This tannery and leather garment unit of Korangi Industrial Area Karachi has been able to sustain profitability for the second consecutive year after two loss years in 2002 and 2003. The directors foresee another profitable year because they observe that international leather market is responding well.
The in-house atmosphere is also conducive as the suppliers and workforce are giving excellent support for smooth operation. The company recorded impressive growth rate of more than 33% in sales which were the second highest sales in the last six years. Its financial backbone is robust and receivables are excellent while inventory is relatively large for extended period.
The share in the company is priced at Rs 14.10 per share carrying 41% premium. During the last one year its share price went up even higher as it peaked at Rs 25 per share. For the year under review the cash dividend announcement is at 10% which will be disbursed next year according to change in Accounting Policy as per IAS-10. During the year under review the effect of appropriation is of last year's dividend announcement of 7.5%. The company has made modest addition in the plant and machinery.
Pak Leather Crafts Limited is a public limited company incorporated in the province of Sindh having its registered office located in the Korangi Industrial Area Karachi.
The company was listed on Karachi Stock Exchange in 1991 and its shares are also quoted on Lahore and Islamabad Stock Exchanges. The principal activity of the company is leather tanning manufacturing of leather garments and export of leather and leather garments.
As regards ownership of the company's equity the directors and the members of their family owned 43.49% of the company's total 3.4 million shares of Rs 10 each. In addition one of the directors family member Aqil Khurshid Ahmed owned 217,900 shares shown separately in his name. This shareholding works out to 6.41% of the company's stock. The company's 326 individual shareholders owned 30.6% of the company's stock. Remaining shares were owned by institutional shareholders among whom one joint stock company held 27.23% and State Life Insurance owned 4.94% of the company's stock.
The directors have further stake in the company as they injected unsecured, interest free loan in the sum of Rs 31.11 million which is repayable after two years. But the directors have deferred its payment for further two years.
Apart from directors' loan, other source of finance is mostly for the short-term export refinance. During the year under review, the company obtained sanctioned limit of Rs 249.95 million under export refinance scheme from commercial banks. Out of this limit the company availed an amount of Rs 214.95 million by 30th June 2005.
The company has very small balance in the long-term debt by way lease finance. In this case the financial charges range between 8% to 9% per annum applied as discounting factor and for this finance the company got buy back option which was accordingly exercised.
During the period under review the financial position of the company remained robust as evidenced from its liquidity and solvency ratios. However cast and bank balances depleted to Rs 7.45 million on 30th June 2005 from Rs 11.93 million same date last year.
The receivables position is excellent as these are for less than 2 weeks. But during both the years under comparison large inventory has been locked in liquidity for much extended period.
Possibly such a large inventory is the requirement of business process in the leather export industry.
During the year under review, the company posted sales in terms of value at Rs 514.10 million (FY 2003-04: Rs 385.95 million) registering impressive growth rate of 33.2%. This is the 2nd highest sales figure during the last six years. The highest sales figure was Rs 567.53 million, posted in year 2001.
The directors are highly optimistic about the future prospects of their enterprise. In their report, they emphasized that keeping in view the present positive behaviour of the international leather market, the export sales in next financial year will increase further. Out of the total export sales, leather export sales comprised 40.9% and leather garments exports accounted for 59.1%.
Tannery and leather garment enterprise is labour intensive business which is also highly dependent on efficient supply chain management.
The directors paid tribute to the company's workforce and suppliers for the uncompromising support and contribution to ensure smooth operation.
During the year the gross profit margin eroded slightly because of increase in cost.
In this period the company also made modest addition in the fixed assets to the extent of Rs 10.8 million, mostly in plant and machinery.
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Performance Statistics (Million Rupees)
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30th June 2005 2004
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Share Capital-Paid-up: 34.00 34.00
Un-appropriated Profit: 32.53 26.94
Shareholders Equity: 66.53 60.94
Loan From Directors-Unsecured: 31.11 31.12
L.T. Debts: 2.02 -
Deferred Liabilities: 2.41 1.48
Current Liabilities: 366.64 289.41
Fixed Assets: 53.11 52.13
L.T. Deposits: 1.15 -
Current Assets: 414.45 330.82
Total Assets: 468.71 382.95
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Sales, Profit & Payout
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Sales-Net: 514.10 385.95
Gross Profit: 66.46 50.98
Operating Profit: 26.59 19.70
Finance (Cost): (13.50) 12.38
(Depreciation): (5.59) (5.63)
Other Operating Income: 0.27 0.08
Profit Before Taxation: 12.69 7.03
Profit After Taxation: 8.14 4.17
Earnings Per Share (Rs): 2.39 1.23
Dividend Cash (Mln Rs): 2.55 -
Share Price (Rs) on 20-12-2005: 14.10 -
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Financial Ratios
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Price/Earning Ratio: 5.90 -
Book Value Per Share: 19.57 17.92
Price/Book Value Ratio: 0.72 -
Debt/Equity Ratio: 2:98 0:100
Current Ratio: 1.13 1.14
Asset Turnover Ratio: 1.10 1.01
Days Receivables: 12 5
Days Inventory: 287 294
Gross Profit Margin (%): 12.92 13.21
Net Profit Margin (%): 1.58 1.09
R.O.A. (%): 1.74 1.09
R.O.C.E. (%): 7.97 4.46
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PRODUCTION CAPACITY: "In view of the peculiar nature of the business carried on by the company the capacity of the tanneries is not determinable. The normal stitching capacity is approximately 120,000 jackets per annum."
COMPANY INFORMATION: Chairman: Muhammad Khurshid Ahmed; Chief Executive: Muhammad Saleem Ahmed; Chief Financial Officer & Company Secretary: Syed Asif Mahmood Rizvi; Registered Office & Factory: Plot-15, Sector 7-A Korangi Industrial Area Karachi; Web Address: Not Reported.
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