Mahmood Textile Mills: Financial Analysis of Year 2011

image

MESSAGE OF THE CHAIRMAN

It gives me immense pleasure to describe the background of Mahmood Group of Industries. In 1935, a tannery in the name of Khawaja Tannery was set up in Multan by my father (late Khawaja Muzaffar Mahmood). He had vast experience in this field and was virtually a pioneer of this industry in Pakistan . The Company was incorporated in 1961, as a private limited company. Cotton ginning factories located in different parts of the country were also set up by him.

Independence there was no large scale industry worth the name and it was the utmost need of the time to establish more and more industries so as to make the country economically strong and to earn much needed foreign exchange for the development of the country. 

Our main object is to set up industry based on “Farm to Fabric”. Consequently an agricultural farm, various ginning factories, spinning and weaving units were set up. In the units about approximately 11000 persons are employed and earning their livelihood. The sincerity, integrity and good name are the factors for the success of an industry. The group is making patriotic efforts to fully participate in the rapid industrialization of Pakistan and is making its humble contribution in its progress and economic development.

As per detail given on the next pages the Group is in the wake of progress and I hope that with the Grace of God and devotion of staff and workers will make further achievements.

Yours truly,

Khawaja M. Masood

Chairman

.

VISION STATEMENT

To be recognized internationally and locally as dynamic, quality conscious and ever progressive Textile Product manufacturer in the Textile Industry of Pakistan

MISSION STATEMENT

Mahmood Group is committed to:

Be ethical in its practices.

Excel through continuous improvement by adopting most modernized technology in production.

Operate through professional Team work.

Retain our position as leading and innovative in the Textile Industry.

Achieve Excellence in the quality of our product.

Be a part of country's economic development and social Prosperity.

COMPANY INFORMATION

BOARD OF DIRECTORS:

Chairman KHAWAJA MUHAMMAD MASOOD

Chief Executive KHAWAJA MUHAMMAD IQBAL

Directors KHAWAJA MUHAMMAD ILYAS

KHAWAJA MUHAMMAD YOUNUS

JALAL-UD-DIN ROOMI

MRS. MEHR FATIMA

MUHAMMAD MUZAFAR IQBAL

Company Secretary: GHULAM MOHAYUDDIN

Chief Financial Officer: MUHAMMAD AMIN PAL

F.C.A.

Auditors: M. YOUSUF ADIL SALEEM & CO.

Chartered Accountants

61-B,AIi Imran Centre Abdali Road, Multan.

Bankers: MCB BANK LTD.

UNITED BANK LIMITED

HABIB BANK LIMITED

Registered Office: MEHR MANZIL, LOHARI GATE, MULTAN.

Tel.: 061-111-181-181 Fax: 061-4511262

E-mail: info@mahmoodgroup.com

URL : www.mahmoodgroup.com

Mills: MAHMOODABAD, MULTAN ROAD,

MUZAFFARGARH.

MASOODABAD, D.G. KHAN ROAD,

MUZAFFARGARH

Introduction of the Company:

Mahmood Group is vertically based on integrated industries and started business in 1935, by setting up a tanning unit. Since then, the group has grown immensely in the fields of cotton ginning, spinning and weaving.

Objectives:

'Farm to Fabric' is the objective of the company. Being vertically integrated, the group possesses its own vast cotton farms in the area of Multan, a region of Punjab. The cotton ginning, seed oil extraction, spinning and weaving units are located at strategic places for efficient and harmonious working of the various production units.

Current Performance:

The only group which starts from cotton farming to ginning, spinning and weaving, which gives it a distinction over the entire textile industry of Pakistan.

· Certified by ISO, Supima, Lycra and Oko-tex.

· Employees = 11,000.

· Turnover = US$ 215 million.

· Exports ratio = 90%.

· Employee Turnover = 10%.

· Responsible Corporate Citizenship

Core Values:

The group is always open for strategic alliances & long term relationships (Core Concept and basic idea). We believe in passing on the benefit of less cost to our buyers instead of increasing our own overheads, however there is no compromise on quality or machinery

Future Plans:

In an era of trade globalization, our vision is excellence in terms of quality with satisfied internal and external valued customers. The objective is to achieve continuous improvement in quality through professional management, state-of-the-art equipment, and highly motivated workforce.

We at Mahmood Group are demonstrating sustained growth over the period of last 3 decades with reasonably good return on investment which have been utilized to give high quality products to our valued customers at least possible prices.

Importance of textile industry

According to the “ECONOMIST” intelligence report of Pakistan the following observations have been made: Despite Government efforts to diversify exports and widen the industrial base, the industrial sector remains dominated by the Textile sector by having 426 mills. Textile Sector still represents 46% of total manufacturing and provides 62% of Pakistan’s Export receipts. Employment level is 40% of the total labor workforce. The textile industry contributes 11% of the total GDP. Some of you may not know that APTMA was founded in 1952 and since then has been the foremost association concerning the textile business in Pakistan. The strong performance stemmed from two factors:

a. Increase in import quotas especially by U.S.A, EU and TURKEY
b. Textile industry has invested over US$1.5 billions in new technologies and modernization in the last 3 years.
Efficiency and the innovation in textile is the only hope to get the country out of economic problems.

Present status of Pakistan Textile engineering sector

The Pakistan Textile Engineering Sector is underdeveloped and under utilized. Mostly it caters in the form of spares, components for modernization and machines used in cottage or small scale industries.
A cursory look at the structure of Pakistan Textile Industry shows that most of them are cottage industry, small/medium industrial units and little large integrated state of art units. The number of units which fall under each category varies from sub-sector to sub-sector. Similarly the Textile Engineering Units also vary from small, medium and large in size. The Textile Engineering Industry comprises approximately 80% small work shops, 15% medium engineering Units and 5% large Engineering Units. It will not be out place to mention that the large engineering units are in Public Sector. The small and medium Engineering Units work on reverse Engineering principles, only few work according to Engineering Drawings and still fewer have Testing or Quality Control facilities.
On the basis of initial survey of Textile Engineering Units (Not complete yet), approximately 500 units are engaged all over Pakistan, employing approximately 50000 work force which is mostly skilled. Even under the present conditions and without any support, Pakistan Textile Engineering Industry is providing import substitution worth around one billion US dollars. This sector also exports to small and medium Textile Units in Bangladesh, Iran, Sri Lanka, etc.
The Textile Engineering Sector is throttled through taxes on raw material, import of components, electronic and electrical parts.

