Business Front

TN

Wednesday, August 5, 2009

Oil needs to Govt to give Rs 1b subsidy in Ramazan soar on new power plants QQOnline

35,000 tonnes of oil a day needed QQReuters

ISLAMABAD: Oil needs for the power sector will likely shoot up by 29 per cent by the end of 2009 as new oil-burning plants are installed to overcome a severe electricity shortage, the water and power ministry said on Tuesday. Pakistan requires 35,000 tonnes of oil a day to feed its thermal power plants, but it is only getting supplies of 24,000 tonnes per day on average, cutting into electricity output, according to official figures. Faced with a power generation shortfall of roughly 4,000 MW that is crippling manufacturers, the government is pushing to bring around 3,782 MW of capacity online by the end of the year, mostly through building and leasing oil-burning plants. That will drive the oil needs of the power sector up to 45,000 tonnes a day, the ministry said in a statement. “We will be needing an additional 10,000 tonnes of oil per day for the upcoming plants,” said a senior power ministry official. Pakistan imports about 80 percent of its oil. It spent $9.5 billion on the import of 10.6 million tonnes of petroleum products and 7.8 million tonnes of crude oil in the 2008/09 (July-June) financial year.

FRANKFURT: German luxury car manufacturer BMW returned to profit and the world’s largest automaker Toyota posted better-than-expected results on Tuesday, further signs that the troubled industry has turned a corner. The day after US giant Ford recorded its first increase in sales for almost two years, BMW said it had made a net profit of 121 million euros (174 million dollars) in the three months from April to June, well above forecasts. Japan’s Toyota Motor also confounded predictions by logging a net loss of 77.8 billion yen (817 million dollars) for the April-June quarter— leaving it still deep in the red but much better than forecasts of a 200 billion yen loss. Neither company said that the results indicated the auto industry was out of the woods, but sounded cautiously optimistic. “Even though some indicators suggest that the economic situation might improve in the second half of the year—we remain cautious,” BMW chairman Norbert Reithofer said in a statement. In the first three months of the year, BMW had posted a net loss of 152 million euros. The new figure, while back in the black, was 76 percent less than the 507 million euros profit it posted in the same period in 2008. An average analyst forecast, compiled by Dow Jones Newswires, had predicted BMW was on course for a loss of 25 million euros.

the decision of ECC aimed to control sugar crisis by providing cheap sugar to masses. He informed the Lower House that the Trading Corporation provided sugar to stores at Rs. 34 per kilogram but the Utility Stores were selling it at Rs. 38 and the impression that the loss of Rs. 550 million was occurred only in months of May and June was wrong. The minister said that the Regional Manager of Utility Stores Corporation in Bhawalnagar has been suspended from his services and categorically

stated that corruption would not be tolerated at any cost, adding Utility Stores were setup to facilitate common people. He said that any officer creating hurdles against objectives of the stores would be dealt strictly, adding in the market, sugar was being sold at Rs. 46 to Rs. 48 and there was no flaw in the distribution of sugar. Mian Manzoor Watto said that the experience of selling of fertilizer through Utility Stores was successful and a record production of wheat was achieved.

Chronic power shortages have prompted hefty fuel purchases as the country grapples with brownouts and was forced to implement daylight-saving measures last year to save electricity. Still, the power ministry said in its statement that it had requested that the Ministry of Petroleum increase oil supplies to make up for the shortfall. The government hopes that the new power plants could alleviate the problem of power shortages in the short term, while it works on longerterm plans of building hydro-power plants. The power plants being hired would add about 1,988 MW of capacity while construction of new plants by the private sector would generate another 1,794 MW by the end of the year, the ministry estimates. Analysts said on Tuesday that the growing fuel oil import bill, together with policy changes that mean the central bank is phasing out use of its foreign exchange reserves for fuel imports, will continue to put downward pressure on Pakistan’s currency. Sayem Ali with Standard Chartered in Karachi expects the rupee to fall to 86 per dollar by June 2010, from about 83.2 now, because of oil demand and the exchange rate reforms. [ID:nSIN94736] (Editing by Jason Subler)

BMW, Toyota return to profit QQAFP

ISLAMABAD: Federal Minister for Industries and Production Mian Manzoor Watto has warned officers of Utility Stores of Corporation of removal of their services, if they were found indulged in corruption, saying subsidy of Rs. 1 billion would be given through a special package in the holy month of Ramzan. The minister was speaking in the National Assembly on Tuesday on a call attention notice regarding loss of

