Business

AMMAN – Arab Bank Group continued its strong financial performance during the first quarter of 2016 as net profit after taxes and provisions reached $218.3 million, compared to $217.2 million in the same period of last year. 

In a statement e-mailed to The Jordan Times on Monday. The bank said that shareholders' equity rose to $8 billion.

The bank’s balance sheet remains strong with loans and advances growing by 3 per cent to reach $24.4 billion compared to $23.7 billion in the first quarter of 2015, said the statement, indicating that customer deposits grew by 2 per cent to $35.4 billion, compared with $34.7 billion in the same period last year.

Excluding the effect of foreign currency devaluations, both loans and customer deposits grew by 4 per cent, according to the bank.

"The bank remains on track to deliver solid financial performance. The first-quarter results are a testimony to the bank’s market leadership and successful strategy," said Arab Bank Chairman Sabih Masri.

Nemeh Sabbagh, Arab Bank CEO, indicated that net operating income grew by 5 per cent excluding non-recurring items, driven by the bank’s focus on its core banking activities and prudent cost control policy. 

The bank maintained a healthy cost-to-income ratio of 39.6 per cent, and non-performing loans to total loans ratio of 4.7 per cent, reflecting the its high quality loan book in addition to the effective management of credit risk, Sabbagh said, adding that Jordan's largest financial institution continues to maintain a high level of liquidity with its loan-to-deposit ratio reaching 68.9 per cent, in addition to its conservative provisioning policy with a coverage ratio of 109 per cent as of March, 31 2016.

The Arab Bank was named as the Best Bank in the Middle East 2016 by the New York-based magazine Global Finance.

AMMAN – Lafarge Jordan on Monday said that its shareholders have unanimously approved the company's future development plans that include turning the site for cement production in Fuheis, near Amman, into a green urban hub. 

In a statement e-mailed to The Jordan Times, Lafarge Jordan said shareholders tasked the management during a meeting for the general assembly last week to follow up on the implementation of future plans.

The company also said it is about to start a solar energy project at Rashadiyah factory in the southern governorate of Tafileh in a bid to reduce production costs, adding that the cement manufacturing company will also explore the possibility of receiving liquefied gas supplies from Aqaba. 

Lafarge Jordan Chief Executive Officer (CEO) Amr Reda briefed shareholders on the company's vision for its production site in Fuheis to develop it as an environment-friendly urban city as the envisioned project  would include a university, a hospital, a hotel, shopping malls, residential and commercial properties, medical facilities and restaurants, adding the scheme –– if implemented –– would create job opportunities for the local community. 

Reda said that Lafarge Jordan has started to work an engineering consulting firm to develop the master plan for the project, adding designs were sent to authorities to study the investment plan, according to the statement. 

Lafarge Jordan is considering the development plan as it seeks a solution to financial costs of around JD10 million annually the Fuheis factory has incurred due to  compensations paid the local community over environmental impact despite being non-operational since 2013, Reda was quoted as saying in the statement, adding that the company is seeking a mutual agreement with residents of Fuheis over the envisaged project that would serve both parties.

Residents of Fuheis, some 20km northwest of Amman, are against the development plan as they claim that the land  of 1,880 dunums was appropriated from them by the government  in 1951 for public use and then sold to cement factory in the 1990s. 

On the value of the project, Reda told The Jordan Times in February of this year that it would exceed JD2 billion. 

During the general assembly, shareholders approved the financial statements of 2015, which showed that net profits reached JD9.7 million last year compared with JD3.3 million in 2014.

AMMAN — The Jordan Petroleum Refinery Company's (JPRC) general assembly on Sunday approved the company's financial statements for 2015 and approved its board of directors' recommendation to increase the company's capital by 33 per cent to JD100 million. 

The increase was covered through the capitalisation of JD25 million of retained earnings and distributing them as free stocks to shareholders, the Jordan News Agency, Petra, reproted. 

During the meeting, the assembly approved distributing 10 per cent of the earnings on shareholders and allocating a JD1.94 million of optional reserves to retained revenues and allocating a JD4.1 million for the obligatory reserves account.

According to Petra, JPRC pre-tax profits reached JD42 million at the end of 2015 compared to JD38.9 million in 2014, registering an 8 per cent increase.