Assistance of present institutions


To encourage the local textile industry an access to the modern practices in the specialized areas of manufacturing processes, productivity enhancement and quality control, an institutional mechanism should be set up which provides the industry an adequate and industry-friendly assistance from such organizations as MIRDC, PITAC, CTL and PSI, etc.

Need for training institutions
Diploma Level Courses on the pattern of Pak-Swiss Training Centre in Karachi should also be opened in the Textile Institutions in Faisalabad and Karachi and more such courses should be introduced in the Polytechnics in areas like Multan, Hyderabad, Lahore and Gujranwala.

Pakistan s textile industry has been investing for the last five years in modernization and the improvement of the production base. During this period the sector has invested over US$ 5.0 billion in modernization and higher value addition. Break up of investment is given as under.

Sectral Shares in Total Investment in the Sector

1 Spinning

46%

2 Weaving

24 %

3 Textile Processing

12%

4 Knitwear & Garments

5%

5 Made-Ups

8%

6 Synthetic Textile

5%

This investment has resulted in the following capacity improvements:

 

Unit

2004-05

2009-10

% Change

Capacity (Spindles)

000

8,477

11,300

33%

Consumption of Raw

000 Kg

1,970,356

3171,123

61%

Cotton

000 Kg

1,566,348

2,680,900

71%

MMF

000 Kg

404,008

490,223

21%

Production of Cotton

Bales

9,745,447

14,339,852

47%

Production of Yarn

000 Kg

1,678,536

2,063,565

23%

Production of Cloth

Mill sq

4,987

6,833

37%

Textile Exports

000 US$

5,156,572

9,030,153

75%

Future opportunities


Our main competitors in primary textile products with the advantage of large engineering sector in this region are China and India. The only country in this region without strong engineering base is Pakistan and our dependence upon outside Engineering Industry keeps our cost of production higher with low engineering skills.

Looking into the future a strong competition from China and India for these market requirements can be used to involve them to start assembly plants under their guidance and cooperation.
Some progress in the direction has led to the development of a Task Force in the Ministry of Industries and Textile Engineering is growingly lucrative for investors, local and foreigners.

Pakistan s textile industry has been investing for the last five years in modernization and the improvement of the production base. During this period the sector has invested over US$ 5.0 billion in modernization and higher value addition. Break up of investment is given as under.

Future Perspective

In order to accelerate the growth of this sector, the Ministry of Textile Industry has been set up specifically to address issues of supply chain management and value addition. Since its creation, the Ministry has taken a number of proactive measures for the promotion of the textile industry. These include:

i. Reactivation of the Federal Textile Board to take decisions involving strategy for the development of textile industry.

ii. Policy support in shifting towards value addition.

iii. Establishment of Textile City and Garments Cities in the main industrial hubs of the country i.e. Karachi, Lahore & Faisalabad. At present one Textile City at Karachi and three Garment Cities (at Karachi, Lahore and Faisalabad) are being established.

iv. Import duty on raw material, sub-components and components used in the local manufacturing of textile plants and machinery for export sector, has been reduced to zero%.

v. Import duty, on ginning presses has been reduced to 5%.

vi. The Program was started in 2005-06 and will be continued during 2006-07 season also. For this purpose total Rs.70 million shall be paid as premium to the growers for production of 100,000 clean cotton bales. Federal and Provincial Governments (Punjab & Sindh) each will pay 50% share of the premium. Federal Govt. s share is Rs.35 ml and Punjab Govt. will pay Rs.24.5 ml and Sindh Rs.10.5 ml (Total Rs.35 ml) for this year. The Prime Minister has approved the continuation of this program up to 2008-09 with production of 300,000 clean cotton bales in 2007-08 and 600,000 bales in 2008-09.

vii. High Volume Instrumentation is another component towards achieving better international quality.

viii. Turn over tax has been reduced to 1 % on retailers of specified textile fabrics and articles of apparel including readymade garments or fashion wear. The 15% Sales Tax levied earlier on retailers has been reduced to 2%. Both these taxes will be their final tax liability.

ix. To improve the human resource base and to improve labor productivity, provision of Rs. 96 million from EDF has been made for providing skills development to the work force in the garment sector. Accordingly, Stitching Machines Operators Training (SMOT) Scheme was initiated which is successfully running in a number of industrial establishments.

x. An initiative of launching of first ever business to business (B2B) web/based portal for providing market access to Pakistani textile products.

xi. A Cotton Ginning Research & Training Institute is being set up at Multan. Funds to the tune of Rs.28 million have been approved by the EDF Board of Administrators.

xii. Continuous supply of natural gas to the textile units during the winter months to ensure uninterrupted supply of power to the industrial units.

xiii. Research & development activity is being augmented by engaging expatriate consultants to benchmark our industrial practices vis-a-vis major international competitors. Two foreign consultants M/S Werner and Gherzi are conducting studies for the improvement of the textile sector. This is assumed that it would help in working out better policies to reduce the cost of doing business and in improving the textile exports.

Agriculture & Fruit Farm

The group owns 400 acres of land on which cotton and wheat are grown. It also contains fruit farms mainly citrus and mangoes and this area is unique for these types of fruits.

