Sugar & Allied Industries: SHAHTAJ SUGAR MILLS LIMITED - Year Ended September 30, 2005 (Audited)
The Directors of Shahtaj Sugar Mills Limited (Shahtaj Sugar) in their Report to the members state that it was a year of shortage of sugarcane in the country as total production was less than the requirement.
This resulted in substantial increase in the price of sugar and for most of the year the price was firm. The Government removed all tariff and non-tariff barriers on import of sugar but since the international market was high, the sugar prices remained steady throughout the year.
Shahtaj Sugar produced 68,152 MT of sugar during 2004-2005 season compared to 91,723 MT sugar produced in the last season. Production data is given below.
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Season Season
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Sugar Unit 2004-2005 2003-2004
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Rated Capacity- Sugar-MT: 108,800 108,800
Cane Crushed - MT: 739,094 981,923
Sugar produced (MT): 68,152 91,723
Recovery %: 9.22% 9.34%
Duration of crushing season-Days: 129 128
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The directors of the company have discussed the situation in their report. The company shareholders are aware that its area is a sugarcane deficit area and the management continuously has to supplement sugarcane supplies by buying sugarcane from the adjoining areas.
This year also about 40% of the sugarcane, the mills crushed was from outside the area, resulting in increased cost of transportation, which the company had to make for the sugarcane, the company purchased from outside the area. The company's average sugarcane price this year was Rs 1,319 PMT as compared to Rs 1,058 PMT in the previous year. They feel that management objective is to always maximise production in a feasible way as ultimately the profitability of the company also depends upon the total production of sugar.
Shahtaj Sugar was incorporated as a public limited company on March 25, 1965 under the Companies Act, 1913 (now Companies Ordinance, 1984) and its shares are quoted on Karachi and Lahore Stock Exchanges in Pakistan.
It is principally engaged in the manufacture of sugar from sugarcane. Molasses is the only significant by-product contributing to the company's revenue. The company had 459 permanent employees on September 30 2005 (2004: 449 employees). The company reportedly has the following associated/related companies: (i) Shahnawaz Corporation (Pvt) Limited; (ii) Shahtaj Textile Limited; and (iii) and Shahnawaz (Private) Limited.
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 120 million held by 429 shareholders.
Holding by the general public is 20% while PICIC has about 4% shares. The Directors/Chief Executive and their spouses hold over 42% shares. National Bank of Pakistan (Trustee Wing) and ICP hold about 14% shares. The rest of the shares are distributed among a small number of corporate entities including banks and DFIs.
Total assets of Shahtaj Sugar as on September 30, 2005 at Rs 791 million were 29% higher than the total assets of Rs 615 million as on the same date last year. The increase in total assets is largely due to increase in the current assets particularly cash and bank balances.
The deployment of resources as on September 30, 2005 in non-current assets was 38% (2004: 52%) and the rest are current assets. The current assets are more than two times of the current liabilities and there are no long term debts. Overall financial position of the company is considered satisfactory. The management of the company might consider other options for investment of its large cash resources.
Net sales for 2004-05 at Rs 1,663 million were 6% higher than net sales at Rs 1,571 million for previous year. Cost of Goods Sold for 2004-05 was 76% of net sales as compared to 87% of net sales for previous year. This increased profit margins and the company also had increased profit before tax at Rs 318 million (2004: Rs 123 million). The company closed the year with after tax profit of Rs 205 million (2004: Rs 78 million). Earnings per share for the year under review were Rs 17.09 (2004: Rs 6.47).
The company's share price is around Rs 59 these days as against par value of Rs 10/-. The company declared cash dividend at 85% for the year ending September 30, 2005 (2004: 45%). Performance statistics are given below.
The Directors in their Report discuss the profitability situation. Since both the sugar and molasses markets were firm, the company earned record profit. The excellent results have been primarily due to good sale price of both sugar and molasses and also satisfactory level of sucrose recovery.
Recording prospects for 2005-06 season, the directors are apprehensive that it is going to be a bad one for the sugar industry. There is shortage of sugarcane all over and price war has started from day one. The price fixed by the government for the current season is Rs 45 per 40 kg but so far the average price being paid is Rs 65 per 40 kg, and still adequate sugarcane is not coming up, as the mills is crushing only 60% of its capacity.
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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: 120,111 120,111
Reserves & un-app. Profit: 395,365 280,165
Total Equity: 515,476 400,276
Revaluation surplus, FA: 0 0
LT Debt: 0 0
Deferred Liability: 65,698 69,153
Total - NC Liabilities: 65,698 69,153
Capitalization: 581,174 469,429
Current Liabilities: 210,278 145,451
Total Liabilities & Equity: 791,452 614,880
Operating Fixed Assets: 281,339 299,851
Long term investments: 10,000 10,000
Long term deposits: 187 296
Stores and spares: 69,653 70,696
Stock-in-Trade: 9,841 72,923
Trade Debts: 0 23,755
Current Assets: 487,698 295,997
Total Assets: 791,452 614,880
Conting.& Commitments: 17,402 2,986
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Ratios:
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Current Ratio: 2.32 2.04
Debt-Equity Ratio: No Debt No Debt
Book Val./share - Rs: 42.92 33.33
Quoted Price- (03-08-06)- Rs: 59.00 -
Price/Book Value Ratio: 1.37 -
Contin. & commit./Equity -X: 0.03 0.01
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Income Statement 2005 2004
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Net Sales: 1,663,234 1,571,465
COGS: 1,256,360 1,373,647
Gross Profit: 406,874 197,818
Operating Profit: 315,020 122,736
Other operating income: 11,838 6,734
Profit from operations: 326,858 129,470
Profit before Taxation: 318,283 122,944
Profit after Taxation: 205,283 77,744
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Ratios:
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Gross Profit/Net Sales: 24% 13%
Operating Profit/Net Sales: 19% 8%
Profit after Tax/Net Sales: 12.3% 5%
Net Profit/Equity: 39.8% 19%
Earnings/Share (Y. end capital)-Rs: 17.09 6.47
ROA: 25.9% 13%
ROCE: 35.3% 17%
Cash Dividend: 85.0% 45.0%
Stock Dividend: 0.0% 0.0%
Inventory Turnover-X: 127.67 18.84
Receivable Turnover-X: No Tr. Debt 66
Price/Earning Ratio: 3.45 -
Asset Turnover-X: 2.10 2.56
Days Inventory: 3 19
Days Receivable: No tr. Debt 5.5
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Cash flow Summary 2005 2004
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Net Cash flow, Operations: 381,140 172,334
Net Cash flow, Investing: -17,537 -37,450
Net Cash flow, Financing: -89,954 -47,999
Change in net Liquidity: 273,649 86,885
Net Liquidity at beginning: 94,073 7,188
Net Liquidity at end: 367,722 94,073
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COMPANY INFORMATION: Chairman: Mahmood Nawaz; Chief Executive: Muneer Nawaz; Company Secretary: Jamil Ahmad Butt; Chief Financial Officer: Muhammad Asghar; Statutory Auditors: M/s. Ford Rhodes Sidat Hyder & Co, Chartered Accountants; Registered Office: 19, Dockyard Road, West Wharf, Karachi-74000; Legal Advisors: Ras Tariq Chowdhary; Head Office: 72/C-I, M.M. Alam Road, Gulberg III, Lahore-54660; Mills: Mandi Bahauddin - 50400 (Punjab); Web Address: Not Provided.
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