The profit increase is due to the lube oil Factory's JD2 million profit increase and the JD4 million increase in profits from oil refining, before taxes, Petra reported. 

JPRC's Jordan Petroleum Products Marketing Company's revenues decreased by JD2.7 million because many of its stations were being updated and, therefore, went out of service, Petra reported, adding the company's assets decreased to JD1.3 billion in 2015 compared with JD1.8 billion in 2014 blamed mainly on the 2015 Income Tax Law.

AMMAN – Jordanian Businessmen Association (JBA) on Monday said that the Tunisian government has pledged to ease the flow of Jordanian exports into the market of the North African country, including pharmaceutical products.

According to a JBA statement, Tunisian Trade Minister Mohsen Hassen told delegation of businesspeople from Jordan that Tunisia sees Jordan as a gateway to the markets of the Gulf region and that his country is looking at making Tunisia as a gateway for Jordanian exports to the African market.

A delegation headed by Hamdi Tabbaa, JBA president on Monday concluded a business visit to Tunisia that aimed at enhancing economic and trade relations between the two countries. During that visit JBA members met also with Tunisian Prime Minister Habib Essid and Minister of Transport Anis Ghedira. 

AMMAN — Amman Stock Exchange (ASE) Chief Executive Officer Nader Azar on Monday said that 212 companies out of 225 firms listed at the Amman bourse submitted their quarterly financial reports before the end of the deadline, which was the end April.

According to ASE instructions, all companies listed in the bourse should provide their quarterly reports, reviewed by their auditors, within a month after the end of the quarter, Azar said. 

WASHINGTON — Two companies crucial to the business of US energy exploration, Halliburton and Baker Hughes, have abandoned their planned merger in the face of opposition by regulators who said it would hurt competition.

Prospects for the merger, which was valued at nearly $35 billion when it was announced in 2014, seemed especially bleak after the Justice Department sued to block the deal on April 6.

The government claimed the merger would lead to higher prices by unlawfully eliminating significant competition in markets for almost two dozen services and products crucial to finding and producing oil and natural gas in the United States.

"The companies' decision to abandon this transaction — which would have left many oilfield service markets in the hands of a duopoly — is a victory for the US economy and for all Americans," Attorney General Loretta E. Lynch said in a statement on Sunday.

The justice department said its opposition to the deal stemmed in part from fear among oil and gas companies that rely on Halliburton and Baker Hughes.

"We heard extreme statements of concern from dozens of companies and over 100 individuals," Mark Gelfand, deputy assistant attorney general in the justice department's antitrust division, told reporters Monday. He declined to identify the companies and did not detail their concerns.

As part of the agreement, Halliburton will pay Baker Hughes the termination fee of $3.5 billion by Wednesday, according to a joint release from the companies on Sunday.

"While both companies expected the proposed merger to result in compelling benefits to shareholders, customers and other stakeholders, challenges in obtaining remaining regulatory approvals and general industry conditions that severely damaged deal economics led to the conclusion that termination is the best course of action," said Halliburton Chairman and CEO Dave Lesar.

Martin Craighead, chairman and CEO of Baker Hughes, said the "outcome is disappointing because of our strong belief in the vast potential of the business combination to deliver benefits for shareholders, customers and both companies' employees”.

The Obama administration has taken credit for stopping more than 30 mergers that were abandoned after antitrust regulators sued or threatened to sue to block the deals. In dozens of other cases, the regulators reached settlements that allowed deals to go ahead, including big airline mergers.

Like other merger applicants, Halliburton said it would divest enough assets for the deal to pass antitrust scrutiny. But Gelfand said the deal was not fixable.

Gelfand said companies mistakenly believe that any merger can win approval if they agree to divest enough assets. In a “good remedy”, companies will agree to sell off entire business units, complete with management, facilities and sales forces, but Halliburton proposed to "take a couple of assets from here, a couple of assets from there”. An operator that bought such disjointed assets would have lost customers and been less competitive, he said.

Halliburton and Baker Hughes now face decisions about how to pick up the pieces and improve their companies while remaining smaller than their common rival, Schlumberger, and at a time when low oil prices have depressed drilling activity.

Baker Hughes will use proceeds of the $3.5 billion it will get from Halliburton to buy back up to $1.5 billion in stock, pay off about $1 billion in debt, and refinance a $2.5 billion credit facility. Overall, the company expects $500 million in annual cost savings by the end of the year.