 

Cotton Ginning & Cleaning

(Run by Khawaja Muzaffar Mahmood Muhammad Masood)

Cotton is regarded as an important crop of Pakistan . The Company is engaged in cotton ginning for the last 50 years and is running a number of ginning factories located in various parts of the country where best quality cotton is produced.

In the factories, about 200,000-225,000 cotton bales are produced in one cotton season, which is the largest number of cotton bales produced by one organization in Pakistan .

The raw cotton is properly selected and before ginning approximately 2500 workers are assigned to pick contamination from the unginned cotton. Every effort is made to make the cotton contamination free. It is ginned under strict supervision of the skilled staff.

The natural characteristics of cotton fiber strength, uniformity, fiber fineness, and spinning values are strictly maintained through various laboratory and technological checks.

Why Mahmood's Cotton?

"The contamination controlled cotton backed by the experience of more than 6 decades ensures that the cotton supplied to the down streaming process gives the best and most competitive product"

 

The spinning facility of Mahmood Group consists of eight units with a capacity of 175,000 spindles, count ranging from Ne 4/1 to Ne 120/1. The consistent and top class quality is maintained by making use of the ‘farm to fabric' cycle with all productions step checked by in house laboratories in all respective units.

For further control of contamination in spinning, devices like Vision Shield / Loptex at blow room stage and Uster Quantum / Lopfe at autocone have been installed.

Mahmood Group is Usterized, Organic, Supima, Lycra, Oko-tex, COM4, Cotton USA, & ISO certified.

Product Range

Specialized Yarn

Cotton Used

Machinery Detail

Product Range

Carded Cotton Yarn

Ne 4/1 – 40/1

Combed Cotton Yarn

Ne 8/1 – 140/1

Core-Spun Stretch Yarn

Ne 7/1 – 40/1 (Also available with Slub)

Plied Yarns

2, 3 and 4 ply

Blended Yarns (PC & Viscose)

Ne 10/1 – 80/1

Slub Yarns

Ne 4/1 – 30/1 Carded & Combed (also with compact)

Compact Yarn

Ne 7/1 – 120/1 ( Normal as well as Slub & Lycra)

Specialized Yarn

Made to Order

Specialized Yarn (Made to Order)

Tencel Yarn, Zero Twist Yarns, Organic, Modal, Bambo, Soybean, Fancy Yarns, Slub & Lycra Slub.

Cotton Used

The Group uses lots of imported cotton as well as per the increasing demand of 100% contamination free yarn for white dyeing guarantee. For this purpose mainly these cottons are imported

Pima (grade II), Giza (88, 70), US Fibermax, Australian, West African ( Burkina Faso ), Brazilian, Greek, Indian (Shankar, MCU-5)

Capacity

  • 175,000 Spindle
  • 8 Spinning Units
  • 45 Doubling machines (2 F 1) with splicing
  • 12,000 Spindles of slub (e-drafting RX-240)
  • 11,000 Spindles of core-spun yarn
  • 15,000 Spindles of compact (REITER K-44)
  • Knitting Machines for testing quality of Knitting Yarn.

Why Mahmood's Spinning?

The cycle of Farm to Fabric makes sure that the yarn produced is of top quality and with well controlled contamination. The updated technology helps in this regard as well

 

Machinery Detail

The machinery as evident from the column below is all imported from well known brands like Reiter (K-44 and combers), Toyoda(Rx-240 and back process), Trutzchler (DK-903) and Reiter cards, Jossi vision Shield, Holfman and Murata doublers.

Brand

Ajwa 1

Ajwa 2

Cotton King

Palm

Zaitoon

Zaitoon 1

Engine

Blow Room

Trutzschler

Reiter

Trutzschler

Trutzschler

Trutzschler

Trutzschler

Trutzschler

Contamination Sorter

Jossi Vision Shield

Jossi Vision Shield

Lop Tex

Lop Tex

Lop Tex

Indian

-

Card

Trutzschler DK 903

Reiter T 60

Trutzschler

Crosroll MK 4

Trutzschler DK 930, TC 03

Trutzschler TC 03

Crosrol

Draw Frame

Toyoda DX-8

HSD 961 Taiwan

Toyoda, Reiter

Toyoda DYH 500C,  Reiter RSD 30

Toyoda 500C, Reiter RSBD 30

Dogtech HSD 961, RSBD 35

Toyoda DYH2C, Reiter RSBD 35C

Comber

Reiter E62

Reiter E 65

Reiter E62

Toyoda CM 100,

-

-

Toyoda CM 10

Simplex

Toyoda FL100

Toyoda FL 100

Toyoda FL - 16

Toyoda FL 16

Toyoda

FL 16

FA 415 A

FA 415 A

Ring Frame

RX-240 n compact

Rx 240

Toyoda RX-240, Reiter K-44

Toyoda Ry 5

Toyoda

RY 4

Toyoda RY 5

EJM 128

Autoconer

Murata 21 C

(Visual Manager)

Schlahorst 338

Murata 21 C

Savio Orian, Murata

Schlahorst 338, Murata

Murata

Murata

Yarn Clearers

Loepfe TK 940 F

(Mill Master),

Quantum 2

(Cone Expert)

Uster Quantom 2, White PP Channel

Loepfe TK 930, Quantum

Uster Quantum

Uster Quantum

Uster Quantum

Twister

Murata, Volksmens

-

Murata

Murata 363

Murata 363-2

-

Murata , Rifa

Yarn Conditioning

OBEM

-

OBEM

-

OBEM

-

-

Mahmood Group weaving constitutes of 500 Airjet Looms. Three sister concern companies by the name of

  • Mahmood Weaving Mills
  • Masood Fabrics Ltd
  • Roomi Fabrics Ltd

come under this head. All state of the art machines are installed in the division which gives the group flexibility to produce all kinds of greige fabrics. The group has a well established name in producing odd and new articles. This is well supported by top class technical and marketing team. Approximately 80 million yards of fabric are produced within the group.

