Day: November 16, 2021

The federal government is considering paying maximum dividends to shareholders from the profit made by state-owned companies listed in the Pakistan Stock Exchange (PSX).

The proposal is being considered with an aim to bring down the soaring circular debt and boost the stock market that has underperformed for several years.

Speaking in this regard, the Adviser to Prime Minister on Finance and Revenue, Shaukat Tarin, said that if energy companies are unable to pay dividends to shareholders due to circular debt, they can use higher dividends received from state-owned entities and reduce the circular debt.

The circular debt stands at Rs. 2.5 trillion. If this strategy can help pay off the circular debt of around Rs. 300-400 billion, then it will be deemed a successful strategy.

He added that the government doesn’t need the dividend income and energy companies can use it to decrease the circular debt. The government will still earn higher dividends regardless of whether it transfers the dividends to the exchequer or uses this money to reduce the circular debt.

The state is the biggest beneficiary of the profit that state-run companies make because it is the majority shareholder in almost all of these firms listed in the PSX.

It was forced to cut down dividends of other shareholders due to circular debt and liquidity crunch. This made the shares of state-run companies unattractive, not only bringing down their stock prices but also crashing their market valuation.

For instance, Pakistan Petroleum Limited (PPL), a state-owned petroleum company, used to give 55% of its profit in dividends to shareholders several years ago. However, PPL is only offering 18% of its profit in dividends to shareholders now.

This strategy not only will increase the market valuation of these companies that are considered heavyweights in the stock market but will also encourage investors to increase their stakes in these companies.

Commenting on this development, Chairman Arif Habib Limited (AHL) Arif Habib lamented that the state lowered the dividend payment to shareholders of state-run companies, adding that a higher dividend payment can certainly ease the circular debt.

He added that low dividend payments caused the stock prices of state-owned companies such as the Oil and Gas Development Corporation Limited (OGDCL), Pakistan State Oil (PSO), and the National Bank of Pakistan (NBP) to plunge to a historic low.

Source: Pro Pakistani

Pakistan has surpassed China in denim apparel exports to the United States (US), as per international media reports.

According to an analysis of Apparel Resources – an India-based textile trade publication – Pakistan’s annual exports of cotton-made clothing to the US touched the $276 million mark ($275.89 million) from January-September 2021, surpassing China’s $274.63 million worth of exports.

This is a 63.40 percent increase compared to the corresponding period of last year when Pakistani shipments to the US accounted for $168.85 million against China’s $238.75 million.

These dominating export figures have also reduced the gap with Vietnam’s denim exports to the US worth $278.69 million during the same period.

Bangladesh remained the top supplier to the US, with its shipments crossing $520.16 million – a 31.40 percent yearly increase.

Mexico followed closely with $471.78 million worth of denim supplies to the US, recording an annual growth of 46.53 percent.

This has been possible due to the business-friendly policies of the Biden administration despite the constraints caused by the COVID-19 pandemic.

According to OTEXA data, during the first nine months of 2021, the US market has imported denim clothing worth $2.54 billion, noting a 28.56 percent surge on a year-on-year basis.

Source: Pro Pakistani

Waves Singer Limited will produce 25,000 coolers of different variants for its client, Coca-Cola, which will be the latter’s largest-ever order.

It has received a corporate order worth Rs. 1.438 billion from Coca-Cola, as per a stock filing.

This is Coca-Cola’s second consecutive year of ordering a supply of branded Coca-Cola freezers since the approval of the manufacturer.

Waves Singer Limited will produce 25,000 chest coolers and visi coolers worth Rs. 1.438 billion until the end of the financial year 2021-22.

It produced 22,850 units of chest coolers and visi coolers at the cost of Rs. 944 million last year.

Waves Singer Limited is one of Pakistan’s leading manufacturers of appliances and has been expanding its business consistently. It also plans to explore opportunities in the businesses of real estate and construction.

The company’s net profit has been Rs. 371 million during the nine months of 2021, as compared to the Rs. 90 million recorded in nine months in the period that ended on 30 September 2020. Its growth can be attributed to the easing of the lockdown, the extended summer, and an increase in disposable household incomes coupled with better cost absorption due to higher volumetric growth.

Source: Pro Pakistani

The Pakistani Rupee (PKR) recovered against the US Dollar (USD) for the second day in a row and appreciated 40 paisas against the greenback in the inter-bank market today.

It appreciated by 0.23 percent against the USD and closed at Rs. 174.89 today after it posted gains of 43 paisas and closed at Rs. 175.29 in the inter-bank market on Monday, 15 November.

So what’s up with the Rupee lately? It is playing the bull and bear numbers a lot faster than anyone could have predicted. The local currency’s growth is feeling the weight of the imbalances it spawned a few years ago (particularly the external deficits), and may settle at resistance levels that are harmful to the economy according to current trends.

