Agribusiness: JDW Sugar aims for global competitiveness

Published: May 21, 2012
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JDW claims to have a crushing efficiency of 72% in its largest unit, higher than any other mill in Pakistan. PHOTO: FILE

JDW claims to have a crushing efficiency of 72% in its largest unit, higher than any other mill in Pakistan. PHOTO: FILE

LAHORE: 

Despite operating in a highly protected market, JDW Sugar Mills Managing Director Jahangir Tareen seems remarkably obsessed with building a globally competitive business, even as he continues to advocate government protection for his industry.

“I came into this business with a vision to compete with the world, not just local firms,” said Tareen in an exclusive interview with The Express Tribune.

Tareen appears to back up his word with at least some actions. The company regularly sends its technical staff to Australia and South Africa to acquire training on how to better manage the business and run their mill more efficiently. “Compared to other sugar mills, my team is the most efficient,” said Tareen, a former federal industries minister.

And unlike many of its competitors, JDW (which stands for Jamal Din Wala) is actually interested in growing its business. The company acquired two units in 2007 to enhance its production capacity, a move that saw its revenues and profits more than double in the next fiscal year that ended September 30, 2008.

As of right now, however, JDW has no plans to grow by acquisition. “We are in no mood to acquire or invest in some other mills,” said Tareen. “We are working on making our own units more energy-efficient so as to enhance our own production capacity.”

That singular obsession with efficiency appears to be yielding results. JDW claims to have a crushing efficiency of 72% in its largest unit, higher than any other mill in Pakistan, which has helped the firm drive down its operating costs and boosting profits. In addition, the firm is looking to use more and more of the waste produced in the sugar manufacturing process to enhance its electricity generation.

While most sugar mills in Pakistan (and around the world) generate power this way, JDW’s ambitions seem a little higher. The company plans to enhance its power production capacity up to 150 megawatts. That would be far beyond its own needs, which would allow JDW to sell power to the grid.

JDW is also one of the very few firms in Pakistan that is actively pursuing a backward integration process: the group’s parent company has dramatically enhanced its production of sugarcane, which allows JDW to purchase up to 20% of the sugarcane it uses from its own farms, which it claims yield up to 44% more sugarcane than the national average.

This obsession with efficiency is perhaps explained by rising operating costs, which have been eating into the company’s profit margins. JDW’s operating margin dropped from a high of 18.3% in 2009 to 13.3% in 2011. Nonetheless, the company is by far the largest and most profitable sugar manufacturer in the country. In financial year 2011, its gross sales were Rs26.5 billion, earning the company a net profit of Rs1.3 billion.

Yet even as it tries to portray itself as an aspiring globally competitive business, JDW appears comfortable with its place within a government-protected industry, where provincial governments set prices for sugarcane and the government buys up much of the end product on generous terms. “The current pricing mechanism protects the grower,” said Tareen, a former federal cabinet member and currently slated as the economic policy guru for the Pakistan Tehreek-e-Insaaf.

As for the relations between JDW and the sugarcane growers in Ghotki and Rahimyar Khan from whom it buys 80% of its feedstock, the company claims to be better than its competitors when it comes to paying them on time. “We pay within seven to 15 days after the crushing season ends,” said Tareen.

Growers seem to agree. “Tareen is a good paymaster,” said Ghulam Mustafa Chaniho, a farmer based in Sindh. “Certainly much better than others who have not paid farmers in four to five years.”

The stock has recently been underperforming the broader market, up 17.5% since the beginning of the year compared to the KSE-100 index’s 22.1%. Over the long run, however, JDW has handily outperformed the broader market, earning investors an average of 45.3% per year for the last ten years, compared to the KSE-100 index’s 22.8%.

With additional reporting by Farooq Tirmizi in Karachi.

Published in The Express Tribune, May 21st, 2012.

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Reader Comments (8)

  • Meekal Ahmed
    May 21, 2012 - 1:36AM

    I find it quite amazing that you make no mention of TAXES paid.

    Shouldn’t this be a matter of pride as well?

    I am interested in profitability and efficiency; but I am also interested in hearing about how much these industries, and others, contribute in terms of taxes.

    Recommend

  • non-conformist
    May 21, 2012 - 4:51AM

    JDW stands for Jamal Din Wali; not Jamal Din Wala.Recommend

  • Talha Abbasi
    May 21, 2012 - 7:46AM

    This PTI guy … has he ever paid any taxes? and why are so many industrialists joining PTI taking over the party from the old crowd just because of money.

    Recommend

  • JS
    May 21, 2012 - 12:02PM

    Go through JDW’s financial report…You will clearly see last year JDW paid more in taxes than the Sharif and Bhutto families combined!!!

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  • Hassan Sadiq
    May 21, 2012 - 12:25PM

    This PTI guy is one of the highest Tax payers in Pakistan His companies tax records are publicly available as its a listed company as for his personal income tax read this report by Pildat http://www.pildat.org/publications/publication/EcoFinance/BP43-TaxonAgricultureIncomeinPakistan.pdf refer to page 16 and his email to the authors!!

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  • Bilal Pervez
    May 21, 2012 - 2:23PM

    He pays a lot of taxes he is one the highest tax paying guys in pakistan, im not a relative fan or anything but for a fact he pays a lot of taxes and his JDW Sugar is the very best.

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  • Parvez
    May 21, 2012 - 4:27PM

    The owner of a large textile unit admitted years ago that he nor his father before him have ever paid taxes because the government laws and rules allow him so. He said all you need is a good munshi and a good tax lawyer. I still remember this interview on TV and next day the wrath of the industry must have descended on his head. The government ‘babu’ has much to answer for as far as tax collection is concerned.

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  • Rizwan
    May 22, 2012 - 12:24AM

    Mr Jahangir Tarin is a performer we wish Pakistan had more like him .By the way he is one of the highest tax payees in Pakistan .

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