Paper & Board: SECURITY PAPERS LIMITED - Year Ended 30th June 2005

The year under report (FY 2004-05) is the first completed year of operations after the induction of the new paper manufacturing machine. PM 2 and the company recorded the highest ever production.
Resultantly, the company achieved highest ever sales volume of 1,975 tonnes as against 1,774 tonnes during the preceding year, which is 11% higher. Due to increase in volume of sales Security Papers Limited's net sales revenue shot up by Rs 123.56 million touching the highest sales figure of Rs 979.96 million as compared to Rs 856.40 million in the preceding year.
The profit before taxation during the year was in the sum of Rs 430.80 as compared to Rs 410.96 million during the previous year, up by 4.82%. But net profit after taxation was lower at Rs 281.74 million as against Rs 387.55 million booked in the previous year reflecting massive decline by 27.3%.
The decline was mainly because of higher provision of taxation, as a result of the amendments made in the Income Tax Ordinance 2001 by the Finance Act 2005. The company made appropriations for cash dividend @Rs 5/share (2003-04: Rs 5.50/share).
Security Papers Ltd (SPL) manufactures paper for bank notes, financial instruments, university degree certificates and other types of security papers. The company was established in 1965, it became a public company and was listed on the Karachi Stock Exchange in 1967.
The company became a joint venture between Pakistan, Iran and Turkey. In the shareholding profile of the company as on June 30, 2005, Pakistan Security Printing Corporation (Pvt) Ltd held 40.03% stock of the company.
Turkiye Seluloz Ve Kagit Fabrikalari, Izmit (Turkey) and Industrial Development and Renovation Organisation of Iran, Tehran (Iran) held 10% stock each. NIT held 10.3% of the company stock.
The registered office of SPL is located at 108 (1st floor), Sidco Avenue Centre, Moulana Din Muhammad Wafai Road Karachi and its factory is situated at Jinnah Avenue, Malir Halt Karachi.
During the last one year the highest price of SPL share was recorded at Rs 186 and the lowest price was quoted at Rs 120.05. On August 4, 2005, the closing quotation of the share was recorded at Rs 130 per share which is 13 times of the par value. The book value per share works out to Rs 91.46.
The market value of SPL share invariably remains high the price is realistically based on excellent financial and operating fundamentals of the company. This has enabled the company to bring sharp turnaround in its productivity and profitability and to receive accolades such as the Top Companies Award of the Karachi Stock Exchange for the fourth consecutive year.
The company has ISO 9002 certification from DEI Norske Veritas (DNV). On the other hand the JCR-VIS Credit Rating Company has upgraded the long term rating of the company to "AAA" (Triple A) and maintained the short term rating of A1+ (A one plus) during the financial year 2004-05. These ratings denote very low expectation of credit risk and a very strong capacity for timely payment of financial commitment.
The Chairman and Chief Executive of the company Syed Naseem Ahmed is a renowned corporate professional and he lays great emphasis on areas concerning effective and efficient corporate governance.
To reinforce this the company voluntarily offered itself during the year 2003-04, for corporate governance rating by an independent agency and had achieved CGR-8 on a rating scale of 1.10.
One can easily visualise the winning model as to how an able leadership coupled with good governance can produce best results in profitability, productivity and customer service.
As regards future, outlook the chairman brought a robust integrated and effective corporate strategy to deliver sustainable volume and profit growth.
To meet growing local demand and to be in a position to export security paper, the company initiated an expansion project which is now complete. For this expansion, plant was supplied by Voith Paper, Germany. Security Papers Ltd, is now in a position to manufacture paper accepted internationally and having the latest security features.
The financial backbone of the company remain robust as is evidenced from the liquidity, and solvency ratios of the company shown in the following performance statistics. During the year under review (FY 2004-05) the company's net sales revenue grew by 14.42% to Rs 0.98 billion (FY 2003-04: Rs 0.86 billion) missing the billion rupees threshold by only 2% and hopefully this will be easily crossed in the FY 2005-06.

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Performance Statistics                     (Million Rupees)

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30th June                                  2005        2004

Share Capital-Paid-up:                   219.82      219.82

Reserves:                              1,790.57    1,629.72

Shareholders Equity:                   2,010.39    1,849.54

Surplus on Revaluation of Investment       0.92           -

Deferred Taxation:                        19.53           -

Current Liabilities:                     160.70       86.10

Fixed Assets:                          1,373.00    1,429.03

L.T. Investments:                         25.92           -

L.T. Loans:                                   -        0.01

L.T. Deposits:                            14.68       14.06

Current Assets:                          777.94      492.54

Total Assets:                          2,191.54    1,935.64

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Sales Profit & Pay Out

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Net Sales:                               979.96      856.40

Gross Profit:                            493.28      453.04

Operating Profit:                        441.21      407.38

Other Income:                             20.90       28.19

Finance (Cost):                          (0.11)      (2.33)

(Depreciation):                         (93.95)     (56.76)

Profit Before Taxation:                  430.80      410.96

Profit After Taxation:                   281.74      387.55

Earnings Per Share (Rs):                  12.82       17.63

Dividend Cash @ 50% (2004: 55%):          109.9      120.90

Market Price Per Share (Rs) on 4/08/05   130.00           -

Price/Earning Ratio:                      10.14           -

Book Value Per Share:                     91.46       84.14

Price/Book Value Ratio:                    1.42           -

Debt/Equity Ratio:                        0:100       0:100

Current Ratio:                             4.84        5.72

Assets Turn Over Ratio:                    0.45        0.44

Days Receivables:                            41          65

Days Inventory:                             107          77

Gross Profit Margin (%):                  50.34       52.90

Net Profit Margin (%):                    28.75       45.25

R.O.A. (%):                               12.85       20.02

R.O.C.E. (%):                             13.87       20.95

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Production Capacity (Tonnes)

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A) Old Paper Manufacturing Plant

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Installed Capacity:                       1,460       1,460

Actual Production:                           68         694

Capacity Utilised (%):                     4.66       47.53

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B) New Paper Manufacturing Plant

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C) Installed Capacity:                    2,000       2,000

Actual Production:                        2,062       1,118

Capacity Utilised (%):                   103.10       55.96

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