This sugar mill of Okara has fallen on difficult lines as it has not been able to produce positive operating results. During the year under review its sales and gross profits were the lowest of the last five years whereas the net loss of the year makes it fifth year of loss out of six years.
The only profitable year since 1999 was the year 2002 when the company posted net profit after taxation at Rs 52.17 million.
However, the directors braced its financial backbone with enhanced subordinated loans. This improved its long-term debt coverage as can be evidenced from the long-term debt to equity ratio. At the same instant its current ratio improved also despite increase in inventory to 26 weeks from four weeks in the preceding year.
But the grave situation was taken up by the statutory auditors of the company in their observations (without qualifying their opinion). It is also given due consideration in the Note No 1.2 under the heading of "Going Concern" listing a number of factors showing reasons of less than conducive environment of sugar industry.
Baba Farid Sugar Mills Limited was incorporated in the province of Sindh in 1978 as a public limited company and is listed on Karachi and Lahore stock exchanges. The company is principally engaged in the manufacture and sale of sugar. Its registered office is located at Panorama Centre, Saddar, Karachi and manufacturing facilities at Okara in the province of Punjab.
In the ownership structure of the company, out of total 9.45 million shares of the company, Fecto Sugar Mills Ltd (affiliated company) has 15.62% stake in its equity. The company's directors and their spouses hold 59.74% of the company's stock.
The company is a part of Fecto Group of Industries whose other major projects are Fecto Sugar Mills Ltd, Fecto Particle Board Mills, Hancom Systems (Pvt) Limited, Supreme Engineering Works (Pvt) Ltd, Fecto Orient (Private) Limited, Burhan Printers & Packages.
At the apex of the Group sits the founder of the Group, Ghulam Muhammad A. Fecto. He had migrated from Mumbai to Dhaka in former East Pakistan and from there he shifted to Pakistan and built a sprawling industrial enterprise.
On 13th June 2005, the market value of its share was quoted for Rs 11.75 per share which carries 175% premium over the par value. During the last one year the price of the share went up to Rs 18.95 from Rs 11.50 per share.
During the year under review, the company crushed 444.55 thousand metric tonnes of sugar cane as against 468.87 thousand tonnes in the preceding year showing 5.2% decrease in the milling of cane.
The crushing season lasted for 136 days as against 149 days in the previous sugar cane season. In 2004-05 season the average recovery of sugar improved from 8.01% to 8.55%. Sale in terms of value was recorded at 387.82 million as against Rs 629.92 million in the previous year denoting 38.4% decline. This is the lowest sales figure since 1999.
Gross margin sharply eroded by 4.72 percentage points from 10.78% to 6.06% during the year under review (FY 2004-05) down to Rs 23.52 million from 67.88 million in the preceding year. It declined by 65.35% as compared to the previous year's and the gross profit figure of that is also the lowest of last six years.
Despite lower productivity, sales and profitability the operating expenses remained stagnant at the level of preceding year. Finance cost also escalated by Rs 3.84 million. Furthermore, other operating income had a major shortfall of Rs 8.8 million when compared the two years figure.
Hence the company booked net loss after taxation at Rs 43.72 million (2003-04: net loss Rs 1.20 million).
This contributed in the enlargement of accumulated deficit from Rs 70.89 million in the previous year to Rs 114.60 million during the period under review. Hence the capital was deficient by Rs 20.10 million as against small shareholders equity of Rs 23.61 million in positive figure.
The company tried to shore-up the busting of the equity base. It injected additional fund as subordinated loan which increased from Rs 60.0 million in the previous year to Rs 135.10 million and it worked as quasi equity while working out the long-term debt coverage and long term debt to equity ratio came close to benchmark ratio.
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Performance Statistics (Million Rupees)
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30 September 2004 2003
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Share Capital-Paid-up: 94.50 94.50
Accumulated (Loss): (114.60) (70.890)
Shareholders Equity: (20.10) 23.61
Subordinated Loan: 135.10 60.00
L.T. Debts: 185.64 144.90
Current Liabilities: 355.57 157.04
Tangible Fixed Assets: 215.85 221.93
L.T. Deposits: 38.02 19.38
Deferred Taxation: 15.87 2.79
Current Assets: 386.47 141.45
Total Assets: 656.21 385.55
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Sales, Profit & Pay Out:
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Sales: 387.82 629.92
Gross Profit: 23.52 67.88
Operating (Loss)/Profit: (10.89) 33.57
Other Operating Income: 0.43 8.38
Finance (Costs): (47.07) 43.23
(Depreciation): (11.53) (15.97)
(Loss) Before Taxation: (57.54) (1.27)
(Loss) After Taxation: (43.72) (1.20)
(Loss) Per Share (Rs): (4.63) (0.13)
Share Price (Rs) on 13/06/05: 11.75 -
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Financial Ratios
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Price/Earning Ratio: (-) -
Book Value Per Share: (2.13) 2.50
Price/Book Value Ratio: (-) -
Debt/Equity Ratio: 62:38 63:37
Current Ratio: 1.09 0.90
Assets Turn Over Ratio: 0.59 1.63
Days Receivables: 2 -
Days Inventory: 185 25
Gross Profit Margin (%): 6.06 10.78
Net Profit Margin (%): (11.27) 0.19
R.O.A. (%): (6.66) 0.31
R.O.C.E. (%): (14.54) 0.50
Plant Capacity & Production Sugar (Thousand Tons)
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A) Capacity under
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production Capacity (Sugar) Rules 1972
Capacity based on 160 Days: 27.20 27.10
Production based on 136/149 Days: 38.01 37.52
Capacity Utilisation (%): 139.74 138.40
B) Average (%): 8.55 8.01
C) Support Price (Rs): 40.00 40.00
D) Cane Crushed (000 Tons): 444.55 468.87
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COMPANY INFORMATION: Chief Executive: Ghulam Muhammed A. Fecto; Director: Munawar Ali Fecto; Company Secretary: Abdul Samad; Registered Office: 1st Floor, Panorama Centre, Raja Ghazanfar Ali Khan Road, Karachi-75530; Islamabad Office: 14-1st Floor Beverly Centre, 56-G Jinnah Avenue Blue Area Islamabad; Zonal Office: Nawa-e-Waqt House 4, Shahrah-e-Fatima Jinnah Lahore; Mills: Okara (Punjab); Web Address: www.fecto.com.
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