Business

TOKYO — Japan Post skyrocketed on its trading debut Wednesday after the biggest initial public offering (IPO) this year, lifting hopes that privatising what is effectively the world’s largest bank will boost Tokyo’s faltering growth blitz.

Shares in the vast company, along with its banking and insurance units, were listed on the Tokyo Stock Exchange following an $11.5 billion share sale, in the largest offering globally since Chinese e-commerce giant Alibaba’s record $25 billion IPO last year.

The bulk of proceeds from selling shares in the government-owned behemoth, which has about 24,000 offices nationwide, are earmarked for reconstruction efforts after Japan’s 2011 quake-tsunami disaster.

Japan Post holds 200 trillion yen ($1.65 trillion) in deposits from millions of Japanese households, the equivalent of 40 per cent of the country’s gross domestic product (GDP).

Tokyo is expected to sell off more of the company to help pay for spiralling social-welfare costs in Japan’s biggest privatisation since Nippon Telephone & Telegraph’s 1987 IPO.

The triple-listing brings with it hopes of drawing more investment to Japanese firms and a lift for Prime Minister Shinzo Abe’s faltering bid to kickstart the world’s number-three economy, known as “Abenomics”.

Analysts said shareholder pressure would help force Japan Post to speed up its decision-making and control costs.

It could also send a wider message that Japan Inc.’s notoriously rigid corporate culture is being shaken up.

“We have shareholders now and so we’re going to promise to lift the value of Japan Post group,” the company’s President Taizo Nishimuro told reporters at the stock exchange. “I believe this will contribute to boosting the Japanese economy.”

Legislation passed under the government of former prime minister Junichiro Koizumi stipulated that the company be split into four units in 2007, to handle deliveries, savings, insurance and counter services at each of its post offices.

Heizo Takenaka, who was a key member of Koizumi’s government and a main driver of Japan Post’s privatisation, said the IPO was not an end in itself.

“What is important is to instill a private management culture,” he stressed. “We are now at the start of that process.”

Nationwide network

At the close, Japan Post Holdings soared 25.7 per cent to 1,760 yen ($15.50), well up from its 1,400 yen IPO price, while the banking unit’s stock jumped 15.2 per cent from its offering price to 1,671 yen.

But the hotly anticipated insurance unit’s debut was the star of the day, skyrocketing 55.9 per cent to 3,430 yen.

The share sale was a hit at home with many ordinary investors eager to get their hands on Japan Post shares, with the effort getting a boost from plenty of Internet and television coverage.

A pensioner who bought shares in the bank and insurance units, said he was “happy to see the initial prices are high but I’m not sure in the longer term. I just hope to get dividends”.

Some observers warned that Japan Post must overhaul its lumbering style to fully succeed.

“One of the company’s greatest advantages is its nationwide network. The downside is its lack of cost-consciousness,” Yasuhide Yajima, chief economist of NLI Research Institute, indicated. “The biggest risk though is that the company lacks a sense of speed.”

Questions over competitiveness 

The postal giant’s efficient mail delivery unit, a big source of national pride in Japan, will remain untouched largely due to social and political pressure to maintain the status quo, including the presence of post offices across the archipelagic country even in its most remote villages.

These offices also offer services for cash deposits and insurance, and a local branch where many of Japan’s legions of retirees withdraw their pension payments.

That system, however, has long drawn criticism both inside and outside Japan.

Financial institutions, carrier services and foreign governments argued that the public body was operating in sectors where it competed directly with private businesses.

In February, Japan Post announced its first overseas acquisition with the $5 billion takeover of Australia transport logistics giant Toll Holdings.

Yoshiaki Miyakoshi, 76, a former trading house official checking share prices on a flashing board outside a brokerage in central Tokyo, told AFP that the listing “will perhaps have some positive impact on the Japanese economy”.

AMMAN — Foodstuff exports during the past 10 months reached JD353 million compared to JD339 million during the same period in 2014.

The foodstuffs industry is one of the “promising and important” sectors in the Kingdom as it has 2,132 institutions employing around 41,000 workers with an investment ratio estimated at JD628 million, Amman Chamber of Industry board member Qasem Abu Salha said.

AMMAN — Jordan Marble Company (JMC) is generating meager profits considering the volume of sales.

