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Oct 9, 2009
Financial Analysis Ratio Analysis of Gul Ahmed Textile Mills for year
2005
Textile Industry
When we think manufacturing industry, Pakistan, it is the textile industry that
immediately come to the mind that is playing an important role in term of the
employment generation and value added special with strong base of raw material has
started its journey from non existence in 1947 with 3000 looms that is too in the
unorganized sector, with only one textile unit. It could supply only 8% of the domestic
demand derived from its population 76 million people.
The industry has gone through a long way and now possesses 443 units, 8.4 million
spindles and 166,000 rotors. 20,000 shuttle less looms, 200,000 power looms, 8,000 terry
towel looms, 7620 canvas looms, 157,000 woolen / worsted installed spindles, 15,000
woolen looms, 12,000 knitting machines, over 600 processing units and over 2500
garments units. The textile industry at present is a passing through a transition phase. It is
sailing smoothly under the protected cover of the quota system; however it has to face the
rough waters of the open sea when globalization of trade is implemented under WTO
agreement in 2004. three years have already gone unnoticed the fast approaching
deadline sounding a note of warning for restructuring of all the segments of the cotton
and textile industries on war footings to enable it to face the future challenges of fierce
competitio0n amongst the low cost Asians manufacturers to capture share of their higher
cost European counter –parts when the gates of the global economies are open.
Description Contribution
Exports 64% of total exports (US$ 4.9 billion)
Manufacturing 46% of total manufacturing
Employment 38% total employment
Investment 31% of total investment
Market capitalization 7% of total market capitalization
Interest Rs. 4 billion per annum
Salaries and wages Rs. 40 billion per annum
Contribution to research and development Rs. 116 million per annum
Gross domestic product (GDP) 8.5% of Total GDP
This sounds a triumph like situation at a glance. There is however much more than it
meets the eyes when you go into details, which carry some failures also to weep on. This
industry has not performed as well as it should have. It is struggling for its survival for
the past 7years.
Contribution in employment
Textile unit constitute 38% of employment generated by the manufacturing sector while
textile being largest industry has got other forward and back ward relation where it must
had played its role in generating employment in related industries for example shipping
industry will definitely by mainly depended upon textile industry.
COMPANY PROFILE
Company Information
BOARD OF DIRECTORS
COMPANY SECRETARY
MOHAMMED SALIM GHAFFAR
AUDIT COMMITTEE
A. RAZAK HAJI SATTAR - Chairman
YOUNUS HAJI LATIF - Member
ZAIN BASHIR - Member
BANKERS
ABN AMRO BANK NV
BANK AL HABIB LIMITED
CITIBANK, N.A.
DEUTSCHE BANK AG
HABIB BANK AG ZURICH
HABIB BANK LIMITED
MEEZAN BANK LIMITED
NATIONAL BANK OF PAKISTAN
NDLC-IFIC BANK LIMITED
STANDARD CHARTERED BANK
THE HONGKONG AND SHANGHAI BANKING
CORPORATION LIMITED
UNION BANK LIMITED
UNITED BANK LIMITED
AUDITORS
GARDEZI & CO.
Chartered Accountants
REGISTERED OFFICE
PLOT NO.82
MAIN NATIONAL HIGHWAY
LANDHI, KARACHI-75120
SHARES DEPARTMENT
PLOT NO. HT/3A
LANDHI INDUSTRIAL AREA
KARACHI-75120
MILLS
LANDHI INDUSTRIAL AREA
KARACHI-75120
E-MAIL
finance@gulahmed.com
URL www.gulahmed.com
Directors’ Report
Your Directors take pleasure in presenting 53 rd Annual Report and the audited accounts
for the nine months ended June 30, 2005.
BONUS SHARES
Your Directors are pleased to recommend issue of 10% bonus shares, i.e. in the ratio of
one share for every ten shares held. These bonus shares will be issued out of the capital
reserves of the Company.
RIGHT SHARES
Your Directors have decided to issue 10% right shares on the existing paid- up capital of
the Company (before the issue of bonus shares) in the ratio of one share for every ten
shares held. The right shares will be issued at an issue price of Rs. 20/= per share
including premium of Rs. 10/= per share.
The right shares are being issued to improve the liquidity of the Company.
FUTURE PROSPECTS
In the fierce competitive environment as a result of the quota free trade, there are many
new entrants in export market. To succeed we are focusing on efficiency, operational
excellence and pursuing new business opportunities.
The increasing fuel prices and continuing increase in mark-up rates are areas of main
concern.
CORPORATE GOVERNANCE
We are pleased to report that your Company has taken necessary steps to comply with the
provisions of the Code of Corporate Governance as incorporated in the Listing Rules of
the Stock Exchanges.
