Munib Rashid Al-Masri: We hope that 2013 will bring the prospect of a political breakthrough and a peace settlement that can stimulate the economic climate.
Samir Hulileh: The continuous rise in profits is due to the increase in profit margins of new projects and growth in their operational revenues.
Ramallah - PADICO HOLDING declared growth of 11.2% in pre-tax profits for the first half of 2013 reaching USD 14.23 million compared to USD 12.80 million for the same period in 2012. Consolidated net profit reached USD13.74 million for the first half of 2013 recording an increase of 12.5%, compared to USD12.21 million for the same period of 2012, while operational profits rose by 10.6% to reach USD19.42 million in the first half of 2013 compared to USD17.56 million in the first half of 2012.
Mr. Munib Rashid Al-Masri, Chairman of the Board of Directors of PADICO HOLDING, acclaimed the increased profits in the first half of 2013 amid hopes that a political breakthrough would take place in the latter part of the year. Mr. Al-Masri expressed hope that peace talks between Palestinians and Israelis would lead to a real political solution that guarantees the legitimate rights of Palestinians and contributes to economic growth. This, in turn, would lead to an improvement in the performance of the private sector and prosperity in the investment climate in Palestine. Al-Masri alluded to the need to resolve the existing internal division that exerts a high price politically and economically on the Palestinian cause. He stated that Palestinian national unity is the sole guarantee to consolidate the political and economic steadfastness of the Palestinian people and their rights and maintain the legitimacy of the Palestinian cause.
Sustained improvement in operational performance of new projects
The CEO of PADICO HOLDING, Mr. Samir Hulileh, explained that growth in profits for the first half of 2013 was the result of higher profit margins of new projects which started operations in 2011 and 2012, in addition to the high profit margins achieved by the Palestine Industrial Investment Company. Mr. Hulileh also indicated that the first half of 2013 witnessed improvements in the performance of several new projects, especially the poultry slaughterhouse, broilers farms, and St. Georges Hotel; this reflects the capacity of the new projects to continue sustained growth in consecutive periods.
The gradual growth in operational profits is anticipated to continue through 2013 and beyond, along with improvement in the performance of other new projects. Some of these projects are still in their establishment phase and ongoing establishment expenses are reflected in the income statement: these projects include the Al-Sharafat project in Jerusalem, NAKHEEL Palestine, the Executive Club in Ramallah, Jericho Gate for Real Estate Investment, and the Solid Waste Recycling Projects. These projects limited the growth of operational profits in the first half of the year, but their operational profits will have an impact on financial performance once they commence operations. Profits for the first half of 2013 before financing expenses, taxes and depreciation grew by 15% from USD 20.68 million in the first half of 2012 to USD 23.79 million in the first half of 2013.
Hulileh affirmed that this substantial improvement in the company's profits in the first half of 2013 is an achievement in line with existing company plans and projections. He expressed confidence that growth in revenues from new projects will contribute to further profits by the end of the year and this growth will continue steadily over the next three years.
Total consolidated revenues increased by 7.9% reaching USD 55.33 million for the first six months of 2013 compared to USD 51.30 million for the same period in 2012. This increase can be mainly attributed to the growth in operating revenues of subsidiaries by 6.4% from USD 30.73 million for the first half of 2012 to USD 32.70 million for the first half of 2013. The main contributors to this growth are the rising operating revenues of PIIC along with the new projects that started operations in 2011 and 2012 as previously mentioned. PADICO HOLDING's share of associates` results of operations also had a positive effect on total revenues as they increased by 7.2% from USD 19.24 million for the first half of 2012 to USD 20.62 million for the first half of 2013, resulting mainly from an increase in PALTEL Group's net profit by 9.5% from JD 41.39 million for the first half of 2012 to JD 45.34 million in the first half of 2013.
Other revenues increased by 51.1% reaching USD 2.01 million for the first half of 2013 compared to USD 1.33 million for the same period in 2012. These revenues include profits of the investment portfolio, interest revenues, and other revenues.
Consolidated operating costs increased slightly from USD 23.08 million for the first half of 2012 to USD 23.63 million for the first half of 2013 recording a rise by 2.4% amounting to USD 0.55 million. This increase in operating costs was accompanied with an increase in operating revenues by 6.4% during the same period, as mentioned above.
Consolidated general and administrative expenses increased by 4.8% from USD 7.54 million for the first half of 2012 to USD 7.90 million for the first half of 2013; this increase is mainly attributed to the consolidation of the financial statements of NAKHEEL Palestine for Agricultural Investment and Palestine Tourism Investment Company (PTIC) during this period, as general and administrative expenses of those two companies were not reflected in the consolidated financial statements of the first half of 2012. Without the effect of the consolidation of those two companies, PADICO HOLDING's general and administrative expenses would have decreased by 3.3% compared to the same period in 2012. This reflects the success of the cutting cost policy that was adopted by PADICO HOLDING's Board of Directors.
