Sugar and Allied Industries: HUSEIN SUGAR MILLS LIMITED - Year Ended September 30, 2005 (Audited)
Husein Sugar Mills Limited (Husein Sugar) is a public limited company incorporated (No KAR.1941 of 1965-66) in Pakistan under the Companies Act, 1913 (Now Companies Ordinance, 1984). Shares of Husein Sugar are listed on Karachi and Lahore stock exchanges.
Principal activity of the company is production and sale of sugar and allied products. The company had 427 permanent employees as on September 30, 2005 (2004: 439 employees).
HUSEIN SUGAR HAS THE FOLLOWING ASSOCIATED COMPANIES: (1) Shadab Textile Mills Limited (12.5% holding), (2) Sargodha Spinning Mills Limited, (3) Tariq Industries Limited (38.51%), and (4) Sargodha Board Mills Limited (31.91%).
Authorised capital of Husein Sugar on September 30, 2005 was Rs 200 million, comprising 20 million shares of Rs 10 each. As on September 30, 2005 the paid up capital of the company was Rs 110 million, which was held by 513 shareholders. The directors, CEO, and their spouses and minor children hold nearly 61% shares. General public holding is over 32%. The rest of the shares are distributed among a small number of corporate entities including banks and DFIs.
Husein Sugar Mills was able to produce 49,956 M. Tons of sugar during 2004-2005 season compared to 55,690 M. Tons sugar produced in the last season. According to the notes to the financial statements, during the year ended September 30, 2005 crushing was low mainly due to normal maintenance of the plant and intermittent supply of sugarcane. The company had imported raw sugar worth over Rs 34 million but it was not refined during 2004-05 season. Details about working days, sugarcane crushed and recovery of sugar are given below.
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Season Season
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Sugarcane 2004-2005 2003-2004
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Crushing capacity/day (M. Tons): 4,700 4,700
Days worked: 135 Days 135 Days
Cane crushed ((M. Tons): 554,113 622,148
Sugar produced: 49,956 55,690
Recovery %: 9.02% 8.95%
Molasses Production (M. Tons): NA NA
Molasses Recovery (%): NA NA
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According to the Directors' Report, the company commenced a major BMR scheme at the end of crushing season 2004-05 and successfully completed it before start of the current crushing season 2005-06. The technology updating mainly aims at improving sugar recovery, increasing sugar production and ameliorate product quality.
As on September 30, 2005, the company had highly satisfactory current ratio (1.94:1) and debt to equity ratio (8:92). The company has built sufficient equity (65% of total assets) by retaining part of the profits. Except finance lease liability of Rs 37 million, there are no long-term or short-term loans. The company has ample borrowing capacity, if it so desires, to mobilise loan funds for expansion in crushing capacity or some other allied project.
Total assets of the company as on September 30, 2005 increased by 32% to Rs 644 million as against Rs 488 million on September 30, 2004.
The increase in assets has been largely due to implementation of addition to operating fixed assets. Net operating assets as on September 30, 2005 show over 49% increase on assets at end of last year. The deployment of financial resources as on September 30, 2005 is 50% in operating fixed asset (2004: 45%) and the rest largely in current assets particularly in stores & spares and stock-in trade.
For the year ending September 30, 2005 the company made handsome after tax profit at Rs 109 million as against profit of Rs 54 million for the previous year. Despite lower production of sugar in 2004-05 season compared to 2003-04 season, net sales have increased form Rs 1.061 billion for 2004 to Rs 1.154 billion for 2005. This has been made possible due to sale of sugar stock carried over from the previous year and better average price for sugar. For the year under review Cost of Goods Sold (COGS) works out to 79% of net sales as against 87% for the last year.
Therefore, profitability margins show an improvement over the previous year. ROE for this year works out to 26% (2004: 16%). The company shares are being traded these days at 1.26 times of the book value on September 30, 2005. The Board of Directors has recommended cash dividend at 20% (2004: 25%) and stock dividend at 10% (2004: Nil). Comparative performance statistics are given below.
