Sugar & Allied Industries: FECTO SUGAR MILLS LIMITED - Year Ended September 30, 2005 (Audited)
Fecto Sugar Mills Limited (Fecto Sugar) is a public limited company incorporated in Pakistan and listed on Karachi and Lahore Stock Exchanges. The company is principally engaged in production and sale of sugar and also operates a particle board unit. It had 1,295 total average number of employees on September 30 2005 (2004: 1,338 employees). Baba Farid Sugar Mills Limited is its associated company as it holds over 15% shares.
Authorised capital of the company is Rs 150 million, comprising 15 million shares of Rs 10 each. As on September 30, 2005 the paid up capital was Rs 50.297 million held by 2,640 shareholders. Of the total capital, 2,627 individuals hold over 99% shares (the directors/Chief Executive holding over 60%). The rest of the shares are distributed among a small number of corporate entities including banks and DFIs.
Fecto Sugar was able to produce 46,630 MT of sugar during 2004-2005 season compared to 60,206 MT sugar produced in the last season. Details on working days, sugarcane crushed and production of sugar are given below.
=================================================
Season Season
=================================================
Sugar Unit 2004-2005 2003-2004
=================================================
Capacity - 160 days basis-MT: 40,800 40,800
Actual Crushing - MT: 580,283 722,488
Sugar produced (MT): 46,630 60,206
Recovery %: 8.03% 8.33%
Duration of crushing season-Days: 126 142
Support Price - Rs: 40 40
=================================================
The Statutory Auditors in paragraph (d) of their Report to the Members state: "Without qualifying our opinion, we draw attention to note 1.2 to the financial statements. The company has earned a net profit after tax of Rs 38.70 million during the year as against after tax loss of Rs 72.23 million in the previous year. As of the balance sheet date company's accumulated loss stood at Rs 433.8 million (2004: Rs 491.8 million) and on that date the shareholders equity position stood at negative Rs 383.5 million (2004: Rs 441.5 million). Besides the Company's current portion of long term liabilities have reached to Rs 140 million (2004: Rs 112.5 million).
These conditions along with matters as (set) fourth in note no. 1.2 indicate the existence of material uncertainty, which may cast doubt about the company's ability to continue as a going concern".
"Furthermore, the comparatives in the accompanying financial statements were audited by another firm of Chartered Accountants whose report, dated January 05, 2005 expressed an unqualified opinion thereon and emphasised on the matter of going concern in view of the loss for the year, accumulated loss, negative shareholders equity and current portion of long term liabilities reaching maturity".
NOTE 1.2 ON GOING CONCERN, IS AS UNDER: "The Company was able to earn Profit after taxation Rs 38.70 million as against loss after taxation of Rs 72.23 million in last year and thus shareholders equity stood at Rs (383.151) Million as compared to Rs (441.51) Million in preceding year.
Performance of the company during the current year has improved despite the fact that company had to face problem of availability of sugarcane at higher prices, because of procuring of sugarcane by neighbouring mills and middlemen who established unauthorised weighbridges at gate area of the mills, which is still continued.
Despite these facts, the company is confident that the above factors are temporary and Company's operation would remain profitable and thus the company will continue as going concern, accordingly these financial statements have been prepared as going concern".
"The sponsors continued assistance for management of funds whenever needed is yet another factor which mitigate the doubt and is further evident from the fact that the company is promptly discharging its all due liabilities including financial obligations which justifies preparation of these accounts as going concern".
The Directors have also discussed the matter of "Going Concern' in their Report. The following two paragraphs shed light on the issue besides note no. 1.2 reproduced above.
"The fact of the matter is that the sugar industry had been facing manifold problems, which include high input cost and depressed selling price, and the company is not the exception".
"The Overall financial and liquidity position of the Company have improved during the year under review. The management feels that improved market conditions and diversification of the operation by installing medium density fibre board plant for which machinery has already procured company will come out of the crises".
Total assets of the company as on September 30, 2005 at Rs 1,564 million were 7% lower from the level of Rs 1,673 million as on September 30, 2004. The deployment of total resources was 79% in non-current assets on September 30, 2005 (2004: 74%) and the rest were current assets, largely the stocks in trade. The current ratio is below unity. Debt to negative equity debt to equity ratio has not been calculated.
