The company is one of the constituent member of a large conglomerate whose other associates are Gulistan Textile Mills Ltd, Gulistan Power Generation Ltd, Gulistan Spinning Mills Ltd, Gulistan Fibres Ltd, Gulshan Weaving Mills Ltd, Paramount Spinning Mills Ltd etc.
During the year under review the company's sales and production registered impressive growth. However, profitability remained low despite higher gross profit and gross profit margin.
Despite lower profit the company announced bonus stock dividend. The company directors advocated that the textile industry of Pakistan desperately needed subsidies/incentives in the form of reduced gas rates, no import duty on textile machinery and spares, suspension of all taxes/levies on export.
They also asked for reduced mark up on short term financing for the purchase of cotton to make themselves competitive in international market which will enable them to earn precious foreign exchange for the country. They further emphasised that the government has to take necessary steps to provide level playing field to the industry in comparison with regional competitor, as textile sector is the largest contributor towards the country's exports.
Gulshan Spinning Mills Ltd was incorporated as a public limited company in the province of Sindh, under the Companies Ordinance 1984 and its registered office is situated at 2nd Floor, Finlay House, I.I. Chundrigar Road Karachi. Its primarily engaged in the manufacturing and sales of yarn.
Its manufacturing facilities are located at three places in the province of Punjab. Unit No I is located in District Vehari at Tibba Sultanpur, Unit II is situated in District Kasur at Jumber Khurd Tehsil Chunian and the third unit is in District Sheikhupura at Warburton.
During the year under review (FY06) the management of the company deferred the decision to split Unit No I at Tibba Sultanpur and merge it with Gulistan Textile Mills Ltd.
Its production capacity includes 44,794 spindles and 1440 rotors and its annual installed capacity has been rated at 18.09 million kgs after conversion into 20's count. The last financial year's (FY05) account has been drawn for nine months only. Hence its operating results and production statistics of the two financial years are not comparable.
In FY 2006 the company achieved capacity utilisation at 110% whereas the company had attained capacity utilisation of 71% in FY05. These statistics show that the company has made tremendous improvement in productivity. It has been reported that the company inducted 5,280 spindles of the latest technology which were installed during FY06 and started commercial production. It also imported three gas generators of 1,000 KW each which were installed at Unit No 2 which also started power generation.
The shares of Gulshan Spinning are listed on Karachi and Lahore Stock Exchanges. At present the share is trading at Rs 8.25 per share at 17.5% discount. However the market value of the share had also moved above its par value during the last one year. According to the share statistics of last 52 weeks published in the Daily Business Recorder of April 11, 2007 the market value of the share ranged between Rs 8.25 and Rs 24 per share.
It may be mentioned here that the textile industry is facing lot of challenges. Hence it is affecting the investors perception in the short run, otherwise it is robust industry and has already passed through the modernisation and rehabilitation phase recently. In the case of Gulshan Spinning it had made new addition in the fixed assets to the extent of Rs 278 million in FY06 and Rs 176 million in FY07.
During the year under review (FY06 of 12 months), the company posted sales at Rs 2.280 billion (whereas in FY05 9 months actual sales were at Rs 1.540 billion). Let us see how FY06 performance relates to FY05. If we work out the annualised estimate of FY05 sales we can have some feel. But a word of caution, the annualised estimate will not be true measurement of performance. The annualised sales in FY05 works out to Rs 2.05 billion and compared to that of FY06 sales registered impressive growth by 11.1%.
Gross profit amounted to Rs 345.34 million FY06 and compared to last year's annualised figure of Gross Profit of Rs 274 million the FY06 figure looks excellent. On the other hand gross profit margin also improved as can be seen from the financial ratios appended with this 'Brief'. The directors of the company explained that improved sales and GP results were mainly due to better selling prices of company's products, fetched from local and international market through "aggressive marketing efforts."
The FY06 pretax profit amounted to Rs 59.04 million and FY05 actual figure were in the sum of Rs 47.10 million. At a glance it may appear that FY06 pretax profit is more. But compared to the FY05 annualised estimate of Rs 63 million, the pretax profit is low. The main reasons are higher finance cost, rise in raw material prices, increased depreciation charges and rise in energy cost. The company suffered net loss after tax. However it announced bonus stock dividend @10%.
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Performance Statistics (Million Rupees)
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30 June 2006 2005
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Share Capital Paid-up: 126.00 126.00
Reserves & Surplus: 532.80 519.59
Shareholder's Equity: 658.80 645.59
Surplus on Rev. F/Assets: 225.66 -
L.T. Debts: 645.58 630.11
Deferred Liabilities: 83.65 50.96
Current Liabilities: 1,463.62 1,338.74
Fixed Assets Tangible: 1,486.42 1,206.85
L.T. Investments: 114.20 100.11
L.T. Deposits: 6.53 4.40
Current Assets: 1,469.16 1,354.04
Total Assets: 3,077.31 2,665.40
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Profit & Loss A/C:
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For year for 9 Months
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Ended June 30 Ended June 30
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2006 2005
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Sales: 2,280.10 1,540.26
Gross Profit: 345.34 203.39
Operating Profit: 260.47 145.20
Other Operating Income: 5.47 7.46
Finance (Cost): (206.48) (100.43)
(Depreciation): (108.78) (71.35)
Share of Profit After
Tax From Associate: 2.57 2.51
Profit Before Tax: 59.04 47.10
Profit After Tax: 13.21 43.39
Earnings Per Share (Rs): 1.04 3.43
Dividend Cash (%): - 7.5
Dividend Stock (%): 10.00 -
Share Price (Rs)
on 10/04/07: 8.25 -
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Financial Ratios:
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Price/Earning Ratio: 7.93 -
Book Value Per Share: 52.29 51.21
Price/Book Value Ratio: 0.16 -
Debt/Equity Ratio: 42:58 49:51
Current Ratio: 1.00 1.01
Asset Turn Over Ratio: 0.74 0.58
Days Receivables: 63 71
Days Inventory: 154 236
Gross Profit Margin (%): 15.15 13.20
Net Profit Margin (%): 0.58 2.82
R.O.A (%): 0.43 1.63
R.O.C.E (%): 0.82 3.27
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Plant Capacity & Actual Production: Spinning Unit
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(Million Kgs)
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Installed Capacity after conversion
into 20s count Yarn: 18.091 15.932
Actual Production: 16.493 11.244
Capacity Utilization (%): 109.69 70.57
Number of Spindles
Installed: 44,794 41,424
Number of Rotors Installed: 1,440 1,440
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