(OGDC earnings grew 20%

In nine months (July-March), revenues of the company grew 13% to Rs190.36 billion, thanks to a rise of 3% and 4% in oil and gas production respectively. PHOTO: FILE

KARACHI: Oil and Gas Development Company (OGDC) on Monday announced that its earnings grew 20% at Rs90.938 billion in the first nine months of financial year 2013-14 compared to Rs75.75 billion in the same period of previous year.

Growth in earnings came on the back of increase in oil and gas production, depreciation of the rupee against the dollar by 7% on average basis and conversion of Rs138.3 billion receivables into investments, which was likely to boost other income, said Global Research while commenting on the results.

The company also announced a cash dividend of Rs2.25 per share, taking total cash payout to Rs6.25 per share so far in the current financial year.

In the third quarter (January-March) alone, OGDC’s profit stood at Rs23.71 billion, a decline of 30% compared to the previous quarter, primarily due to an increase in operating expenditure and higher effective tax rate of 40%, the research house said.

In nine months (July-March), revenues of the company grew 13% to Rs190.36 billion, thanks to a rise of 3% and 4% in oil and gas production respectively.

According to Pakistan Petroleum Information Service’s earlier data, OGDC’s oil production was likely to hit 42,000 barrels per day and gas flow could reach 1,230 million cubic feet per day in the third quarter. In nine months, operating expenditures increased 19% to Rs33.25 billion following enhanced activity in fields operated by joint ventures, Global Research said.

In the third quarter, operating expenditures rose 29% to Rs12.94 billion compared to Rs10 billion in the second quarter, which could be due to higher amortisation charge pertaining to the Manzalai field downgrade

Tyre industry: Smuggling on the rise, laments industry

Officials said that the jump in smuggling is not being tackled by the government which is the single most important factor contributing to its rise.

KARACHI: Local industry officials have expressed concerns on the rise of tyre smuggling from Afghanistan that, they say, has seen an unprecedented rise in recent months, making it difficult for the industry to sustain even its regular sales.

Officials said that the jump in smuggling is not being tackled by the government which is the single most important factor contributing to its rise.

While suggesting a counter strategy, an official of a local tyre manufacturer said the Federal Bureau of Revenue’s (FBR) Investigation and Intelligence wing should conduct raids on the tyre market in Rawalpindi and ask for documents from shop owners. In absence of documents, they should simply confiscate the tyres, he said.

He further suggested that this practice should be augmented and such raids should be conducted in tyre markets of Lahore, Karachi and other major cities to stop the shopkeepers from dealing in smuggled items. This will force the smugglers to eventually withdraw from the main consumption centres where some of them even have warehouses to store smuggled tyres, he added.

According to the industry, sharp increase in smuggling of tyres from Afghanistan has already caused a serious blow to local tyre production.

Industry people say that FBR should take stern measures to root out shops selling smuggled tyres that have mushroomed in major cities of the country.

Pakistan’s annual consumption of tyres is about 8 million out of which, industry officials estimate, around 2.5-3 million tyres are smuggled into the country.

According to industry estimates, Pakistan produces around 20% of the total tyre demand of the country, while 48% are imported and 32% are smuggled into the country. Total market demand in the year 2012-13 was 8,224,000 tyres out of which 1,654,700 were produced locally, 3,941,500 imported and 2,627,800 were smuggled.

Tyre industry is one of the industries, like tea and tobacco, that are affected by smuggling through the Afghan Transit Trade (ATT) but Pakistan authorities have long ignored rampant smuggling through  the porous Afghan border.

International financing: Pakistan, ADB sign $400 million loan agreement

The ADB along with Japan and the World Bank have been working with the government to formulate and implement a five-year plan targeted the power sector. PHOTO: FILE

ISLAMABAD: 

Pakistan and the Asian Development Bank (ADB) have signed an agreement for a $400-million loan to help Islamabad carry out reforms in the energy sector aimed at overcoming power shortages and ensuring accountability in a highly inefficient sector. 

The agreement was signed by Nargis Sethi, secretary for Economic Affairs Division and Werner E Liepach, the ADB’s country director for Pakistan.

It is the first programme loan by the Manila-based lending agency after a gap of almost six years.

