Textile Spinning: SARITOW SPINNING MILLS LIMITED - Year Ended 30-09-2003

This spinning unit of Bhai Pheru District Kasur has registered decline in sales and productivity. The accumulated deficit has swelled due to consecutive losses for the second year and losses during the last four years out of 6 years.
As regards losses for the year under review the directors, attributed these to the increase in the price of cotton and at the same time depressed yarn prices in the international and local markets.
They also pointed out that they were further affected by the higher mark-up rates charged by financial institutions as compared to the rates applied to others.
They also informed that the negotiation for reduction in mark-up rates was continuing. They have succeeded in renegotiating mark-up rates with NBP on working capital finance limits from 12% to 8% p.a. which was be effective from July 2003.
Saritow Spinning Mills Ltd is a public limited company incorporated in the province of Punjab. Its registered office is located at 06 Egerton Road Lahore. The company was incorporated on 18th March 1987.
Its shares are quoted on all stock exchanges in the country. At present the share in the company is trading at Rs 4 per share at 60% discount to the par value of Rs 10. During the last one year the market value of the share appreciated from Rs 0.5 to Rs 6.0 per share which is substantially below its par value.
On 30th September 2003, on the last count of shareholders of the company, 69.14% of its total 13.27 million shares was held by its directors their spouses etc. Its 178 individual shareholders held 4.76% of its stock ICP held 3.43% and 6 financial institutions held 21.76% stock.
The company is engaged in the manufacture and sale of yarn. Its manufacturing facilities are located at 51-KM Multan Road, Bhai Pheru. Its production facilities are equipped with 17,280 spindles.
A note annexed to account stated that land, building and plant and machinery of the company and were first time re-valued.
The revaluation surplus then determined was Rs 305.87 million. At the end of the financial year under review the supplies on revaluation for fixed assets was booked at Rs 243.04 million which provided substantial coverage to the other long term debt in the absence of positive figure in the shareholders equity.
The long term debt to equity ratio works out to 26:74 a ratio much better than the bench mark ratio of 60:40.
The said note also states that the management had reviewed the useful life of the machinery in 1998 and building on freehold land in 2001 and since than the depreciation is being provided @ 5%.
The note also emphasised had the depreciation been charged on these fixed assets @ 10% instead of 5%, the loss of the year would have been higher by Rs 20.98 million (2002: 22.08 million).
During the year the company's utilised production capacity declined to 91% from almost full capacity utilisation in the preceding year.
The company's actual production conversion into 20's count declined by 8.26% to 5.66 million kgs of yarn from 6.17 million kgs recorded in the preceding year.
The report of the directors clarified that they have totally revamped the production pattern of the company and started production of super fine count ranging from 52/1 to 81/1 count yarn instead of conventional count of 20/1, and 30/1.
They expressed satisfaction on achieving cash break even during the first quarter of the forthcoming financial year 2003-04 due to this change.
They are optimistic that in the future they will be able to earn profit. Its appears that in addition to these measures, a long term strategy for turnaround is the call of the time as the company has piled up large accumulated deficit.

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Performance Statistics                (Million Rupees)

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30 September                         2003         2002

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Share Capital-Paid-up:             132.75       132.75

Accumulated (Loss):               (230.32)    (229.88)

Shareholders Equity:               (97.57)     (97.13)

Surplus on Revaluation

 of Fixed Assets:                  243.04       299.02

Loan from Directors:                13.16        13.16

Other L.T Debts:                    55.68        80.78

Deferred Liabilities:              145.34       143.90

Current Liabilities:               209.26       192.33

Tangible Fixed Assets:             406.08       427.38

L.T Deposits & Other Receivables:    9.82         9.67

Current Assets:                    153.91       195.01

Total Assets:                      568.91       632.06

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Sales, Profit & Pay Out

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Sales:                             675.84       706.05

Gross Profit:                       29.24        78.26

Operating (Loss)/Profit:           (16.29)       21.51

Other Income:                        0.46         2.22

Financial (Charges):               (36.53)     (44.16)

Depreciation:                      (21.38)     (22.55)

(Loss) Before Taxation:            (52.36)     (20.43)

(Loss) After Taxation:             (56.42)     (28.38)

Accumulated (Loss) B/F:           (229.88)    (201.51)

(Loss) Per Share (Rs):              (4.25)      (2.14)

Share Price (Rs) Dated 12.03.2004:    4.0            -

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Financial Ratios

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Price/Earning Ratio:                 (-)             -

Book Value Per Share:               (7.35)      (7.32)

Price/Book Value Ratio:              (-)             -

Debt/Equity Ratio:                  26:74        27:73

Current Ratio:                       0.73         1.01

Asset Turn Over Ratio:               1.19         1.11

Days Receivables:                       4           15

Days Inventory:                        24           32

Gross Profit Margin (%):             4.32        11.08

Net Profit Margin (%):              (8.34)      (4.02)

R.O.A (%):                          (9.92)      (4.49)

R.O.C.E (%):                       (15.68)        6.45

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Plant Capacity & Production (Million Kgs)

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A) Yarn After Conversion into 20's Count

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Installed Capacity:                  6.22         6.22

Actual Production:                   5.66         6.17

Utilised Capacity (%):              91.00        99.20

B) Number of Spindles Installed:   17,280       17,280

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