The Directors in their Report to the Shareholders have discussed the situation about sugar cane availability and prices.
As envisaged, less sugarcane availability against enhanced sugarcane crushing capacity has triggered, during current crushing season, early price-war among sugar manufacturers to attract sugarcane to feed their mills. A number of sugar mills, neighbouring and from remote areas, have been trying their utmost to divert sugarcane flow to their mills by fuelling rising trend of sugarcane prices, despite additional procurement, handling and transportation const. The situation is prone to worsen if situation is allowed to continue.
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Performance Statistics
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Balance Sheet (Audited) (Rs in 000)
As on September 30, 2005 2004
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Share Capital-Paid-up: 110,000 110,000
Reserves & un-app. Profit: 308,268 219,217
Total Equity: 418,268 329,217
Surplus on Revalue, FA: 0 0
Equity & Revalue Surplus: 418,268 329,217
Subordinated Debt, Directors: 0 0
Other LT Debt: 36,636 676
LT Debt: 36,636 676
Deferred tax & Gratuity: 34,979 26,724
Total - NC Liabilities: 71,615 27,400
Capitalization: 489,883 356,617
Current Liabilities: 154,158 131,044
Total Liabilities & Equity: 644,041 487,661
Operating Fixed Assets: 325,116 218,271
Other non current assets: 19,722 7,835
Stores and spares: 88,401 59,462
Stock-in-Trade: 140,909 98,658
Trade Debts: 887 1,064
Advances, deposits, etc: 6,779 13,062
Current Assets: 299,203 261,555
Total Assets: 644,041 487,661
Conting.& commitments: 14,919 62,798
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Ratios:
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Current Ratio: 1.94 2.00
Debt-Equity Ratio: 8:92 0:100
Book Val./share - Rs: 38.02 29.93
Quoted Price- (20-6-06)- Rs: 48.00 -
Price/Book Value Ratio: 1.26 -
Contin. & commit./Equity-X: 0.04 0.19
Income Statement 2,005 2,004
Net Sales: 1,153,628 1,061,314
COGS: 908,294 923,218
Gross Profit: 245,334 138,096
Operating Profit: 170,417 85,924
Profit before Taxation: 167,631 83,303
Profit after Taxation: 109,070 54,229
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Ratios:
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Gross Profit/Net Sales: 21% 13%
Operating Profit/Net Sales: 15% 8%
Profit after Tax/Net Sales: 9% 5%
Net Profit/Equity: 26% 16%
ROA: 17% 11%
ROCE: 22% 15%
Earnings/Share (Y. end capital)-Rs: 9.92 4.93
Cash Dividend: 20% 25%
Stock Dividend: 10% 0%
Inventory Turnover-X: 6.45 9.36
Receivable Turnover- X: 1301 997
Price/Earning Ratio: 4.84 -
Asset Turnover-X: 1.79 2.18
Days Inventory: 57 39
Days Receivable: 0.3 0.4
Debt service coverage (times): 1.9 11.9
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Cash flow Summary 2005 2004
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Net Cash flow, Operations: 75,373 97,436
Net Cash flow, Investing: -73,366 -36,401
Net Cash flow, Financing: -30,326 -103
Change in net Liquidity: -28,319 60,932
Net Liquidity at beginning: 67,790 6,858
Net Liquidity at end: 39,471 67,790
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COMPANY INFORMATION: Chairperson & CEO: Mst. Nusrat Shamim; Director: Mian Sajjad Aslam; Company Secretary: Syed Arif Hussain; Chief Financial Officer: Irfan Qamar; Auditors: Riaz Ahmad & Co, Chartered Accountants; Legal Advisors: Manzoor Hussain Syed; Registered Office: 30-A, E/I, Old FCC, Gulberg - III, Lahore, Pakistan; Works: Lahore Road, Jaranwala, Punjab; Web Address: www.huseinsugarmills.com
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