Amman – 14 May 2013: The General
Assembly of Palestine Development and Investment Company Ltd. (PADICO HOLDING)
approved the Board of Director’s recommendation to distribute a 5% cash
dividend out of the capital stock, as in 5 cents per share.
PADICO HOLDING General Assembly held
its 18th Annual Ordinary Meeting in Amman which was transmitted via videoconference to Ramallah. The meeting
brought together the Company’s Board of directors, legal advisor, external
auditor, and shareholders of 71.1% of the company’s shares.
Mr. Munib R. Masri Chairman of PADICO HOLDING stated that the
Board of director’s recommendation to distribute cash dividends to shareholders
reflects its due diligence to adhere to a years-long policy of annual dividend
distribution despite the fact that the Company is implementing new projects worth
millions of dollars. Additionally, profits have also been
adversely impacted by unstable political and economic conditions in Palestine,
including an acute financial crisis that has negatively affected the business
sector as a whole.
Expressing the Board of Director’s content with the 2012 results, Mr.
Masri announced that PADICO HOLDING marked a pre-tax profit of USD 20.04
million in spite of current predicaments.
20 Years for PADICO HOLDING’s Inception
Mr. Masri overviewed PADICO HOLDING’s
journey over the past two decades, emphasizing achievements and challenges
the threshold to the third decade in the Company’s life, and with an insightful
look back, I can proudly say that PADICO HOLDING has distinctively succeeded in
leading the process of investment in the Palestinian economy, guided by a
vision that has never missed the objective of effective and efficient
contribution to building an independent Palestinian state. A state that is capable
of providing a decent standard of living to the Palestinian people, with respect
to public rights and freedom. A state that treats all citizens on an equally,
and furnishes equitable opportunities for all.
the course of two decades, PADICO HOLDING has incorporated and invested in
almost 33 companies across all economy sectors: tourism, agriculture, industry,
real estate, and infrastructure. Towards the end of 2012, the Company’s assets totalled
USD 774 million. The company’s investments reach diverse geographic area and cover
the West Bank, including East Jerusalem, and Gaza Strip. PADICO HOLDING’s
investments are demarcating boundaries of our homeland.
Internal Political Division is the Most
“The Company’s path towards this success
has never been a path strewn with roses.” Mr. Masri reflected. On the contrary,
PADICO HOLDING has encountered a challenge in every phase and an impediment in
every step forward. “As early as the thought of founding the company which was raised in a meeting with
the late President Yasser Arafat, we didn’t have the faintest illusion about
the tough path and immense difficulties we were to face ahead. However, this
has not undermined our determination. We decided to move forward no matter what
conditions we stumble upon.” Mr. Masri resolved.
Mr. Masri emphasised that the worst
challenge that has ever faced the Palestinian economy and exerted far-reaching adverse
impacts on performance of Palestinian
companies, national economy and the national Palestinian project as a whole has
been the Palestinian internal political division of June 2007. This split has
been exacerbated by an impasse in political prospects and a setback in the
political process. The Palestinian Authority (PA) has further suffered from an
unprecedented financial crisis, resulting in an irregular payment of the public
sector wage bill, almost complete inability to pay private sector arrears, and
a remarkable rise in the PA public debt.
However, Mr. Masri assured
“Notwithstanding all these grave
challenges and obstacles in the face of the Palestinian economy, your Company
has continued to register growth in various financial indicators. Net shareholders equity rose from USD 24.4 million in 1994
to USD 400 million in the end of 2012. Since it was incorporated, total
dividends distributed to the Company’s shareholders have exceeded USD 166
Mr. Masri expressed his appreciation to
shareholders for their trust and confidence in the Company’s Board and
successive Executive Managements. He also articulated his gratitude
to the Executive Management. “We believe that if it were not for shareholders’
trust and Executive Management’s diligent effort, these results would have not
materialised.” Mr. Masri concluded.
Reviewing the Executive
Management’s Report, Mr. Samir Hulileh CEO of
PADICO HOLDING, presented the Company’s performance throughout 2012, highlighting
surrounding environment, projects under implementation, and plans for upcoming
2012 was a tough year, subsequent political and economic events have
continued to negatively reflect on the business sector performance in
Palestine. The Palestinian Government’s decision to raise income tax on both
corporations and individuals has further increased burden on the private
sector. Israel’s attack on the Gaza Strip in late 2011 also resulted in
exorbitant financial losses.
Combined, these causes have resulted in
a GDP decline from 10% in 2011 to less than 6% in 2012. Meantime, unemployment soared up across the
West Bank and Gaza Strip. In addition to the financial crisis in the Euro zone,
regional developments and consequences of the Arab Spring have negatively
impacted the Palestinian economic activity, particularly tourism. Perhaps the
most visible domestic factor was the suspended enforcement of the Investment
Promotion Law and raised corporate income tax, costing the Company a remarkable
fall of income as a main result of its declining share of
the Palestine Telecommunications Company (PALTEL Group) profits.
