Business

AMMAN — The Council of Ministers on Wednesday approved in principle changing the Amman Stock Exchange (ASE) into a public shareholding company.

The committee tasked with considering the change had studied the economic and technical benefits in light of ASE's current status and the challenges it is facing.

The committee also considered ASE's relations with its partners and the expected opportunities which can be realised from the change.

LONDON — Retrenching and cost-cutting European investment banks are on course to lose market share to their bigger US rivals for the 10th straight year in 2015, a startling retreat that leaves the continent in danger of having no global champion.

The top dozen European investment banks have taken just 20.7 per cent of global investment banking fees so far this year, down almost a third from a peak of 29 per cent in 2003, according to Thomson Reuters data. Their share has fallen every year since 2005.

The top eight US banks, meanwhile, had 35.7 per cent of the market so far this year, their highest since 2007, although still below their 44.3 per cent peak in 2001 before boutique firms began absorbing a larger share of mergers deal revenue.

The Thomson Reuters data covers bond underwriting, equity underwriting, loans and merger and acquisition income, but not trading income.

For some European banks, like UBS, cutting back in investment banking could be a good sign: They are reducing a business where profitability was weak to focus on areas where they have expertise, like wealth management. 

But others, like Deutsche Bank, may face tougher questions: if investment banking is not their strength, what is?

The shrinking European banks are putting more focus on profitability than in the past, which investors and analysts said was welcome, but there is unease about whether other businesses will be hurt by the smaller scale.

"If they are making better use of their capital it's got to be a good thing. But for anybody who believes in critical mass and the importance of scale then it's a bad thing, especially when you start to withdraw from the biggest market in the world," said Chris Wheeler, analyst at Atlantic Equities in London.

After years of chasing revenues around the world, investment banks, especially Europe's, are cutting offices and products due to tougher rules and capital regulations.

"There was this whole dream to be global masters of the universe, flow monsters — but is it really relevant to be global?" said one senior investment banker, who asked not to be identified to avoid appearing to comment on behalf of his firm.

"Being global is brainwashing... The environment has changed, those who resisted most are having to do it now in pain. You have to trade growth for higher profitability," he added.

Investors now perceive running a global investment bank as "too complex to manage, too risky and too expensive", he indicated.

HSBC, Europe's biggest bank, became the latest last week to scale back global investment banking ambitions, with plans to shrink the division by a third to boost profitability.

Tellingly, it said 70 per cent of its revenues were made in markets where it held a top five position.

New bosses at Deutsche Bank and Credit Suisse are also expected to cut back hard. Barclays, UBS and Royal Bank of Scotland already have.

The top positions for fees have long been dominated by the big five US banks — JPMorgan, Bank of America Merrill Lynch, Goldman Sachs, Morgan Stanley and Citigroup. From Europe, Only Credit Suisse and UBS have briefly broken into the top five since the turn of the century.

Investment banking fees are not the only area where Europe is losing ground. US banks have also increased their share in equities trading. 

In fixed income, currencies and commodities they have grabbed about 7 percentage points of market share from European rivals since 2010, led by gains by JPMorgan and Citi, Wheeler estimated.

US banks' return on equity is lower than before the crisis, but at 12 per cent is still almost three times higher than in Europe, according to consulting firm EY.

Mind the revenue gap

The twin challenge for Europe's banks is to make their investment banks profitable and make up for any revenue shortfall in other areas.

Deutsche Bank under new Chief Executive Officer John Cryan potentially faces the biggest challenge. The bank has ranked 6-8th in investment banking fees in the last decade, leaving it as Europe's last challenger as a top tier global firm after Barclays' retreat.

But with a return on equity of just 2.7 per cent last year and shares trading at barely half of their book value, investors are growing impatient.

Cryan has limited options to fall back on, as German retail banking is an unattractive market and Deutsche is not a powerhouse in wealth management.

By contrast, UBS' big retreat from fixed income trading in 2012, and a tumble to 12th position in investment banking fees this year from 5th in 2008, allowed it to fall back on its core wealth management strength. 

Its shares have rallied 75 per cent since its shift and trade at a 40 per cent premium to book value, one of the highest bank valuations.

Bankers said the industry is likely to remain in flux for several years, although the declining trend in Europe appears well defined and unlikely to reverse soon.

"The question people are still asking is what is the impact of stepping back on other businesses. Does stepping back [in fixed income] impact mergers and acquisitions or equities or the investing clients?" Wheeler said.