Halliburton and Baker Hughes announced their plan to combine in November 2014, shortly after oil prices began to fall. Few, however, predicted the depth and duration of lower prices caused by a global oversupply of oil.

The glut slowed demand for drilling services and crushed the stock price of both companies.

Europe's top regulator, the European Commission, raised concerns about the deal. It said that it had investigated its potential impact on competition together with regulators in the US, Brazil and Australia.

In morning trading Monday, shares of Halliburton Co. rose 86 cents, or 2.1 per cent, to $42.17, while Baker Hughes Inc. shares fell $1.59, or 3.3 per cent, to $46.77.

LONDON — It's been a long and tortuous journey, but the eurozone economy is finally back to the size it was before the global financial crisis.

The 19-country currency union, which is as a bloc the world's second-largest economy, enjoyed an unexpected acceleration in the first three months of the year, when it expanded by a quarterly rate of 0.6 per cent, official figures showed on Friday.

That's twice the previous quarter's rate and means the economy is now bigger than it was at the start of 2008, before the financial crisis triggered the deepest global recession since World War II.

While the size of the eurozone economy has recovered, however, the region still has far to go to heal fully.

That's most evident in the unemployment rate, which dipped to 10.2 per cent in March but is still 3 per centage points higher than it was in 2008. The jobs problem remains particularly acute in countries like Greece and Spain that suffered the most financially. They have unemployment above 20 per cent and about half of young jobseekers can't get work.

Meanwhile, inflation is way too low for a healthy economy, and the banks in many countries are still burdened with bad loans that keep them from lending.

Since 2008, the eurozone has had a torrid time, falling in and out of recession as the global financial crisis morphed into a regional debt crisis that at various times threatened the future of the euro currency itself. As the region bailed out Greece and several other member states and required governments to make painful budget cuts, its economy struggled to get back on track.

By contrast, other economies like the US and Britain recovered steadily. The US, for example, regained its pre-recession size back in 2011 and has seen unemployment fall sharply.

The acceleration in the eurozone's growth in the first quarter of this year may be the clearest indication yet that the region is finally moving into a higher gear — particularly as it came during a period of high global uncertainty. Financial markets were volatile due to worries that the Chinese economy would slow down sharply, dragging down global growth, and the price of oil tumbled to 12-year lows, raising concerns about the energy industry.

The eurozone's first-quarter growth rate — reported by statistics agency Eurostat on Friday alongside the unemployment figure — was above market expectations for a 0.4 per cent gain. The annualised rate of about 2.5 per cent is way more than the US equivalent of 0.5 per cent in the same period.

Though no details were offered beyond the headline numbers, it seems that the eurozone — a net importer of crude — has benefited from the fall in oil prices. The fall in the value of the euro has also helped the region's exporters, particularly in Germany. The European Central Bank's (ECB) monetary stimulus measures appear to be helping to boost lending, which is vital to business activity and growth. And governments are less focused on budget cutbacks that tend to weigh on growth.

Whether the economy will keep expanding at this rate will depend on a number of factors, many of which are external to the eurozone, such as the British vote on June 23 on whether to leave the European Union and China's performance. Within the eurozone, worries over Greece's future in the single currency bloc could flare up again and the upcoming Spanish general election may cause jitters.

"False dawns have been common since the financial crisis and nowhere more so than in Europe," cautioned Alasdair Cavalla, senior economist at the Centre for Economics and Business Research.

Though the growth and unemployment figures are on the right path, the lack of inflation remains a problem.

Eurostat said that consumer prices in the year to April fell by 0.2 per cent. That's down from the previous month's annual rate of zero and below market expectations for a more modest decline to minus 0.1 per cent. The core rate, which strips out the volatile items of food, alcohol, tobacco and energy, also declined, to 0.8 per cent from 1 per cent.

That will be disappointing for the ECB, whose primary policy aim is to keep inflation just below 2 per cent.

As a result, the market reaction to Friday's data was muted. While the growth and unemployment figures may have encouraged traders to think that the ECB will be less likely to enact a further stimulus, the inflation data suggest the opposite. The euro was steady just below $1.14 following the data.

The ECB is worried that low or subzero inflation could lead to deflation, a long-term drop in prices that can choke the life out of an economy for years. That's the primary reason why it's cut its interest rates, including its main one to zero, and launched a bond-buying programme that it hopes will stoke economic activity and lift prices in the longer-term.