The multilateral lenders had suspended the programme loans to Pakistan during Pakistan Peoples Party’s tenure. However, the project loans, aimed mainly for procurement of goods, continued during the five-year period.

“The programme loan will support key reforms in the energy sector to enable Pakistan ensure uninterrupted supply of cheaper and dependable power to millions of industrial and private consumers who are presently adversely affected by long hours of power outages,” said Liepach.

He said the ADB’s assistance for the energy sector will help propel growth, boost businesses, and create jobs that are critical to reducing poverty in the country.

Like its predecessor, the PML-N government has remained unable to introduce meaningful reforms in the energy sector during its first year in power, except increasing power tariffs, which the analysts term an administrative action instead of a reform.

The government has so far failed to reduce line losses, control theft and appoint professional heads at power distribution and generation companies.

According to a handout issued by the ADB, the lending programme was in line with Pakistan’s National Power Policy approved in 2013. It added a sustainable energy sector reform programme that will target robust policy, capacity development and institutional strengthening action to reduce crippling power shortages. The power shortages according to estimates are costing the country about 2% of its GDP growth every year.

It further noted that the ADB along with Japan and the World Bank have been working with the government to formulate and implement a five-year plan aimed towards the power sector.

The programme will support the government’s plans to rationalise tariffs and eliminate subsidies by 2016, except for low income customers.

“The reforms will improve transparency and accountability, which will also go a long way in leveraging stronger private sector-led investments in the power sector,” Liepach added.

The full programme, set to complete by June 2018, spans a total of a $1.2-billion investment by ADB, and for the first sub-programme, co-financing is expected from Japan with $49 million and the World Bank with $600 million.

ADB is the leading development partner in Pakistan’s energy sector supporting a wide range of power sector activities including energy efficiency, transmission, distribution, cross-border natural gas pipelines, power generation, and renewable energy projects.

Owing to delay in undertaking critical reforms, the PML-N government is going to spend over Rs270 billion on power subsidies against budgetary allocation of Rs220 billion for the current fiscal year 2013-14, according to officials of the Ministry of Finance.

The curious case of the UHT milk’s shelf life

The cost of Tetra Pak packaging is about 13% of the total price of a one-litre-UHT milk package that we buy from the market. PHOTO: FILE

KARACHI: 

A package should always save a business more than it costs, according to Dr Ruben Rausing, founder of Tetra Pak – the Sweden-based packaging giant and the single largest player responsible for the packaging of Ultra-High-Temperature (UHT) processing milk sold in Pakistan.

His quote, perhaps, best sums up what happens in the Pakistan market.

The cost of Tetra Pak packaging is about 13% of the total price of a one-litre-UHT milk package that we buy from the market. Whether or not this number is large enough will remain a debate but on a holistic level, the technology has the potential to save the country more than it costs.

According to conservative estimates of the dairy milk industry, Pakistan faces milk shortage to the tune of 4 billion litres a year. What is more ironic is the fact that of the total milk produced by the country, over 6 billion litres is wasted every year due to lack of proper cold chain and technologies for preservation.

The formal dairy sector, which is less than 10% of the total milk market, has been able to preserve its milk collection through Tetra Pak packaging technology – a six-layer carton – that helps increase the milk’s shelf life for up to 90 days.

However, a majority of consumers still think that Tetra Pak milk – a common name for the UHT milk sold in the country – contains preservatives added by the industry to increase the product’s shelf life.

Story behind milk preservation

To find out to what extent is the impression true, The Express Tribune recently covered the handling and processing of UHT milk. It was found out that the entire supply chain was managed under hygienic conditions and followed international best practices. No evidence was found that support the notion that the industry mixes chemicals in their milk.

Like many consumers, our correspondents, too, were curious to know how the formal players preserve milk for so long without any preservatives. The answer was the aseptic packaging technology.

The aseptic packaging material of Tetra Pak, as observed and learned, does not allow milk or food inside Tetra Pak packages to come into contact with moisture, light and microorganisms – the three reasons for food degradation.

The aseptic technology ensures food and packaging material are free from harmful bacteria, meaning that it can be kept for several months without the need for preservatives or even refrigeration.

