Crescent Textile Mills (CRTM) is a Faisalabad-based textile unit which was registered at stock exchange in 1951. CRTM is involved in textile spinning, weaving, dyeing, printing, made-ups and also trades in yarn and fabric. CRTM is the one of the first composite textile mill to achieve the ISO 9002 accreditation in 1997.
Crescent Textile Mills has 120,000 spindles and 288 MJS drums, and its weaving unit has 240 air jet looms. CRTM has the capacity to process 42 million meters of fabric annually, reportedly. The firm also entails in generating, distributing and selling electricity amidst having a cold storage unit.
CRTM's sales mix includes exports comprising 63 percent of total company sales while holding 0.64 percent share in overall industry exports. It sells more than 80 percent of its products to the foreign market such as USA, Europe, Middle East and Japan.
Performance for 1QFY15 Several issues that affected economy in FY14 continued to grapple it in 1QFY15 as energy crunches and political uncertainty reinforced scrawny macroeconomic performance.
Looking at the first quarter financial performance, CRTM experienced a paltry increase in revenue with net sales recorded at Rs 3,131 million, up by 3.7 percent year-on-year compared to net sales of Rs 3,019 million. During the quarter, cotton prices sustained to drift lesser owed to surge in global inventories on uncertainties over waning Chinese demand thus pushing burden on yarn prices and contraction of margins.
Increase in cost of sales by 8.2 percent year-on-year has lead to gross profit reduction of 20.9 percent year-on-year to Rs 369 million. Operating profit margin was noted at 5.6 percent compared to 8.5 percent in the same period last year. But use of HFO due to increased power crisis, increase in gas and power fares and rise in minimum wage rate along with pressure on yarn prices led to the decline in margins. Moreover, decline in distribution costs of 14 percent year-on-year provided further support.
This quarter CRTM made a loss of Rs 45 million down by 189 percent year-on-year against net earnings of Rs 52 million in 1QFY15 primarily as a result of attrition in gross margins (down from 15.46 percent to 11.80 percent) and upsurge in finance cost owing to exchange losses on US loans. The earning per share was recorded at Rs 0.93 compared to Rs 1.05 vis-à-vis in previous financial year. The company's ROA comes to negative 0.4 percent due to pre-tax losses. The quick ratio stands at 0.5.
Future outlook In the face of having sufficient raw materials resources, enough capacity and abundance of unemployed labour, textile exports for the previous month have recorded a drop, in that way not showing any substantial results of the GSP+ status for the time being.
Going forward, the crux of cotton outlook is bearish and progress in margins will mostly be contingent on provision of uninterrupted power and gas supply to industry to take full benefit of GSP+ and of lesser raw material prices. In spite of trials CRTM remains concentrated on clienteles, energy preservation and cost decrease initiatives as these steps are aimed at improving performance of the company in future periods.
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1QFY14 1QFY15
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Profitability
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Gross profit margin 15.5% 11.8%
Operating profit margin 8.5% 5.6%
Net profit margin 1.7% -1.5%
ROE 1.8% -1.5%
ROA 0.4% -0.4%
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Liquidity
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Current ratio 0.72 0.77
Quick ratio 0.54 0.53
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Turnover
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Total asset turnover 0.24 0.25
Fixed asset turnover 0.68 0.75
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Market
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EPS (Rs) 1.05 0.93
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Source: Company accounts
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