Textile Spinning: SALFI TEXTILE MILLS LIMITED - Year Ended 30-06-2005 & 9 Months Ended 31-03-2006

This review encompasses two periods ie last financial year's (2004-05) nine months from July 2004 to June 2005 and cumulative three quarters (9 months) of current financial year 2005-06.
During the last financial year (9M 2004-05), the company posted net sales at Rs 720.54 million which is for nine months and its annualised estimate works out to Rs 961 million which is very close the previous financial year (12 months) 2003-04 actual, audited net sales of Rs 964 million. Operating profit of 9M 2004-05, was posted at 21.68 million. But the finance cost escalated to Rs 21.07 million almost wiping out the profitability. This left only Rs 0.61 million as pretax profit and Rs 0.97 million as net profit. The performance statistics of 9M 2004-05 has been appended with this column.
As regards the nine months review of current financial year (9M 2005-06) the company posted net sales at Rs 658 million and in these nine months company booked net loss after taxation at Rs 2.90 million as against net profit of Rs 7.56 million in the nine months of July 2004 to March 2005 of last financial year. The main reasons were larger financial cost and tremendous pressure on cost because of inflation.
Salfi Textile Mills Ltd was incorporated in the province of Sindh on January 05, 1968 as a public limited company and is listed on Karachi Stock Exchange. The principal activity of the company is manufacture and sale of yarn. The address of its registered office is 8th Floor, Textile Plaza, M.A. Jinnah Road Karachi and its manufacturing facilities are located at Landhi Industrial Estate Karachi.
At present Salfi Textile shares are trading at the stock exchange at Rs 32.08 per share which is more than three times of the par value. During the last one year market value of the share ranged between Rs 28.35 and Rs 35.70 per share.
The company has very consistent profit distribution strategy since the last two years. Even though the Earning Per Share for last year 2004-05, was minimal at paisas 10 only, the company announced cash dividend at 10% (Re one per share) identical to the previous financial year 2003-04 cash payout of 10%. In addition, in the previous year the company had declared also stock dividend at 10%.
As regards ownership of its equity, Anwar Ahmed Tata Chairman and Chief Executive Officer of the company is holding 69.3% of the company's stock. Its associated undertaking Island Textile Mills Ltd owns 11% of the company stock. Its 927 individual shareholders own 6.3% of the company.
This is a spinning unit equipped with 35,100 spindles and its production capacity has been rated at 9.016 million kgs of 20s count yarn for nine months whereas its annual production capacity has been rated at 10.458 million kgs of 20s count yarn. For the nine months of the last financial year 2004-05, the company attained utilised capacity of 105% whereas during the previous year (12 months) FY 2003-04 the company had attained 123% utilised capacity.
The company has attained a number of certifications of Quality Management Systems since 1997, the latest being EN ISO 9001:2000 valid upto October 24, 2007. This shows the company's awareness of Quality Control which attracts confidence of its stakeholders. The company also ensures continuous enhancement in this technology although renovation/construction work has been arduous task in a running mill.
It has been reported that an amount of Rs 700 million is being invested. It is in the process of a major renovation, including selling up of a new unit namely Salfi-2.
The products of Salfi is envisaged to be diversified with Salfi-1 producing synthetic yarn and Salfi-2 to be lined up for cotton yarn only. The directors visualise that Salfi Textile Mills will become one of the best mills in the textile spinning sector.
The 3rd Quarter Report of the textile spinning financial year 2005-06 (9M 2005-06) is in hand. The report is that unit 1 is fully operational with all 40 frames working, simultaneously renovation work was going on until April 26, 2006. It is hoped that complete overhauling of this unit would take another two-three months.
The unit remained shut down from mid December 2005 to April, 2006. During this closure the factory building was renovated and prepared to replace old machines with brand new, modern, state-of-the-art machines. After the installation of these machines, Unit 2 commenced production.
The management is bracing its muscles to overcome the initial hiccups. The directors are confident that with most modern machines and equipment at their disposal, they will make their mark in the medium coarse counts for denim, towel and knitting markets.
Unit No 1 specialising in polyester yarn and Unit No 2 dedicated for cotton yarn of the highest quality will provide cutting edge for competition and excellent support to the marketing team.

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Performance Statistics                       (Million Rupees)

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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:                  33.43           33.39

Reserves & Surplus:                     76.57           70.61

Shareholders Equity:                   110.00          104.00

Unrealized Gain in Value of Securities

Available for Sale:                      0.86            0.81

Surplus on Revaluation

 of Fixed Assets:                      559.62          255.45

L.T. Debts:                            192.17          126.54

Deferred Liabilities:                   78.97           83.62

Current Liabilities:                   460.12          362.05

L.T. Investment:                        31.34           31.29

L.T. Deposits:                           2.16            2.97

Current Assets:                        479.85          366.58

Total Assets:                        1,401.74          932.47

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Profit & Loss A/c for the Nine Months Ended June 30 2005

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                        (9 Months) October 01  (Year) October

                                     2004 to       01 2003 to

                                        June        September

                                     30, 2005        30, 2004

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Sales-Net:                             720.54          964.45

Gross Profit:                           48.47           74.65

Other Operating Income:                  0.07            0.83

Profit From Operations:                 21.68           38.62

Finance (Cost):                        (21.07)        (19.35)

(Depreciation):                        (30.06)        (38.39)

Profit Before Taxation:                  0.61           19.27

Profit After Taxation:                   0.97           12.15

Earnings Per Share (Rs):                 0.29            3.64

Dividend Cash (%):                      10.00           10.00

Dividend Bonus Stocks (%):                  -           10.00

Share Price (Rs) on 14-07-06:           32.80               -

Financial Ratios

Price/Earning Ratio (Times):           113.10               -

Book Value Per Share (Times):           32.90           31.15

Price/Book Value Ratio (Times):          1.00               -

Debt/Equity Ratio:                      82:78           26:74

Current Ratio (Times):                   1.04            1.01

Asset Turn Over Ratio:                   0.51            1.03

Days Receivables:                          56              42

Days Inventory:                           148              67

Gross Profit Margin (%):                 6.73            7.74

Net Profit Margin (%):                   0.13            1.23

R.O.A. (%):                              0.07            1.30

R.O.C.E. (%):                            0.10            2.13

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Plant Capacity & Production

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A) Spinning (Figure in Million Kgs)-

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Installed Capacity (20's Count):        9.016          10.458

Actual Production Converted

 into 20 Count:                         9.429          12.867

Capacity Utilization (%):             104.581          123.03

B) Number of Spindles Installed:       35,100          39,036

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