Nishat Mills Limited

Nishat Mills Limited (KSE: NML) is the leading firm of Nishat Group that was commenced in 1951 and listed at stock exchange in 1989. The company is engaged in the business of textile spinning, weaving, processing, stitching, and apparel. It is one of the modern and biggest vertically integrated textile establishments in Pakistan.
Over the years, NML has attained substantial geographical diversification in its export sales and is fast becoming a force to be reckoned with in the value-added garment sector in the region. The textile mill has a long working relationship with the top brands of the world such as Levis, Next, Tommy Hilfiger and Hugo Boss. Reportedly, NML has 29 manufacturing units, each specializing in a specific product range located in Faisalabad, Sheikhupura, Ferozewatwan and Lahore. NML has 199,536 spindles and 40 sulzer shuttle-less looms, and its weaving unit has 655 air jet looms and two stitching units for home textile with annual capacity of 24 million meters per annum.
PERFORMANCE FOR FY14 Owing to improved production efficiencies and enhanced financial planning the sales revenue of NML was Rs 54.44 billion during the period FY14, showing positive growth of 3.8 percent over same period last year. All business segments of the firm contributed towards this sales growth in terms of both increased volume and favourable prices except the garments group which witnessed a drop in sales of 2.3 percent year-on-year.
The weaving division performed favourably in FY14 as compared to the corresponding period last year. Sales performance could have been better for FY14 but were hampered by appreciation of rupee against the dollar. NML's gross profit margin was 14.4 percent in FY14, down due to rise in cost of sales which grew by 7.4 percent. As a result, operating profit also registered a decrease of 24 percent year-on-year mainly attributing to surge in administrative expenses of 18.6 percent year-on-year.
NML reported profit after tax of Rs 5.5 billion in FY14 which is down by 5.7 percent year-on-year. The dividend income was among the contributors to the profitability, cushioning an increase of 32.41 percent year-on-year to bottomline largely on sale of partial investment in Lalpir Power Limited. The company's liquidity and short-term financial situation enhanced further in the current year. Weighted average cost of debt tapped a decline from 10.57 percent to 8.28 percent in FY14. Cautious working capital and financial management seems to be at work.
NML is a low-geared enterprise. It incurred fixed capital expenditures of Rs 9,135 million during FY14 on BMR expansion of all the business divisions. The firm upholds optimal capital structure in order to generate balance between financing requirements. The management recommended 40 percent cash dividend with the earning per share of Rs 15.68 compared to Rs 16.63 for the same period in previous financial year. A greater proportion of equity provides a cushion and is seen as a measure of financial strength.
FUTURE OUTLOOK In spite of, the challenging times which prevail in the textile industry during the year, NML net profit margin of 10.1 percent was striking owing to an enhanced investment portfolio and well-developed product mix. For the garment division, the construction work is in process on enhancing the production facility in Lahore. The management of the company is planning to expand the investment portfolio by capitalising in a 660 MW coal fired power plant at Rahim Yar Khan.

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                           FY13      FY14

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Profitability

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Gross profit margin       17.3%     14.4%

Operating profit margin   10.8%      7.9%

Net profit margin         11.2%     10.1%

ROE                        9.9%      8.0%

ROA                        7.3%      5.7%

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Liquidity

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Current ratio              1.49      1.34

Quick ratio                0.89      0.74

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Turnover

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Total asset turnover       0.65      0.56

Fixed asset turnover       3.38      2.37

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Market

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EPS - Rs                  16.63     15.68

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