AMMAN — Quarterly and annual financial statements show an upward trajectory at Jordan Dairy Company.

According to an interim summary of the consolidated income statement as of March 31, 2015, Jordan Dairy generated JD0.4 million pretax profit, double the JD0.2 million recorded at the end of March 2014.

At the end of 2014, net profit was JD1.3 million, rising from JD1.1 million in 2013, JD0.7 million in 2012 and JD0.3 million in 2011. 

The income statement covering the first quarter of this year, indicated that net sales rose to JD4.2 million from JD4  million in the first quarter of last year.

Total sales at the end of 2014 were JD17.1 million, rising from JD16.4 million in 2013, and JD14.5 million, JD11.5 million, and JD10.6 million in the preceding years.

With production costs slightly higher, gross profit during the first three months of this year came at JD0.9 million, compared to JD0.7 million during the January-March period of 2014.

The gross profit was derived about equally from two operations run by Jordan Dairy, the first  being the production and distribution of fresh milk and milk products, including pasteurised milk and white cheese, in addition to the manufacture of plastic bottles for the company’s purpose. 

This function is carried out at factories located in Russeifa area. 

The second activity is raising and fattening livestock at a farm in Mafraq, through the subsidiary Al Maha for Agriculture and Animals Investments Company.

Assets of the overall business, including investment activity but excluding cash and quasi cash, totalled JD10.6 million at the end of March 2015, with the industrial  share at JD5.2 million, followed by farming at JD4.5 million.

Current assets amounted to JD6.4 million, of which JD0.9 million were cash and cash equivalent, JD1.8 million net receivables, and JD1.5 million net inventory.  

Capitalised at JD4 million, the company's JD9.2 million net shareholders equity included JD2.4 million retained earnings, JD1.2 million mandatory reserve, and JD1.3 million issuance premium.

According to the 2014 annual report, the company does not have export markets and relies on the domestic outlets for its local sales which are channelled via mega- stores, groceries and government tenders.

Jordan Dairy estimated its market share at 10-12 per cent of the overall sales by companies that were in the same line of business.

Chairman Ahmad Mufleh Al Horani commended the accomplishments that were achieved despite the rise in electricity charges and some production inputs and the inability to raise prices due to the limited local market and tough competition.

Horani, who owns a 75.7 per cent stake in Jordan Dairy, said the company was able to surmount negative effects brought by unfavourable international conditions and regional instability that are weakening the local economy and pressuring the industrial sector with difficulties and challenges.

Listing key plans for future development,  the annual report mentioned the installation of a modern cooling system at Jordan Dairy, upgrading production lines, and setting up a milking machine with a capacity to deal with 24 cows in order to raise the production output of the subsidiary firm.

The report showed Jordan Dairy's capital investment at JD6.2 million and indicated that the company's labour force at the end of last year comprised 265 employees.

Cash dividends to shareholders for the year 2014 amounted to JD0.6 million, at a rate of 15 per cent.

For 2013, the company distributed JD0.4 million in cash dividends to shareholders, at a rate of 10 per cent.

AMMAN — Jordan's commerce and industry chiefs recently sought enhanced relations with the Netherlands. 

During meetings in Amsterdam with represintatives of Rotterdam chambers of commerce and industry, Amman Chamber of Commerce (ACC) President Issa Murad and Amman Chamber of Industry (ACI) President Ziad Homsi discussed ways to enhance commercial and investment ties.

The talks addressed many issues of mutual interest that highlighted the significance for ACC and ACI to sign cooperation agreements with their Dutch peers, especially that Netherland's chambers have more than 1 million members.

The Kingdom's exports to the Netherlands in 2014 stood at JD16 million, compared to JD194 million worth of Dutch exports to Jordan in the same year, according to Murad.

Murad stressed the Jordanian private sector's keenness to enhance economic and investment cooperation, especially in terms of attracting more Dutch investments to the Kingdom in the sectors of tourism and renewable and alternative energy. 

He also noted that there are many Dutch companies that run investments in Jordan in different sectors such as construction, transport, fruits and vegetables.

Homsi reiterated the importance of enhancing bilateral economic ties and increasing Jordanian exports to the Netherlands, noting that there are many local high-quality products that are exported to Europe.

He also called for establishing joint investments between the private sectors in both countries, especially at the industrial sector, highlighting the Kingdom's investment characteristics due to the availability of modern laws that support the business environment. 