No further stimulus is expected from the ECB soon but if prices keep falling for longer than anticipated, then it could be forced to act again. The ECB expects prices to start picking up soon, partly because of its stimulus programmes but also because of the recent pick-up in oil prices, which should lead to higher energy bills and prices at the pump.

Tomas Holinka, an economist at Moody's Analytics, thinks that higher eurozone growth will be one reason why inflation "should return to positive territory in the second half of the year".

NEW YORK — Plunging oil prices battered oil giants' profits in the first quarter, another blow following credit downgrades, lay-offs and drilling cutbacks in the wake of a long rout.

Chevron on Friday became the latest big oil company to land in the red due to low commodity prices, reporting a loss of $725 million in the quarter ending March 31.

The second biggest US oil company pledged more belt-tightening after trimming capital spending nearly 25 per cent in the first quarter from the year-ago period, said Chevron Chief Executive John Watson.

"We continue to lower our cost structure with better pricing, work flow efficiencies and matching our organisational size to expected future activity levels," Watson said.

ExxonMobil, which was downgraded from the highest triple A credit rating earlier this week, managed to stay in the black with $1.8 billion in profits. 

But profit at the biggest oil company was 63 per cent lower than in the year-ago period and included a loss of $76 million in its normally lucrative exploration and production business. 

Both BP and ConocoPhillips reported losses earlier in the week. 

The results reflect the effects of a nearly 40 per cent drop in oil prices to under $30 a barrel for much of the first quarter amid a persistent global oversupply. 

Oil prices have since risen back to around $45 a barrel, raising hopes that the first quarter could be a low point.

"This quarter is probably going to be the trough in their earnings profiles," said Nate Thooft, a senior managing director at John Hancock Asset Management.

"Later in the year, assuming oil stays at this level, or at least stays somewhat stable, this will probably be the worst quarter for energy earnings we'll see."

While results in exploration and production were particularly ugly, profits in the refining business were also bad. Chevron saw a nearly 50 per cent decline in earnings from this area to $735 million.

Cheaper oil prices usually boost refining profits because crude is a feedstock for making gasoline. But that effect was blunted in the first quarter due to weak demand for some petroleum products, such as heating oil, because of the unseasonally warm winter.

ExxonMobil also suffered a big hit to its refining profits, but got a boost from $373 million rise in chemical earnings to $1.4 billion. Chevron does not have a chemical business.

ExxonMobil shares were up 0.4 per cent to $88.40 in morning trade, while Chevron fell 1.3 per cent to $101.03.

Losing streak 

Friday's weak earnings came on the heels of other poor results earlier in the week from other large oil companies. ConocoPhillips reported a loss of $1.5 billion, while British giant BP lost $583 million.

Both of those companies took a cautious stance on the recent rise in oil prices.

ConocoPhillips, which announced Thursday it was slashing its 2016 capital budget for a second time, said it would devote gains from higher oil prices to debt reduction before boosting its drilling budget.

"We are not in a hurry to say there is some price trigger where we are going to add back capital," said Al Hirshberg, the executive vice president for production, drilling and projects.

"We will be looking at the entire macroenvironment, looking at supply and demand fundamentals and whether we think that any price action that we get is actually sustainable or not."

BP Chief Financial Officer Brian Gilvary said the company expects "a modestly more favourable oil price environment in 2017 than we see today" and suggested the second half of 2016 could also see some gains from today's levels.

The reticence stems from the fact that oil inventories remain at lofty levels. A major summit of producers earlier last  month in Qatar reflected the concern about low prices of Saudi Arabia, Russia and others, but still fell short of an agreement to limit output.

"I don't think oil prices are going to be materially higher from here," said Thooft. "We haven't really solved the supply issue."

LONDON/TRIPOLI — Libya's National Oil Corporation (NOC) has ambitious plans to restore output to pre-2011 levels after years of violence and disruption, officials said.

Oil output is now less than a quarter of the 1.6 million barrels per day (bpd) Libya pumped before Muammar Qadhafi fell in 2011, and the NOC in Tripoli hopes to ramp it up swiftly with the backing of a new unity government.

Full recovery could take years because of shutdowns by disgruntled workers, political rivalry and attacks by militants.

