Since 1953, Rafhan Maize has been the premier provider of refined corn based products and ingredients in Pakistan. The company has focused on defending and reinventing traditional markets through delivering the right products at the right prices. Rafhan Maize has the capacity and capability to produce a wide range of food, industrial, animal nutrition and health ingredients. Important segments of diverse customers' base include textile, paper, food, confectionary, baking, pharmaceutical, livestock feed and edible oil refiners.
The company has excellent records of continuous growth performance and, in years of mixed uncertainties has continued to reinforce its market position. The gross profit margin has shown an erratic trend over the years. After 2004 gross profit margin declined despite a significant rise in sales as cost of goods sold also increased tremendously. The higher sales could not be translated into better margins as the price of corn, which is the basic raw material for the company, increased by 25% as compared to last year. Consequently, profit after tax declined by 9% against last year.
The liquidity position has improved significantly over the years as evident from the rising current ratio. This can be primarily attributed to the phenomenal increase in the company's cash reserves by over 1000%, and a relatively lower increase in the current liabilities failed to mitigate the effect of the rise in the current assets.
Rafhan Maize's asset management as far as the inventories' are concerned has been commendable. The operating cycle had risen in 2005, owing primarily to a rise in both the inventory turnover sales and the days outstanding. This shows that in 2005, Rafhan Maize faced relative difficulty in utilizing its inventories and obtaining cash against its credit sales compared to the previous years. During 2006, the operating cycle declined considerably majorly due to a sharp decline in the inventory turnover (days), hence showing that with aggressive marketing strategies to boost sales, the company has been able to better utilize its inventories in the recent years.
The total asset turnover ratio of Rafhan Maize has witnessed a rising trend since 2004. This can be attributed to the sharp rise in sales over the years owing to the marketing efforts by the company, which attracted customers. However, the return on assets declined in 2005 because of a 9% fall in profit after taxes, but increased in profit after taxes recovered in 2006 by 32.24% compared to the previous year.
Times interest earned for the company has declined since 2004, primarily because of a sharp hike in interest rates owing to inflationary pressures in the country. The operating profit of Rafhan Maize saw a decline in 2005, but to recover in 2006. However, the rise in the operating profit was not sufficient to off set the effect of a rise in interest rates.
The total liabilities of the company have declined as evident from the declining debt to asset and debt to equity ratios. This shows that Rafhan maize is managing its debts well and has improved its credit policies over the years. The current and non-current liabilities of the company have increased over the years, but the effect has been largely mitigated by the increase in assets and equity of the firm. Consequently, the debt asset and equity ratios have declined.
The earnings per share improved over the years, as did the book value per share. This is because of the net income increased subsequently over the years except in 2005. The company paid dividends in 2003-04, possibly is the reason for the lower EPS in 2003-04. The authorised capital of the company remained consistent over the four years, and the increase in equity was primarily due to an increase in the reserves of the company, by 31.8%, 13.6% and 7.5% respectively over the years, compared to last year.
Overall, Rafhan Maize has maintained a commendable record as far as asset, debt and liquidity management is concerned. It faced an erratic trend as far as profitability is concerned possibly because of a sharp rise in corn prices, the major raw material for the company. However, recently in 2006, profits have shown significant improvements. Hence, Rafhan Maize is a company that has always managed to recover from any set backs caused by any negative externalities.
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ICI - Financial Highlights
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2003 2004 2005 2006
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INCOME STATEMENT
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Turnover 4,031,195 4,509,992 5,194,388 6,127,127
Gross Profit 1,029,948 1,250,709 1,194,804 1,571,059
Operating Profit 893,033 1,101,138 975,470 1,320,865
Profit Before Tax 848,002 1,049,838 950,174 1,252,394
Net Profit 521,190 669,726 611,972 809,279
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BALANCE SHEET
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Total Equity 1,731,673 2,253,616 2,542,313 2,726,645
Current Liabilities 741,748 714,313 816,894 609,808
Non-current Liabilities 30,796 153,908 132,046 190,195
Current Assets 1,285,143 1,571,776 1,809,080 1,877,391
Non-current Assets 1,215,830 1,547,067 1,679,728 1,613,511
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LIQUIDITY
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Current Ratio 1.73 2.20 2.21 3.08
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ASSET MANAGEMENT
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Inventory Turnover 98.29 105.97 106.66 78.51
Days Sales Outstanding 12.17 13.28 14.99 15.68
Operating Cycle 110.45 119.25 121.65 94.19
Total Asset Turnover 1.61 1.45 1.49 1.76
Sales/Equity 2.33 2.00 2.04 2.25
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DEBT MANAGEMENT
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Debt to Asset Ratio 0.31 0.28 0.27 0.23
Debt to Equity Ratio 0.45 0.39 0.37 0.29
Long Term Debt to Equity 0.02 0.07 0.05 0.07
Times Interest Earned 126.76 215.28 118.04 64.73
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PROFITABILITY
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Gross Profit Margin 25.55 27.73 23.00 25.64
Profit Margin 12.93 14.85 11.78 13.21
Return on Assets 0.21 0.21 0.18 0.23
Return on Equity 30.10 29.72 24.07 29.68
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MARKET VALUE
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Book Value 18.75 24.40 27.52 29.52
EPS 56.43 72.51 66.26 87.62
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