Rs. 550 million faced in the month of May and June due to illegal selling of sugar from godowns of USC. Talking on government steps to control prices during Ramzan, the minister said that the government has decided to provide a special package in the holy month and work in this regard is underway. He said that under the package, subsidy would be given on ghee, oil, tea and other daily commodities. Mian Manzoor Wattoo said that Trading Corporation had been asked to provide sugar to Utility Stores on

Citing “an increasingly competitive environment” and “high volatility of international financial and raw materials markets,” BMW did not give a detailed outlook for this year. However it repeated that it expected 2009 sales to be lower than in the previous year, before picking up in 2010 following the roll out of new models. Toyota managing director Takahiko Ijichi meanwhile said that government subsidies and tax cuts had helped an improvement in domestic sales. Toyota, which last year suffered its first annual loss, now expects to sell 6.6 million vehicles in the year, up from a previous goal of 6.5 million. It narrowed its annual net loss forecast to 450 billion yen from 550 billion and trimmed its operating loss projection to 750 billion yen from 850 billion. “The current situation is still very severe. We can’t be sure whether (the market) will enter a sustainable recovery,” Ijichi added to reporters. Government incentives helped Toyota’s revamped Prius hybrid become the top-selling car in Japan in May and June. The Japanese maker has idled plants and slashed thousands of temporary jobs as it tries to weather the worst global downturn in decades, but has so far avoided closing plants or firing regular employees. The glimmers of hope at Toyota contrasted sharply with its fellow Japanese firm Yamaha Motor Co. which said its loss in 2009 would be more than four times bigger than expected because of sluggish motorcycle sales and a strong yen.

LAMONGAN, EAST JAVA: A villager collects water to take to crops in a field affected by the recent lack of rain on August 4. The area has been without rain for three months now as a result of El Nino bringing the annual rains late this year, causing drought in affected areas. Indonesian President Susilo Bambang Yudhoyono announced measures to minimise the drought’s effects last week. | AFP

Oil falls below $71 after big rally QQAP

NEW YORK: Oil prices fell below $71 a barrel Tuesday, as investors booked profits after a big rally fueled by signs of economic recovery in the U.S. By midday in Europe, benchmark crude for September delivery was down 92 cents to $70.66 a barrel in electronic trading on the New York Mercantile Exchange. Earlier in the session, the contract fell as low as $70.28. On Monday, the contract rose $2.13 to settle at $71.58. “Oil has rallied to levels seen in June, before the sharp decline of nearly 16 percent,” said analysts at Sucden Financial in London. “Given continuing poor oil fundamentals, current high prices seem difficult to sustain.” A report Monday from the Institute for Supply Management, a trade group of purchasing executives, said U.S. manufacturing activity should increase next month for the first time since January 2008. Also, the Commerce Department said construction spending rose in June. The positive economic news has emboldened investors to bid up stocks and oil. The Dow Jones industrial average rose 1.3 percent Monday and most Asian indexes gained Tuesday.

Lucky Cement plans to start production in Africa Aims to export cement to Europe QQBusiness Desk

LAHORE: Lucky Cement Ltd., Pakistan’s biggest producer, plans to start its first overseas factory in Africa by 2011 to take advantage of a construction boom. “The African market is where the future growth for Pakistan lies,” Chief Executive Officer Muhammad Ali Tabba said yesterday in an interview in Karachi. “Demand is growing and there are not many plants in the region.” He declined to give investment, capacity or location details of the planned factory. Lucky, which exports to South Africa, aims to use the African factory to export to Europe, Tabba said, without elaborating. Africa, with a combined gross domestic product of $2.68 trillion and 987 million people, is forecast to expand 4.5 percent next year, compared with 2.8 percent in 2009. “Lucky has the first-mover advantage in capacity building, exploring export markets and providing better quality with competitive prices,” said Rehan Khan, who has a “buy” rating on the stock at First Capital Equities

