ICI PAKISTAN LTD.

PORTFOLIO MANAGEMENT

TERM ASSIGNMENT
 A research paper for the course of
Portfolio Management

ICI Pakistan Ltd.

By

Syed Ali Ammar Rizvi – M03-MS042

Under the supervision of

Mr. SHAHZAD AWAN

JULY, 2005

Hailey College of Banking & Finance,

University of the Punjab, Lahore, Pakistan
INTRODUCTION

ICI’s vision is to be the leader in formulation science. It has, and

continues to develop, a portfolio of businesses that are major players
within their respective industries, bringing together outstanding
knowledge of customer needs with leading edge technology platforms
to provide superior products to its customers.

Through these attributes, it aims to create

superior value for ICI customers and
shareholders, without compromising its
commitment to safety, health and the
environment and the communities in which it
operates.

ICI creates, develops and markets products that make the world look
brighter, taste fresher, smell sweeter and feel smoother. Paints, foods,
fragrances, personal care. The kind of products you use every day.

The ICI Group is a renowned international

business. It employs more than 33,000 people
worldwide. Its product range is 50,000 strong. And
its over 200 manufacturing facilities are in 55
countries worldwide. In 2004 ICI’s sales touched
£5.6 bn.

The ICI Group comprises the International Businesses of National

Starch & Chemical Company, Quest International, Uniqema and ICI
Paints and as well as the Regional & Industrial Group, made up of
businesses which are more regional in their scope with principal
locations in Pakistan, India and Argentina.

ICI has consistently developed new and innovative areas of

businesses, since its formation in December 1926, by the merger of
four of the largest chemical companies in the UK. ICI today is a
collection of world-class businesses, many of them leaders in their
sectors. They are strongly led, technologically sophisticated with
healthy and sustainable long-term growth prospects.

ICI’s paints brands are some of the most successful in the world. It’s
starches and adhesives find their way into everything from foods to
building materials, and from sports shoes to medical electronics. Its
lubricants make vehicle transmission and fridges run smoothly, and
the vital ingredients in many personal and household care products
come from ICI.

ICI IN PAKISTAN

ICI Pakistan Limited is a 75.81% owned subsidiary of ICI Plc, UK. It

was set up as a public limited company in Pakistan in 1952. ICI’s
presence in this part of the world, however, predates the formation of
the public limited company and indeed, Pakistan itself. The Khewra
Soda Ash Company, a predecessor of ICI Pakistan Limited, set up a
soda ash manufacturing facility in Khewra in 1944 with a capacity of
18,000 tonnes per annum. This facility was sited next to the salt range
as rock salt and limestone; two key raw materials for manufacturing
soda ash were available here in abundance.

BUSINESSES

Today ICI Pakistan’s five businesses, Polyester, Soda Ash, Paints,

Chemicals and
Life Sciences manufacture and sell a range of industrial and consumer
products. These include, Polyester Staple Fibres, POY Chips, Light
and Dense Soda Ash, Sodium Bicarbonate, Paints for the Decorative,
Automotive, Refinish segments, for Industrial use and Projects,
Uniqema Specialty Chemicals, Polyurethanes, and Adhesives and
arranges manufacture on a toll basis of Pharmaceutical and Animal
Health products. It also markets Seeds and in addition is engaged in
trading in various specialised chemicals for use in industries in
Pakistan

In 1995 ICI Pakistan Limited set up a USD 490 million PTA

manufacturing facility at Port Qasim, near Karachi, which was
commissioned in 1998. In 2001, the business was demerged to form
Pakistan PTA Limited, a subsidiary of ICI Plc UK.

The turnover of ICI Pakistan Limited in 2004 was Rs 21.3 billion and
gross assets employed amounted to Rs 13.9 billion. It is one of the
largest quoted companies on the Karachi, Lahore and Islamabad
Stock Exchanges with a paid up share capital of Rs 1.39 billion. The
company has around 1,300 permanent employees and the same
numbers of people provide services through contractual arrangements

ICI Pakistan has a proud history of sustained investments in the

Pakistan economy in basic manufacture and as a good corporate
citizen, the company continues with its policy to serve the community
it operates in.

HISTORIC PERFORMANCE AND INVESTMENT RECORDS

ICI has maintained a presence in the subcontinent for almost a

century, with manufacturing operations in the region for more than
sixty years. Planning for the future, ICI Pakistan is strategically
investing in human, technological and most importantly, financial
resources to meet the emerging needs of a growing country. Starting
with a Soda Ash Plant, ICI Pakistan has today evolved into a company
comprising a diverse portfolio of five Businesses. Turnover was Rs
21.3 billion and gross assets employed amounted to Rs 16.3 billion for
the year ended 31 December 2004.

ICI Pakistan has been continually evaluating new business

opportunities with appropriate technologies for transfer to Pakistan .
In 1995, the Company invested US$ 490 million in setting up a Pure
Terephthalic Acid (PTA) Plant, at Port Qasim, near Karachi . In 2001,
the PTA Business was demerged from ICI Pakistan to form Pakistan
PTA Limited, a public quoted company, which is also an ICI plc
subsidiary.

ICI Pakistan has invested over Rs 35 billion in capital projects since

its first factory for the manufacture of soda ash was set up at Khewra
over 60 years ago.

