Sugar & Allied Industries: THE FRONTIER SUGAR MILLS & DISTILLERY LIMITED - Year Ended September 30, 2005 (Audited)
The Frontier Sugar Mills & Distillery Limited (Frontier Sugar) is a public limited company incorporated on March 31, 1938 under the provisions of the Companies Act, 1913 (now the Companies Ordinance, 1984).
Shares of the company are quoted on Karachi and Islamabad stock exchanges in Pakistan. Frontier Sugar, principally engaged in manufacturing and sale of white sugar, is a subsidiary of the Premier Sugar Mills & Distillery Company Limited. Average number of employees of Frontier Sugar during the year ended September 30, 2005 was 396 (2004: 452).
Authorised capital of Frontier Sugar is Rs 20 million, comprising Preference as well as Ordinary Shares of Rs 10 each. Preference shares numbering 50,000 are 7% irredeemable shares with total par value at Rs 0.500 million, all of which is paid up as on September 30, 2005.
Ordinary authorised shares are valued at Rs 19.5 million, of which Rs 13.5 million are paid up representing 1,350,000 shares. Thus, the total paid up capital is Rs 14.0 million, which is held by 776 shareholders.
The Premier Sugar Mills & Distillery Company holds over 77% shares while holding in the names of sponsoring directors is rather small. General public holding is over 19% while the Government of NWFP holds 1.43% shares. The rest of the shares are distributed among a small number of entities including banks.
FRONTIER SUGAR, BESIDES PREMIER SUGAR- THE PARENT COMPANY, HAS THE FOLLOWING ASSOCIATED COMPANIES: (1) Chashma Sugar Mills Limited, (2) Arpak International Investments Limited, (3) Syntron Limited, and (4) Phipson and Co Pakistan (Pvt) Limited. The present Overview, however, is that of Frontier Sugar alone without consolidation with the holding company.
Frontier Sugar has been a 'composite' sugar mills. It has the capacity to make sugar from sugarcane as well as from sugar beet. Sugar beet season starts around May when sugarcane crushing season is almost over.
It had the Distillery plant. However, during the financial year ended September 30, 2004 it had written off the book value of its non-operating Distillery's plant & machinery.
Frontier Sugar was able to produce 8,202 MT sugar during 2004-2005 season compared to 19,254 MT sugar produced in the last season (from sugar cane and sugar beet).
During 2004-05 season sugar production was lower mainly due to lower availability of sugarcane, ostensibly diverted to 'Gur' making by the farmers. Also, crop of sugar beet was lower this season as growing wheat was considered a better option by some of the farmers. Therefore, sugar beet plant was not operated during 2004-05. Details about sugarcane crushed/sugar beet sliced and recovery of sugar are given below.
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Season Season
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Sugar cane 2004-2005 2003-2004
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Crushing capacity/day-(MT): 880 880
Days worked: 66 119
Cane crushed (MT): 82,999 145,686
Sugar produced-(MT): 8,202 15,002
Recovery %: 9.86% 10.38%
Sugar beet
Slicing capacity/day - (MT): 1,000 1,000
Days worked: 0 41
Sugar beet sliced-(MT): 0 45,934
Sugar produced-(MT): 0 4,252
Recovery %: 0.00% 9.12%
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The company has current ratio in highly satisfactory zone. There are no debts. The comfortable financial position of Frontier Sugar has been achieved largely through retention of profits in the past.
Total equity excluding Revaluation Surplus forms 80% of the total resources (2004: 75%). Current liabilities are about 6% of total assets. Non-current liabilities are deferred taxation and staff gratuity.
The company's total assets as on September 30, 2005 were 9% higher at Rs 264 million as against Rs 241 million on September 30, 2004.
The deployment of resources as on September 30, 2005 was 14% in Operating Fixed Asset (2004: 17%), long term investments at 6% (2004: 7%), stores and spares 14 % (2004: 14%), advances and receivables 4% (2004: 1%) and cash with banks at 58% (2004: 56%). The management might consider a review of investment and liquidity policies.
For the year ending September 30, 2005 the company made handsome profit at Rs 29 million as against a profit of Rs 11 million for the previous year. Despite lower production of sugar, higher profitability this year has been made possible due to better prices of sugar.