and Operating Performance
operates in most business sectors, PADICO HOLDING Group has not been immune
from concurrent political and economic events. In addition, PADICO HOLDING has
engaged in new investments in the tourism, agriculture and infrastructure
sectors. Not matched by increasing corporate profits yet, these new enterprises
have resulted in rising operating revenues. Compared to USD 26.8 million in
2011, the Company made a pre-tax profit of USD 20.04 million in 2012, marking a
drop of 25.2%. The major cause of declining 2012 profits is attributed to the plummeting
performance of restructured holding companies as well as low profit margins
scored by new projects, which started operation in 2011 and 2012. These include
Al Mashtal Hotel in Gaza, St. George Landmark Hotel Jerusalem, Mövenpick Hotel
Ramallah, and slaughterhouse of the Palestine Poultry
Company (PPC) in Tulkarem. These projects need some
time until they reach a break-even point, where they can cover their
non-variable costs and start to achieve growing profit margins. Additionally, a
number of projects are still under construction, incurring incorporation
expenses that are charged to the income statement. These are the Sharafat
housing project in Jerusalem, Executive Club in Ramallah, Jericho Gate Real
Estate Investment Company, and solid waste management projects. Implementation
of the new 20% Income Tax Law has further led to declining PADICO HOLDING’s share
of affiliates’ profit, particularly PALTEL Group. These causes have led to low profits
generated by operations on the level of the PADICO HOLDING Group, manifesting
clearly in 2012.
Mr. Hulileh explained that PADICO
HOLDING’s revenues totalled USD 103.78 million in 2012
compared to USD 103.89 million in 2011. New projects contributed to increasing
operating revenues in 2012 by 8.4%, from USD 58.78 million in 2011 to USD 63.69
million in 2012. PADICO HOLDING’s share of associates’ profit fell from USD 43.07
million in 2011 to USD 37.25 million in 2012. The drop was a main result of the
Company’s declining share of PALTEL profits, which receded from JD 90.74
million in 2011 to JD 82.13 million in 2012. This is due to raising the
corporate income tax bracket from 15% to 20% in early 2012 as well as PALTEL’s
initiative to postpone benefit of the partial exemption (50%) offered by the
Investment Promotion Law for a period of two years.
Mr. Hulileh stated that 2012 saw major
developments and marked progress in PADICO HOLDING’s projects and investments. With
effects manifesting on the Company’s financial statements, some projects have
already started to achieve returns. Mr. Hulileh envisaged that these returns
would scale up incrementally and reach the desired level over the upcoming two
or three years.
In 2012, PADICO HOLDING started to
operate a number of old and new projects, most notably the St.
George Landmark Hotel Jerusalem. After a USD 14 million worth investment of
refurbishment and renovation, the Hotel was in full operation in Q1 2012. Following
a five-year suspension generated by the internal split and siege on Gaza, 2012
marked the launch of Al Mashtal Hotel. Facilities include 222 five star hotel
rooms, halls, and restaurants.
The Nakheel Palestine for Agricultural
Investment Company (Nakheel Palestine) continued to expand agricultural
operations. In its final phases, the enterprise will cultivate a total of
36,000 palm trees over an area of more than 3,000 dunums in Area
C. With a total investment of USD 11 million, the Company finalised cultivation
of over 20,000 palm treestowards the end of 2012. Nakheel Palestine’s palm plantations
produce high quality Medjool dates.
The Palestine Poultry Company (PPC), owner
of AZIZA trademark, also continued to expand broiler
poultry farms, now providing the Company’s slaughterhouse with even surplus
birds. The project includes construction of seven broiler poultry farms across
the West Bank governorates with a production capacity of 9,000 tonnes of live
chickens per annum. The cost of broiler poultry farm construction is expected
to total USD 7 million. Upon completion, PPC will have spent a total of USD 22
million on expansion investments since early 2009.
As the largest real estate, tourist and
recreational facility across Palestine, PADICO HOLDING announced completion of sporadic
registration of land needed to launch the Jericho Gate Real Estate Investment
project. Stretching over 3,000 dunums, the project is located in Area A
at the southern entrance to Jericho city. Land registration certificates have
been issued by the Jericho Land Registration Department. To secure the
project’s operational needs, the Company also developed two integrated research
papers on water and energy supply. In April 2013, an initial outline plan has
Incorporated in partnership with the Palestine
Investment Fund (PIF), the Palestine Real Estate Investment Company (PRICO) won
a concession contract to develop the Jericho Agro-Industrial Park. Having started
to develop internal infrastructure networks, PRICO signed more than 21
memorandums of understandings with companies and factories, which expressed interest
to operate in the Jericho Agro-Industrial Parkand enjoy associated privileges.
With an investment of around USD 5
million, a major portion of the Business Club in Ramallah has
been finalised. It is expected that it would start operation in August 2013.
addition to the St. George Landmark Hotel, 2012 saw a noticeable progress
towards implementing the Sharafat housing project in Jerusalem. Having been
suspended for over 10 years, initial construction licences have been obtained
from relevant authorities. Development work is scheduled to start in summer
Plan of the Upcoming Phase
Regarding future planning activity, Mr.
Hulileh stated that PADICO HOLDING’s
Mid-term Plan 2013-17 is designed to maintain
and develop current investments as well as to finalise projects under
implementation, particularly in energy and infrastructure sectors. The Plan is
also tailored to enhance performance and profitability of existing enterprises.
liquidity and reduce indebtedness and administrative expenses, the Executive
Management, guided by the Board of Directors, has developed an ambitious 2013
budget with a view to reduce PADICO HOLDING’s administrative and general
expenses by 24%. The Company would continue to reduce debts over the upcoming
few years. “We are confident that successful implementation of the Mid-term
Plan will promote the Company to sustained growth of profits over years to come,
meeting our shareholders’ aspiration for stable annual dividends. New projects
will be ready to generate favourable results as of 2013.” Mr. Hulileh