Machinery Detail

Product Range

Machinery Detail

Warping

Benninger Model 2003, 2006, 2008

Sizing

Benninger Zell Model 2003, 2006, 2008

Looms

JAT 710(reinforced)  JAT 610

No. Looms

500

Model

1997-2006

Widths

67 - 168 inches

Special Features

Dobby Attachments

Compressor

Atlas Capco

Air conditioning

Luwa, Airplus

"Mahmood Group is Organic cotton (GOTS), ISO, Supima, Lycra, Oko-te, COM4, Usterization and Cotton USA. Certified"

Why Mahmood Group's Fabric?

"The huge capacity and advantage of in-house spinning (and further cotton) makes sure that the cost and quality advantages are transferred to the customer with on-time deliveries. Also, the group is renowned for producing very special constructions as it always keeps investing in the new developments."


Product Range (Weaving Division)

Composition

100% cotton, carded, combed. Compact/Non Compact/ O.E/Ring spun. Blended Fabrics in different ratios

Blended cotton with polyester/viscose/Rayon/tencel/model/Organic Cotton etc along with the certificates of Certifying Bodies

Poplins

Dense poplins with the range of rough to very fine counts i-e from 4/1 n.e to 120/1 n.e

Panama in half and Full Panama Styles

Twills

Heavy weight twills and drills in all styles 2/1, 3/1 and 2/2 twills for all seasons with respect to different uses

Satin and sateen for all types feasible for raising etc

Stretch Fabrics

All kinds of uni-stretch and Bi-Stretch in twills/drills/poplins and dobbies

Plied Fabrics

Fabrics in Two-Plied, three plied and four plied in different weights and composition

Unique Designs

All sorts of dobbies with heavy weight fabrics upto 450 gms/sqr mtr with different weaves like

Bedford Cords, high-low cords, Irregular Twills, Broken Twills, Crinkles, Herringbones , elephant skins, etc

Slub Fabrics

Fabrics with different slubs patters and styles, slub with stretch and non Stretch ,Fancy yarns Fabrics , Multicounts in one way/both ways

High-Twists in both side, zero twisted yarn fabrics

Finished

PFP ( Prepared for Printing), PFD ( Prepared for Dyeing), PFGD ( Prepared for Garments Dyeing) both with Peach and Non Peach, Dyed in different colours

 

Roomi Enterprises (Pvt) Ltd.

The Company was set up in 1993. It is the trading arm of the group. In the last few years large quantity of fabric has been exported and vast contacts developed with the foreign buyers through this company. The annual turnover of this company only is $ 10 million. The Company deals in export and import of various commodities and therefore keeps on availing the opportunities which the global market presents

 


"The group has its own power generation plants to supply uninterrupted power to all units in order to maintain quality and consistency."

Mahmood Group's Own Power Generation.

image

Due to frequent break-downs in electric supply, production and quality of yarn / fabrics suffered. In order to supply uninterrupted power to the units, a power generation plant of 9.2 MW capacity was installed in 1997.

Caterpillar generators running on gas of approximately 30 MW have also been added

Masood Power plant has 6 Caterpillar generators running on gas of approximately 8 MW, providing uninterrupted supply to its Masood Nagar Units (Masood Fabrics and Masood Spinning Limited).

Roomi Power plant has 3 Caterpillar generators running on gas of approximately 5 MW, providing uninterrupted supply to its Masood Abad Units. (Roomi Fabrics).

image

 

In an era of trade globalization, our vision is excellence in terms of quality with satisfied internal and external valued customers. The objective is to achieve continuous improvement in quality through professional management, state-of-the-art equipment, and highly motivated workforce.

We at Mahmood Group are demonstrating sustained growth over the period of last 3 decades with reasonably good return on investment which have been utilized to give high quality products to customers at least possible prices.

Corporate Citizen

We at Mahmood Group think ahead of entrepreneurship with belief in strategic human resource management. The sole objective is to have cordial employee relationship. The professionally managed employees are invaluable assets of the group in all disciplines. We here not only care for the social needs of the employees but also a participative environment is provided where employees are able to take decisions as a result of planned and regular brain storming sessions. Environmental friendly atmosphere has ever been our prime concern.

"In order to meet and exceed the quality standards we also care for having close interactions with our suppliers."

 

In order to conform to international quality standards, highly sophisticated and most modern testing equipment has been installed. Each unit has its own laboratory for quality control.

Quality Policy

The quality policy of the group states as follows:

"We are committed to the achievement of excellence in the quality of our products. This is done by motivating all employees towards the satisfaction of our customers and with the use of best quality raw materials."

Why Mahmood's Products?

The Group is committed to achievement of excellence in the quality of products. This is done by motivating all employees towards the satisfaction of the invaluable customers and with the use of best quality raw materials

RATIO ANALYSIS

Ratio analysis is a shortcut method of expressing relationships among various items on the finanicial statements. However, ratios are not substitutes for looking deeper into the financial position of company.

In the analysis of Mahomood Textile Mills we found the following ratios:

1) Time interest earned

2) Book value per share

3) Earnings per share

4) Equity ratios

5) Profit margin

6) Inventory turnover ratio

7) Cash ratio

8) Debt to equity

9) Working capital

10) Current ratios

11) Return on total assets

12) Return on shareholders’ equity

13) Gross profit ratio

14) Debt ratio

15) Quick ratio

Time interest earned

TIE = Income before interest and taxes/annual interest expense

2006 304924164 /127242498 = 2.40

2007 438012752 /190691630 = 2.30

2008 271248824/221160302 =1.23

2009 571453864/381249583 =1.50

2010 986506596/340466887 =2.90

COMMENTS

From 2006-2009 Time Interest Earned decreased due to high interest expense. As compare to 2009 Net Income Increased by 240% and Interest Expense decreased by almost 11% in 2010 which cause of increased in Time Interest Earned ratio. The company should arrange finance at minimum cost to increase the Time Interest Earned Ratio in other words to increase the ability to meet its interest expenses.

