Gul Ahmed Textile Mills Limited

Gul Ahmed Textile Mills Limited (GATM) is one of the prominent vertically-integrated composite textile companies in Pakistan that was listed at Karachi stock exchange in 1970. The firm is involved in the business of textile spinning, weaving, processing, designing, stitching, made-ups and processed cloth.
The company has130,000 spindles, 250 wide width air jet looms, 297 conventional looms, and a state-of-the-art processing and finishing unit, having a production capacity of around 100,000 meters per day. GATM has its own captive power plant including of gas engines, gas & steam turbines, and backup diesel engines. Moreover, the firm has also set up a waste water treatment plant to treat 100% of its effluent.
Opening its first 'Ideas' store in 2003, GATM was among the first and successively one of the most efficacious composite mills that went down the retail path. While numerous have followed suit, Gul Ahmed remains the pioneer of the "original lawn", a phrase that ushered in an era of innovation and growth in the value-added textile sector of the country.
PERFORMANCE FOR 9MFY14 Regardless of the several challenges the economy is facing which are unfavourably affecting the business environment GATM has observed promising results. Value-added sales initiatives have allowed sales revenue to rise by 12.4 percent year-on-year with net sales for the half year have clocked in at Rs 23,944 million, against sales of Rs 21,310 million in the same period last year. Sales performance in local market was dismal but export market was positive, with export sales having increased by 26.44 percent respectively due to its trusty client base in the EU.
Sound management of core operations has allowed for tight control in cost of sales and considerable improvement in gross profit margin of 19.1 percent. Profit after tax of the company clocked in at to Rs 1,003 million, up by 168.8 percent year-on-year against net earnings of Rs 373 million. Rise in 'other income' provided further assistance to the bottomline. Certain pressure was added by surge in 'other expenses' of Rs 162 million, up by 289 percent year-on-year against Rs 42 million in the corresponding period last year, due to increase in many reasons.
The earning per share was Rs 5.49 compared to Rs 2.04 for the same period in previous financial year. Fixed assets have increased by 13 percent particularly owing to the addition of latest machinery in their production facilities. The firm's ROA is 4.0 percent as a result of its optimum capacity utilisation.
FUTURE OUTLOOK The textile division did well as it achieved cumulative growth of 1.6 percent till January of the current FY14, reportedly, as compared to 0.5 percent of the corresponding period. In spite of the optimistic sentiments, challenges for the economy carry on to remain the same.
Sharp appreciation of around 10 percent in rupee against dollar, law and order fears, energy shortages and low tax to GDP ratio are the foremost obstacles. Moreover, energy cost has amplified by about 22 percent to 25 percent and prices of all other operational costs have also increased considerably.
However, GATM management is focusing on customer satisfaction by having robust quality management systems with the policy of product diversification and expansion in target markets. In addition, the firm has also launched its export apparel business which will contribute considerably to the gross profit from the next fiscal year.

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                                    9MFY13       9MFY14

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Profitability

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Gross profit margin                  15.4%        19.1%

Operating profit margin               6.7%         9.2%

Net profit margin                     1.8%         4.2%

ROE                                   7.8%        16.7%

ROA                                   1.7%         4.0%

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Liquidity

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Current ratio                        1.01          1.05

Quick ratio                          0.35          0.32

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Turnover

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Total asset turnover                 0.97          0.95

Fixed asset turnover                 3.16          3.14

Market EPS - Rs                      2.04          5.49

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