Textile Spinning: FAZAL TEXTILE MILLS LIMITED - Half Year Ended December 31, 2006

Fazal Textile Mills Ltd is one of the constituent members of one of the oldest trading and industrial groups - Yunus Brothers whose another prominent industrial undertaking is Gadoon Textile Mills Ltd.
Total installed spindles of the group are 245,000 out of which Fazal Textile is equipped with 60,000 spindles and Gadoon is equipped with 185,000 spindles. Weaving mill with over 750 looms has also been started, which is most modern vertically integrated textile mill of USD 30 million having 214 air jet looms with the state of the art processing and stitching facilities.
Yunus Brothers, is actively involved in international trading of various products including cotton and blended yarn, cotton and blended fabrics, garments, rice, sugar, fertiliser, earth moving equipments, chemical, spare parts and automobile vehicles etc. Yunus Brothers is one of the largest export houses of Pakistan exporting mainly to the European, US, Far Eastern and African markets. Its annual sales turnover exceeds USD 300 million, with 95% of the sales geared towards the export markets.
Fazal Textile Mills Ltd (The Company) was incorporated on July 6, 1963 as a private limited company and was converted into a public limited company on May 4, 1966. The company is engaged in manufacturing, selling, buying and dealing in all types of yarn and knitted fabrics.
The company is quoted on stock exchanges in Pakistan since 1971. It is a blue chip company whose shares are trading at very high market price. On June 19, 2007, the closing price of the share was quoted at Rs 242 per share which is more than 24 times of the par value. During the last 52 weeks the market value of its share sharply moved upward from Rs 77 to Rs 256.95 per share.
As regards operating performance of the company in the half year ended December 31, 2006 (HYD 06-07), the company generated sales at Rs 1.160 billion as against Rs 988.55 million posted in the same period last year (SPLY) registering 17.3% growth. But the company experienced increase in cost of inputs ie cost of lint cotton, energy cost, minimum wage limit, freight charges. Hence its gross profit margin showed erosion by 2.73 percentage points in HYD 06-07 to 7.17 percent from 9.90 percent in the SPLY. Furthermore, finance cost was also on the higher side. Hence pretax profit sharply declined to Rs 24.20 million in HYD 06-07 as compared to Rs 36.63 million in the SPLY.
At the bottom line, higher tax provision, further widened the gap in net profit between the two periods under comparison. In HYD 06-07 the company booked net profit after taxation at Rs 12.46 million as compared to Rs 40.28 million in the SPLY showing drastic decline by 69%.

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Performance Statistics                     (Million Rupees)

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Balance Sheet                                       -As At-

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                                  December 31       June 30

                                         2006          2006

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                                   Un-audited       Audited

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Share Capital-Paid-up:                  61.87         61.87

Reserves:                              680.96        683.97

Shareholders Equity:                   742.83        745.84

Deferred Gratuity:                      27.83         25.09

Deferred Taxation:                      57.92         61.51

Current Liabilities:                 1,593.20      1,036.36

Fixed Assets Tangible:                 777.60        652.33

L.T. Loans & Advance:                    5.71          2.73

L.T. Deposits:                           0.53          0.53

Current Assets:                      1,637.94      1,213.21

Total Assets:                        2,421.78      1,868.80

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Profit & Loss A/c for Half Year Ended         -December 31-

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                                         2006          2005

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Sales:                               1,159.89        988.55

Gross Profit:                           83.22         97.87

Other Operating Income:                  4.86          0.29

Operating Profit:                       60.64         67.73

Finance (Cost):                       (36.43)       (31.10)

Profit Before Taxation:                 24.20         36.63

Profit After Taxation:                  12.46         40.28

Earnings Per Share (Rs):                 2.01          6.51

Share Price (Rs) on 19/06/2007:        242.00             -

Price/Earning Ration:                  120.00             -

Debt/Equity Ratio:                      0:100         0:100

Current Ratio:                           1.03          1.17

Gross Profit Margin (%):                 7.17          9.90

Net Profit Margin (%):                   1.07          4.07

R.O.A. (%):                              0.51          2.16

R.O.E. (%):                              1.68          5.40

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