However, it may be noted that as of September 30, 2005, total debt is Rs 966 million of which Rs 451 million is interest free loan subordinated to the long terms loans/financings. The sponsors/directors may consider restructuring of the capitalisation of the company.
Net sales for 2004-05 at Rs 1,016 million were 40% higher over the net sales at Rs 723 million for the previous year. Net sales for the year include net sales of particle board at Rs 41 million (2004: Rs 29 million). Cost of Goods Sold for 2004-05 was 82% of net sales as compared to 97% of net sales for the previous year.
This increased profitability margins and the company made after tax profit of Rs 39 million for the year ending September 30, 2005 as against after tax loss of Rs 72 million for the previous year. Despite negative equity, the company shares are being traded these days at premium to the par value. The Board of Directors has approved cash dividend at 15% for the year under review. Performance statistics are given below.
===========================================================
Performance Statistics -
===========================================================
Balance Sheet (Audited) (Rs in 000)
As on September 30, 2005 2004
===========================================================
Share Capital-Paid-up: 50,297 50,297
Reserves & un-app. Profit: -433,809 -491,803
Total Equity: -383,512 -441,506
Revaluation Surplus, FA: 354,407 373,691
LT Debt: 966,155 1,017,952
Deferred tax: 115,386 125,770
Total - NC Liabilities: 1,081,541 1,143,722
Capitalisation: 1,052,436 1,075,907
Current Liabilities: 511,369 596,756
Total Liabilities & Equity: 1,563,805 1,672,663
Operating Fixed Assets: 1,112,775 1,153,009
Long term Investments: 92,433 54,330
Long term deposits: 33,192 30,765
Stores and spares: 69,117 63,742
Stock-in-Trade: 219,436 244,482
Trade Debts: 0 0
Current Assets: 325,405 434,559
Total Assets: 1,563,805 1,672,663
Conting. & Commitments: 1,500 1,500
-----------------------------------------------------------
Ratios:
-----------------------------------------------------------
Current Ratio: 0.64 0.73
Debt-Equity Ratio: Neg. equity Neg. equity
Book Val./share - Rs: -76.25 -87.78
Quoted Price-(19-7-06)-Rs: 28.00 -
Price/Book Value Ratio: -0.37 -
Contin. & Commit./Equity-X: 0.00 0.00
-----------------------------------------------------------
Income Statement 2005 2004
-----------------------------------------------------------
Net Sales: 1,015,957 723,589
COGS: 831,290 704,532
Gross Profit: 184,667 19,057
Operating Profit: 131,295 -24,489
Profit before Taxation: 33,890 -80,883
Profit after Taxation: 38,708 -72,234
-----------------------------------------------------------
Ratios:
-----------------------------------------------------------
Gross Profit/Net Sales: 18% 3%
Operating Profit/Net Sales: 13% -3%
Profit after Tax/Net Sales: 4% -10%
Net Profit/Equity: Neg. equity Neg. equity
ROA: 2% -4%
ROCE: 4% -7%
Earnings/Share (Y. end capital)-Rs: 7.70 -14.36
Cash Dividend: 15% 0%
Stock Dividend: 0% 0%
Inventory Turnover-X: 3.79 2.88
Receivable Turnover-X: No Tr. debts No Tr. Debts
Price/Earning Ratio: 3.64 -
Asset Turnover-X: 0.65 0.43
Days Inventory: 96 127
Days Receivable: No Tr. debts No Tr. debts
-----------------------------------------------------------
Cash flow Summary 2005 2004
-----------------------------------------------------------
Net Cash flow, Operations: 89,932 -230,230
Net Cash flow, Investing: -62,266 7,540
Net Cash flow, Financing: -72,756 250,962
Change in net Liquidity: -45,090 28,272
Net Liquidity at beginning: 49,672 21,400
Net Liquidity at end: 4,582 49,672
===========================================================
COMPANY INFORMATION: Chairman: Ghulam Muhammad A. Fecto; Chief Executive: Munawar Ali Fecto; Company Secretary: Abdul Samad; Statutory Auditors: M/s Gardezi & Co, Chartered Accountants; Registered Office: 1st Floor, Panorama Centre, Raja Ghazanfar Ali Khan Road, Saddar, Karachi-75530; Mills: Daryakhan, District Bhakkar (Punjab); Web Address: www.fecto.com
Comments
Comments are closed.