Militants hit Al Ghani, Mabrouk, and Dahra fields in the Sirte basin over a year ago, forcing the NOC to declare force-majeure on 11 fields, and there have been further attacks since then.

An NOC official in Tripoli told Reuters that at least 200,000 bpd of capacity had been damaged in attacks on oil fields in the western Sirte basin, Libya's most prolific.

It may take the NOC until late 2017 or 2018 to bring those fields back to full capacity, the official said, if it can afford the repairs.

The first phase of a three-stage recovery plan can be implemented within three months, a second NOC official in Tripoli said, allowing fields like El Sharara and Elephant, with a combined capacity of around 430,000 bpd, to come back on stream.

But other fields, including those that have been directly attacked and others that feed via pipeline to Libya's largest export terminals at Ras Lanuf and Es Sider, may take longer to bring back online, he added.

Phase two covers six to eight months down the line while the final phase covers fields that will take between eight months and several years to reopen.

Infrastructure damage at the ports could take years to repair and will delay the restart of the fields feeding to them. Another big factor is the cost of the repairs.

"All those plans depend on security. If proper and robust security at the oil facilities is not in place, then our plans will be in jeopardy," the second official said.

Earlier this year, militants attacked Ras Lanuf and Es Sider, which can handle 600,000 bpd of crude exports. The two terminals had been closed since December 2014, after an attack on Es Sider.

The latest assault left just 12 out of 32 storage tanks at the terminals operational, NOC Chairman Mustafa Sanalla told Reuters in February. It may take NOC "many years" to rebuild damaged "long lead items" at the ports, he said.

Modest, conditional ramp-up

A UN-backed unity government's move to Tripoli last month raised hopes that Libya could restart idled fields and reopen export terminals, and the NOC in Tripoli says it could quickly double production to over 700,000 bpd, if political and security conditions stabilise.

The government is still struggling to gain clear support, especially in the east. A parallel NOC in the east exported a shipment of oil independently for the first time this week, further complicating the prospects for recovery.

"We are focused now on how to resume oil production. In some places, we'll just have to open the valves," Sanalla said last week. "But first of all, we need to have stability."

Industry sources do not expect production to increase beyond 600,000 bpd within the next few months.

"If the new unity government is successful in asserting some control, then output should recover, but only slowly and with setbacks," Energy Aspects analyst Richard Mallinson told the Reuters Global Oil Forum earlier this month.

Security challenge

The NOC hopes the unity government can create a unified security force to protect oil infrastructure.

For now, security will depend on an array of armed factions including the Petroleum Facilities Guard (PFG), a semi-official corps that has blockaded ports and whose attempt in 2014 to export crude independently was thwarted by US special forces.

PFG leader Ibrahim Jathran says he supports the unity government and is ready to reopen the ports of Zueitina, Es Sider, and Ras Lanuf, and Sanalla has said the NOC would accept the PFG as part of a future, national security force.

But the blockade and the PFG's refusal to allow storage tanks to be emptied at threatened terminals have infuriated the NOC. Meanwhile a rival PFG faction, Battalion 152, has said it is loyal to eastern military commander Khalifa Haftar, whose political allies have blocked the eastern parliament from approving the unity government.

The unity government said on Sunday it feared further attacks on coastal infrastructure and oil fields, and that it had received reports that these were threatened not only by Daesh but also by Qadhafi loyalists and Sudanese rebels.

Financing could be a challenge in the short term as Libya has been hard hit by falling oil prices and has had to bear the double burden of a price crash and constrained output simultaneously. 

Sanalla has estimated the cost of lost production at more than $68 billion for the past three years, and says Libya loses $30 million every day because of shutdowns. Security worries in some areas mean the NOC has yet to assess the full cost to repair damaged facilities.

AMMAN — Finance Minister Omar Malhas on Thursday  underlined the importance of the partnership between public and private sectors and its role in stimulating the private sector's participation in economic development.

Inaugurating a workshop on public-private partnership, Malhas said the government worked on providing adequate environment to attract private investments to help implement important projects in vital sectors such as water, electricity, renewable energy and transportation.

Under partnership projects, the private sector is tasked with providing necessary funds for these schemes and is responsible for bearing risks related to project establishment, operation and maintenance, in addition to providing services with high quality and competitive prices, in return for achieving proper financial revenues, the minister said.