Moreover, for the year under review Cost of Goods Sold (COGS) works out to only 87% of net sales as against 97% of net sales for the last year. Similarly, other income was larger this year.
All these factors made positive contribution and the ROE for this year works out to 14% (2004: 6%). Earnings per Ordinary share works out to Rs 21.38 (2004: Rs 8.07). The Board of Directors has recommended cash dividend on Preference shares at 7% (2004: 14%) and on Ordinary shares at 15% (2004: 10%). Comparative performance statistics are given below.
The Directors in their Report state that for the 2005-06 season, the sugarcane growers are reluctant to supply sugarcane to the Mills, as the prices of "GUR" are very high in the local market. There is no sales tax on "GUR", while the sugar Mills are paying heavy government levies. This is uneven competition between "GUR" manufacturers and sugar industry.
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Performance Statistics -
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Balance Sheet (Audited) (Rs in 000)
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As on September 30, 2005 2004
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Share Capital-Paid-up
Preferred shares: 500 500
Ordinary shares: 13,500 13,500
Total Paid up capital: 14,000 14,000
Reserves & un-app. Profit: 197,522 168,204
Total Equity: 211,522 182,204
Surplus on Revalue, FA: 20,847 23,163
Equity & Revalue Surplus: 232,369 205,367
LT Debt: 0 0
Deferred tax & Gratuity: 16,519 21,606
Total - NC Liabilities: 16,519 21,606
Capitalization: 248,888 226,973
Current Liabilities: 14,981 14,519
Total Liabilities & Equity: 263,869 241,492
Operating Fixed Assets: 36,329 40,171
LT Investments: 17,048 17,530
LT deposits: 92 92
Stock-in-Trade: 416 1,219
Trade Debts: 0 330
Current Assets: 210,400 183,699
Total Assets: 263,869 241,492
Conting.& Commitments: 6,819 6,819
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Ratios:
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Current Ratio: 14.04 12.65
Debt-Equity Ratio: No debt No debt
Book Val./share - Rs: 151.09 130.15
Quoted Price-(O) (14-7-06)- Rs: 73.50 -
Price/Book Value Ratio: 0.49 -
Contin. & commit./Equity-X: 0.03 0.04
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Income Statement 2005 2004
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Net Sales: 177,537 371,397
COGS: 153,989 359,513
Gross Profit: 23,548 11,884
Operating Profit: 13,773 3,306
Profit before Taxation: 24,228 5,645
Profit after Taxation: 28,904 10,889
Profit Attrib. to Ordinary shares: 28,869 10,854
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Ratios:
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Cash dividends - Ordinary-%: 15% 10%
Cash dividend- Preferred- %: 7% 14%
Gross Profit/Net Sales: 13% 3%
Operating Profit/Net Sales: 8% 1%
Profit after Tax/Net Sales: 16% 3%
Net Profit/Equity: 14% 6%
ROA: 11% 5%
ROCE: 12% 5%
Earnings Per Ordinary Share (Rs): 21.38 8.04
Inventory Turnover-X: 370.17 294.92
Receivable Turnover-X: 0.00 1125.45
Price/Earning Ratio: 3.44 -
Asset Turnover-X: 0.67 1.54
Days Inventory: 1 1
Days Receivable: 0 0
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Cash flow Summary 2005 2004
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Net Cash flow, Operations: 15,277 75,729
Net Cash flow, Investing: 2,741 3,027
Net Cash flow, Financing: -988 -631
Change in net Liquidity: 17,030 78,125
Net Liquidity at beginning: 134,976 56,851
Net Liquidity at end: 152,006 134,976
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COMPANY INFORMATION: Chairperson/Chief Executive: Begum Zari Sarfaraz; Director: Khan Aziz Sarfaraz Khan; Company Secretary & CFO: Malik Mohammad Aslam, FCMA; Auditors: M/s Hameed Chaudhri & Co, Chartered Accountants; Cost auditors: M/s Munawar Associates, Chartered Accountants; Tax Consultants: Mahmood Mirza
Legal Advisor: Qazi Muhammad Anwar, Advocate; Registered Office: Mardan, NWFP Works: Takht-i-Bhai, District Mardan, NWFP; Web Address: Not Provided.
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