This giant manufacturing complex in the synthetic sector has been able to generate higher sales but the gross margin and operating profit were comparatively lower. For the coming year too there is no hope that profitability might improve.
The reason being rising cost of raw material and furnace oil, and higher finance costs and depreciation charges. On the other hand the selling prices of filament yarns were less compliant compared to cost increases.
The pressure on the market was due to over supply, particularly from China including Far Eastern suppliers and alleged smuggling of polyester fibre in huge quantities. The company almost completed huge expansion programme. This included three injection-molding machines for PET preforms, more power efficient compressors for cost effective air generation.
The new and better texturising and other yarn processing machinery became fully productive towards end of the year. The captive power generating company Gatro Power (Private) Limited has installed power generation facilities for reducing dependence on furnace oil and replacing with gas. The directors foresee that benefits of these initiatives will be visible by 2nd quarter of 2006.
Gatron (Industries) Limited was incorporated in the province of Balochistan in 1980 having its registered office situated at 1st Floor, Ahmed Complex Jinnah Road, Quetta. Its liaison office is located at Textile Plaza, M.A. Jinnah Donally Road Karachi 74000.
Its shares are quoted at all stock exchanges of Pakistan. The principal business of the company is the manufacturing of polyester polymer and its various downstream products viz. filament/texturised polyester yarn and polyester chips bottle grade (PET resin converted into polyester PET preforms.
The company wholly owns a subsidiary company namely Gatro Power (Private) Limited engaged in power generation and its supply to the company.
In the pattern of the company's shareholding its 1838 individual investors' stock add up to 65.4% of the company's total 38.36 million share. The company's directors, their spouses and minor children hold 42% of the company's stock.
Among the institutional category of investor the largest group comprises five investment companies who own 22.3% of the company's stock. Eleven joint stock companies own 11.34% of the stock.
The Gatron (Industries) shares are trading at Rs 171 per share which works out to more than 17 times of the par value. During the last one year the price of the share continued to trend upward from Rs 91 per share and peaked at Rs 186 per share.
The company has been very regular in the announcements of cash dividends and for the year under review the dividend payout has been declared at Rs 3 per share as against Rs five per share.
The manufacturing facilities of Gatron (Industries) Limited are situated in the province of Balochistan at Hub Industrial Trading Estate Hub Chowki which is adjacent to the port city of Karachi.
During the year under review, the company made huge additions in the fixed assets at the capital outlay of Rs 720.6 million out of which Rs 648.5 million was booked for plant and machinery. The annual production capacity of polyester yarn (based on Denier 75 and filament 24) has been rated at 24.19 thousand metric tonnes (2004: 23.23 thousand metric tonnes).
The actual production based on various deniers was recorded at 31.22 thousand metric tonnes as against 33.67 thousand metric tonnes in the preceding year, showing 7.2% decline as compared to the preceding year. However capacity utilisation was much above the rated capacity.
As regards polyester PET prefroms the actual production was recorded at 262.34 million pieces (2004: 118.51 million pieces) registering 121.4% increase. But the shortfall in the capacity utilisation persisted. During the year under review the company posted sales in terms of value at Rs 5.048 billion (2004: Rs 5.191 billion) posting 2.8% decline as compared to the preceding year's.
But there was significant erosion in the gross margin. Resultantly, gross profit went down by 13.6% to Rs 400.20 million from 463.31 million of the preceding year's. The decline in the gross profit was mainly because of continued increasing trend of the raw material cost. The cost of both PTA and MEG the main raw materials were high. The increases in the cost of furnace oil drove up the cost of generation of power and electricity.
Operating profit was down by 13% while finance cost was also on the higher side by 115%. Hence profit before tax at Rs 214.4 million was 23.7% lower compared to preceding year's.
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Performance Statistics (Million Rupees)
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30th June 2005 2004
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Share Capital-Paid-up: 383.64 383.64
Reserves & Surplus: 1,711.41 1,750.53
Shareholders Equity: 2,095.05 2,134.17
L.T. Debts: 413.18 112.00
Deferred Liabilities: 407.59 368.86
Current Liabilities: 1,976.20 1,962.91
Fixed Assets: 2,297.68 1,772.94
L.T. Investments: 300.50 300.50
L.T. Loans: 0.46 0.43
L.T. Security Deposits: 1.33 1.28
Current Assets: 2,292.05 2,502.79
Total Assets: 4,892.02 4,577.94
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Sales, Profit & Payout
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Net Sales: 5,048.09 5,190.51
Gross Profit: 400.20 463.34
Other Operating Income: 26.56 16.26
Operating Profit: 264.77 304.40
Finance (Cost): (50.35) (23.42)
(Depreciation): (205.12) (175.73)
Profit Before Taxation: 214.42 280.98
Profit After Taxation: 152.71 203.02
Earnings Per Share (Rs): 3.98 5.29
Dividend Rs Per Share: 3.00 5.00
Share Price (Rs) on 11-5-2006: 171.00 -
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Financial Ratios
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Price/Earning Ratio: 42.96 -
Book Value Per Share: 54.60 55.62
Price/Book Value Ratio: 3.13 -
Debt/Equity Ratio: 16:84 5:95
Current Ratio (Times): 1.16 1.28
Asset Turnover Ratio (Times): 1.03 1.3
Days Receivables: 35 43
Days Inventory: 112 111
Gross Profit Margin (%): 7.92 8.93
Net Profit Margin (%): 3.03 3.91
R.O.A. (%): 3.12 4.43
R.O.C.E. (%): 5.24 7.76
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Plant Capacity & Actual Production
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Polyester Yarn (000 Metric Tons)
Annual Capacity (Base on Denier 75
and Filament 24): 24.19 23.23
Actual Production (Various Deniers): 31.22 33.67
Capacity Utilisation (%): 129.06 144.94
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Polyester P.E.T. Preforms (Million Pieces)
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Annual Capacity (Based on 30 gms) 344.19 123.12
Actual Production
(Various Grammages): 262.34 118.51
Capacity Utilisation (%): 76.21 96.25
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