Upgradation of manufacturing facilities is a continuous process in the textile industry which entails large amount of finance.
The company is fortunate that it is through with the major renovation and major development of its manufacturing facilities at such a time when finance cost was much lower than the year under review.
During the year under review, the company posted second highest amount in sales in the last six years. Moreover gross profit was its historic best. Higher operating expenses and substantially high finance cost did not deter the company in achieving all time highest net profit after taxation at Rs 293.02 million.
The company has gratifying record of profit distribution in terms of regular dividend announcement and quite attractive payout rates. For the year under review it declared cash dividend at 25% which was identical to the preceding year's. This encouraging profit distribution profile coupled with continuous profitable years have boosted the confidence of investors in this enterprise. This resulted in pricing the value of its share at a very high level.
At present its share is trading at Rs 63 per share, which is more than six times of par value.
Gadoon Textile Mills Limited was incorporated in NWFP as a public limited company on February 23, 1988. The registered office of the company is located at APTMA House Tahkal Payan, Jamrud Road Peshawar and its manufacturing facilities are situated at Gadoon Amazai Industrial Estate Distt. Swabi, NWFP. The company is principally engaged in the manufacturing and sale of yarn.
Gadoon Textile Mills Limited is a large textile spinning unit of the country as it is equipped with 191,232 spindles. In both the years under review the unit operated on all days and at three shifts per day. Since the company's previous financial year (FY05) was for nine months so last year the plant operated for 273 days. The year under review (FY06) of the company was for 12 months so worked for 365 days.
The annual installed capacity of the plant has been rated at 77.418 million kgs after conversion into 20s count of yarn.
The note No 28 annexed to the accounts in the Annual Report 2006, has made some clarification about the production capacity. According to the note, it is difficult to describe precisely the production capacity in the textile industry since it fluctuates widely depending upon various factors such as count of yarn spun, spindles speed, twist per inch, raw material used etc.
Even then to estimate production capacity of any textile unit is essential to find out the production efficiency and compare it with other similar units as well as industry average.
During FY06, the company's actual production was 34.63 million kgs and after correlating with its installed capacity, the utilised capacity for the year 2005-06, works out to 44.73% while last year its the utilised capacity appears to be 45.18% which is around the percentage of the year under review.
Then it would appear that in both the years under comparison there had been substantial un-utilised capacity. This also reflects that the company could not utilised benefits of full economies of scale.
The other observation is that the company has incurred capital expenditure to the tune of Rs 138 million in plant and machinery. In this textile industry upgradation is required to be a continuous process.
The directors of the company reported that the company's major development and renovation of production facilities of the company has been accomplished in the period when cheaper funds were available.
Otherwise it would have faced bottleneck due to rising cost of funds. During the year under review textile industry faced big set back due to tremendous increase in the cost of inputs, steep rise in lint cotton, energy cost, and freight charges. These days what hit the industry most is more than 200 percent increase in the finance cost.
During the year under review FY06, the company posted sales at Rs 5.637 billion out of which 66.2% were export sales. The company has maintained its export performance identical to the previous year FY05 when export sales were 66.8% of total sales. The company's sales in FY06 were second highest of the last six years while higher sales were recorded in FY04.
But gross profit at Rs 800 million was its historic best. This has helped in achieving highest Earning Per Share at Rs 12.50 despite rising operating expenses and finance cost.
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Performance Statistics (Million Rupees)
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30th June 2006 2005
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Share Capital-Paid-up: 234.37 234.37
Reserves & Surplus: 2,127.38 1,892.95
Shareholders Equity: 2,361.75 2,127.32
L.T. Debts: 375.00 750.00
Deferred Liabilities: 191.36 194.64
Current Liabilities: 3,216.53 2,694.00
Fixed Assets: 3,020.79 3,057.99
L.T. Loans: 2.73 1.98
L.T. Deposits: 7.00 2.45
Current Assets: 3,114.12 2,703.55
Total Assets: 6,144.64 5,765.96
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Profit & Loss A/c
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For Year For 9 Months
Ended June Period Ended
30, 2006 June 30 2005
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Sales: 5,637.14 4,072.07
Gross Profit: 799.89 541.80
Other Operating Income: 6.80 5.18
Finance (Cost): (204.84) (84.39)
(Depreciation): (318.12) 243.26
Profit Before Taxation: 363.02 279.43
Profit After Taxation: 293.02 206.92
Earnings Per Share (Rs): 12.50 8.83
Dividend Cash (%): 25.00 25.00
Share Price (Rs) on 22-1-07: 63.00 -
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Financial Ratios
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Price/Earning Ratio: 5.04 -
Book Value Per Share: 100.77 90.76
Price/Book Value Ratio: 0.63 -
Debt/Equity Ratio: 14:86 26:74
Current Ratio: 0.96 1.00
Asset Turnover Ratio: 0.92 0.71
Days Receivables: 40 14
Days Inventory: 142 191
Gross Profit Margin (%): 14.19 13.30
Net Profit Margin (%): 5.20 5.08
R.O.A. (%): 4.77 3.58
R.O.C.E. (%): 10.01 6.74
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Production & Capacity Yarn After
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Conversion into 20/s Count (Million Kgs)
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A) Installed Capacity: 77.42 57.59
Actual Production: 34.63 26.02
Capacity Utilisation (%): 44.73 45.18
B) Number of Spindles Install 191,232 190,416
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COMPANY INFORMATION: Chairman: M. Yunus A. Aziz Tabba; Chief Executive: M. Sohail M. Yunus Tabba; Company Secretary & Senior Manager Finance: Abdul Sattar Abdullah; Registered Office: APTMA, House, Tahkal Payan, Jamrud Road Peshawar; Web Address: Not Reported; Karachi Office & Share Department: 6-A, Muhammad Ali Housing Society, Abdul Aziz Haji Hashim Tabba Street Karachi 75350; Factory: Gadoon Amazai Industrial Estate Distt Swabi NWFP.
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