AMMAN –– Jordan will soon launch its first sovereign issue of Islamic bonds, sukuk, to finance real estate projects, Finance Minister Umayya Toukan said Monday. 

Toukan, speaking at a meeting for Prime Minister Abdullah Ensour with chief editors of daily newspapers and economic journalists, did not give details on the size of the planned Islamic Sharia-compliant issuance, but informed sources indicated that the sovereign sukuk could raise around JD400 million. 

The source said the government may enter the Islamic financial market in the coming few weeks, adding that Islamic banks in Jordan enjoy liquidity in excess of JD1.4 billion. 

Tapping the sukuk market by the government, the source said, would also encourage more corporate sukuk issues. 

Jordan's only private sector sukuk issuance was issued by Al Rajhi Cement for JD85 million in 2011. 

In 2012,  Parliament passed the Islamic Finance Sukuk Law to allow both public and private entities to issue Islamic bonds in dinars and in foreign currencies. 

In April of this year, the government chose the Islamic Corporation for the Development of the Private Sector, an arm of the Jeddah-based Islamic Development Bank, to support the country's debut for the planned domestic sukuk offering. 

The sukuk issuance will be a dinar-dominated offering. 

PARIS — After the marketing triumphs of recent years, manufacturing moved into the spotlight on the opening day of the Paris Air Show on Monday as plane makers Airbus and Boeing battle to deliver a record $1.8 trillion backlog of orders.

There was still the traditional burst of multi-billion-dollar deals in the first few hours of the aerospace industry's annual jamboree, with fast-growing Middle Eastern and Asian airlines again leading the buying.

But the sums involved were smaller than in previous years, and both plane makers and their suppliers were at pains to tell airlines they were focused on stepping up production to meet the 12,000 or so orders already stacked up for the coming decade.

Reassurance also came from Airbus as its A400M military plane made a tour of the skies following a crash last month, while a stretched version of Boeing's 787 Dreamliner delivered the wow-factor promised by its pre-show hype.

GE Aviation, whose CFM International venture with France's Safran builds engines for both Airbus and Boeing, highlighted the manufacturing challenges ahead, at a time when the plane makers are starting to look at further increases in output on top of existing plans.

CEO David Joyce said the venture already faced a steep increase in production for its LEAP engine from 40 in the first year to 600 in the second and 1,200 in year three.

"We need to prove to ourselves that we can go from 40 to 600 to 1,200, and while we do that we will learn more about our capacity as well as our efficiency," he added. "There is no conflict with the airplane companies. Our job is to make sure that when they ask for a rate, and we say 'yes', that we deliver." 

Raising forecasts

While blockbuster plane deals may be becoming more scarce, there is still plenty of demand for new aircraft, particularly from Asia and the Middle East, driven by robust local economies, low interest rates and new fuel-efficient jets.

Airbus on Monday raised its 20-year forecast for jet demand by nearly 4 per cent to 32,600. That broadly echoed Boeing's assessment of the market last week.

Unlike Boeing, Airbus sounded upbeat about prospects for four-engined superjumbos, including its A380, the world's biggest passenger plane, which has so far failed to live up to sales expectations.

"Very large aircraft are required over the next 20 years, we can't just increase efficiency," Airbus sales chief John Leahy told a news conference, pointing to airport congestion as a reason to use larger planes.

In a bid to revive interest in the A380, Airbus is in talks with customers about possibly putting new engines on the jet or making a version with about 50 more seats.

Boeing, meanwhile, said on the eve of the Air Show it was exploring a potential market of more than 1,000 jets in a niche between its single-aisle 737 and wide-body 787, but had not decided whether to invest in a new plane.

Among Monday's deals, Airbus signed up Saudi Arabian Airlines as the launch customer for its new A330-300 Regional aircraft, with the carrier committing to 20 of the planes as well as 30 A320neo jets in a deal worth about $8.2 billion at list prices.

The agreement comes after French President Francois Hollande met the head of the airline in May during a Gulf Arab leaders summit in Saudi Arabia.

France, deemed to have the toughest stance among the six world powers negotiating with Iran over its nuclear programme, has been able to nurture new commercial links with the region in the face of what some Gulf countries perceive as disengagement on the part of traditional ally the United States.

Airbus also said Garuda Indonesia signed a letter of intent to buy 30 A350 XWB jets, potentially worth around $9 billion at list prices.

The same airline, meanwhile, committed to buy up to 30 of Boeing's 787-9 Dreamliners and 30 737 MAX 8 jets in a deal that could be worth about $10.9 billion.

