest urea manufacturer country is sitting on an idle urea capacity of over 3.0 million tonnes. Fertilizer sector official said that if the same gas curtailment continues during remaining 5 months of 2012, the SnGPL based fertilizer plants would be forced to shut down permanently result- ing laying off highly skilled manpower, in addition to huge burden on GoP ex- chequer, to import urea to meet the urea shortfall. Fertilizer sector official said that it’s not just Fertilizer plants that will face the burn, the whole farmers’ community as well as the government would be the ultimate losers if fertilizer plants with over 2 million tonnes of ca- pacity are shutdown. He said that Gov- ernment needs to support fertilizer industry to ensure cheap local urea to farmers and import fuel for the power sector and the industry which is more cost effective. Let’s capitulate collectively, shall we? SNGPL-based fertiliser plants face collective revenue loss of Rs 5.5 billion KARACHI ISMAIL DILAWAR H AvInG borrowed a record Rs 1.2 trillion from the banking sys- tem, the cash-strapped government keeps its focus intact on the central and scheduled banks for bridging its ever-widening fiscal deficit that in FY12 accumulated to over Rs1.7 trillion, above 8 percent of GDP. According to central bank, the funds- starved federal government has set a rounded off target of Rs 1.590 trillion to be borrowed from the scheduled banks during first quarter of the FY13, July-September. In its bank borrowing spree that, the analysts warn, has a highly inflationary impact on the economy, the government had borrowed Rs 1.085 trillion during the fourth quarter, April-June, and Rs 777 billion during the third quarter, January-March, of FY12 to cater its ever increasing budgetary needs. “Domestic structural weakness like low tax to GDP ratio and higher subsidy coupled with restricted external flows forced govern- ment to rely highly on the banking channel to fill the escalating budget deficit,” viewed Topline Research analyst nauman Khan. The analyst observed that contrary to last few years’ trend, the onus had shift to- wards inflationary central bank borrowing. The official data show that the government’s budgetary borrowing from the State Bank accumulated to an alarming Rs 505 billion in FY12 against the retirement of Rs 8 billion in FY11. “This record borrowing from the central bank to fund the fiscal deficit is a major cause of concern which has also been pointed by State Bank in its re- cent publications,” said Khan. Wednesday, too, saw the resource-constrained federal government raising over Rs 360 billion from the banks through auc- tioning Market Treasury Bills (MTBs) of 3-, 6- and 12-month maturity period. The new budgetary loan, hav- ing a total face value of Rs 360.269 billion, was taken at a cut-off yield ranging from 11.8283 percent to 11.8745 per- cent and 11.8894 percent, respectively, for the 3-, 6- and 12-month T-bills. The borrowed amount was against the otherwise liquidity-starved primary dealers’ (mostly banks) offer of Rs 441.177 billion. During the current quarter, the gov- ernment would borrow over a trillion ru- pees from the banks through selling the T-bills, Pakistan In- vestment Bonds (PIBs) and the Ijara Sukuk, Islamic bonds. Of the total Rs 1.5 trillion targeted amount, Rs 12.897 billion would be raised as an additional requirement of the gov- ernment. Such inflationary borrowings, Khan said, would be a major factor in the minds of authorities regarding the future direc- tion of the interest rates that currently stands at the pre-2008 level of 12 percent. “We believe the materialization of Coali- tion Support Fund could reduce the gov- ernment’s borrowing at least in early part of FY13,” the analyst said. Further, the analyst said, there was still a room of 50 to 100 basis points rate cut in the discount rate at least in early FY13, if the foreign flows ma- terialized. The United States would, reportedly, this week transfer over $ 1.2 billion under the CSF to the dollar- hungry Pakistan which in FY12 faced a $ 4.2 billion current account deficit. “With external ac- count under pressure in FY12, the onus of fi- nancing the fiscal deficit fell squarely on the domestic sources and that particularly on central bank borrowing,” Khan said. Dubbing it against the spirit of SBP Act passed by the parliament in April 2012, the analyst said in FY12 the govern- ment financed approx. 