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ICI Pakistan is a chemical manufacturer and a trading company that has been operating for more than 70 years. Belonging to the Yunus Brothers Group, ICI Pakistan has four major divisions: polyester, life sciences, soda ash and general chemicals. It also has a management stake in the infant milk formula business under the name of NutriCo Pakistan Private Limited, which manages the import, marketing and distribution of select Morinaga Milk Industry Co. Limited products in Pakistan.

Industry overview The soda ash market has been growing with the glass, paper and detergent segments being the main growth engines. An increase in construction activity as well as rising demand for container glass bodes well for the growth of the glass segment which uses soda ash. The bazaar and detergent segments provided the impetus for market growth due to the high demand of branded/unbranded detergent. A growing population and the evident transition from laundry soap to detergents auger well for powder detergents, which will continue to dominate the downstream customer base. However, the falling prices of writing paper adversely affected the paper segment, which struggled to maintain operating rates for much of the year.

ICI's life sciences division caters to Pakistan's agriculture, livestock and poultry sectors. It also has a pharmaceuticals section under this division. The agriculture sector contributes to nearly 20 percent of Pakistan's GDP and employs nearly half the workforce. The livestock sector, which contributes nearly half of the agriculture market, grew by almost 4 percent in FY16. Population growth, urbanisation, increases in per capita, income and export opportunities are a few of the main factors fuelling the demand of livestock and livestock products in the country.

Changes in the petrochemical affect sales and margins of polyester staple fiber (PSF). The local market continues to remain under pressure due to oversupply of PSF in the domestic and regional markets coupled with dumping from China.

Under its general chemicals division it has four segments: consumer, industrial, paints and coatings, and water treatment chemicals. ICI's business in the chemical sector has been facing challenges due to new competition in the water treatment chemicals segment and in the paint and coatings segment, especially due to imports from China. Furthermore imposition of regulatory duty on consumer chemicals depressed chemical margins. Regardless, the chemical division achieved increased growth in FY17.

Operational performance ICI's policy of growth through expansion and diversification led it to investment in its soda ash business through new dense ash and refined sodium bicarbonate plants. Furthermore, the 75 KTPA soda ash expansion project was launched last year.

In 2015, an in-house steam, power and heating systems were set up for the polyester plant. In 2016, two new power and steam generation projects were commissioned. Coal fired boilers at the soda ash plant are being used optimally as well. Together, this has enabled ICI to alleviate the energy cost burden by replacing expensive fuel with coal for electricity and steam generation, to prevent a dip in margins witnessed in 2012.

Financial performance ICI Pakistan has been performing well with the bottom line and EPS both seeing a 14 percent year-on-year increase in FY17.

The polyester business's turnover increased by 7 percent year-on-year due to higher prices across the petrochemical chain, higher PSF selling prices, and higher sales of Black Fibre. However, it still recorded a net loss of about Rs 440 million which was nearly half the loss made in this division in FY 16.

Soda Ash net turnover increased by a modest 2 percent but its operating profit declined by 4 percent. Chemicals net turnover increased by 20 percent and the highest growth was recorded in the Life Sciences division that saw a YoY growth of 28 percent. The growth in Life Sciences came from new partnerships, expansions, and new product launches, whereas the growth in chemical revenues came from increased sales volumes and greater customer base in FY17.

Furthermore, ICI's bottom-line was also supported by higher dividend incomes from Nutrico Pakistan (Pvt) Limited. Consolidated profits increased by 20 percent year-on-year that include the results of ICI Pakistan PowerGen Limited, Cirin Pharmaceuticals (Private) Limited, NutriCo Morinaga (Private) Limited.

Continuing its mantra of growth through acquisition, ICI is setting up a facility for manufacturing Japan's Morinaga infant formula in the country. The company already has a management stake in the infant milk formula business under the name of NutriCo Pakistan Private Limited. The firm also completed its acquisition of Cirin Pharmaceuticals (Private) Limited as a wholly owned subsidiary.

And just recently, ICI executed Asset Purchase Agreement with Wyeth Pakistan Limited and Pfizer Pakistan Limited for the acquisition of certain assets that include Wyeth's own pharmaceutical manufacturing facility in Karachi along with some of key brands, products and registrations of Wyeth and Pfizer.

Future outlook ICI has a diversified portfolio and supplies products to almost every industry in the country. However, it is dependent on the consistent supply of key raw materials such as PTA, coke, and MEG. Furthermore its business is affected by volatility in international raw materials markets, fuel prices, government levies and fluctuating exchange rates. Dumping of imported products and unfavourable law and order conditions adversely affect its business.

On the other hand CPEC projects, relative political stability, reduction in oil prices, influx with LNG, lower inflation and reduced interest rates have created an atmosphere for investment growth in the country. This provides scope for increase in turnover for all its business categories.

Internationally, petrochemical chain is expected to continue search for a new equilibrium in light of Brexit consequences. On the domestic front, continuous provision of cheaper energy to the textile industry will greatly determine PSF demand. The imposition of an anti-dumping duty of 3 - 11 percent for a period of 5 years on all Chinese PSF exports and increase in net protection rate to 4.5 percent for the PSF industry has provided support to domestic PSF prices.

Increased construction activity and demand for carbonated drinks which has led previously closed producers to restart their productions bodes well for ICI's soda ash division. Furthermore, the expanding population of the country and urbanisation is expected to increase detergent demand for which soda ash is used.

Under life sciences, in its Agri division, ICI plans to gear towards aggressive growth through its seeds segment and agrochemicals. Under its chemical division, the latest financial performance notice on PSX includes a note on the firm approving the establishment of a facility to manufacture Masterbatch, a colorant and additive utilised in the manufacture of various plastics.

Thus ICI looks set to grow in all its business divisions. Given its past performance, planned investments and current economic conditions of Pakistan, ICI is expected to continue growing and posting strong financial results.





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ICI Pakistan Limited

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For the For the

year ended year ended

Rs. 000 June 30, 2017 June 30, 2016 YoY

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Net turnover 41,363,695 36,954,437 11%

Cost of sales (33,598,220) (30,475,911) 9%

Gross profit 7,765,475 6,478,526 17%

Selling and distribution expenses (2,607,114) (2,118,142) 19%

Administration and general expenses (1,114,785) (881,677) 21%

Operating result 4,043,576 3,478,707 14%

Other charges (143,828) (284,840) -98%

Finance costs (398,079) (383,298) 4%

(541,907) (668,138) -23%

Other income 892,701 687,697 23%

Profit before taxation 4,394,370 3,498,266 20%

Taxation (1,098,279) (655,080) 40%

Profit after taxation 3,296,091 2,843,186 14%

Basic and diluted earnings per share (Rs) 35.69 30.78 14%

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Pattern of Shareholding

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Categories of shareholders Shares held Percentage

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Associated Companies, undertakings

and related parties.

Gadoon Textile Mills Limited 5,980,917 6.48

Lucky Holdings Limited 68,996,337 74.7

Lucky Textile Mills Limited 5,077,180 5.5

80,054,434 86.88

Mutual Funds 2,226,647 2.41

Directors and their spouse(s)

and minor children 531,019 0.57

Executives 12,386 0.01

Public Sector Companies and Corporations 2,229,832 2.41

Banks Development Financial Institutions,

Non Banking Financial Institutions,

Insurance Companies, Takaful,

Modarba, and Pension Funds 1,304,298 1.41

Others & General Public 8,000,434 6.5

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