Shezan International Limited

Incorporated in Pakistan in 1964, Shezan was initially a joint venture with the Alliance Development Corporation of the USA. After purchasing all shares of the Company in 1971, Shahnawaz Group made it a Public Limited Company and it was listed on the Karachi and Lahore Stock Exchanges.
The registered office of the Company is situated in Lahore, Pakistan. The Company has a bottle filling plant in Lahore, and a separate unit in Karachi to cater to the Karachi, Sindh and export demand. The Company is primarily involved in the manufacturing, trading and sale of juices, pickles, jams, ketchups, etc.
FINANCIAL ANALYSIS OF SHEZAN INTERNATIONAL LIMITED PROFITABILITY Sales:
Despite a decline in the purchasing power of the general public due to rising inflation, net sales of the Company increased to Rs 2.728 billion in FY 09, an increase of 10 percent compared with the same period last year. The turnover for the FY 10 improved by 29.30 percent compared with the figures of FY 09, exceeding Rs 3.5 billion. This growth in sales may be attributable to a significant increase in the sale of juice products with "All Pure" and "Twist" being the most famous.
As a result of the Company's efforts towards advertisement and promotional campaigns, nets sales figure increased to Rs 4.222 billion in FY 11, registering a growth of 19.67 percent in a year. The Company has made constructive efforts to expand its range of products and find new channels of distribution in key markets, promising turnover growth in the coming years. Turnover of the Company grew by 27.86 percent for the first half of FY 12 compared with the same period a year earlier. It was recorded at Rs 2.282 billion as against Rs 1.784 billion in the corresponding period of 2010.
Cost of Sales: Since FY 09, the economy has been affected by high inflation, severe energy crisis and an increase in the energy and raw material cost. Resultantly, production costs have risen significantly, affecting the profitability of the Company.
The cost of goods sold for Shezan International has moved up from Rs 1.974 billion in FY 09 to Rs 3.130 billion in FY 11. The cost of sales for the first six months of FY12 stood at Rs 1.670 billion compared with Rs 1.367 billion in the corresponding period of FY11.
Distribution and Administrative Costs: The distribution and administrative cost of the Company has experienced an upward trend since FY 09, increasing from Rs 535 million to Rs 746 million in FY11. Compared with the same period last year, this cost increased by 51.95 percent in the first half of the ongoing fiscal year.
Due to serious market competition, the Company has increased its advertisement and promotion expenses to boost Company's sales. This cost has risen from Rs 146 million in FY 09 to Rs 236 million in FY11, an increase of 61 percent. For the first six month of FY12, the Company spent Rs 154 million to improve its advertisement campaign.
Operating Profit: The profit earned from the Company's core business operations has shown a positive increasing trend. The operating profit has increased by 50.16 percent since FY 09, moving from Rs 167 million to Rs 250 million in FY11.
Net Profit: Despite increasing market competition and commodity inflation, the profitability of the Company has remained strong. Net earnings of Shezan International have increased from Rs 102 million in FY 09 to Rs 141 million in FY11, showing an improvement of 38.23 percent over the period.
Return on Equity: Despite the current challenging economic situation, Shezan International Limited has managed to maintain a healthy return on equity ratio of over 12 percent since FY 09.
Net Income by Sales: The net income by sales of the Company has shown a stable position indicating the increasing profitability of the Company that has better control over its costs. The ratio has increased from 3.03 percent in FY10 to 3.33 percent in FY11.
LIQUIDITY The increase in the Company's short-term borrowings over the years since FY 09 has led to an increase in the current liabilities affecting the current ratio. The ratio, although still healthy, has experienced a decline from 1.97 in FY 09 to 1.64 in FY11.
DEBT MANAGEMENT Higher borrowings for the working capital requirements of the Company has led to an increase in the interest expense of the Company, which has increased from Rs 6.45 million in FY 09 to a staggering Rs 40.34 million in FY11. Higher borrowings were made in FY10 to stock the seasonal fruits, pulps and packaging material to meet the sales demand.
OPERATIONAL EFFICIENCY The management of the Company has been successful in efficiently using the investment in fixed assets to generate revenues. This is depicted by the increase in the fixed asset turnover ratio, which increased to 9.10 in FY 09. The ratio fell to 8.46 in FY10 due to major investments in the fixed assets, and increased by 18 percent to 9.98 in FY11.
MARKET VALUE Following the upward profitability trend, the Earnings per Share of SIL have increased from Rs 17.08 in FY 09 to Rs 23.43 in FY11, showing an improvement of 37 percent over the three years.
FUTURE PROSPECTS Despite serious challenges like the power crisis, internal security issues, rising inflation rate, high commodity prices and political instability, the management of the Company aims to focus on cost effectiveness and profit maximisation. Going forward, Shezan International Limited aims to expand production capacity of juice products in "All Pure" and "Twist" category to improve turnover growth.