70% of its budget deficit from the banking channel as against 52% in FY11. The economic observers call it a sort of cyclical debt as the central bank, on one hand, is raising billions of rupees from the banks for the government and injecting heavy liquidity into the system on the other. The SBP believes many of the small banks would fail if it stopped pumping cash in the system. The economic observers are con- cerned as the cash-strapped governments, both in the center and provinces, whereas are relying almost totally on the banks for cater- ing their burgeoning budgetary require- ments, the banks’ advances to the private borrower are depleting to a nominal level. The analysts’ concern is that much of the banking liquidity being sucked up by the cash-strapped government is being used for non-productive purpose: running of the government. This trend, they warn, would leave the private sector sans cash thus dealing fresh blow to the govern- ment’s growth targets. A cry beyond borders Only improved foreign inflows can help as cash-strapped govt keeps borrowing billions from risk-averse banks SAN FRANCISCO: Apple on Tuesday reported that quarterly profit grew to $8.8 billion on hot iPad sales but the results came up short of lofty expectations. Apple said that its revenue hit $35 billion in the quarter ended June 30, a figure shy of Wall Street expectations despite nearly doubling iPad sales and selling 28 percent more iPhones than in the same period a year ear- lier. With results below analyst forecasts, Apple shares slid 5.4 percent in after-hours trade to $568.45. “We’re thrilled with record sales of 17 mil- lion iPads in the June quarter,” Apple chief Tim Cook said in a release. “We’ve also just updated the entire MacBook line, will re- lease (the computer operating syste) Mountain Lion tomorrow and will be launching (mobile operating system) iOS 6 this fall.” Cook added that the Cupertino, California-based company has “amaz- ing new products” on the way. Some analysts believe that the blistering pace of iPhone sales growth faces a temporary cooling as potential buyers wait for the release of a new-generation iPhone, perhaps later this year. Apple’s share of the US smart- phone market was expected to inch up a percent to 31 percent this year, while the share for handsets powered by Google- backed Android software was expected to hit 41 per- cent, according to eMar- keter. Apple used the earnings report to declare a cash dividend of $2.65 per share of common stock. AFP Apple goes bAnAnAs Profit jumps to $8.8 bn, but misses forecasts ISLAMABAD APP Islamabad Stock Exchange (ISE-10) here on Wednesday witnessed bullish trend as the index was up by 11.67 points when compared to the previous day’s trading. Talking to APP, Stock Analyst M.M Hassan said that the re- sult announced by Fauji Fertilizer Corporation (FFC) led the bullish rally in the local stock mar- ket. The FFC has recommended Rs.5.00 per share or 50 per cent second interim cash di- vided for the half year ended June 30, he said, adding this is an addition to first in- terim dividend already paid at Rs.3.00 per share or 30 per cent. “This was total Rs.8.00 per share or 80 per cent cash div- idend for half year ended on June 30, which was the positive and beyond the expectation of the market despite the various challenges was faced by the FFC”, he added. He said that the volume in the bourse had also witnessed an increase against the earlier’ day because the investors had taken major posi- tions in the market owing to this posi- tive development. Total volume of shares traded was 38,200, which was up by 27,200 as compared to a day earlier’s closing. Out of 101 compa- nies’ shares traded, the price of 65 was increased while the price of 36 decreased. The price top gainer Millat Trac- tors was increased by Rs.6.76, while the price top loser Unilever Pak- istan decreased by Rs.25.00. Silk Bank Limited, Soneri Bank and Bank of Punjab remained volume leaders on Wednesday, with volume of 6,000, 2,000 and 2,000 shares respectively. Bulls in Islamabad! The bulls in the capital aren’t quiet as devastating but ISE-10 gains 12 points anyway… PRO 25-07-2012_Layout 1 7/26/2012 6:24 AM Page 1
