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| Chairman's Statement |
 I am pleased to present the audited financial statements of Saudi Pak Industrial and Agricultural Investment Company Limited as well as consolidated accounts for the year ended December 31, 2009 together with auditors’ report to Members and the Directors’ Report.
In the year 2009 the global financial crisis engulfed the developing countries. To cope with the situation, commercial banks in Pakistan adopted risk averse business strategies, which adversely affected the working of down stream financial institutions which relied on banks for their funding needs. The meltdown of stock prices coupled with sharp rise in non-performing loans was a nightmarish experience for many financial institutions.
It is highly gratifying that Saudi Pak emerged largely unscathed from the crisis. A timely review of the business strategy served the Company in good stead. The revised strategy envisaged increased emphasis on internal cash generation by reducing appetite for new business, optimizing loan recovery and utilizing the occasional upturn in the stock market for realising gains. It contributed to improved liquidity and enhanced protection against vagaries of economic recession.
The revised strategy yielded desired results. Total amount of fresh financing and investment approved by Saudi Pak dropped to Rs. 2,354 million from Rs. 3,336 million in 2008 and aggregate amount of disbursement to Rs. 2,148 million from Rs. 4,627 million. The recovery on account of current dues against advances and term finance certificates stood at 79 percent as compared to 83 percent in the previous year.
In the wake of tight monetary policy of the central bank to curb inflationary pressures and weak general outlook for industry, the stock market remained volatile during the year under review. Karachi Stock Exchange (KSE) 100 Index, which had declined to 5,753 on January 1, 2009 rose by 3,634 points to 9,387 at year end 2009. Saudi Pak realized total income of Rs. 711 million from capital market operations.
Notwithstanding, the tough investment environment, during 2009, the Company achieved combined markup and non-markup income of Rs. 2,600 million and earned net profit of Rs. 419 million. This compares with gross income of Rs. 8,897 million (including gain of Rs. 6,411 million on divestment of a subsidiary) and net profit of Rs. 4,427 million in 2008.
Of three subsidiaries managed by the Company, Saudi Pak Leasing Company Limited faced exceptionally hard times owing to the financial crises. While Saudi Pak Insurance Company Limited achieved breakeven in its operations, Saudi Pak Real Estate Limited restrained from entering into any business venture in view of the slump in the real estate sector.
The shareholders will appreciate that the Company showed considerable resilience in the face of unprecedented challenges. I trust that the management will now make efforts to return the Company to the path of consistent growth. This would require on one hand beefing up the resource position of the Company by leveraging its capital through issue of long term bonds and Certificates of Investment (COIs) and on the other hand raising the standard of appraisal to further improve the quality of credit portfolio. At the same time, it will be imperative to upgrade the risk management and credit monitoring techniques to control the incidence of delinquencies.
In the end, I would like to express on my behalf and on behalf of the Board my sincere gratitude to the joint venture partners, the Kingdom of Saudi Arabia and the Islamic Republic of Pakistan for their unstinted support. Thanks are due to the regulatory agencies, that is, State Bank of Pakistan and Securities & Exchange Commission of Pakistan for their professional guidance. I am also thankful to the Board and appreciate the valuable services and dedication of the Management and Staff.
Dr. Abdullah T. Al-Thenayan
Chairman |
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