According to unaudited interim financial results as of September 30, 2015, disclosed to the Jordan Securities Commission, the company seems overburdened by administrative and general expenses besides financing costs.

The income statement showed that sales increased by 21.4 per cent during the first nine months of this year to JD5.1 million from JD4.1 million during the same period of last year.

After taking into consideration production costs, the gross profit boiled down to JD0.8 million on September 30, 2015, compared to JD0.6 million registered on September 30, 2014.

Yet, these aforementioned amounts were struck down to a JD25,959 net profit for January-September 2015 and JD50,734 for the same period of last year due administrative and general expenses as well as financing costs. 

In a previous disclosure sent to the JSC in late July, the company revealed that its sales amounted to JD3.4 million during the first six months of 2015, 9.7 per cent higher than the JD3.1 million recorded during the same period of 2014.

JMC indicated that JD2.3 million of the sales during January-June 2015 were exports and the remaining JD1.1 million were sales in the local market.

Sales in 2014 amounted to JD5.4 million split evenly between exports and the domestic market.

"We opened new markets in neighbouring countries, especially the Gulf states, in South Korea and the United States," JMC Chairman Nabil Salim Al Zammar wrote in the disclosure, expressing hope that the company would be able to broaden these markets in the future so that they would reflect positively on sales and profitability.

The net profit at the end of June 2015 and June 2014 amounted to JD49,144 and JD47,239 respectively.

The company's annual report covering 2014 estimated JMC's share of the local market at present at more than 10 per cent, anticipating the rate to rise over the next five years to  20-25 per cent.

It described the competition in the market as severe and mentioned in this regard 5 main firms that produce marble and granite.

"The company will try to achieve a volume that corresponds to its highly technical state-of-the-art production lines and large capital," the report said.

It added that capital investment stood at JD1.9 million at the end of June 2015, down from JD2.2 million at the end of last year and JD2.6 million at the end of 2013.

According to the balance sheet as of September 30, 2015, total assets amounted to JD7.9 million, JD1.9 million of which were property and equipment.

Other assets included JD2.9 million of inventory and JD2.1 million of receivables.

Liabilities totaled JD3.8 million, mostly debts to Arab Bank and Jordan Ahli Bank..

Notes accompanying the financial statements showed average indebtedness at JD2.7 million and shareholders equity at JD4.1 million.

Consequently, the ratio of indebtedness to shareholders equity stood at 65 per cent in 2015 compared to 60 per cent in 2014.

Shareholders approved during an ordinary general assembly meeting to distribute JD45,000 in cash dividends at a rate of 1.125 per cent and to tap the JD350,098 voluntary reserve as another disbursement.

The meeting was attended by four shareholders who held 99.2 per cent of the JD4 million capital.

At the end of last year, JMC was owned by Mohammed Marwan Salim Al Zammar (35.9 per cent), Nabil Salim Al Zammar (34.4 per cent) and Najib Salim Al Zammar (28.7 per cent).

The company, located in Amman's Abu Alanda suburb, employed 66 workers at the end of last year.

AMMAN — The Amman Stock Exchange, represented by its Chief Executive Officer Nader Azar, participated in the World Federation of Exchange (WFE) 55th General Assembly and Annual Meeting which was held in Doha, Qatar last month.

The meeting gathered CEOs and stock exchange representatives who discussed major issues related to the securities industry. During the meeting, participating stock exchanges agreed on several issues related to the WFE's work.

AMMAN — Jordan Chamber of Industry (JCI) First Deputy Chairman Adnan Abul Ragheb on Tuesday promoted Jordan's strategic location as a gateway to penetrate Arab markets. At a meeting with Danish Regional Ambassador to Amman, Damascus and Beirut Svend Waevers, Abul Ragheb discussed ways to enhance economic and commercial ties between the private sectors in Jordan and Denmark.

They stressed the importance of addressing obstacles facing Jordanian exports to the European Union (EU) in general, with Abul Ragheb noting that meeting EU technical standards is the most important challenge in this regard. The JCI official also called for arranging a visit to the Kingdom by a Danish economic delegation to have a firsthand look at available opportunities and establishing joint investment and commercial partnerships.

They also expressed their desire to promote business opportunities and partnerships and to increase the commercial trade balance, which stood at $183 million last year.

