Suhail Jute Mils Limited (Suhail Jute) was incorporated in Pakistan in 1981 as a public limited company under the Companies Act, 1913 (now Companies Ordinance, 1984). Suhail Jute shares are quoted on Lahore and Karachi stock exchanges.
The company is principally engaged in the business of manufacturing and sale of jute products. (Colony) Sarhad Textile Mills Limited, Ismail Farooq Industries (Pvt) Limited and Surriya Farooq Charitable Foundation are the associated undertakings of Suhail Jute.
At the end of 2005, the company had 794 employees (2004: 645employees). The authorised capital of Suhail Jute is Rs 50 million, comprising five million shares of Rs 10 each. As on June 30, 2005 the paid up capital was Rs 37.45 million, which is held by 460 shareholders, of which 454 individuals hold 85.75% shares.
The shareholders with holding 10 % or more voting interest include (Colony) Sarhad Textile Mills Limited with 0.5 million shares and Sohail Farooq Shaikh with 1.356 million shares. Six other members of his family among them own 1.434 million shares. The rest of the shares are distributed among a small number of corporate entities.
The Auditors in their Report to the Members, while expressing the opinion in paragraph 2-c, have stated " except for the effects of such adjustments, if any, that might have been determined to be necessary in view of the matters stated in paragraphs '1' and '2' above,".
Paragraph '1' and '2' are reproduced below:
"1) Rs 52.625 million is receivable from associated undertaking (note 15) which is doubtful of recovery as it is dependent on the financial ability and liquidity of the associated company and should be written off"
"2) We have not been able to verify the amount of outstanding liability of loan appearing in the (note 8.3) pending confirmation from the creditor".
Note 15 is about 'Due from Associated Undertaking' as on June 30, 2005 and provides break up of Rs 52.625 million as follows:
(1) Borrowings at Rs 10.405 million are by (Colony) Sarhad Textile Mills Limited at an interest rate of 14% as against cost of 5.5 to 11.37%;
(2) Mark up on borrowings is Rs 23.729 million; and
(3) Rs 18.491 million is the share of joint expenses of the office.
The Directors in their Report to the Shareholders, while providing perceived justification and circumstances for the outstanding amount, have added that the reciprocal arrangement has been successfully maintained in place for a very long time to the benefit of both the companies.
Note 8.3 reads as follows: "This represents accrued principal / mark up/ LC and other claim in respect of loan from National Bank of Pakistan, which has been rescheduled through compromise arrangement under which the settlement has been made through Corporate and Industrial Restructuring Corporation (CIRC) under CIRC Ordinance no. 1 of 2002 on June 29, 2002. CIRC acquired the rights and privileges of NBP in and against the Company.
According to compromise arrangement the repayment amount has been fixed at Rs 22.193 million as settled liability while company would be entitled for a waiver of said amount depending upon the continued performance under the settlement agreement and is waiting for clearance from State Bank of Pakistan from the creditors list.
The Company has successfully repaid the settled liability and is waiting for clearance by the creditors in accordance with the settlement deed". The Auditors conclude their Report to the Members by saying that "Without qualifying our opinion we draw attention to the preparation of accounts on a going concern basis as fully explained in note 2.1 to the financial statements".
Note 2.1 is reproduced below: "2.1- Going concern assumption- During the current financial year the Company has incurred operating losses of Rs 21.076 million resulting in negative cash flow from operations.
Given the current financial position, the Company's ability to continue as a going concern is dependent on being able to carry on economically viable operations resulting in generating positive cash flows.
The management is of the opinion that the current loss is due to abnormally temporary rise in the raw material price which is not likely to continue while due to high demand envisaged the company will be able to carry out economically viable operations and therefore these accounts are prepared on going concern basis".
The Directors in their Report to the Shareholders on Suhail Jute performance state that operating losses have arisen primarily due to non-utilization of full available capacity of the unit.
Other adverse factors mentioned are:
(1) A significant shortage of Raw Jute due to crop failure in Bangladesh, with resultant high prices;
(2) government demand for Wheat Packing, the major product of the unit, was significantly reduced;
(3) We were forced to carry over a large stock of Grain Sacks due to inordinate delay s in finalizing contracts by the buyers;
(4) Various Food Department payments were delayed by 3-4 months beyond their due dates; and
(5) The sales price of Hessian cloth did not adequately reflect the ever-increasing input cost.
The Directors are hopeful that the finished goods prices will rise to reflect the higher input costs and that the supplies to the Government Agencies will improve. Performance statistics are given below.
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Performance Statistics (Rs in 000)
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Balance Sheet (Audited)
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As on June 30, 2005 2004
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Share Capital-Paid-up: 37,450 37,450
Reserves: 10,870 10,870
Unrealized gain on investment: 46,684 18,646
Un-appropriated Profit: 22,735 41,954
Equity-Basic: 117,739 108,920
Surplus on Revaluation of Assets: 208,772 212,501
Equity incl: revaluation of Assets: 326,511 321,421
Non-Current Liabilities: 126,324 132,011
Capitalization: 452,835 453,432
Current Liabilities: 187,403 117,748
Total Liabilities and Equity: 640,238 571,180
Operating Fixed Assets: 244,915 250,016
LT loans, deposits, etc: 55,176 52,719
Stock-in-Trade: 103,740 97,066
Short term Investment: 166,125 129,605
Trade Debts: 24,408 11,329
Current Assets: 340,147 268,445
Total Assets: 640,238 571,180
Contingencies & Commitments: 24,384 24,384
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Ratios:
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Current Ratio: 1.82 2.28
Debt-Equity Ratio (incl: Rev. FA): 28:72 29:71
Debt-Equity Ratio (excl: Rev. FA): 52:48 55:45
Book Val./share - Rs: 31.44 29.08
Quoted Share Price- (2-3-06)- Rs: 22.50 -
Price/Book Value Ratio: 0.72 -
Contin. & commit./Equity (times): 0.21 0.22
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Income Statement
Year Ended June 30, 2005 2004
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Net Sales: 180,783 74,462
Gross Profit: 6,028 20,542
Operating Profit (Loss): -19,343 -8,861
Profit before Taxation (Loss): -20,143 18,338
Profit after Taxation (Loss): -21,076 7,707
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Ratios:
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Cash Dividend: 0% 5%
Dividend Amount: 0 1,872
Dividend payout ratio: 0% 24%
Gross Profit/Net Sales: 3% 28%
Operating Profit/Net Sales: Loss Loss
Profit after Tax/Net Sales: Loss Loss
Net Profit/Equity: Loss Loss
ROA: Loss 1%
ROCE: Loss 2%
Earnings Per Share (Rs): -5.63 2.06
Inventory Turnover (times): 1.74 0.77
Receivable Turnover (times): 7.41 6.57
Price/Earning Ratio: -4.00 -
Asset Turnover (times): 0.28 0.13
Days Inventory: 209 476
Days Receivable: 49 56
Debt Service Coverage (times): -3.30 -3.64
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Cash flow Summary: 2005 2004
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Net Cash flow, Operations: -43,876 -37,634
Net Cash flow, Investing: -13,466 -6,168
Net Cash flow, Financing: -8,593 -6,408
Change in net Liquidity: -65,935 -50,210
Net Liquidity at beginning: -89,259 -39,049
Net Liquidity at end of period: -155,194 -89,259
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Capacity & Production (M. Tons) 2005 2004
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Capacity on 360 days basis: 6,000 6,000
Actual Production: 3,719 3,345
Capacity Utilization: 62% 56%
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