During the year under review the company recorded sales in the sum of Rs 1.331 billion (FY 2002-03: Rs 1.145 billion) registering 16.2% growth. This is the record highest sales figure in the company's history. Unfortunately the company could not sustain the lead created by increase in sales as the eroded gross margin reversed the growth in profitability and showed 7.5% decline in gross profit.
The company posted pretax profit at Rs 14.37 million as against Rs 28.50 million recorded in the preceding year showing 49.5% decline. But the company has written much larger profit at the bottom line because of favourable write back of taxation in a large sum of Rs 80.08 million.
Hence the profit after taxation zoomed to Rs 94.47 million. This has enabled the company to turn the equity from deficient capital to positive equity figure. However, the company's accumulated deficiency compared to its paid up capital is still higher. Hopefully, the future year will see further decrease in the accumulated loss.
Sargodha Spinning Mills Ltd is a public limited company incorporated in the province of Punjab. It is listed on Karachi as well as Lahore Stock Exchanges. It was listed on Karachi Stock Exchange in 1992.
It is a textile spinning unit located at 8th Kilometer Sargodha Road, Faisalabad. Its manufacturing facilities include 48,640 spindles all of which have remained operational but have not increased in number since 1999.
The annual normal production capacity of the plant has been rated in terms of yarn converted into 20/s counts. During FY 2003-04, the year under review, its production capacity increased to 22.55 million kgs from 21.45 million kgs recorded in the preceding financial year 2002-03.
The actual production after conversion into 21/s count of yarn, in the year under review, was recorded at 21.99 million kgs as against 20.91 million kgs recorded in the preceding year. The increase in production was 4.8% over preceding year's whereas the capacity utilisation reached 97.52%. Since last six years the production figure is second highest after 1999 while the production was record highest at 25.21 million kgs.
During the year under review the company made additions in the fixed assets in the sum of Rs 24.59 million (2002-03: Rs 43.79 million) out of which Rs 18.29 million was booked for plant and machinery.
Additionally, the company spent Rs 9.39 million for Buildings and Rs 6.10 million for machinery all of which were booked in the capital work-in-progress account. During the year under review, the company imported two Draw Frames, two complete Fly Frame of China, one Murata Auto Coner - second hand, and two roller cleaners.
The entire capital expenditure has been funded by the sponsors and from the company's internal resources.
More than Rs 100 million have already been spent by the sponsors during the last three/four years. The BMR programme is its continuous business process to make the enterprise more viable and to remain competitive.
Proposals for further BMR of the existing facilities for the value of Rs 175 million has been submitted to their bankers for financial assistance. Letter of Credit for one Murata Mach Coner, one set Draw Frame and two carding Machines have been established.
The project is switching on electricity generated by sui gas for which three generator sets of Caterpillars were under erection by December 2004 and hopefully by this time the same would have been installed and fully operational. This will enable the company to cut operating cost and at the same time ensure uninterrupted power supply for smooth production line.
This is very important development as in the quota free regime of WTO, just in time production and fast delivery system would be critical success factors.
It has been informed by the directors that the management intends to publish Quarterly Financial Statements on the company's website. Even then the company has not recorded the URL of its website in the page of "Company Information" or in any other page of Annual Report under review.
The placing of quarterly account on website is excellent but without the address of website how can the shareholder read the same. It will be worth taking the pains to construct an information website for the stakeholders of the company in particular.
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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: 312.00 312.00
Accumulated (Loss): (219.90) (331.90)
Shareholders Equity: 92.10 (19.90)
Fair Value Adjustment Reserve: (2.24) (2.38)
Surplus on Revaluation
Operating Fixed Assets: 382.06 249.22
Sponsors Advances Interest Free: 15.94 15.94
Other L.T. Debts: 207.95 259.98
Current Liabilities: 335.31 260.60
Tangible Fixed Assets: 693.76 560.89
Equity Investments: 1.21 1.07
L.T. Security Deposits: 2.84 1.93
Deferred Tax: 86.74 -
Current Assets: 246.57 199.57
Total Assets: 1,031.12 763.46
Sales, Profit & Pay Out
Sales: 1,330.56 1,144.71
Gross Profit: 59.70 64.56
Operating Profit: 30.13 36.28
Other Income: 0.64 10.84
Financial (Charges): (14.69) (16.48)
(Depreciation): (46.72) 46.30
Profit Before Taxation: 14.37 28.50
Profit After Taxation: 94.47 22.77
Earnings Per Share (Rs): 3.03 0.73
Share Price (Rs) on 25-3-05: 9.50 -
Financial Ratios
Price/Earning Ratio: 3.14 -
Book Value Per Share: 2.95 (0.63)
Price/Book Value Ratio: 3.22 -
Debt/Equity Ratio: 30:70 52:48
Current Ratio: 0.73 0.76
Asset Turnover Ratio: 1.29 1.50
Days Receivables: 13 17
Days Inventory: 41 33
Gross Profit Margin (%): 4.49 5.64
Net Profit Margin (%): 7.10 1.99
R O A (%): 9.16 2.98
R O C E (%): 13.56 4.52
Plant Capacity & Production
(Million Kgs Yarn after conversion into 20/s counts)
Production at Normal Capacity: 22.55 21.45
Actual Production: 21.99 20.91
Capacity Utilisation (%): 97.52 97.48
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