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    Company Overview

    Formerly a group company of ICI PLC UK which was globallyacquired in 2008 by AkzoNobel

    Lucky holdings acquired shareholding of ICI making it a partof Yunus Group

    YB group is largest export house and cement manufacturer

    Vision:As the partner of choice, we aspire to build our localand international footprint through sustainable growth andby creating value for all our stakeholders.

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    Polyester (48%) Soda Ash (24%) Life Sciences (17%) Chemicals (11%)

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    Primary Sector: Refinery, Natural Gas, Mineral, Agriculture,Farming

    Secondary Sector uses output from the primary industry tofurther process for products such as polymersand plastics

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    Industry Overview

    Soda Ash

    2 Plants in Khewra Mine Region

    43% consumed in Glass Silicate

    production, 28% in Textile, 7% in

    Soaps, 11% for Paper

    Pakistans current productioncapacity is 470,000 MTPY while

    demand is 364,000, surplus can be

    exported to foreign markets

    Polyester Fiber (PSF)

    5 major producers with total

    capacity of 636,000 tons per annum

    Major players are ICI, Rupali,

    Pakistan Synthetics and Ibrahim

    Fibers Extensive load shedding of power

    and limited gas supply resulted in

    lower demand for PSF

    Dumping from China

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    Key Competitors

    Olympia Chemicals

    Fibres

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    Polyester Staple Fibre (PSF) manufacturing Plant having acapacity to produce 70,000 tons of PSF per annum.

    Established Ibrahim Energy Limited, a 31.8 MW powergeneration plant.

    The expansion unit of Polyester plant started commercialproduction thus increasing the PSF production capacity from70,000 tons per annum to 208,600 tons per annum.2001

    Acquired Allied Bank Limited, one of the five largestcommercial banks in Pakistan

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    Ibrahim Group (Fibres)

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    Primary activitiesMarketing and Sales Production Research anddevelopment Distribution Regular market

    visits

    Maintaining close

    contacts with the

    customers

    Product

    knowledge and

    technical

    knowledge

    Market Research

    Polyester fiber Professional

    Staff Trained staff Proper

    transport

    channel On time

    delivery

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    Ibrahim Fibers - Value Chain Analysis

    Support activitiesHuman Resource

    Management General

    Administration Technology

    Performance and

    Compensation

    Management, Recruitment,

    Training and Selection

    General management,

    accounting, safety and

    maintenance

    Computer system,

    internet, updated

    machinery and plants

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    Porters Competitor Analysis

    Ibrahim Fibers Olympia Chemicals

    Current Strategy Modernization & Expansion Investment in Power

    Generations

    Export to foreign markets

    Growth in capacity

    Objectives Sustainable Growth

    Remain Competitive

    Become leading Soda Ash

    producer

    Consistent growth

    Assumptions Sufficient future demand No energy issues

    Minor Price Fluctuations

    Resources &Capabilities

    30 years experience

    Synergy with textile, bank

    and power plant

    Strong distributionnetwork

    40 years experience

    Exporting to UAE, South

    Africa

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    Valuable? Rare? Costly to

    Imitate?

    Level of

    organization

    Implications

    Experienced

    ManagementYes No No No Parity

    Diversified

    Portfolio of

    Businesses

    Yes Yes Yes Yes Sustained

    Strong

    PartnershipsYes Yes Yes Yes Sustained

    Large

    Capacity Yes Yes Yes NoTemporary

    Ease of

    Capital

    Access

    Yes No No No Parity

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    VRIO Analysis of ICI Pakistan

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    The switch to coal in both the PSF and Soda Ash divisions is set toprovide expansions in gross margins and the bottom line due tofuel cost savings as well as improved soda ash plant utilization.

    Low domestic demand and frequent gas outages resulted in acapacity utilization of 73% in the soda ash division

    Due to low margins, the plant was not able to operate at fullcapacity, resulting very low exports

    Yunus Brothers Group has strong presence in the textile sector,which will create synergies for ICI

    The company has a stable dividend payout history, where theyhave sustained the dividend payout ratio above 50% in the past

    Strong profitability growth is likely to lead to higher payouts as themanagement aims to optimize RoE

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    Financial Analysis of ICI Pakistan

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    SWOT Analysis of ICI Pakistan

    STRENGTHS Leading manufacturer of chemicals in

    Pakistan

    Highly Trained Employees

    40 years, strong track record

    Extraordinary research Excellent management team

    Synergies with Yunus Holdings

    WEAKNESSES Prices are too higher than competitors

    High switching rates

    Barrier perception from Middle Class

    Some resources are easy to imitate

    OPPORTUNITIES Abundant resources for market

    expansion

    Potential market for better quality

    products

    Growing export market demand and

    globalization

    Exploit synergies with Yunus/Lucky

    THREATS Competitors are rapidly expanding

    Availability of capital to competitors

    Government policies

    Political Instability

    Economic Crisis

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    STRATEGIC INITIATIVES AND IMPLEMENTATIONThree Tiered Strategy

    Tier 1: Differentiation Strategy

    Tier 2: Vertical Integration

    Tier 3: Product Diversification

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    Tobe the partner of first choice for customers and suppliers,ensuring sustained leadership positions in the markets where wecompete, delivering long-term business value through a high

    performance culture, innovation, ethics and responsible care.

