Textile Weaving: Kohinoor Weaving Mills Limited - Nine Months Ended June 30, 2005.

The production facilities of the company are located on 164 acres with building area of over one billion square feet. The report of the company claims that today Kohinoor Weaving Mills Limited is one of the largest, most modern and technologically advanced greige weaving plant in the world.
The weaving unit is equipped with 256 looms and Hosiery Unit with 240 knitting machines. Its power generating plant has achieved 74% of the generation capacity. During the nine months under review, the company has taken a number of strategic decision to arrest the declining trend in profitability.
The financial cost has escalated due to rise in interest rate and additional investments in Hosiery, Genertek and Home Textile Divisions.
Hence the company is planning to implement a debt reduction plan. Repayment of the bank loans will be made out of additional cash flows the company expects to generate from sale of short terms securities, right issue and sale of surplus land. The electric generation cost has been adversely impacted due to rise in fuel oil prices. The company is switching over to gas fired power generation. Other reasons of declining profitability has been also given in this column.
Kohinoor Weaving Mills Ltd was incorporated in December 21, 1987 as a public limited company. Its registered office is situated at 42 Lawrence Road Lahore and its shares are quoted on Karachi, Lahore, and Islamabad.
The company is one of the constituent members of a large industrial group - Kohinoor Maple Leaf Group. The company is principally engaged in the manufacturing, dyeing, trading of cloth, yarn and generation and distribution of electricity. Its manufacturing facilities are located at 8th km Manga Raiwind Road District Kasur.
CBR has changed the financial year for cotton textile companies from September to June. Consequently the current financial statements under review have been presented for nine months period ended June 30, 2005. Accordingly, the figures and comparatives in the profit and loss account statement of changes in Equity, and Cash Flow statement of the previous year are not comparable with the period under review.
During the nine months period ended June 30, 2005, Kohinoor Weaving Mills Ltd earned a gross profit of Rs 204.07 million on sales of Rs 3,571.94 million as compared to gross profit at Rs 342 million on sales of Rs 3370 million for the corresponding nine months of the previous financial year. This shows 40.3% decline in gross profit but 6% growth in sales.
It can be observed from the performance statistics that gross profit for the complete financial year ended September 30, 2004 (last year) was Rs 503.85 million on sales of Rs 4627.12 million.
According to the Directors Report net loss before taxation for the nine months period was Rs 182.12 million and compared the net profit before tax of Rs 111 million during the corresponding period of nine months ended June 30, 2004. The net profit before tax for the full year ended September 30, 2004 was Rs 154.71 million.
The graphic presentation of 5-year performance review shows that bars in the diagram of each year's profitability continued to be smaller until the same went down the axis during the period under review.
The loss per share works out to Rs 6.09 whereas at present the share in the company is trading at Rs 39 per share which is nearly four times of the par value.
In spite of accumulated loss the shareholders equity remained high at Rs 1.694 billion which translates into the breakup value of the share at Rs 51.24 per share which is more than five times of the par value. It would appear that despite downward trend in profitability the investors confidence remained high. During the last one year market value of the share of the company peaked at Rs 55.
Nevertheless the leadership in the company has identified the causes of decline and working on the strategic plans to address the challenges. One of the most important factors of decline in profitability is decline in per unit sales rate of greige fabric. For this the company is focusing on sales of value added products through enhanced efficiency and has taken steps to reduce over head.
The company has faced competition from large scale producers such as China and India in the post quota environment. The company is focusing on design development, value addition better productivity and increased efficiency. In line with this, modernisation and upgradation of its production facilities is under consideration whereby old Tsudakoma looms installed in 1994 will be replaced with high speed state of the art jet weaving machines.
The other reason has been the under utilisation of capacity in hosiery division. The directors reported that diversified marketing in the Hosiery Division has been undertaken to increase customer base beyond USA, to cover EU countries and Australia.
The company is considering to upgrade recently imported additional knitting machines of 108 needles with 132 needles knitting machines, this will provide competitive edge by producing value added socks.

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Performance Statistics                (Million Rupees)

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Balance sheet                                  -As At-

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                                  June 30 September 30

                                     2005         2004

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Share Capital-paid-up:             330.59       300.54

Reserves:                        1,546.28     1,639.26

Accumulated (Loss)/

Un-appropriated Profit:           (183.03)       48.46

Shareholders Equity:             1,693.84     1,988.26

L.T. Debts:                      2,013.43     1,172.65

Current Liabilities:             3,222.56     2,851.57

Fixed Assets:                    3,841.46     2,865.85

L.T. Investments:                   11.94         9.14

L.T. Security Deposits:              3.09         2.34

Current Assets:                  3,073.34     3,133.15

Total Assets:                    6,929.83     6,010.48

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Profit & Loss A/C for:

                           9 Months Ended   Year Ended

                             June 30 2005 Sept 30 2004

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Sales:                           3,571.94     4,627.12

Gross Profit:                      204.07       503.85

Other Operating Income:             10.85        23.55

Operating (Loss)/Profit:           (42.07)      274.69

Financial (Costs):                (145.05)    (119.98)

(Depreciation):                   (163.50)    (212.49)

(Loss)/Profit Before Taxation:    (182.12)      154.71

(Loss)/Profit After Taxation:     (201.43)      100.77

Earning Per Share (Rs):             (6.09)        3.05

Dividend Pay Out - Cash (%):          -          10.00

Share Price (Rs) on 20/12/05:       39.00            -

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Financial Ratios

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Price/Earning Ratio:                 (-)             -

Book Value Per Share:               51.24        66.16

Price/Book Value Ratio:              0.76            -

Debt/Equity Ratio:                  54:46        37:63

Current Ratio:                       0.95         1.09

Asset Turn Over Ratio:               0.51         0.77

Days Receivables:                      61           66

Days Inventory:                       103           77

Gross Profit Margin (%):             5.72        10.89

Net Profit Margin (%):              (5.63)        2.18

R.O.A      (%):                     (2.91)        1.68

R.O.C.E (%):                        (5.43)        3.19

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A) Plant Capacity & Production (Figures in Millions)

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                                      100% Capacity      Actual Production

                                     2005       2004       2005       2004

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Weaving 60 Picks (sq. Meters):      54.76      69.83      46.05      62.34

Capacity Utilization (%):             -          -        84.09      89.27

Dying (Linear Meters):              22.44      30.00      14.39      15.40

Capacity Utilization (%):             -          -        64.12      51.33

Hosiery (Dozs):                      3.29       2.63       1.94       2.56

Capacity Utilization (%):             -          -        58.97      97.33

Genertek (Power Plant)(000 MWH):   117.47     157.06      87.30     112.67

Capacity Utilisation (%):             -          -        74.58      71.73

B) Number of Looms Installed:         -          -          256        256

Number of Knitting Machines

 Installed:                           -          -          240        144

Number of Generators Installed:       -          -            3          3

Number of Standby Generators

 Installed (Cater Pillars):           -          -            8          8

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