AMMAN — Industry, Trade and Supply Minister Maha Ali on Tuesday said the government took a set of measures to stimulate different economic sectors, enhance their competitiveness and improve the business environment to face challenges, especially those resulting from regional instability. Ali stressed during a meeting with president and members of the Iraqi Business Council that the government will remove hindrances facing investors.

Ali valued Iraqi investments in Jordan and indicated that the government is following up with the Iraqi side to reopen border crossings as soon as possible to facilitate the entrance of Jordanian exports that was damaged a lot as a result of the Treibeel border crossing's closure. She said specialised government entities were working in coordination with commissions representing the private sector to resolve any obstacles facing investment projects in different fields.

The minister said the government is also working on diversifying energy resources and shifting to renewable ones to use in the industrial and other sectors in order to reduce production costs. The president and members of the Iraqi council spoke about some problems facing their investment projects which the ministry will be following up on them with concerned institutions.

WASHINGTON — President Barack Obama on Monday signed into law a bipartisan budget bill that avoids a catastrophic US default and puts off the next round of fighting over federal spending and debt until after next year's presidential and congressional elections in November.

Obama praised the rare bipartisan cooperation behind the deal, saying that two-year agreement puts the government on a responsible path.

"It should finally free us from the cycle of shutdown threats and last-minute fixes and allows us to, therefore, plan for the future," Obama said in brief remarks as he signed the bill.

Tuesday was the deadline for averting a default on US financial obligations by raising the debt limit.

The Senate gave final approval to the House-passed bill late last week and sent it to Obama. He signed it in the Oval Office, shortly before departing on a day trip to New Jersey and New York.

The legislation raises the limit on the government's debt through March 2017, pushing reconsideration of what in recent years has become a contentious issue until after the elections for the White House and Congress in November 2016.

The measure also sets federal spending through the 2016 and 2017 fiscal years, and eases strict caps on spending by providing an additional $80 billion, split evenly between military and domestic programmes.

The appropriations committees must write legislation to reflect the spending and they face a December 11 deadline to finish the work.

Negotiations over the budget, which began weeks ago, wrapped up quickly last week as Republican Representatve Paul Ryan prepared to become the new House speaker.

Obama negotiated the agreement with Republican and Democratic congressional leaders who were intent on steering the institution away from brinkmanship and government shutdown threats that have haunted lawmakers for years. 

Republican Representatve John Boehner of Ohio, who stepped down both as speaker and from his seat in Congress at the end of last week, said he felt a sense of urgency to reach a deal before turning the gavel over to Ryan. 

Other lawmakers wanted the issue taken off the table as they look ahead to next fall's elections.

Obama called the deal "a signal of how Washington should work" and urged lawmakers to keep up the collaboration.

"My hope is now that they build on this agreement with spending bills that also invest in America's priorities — without getting sidetracked by a whole bunch of ideological issues that have nothing to do with the budget," he said.

The $80 billion in additional spending is paid for with a mix of spending cuts and revenue increases touching areas from tax compliance to spectrum auctions.

The deal would also avert a looming shortfall in the Social Security disability trust fund that threatened to slash benefits, and head off an unprecedented increase in Medicare premiums for outpatient care for about 15 million beneficiaries.

The plan will lift caps on the appropriated spending passed by Congress each year by $50 billion in 2016 and $30 billion in 2017, evenly divided between defense and domestic programmes. Another approximate $16 billion would come each year in the form of inflated war spending, evenly split between the defence and state departments.

Separately, the Congressional Budget Office (CBO) said last month that the US budget deal would reduce deficits by nearly $80 billion over 10 years due to increases in revenues and lower expenditures on healthcare, pension guarantees and Social Security.

The legislation, which would ease automatic spending caps to increase discretionary spending by $80 billion over the next two fiscal years, would produce larger savings in later years, according to the analysis by the CBO, Congress' nonpartisan referee agency on fiscal matters.

The budget plan would show a net deficit increase of $4.6 billion in fiscal 2016 and $53 million in fiscal 2017. But this swings to annual deficit reductions of $4.9 billion to $9 billion between fiscal 2018 and fiscal 2025.

The deal would add $32.3 billion in revenues over the 10-year period, chiefly from tax compliance, health care and pension provisions, while reducing estimated outlays by $47.6 billion.

