|
| Chairman's Statement |
I am pleased to present the 29th audited financial statements of Saudi Pak Industrial and Agricultural Investment Company Limited as well as consolidated accounts for the year ended December 31, 2010 together with Auditors’ Report to Members and the Directors’ Report.
The year 2010 proved to be another challenging year for Pakistan’s economy. The persistent inflationary pressures, rising trend of interest rates, weak fiscal position, susceptible law and order situation in the country coupled with energy shortages were the main constrains that surrounded the economy during the year 2010. Although external current account deficit and economic growth showed improvement on the back of recovery in the industrial and service sectors in 2010, the overall recovery remained fragile. Further, difficulties were emanated from the uncertain global economic outlook and catastrophic flooding in major parts of the country during second half of 2010.
The banking sector remained under pressure due to rising trend of NPLs. The economic recession along with power shortages, security concerns, and higher inflation squeezed profit margins as well as the repayment capacity of the borrowers. Accordingly, the banks maintained their risk averse stance and preferred to invest in government securities offering higher risk adjusted returns along with increased preference for top rated private sector corporations.
Despite tough challenges, Saudi Pak contributed in the growth of corporate sector and approved aggregate financing of Rs.2,705 million and disbursed an amount of Rs.2,697 million. Total approvals and disbursements during the year 2010 enhanced by Rs.501.4 million and Rs.549.2 million respectively.
The recovery on account of current dues against advances and term finance certificates stood at 83.12 percent as compared to 79 percent in the previous year.
In order to address high inflation, State Bank of Pakistan in July, 2010 increased the discount rate from 12.5 percent to 13.0 percent followed by another increase from 13.0 percent to 14.0 percent on November 30, 2010. Despite interest rate hike, KSE-100 Index concluded the year with an impressive 28 percent return. The Index at the closing of the year i.e. December 31, 2010 reached to 12,022.46 points from 9,386.92 points as of December 31, 2009. During the outgoing year, foreign funds remained the most active participants at the local bourse outpacing local players. During the period under review, Saudi Pak realized Rs.253.5 million as gain on dealing in quoted securities, Rs.96.2 million as dividend income, aggregating total income of Rs.349.7 million. This total income earned from stock portfolio is 53 percent lesser than the income earned on this account in previous year.
Saudi Pak Leasing Company Limited (SPLC) faced exceptionally hard times owing to the financial crisis. Your company adopted a prudent approach and made 100 percent provisions against its shareholding (35% of paid up capital of SPLC) as well as subordinate loan provided to Saudi Pak Leasing Company Limited. Notwithstanding plans are underway to try for its rehabilitation.
Saudi Pak Real Estate Limited, a fully owned subsidiary of the Company posted a profit of Rs.51 million as against a loss of Rs. 42 million incurred by Saudi Pak Insurance Limited in 2010.
The rising interest rate in Pakistan and historic low rate of Libor has made quite costly for Saudi Pak to hold its own foreign currency assets and resultantly incurred a net cost of Rs.443.79 million in mobilizing local currency funds to meet Company’s operational requirements. This factor coupled with full provision of Rs.576.68 million in Saudi Pak Leasing and sector problem of non-performing loans contributed adversely and as a result company incurred a net after tax loss of Rs.503.85 million in the year 2010 as compared to net after tax profit of Rs.418.90 million in the previous year.
Remedial measures have since been initiated. I assure you that the Company will endeavor to transfer the current year loss into profit in 2011 on the back of the consolidation of operations, stringent business guidelines, strengthened oversight function of the Board and Management’s vigour for transformation.
In the end, I would like to express on my behalf and on behalf of the Board our 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.
Mohammed W. Al-Harby
Chairman
|
| |
|
