During the year under review, the company's sales were record highest and for the first time sales crossed one billion rupees threshold. Despite record higher growth in sales, gross margin fast eroded because of mainly two factors. The inventory of cotton was procured in the beginning of the year when the cotton prices were higher - approximately by 45% over the preceding year. After wards prices of cotton nose dived. On top of it quality cotton was also imported.
So there was adverse impact on profitability due to unconsumed raw material inventory and unsold finished goods inventory. Even then the company could post pre-tax profit of Rs 23.25 million despite unprecedented/unexpected volatility in raw cotton prices.
In the forth coming year, while threat of price competition is looming large due to WTO regime but at the same time the bumper cotton crop has lowered the price of cotton in the range of Rs 1900 to Rs 2000 per maund. Paramount Spinning Mills Ltd was incorporated as a pubic limited company in the province of Sindh. The shares of the company are listed on Karachi and Lahore Stock Exchanges. The company was listed on Karachi Stock Exchange in 1991.
The stock exchange classifies the company as textile composite unit but note No 1 states that the main business of Paramount Spinning Mills Ltd is manufacturing and sale of cotton yarn. Even the name of the company indicates that it is a textile spinning unit.
It is one of the Gulistan Group of companies and its two associated concerns Gulistan Textile Mills Ltd and Gulistan Fibres Ltd own 25.05% of its total 10.50 million paid-up shares of Rs 10 each. The company's directors and sponsors hold 25.24% of the stock of the company. But small investors holding 10 thousand shares or less own only 4% of the company's stock.
The market value of its share carries substantial premium as it is trading at Rs 26.75 per share which is more than 2.5 times of the par value. During the last one year the price of the share increased from Rs 18 to Rs 32.50 per share.
Its manufacturing facilities are situated in S.I.T.E. Kotri Sindh and the annual production capacity of the plant has been rated at 8.195 million kgs of yarn of 20/s count. Its manufacturing facilities include 24,000 spindles. In both the years under comparison the actual production by far exceeded the production capacity. During the year under review, its actual production was recorded at 8.825 million kgs of yarn as compared to 9.054 million produces in the preceding year showing 2.53% decline.
During the year under review, the company generated sales at Rs 1.278 billion as compared to Rs 0.856 billion in the preceding year registering 49.29% growth in sales. This is record highest sales figure and for the first time the company crossed the billion rupee threshold.
The directors report indicates that its weaving unit has commenced commercial production although there is no detail of its weaving unit under the "Plant and capacity and Actual Production." The sales figure also includes sales generated by weaving unit and stitching units.
The company has also installed Dyeing Unit and the trial runs were expected during the current year. The present dyeing capacity of cotton & yarn of three tons a day is being expanded to 5 tons a day for which L/C for the import of additional machinery has already been established.
Its stitching unit is presently operating in the rented premises (unit No 1) permanent building for this unit at Raiwind Road, Lahore (Unit No 2) is almost complete.
While the sales grow at 49% the gross profit marginally declined as there was substantial pressure on the gross margin. The lower profitability has been attributed to higher cost of cotton. The price of cotton jumped to Rs 3,500 per maund from Rs 2,450 per maund approximately recording an unprecedented rise of 45% over last year.
The company also imported cotton due to non availability of high quality cotton within the country. The entire inventory of cotton was procured at the beginning of the year. After cotton prices nose dived.
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Performance Statistics (Million Rupees)
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Balance sheet -As At-
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September 30
2004 2003
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Share Capital-Paid-up: 105.00 105.00
Reserves & Surplus: 215.26 202.73
Shareholders Equity: 320.26 307.73
L T Debts: 508.17 424.35
Deferred Liabilities: 12.71 10.67
Current Liabilities: 484.50 126.95
Fixed Assets: 634.77 482.39
Investments: 69.50 60.25
L T Loans & Deposits: 22.45 23.57
Current Assets: 598.92 303.49
Total Assets: 1,325.64 869.70
Sales, Profit & Pay Out
Sales-Net: 1,278.16 856.18
Gross Profit: 98.02 101.06
Operating Profit: 59.54 76.16
Other Income: 1.67 0.54
Financial (Charges): (48.13) (53.45)
(Depreciation): (34.48) (22.64)
Profit Before Taxation: 23.25 41.36
Profit After Taxation: 12.53 30.86
Earnings Per Share (Rs): 1.19 2.94
Dividend Cash @10 (2003: @12.5): (10.50) 13.13
Share Price (Rs) 17-3-2005: 26.75 -
Financial Ratios
Price/Earning Ratio: 22.48 -
Book Value Per Share: 30.50 29.31
Price/Book Value Ratio: 0.88 -
Debt/Equity Ratio: 61:39 58:42
Current Ratio: 1.24 2.39
Asset Turnover Ratio: 0.96 -
Days Receivables: 40 19
Days Inventory: 86 38
Gross Profit Margin (%): 7.67 11.80
Net Profit Margin (%): 0.98 3.60
R O A (%): 0.94 3.54
R O C E (%): 1.49 4.15
Plant Capacity & Production (Million Kgs)
A) Yarn after conversion into 20/s count
Installed Capacity: 8.195 8.195
Production: 8.825 9.054
Capacity Utilisation (%): 107.69 110.48
B) Number of Spindles Installed: 24,000 24,000
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