Security Papers Limited (SPL) was established in 1965; it became a public company and was listed on Karachi Stock Exchange in 1967. The company also became a joint venture between Pakistan, Iran and Turkey in 1967. The company manufactures paper for bank notes, financial instruments, university degree certificates and other types of security papers. The technical know-how for manufacturing security paper was provided by Portals of the United Kingdom. The manufacturing process uses local textile waste as raw material.
The paper produced by SPL incorporates the most modern counterfeit deterrence features. SPL is said to be self reliant and saves substantial amounts of foreign exchange, which would be otherwise needed to import security paper. Moreover, customer satisfaction is of utmost importance and SPL has since upgraded the in-house laboratory with modern and more functional equipment.
Pakistan Security Printing Corporation (Private) limited (PSPC), an associated company, owns 40% of the shares of the company. The joint venture partners from Iran and Turkey own 10% shares each. ICP and NIT also hold over 10% shares. Fourteen banks and financial institutions own about 21% shares. Other corporate sector holds over 2%. The rest about 7% shares are with individuals. The total number of shareholders is 830 of which 790 are individual shareholders.
The Chairman and Chief Executive of SPL is a nominee of PSPC, besides two other directors nominated by PSPC. Joint venture partners from Turkey and Iran have one director each. The rest of the directors are elected. The Board has an Audit Committee and a HR and Compensation Committee. Management has a Strategic Plan Committee and a Systems and Technology Committee. The company is very well managed and the employees numbering 502 (2003: 538) are also looked after well. The company operates an approved funded gratuity scheme for all permanent employees and a contributory Provident Fund scheme for all eligible employees.
To meet growing local demand and to be in a position to export security paper, SPL initiated an expansion project, which is now complete. For this expansion plant was supplied by Voith Paper Germany. The company is now in a position to manufacture paper accepted internationally and having the latest security features. According to the company, completion of this task had become difficult on account of various negative factors namely the 9/11 incident and the Iraq war. Travel to Pakistan by the expatriates working on the project was restricted by their governments. Despite this, the project was successfully completed with minimum time delay and without any cost overruns.
For SPL, it is a matter of pride that the entire process of tendering, evaluation, award of contract and execution of the contract was handled by an in-house team of experts without seeking the help of any outside consultants. The engineers of SPL have undergone theoretical and on the job training both in Pakistan and abroad. This extensive training has enhanced their capabilities to operate the plant independently with efficiency. The new plant (PM-2) was dovetailed with the old plant in such a manner so as to ensure that there were no production losses during the entire period of execution of PM-2. Production of finished paper during FY04 was 1,812 tonnes as compared to 1,711 tonnes of the previous year, showing an increase of 6 %. With PM-2 in operation, SPL has brought the quality of paper to international standards, enhanced the capacity of the plant and eliminated the risk of any major breakdown apprehended on PM-1 that has served its economical life. Now SPL is poised to increase production, build product inventory level, manage waste and reduce cost as well as operational downtime. This should help achieve better customer satisfaction, return to stakeholders.
SPL products require strictest security arrangements during all stages of production and storage until delivered to customers. To achieve this end, the entire security system has reportedly been reviewed and revamped with access control, latest equipment and deployment of more security procedures. The company is committed to maintain trust and confidence of its customers.
During FY04, net sales were Rs 856 million as against sales of Rs 737 million in the previous year. Sales for FY04 are net of excise duty of Rs Nil (2003: Rs35 million) and sales tax of Rs 132 million (2003: Rs 116 million). Almost all SPL sales at present are to PSPC, an associated company. All transactions with PSPC are carried out at arm's length prices using the "Cost Plus Mark-Up Method". Transactions with all other related parties are carried out at arm's length prices using the "Comparable Uncontrolled Price Method".
SPL has maintained during FY04 the high level high level of profitability as seen from the 10-year performance attached to the annual report. Return on equity for FY04 was 22% as against 29 % in the previous year. High dividend rate at 55 % during FY04 is also in line with the dividend record achieved for the last seven year. Presently there are no long term debts. Short-term financial position of the company is also satisfactory. SPL is one of the top performers in the country and has received KSE's Top Companies Award for the third consecutive year. More data on its performance is given below.
SPL has ISO 9002 Certification for DET NORSKE VERITAS (DNV). JCR-VIS Credit Rating Company has on 28th December 2004 given SPL a medium/long term rating of AAA (triple A) and a short term rating of A- 1+ (A one plus).
The company is committed to protecting the environment for its customers, employees and the communities in which it operates. The company is proudly maintaining green lawns at the Mills made possible by using effluent treated water.
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Performance Statistics (SPL)
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Balance sheet (Million Rupees)
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As At June 30
2004 2003
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Share Capital-Paid-up: 220 220
Reserves & Surplus: 1,509 1,242
Shareholders Equity: 1,729 1,462
L T and deferred liabilities: 0 105
Capitalisation: 1,729 1,567
Current Liabilities: 207 386
Total Liabilities and Equity: 1,936 1,953
Tangible Fixed Assets: 1,429 1,437
L.T. Investment, Other Assets: 14 74
Current Assets: 493 442
Total Assets: 1,936 1,953
Ratios:
Current Ratio: 2.38 1.15
Debt-Equity Ratio: 0:100 7:93
Book Value per Share: 78.59 66.45
Share Price Rs (18-3-05): 165.00 -
Price/Book Value Ratio 2.10 -
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Income Statement (Million Rupees)
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Year Ending June 30: 2,004 2,003
Net Sales: 856 737
Gross Profit: 453 460
Operating Profit: 407 417
Profit Before Taxation: 411 449
Profit After Taxation: 388 430
Cash Dividends %: 55% 60%
Cash Dividend - Amount: 121 132
Ratios:
Gross Profit to Sales: 53% 62%
Operating Profit to Sales: 48% 57%
Profit After Tax to Sales: 45% 58%
Net Profit to Equity: 22% 29%
R O A : 20% 22%
R O C E.: 22% 27%
Dividend Payout Ratio: 31% 31%
Earnings Per Share (Rs): 17.64 19.55
Inventory Turnover (Times): 10.07 16.02
Receivable Turnover (Times) 5.63 5.46
Price/Earning Ratio: 9.36 -
Asset Turnover (Times): 0.44 0.38
Days Inventory: 36 23
Days Receivable: 65 67
Debt Service Cover (times): 1.24 -
Capacity - (Tonnes)
Old Paper mfg Plant: 1,460 1,460
New Paper mfg Plant: 2,000 0
Actual Production - Tonnes
Old Paper mfg Plant 694** 1,711
New Paper mfg Plant* 1,118** 0
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