This textile spinning unit of Muridke's bottom lines has gone into the red after several years profit. This is despite the fact the company has registered increases in production, sales revenue, and export sales. At the same time the company has remained cost efficient in terms of financial charges and operating expenses.
The full utilisation of production capacity too enabled the company to avail economies of scale and implementation of BMR project is providing the company with the cutting edge resources for competition even in the most challenging business environment.
The directors of the company are confident of better prospects in the current year to enhance value for shareholder.
The company has missed several years without payout of dividends and this payout profile more hurts the small shareholders whose contributions are substantial in its paid-up capital - more than one fifth of total 8 million shares.
The company's directors, their spouses held 20.24% of its total 8 million shares of Rs 10 each. Its associated companies owned 22.34% of its stock.
These associated companies are Service Industries Ltd Service Sales Corporation (Pvt) Ltd and Borjan (Private) Limited, National Bank of Pakistan held 6.78% of its total 8 million shares. The individual shareholders of Dar Es Salaam Textile Mills Ltd owned 47.49% of its stock.
Small shareholders having of 10 thousand shares or less each were 2582 and their shareholding aggregated to 21.3% of the stock of the company. So there is wide dispersal of small shareholders.
However their contribution is highly significant - more than one fifth of the total stock. But their fortune has remained stagnant as the market price of the company's share is Rs 10.60 per share and that too at this time when the stock market has remained buoyant since more than one year. In the last one year the lowest price of the share was Rs 5.
They have also not gained much in terms of cash dividend as during the last 6 years the company announced dividend in two years ie in the years 2000 and 2001 and that too at a modest rate of 15% in each of these years.
Dar Es Salaam Textile Mills is a textile spinning unit which is situated in Muridke in the province of Punjab. Its manufacturing facilities include 16,320 spindles.
The production capacity of the plant has been rated in terms 20/s count and the annual capacity is 5.305 million kgs.
The production in terms of various actual counts has been recorded at 4.104 million kgs which is the highest production figure since 1998.
However for the purpose of comparison the figure has been converted into 20/s count on which basis the company attained 106.05% utilised capacity compared to 107.54% utilised capacity in the preceding financial year 2001-02.
This shows that the company has availed the economies of scale because of full capacity utilisation.
The company is also striving for further reduction in the cost of input per spindle. The directors informed that in the BMR project, combers were installed and by January 7, 2004, their new back process machinery has shipped.
Resultantly, the financial year 2003-04 will see the expanded spindleage and will create enabling environment to be more competitive at, "any given cotton and yarn prices".
After these strategic decisions, one comes across the loss scenario for the first time according to the "Financial Highlights of the Last Six Years" published with the Annual Report under review.
The company booked Pre-tax Loss at Rs 5.14 million compared to Pretax Profit at Rs 6.15 million in the preceding year. It is ironical, was the loss in the background of higher sales. Sales, in terms of value increased to Rs 479.02 million as against Rs 453.85 million by 5.5%.
The enterprise remained cost efficient at the micro-economics level as its financial charges declined and at the same time operating expenses were also lower than preceding years. But at the macroeconomics level was its higher cost of input which remained uncontrolled factor.
The inevitably, gross margin eroded by 3.51 percentage points to 8.41% from 11.92% in the preceding year.
The main cause of the reduced margin was increase the cost of raw material from 59.7% to 66.7% of sales. On the other hand selling price did not rise to match the increase in cost.
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Performance Statistics (Million Rupees)
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30 September 2003 2002
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Share Capital Paid-up: 80.00 80.00
Reserves: 16.00 16.00
Un-appropriated (Loss)/Profit: (4.03) 5.75
Shareholders Equity: 91.97 101.75
L.T Debts: 52.51 17.58
Deferred Liabilities-Gratuity: 1.57 1.40
Current Liabilities: 164.77 179.73
Fixed Assets-Tangible: 159.57 134.87
L.T Deposits: 2.97 3.08
Current Assets: 148.28 162.51
Total Assets: 310.82 300.46
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Sales, Profit & Payout:
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Sales: 479.02 453.85
Gross Profit: 40.30 54.10
Operating Profit: 12.98 26.55
Other Income: 0.87 0.04
Financial (Expenses): (19.07) (19.98)
Prior Year's Adjustments: 0.09 -
(Depreciation): (15.08) (11.71)
(Loss)/Profit Before Taxation: (5.14) 6.15
(Loss)/Profit After Taxation: (9.78) 3.82
(Loss)/Earnings Per Share (Rs): (1.22) 0.48
Share Price (Rs) on 28-05-04: 10.60 -
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Financial Ratios:
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Price/Earning Ratio: (-) -
Book Value Per Share: 11.50 12.72
Price/Book Value Ratio: 0.92 -
Debt/Equity Ratio: 36:64 15:85
Current Ratio: 0.90 0.90
Asset Turn Over Ratio: 1.54 1.44
Days Receivables: 31 45
Days Inventory: 43 45
Gross Profit Margin (%): 8.41 11.92
Operating Margin (%): 2.70 5.85
Net Profit Margin (%): (2.04) 0.84
R.O.A (%): (3.15) 1.27
R.O.C.E (%): (6.70) 3.16
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Plant Capacity & Production:
Yarn 20/s count (million kgs)
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Installed Capacity: 5.305 5.305
Production 20/s Count: 5.626 5.705
Capacity Utilisation (%): 106.05 107.54
(B) Number of Spindles Installed: 16,320 16,320
(C) Days Worked: 364 364
(D) Number of Shifts Worked: 1,092 1,092
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COMPANY INFORMATION: Chairman: Shahid Hussain; Chief Executive: Arif Saeed; Director: Zahid Hussain; Secretary: Sultan Anwar; Registered Office/Service House: 2, Main Gulberg, Lahore-54662; Factory: 10-KM Muridke-Sheikhupura Road, Muridke.
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