Ltd. in Karachi. Lucky Cement’s shares, which more than doubled this year, rose as much as 3.7 percent to 77.38 rupees before closing at 74.15 rupees, 0.7 percent lower. Africa Demand Africa’s cement demand exceeds supply by as much as 7 million tons a year, Tabba said. The construction industry there is growing at an average annual rate of 25 percent, he said. Lucky Cement may also acquire some local rivals to expand capacity at home, Tabba said. “We are evaluating good plants which are distressed,” Tabba said, without naming the companies. “By next year, we may go and acquire some of them.” Of the 20 cement makers on the Karachi Stock Exchange, Flying Cement Co., Gharibwal Cement Co. and Dandot Cement Co. are financially distressed, according to First Capital’s Khan. Flying Cement’s nine-month net loss widened to 140.5 million rupees in the period ended March 31 from 99.7 million rupees a year ago, according to its financial report. Gharibwal’s

loss for the period widened to 168.7 million rupees from 124.8 million rupees a year ago. Pakistan’s cement exports rose 47 percent in financial year ended June 30 to a record 11.38 million metric tons, according to First Capital. India, Sri Lanka Lucky, which accounts for a third of Pakistan’s overseas cement sales, exported 57 percent of its production to the Middle East, Africa, Sri Lanka, India and Afghanistan in the nine months ended March 31. Sales to India, Sri Lanka and Egypt will continue to grow, as demand from the Middle East slows, Tabba said. “Africa is a good focal point since the Middle East, which has been a strong market for us, is seeing an increase in its own production capacities,” he said. Lucky Cement raised $109.3 million selling shares overseas last year and said it would use the funds to increase production capacity to 9 million tons in three years from 6.55 million tons. Lucky Cement’s net income rose 58 percent to 1.13 billion rupees ($14 million) in the three months ended March 31. The cement maker’s full-year profit may rise 60 percent, First Capital’s Khan estimated. The company is expected to announce full-year earnings tomorrow.

Standard Chartered Bank plans to raise extra cash QQAFP

LONDON: Emerging markets bank Standard Chartered posted record first-half profits on Tuesday and launched plans to raise extra cash from shareholders to fund ambitious growth in Asia, Africa and the Middle East. Pre-tax profits surged 9.7 percent to a record 2.838 billion dollars (1.971 billion euros) in the six months to the end of June, compared with 2.586 billion dollars in the same part of last year. Net profits advanced 5.5 percent to

1.883 billion dollars, the British-based group said, adding that it would launch a 1.0-billion-pound (1.17-billion-euro, 1.69-billion-dollar) rights issue. “We have achieved record results through our disciplined management approach and the diversity of our business and markets in Asia, Africa and the Middle East,” chairman John Peace said in the earnings release. “I believe that the bank has a very clear and focused strategy and we have no intention of deviating from this. “Our strong levels of capital and liquidity have given us a competitive

advantage and our decision to raise further capital today will reinforce this and support our future growth.” The news comes one day after British banking peers Barclays and HSBC posted combined first-half net profits of 6.55 billion dollars but also revealed rocketing bad debts in the first six months of the year. All three banks have avoided state control unlike rivals which fell victim to the global financial crisis and subsequent international lending squeeze. Lloyds Banking Group and Royal Bank of Scotland—which are both now

majority state-owned after receiving enormous government bailouts— will post their first-half numbers on Wednesday and Friday respectively. Northern Rock bank, nationalised last year after it was also ravaged by the credit crunch, admitted Tuesday that pre-tax losses deepened in the first half as bad debts tripled amid a worsening recession in Britain. Standard Chartered said it remained cautious about the global outlook amid “testing times” for the banking industry. “These remain testing times for banks

and we remain cautious about the near term global economic outlook,” Peace added. The bank also revealed that revenues soared 13.9 percent to 7.96 billion dollars in the first half—but its bad debts more than doubled to 1.088 billion dollars. “The group has continued to deliver record profits in the face of a difficult environment... We expect the take-up of the placing to be strong,” said NCB equities analyst Simon Willis. Meanwhile, recent press reports suggested that Standard Chartered was

mulling the purchase of some Asian assets from Royal Bank of Scotland. RBS, which is now 70-percent owned by the state, said Tuesday that it will sell part of its Asian operations to Australia and New Zealand Banking Group for 418 million dollars (294 million euros). The embattled group added that it was in “advanced” talks over the sale of its remaining Asian assets. However, an RBS spokesman declined to comment on reports that Standard Chartered was in the running.