This is a textile spinning unit and not textile composite unit as classified by the stock exchange. The company has been able to improve its sales and maintained utilisation of production at the level of last financial period.
Due to higher raw material cost, increased operating expenses, exorbitant rise in borrowing cost and depreciation charges it had to face lower profitability. However, it announced cash dividend in FY06 according to previous two years' rates.
The company is listed on Karachi and Lahore Stock Exchanges and during the last one year market value of Shams Textile's shares were highly priced as low/high prices were at Rs 20/37.40 per share and the closing price of the share on April 13, 2006, was quoted at Rs 37.40 per share. At this market value, the price/earning ratio (P/E) is a multiple of nine.
Shams Textile Mills Ltd is a textile spinning unit. It was incorporated in the province of Punjab in 1968, when it had initially set up its composite project comprising spinning, weaving, dyeing and finishing at Chiniot (Punjab).
During its initial years, the company succeeded in marketing cotton yarn, grey and finished fabrics produced from these facilities, undertaking substantial export business. The manufacturing of premium quality products, leading to higher profitability and converting to larger reserves. This enabled the company to increase number of spindles by installing another spinning unit at Sheikhupura Road near Shahkot. As expected, these facilities gave positive results.
The directors of the company said that the company grew steadily and has to its credit of being associated with several prestigious local and foreign firms and the company attracted investment in the form of equity participation and loans.
However, its weaving, dyeing and finishing facilities were shut down with the passage of time due to low profit and inevitably focused in more profitable business segment of textile of spinning and marketing yarn. According to the company's Annual Report 2006, its manufacturing facilities included 58,416 spindles and the annual production capacity of the plant was rated at 21.1 million kgs of yarn after conversion into 20s count. During the year under review (FY06) of 12 months the company spun 20.7 million kgs of yarn whereas in the preceding financial period (FY05 of nine months) it produced 15.3 million kgs.
In both the financial periods, the company almost attained full utilisation of capacity between 98.1% (FY06) and 98.8% (FY05). The reason for some shortfall in production as compared to capacity has been attributed to normal repairs and maintenance of plant and machinery.
The directors also stated that a new specialised yarn coarse count unit had gone into commercial production in April 2006 but could not make any positive contribution in the results of the period under review. The directors reasoned that they being in a relatively new field, faced various pre-production problems, which took considerable time to sort out. This unit is now working smoothly but is not expected to make significant contribution in the overall performance of the company in the near term, in view of very high cost of raw material.
During FY06 (12 months) the company posted sales at Rs 1.547 billion whereas in FY05 (nine months) its sales amounted to Rs 0.974 billion. For ascertaining performance the FY05 annualised sales are estimated at Rs 1,300 million which are much better yardstick of performance at least when compared to the gut-feeling. From the foregoing estimate, it can be seen that FY06 sales were 19% higher than the estimated sales figure of FY05.
Gross margin of the company came under severe pressure despite higher volume sales as evidenced from the financial ratios appended with this 'Brief.' Finance cost and depreciation charges were on the much higher side.
The company posted in FY06 (12 months) pretax profit at Rs 50 million whereas in FY05 (nine months) it was Rs 76 million. After providing for taxation at Rs 8.8 million (FY05: Rs 5.97 million) the FY06 net profit after taxation was at Rs 41.2 million which translates into Earnings Per Share (EPS) at Rs 4.76 (FY05 EPS: Rs 8.12).
Although profit was lower but the company maintained its dividend rate of Rs 1.75 per share per annum of last three years. The company has regularly announced cash dividends since the last five years.
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Performance Statistics (Million Rupees)
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30th June 2006 2005
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Share Capital Paid-up: 86.40 86.40
Reserves: 416.96 422.51
Shareholder's Equity: 503.36 508.91
L.T. Debts: 528.70 207.71
Deferred Taxation: 33.51 33.27
Current Liabilities: 594.45 348.83
Fixed Assets Tangible: 1,105.59 578.52
L.T. Deposits: 1.57 1.53
Current Assets: 552.86 518.67
Total Assets: 1,660.02 1,098.72
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Profit & Loss A/c:
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For Year For 9 Months
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Ended June 30 Ended June 30
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2006 2005
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Sales: 1,547.30 974.00
Gross Profit: 147.93 130.71
Other Operating Income: 15.11 6.82
Operating Profit: 115.29 100.85
Finance (Cost): (65.29) (24.80)
(Depreciation): (55.63) (33.30)
Profit Before Tax: 49.99 76.05
Profit After Tax: 41.16 70.13
Earnings Per Share (Rs): 4.76 8.12
Dividend Cash (%): 17.50 17.50
Share Price (Rs) on 13.04.07: 37.40 -
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Financial Ratios:
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Price/Earning Ratio: 7.85 -
Book Value Per Share: 58.26 58.90
Price/Book Value Ratio: 0.64 -
Debt/Equity Ratio: 51:49 29:71
Current Ratio: 0.93 1.48
Assets Turn Over Ratio: 0.93 0.89
Days Receivables: 28 26
Days Inventory: 37 47
Gross Profit Margin (%): 9.56 13.42
Net Profit Margin (%): 2.66 7.20
R.O.A (%): 2.48 6.38
R.O.C.E (%): 3.86 9.35
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Plant Capacity & Actual Production:
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Spinning Unit (Million Kgs)
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100% Plant Capacity Converted
to 20s Count Yarn: 21.132 15.526
Actual Production: 20.727 15.341
Capacity Utilization (%): 98.08 98.80
Number of Spindles Installed: 58,416 46,320
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NOTE: : "Reason for low production is due to normal repairs and maintenance of plant & machinery."
COMPANY INFORMATION: : Chairman: Muhammad Anwar; Chief Executive: Khalid Basher; Director: Adil Basher; Chief Financial Officer: Farooq Ahmed; Company Secretary: Muhammad Farrukh Hassan; Registered Office: 7-B-III Aziz Avenue Gulberg-V Lahore; Website: Not Reported; Project Location: Kotla Kahloon, Distt. Nankana Sahib Punjab; 3 Km, Faisalabad Road, Chiniot Punjab.
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