During the year under review, the company's sales increased by 42% and gross profit at 65%. Net profit after taxation decreased by 38.4% in FY06 to Rs 36.97 million from Rs 60.01 million in FY05.
Profit before taxation declined by 36% to Rs 72.27 million in FY06 from Rs 112.88 million in FY05. Main reason for lower profitability, despite higher sales revenue, were quite higher finance cost and administrative expenses.
The company directors pointed out, they thought that the government would not use TCP to depress beyond the imported sugar prices. On this, according to directors, the general expectation was that sugar prices will remain around Rs 37/38 per kg ex-mill.
Sugarcane growers thus were paid prices upto Rs 110 per 40 kgs in anticipation of higher sugar prices. The directors lamented that the government did not keep its commitment and distorted the sugar market by selling TCP sugar stocks at substantially lower prices, they said that this factor also contributed significantly to major drops in the profit.
Tandlianwala Sugar Mills Limited was incorporated in the province of Punjab on November 01, 1988 as a public limited company. It is listed on Karachi and Lahore stock exchanges and its registered office is situated at 32-N Gulberg II Lahore. The company is primarily engaged in the manufacturing and selling of white crystalline sugar. Its manufacturing facilities comprise three units located in three different places.
Unit No 1 is the oldest unit located in Tehsil Tandlianwala district Faisalabad. During the financial year ended September 30, 2006, the period under review (FY06) this unit crushed 710.44 thousand metric tonnes of cane (FY05: 806.21 thousand metric tonnes) registering 11.9% declined.
Its average sucrose recovery rate declined to 7.66% in FY06, from FY05 recovery of 8.73 and produced 74.88 thousand metric tonnes of sugar as against 76.90 thousand tonnes in the preceding year. The cane crushing season of Unit 1 lasted for 143 days as against 154 days in the previous season.
The company's Unit-2 is situated at Taunsa Road, Indus Highway, Dera Ismail Khan. Its cane crushing season in FY06 lasted for 157 days as against 2 days in FY05. In this unit the company attained sucrose recovery rate of 7.54% and crushed 731.84 thousand metric tonnes of sugarcane producing 55.14 thousand metric tonnes of sugar. The director's report conveys a positive note of achievement about the production result of Unit No 2 and start of its commercial operations in a record time. This helped to a great extent in improving the financial result of the company.
The directors also said that they could have recorded still higher production figures had the sugar recoveries not dropped due to frost bite, as well as excessive trash content added by the growers in the sugarcane supplied by them. As regards Unit No 3, it is situated at Shah Jamal Road, Muzaffargarh and its construction has already started and it is hoped that the crushing from this unit would start by October 2007.
The crushing capacity of the plant has been rated at 8000 tonnes per day (TCD). Major local components of the machinery for this unit will be supplied by Heavy Machinery Complex Taxila while the foreign components will be supplied by different companies of England, Germany and Japan. The total project cost of unit No 3 is estimated at 1.620 billion with equity contribution of Rs 620 million.
The paid-up capital of the company has remained constant at Rs 700.14 million. Since the last several years. Since the last three years it has remained profitable therefore its share's book value works out at Rs 16.10 per share carrying 61% premium over the par value.
During the last 52 weeks market value of its share remained higher than par value as it ranged between Rs 11 and Rs 18.45 per share. At the closing price of its share on 18/05/2007, at Rs 12.50 per share its market capitalization has shot up to Rs 875 million.
The directors have injected unsecured and interest free loan of Rs 334.03 million. The financial health of the company's balance sheet has further strengthened as evidenced from the book value of its share, long-term debt to equity ratio and current ratio as shown in the performance statistics appended below.
During FY06, the company generated sales at Rs 3.060 billion (FY05: Rs 2.160 billion) and posted gross profit at Rs 392.16 million (FY05: Rs 232.29 million) showing increase by 41.6% and 64.6% respectively over preceding year's.
=====================================================
Performance Statistics (Million Rupees)
=====================================================
30 September 2006 2005
=====================================================
Share Capital-Paid-up: 700.14 700.14
Reserves: 427.07 390.10
Shareholders Equity: 1,127.21 1,090.24
Loan from Directors
Unsecured Interest Free: 334.03 170.18
Other L.T. Debts: 1,531.98 1,174.71
Deferred Liabilities: 83.37 58.89
Retention Money Payable: 9.68 3.42
Current Liabilities: 2,308.54 980.08
Tangible Fixed Assets: 3,051.62 2,382.34
L.T. Deposits: 25.35 28.69
Current Assets: 2,317.84 1,066.53
Total Assets: 5,394.81 3,477.52
-----------------------------------------------------
Sales, Profit & Payout:
-----------------------------------------------------
Sales: 3,060.33 2,160.49
Gross Profit: 392.16 238.29
Other Income: 3.95 0.89
Profit from Operations: 288.05 171.45
Finance (Cost): (215.78) (58.57)
(Depreciation): (67.07) (29.32)
Profit Before Taxation: 72.27 112.88
Profit After Taxation: 36.97 60.01
Earnings Per Share (Rs): 0.53 1.46
Share Price (Rs) on 18/05/2007: 12.50 -
-----------------------------------------------------
Financial Ratios:
-----------------------------------------------------
Price/Earning Ratio: 23.58 -
Book Value Per Ratio: 16.10 15.57
Price/Book Value Ratio: 23.58 -
Debt/Equity Ratio: 51:49 48:52
Current Ratio (times): 1.00 1.09
Assets Turn Over Ratio (times): 0.57 0.62
Days Receivable: 3 1.44
Days Inventory: 163 93
Gross Profit Margin (%): 12.81 11.03
Net Profit Margin (%): 1.21 2.78
R.O.A (%): 0.69 1.72
R.O.C.E (%): 1.20 2.40
-----------------------------------------------------
Capacity & Production: (Million Tonnes)
-----------------------------------------------------
Sugarcane Crushing Capacity: 2.240 2.240
Actual Crushing: 1.442 0.806
Capacity Utilization (%): 64.38 35.98
Sugar Recovery Percentage (%): 8.73 7.66/7.54
Sugarcane Produced (000 tonnes): 76.901 130.015
=====================================================