Consolidated finance costs increased by 9.0% from USD 4.76 million for the first half of 2012 to USD 5.19 million for the same period in 2013; this resulted from an increase in average total debt from USD 204.65 million in the first half of 2012 to USD 218.05 million in the first half of 2013. This debt includes bonds in an amount of USD 85 million, as well as loans of NAKHEEL Palestine and PTIC that were consolidated during this period. Despite the increase in average total debt in the first half of 2013 when compared to the same period in 2012, it should be noted that total current period end debt balance witnessed a reduction by 6.4% when compared to the end of the year 2012.
Consolidated assets rose by 0.2% from USD 773.75 million at the end of 2012 to USD 775.18 million at the end of the first half of 2013. The equity attributable to shareholders of the parent company rose by USD0.18 million from USD 398.49 million at the end of 2012 to USD 398.67 million at the end of the first half of 2013.
Total consolidated liabilities were USD 277.61 at the end of the first half of 2013 compared to USD 277.93 million at the end of 2012. Debt bonds, loans and credit facilities constitute around 75.9% of total liabilities and totaled USD 210.82 million at the end of the first half of 2013 compared to USD 225.29 million at the end of 2012 recording a decrease of 6.4% with an amount of USD 14.47 million. It is anticipated that the forthcoming financial periods will witness consecutive reduction in borrowing by PADICO HOLDING and its companies.
Main Recent Developments
Al-Sharafat Real Estate Project is implemented by PADICO HOLDING in the southern of Jerusalem and comprises the construction of 22 residential buildings. The company is now finalizing the engineering plans and design of buildings, infrastructure, roads and technical work related to the project. Applications for licenses are currently being submitted following permission for construction being obtained by the company at the beginning of the year. Marketing and sales of apartments will commence shortly. The project is expected to generate rewarding profitable returns and cash revenues.
Jericho Gate Project
PADICO HOLDING is implementing Jericho Gate Project in partnership with PALTEL and Palestine Real Estate Investment Company (PRICO). The project is the first of its kind in Palestine and includes the development of a variety of tourist and entertainment facilities on an area of 3,000 dunums in the southern entrance of Jericho. The company has completed the preliminary structural plans and is currently commissioning detailed structural plans, including roads and infrastructure. Preparatory work on the project is expected to start at the end of this year after obtaining official approval. The company is preparing a study on the socio-economic impact of the project on Jericho.
NAKHEEL Palestine Project
PADICO HOLDING established Palestine Palm Trees Project in 2010 to create the largest majhoul palm tree farm in Palestine on 3,000 dunums of land. In 2013, Palestine Palm Trees Company planted more than 4,500 new trees, bringing the total number of palm trees to over 26,000. Production is anticipated to total more than 300 tons of dates in the current year. The company has signed deals to purchase dates from local farmers, accordingly, total production for this year is expected to exceed 600 tons. In 2013 the company succeeded in exporting dates to international markets including Russia, America and Indonesia, and the company was awarded two gold stars in the Tasting Contest in Brussels.
At the end of July 2013, PADICO HOLDING's stock began ascending to reach USD 1.15 and with trading levels not witnessed by the stock for a sometime. This high demand on the stock was driven by political and economic developments in the region, most notably the escalating growth of stock indices in the Arab financial markets, led by Dubai Financial Market. This also coincided with news on the resumption of negotiations with the Israeli side which renewed hopes for political breakthroughs and economic developments that are expected to reflect positively on the performance of Palestinian companies, especially PADICO HOLDING as a leading investment company in Palestine. PADICO HOLDING's stock was affected more than others while the Palestinian stock market stumbled, reaching USD 0.82 during times of deteriorating political and economic conditions, especially in the second half of 2012 when the Palestinian Authority's financial crisis exacerbated. Therefore it would be natural for PADICO HOLDING to lead growth in the stock market, especially that its book value per share reached USD 1.6 by the end of June 2013, which is well above current prices (USD 1.15) by almost 40%.
Along with that, the share prices of some of PADICO HOLDING's subsidiaries and affiliates improved significantly in recent weeks, as PIIC's share price reached JD 1.50 recording a growth rate of 26% in comparison with the closing price at the end of 2012. The share price of Palestine Poultry company (AZIZA) reached JD 3.00 achieving a growth rate of 22%, while the share price of the Vegetable Oil Industries Company (VOIC) reached JD 5.35 attaining a growth of 5%, and the share price of the National Carton Industry Company (NCI) increased by 38% to reach USD 0.76. PALTEL Group's share price also recorded an increase by 11% escalating from JD 4.70 level in Q2 2013 to reach JD 5.2 in the middle of August 2013.
The General Assembly of PADICO HOLDING held its annual meeting on May 14, 2013 and ratified the recommendations of the Board of Directors on cash profit distribution for 2012 at USD 0.05 per share with a total sum of USD 12,500,000. The distribution of profits to shareholders started through branches of the Cairo-Amman Bank in Palestine on June 17, 2013.
- End -