Textile Spinning: DEWAN KHALID TEXTILE MILLS LIMITED - Year Ended 30-06-2005 & 9 Months Ended 31-03-2006
This review is based on two periods for the simple reason that updated data provides better basis for management decision. The reason for last year's review is because of the better data integrity as it is based on audited figures.
The latest update is the current year 2005-06 nine months financials and after that dovetailed is review of last year 2004-05 nine months' financials alongwith its performance statistics.
During 9M 2005-06, the company posted higher net sales, gross profit and operating profit but further down the line the scenario changed because pretax profit was much lower compared to the same period last year's (9M 2004-05). However, the lower provision of the tax came to its rescue and the net profit after tax surfaced above the same period last year's (SPLY).
To report statistically, during 9M 2005-06, the company posted sales at Rs 567.61 million (SPLY: Rs 410.19 million), gross profit at Rs 73.49 million (SPLY: Rs 53.17 million) and operating profit at Rs 49.40 million (SPLY: Rs 36.97 million) showing growth by 38.3%, 38.2% and 33.7% respectively.
Pre-tax profit declined by 47.9% to Rs 11.04 million (SPLY: Rs 21.17 million) because higher finance cost played havoc. Net profit improved to Rs 7.9 million (SPLY: Rs 5.14 million).
Dewan Khalid Textile Mills Ltd is one of the four textile units of Dewan Mushtaq Group of Companies. The group has diversified interests in automobile assembly, and manufacturing, polyester staple fibre (PSF), sugar, textile, cement and equity participation in a private bank.
The company is a yarn spinning plant with an installed capacity of 26,624 spindles set up at S.I.T.E Kotri near Hyderabad, Sindh. The unit was set up with Chinese assistance in the mode of complete spinning equipment valued at RMB yuan 6.763 million under pay as you earn scheme. The whole loan stands retired with timely repayment as per originally agreed schedule.
Dewan Khalid Textile Mills Ltd is a public limited company incorporated in April 1978 and its shares are listed on the Karachi and Lahore Stock Exchanges.
The main building of the plant was completed in 1979. Erection of machinery had started soon thereafter the project was completed by September that year; and within a month after completion commercial production started.
The company manufactures cotton and blended yarn using lint cotton both of local origin and imported origin, viscose fibre, acrylic staple fibre and polyester fibre. The polyester staple fibre (PSF) and acrylic staple fibre being used in yarn spinning is produced by the sister concern Dewan Salman Fibre Ltd.
The annual attainable production capacity of the plant has been rated at 4.25 million kgs of yarn converted into 20 account. For the last financial year from October 2004 to June 2005 (9M 2004-05) which is for nine months, the production capacity has been rated at 3.187 million kgs. The actual production has been converted in 20 count for the purpose of comparison. According to this estimate the company produced 5.980 million kgs for 9M 2004-05 attaining 188% capacity utilisation which is impressive performance. In the previous financial 2003-04 the company had attained 125% capacity utilisation.
The leadership in the company has continued BMR policy. The directors informed that the company entered into various contracts for supply of latest start of the art machines to meet the standard of quality required by the customers.
During the last financial year 9M 2004-05 the company posted net sales at Rs 334.52 million which works out to the annualised sales amount of Rs 446 million. The annualised sales amount is much less than the actual audited figures of Rs 766 million of the previous financial year 2003-04 of 12 months.
So lower sales should naturally lead to lower profitability. But in this case the net profit after taxation for 9M 2004-05 is in the sum of Rs 8.66 million which is only marginally lower than preceding 12 months (FY 2003-04) net profit after taxation at Rs 9.10 million.
If the profit and loss account is seen a little more deeply one can find that the gross profit, operating profit even pretax profit were much lower than previous 12 months period. On the other hand finance cost for nine months was 30% higher than the previous 12 months.
Then what is the reason for little impact on the nine month's profitability. The answer lies here. The previous year's profitability clipped greatly because of large tax provisions at Rs 19.38 million whereas during nine months of last year 2004-05 the provision for taxation was much less, the sum of Rs 4 million.
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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: 46.96 42.69
Reserves & Surplus: 234.98 230.59
Shareholders Equity: 281.94 273.28
L.T. Debts: 64.50 85.88
Provision for Staff Gratuity: 9.55 10.76
Deferred Taxation: 19.70 20.45
Current Liabilities: 691.68 547.53
Fixed Assets: 276.68 241.22
L.T. Investment: 65.00 65.00
L.T. Deposits: 0.08 0.08
Current Assets: 725.91 631.60
Total Assets: 1,067.67 937.90
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Profit & Loss A/c for the Nine Months Ended June 30 2005
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Oct 01 2004 to Oct 01 2003 to
June 30, 2005 Sept 30, 2004
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Sales-Net: 334.52 765.82
Gross Profit: 51.28 70.29
Operating Profit: 35.71 47.70
Finance (Cost): (22.10) (17.10)
(Depreciation): (13.99) (20.09)
Profit Before Taxation: 12.67 28.48
Profit After Taxation: 8.66 9.10
Earnings Per Share (Rs): 1.84 1.94
Cash Dividend (%): - -
Stock Dividend (%): 10.00 10.00
Share Price (Rs) on 08-08-2006: 30.25 -
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Financial Ratios
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Price/Earning Ratio: 16.44 -
Book Value Per Share: 60.04 64.01
Price/Book Value Ratio: 0.50 -
Debt/Equity Ratio: 19:81 24:76
Current Ratio: 1.05 1.15
Asset Turn Over Ratio: 0.31 0.82
Days Receivables: 97 55
Days Inventory: 692 227
Gross Profit Margin (%): 15.33 9.17
Net Profit Margin (%): 2.59 1.19
R.O.A. (%): 0.81 0.97
R.O.C.E. (%): 2.31 2.33
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Plant Capacity & Production
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A) Spinning (Figures in Million Kgs)
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Actual Production at
actual average count: 3.937 5.160
Actual Production converted
into 20 Count: 5.980 5.315
Attainable Capacity in 20 Count 3.188 4.250
Capacity Utilisation (%): 187.58 125.06
B) Number of Spindles Installed: 26,624 26,624
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COMPANY INFORMATION: Chairman: Dewan Zia-ur-Rehman Farooqui; Vice Chairman: Dewan Ghulam Mustafa Khalid; Chief Executive & Managing Director: Dewan Abdul Rehman Farooqui; Chief Financial Officer: Mohammad Nadeem; Company Secretary: Mansoor Ahmed Farooqui; Registered Office: Dewan Center, 3-A Lalazar Beach Hotel Road, Karachi 7400; Web Address: www.dewangroup.com.pk; Factory: G/II, S.I.T.E. Kotri Sindh.
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