Book Value Per Share

BVPS= Total Common Shareholder’s Equity/Number of common share outstanding

2006 1551824359 /9984989 =155.42

2007 1693533968 /9984989 =169.61

2008 1623589865 /9984989 =162.60

2009 1711456511 /9984989 =171.40

2010 2249716345 /15000000 =149.98

COMMENTS:

In 2006-2007 Book Value per Share increased From Rs.155.42-169.61 but in 2008 due to allocation a large amount for “Provision for Tax” owners’ equity decreased which decreased the Book Value per Share by Rs.7. in 2009 Book Value per Share was the highest Rs.171.4 but the Book Value per Share again decline in 1st half of 2010. In 2010 number of share increased by 50% while owners’ equity could not increase with the same proportion as the result Book Value per Share decreased by almost Rs. 21.5.

EARNING PER SHARE

Eps= Net Income/No. of Shares

2006 110127922/9984989 =11.03

2007 176842561/9984989 =17.71

2008 (4979641)/9984984 =(0.5)

2009 102843981/9984989 =10.30

2010 578199790/15000000 =38.55

COMMENTS :

In 2006-2007 Earnings per Share increased from Rs.11.03 to 17.71 but in 2008 due to allocation a large amount for “Provision for Tax” company faced lose and EPS Changed to LPS that was (0.5). In 2009 EPS was Rs. 10.3 Which became Rs. 38.55 in the 1st half of 2010. There is a very high fluctuation in EPS the company should concentrate the factors which affect EPS

Equity Ratio:

ER= Total equity/Total Assets x 100

2006 1551824359/3191311845 x 100 = 48.63%

2007 1693533968/3742731114 x 100 = 45.25%

2008 1623589865/4296653569 x 100 = 37.79%

2009 1711456511/4418368036 x 100 = 38.74%

2010 2249716345/5014717477 x 100 = 44.86%

COMMENTS:

In 2006 Equity Ratio was 48.63% in Total Assets. In 2007 we can see increase in Equity as well as in Assets but despite that Equity ratio decreased which shows that increase in Assets is not due to increase in equity it is increase because of debt. In 2008 due to lose owners’ equity decreased and so that equity ratio became more less. From 2009 to 1st half of 2010 equity is increasing and Equity ratio is also increasing which is a good sign for the business that should be maintain.

Profit Margin:

PM= Net Income/Net Sales x 100

2006 177681666/ 3839168820 x 100 =4.63%

2007 247321122/ 4583350069 x 100 =5.40%

2008 82715372/5073168667 x 100 =1.63%

2009 190204281/ 6811267831 x 100 =2.79%

2010 646039709/ 8135551381 x 100 =7.94%

Comments:

Shareholder's as well as the firm's management a particularly interested in wealth maximization which would be gained by profit maximization and to achieve this in a higher rate. We have to the analysis on increase in sales and to decrease in cost of goods sold which give the higher profit which increases the share value. As above ratio we can analyze; that 2010 is higher than remaining years. It is higher because of low cost of goods sold and the low operating expenses.

Inventory Turnover ratio

Inventory turnover =Cost of Goods Sold/Avg.inventory

2007 4038046572/1035011516 =3.90

In Days 365/3.90 =93.5

2008 4478253669/1388553181 =3.22

In Days 365/3.22 =113.35

2009 5727024986/1516556902 =3.77

In Days 365/3.77 =96.81

2010 6628423205/1543182901 =4.295

In Days 365/4.295 =84.98

Comments:

As we know the inventory turnover including in current ratio which shows the liquidity of a firm. A firm can analyze the liquidity of paying debt immediately. As above ratio shows the inventory turnover ratio that how immediately converts in cash. 2010 is higher liquidity ration than remaining years

Cash Ratio

CR =Cash +Marketable Securities/ Current Liability

2006 7584259/ 1055824886 =0.0072

2007 8848952/1384082252 =0.0064

2008 7611631/1924504789 =0.0040

2009 9226439/1972157401 =0.0047

2010 15358305/1955831122 =0.0079

Comments:

Cash ratio shows the firm ability to pay off its current liability. Above ratios show that the firm is not able to pay current liability if urgently required by creditors because available cash are too short than current liabilities, so, firm management need to increase its cash.

Debt to Equity Ratio

Debt to Equity Ratio =Total Liabilities/ Total Stockholder’s Equity

2006 1639487486/1551824359 = 1.06

2007 2008870895 /1701916751 = 1.18

2008 2673063704/1623589865 = 1.65

2009 2706911525/1711456511 = 1.58

2010 2765001132/2249716345 = 1.23

COMMENTS

Debt to equity ratio measures the balance of funds being provided by creditors and stockholders. The higher the debt to equity ratio is, the more debt the company has, and all else being the riskier it is.

1) In 2006 the debt to equity was 1.06 which is increased in 2007 up to 1.18 due to increase the portion of total liabilities.

2) In 2008 the ratio is further increased due to increase portion of total liabilities versus stockholders equity which is not good for company it shows the weak financial position of company.

3) In 2009 debt to equity ratio decreased from 1.65 to 1.58 but still it is not satisfactory. Company needs to decrease more its liability.

4) In 2010 due to increase the portion of stockholders equity a decline is occurred in debt to equity ratio which shows the good performance of company. It is very satisfactory shareholders as well as creditors.