Today’s gains are a mere reflection of yesterday’s surge against the remarks of Finance Advisor Shaukat Tarin, and the release of the remittances figure for Q1 FY22.

Considering the PKR’s interbank performance earlier today during the trading hours, the former Treasury Head of Chase Manhattan Bank, Asad Rizvi, seemed disappointed with the Rupee’s performance as it failed to exploit gains to achieve higher resistance levels. He said, “Yesterday after a blistering start Rupee failed to keep its upside momentum”.

“Release of remittances figure of $ 2.5bn inflow for OCT & FM’s statement of undervalued #PKR supported the local currency, but late demand narrowed the gain. It may continue to look for direction,” he added.

The PKR maintained its performance against most of the other major currencies as well and posted encouraging gains in the inter-bank currency market today.

It gained a whopping Rs. 1.85 against the Euro (EUR), 12 paisas against the Malaysian Ringgit (MYR), and five paisas against the Chinese Yuan (CNY).

It also posted gains of 11 paisas against both the UAE Dirham (AED) and the Saudi Riyal (SAR) in today’s inter-bank currency market.

Besides this, the PKR posted gains of 23 paisas against the Canadian Dollar (CAD), 51 paisas against the Australian Dollar (AUD), and losses of 19 paisas against the Pound Sterling (GBP).

Source: Pro Pakistani

Interloop Limited (ILP) is planning to invest about $100 million to set up a vertically integrated knitwear apparel plant, reported Link News on Tuesday citing the management of ILP.

During a discussion on the company’s latest financial results and future outlook, the management said the decision was made in view of an increase in the market demand. It added that the company, at present, was looking forward to doubling the capacity of its denim plant and increasing the production of 20,000 pieces per day to 40,000 pieces per day.

Under its vision 2025, ILP intends to double its revenue by $700 million. The expenditures of the plan will add up to $300 million from which 50% will be financed through debt whereas 50% through internal cash generation, adds the report.

Moreover, the company may also approach the State Bank of Pakistan to finance its operations at an interest rate of 2-2.5% with a maximum limit of $5 billion for the next five years.

It is to be noted that the net income of the company increased by 95% during the first quarter of the current fiscal year as compared to the first quarter of the previous fiscal year. During the same time period, the net sales of the company surged by 50% Year-on-Year to Rs. 19.3 billion as the company added new machinery in its hosiery division.

With the addition of denim and hosiery plants, the company is expected to gain more revenue.

Source: Pro Pakistani

The textile sector of Pakistan makes a contribution of only 3.4 percent to the country’s total gross domestic product (GDP) and it is considerably low as compared to different other countries.

According to a report titled, “Global Value Chain [GVC], Development Report 2021 – Beyond Production” by the Asian Development Bank (ADB), the textile sector accounts for 3.4 percent of Pakistan’s GDP as compared to the sector’s contribution of 7.5 percent to GDP in Bangladesh, 5.1 percent in Sri Lanka, 12 percent in Cambodia and 3.5 percent in Turkey.

The report further reveals that the textile sector accounts for 54.7 percent of Pakistan’s gross exports and 3.4 percent of its GDP compared to 79.7 percent and 7.5 percent for Bangladesh, 31.3 percent and 5.1 percent for Sri Lanka, 52.8 percent and 12 percent for Cambodia, and 17.5 percent and 3.5 percent for Turkey respectively.

It has been noted in the report that Bangladesh is a curious case which, despite stellar 10.5 percent annual growth in indirect exports over 2010-2019, remains a laggard in the GVC participation, appearing near or at the bottom for both rates. One explanation is that its GVC trade is highly concentrated in a particular sector, i.e., textiles and garments. This sector accounts for 79.7 percent of Bangladesh’s gross exports and 7.5 percent of its GDP, the highest and the second-highest respectively, out of the 62 economies.

For textiles and garments, Bangladesh’s participation is actually above the world average, beating Pakistan and Sri Lanka. This is because of a development strategy that is based on wise use of Bangladesh’s abundant pool of cheap, low-skilled labor that allows it to achieve an average real GDP growth rate of 7.4 percent over 2015-2019 and to be among the few economies to grow in 2020.

The report further notes that Bangladesh’s textiles and garments industry remains confined to relatively low-value-added segments like cutting and sewing and its cost advantage may have been gained at the expense of labor welfare.

GVCs not only transmit shocks within domestic economies but also play an important role in cross-country transmission. When suppliers in source countries are affected by disasters, it is not uncommon for firms to report production delays and profit losses as their suppliers fail to provide parts and components on time, it added.

Most of the researches on GVCs focuses on manufacturing production, in other words, on the breaking up of production processes into many discrete steps with a resulting explosion of trade in parts and components. Nonetheless, there are aspects of GVCs that go beyond manufacturing processes. In fact, value-added and employment generation in GVCs are depending less on manufacturing production.

Source: Pro Pakistani