The six-layer Tetra Pak Brik or aseptic packaging has three core components — 75% carton board for strength and labelling, 20% polyethylene plastic and 5% aluminium foil for impermeability to light and air.

According to our findings, it is this technology that preserves food – milk in this case – and not any chemicals or preservatives. Hence, it was not surprising to learn that Tetra Pak, which follows food safety standards defined by World Health Organisation, is catering to the packaging and preservation needs of over 170 countries of the world including the US and Europe.

Moneymaker: Milk could become the country’s white gold

72m was the number of milkproducing animals in the country as per 2007 estimates. PHOTO: AFP/FILE

KARACHI: 

In terms of total tradable white milk, Pakistan is the third largest milk producing country in the world with annual turnover of 20 billion litres, according to 2012 official estimates. India and the US are the largest and second largest, producing 54 billion litres and 21 billion litres respectively.

By contrast, Pakistan is at least 4 billion litres short of meeting local demand, ending up as a net importer of milk products. It ranks equally high – the third highest – in terms of per capita milk consumption.

Source: Dairy Incidence Study 2010- U&A study 2010-IFCN reports - Dairy Farmer & Specialists reports

According to government’s estimates, the country produces 38.5 billion litres of milk a year – not all the dairy players agree on these statistics, which are about seven years old but there is no alternative study available to find the latest number.

“I would be surprised if we are anywhere near the top 10 milk producers in the world,” Engro Foods’ Chief Executive Officer Sarfaraz Rehman told The Express Tribune. “The country faces severe shortage of milk and we don’t find enough to meet our demand,” he said.

Rehman, however, endorsed the official estimates of total tradable milk available in the market.

Of the total production, 20.75 billion litres are tradable while 11 billion litres are kept by farmers and 6.75 billion litres are lost in the value chain, official statistics show.

The untaxed informal sector comprises more than 90% of the fresh milk market but lacks a proper cold chain and preservation techniques to stop wastage – the unhygienic conditions under which loose milk is handled are also a health concern.

Undeveloped

It is primarily because of primitive dairy farming practices and lack of infrastructure and training that Pakistan’s dairy sector, despite its massive economic potential, remains largely unstructured and undeveloped. The developed formal sector, on the other hand, is not even 10% of the market.

According to industry experts and executives of dairy companies, there is a huge untapped potential in the dairy segment but it is mostly part of the informal economy. If developed properly, they say, it could make a significant contribution to the national economy.

According to data, dairy and livestock constitutes about 12% of the country’s gross domestic product and 46% of the agriculture sector that employs nearly half of the total workforce. Dairy milk alone accounts for 27% of the agricultural economy.

There are 10 million dairy farmers, of whom 95% are small farmers with two to three milk-producing animals. Though current numbers are unavailable, as per 2007 estimates, the country had 72 million milk-producing animals.

However, the animal herd in Pakistan is spread across thousands of square kilometres with an average of 2 to 5 animals per household – which remains undocumented and untapped, according to industry sources.

Investment

It is perhaps this untapped potential that the dairy segment has attracted a lot of investment recently. It got $700 million in foreign direct investment during the last five years while the formal sector paid $28 million in taxes last year alone.

The private sector – dairy companies like Nestle Pakistan, Engro Foods and packaging giant Tetra Pak – has started farmer training programmes for development of the dairy sector and the results are encouraging. Calf mortality rate has dropped and animals’ daily yield has improved with the farmers trained by the formal sector.

Corporate farms

The overall share of the processing industry is growing at 19% whereas loose milk is growing by only 3%, the industry estimates show. All processed milk formats including UHT, powder, chilled plastic pouches and other aseptic pouches are gradually gaining share.

In fact, some of the country’s leading businessmen, including the likes of Mian Muhammad Mansha, have also entered the dairy segment and set up what are now called corporate farms. Mansha owns the largest corporate dairy farm with 5,000 milk-producing imported animals.

In a white paper written on the dairy sector in June 2006, the formal industry had proposed to improve the dairy sector through improved research facilities, training of farmers and veterinarians.

Other proposals included improving the cold chain, promoting healthy pasteurised milk, developing model commercial dairy farms and focusing on breed improvement.