The US group also said Qatar Airways had ordered 10 of its 777-8X jets and four 777 freighters, valued at a total of $4.8 billion at list prices, while GE Capital Aviation Services ordered 60 Airbus A320neo aircraft valued at around $6.4 billion.

Heading into the Air Show, Airbus had a lead over Boeing in plane orders this year, with 247 versus Boeing's 175.

VIENNA — A recent announcement by the Organisation of Petroleum Exporting Countries (OPEC) that it is keeping crude output levels unchanged again, despite a collapse in oil prices, reflects the growing influence of booming US shale but analysts say the group is still the dominant player.

The 12-nation OPEC switched its production strategy in November in order to push down prices and hurt high-cost US shale producers, who need elevated prices to make their operations profitable.

OPEC ditched its traditional role of supporting higher prices to boost revenues, and instead left its output ceiling unchanged at 30 million barrels per day (mbpd), despite the collapsing oil market and a stubborn global supply glut that is fuelled partly by US shale.

The policy was extended earlier this month when the group of producers from Africa, Latin America and the Middle East decided to leave the taps open, sparking questions from some quarters about the increasing influence of US shale on the oil market.

OPEC's dozen members pump a third of the world's crude oil.

"OPEC members continue to play a key role in the current conditions of the oil market," said senior energy analyst Myrto Sokou at the Sucden brokerage in London.

"We cannot necessarily say that OPEC is losing its price influence on oil prices to the US shale production. OPEC still has very significant influence over the current crude oil prices," he added.

"However, the US shale oil production continued to increase strongly during the last few months and it is definitely something we need to keep an eye on in the near term," Sokou continued.

The United States has significantly ramped up its production of oil extracted from hard-to-reach shale, or sedimentary rock, now producing 5.0 mbpd, making the country far less dependent on imports from the crude-rich Middle East.

But Capital Economics commodities analyst Thomas Pugh also downplayed talk that the US shale boom could weaken OPEC's standing.

"I don't think it's fair to say that OPEC is losing influence to the United States," Pugh told AFP.

"Production in the two regions is managed very differently. OPEC can take strategic decisions to manage output to manipulate prices, whereas US production is controlled by hundreds of small firms who manage production based on market conditions," he indicated.

He added: "Obviously OPEC as a group still controls a much larger share of the market than the US, but if the US could act as one oil producer, in the same way that the Gulf states do, it would make it significantly more powerful."

Fawad Razaqzada, technical analyst at trading website FOREX.com, conceded that the group was less powerful than it used to be, due in part to strong oil output in non-OPEC member Russia, but it still remained a "dominant force".

"OPEC is clearly in defence mode as it tries to maintain market share by pumping more oil than is needed," Razaqzada said. "The group is losing some influence to the US shale oil market and to a lesser degree Russia, but it still remains a dominant force, just not as powerful as before."

Over the past five years, the United States has enjoyed a shale oil and gas boom, revolutionising the global energy sector but adding to the global glut that has plagued the market.

That boom caught OPEC ministers by surprise, Iraq's Oil Minister Adel Abdul Mahdi admitted in Vienna.

"We were two years late on evaluating shale oil, that's why it came almost as a shock," Abdel Mahdi told reporters. "It should not have been a shock given that we knew they were working on [extracting] shale oil. Now this is the reality and we have to take it into consideration."

In recent years, OPEC has shrugged off talk that the US shale energy revolution would weaken the influence of the group but ministers changed tack this month, arguing that it was a phenomenon that was to be welcomed as part of the global energy landscape.

Plagued by demand worries and oversupply, the oil market collapsed 60 per cent between June 2014, when West Texas Intermediate (WTI) crude stood at about $106 per barrel, and late January, when it hit a six-year low of under $45.

Prices have since recovered, but only to around $60, but analysts argue shale oil exploration is still profitable at this level.

"It has been a remarkable revolution in the United States," said Chevron Chief Executive John Watson last month.

"We are producing close to 5 million barrels per day that no one expected, and shale oil will be a balancing mechanism to some degree over the next few years," he added.

AMMAN — Talal Abu Ghazaleh Group International (TAGI) and the UNDP on Sunday launched the "Partnership forum between the UN and the business sector" during a meeting held at the Talal Abu-Ghazaleh Knowledge Forum.