Most recently, an investment of Rs 555 million was made in the Soda

Ash Plant to further enhance capacity to 225,000 tonnes per annum
through a Debottlenecking Project and to install a Distributed Control
System (DCS) to automate plant operations. These together, with the
Power Co-Generation project were successfully commissioned during
the first quarter of 2002. Earlier in 1994 a major Plant expansion was
completed at a cost of Rs 800 million and took its production capacity
to 200,000 tonnes per annum, while product diversification at the
same site with a 10,000 tonnes per annum Refined Sodium
Bicarbonate Plant (RSB) commissioned in April 1995 was achieved at
a cost of Rs 145 million. The business undertook to enhance
production of RSB by increasing its name-plate capacity to 20 ktpa
through debottlenecking / expansion project completed in 2004. In
1997, the Soda Ash Works was equipped with a 40 tonnes per hour
boiler, capable of operating on both gas and oil, at a cost of Rs 110
million, and a Computerised Maintenance Management System was
installed at a total cost of Rs 16.1 million.
At the Company's Polyester Fibres Plant at Sheikhupura, to further
expand the spinning and processing line and to increase the Polyester
Staple Fibre (PSF) capacity by 44,000 tonnes per annum, expansion
was successfully completed in 2002 through the formation of a
specific purpose Modaraba, Fayzan Manufacturing Modaraba which
runs the plant and uses the excess polymer from ICI's polymer plant
to produce polyester fibre under a toll manufacturing agreement. This
expansion has increased fibre capacity from 65.5 ktpa to 109.5 ktpa
with an investment of US$ 20.0 million

In 2004 an Asset Modernization & Improvement Project was launched

at the Plant at Sheikhupura. The project scope encompasses
modernization, upgrading and de-bottlenecking of the current
capacity to achieve an additional 10,000 tonnes per annum
production.

The project agreement was signed in December 2004 in UK with

technology suppliers Chemtex Overseas Inc. utilizing Invista (formerly
DuPont) know-how. ICI will invest US$ 16 million (Rs 1.0 bn) on de-
bottlenecking the existing Continuous Polymerisation Plant and
replacement of two of its small scale Batch Polymerisation spinning
and draw lines with a single state-of-the-art line, retaining one Batch
Polymerisation line for manufacturing specialty products for which ICI
Pakistan is currently the market leader in the domestic market. Work
on this project began in January 2005 with commercial production
targeted for Q2 2006. The Company's decision to make this
investment is evidence of ICI's ongoing commitment to business
growth in the region

Earlier in 1997 also the Company had invested US$ 100 million to
expand the Polyester Staple Fibre Plant with state-of-the-art DuPont
technology. To cater for the enhanced demand of electricity for the
expanded PSF Plant, the Company installed two additional generators
of 2MW each at a total cost of over Rs 140 million, increasing the
generating capability of the ICI Pakistan PowerGen Limited plant, a
wholly owned subsidiary of ICI Pakistan, to 14MW.

Reaffirming its pledge to provide international standard training to its

Pakistani customers, ICI Pakistan's Autocolor Paints Business opened
its state-of-the-art Autocolor Training Centre at Port Qasim near
Karachi in October 1996 on a two acre site at a cost of Rs 23.6 million.
Providing training for refinishing, this is the first of its kind from a
commercial enterprise in Pakistan . Another investment in the Paints
Business was the completion of a materials store in January 1997 at a
cost of Rs 17.8 million.
Adding diversity to the Company's Chemicals Business, which
comprises a diversified portfolio encompassing Uniqema International
(an ICI Group company) products, Polyurethanes and a Trading
Business, Polyurethanes blending unit was commissioned at Karachi
in July 1993 with an installed capacity of approximately 2,000 tonnes
per annum. The Polyurethanes blending unit produces rigid polyol,
which is one of the two components used in thermal insulation of
appliances and panels for cold storage. The 7,000 tonnes per annum
Uniqema Specialty Chemicals Plant, set up in Karachi in 1964
manufactures and formulates a range of over 60 products used in
industrial processing for speciality chemical applications. In 2004 a
new Polymer Reaction Vessel was installed at the Specialty Chemicals
plant, increasing the production capability of the Polymer products to
2,070 tonnes per annum

In 2003, the SAP systems was implemented all over the Company with
an investment of Rs 168.8 million.

ICI Pakistan's overall exceptional performance is also manifested in its

commitment to ‘Responsible Care for the Environment' - a continuous
effort aimed at the reduction of both hazardous and non-hazardous
wastes. It has set up Effluent Treatment Plants at Polyester, Paints
and Specialty Chemicals manufacturing sites at a cost of Rs 78.8
million, enabling the plants to fully comply with the National
Environmental Quality Standards (NEQS) for liquid effluents.

ICI continues to invest in Pakistan in order to respond to and meet the

challenges of the new century by capitalising on market opportunities
and ensuring the benefits of latest technologies. Developing an ability
to compete internationally, focusing sharply on customer needs and
having a culture of continuous improvement enables ICI Pakistan to
achieve its vision of enhancing value for shareholders and customers
and also meet the challenging targets it has set for Safety, Security,
Health and Environmental (SSHE) performance. Continuing to invest
in the nation's economy, ICI strives to achieve success for the
Company, its shareholders, employees, customers, and suppliers.