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Despite rosy picture parent eyes seperation

March 20, 2017
A potential disposal would offer Linde Pakistan more flexibility in the market, independent from the Linde Group — Ashraf Bawany, CEO, Linde Pakistan
A potential disposal would offer Linde Pakistan more flexibility in the market, independent from the Linde Group — Ashraf Bawany, CEO, Linde Pakistan

Veterans still have fond memories of Pakistan Oxygen Limited. The company was listed at the stock exchange in 1958 with its shares divided between the BOC Group of UK (60pc) and the general public (40pc). With no change in pattern of holdings, Pakistan Oxygen Limited was renamed as BOC Pakistan in 1995.

BOC and Linde AG, Germany merged in 2006 to form The Linde Group, which went on to re-brand BOC Pakistan as Linde Pakistan on Sep 19, 2011. Never having seen a bad year in its history, the company, by whatever name, has continued to make its fortune which it has generously shared with the investing public.

Linde Pakistan produces and distributes industrial, medical and specialty gases as well as welding products. It also provides a range of related services including installation of on-site plants, gas equipment, pipelines and associated engineering services.


Investors were curious: was the divestment by Linde AG, Pakistan-specific?


The company’s outstanding service is the provision of life-saving oxygen to millions of patients on a daily basis across Pakistan.

On Sept 30, 2016, total assets of the company stood at Rs4.8bn, while the company held Rs1.5bn in reserves, almost six times the paid-up capital of Rs250m.

With the balance sheet showing such a healthy picture, it came as a bolt from the blue — for both investors and sector watchers — when Linde AG announced late last year that it intends to sell its controlling 60pc stock and quit the country.

Alarmed investors were curious: Was the divestment by Linde AG, Pakistan-specific?

Muhammad Ashraf Bawany, the company CEO and MD tells Dawn: “The Linde Group is undergoing a global refinement of its operating model, kicked-off by the Executive Board in 2015. Part of this refinement is also the evaluation of potential divestment opportunities. Therefore, BOC Group (Linde AG) is evaluating a potential divestment of its shares in Linde Pakistan”.

He affirmed that currently, Linde was in the preliminary evaluation stages and had not entered into any binding agreement or arrangement for the divestment of shares in Linde Pakistan.

“It is in the group’s interest to find the best possible future owner for Linde Pakistan, taking into account the overall value proposition for Linde as well as the future of Linde Pakistan’s management and the employees”, said Mr Bawany, adding that a potential disposal would offer Linde Pakistan more flexibility in the market, independent from the Linde Group.

The possible contenders to acquire the stake have already started to sharpen their tools.

Abraaj Investment Management Limited and ICI Pakistan Limited have notified the Pakistan Stock Exchange of their interest in acquiring the 15m or 60pc controlling shares held by Linde AG and its nominees.

Among other contenders is Metro Securities (Pvt) Limited which said late last month that the firm — and/or persons acting in concert — intends to buy the shares on offer.

A consortium of four companies comprising Al Karam Textiles Mills (Pvt) Limited, Soorty Enterprises (Pvt) Limited, Hilton Pharma (Pvt) Limited and Adira Capital Holding (Pvt) Limited is also interested to try its luck at a possible bidding, whenever that takes place.

In the just-concluded winter results reporting season, Linde Pakistan announced financial figures for the year ended Dec 31, 2016 clocking in profit after tax (PAT) at Rs217m and recording growth of 54pc over PAT at Rs141m the previous year.

Net sales rose to Rs3.95bn from Rs3.91bn while operating profit before other income increased 21pc to Rs399m from Rs331m.

On query, the company CEO confirmed that industrial gases like oxygen, nitrogen, argon and carbon dioxide were the main contributors to revenue and profit along with medical gases such as medical oxygen, carbon dioxide, nitrous oxide; and hard goods including welding electrodes and gas arc equipment.

Are there many competitors of Linde Pakistan in the market?

“There are many local competitors”, Mr Bawany responded. Yet he stressed that the key market differentiator was the range of products that Linde Pakistan offered and the company’s ability to provide turnkey solutions — from product supply to engineering services (hardware installation) and safety training.

“In addition, our best operating practice to ensure product quality, supply reliability and high safety standards gives us an added advantage in the market place”, he said.

With regard to the board of director’s preference of retention of profit or distribution of dividend, Mr Bawany observed that the board believed in making a balance of the two depending on cash flow requirements and projections.

In the report for the quarter ended Oct 31 last year, directors were confident that going forward, Pakistan’s economy would expand as a result of the China Pakistan Economic Corridor projects, which in turn were expected to improve industrial activity — especially construction and power generation — and as a consequence rising demand for allied services.

Published in Dawn, Business & Finance weekly, March 20th, 2017