Working Capital

WC =Current Assets - Current Liabilities

2006 1386908396 -1055824886 = 331083510

2007 1750363845 -1384082252 = 336281593

2008 2263757417 -1924504789 = 339252628

2009 2441209096 -1972157401 = 469051686

2010 2672950020 -1955831122 = 717118898

Comments:

Working Capital is an important measure of any management; it helps to prepare changes in financial statement. Working Capital shows the liquidity of the firm. If we see the five years then we analyses that in 2006 the working capital is about 3.3 million and in 2007 the working capital is increase to 3.6 million, in 2008 again decrease to 3.3 million, because liability is so increased in 2009, current liability is decreased so w.c increased to 4.6 million and in 2010 w.c is so high and it increases to 7.1 million, because current liability decreased. Here we have excess w.c interest for therefore We should invest the rest w.c in any firm where we could get the more wealth maximization

Current Ratio

CR =Current Assets/ Current Liabilities

2006 1386908396 /1055824886 =1.31

2007 1710037594 /1343750001 =1.27

2008 2263757417 /1924504789 =1.18

2009 2441209096/1972157401 =1.24

2010 2672950020 /1955831122 =1.37

Comments:

Current ratio is one of the most common measures of liquidity and the ability of the company to meet its short term debt. Uses of LIFO to cost a large inventories decrease the current ratio and FIFO increases the current ratio. In 2006the firm had Rs=1.31 to meet its Rs=1 liability. In 2007 and 2008 it decreased but 2009 and 2010 the current assets increased. Increase in current assets is not in favor of any firm. The firm has to utilize the current assets and increase the profitability of the firm.

Return on Total Assets

Return on Total Assets

=Net Income +Interest Exp/ Average on Total Assets x 100

2006 237370420/ 3191311845 x 100 =7.44

2007 367534191/3467021480 x 100 =10.60

2008 216180661/ 4019692342 x 100 =5.38

2009 484093564/ 4357510803 x 100 =11.11

2010 918666677/ 4716542757 x 100 =19.48

Comments:

1) Return on total assets measure of profitability of the firm and how efficiently assets are employed, it is one of the important ratio because it answers the basic question. What rate of return of the firm earned on the assets under its control?

2) Return on total assets in 2006 was 7.44% which increase in2007 up to 10.6% it means company utilizing, it assets efficiently.

3) But in 2008 return on total assets decreases up to 5.38% due to earning loss

4) In 2009 company's return on total assets up to 11.11% due to increase the net income.

5) In 2010 company's return on total assets increases up to 19.48% which shows the profitability of the company and company is utilizing its assets effectively

Return on Common Shareholder's Equity

=Net Income less Preferred dividend/ Average common shareholder's equity x 100

2006 110127922/ 1552824359 x 100 =7.09

2007 176842561/ 1622679164 x 100 =10.90

2008 -4979641/1658561917 x 100 =-0.30

2009 102843981/ 1667523188 x 100 =6.17

2010 578199790/ 1980586428 x 100 =29.19

Comments

The return on common stock holders’ equity is a ratio that measures the return generated to common stockholders for each rupee they have invested. In 2006 return on common shareholders’ equity was 7.09% which increases in 2007 up to 10.9% which is satisfactory for investors. In 2008 company's return on common shareholder's equity earn lose 0.3% due to earning net loss. In 2009 investor earn the return 6.167% on every rupee. In 2010 company's return on shareholder's equity increases up to 29.19% which will attract the new investors and it shows company’s good profitability and strong financial position.

Gross Profit Ratio

GP =Gross profit/ Net Sales x 100

2006 406043788/ 3839168820 x 100 = 10.58%

2007 545303497/ 4583350069 x 100 = 11.90%

2008 562288148/ 5073168667 x 100 = 11.08%

2009 1084242845 /6811267831 x 100 = 15.92%

2010 1507128176/8135551381 x 100 = 18.53%

Comments

1) In 2006 gross profit ratio was 10.58% which is increased in 2007 and 2008 due to decrease cost of goods sold. If company wants to achieve more gross profit company needs to decrease those expenses which cause to increase the cost of goods sold.

2) In 2009 firm’s gross profit further increased up to 15.92% which is favorable for company because in this year company try to reduce its cost of goods sold.

3) In 2010 company has shown very good performance that is why its gross profit is further increased up to 18.53% and company has further reduced its cost of goods sold which shows the increasing profitability of company.

DEBT RATIO

DR =Total Liability/ Total Assets x 100

2006 1639487486 /3191311845 x 100 = 51.37%

2007 2049197146/3742731114 x 100 = 54.75%

2008 2673063704/4296653551 x 100 = 62.21%

2009 2706911525/4418368036 x 100 = 61.26%

2010 2765001132/5014717477 x 100 = 55.14%

Comments

THE debt ratio measures the relative proportion of assets contributed by the shareholders and the creditors. The higher the debt ratio is, the less likely it is that a creditor would loan additional funds to the company. Clearly the creditor’s margin of protection decreases as the total debt of a firm increases.

In 2006 debt ratio increases up to 51.37%.It is not favorable for firm because the proportion of liability is more than its assets.

In 2007 debt ratio further increases up to 54.75% due to increase total liability. Company need to decrease its liability.

In 2008 Mehmood Textile debt ratio further increase up to 62.21% it means company performance is not satisfactory and creditor will be hesitant to loan additional funds.

In 2009 although company debt ratio as decrease as compare to 2008 but it is still not satisfactory for creditor.

In 2010 company debt ratio decreases up to 55.14% due to increase the portion of assets which is contributed by share holders and creditors but company still need to decrease the portion of liabilities.

Quick Ratio

QR =Quick Assets/ Current Liabilities x 100

2006 21005339/1055824886 x 100 = 1.99%

2007 19417934/1384082252 x 100 = 1.40%

2008 63890190/1924504789 x 100 = 3.32%

2009 115811515/ 1972157401 x 100 = 5.87%

2010 24358305/1955831122 x 100 = 1.25%

Comments

It measures ability of firm to meet immediate debt. In 2006 quick ratio was .0198 or 1.98 which decrease in 2007 up to 3.31 due to increase current liability.

In 2008 quick ratio increases up to 3.31 due to increase quick asset.

In 2009 quick ratio also increase up to 5.87% due to increase assets. It means company has improved its ability to meet immediate debt.

