Textile Spinning: TATA TEXTILE MILLS LIMITED - Period (9 Months) Ended June 30, 2005

The company belongs to a large conglomerate Tata Group of Companies whose other associated companies are Salfi Textile Mills Ltd, Island Textile Mills Ltd and Tata Energy Ltd during the period (nine months) under review, the company's sales revenue was lower than preceding full year's figure.
Despite nine months report the company's profitability were much higher than preceding year's figure. The company has enlarged its production capacity and the forthcoming full financial year would be able to enhance further its capacity utilisation.
The company's unit No 1 is dedicated for local cotton whereas the purchase for unit No 2 has been diversified to procure cotton from two sources in USA. The strategy is to minimise risk of cotton buying and trading and to strike a balance between local and imported cotton. It has been experienced that international prices are now affecting local prices but the industry's large imported stock and carry over stock, the prices of cotton seem to be, "respectable."
Tata Textile Mills was incorporated in the province of Sindh on April 15, 1987 as a public limited company. The company is listed on Karachi and Lahore stock exchanges while its registered office is situated at Textile Plaza M.A. Jinnah Road Karachi. Its manufacturing facilities are located at District Muzaffargarh in the province of Punjab. The company is a textile spinning unit equipped with 44,400 spindles.
The capacity has increased from 19,200 spindles to 44,400 during the nine months under review. Thus the production capacity has been rated at 9.816 million kgs of yarn after conversion into 20/s count.
The company attained 94.9% utilisation of capacity and the annual report under review clarified that the low production is due to the installation of 25,000 spindles which came under production with effect from December 30, 2004 and the remaining period is only six months contributing to the production activity.
The company has received a number of certification such as Supima, EN ISO 9001:2000 (expiry date October 24, 2007) from AV International Ltd Brussels.
The authorisation to use the Supima trademark enables the licencee of Supima to uphold the highest standard of quality and distribution of all Supima cotton textile products. This also certifies that the said licencee is purchasing, consuming or using yarn or fabric made from American Pima Cotton.
The share of the company is trading at high market value as on September 20, 2005, the price of Tata Textile Mills shares was quoted at Rs 35.50 per share for the closing quotation of the day. This works out to 3.6 times of the par value whereas the peak price of the share during the last year was 77.25 per share approaching nearly eight times of the par value.
The company has a track record of regular dividend payouts and the financial results since year 2000 denote that the dividend rate (cash & stock) ranged between 10% to 20%. The 10% cash dividend payout was recommended for the 9M 2004-05 and 20% dividend payout was recorded in the year 2000.
The financial year of the company has been changed from October-September to July-June period. Due to the implementation of the new financial year, the reporting accounting year could cover only nine months.
During the period (nine months) under review, the company generated sales at Rs 1.095 billion as against Rs 1.169 billion posted for last full year 2003-04. Despite shorter period, the company's profitability was on much higher side as compared to the preceding year. It can be seen from the following Performance Statistics that although the profitability stages of gross profit, profit from operations and pre-tax profit the figures were much higher and the performance can be termed impressive.
The company posted net profit at Rs 60.08 million for the nine months period as against Rs 40.08 million in the preceding full financial year.

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Performance Statistics                            (Mln Rs)

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Balance sheet                                      -As At-

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                                  June 30     September 30

                                     2005             2004

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Share Capital-Paid-up:             173.25           150.65

Reserves & Surplus:                228.71           181.02

Shareholders Equity:               401.96           331.67

Surplus on Revaluation of F/A:     135.93           146.18

L.T. Debts:                        899.28           436.18

Deferred Liabilities:               41.41            30.21

Current Liabilities:               960.13           406.17

Fixed Assets:                    1,447.16           931.55

L.T. Deposits:                      26.75            12.55

Current Assets:                    964.80           406.31

Total Assets:                    2,438.71         1,350.41

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Profit & Loss A/C for:

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                           9 Months ended       Year ended

                             June 30 2005     Sept 30 2004

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Sales:                           1,095.06         1,168.56

Gross Profit:                      217.64           152.16

Other Operating Income:              0.53             0.34

Profit From Operations:            144.82            79.96

Financial Cost:                    (64.08)         (24.90)

(Depreciation):                    (80.57)         (56.58)

Profit Before Taxation:             80.74            55.06

Profit After Taxation:              60.03            40.08

Earning Per Share (Rs):              3.47             2.31

Dividend (Cash) %:                     10                -

Dividend (Stock) %:                     -            15.00

Share Price (Rs) on 20-09-2005:     35.50                -

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Financial Ratios

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Price/Earning Ratio:                10.23                -

Book Value Per Share:               23.20            22.01

Price/Book Value Ratio:              1.53                -

Debt/Equity Ratio:                  63:37            48:52

Current Ratio:                       1.00             1.00

Assets Turn Over Ratio:              0.45             0.87

Days Receivables:                      48               17

Days Inventory:                       268               91

Gross Profit Margin (%):            19.87            13.02

Net Profit Margin (%):               5.48             3.43

R.O.A      (%):                      2.46             2.97

R.O.C.E (%):                         4.06             4.24

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A) Plant Capacity & Production Million Kgs Yarn 20/s Count

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Installed Capacity:                 9.816            5.879

Production:                         9.313            7.386

Capacity Utilisation (%):           94.87           125.63

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The Low Production against capacity is due to installation of 25,200 new spindles and come under production with effect from December 30, 2004.