AMMAN — Indian Ambassador to Jordan Anil Trigunayat on Monday said he will invite businesspeople and several private sector institutions for a special meeting next week to prepare for holding the first Jordanian-Indian Forum at the start of 2016, the Jordan News Agency, Petra, reported.

Trigunayat made his remarks during a meeting with board members of the  Jordan Businessmen Association (JBA) to make an economic work programme between his embassy and the association, enhancing the results of  India president's visit to Jordan last month.

The ambassador said the forum will be an important chance to discuss joint projects between Jordanian and Indian businesspeople. He added that the discussions come in light of the Indian government's allocation a $100 million private fund through the Export-Import Bank of India to support and encourage exports for joint bilateral projects implemented in the Kingdom or India.

JBA President Hamdi Tabaa stressed the importance of true partnerships between businesspeople of both countries in light of investment incentives announced by Prime Minister Abdullah Ensour on Saturday, especially in the field of IT, noting that the association is ready to offer all facilitations for the success of the Jordanian-Indian forum, Petra reported.

AMMAN — The Arab Potash Company (APC) generated around JD96 million net after-tax profit during the first nine months of this year. The amount was 37 per cent higher than the JD69.7 million posted during the same period of 2014, when, the Jordan News Agency, Petra, reported.

APC Chairman Jamal Sarayrah attributed the noticeable improvement in operational costs to production efficiency and cost management. Combined with higher international prices of potash, APC's profit margin went up from 23 per cent in 2014 to 40 per cent in 2015 despite a drop in sales and earnings,

Sarayrah told Petra. He noted that income tax increased to JD22.4 million during the January-September 2015 period, compared to JD8.7 million during the same period of 2014.

Mining revenues at the end of the end of September 2015 were double those the company paid during the same period of 2014, registering JD17 million from JD8.5 million, Sarayrah pointed out.

The company's board of directors agreed to increase allocations for social responsibility programmes from JD7.5 million to JD10 million, the chairman told Petra.

AMMAN — The entrepreneurship spirit in Jordan seems more accommodating than in other countries of the region, according to a Swedish investor.

Lars Rennerfelt, president of the Swedish Jordanian Chemicals Company (SJCC), told The Jordan Times in an interview last week that aversion to risk is high in the Middle East and people shun long-term investments.

"As an entrepreneur, a person should have patience and tolerance because it takes time to be able to receive a return on an investment," he said.

Rennerfelt added that he had been looking for an opening in the region for quite some time before finding a Jordanian entrepreneur who shared his passion for a chemical project.

The SJCC president is injecting capital and providing financing, as well as technical expertise, into a project that is expected to boost the country's capabilities and tout the chemical industry in the Kingdom.

Partnering with Hazem Ishaqat, a Jordanian entrepreneur, the two chemical engineers are currently setting up a $3 million capital factory in Mafraq's King Hussein Bin Talal Development Area. 

The factory, to be built on six dunums of land, will produce ferric chloride, a chemical product used for water purification; it will have an output capacity of around 30,000 tonnes annually.

Ishaqat said the product will be sold locally at a competitive price that compares to the cost of imported ferric chloride used now in Jordan. He stressed, in this regard, the SJCC's advantages in terms of quality, and method of transportation and delivery.

Rennerfelt said the project enjoys developed production, efficiency and flexibility, adding that it will make "tap water a more reliable source for drinking".

With over 25 years of experience as an entrepreneur, he built factories in Sweden, Norway, Germany and Belgium based on proprietary technology, which has also been licensed out to manufacturers in Austria and Saudi Arabia.

Asked why he selected the Middle East to expand his investment and operations, Rennerfelt said that water scarcity makes it imperative for the region to look for options to preserve this vital resource through recycling and better waste water treatment.

According to the Swedish investor, the domestic and regional clients who might be willing to buy the locally produced ferric chloride include waste water treatment plants, desalination projects and other enterprises that require purification techniques. 

He explained that ferric chloride was a chemical substance known for quite a long time; it is now more effective in waste water treatment with higher efficiency and better qualities.

The process entails quicker and improved methods of coagulation and flocculation, he elaborated.

Ishaqat pointed out that some local industries, like steel and fertilisers, will be having an input in SJCC's operations.

The partners valued the support extended by the officials at the Investment Commission and at  King Hussein Bin Talal Development Area who facilitated the process for moving ahead with the project which is expected to start production in August 2016 employing around 20 workers from the Mafraq community.