In 2010 quick ratio decrease up to 1.24% due to decrease quick assets. It means company need to improve its ability to meet immediate debt.

Vertical Analysis

Vertical analysis is used to evaluate the relationships within single financial statements. Essentially, the appropriate total figure in the financial statements is set to 100% and other items are expressed as a percentage of that figure.

Balance Sheet

Assets

Non-Current Assets : 2010 2009 2008 2007 2006

Property, plant & Equipment 35.38% 36.94% 40.36% 46.37% 52.20%

Long term Investment 5.12% 7.65% 6.27% 6.75% 4.22%

Deposit for Shares 6.03% 0.00% 0.00% 0.00% 0.00%

Long term Deposits 0.12% 0.14% 0.088% 0.10% 0.12%

Loans to Employees 0.04% 0.00% 0.00% 0.00% 0.00%

Total Non-Current Assets 46.69% 44.74% 46.68% 53.23% 56.54%

Current Assets : 2010 2009 2008 2007 2006

Stores,spare & loose tools 2.21% 2.63% 3.81% 2.72% 3.04%

Stock in Trade 32.75% 32.67% 37.82% 30.19% 29.45%

Trade Debts 8.38% 8.77% 3.34% 2.60% 2.17%

Short term Investment 5.37% 5.93% 3.91% 7.76% 4.33%

Loans to &Advances 0.71% 1.21% 2.23% 2.05% 2.28%

Other Receivable 1.79% 2.41% 1.30% 0.28% 0.06%

Tax Refunds, Due from Govt. 1.75% 1.39% 0.72% 0.91% 1.44%

Cash & Bank Balance 0.30% 0.20% 0.17% 0.23% 0.24%

Total Current Assets 53.31% 55.26% 53.32% 46.77% 43.46%

Total Assets 100% 100% 100% 100% 100%

EQUITY AND LIABILITIES

EQUITY 2010 2009 2008 2007 2006

Issued And Paid up capital 3.00% 2.26% 2.30% 2.66% 3.12%

Capital Reserve 0.14% 0.16% 0.37% 0.19% 0.22%

Inappropriate profit 41.73% 36.31% 36.15% 42.19% 45.27%

Total Equity 44.86% 38.73% 38.61% 45.24% 48.62%

NON CURRENT LIABILITIES

Long term financing 13.73% 13.46% 15.06% 16.07% 17.25%

Deferred Taxation 2.40% 3.16% 2.12% 1.70% 1.03%

Total Non Current Liabilities 16.13% 16.62% 17.19% 17.77% 18.28%

CURRENT LIABILITIES

Trade and Other Payable 6.87% 5.73% 4.03% 5.08% 6.18%

Accrued Markup 1.24% 2.09% 0.99% 0.71% 0.43%

Short Term Borrowing 25.90% 33.76% 35.60% 27.54% 24.08%

Current Maturity Of long

Term Financing 3.28% 2.27% 2.93% 2.55% 2.34%

Taxation 1.69% 0.76% 0.64% 1.08% 0.04%

Total Current liabilities 39.00% 44.63% 44.19% 36.98% 33.03%

Total Liabilities 55.14% 61.27% 61.39% 54.76% 51.38%

Total Liabilities and Equity 100% 100% 100% 100% 100%

COMMENTS:

In 2006 Mahmood Textile Mills Ltd. Non current assets percentage was 56.54% due to high percentage of property, plant and equipment which was 52.20% and in 2007 noncurrent assets percentage increase to 53.23% due to increase long term investment. In 2008 Mahmood Textile Mills noncurrent assets decreases up to 46.68% due to decrease percentage of property plant and equipment and long term deposits. In 2009 there was further decline in the percentage of noncurrent assets due to decrease percentage of property plant and equipment. In 2010 noncurrent assets percentage increase as compare to 2009 because of increment in the percentage of deposits for shares and loans to employees.

In 2006 company current assets percentage was 43.46% which increase in 2007, 2008, 2009 up to 46.77%, 53.32% and 55.26% respectively due to increase in stocks in trade. In 2010 current assets decreased due to decrease in loan and advances.

In 2006 company finance 51.38% from liability that is why company liability portion was more than its equity and company liability increase in 2007, 2008, and 2009 due to increase in liability and decrease in equity but in 2010 portion of liabilities decreases up to 55.14% and total equity increases up to 44.86%.

Vertical analysis

Income Statement

2010 2009 2008 2007 2006

Sales 100% 100% 100% 100% 100%

Less: Cost of Sales 81.47% 84.08% 88.91% 88.10% 89.4%

Gross Profit 18.53% 15.92% 11.09% 11.90% 10.5%

Less: Operating Expenses

Distribution Cost 3.31% 3.34% 3.51% 3.68% 2.56%

Administrative Expenses 1.45% 1.18% 1.22% 1.18% 1.25%

Other Expenses 2.33% 4.06% 1.82% 0.48% 0.57%

Other Income 0.05% 0.34% 0.45% 2.41% 1.11%

Profit from Operation 11.49% 7.68% 4.99% 8.97% 7.31%

finance Cost 4.18% 5.60% 4.35% 4.16% 3.31%

Share Profit of Associates0.65% 0.71% 0.36% 0.59% 0.64%

Profit Before Tax 7.96% 2.79% 1.00% 5.40% 4.64%

Taxation

Current year 1.04% 0.58% 1.08% 1.53% 0.89%

Perior year 0.02% 0.003% 0.00% 0.00% 0.00%

Deffered -0.23% 0.69% 0.00% 0.00% 0.86%

Profit after tax 7.13% 1.52% -0.08% 3.87% 2.89%

Other income 0.00% 0.00% 0.00% 0.00% 0.00%

Net income 7.13% 1.52% -0.08% 3.87% 2.89%

Comments:

1) In 2006 Mahmood Textile Mills Ltd. Total net income was 2.89% which increased in 2007 up to 3.85% due to decrease cost of goods sold and operating expenses

2) in 2008 company earned the loss due to the increase of operating expense up to 6.1% which is not favorable for company. A company needs to control its operating expense

3) in 2009 company recovered and its get the profit 1.5% due to the decrease of cost of good sold but on the other hand its operating expenses increases by 8.24% which is not favorable

4) in 2010 company earned net income 7.1% which shows the good performance of company. Company cost of good sold and operating expenses decreases that is why company net income increases which is good sign of company that is why earning per share increases which will attracts new shareholders.