    To achieve our mission we will:

    Give highest priority to health, safety, environment and ethicalmatters Ensure our products deliver maximum value to customers bymaintaining dependable supply, consistent quality, and reliability Uphold excellent service levels to foster long-term relationshipswith customers and suppliers

    Achieve the highest possible operating efficiencies and lowest costs,and expand the business through selective capacity increase and new

    product launches Develop and retain a team of highly capable people dedicated todelivering the mission

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    Proposed Mission Statement

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    Even though cost control is essential, ICI should notcompriseon its quality

    Market position would be greatly affected

    ICI should opt for a differentiation and focus strategy and itshould continue to pursue it

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    A. Differentiation Strategy

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    The rising cost of sales as well as the energy crisis presents ICIwith the opportunity to form backward linkages.

    Since the raw materials of both Soda Ash and PSF have beenincreasing, an opportunity exists to form backward linkages inthe manufacture of raw materials for both these products

    Nishat Mills are primarily a textile goods manufacturercompany and Formed a subsidiary called Nishat Power

    A similar strategy can be applied by ICI, if they truly want toincrease their operational efficiency and plant load.

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    B. Vertical Integration

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    1. DIVERSIFY INTO THE PACKAGING BUSINESS

    Moderately feasible (cost of acquiring or building a plant from scratchcould be high).

    Cost savings possible through use of Soda Ash and other chemicalsproduced by ICI

    Experience is a critical factor in the competitive advantage that PackagesLtd has over other small players in the packaging industry. This could be amajor hurdle for ICI.

    There is a huge market for packaging in Pakistan particularly in thebusiness to business segment with major customers being food etc

    In the B2C segment the market is dominated by Packages Ltd. which sellsthe Rose Petal brand.

    Demand will continue to grow with the dominance of the FMCG sector inthe Pakistani economy.

    Since the major portion of the business will come from B2B, ICIs brandimage should not be a major factor in the decision making process.

    Quality and reliability which go with the ICI brand perception could beadvantageous though for customers such as Unilever and Engro.

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    C. Product Diversification

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    2. DIVERSIFY INTO CONSUMER HEALTHCARE

    Engage in the business of developing, manufacturing andmarketing non-prescription medicines, vitamins andnutritional products.

    This venture would allow ICI to leverage on its expertise in

    the pharmaceutical and chemical aspect of its currentbusiness and add a wide range of products to its portfolio,such as:

    1. Oral hygiene

    2. Multi-vitamins

    3. Pain suppressants (analgesics)4. Skincare

    5. Nutritional drinks

    6. Anti-bacterial soaps

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    C. Product Diversification

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    Assumptions1. The idea of expanding into the B2C market, is in line with

    the ICIs vision of Cultivating Growth.

    2. ICI is willing to form a team, where the focus would be onproduction and marketing of the product to the consumers

    3. The growth in the Consumer Health market falls in linewith the said forecasts

    Risks

    1. Consumers still perceive ICI as a paints manufacturer.

    Changing this perception is going to take a lot of effort.2. Internal and external marketing will require a lot of

    investment.

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    C. Product Diversification

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    Buying 100% of ZIL Limited (formerly Zulfeqar IndustriesLtd.) .

    ZIL Ltd excels in soap manufacturing with an experience ofover 50 years.

    Capris Natural Skincare and Wellness Range delivers a

    lifestyle to consumers in the premium segment. Palmy is positioned on the affordable beauty platform and

    gives consumers the best quality product in the popularsegment.

    Opal was launched with an innovative concept of multi-

    packs i.e. four soaps in one pack, giving consumers bestvalue for money.

    Champion and King Swan in the discounted segment offervalue conscious consumers viable options and solutions foreveryday laundry wash.

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    Target Acquisition

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    Valuation MetricsZIL Limited Sector (Peers)

    Average EPS Rs 7.36 Rs 4.85

    EPS Rs -4.61 Rs 10.87

    Dividend (last 4 quarters) Rs 4.50 Rs 2.24

    Dividend Yield 2.32%

    Book Value Rs 77.20 Rs 147.08

    Outstanding Shares 5,324,000 -

    Net Current Asset Value /

    Share

    Rs 5.45 -

    Total Assets Rs 1,006.00 (In Millions) -

    P/E 107.51 52.35

    Current Price Rs 95.10 -

    DCF Value (based on EPS) Rs -37.66 -

    DCF (Free Cash Flow) Rs -78.26 -

    DCF Value (Dividends) Rs 36.76 Rs 0.97

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    Soda Ash, a major resource for Soap production is apart of ICIs product portfolio.

    Soda Ash could be used at lower cost and supplied tothe newly acquired factory which is located in

    Hyderabad Other chemicals in the ICI Chemicals Business could

    also be utilized

    ZILs chemical suppliers could be potential business

    partners

    ICI can avoid paying these synergies to ZIL Limited bymaking a complete acquisition of the business

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    Post Acquisition Synergies

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    Thank You

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