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Jordanian company seeks new legal form outside stock exchange

By Samir Ghawi - Jun 20,2015 - Last updated at Jun 20,2015

AMMAN — It is customary for different kinds of businesses to become public shareholding companies, but Al-Ekbal Printing & Packaging Co. is the first Jordanian entity seeking the other way.

As unanimously approved by shareholders during a recent extraordinary general assembly meeting, Al-Ekbal is now awaiting a government decision regarding its request to delist from the Amman Stock Exchange and become a limited liability company.

According to a knowledgeable source at the company, Al-Ekbal submitted all the documents required for the shift in legal status along with supportive justification to the authorities concerned.

“We are now waiting for a government ‘yes or no’ answer to our demand,” the source said, adding that the authorities need not justify their decision. He would not predict the outcome.

Legal government officials’ deliberations, conducted carefully and in confidentiality, may take some time because the decision could be a precedent that others may choose to copy.

Al-Ekbal, whose plant in Amman’s Naur suburb employs 123 workers, is the first company requesting to shift from a public shareholding to a limited liability status, according to the source.

Asked to elaborate on the motives behind seeking a limited liability company status, he mentioned ownership, share trading, financial costs, openness and extensive exposure of dealings that do not apply to competitors in the same line of business.

He explained that because the investors in the company were primarily Mayr-Meinhof Packaging International Gmbh (34.6 per cent), Mayr-Meinhof Packaging Austria (29.5 per cent) and Neupack Gesellschaft (20 per cent), the number of shareholders was limited and, as such, the share trading on Amman Bourse was occasional.

He also noted that expenses associated with the public shareholding status were large and do not commensurate with the company’s size in terms of ownership, business volume and market conditions.

In the company’s 20th annual report covering the year 2014, the board of directors described local and regional competition as strong that it may pressure prices and profit margins.

The board of directors attributed the competition to the high production capacity available in the region and the size of the market which was negatively affected by the security situation in neighbouring countries.  

But, the board of directors assured shareholders that the company possesses a big share of the local market and continues to expand domestically and regionally.

The annual report listed four risks that Al-Ekbal Printing & Packaging Co., faced during 2014 and might face in the future.

Insecurity and political instability in the region topped the list of risks as it negatively affected the demand for the company’s products especially in the Iraqi, Yemeni and Syrian markets.

The fluctuation in the euro’s exchange rate against the Jordanian dinar was the second risk as it negatively affected the company in the past and continues to influence it until now.

The third risk mentioned in the report was local tax modifications on tobacco and cigarettes as they may negatively impact the levels of cigarette consumption and production, and consequently the sales of the company.

Because a high percentage of sales is achieved in export markets, Al-Ekbal said that any changes in trade laws and regulations or changes in customs within the Arab League may affect its sales and profits.

The board of directors also listed four achievements accomplished last year, the first of which was the selection of Al-Ekbal as a qualified supplier for international tobacco and cigarette companies operating domestically and abroad.

The second success was the increase in production capacity in post-printing stages through the addition of a new gluing line for various products of high technical specifications besides the types that are currently produced.

Another accomplishment was building a new 900 square metres warehouse to stockpile raw materials, a step aimed at lowering storage costs.

Noting the success in gaining multinational producers of tobacco and cigarettes,  among new international clients in various sectors of packing and packaging, the company plans to push for entering new export markets.

At present, most of the exports go to Saudi Arabia, Yemen, Sudan, United Arab Emirates, and Qatar. 

A foreword written by Board Chairman Armin Hessenburger in the annual report showed that exports declined last year by 27 per cent to JD1 million from JD2.6 million in 2013.

But the company was able to compensate the drop in exports from local sales which rose by 9.2 per cent to 9.3 million from JD8.5 million in 2013. Overall sales hovered around JD11.2 million in both years.  

Moreover, Al-Ekbal generated a JD0.42 million net after-tax profit, 14.5 per cent higher than the JD0.36 million in 2013 taking into consideration that the gross profit was around JD1.5 million in both years.

Capitalised at JD5 million, the capital investment of the company at the end of last year was JD11.1 million.

When the company was established in 1994, its capital was registered at JD8 million but shareholders unanimously decided in 2006 to lower the capital to JD5 million because it was more than it is needed.

The subsidiary, Ekbal Company for Logistics and Paper Trade, was removed last year from the records of the Department of Companies Comptroller following a decision from the board of directors to liquidate the entity.

Financially, total assets as of March 31, 2015, amounted to JD10.6 million, JD4.2 million of which were in property, buildings and machinery. The remaining JD6.4 million were equally divided between inventory and receivables.

Shareholders equity includes JD1.4 million of retained earnings, JD1.1 million  of mandatory and voluntary reserves, besides the JD5 million capital.

Out of JD3.1 million in total liabilities, JD0.7 million are bank debts and JD0.9 million are commercial payables.

During the first quarter of this year, Al-Ekbal’s sales, gross profit and net pretax profit dropped to JD2.5 million, JD0.3 million and JD0.1 million respectively from JD2.9 million, JD0.4 million and JD0.2 million.

 

As authorised by the shareholders at the end of March 2015, the company is distributing JD0.4 million in cash dividends at a rate of 8 per cent.

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