Sugar & Allied Industries: HABIB-ADM LTD (Habib-Archer Daniels Midland Co Ltd) - Year Ended 30th June 2005
The company has been able to improve profitability because of its subsidiary company's dividend income inspite of its higher finance cost and administrative expenses and very low gross profit.
It is refreshing that the company has been able to recommend dividend after remaining without dividend last year. On the one hand, the rice market witnessed price correction due to liquidation of long positions by the supply chain.
On the other, this liquidation is likely to be further impacted by the new crop arrivals. Hence this opportunity unfolded to realign the market policy to aggressively pursue and recapture the market share lost earlier due to non competitive pricing.
During the year under review the financial position of the company remained robust as there was no long term borrowing and current ratio was much higher than the benchmark ratio. However the receivables were locked-in for longer period.
Habib-ADM Limited was incorporated in the province of Sindh as a public limited company having its registered office located at PCG Plaza, Sarwar Shaheed Road Karachi.
The principal activity of the company is to produce rice based starch sugar and protein. The manufacturing facilities of the company is situated in Balochistan province at Hub Industrial Trading Estate.
Habib-ADM Limited pioneered the conversion of rice into glucose, dextrose, fructose, sorbitol, maltodextrine. These are essential ingredients for pharmaceuticals, food and beverages, cosmetic and healthcare products, confectionery products, powdered energy drinks, breads and biscuits poultry feeds, aquatic feeds and animal feeds.
The company is listed on stock exchanges in Karachi and Lahore. At present its five-rupee share is trading at Rs 6.55 per share carrying 31% premium over the par value. During the last one year the market value of the share had peaked at Rs 10.15 per share.
During the financial year ended on June 30, 2005 (FY 2004-05) and export sales accounted for 4.0% (FY 2003-04: 9.7%) of net sales. Net sales after deduction of sales tax amounted to Rs 348.52 million showing 17.97% decline as against Rs 424.87 million posted in the preceding year.
During the year its gross profit nose-dived to Rs 18.93 million as against Rs 60.58 million in the preceding year. The administrative expenses were higher by a million rupees but distribution cost decreased by Rs 5.24 million. Net operating expenses were lower by Rs 4.03 million.
Nevertheless the operation could not absorb fully the operating expenses hence there relatively larger operating loss at Rs 46.87 million as against operating loss of Rs 9.46 million in the preceding year.
Even then the company remained profitable in view of relatively dividend income of Rs 80.17 million (2003-04: Rs 25.31 million) received from subsidiary company Habib Microfine (Pvt) Ltd. The dividend income absorbed higher finance cost as can be observed from the following Performance Statistics. The company posted pre-tax profit of Rs 25.26 million (16.45 million) showing 53.6% increase over the preceding year's.
The Chairman of the company Ghaffar A Habib reported that during the second half of the year there was upsurge in demand for the Group's products in the foreign market and this helped in improving the profitability. This permitted the directors to recommend dividend which is in cash at 10%.
The other positive factor emerged towards the end of financial year that the supply chain in the rice market started liquidating their long positions ahead of the new crop.
This has enable the company to realigned its marketing policy to aggressively pursue and recapture lost market share.
The chairman also recounted the status of capital works-in-process of manufacturing facilities in the consumer division (confectionery and drinks), rice husking plant, Sorbitol expansion, Protein processing and solvent plant.
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Performance Statistics (Million Rupees)
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30th June 2005 2004
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Share Capital-Paid-up
(5-Rupee Shares): 200.00 200.00
Reserves & Surplus: 159.18 139.74
Shareholders Equity: 359.18 339.74
Current Liabilities: 105.17 151.26
Fixed Assets: 232.75 238.93
L.T. Deposits: 5.83 5.83
L.T. Investment in Share
Capital of Subsidiary Company: 1.00 1.00
Current Assets: 224.77 245.24
Total Assets: 464.35 491.00
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Sales Profit & Pay Out
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Sales-Net: 348.75 424.87
Gross Profit: 18.93 60.58
Operating (Loss): (46.87) (9.45)
Dividend Income from
Subsidiary Company: 80.17 25.31
Finance (Cost): (7.70) (3.25)
(Depreciation): (16.24) (18.51)
Profit Before Taxation: 25.26 16.45
Profit After Taxation: 19.44 15.04
Earning Per Share of Rs 5/- each: 0.49 0.38
Dividend: - -
Share Price (Rs) on 13/09/05: 6.55 -
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Financial Ratios
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Price/Earning Ratio: 13.37 -
Book Value Per Share: 8.98 16.99
Price/Book Value Ratio: 0.73 -
Debt/Equity Ratio: 0:100 0:100
Current Ratio: 2.14 1.62
Asset Turn Over Ratio: 0.75 0.86
Days Receivable: 106 76
Days Inventory: 88 106
Gross Profit Margin (%): 5.43 14.26
Net Profit Margin (%): 5.57 3.53
R.O.A (%): 4.19 3.06
R.O.C.E (%): 5.41 4.42
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Production Capacity: The designed capacity of the plant is 45,000 M. Tons of High Fructose. Subsequent additions and modifications to the plant have enabled production of a wider range of products including liquid glucose, maltodextrins, dextrose powder, orbital etc. Market constraints have been the main factors for low utilisation of capacity.
COMPANY INFORMATION: Chairman: Ghaffar A. Habib; Chief Executive Officer: Owais G. Habib; Chief Financial Officer & Company Secretary: S.M. Vakil; Registered Office & Head Office: PCG Plaza Sarwar Shaheed Road Karachi-74200 Web Address: Not Reported: Factory: Plot No 6 Sector M-243 Mauza Baroot, District Hub, H.I.T.E. Balochistan.
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