There is certainly a huge potential in the dairy segment but the country needs to graduate from buffalo milk – which is about 70% of the total milk produced in the country – to cow milk, Engro Foods’ chief Rehman said. reporting by Farooq Baloch

Ancelotti: "We're not stupid enough to think we've qualified

Carlo Ancelottiwas in a much more relaxed mood thanPep Guardioladuring his press conference, appearing confident that his team will bring their A-game and insisting that they will be looking to score to give themselves some breathing room.

His response to Guardiola:
"I wish we had the Champions League in the bag, but we're not that shallow. It's a very tough game because we're up against a great team. We're not stupid enough to think we've qualified. Sometimes when you're in a press conference you have to say something like that, otherwise it just drags on... Rummenigge said that the trees would be burning and it's raining".

Real's team of athletes:
"I don't think Guardiola was being sarcastic: it's true that we have some great players with a very powerful physique".

A battle of nerves:
"I don't think it's going to be a different match in terms of tactics. Bayern aren't going to change their philosophy and neither are we... We might make some tweaks, but not much is going to change. The mental side of the game is going to be key, not tactics".

How he will set up:
"We have an advantage and we want to press it home. It would be a huge risk to start tentatively, which is why we're going to try to shake things up. We need to get our forwards involved and defend as a team. It won't make a big difference whether we play 4-3-3 or 4-4-2. Our aim is to go out there and score".

Biggest threats to 3G and 4G in Pakistan

Pakistani telecom operators are now offering 3G and 4G services to the green flag holders after completion of auction’s first phase.

Telenor, Ufone, Mobilink and Zong are running pilot projects to check the new technology in different areas of the country.

Many from the telecom or telcos claim that PR and ATL did its work to attract users, there is no doubt that users are excited but few believe the credit goes to the Pakistan Telecommunication Authority’s (PTA) delay in the auction, telcos fail to generate awareness at the users level.

It’s a week now that Pakistan officially turns into 3G and 4G enabled country but there are lot of grey areas and question while we talk about the ground realities.

Cost
There are reports everywhere in conventional and new media that 3G and 4G cost will be three times higher than current tariffs.

Though, Pakistan has good a number of telecom users with more than 120 million but the number which can be avail high-end services of 3G and 4G are estimated to 20 percent (12 million) including 3 percent (3.3 million) postpaid users.

It’s yet to be confirmed that the predicted numbers can be achieved or not? But one thing is confirm that telcos can’t dothe job by their own.

We all remember the 4G advertisement of Telenor appeared on the hoarding at Islamabad’s busy area couple of months ago but in reality Telenor auctioned for 3G’s 5MHZ spectrum only. Despite the 2nd largest telecom operator status, Telenor fails to buy 4G spectrum like Zong and 10MHZ of 3G like Mobilink and Zong.

Smartphones and tech equipped devices

Second threat to the stable 3G and 4G environment is the availability of technology enabled devices. almost all members of tech world know that raise-in-tax is on the government tables.

According to the report already published in PakistanTribe.com, Pakistan government is planning to raise the tax on android based smartphones.

Many distributors and retailers are trying to maintain good stock of android based devices before any tax-raiseannouncement.

As a platform, Google’s owned Android is the largest operating system being used by Pakistanis.

Coverage quality

Coverage will be the biggest challenge for all telcos including Warid, whic plans to acquire 4G LTE technology.

If for the time being we exclude rural area from our debate, urban parts of the country even those areas where telecomoperators have good numbers of users base are facing compromised coverage, bad signals and poor quality of voice services.

In this situation good coverage will be the top demand of users of 3G and 4G technology, but there is no answer that how telecom operators will fulfill the demand. (We aren’t talking about fulfilling demands in the Ads like one did it about 4G, we are talking about reality)

Users database

PTA and telecom operators claim that 20 percent (24 million) of current telecom users will shift to 3G and 4G, they also assume that postpaid users will also shift towards new technology.

We hope that PTA and Telecom operators have solid and reality based arguments in favour of their calculations but the situation isn’t seemed in favour of the prediction.

WiFi enabled environment, availability of Wireless internet devices at consumer level, cost of 3G and 4G packages, policies of digital media stakeholders, coverage quality and data-less planning can be the biggest threats to attract considerable numbers of consumers.