The partnership forum aims at having a comprehensive, sustainable economy that presents services to citizens and societies through businesspeople in cooperation with the public sector, according to a TAGI statement.

Talal Abu Ghazaleh said the establishment of the forum is a joint initiative between TAGI and the UN to enhance human development.

Edward Kallon, UN Resident and Humanitarian Coordinator in Jordan, said the forum was launched at the right time especially that the World Economic Forum stressed the importance of the public-private sectors partnership.

UNDP Country Director Zena Ali Ahmad reviewed the scopes of cooperation between the two sectors through the forum, which will be open for business companies, associations, and chambers of trade and commerce to join it.

AMMAN — Investment Commission (IC) President Muntaser Oqlah on Saturday called on Dutch businesspeople and investors to benefit from the investment opportunities Jordan offers.

At a meeting with a Dutch delegation representing the foreign and economy ministries, Oqlah said the next phase will include a new strategy for investment and business environment, stressing the IC's readiness to support Dutch investors willing to establish projects in the Kingdom.

Amman Chamber of Commerce President Issa Murad stressed the importance of joining Jordanian-Dutch efforts to find new joint markets, noting that there are many Dutch companies in Jordan and that such partnerships can help both countries enter new non-traditional markets, according to an IC statement.

The Dutch delegates expressed interest in developing economic, commercial and investment relations with the Kingdom, through encouraging their companies to establish projects in Jordan.

AMMAN — Earnings generated by the Arab International Food Factories and Investment Company amounted to JD790 during the first quarter of this year.

During the first quarter of last year, the company generated JD300.

In both periods,  the firm's losses came at JD0.4 million after accounting for administrative and general expenses, benefits to employees, and depreciation. 

These figures, seemingly strange and dismal, are not really reflective of the company's strength, broadness and scope of business.

According to the 20th annual report, Arab International Food Factories and Investment Company achieved JD2 million net profit last year, 53.8 per cent higher than the JD1.3 million posted in 2013.

The board of directors mentioned in the annual report, disclosed to the Jordan Securities Commission, that the main objective of Arab International Food Factories and Investment is producing baby food and investment, but the company is now concentrating its business only on investment.

Reflecting this concentration, the report showed that only three employees work at the company whose capital investment as of December 31, 2014 stood at JD252,628.

"As the company has no activity other than investment in shares, it is very difficult to specify its competitive situation in this sector," the report said.

"The firm's activity is also limited to the local market and does not have any functions outside Jordan," it added.

Chairman Abdullah Abu Khadija, who owns a 27.9 per cent stake in the company, wrote in the report's  foreword that 2014 was a good year for the company as the noticeable increase in earnings, compared to 2013, reflected positively on the profit.

The report also listed Abu Khadijeh as chairman of  the Arab International Company for Education and Investment, which is among the major shareholders in the Arab International Food Factories and Investment with a 46 per cent stake.

He expressed hope that the profit would be raised in 2015 in order to enhance the firm's financial position.   

The report showed that the company's profits rose steadily from JD0.5 million in 2010 to JD1 million in 2011 and then to JD1.2 million in 2012.

Shareholders also benefited from cash dividends as they received JD1.3 million each year in 2014 and 2013 at a rate of 12 per cent.

In preceding years, shareholders received JD0.7 million in cash dividends at a rate of 7 per cent, JD0.8 million at a rate of 8 per cent; and JD1 million at a rate of 10 per cent.

According to the balance sheet at the end of last year, the financial assets at fair value amounted to JD35.1 million and investments in affiliated companies totalled JD0.5 million out of JD36 million in total assets.

Of the JD35.1 million, JD33.8 million is the fair value of shares listed on the Amman Bourse and JD1.3 million are investments in non-listed shares of limited liability companies.

At the end of the previous year, financial assets at fair value amounted to JD29.4 million and investments in affiliated companies totalled JD0.4 million out of JD30.1 million in total assets.

Net value of property and equipment was JD0.2 million in both years.

Shareholders equity comprised JD10 million capital, JD21.1 million as a reserve for the fair value of financial assets, JD3 million in retained earnings, and JD1.4 million in mandatory reserve.

According to the board of directors' report, Abdullah Abu Khadija is also chairman of Ibn Al Hayatham Hospital, Al Ittihad Schools, and First Finance Company, all of which are public shareholding companies listed on the Amman Stock Exchange.

In addition, Abu Khadija heads the administration board of Al Omana'a Portfolio and Investment Company which operates as a brokerage firm at Amman Bourse.