TREND ANALYSIS

Trend analysis focuses on the dollar change that have occurred more than a single change from one year to the next. in many cases it is important to look at changes over a period of time in order to evaluate emerging that are likely to have an impact on future years performance .When more than two years are involved, index number are used instead of percentage changes. Essentially, one year is selected as the base year and is set to 100%.All other years are represented as a percentage of the base year. An index no can be calculated by the following formula:

INDEX NO = INDEX YEAR DOLLAR AMOUNT /BASE YEAR DOLLAR AMOUNT X 100

Balance Sheet

2006 2007 2008 2009 2010

Non-Current Assets

Property, plant and equipment 100% 104% 105% 98% 106%

Long term investment 100% 188% 203% 251% 190%

Long term security deposits 100% 103% 103% 172% 172%

Total Non Current Assets 100% 110% 113% 110% 130%

Current Assets

Stores, spares and loose tools 100% 105% 171% 120% 114%

Stock in trade 100% 120% 169% 154% 175%

Trade debts 100% 140% 209% 559% 606%

Short term investments 100% 210% 123% 189% 195%

Loans and advances 100% 105% 133% 74% 49%

Trade Deposits and

short term prepayments 100% 0% 0% 0% 0%

Other receivable 100% 79% 419% 794% 671%

Sales tax refundable 100% 75% 68% 134% 191%

Cash and bank balance 100% 117% 100% 122% 203%

Total Current Assets 100% 126% 163% 176% 193%

EQUITY

Share Capital and Reserves

Issued, subscribed and

paid up capital 100% 100% 100% 100% 150%

Capital reserve 100% 100% 100% 100% 100%

Unappropiated profit 100% 110% 105% 111% 145%

Total Equity 100% 109% 105% 110% 145%

Non-Current Liabilities

Long term finances 100% 109% 119% 108% 125%

Deferred liability 100% 192% 280% 414% 365%

Total Non Current Liabilities 100% 114% 128% 126% 139%

Current Liabilities

Trade and other payables 100% 96% 89% 128% 175%

Interest/mark up on loans 100% 193% 312% 671% 452%

Short term borrowings 100% 134% 202% 194% 169%

Current portion of long

term finances 100% 128% 171% 134% 220%

Provision for taxation 100% 312% 216% 259% 653%

Total Current Liabilities 100% 131% 182% 187% 185%

image

image

image

 

COMMENTS

In 2007 Mahmood Textile Mills gross profit is increase up to 134% as compared to 2006 which is very good it means company has reduced the expenses which cause to increase cost of goods sold that is why company overall profit is also increased but on the other hand its total operating expenses are also increased. Now management to think to reduce the operating expenses so that firm can generate more profit.

In 2008 company gross profit is increased still company incurred loss due to increase operating expenses up to 197% as compare to 2006 it means management has failed to control the operating expenses.

In 2009 company achieved a good gross profit but on the other hand company operating expenses is increased as well that is why company just incurred the net income 93% as compare to 2006.

In 2010 company overall performance is very satisfactory. Company has reduced its cost of goods sold that is why company generated very good gross profit and has increased its overall net income up to 525% as compare to 2006. There is one major reason of increasing gross profit is a major decline in operating expenses which shows the good performance of management and profitability of the company.

 

TREND ANALYSIS

Income Statement

2006 2007 2008 2009 2010

Sales-net 100% 119% 132% 177% 212%

Cost of sales 100% 118% 131% 167% 193%

Gross profit 100% 134% 138% 267% 371%

Other Operating Income 100% 258% 54% 55% 10%

100% 146% 130% 247% 337%

Expenses

Distribution cost 100% 172% 181% 231% 273%

Administration expenses 100% 113% 129% 167% 246%

Other operating expenses 100% 99% 416% 124% 856%

Total Expenses 100% 145% 197% 347% 342%

Share of profit of

associates(net of tax) 100% 110% 75% 197% 215%

Income before Interest

and Taxes 100% 144% 89% 155% 324%

Finance cost 100% 150% 174% 300% 268%

Profit before taxation 100% 139% 28% 107% 364%

Provision for taxation 100% 104% 82% 129% 100%

Profit for the year 100% 161% -5% 93% 525%

image

image

image

image

 

Comments

In trend analysis we compare each element of every year to the base element of year. In this analysis we set base year 2006.In 2007 company’s fixed asset increases 110%as compare to 2006 and its current assets also increases which you favorable for company because portion of asset increases which is supplied by shareholder and creditor. In 2007 company’s equity increases up to 109%and its total liabilities also increases company need to control its liability portion so company financial portion will be stronger.

In 2008 companies fixed asset as well current asset increases up to 113% and 163% respectively but as equity decreases up to 105%and its fixed and current liabilities also increases up to 128% and 182% which does not show satisfactory portion of the company if current liabilities increases creditor will be reluctant to pay additional loans.

In 2009 company’s current asset increases up to 176% that is why firm’s ability will be increase to pay short term obligation.

In 2010 company’s fixed as well as current asset increases up to 130%to 193% respectively this shows good performance of company and trust of shareholders

2 comments:

  1. Great report, The institution have a well position. In this site The textile mills report is very well.

    ReplyDelete
    Replies
    1. ABSOLUTALY POOR REPORT TANZEEL UR REHAM 1991

      Delete