The financial statements, prepared by the management of the company, present fairly its
state of affairs, the result of its operations, cash flows and changes in equity. Proper
books of account of the company have been maintained. Appropriate accounting policies
have been consistently applied in preparation of financial statements and accounting
estimates are based on reasonable and prudent judgment. International Financial
Reporting Standards, as applicable in Pakistan, have been followed
in preparation of financial statements and departure, if any, has been adequately
disclosed. The system of internal control is sound in design and has been effectively
implemented and monitored. The process of review will continue and any weaknesses in
controls will be removed.
There are no significant doubts upon the Company’s ability to continue as a going
concern. There has been no material departure from the best practices of corporate
governance, as detailed in the listing regulations.
The key operating and financial data for the last six years, in a summarized from, is
annexed. During the year three board meetings were held and the attendance by each
Director is included in the annual report.
BOARD OF DIRECTORS
At the Extraordinary General Meeting of the Company held on March 28, 2005 election
of directors was held and all the retiring directors, Mr. Bashir H. AliMohammed, Mr. A.
Razak Haji Sattar, Mr.Yasin Haji Kassam, Mr. Younus Haji Latif, Mr. Zain Bashir, Mr.
Ziad Bashir and Mr. Abdul Aziz Yousuf were unanimously elected uncontested.
The present Board of Directors consists of the above noted persons.
PATTERN OF SHAREHOLDING
A statement showing the pattern of shareholding in the Company as at June 30, 2005 is
included in the annual report.
AUDITORS
The present auditors Gardezi & Co., Chartered Accountants, retire and offer themselves
for reappointment.
CONSOLIDATED ACCOUNTS
Consolidated accounts for the nine months ended June 30, 2005 of the Company and its
subsidiaries Gul Ahmed International Limited (FZC) and GTM (Europe) Limited are
attached.
ACKNOWLEDGMENT
Your Directors are pleased to record their appreciation for the continued dedication,
commitment and loyalty of the employees of the Company. We also appreciate the
assistance and continued support of the various Government Departments and Bankers.
For and on behalf of the Board
Karachi BASHIR H. ALIMOHAMMED
October 01, 2005 Chairman & Chief Executive
Gul Ahmed Textile Mills Limited
Current Liabilities
Short term bank borrowings 8 4375827 4541962
Current maturity of long term loans 73993 99798
Trade and other payable 9 943201 684018
Provision for taxation 39000 60000
5432021 5385778
9805293 9076238
Note Note June 30,2005 Sep. 30,2004
Rs.000s Rs.000s
Current assets
9805293 9076238
Operating Express
Administration 25 350789 411309
Distribution cost 26 253435 270558
604224 681867
Operating profit 359149 362947
Liquidity Ratios
The liquidity of a business firm is measured by its ability to satisfy its short – term
obligations as they come due. Liquidity refers to the solvency of the firm’s over all
financial position the case with which it can pay its bills.
Networking Capital
Networking capital though not actually a ratio is commonly used to measure a firm’s over
all liquidity. It is calculated as follows.
The figure is quite useful for internal control. A time series comparison of the firm’s net
working capital is often helpful in evaluating its operations.
Current Ratio:
The current ratio is one of the most commonly cited financial ratios, measures of the
firm’s ability to meet its short-term obligations.
It is calculated as follows.
For the year in 1999
Current ratio = current assets / current liabilities
=101,242,705 / 157,063,847
= 0.6446
2000
Current ratios = 168,786,119 / 227,652,492 = 0.7414
1999
Quick Ratio =
= .5219
2000
Quick Ratios =
=0.4805
Activate Ratio
Activity ratios can be used to asses the speed with which current accounts, inventory,
accounts receivable and accounts payable are converted into sales or cash.
Inventory Turnover
Commonly measures the activity, or liquidity of a firm’s inventory. It is calculated as
Inventory turnover =
1999
Inventory turnover =
=27.82 times
Inventory turnover can easily be converted into an average age of inventory by dividing it
into 365 days. The number of days in a year. For the SUNRAYS TEXTIEL MILLS
LIMITED the average age of inventory would by (365/27.82) 138.2 days.
2000
Inventory Turnover =
=9.49 times
2000
Average collection period =4,238,031/1, 3839,349.96
=2.30days
This shows that the companies average collection period has been increased as compared
to the past year of 2000, which is not a good sign for the company.
Fixed Asset Turnover
The fixed asset turnover measures the efficiency, with which the firm has been using its
fixed, or earning, assets to generate sales. It is calculated by dividing the firm’s sales by
its net fixed assets:
Fixed asset turnover = sales / net fixed assets
1999
=612,068,314 / 293,395,271 =2.09 times
2000
=662,165,987/288,368,555 =2.29times
This means that the company turns over its net fixed asset 2.09 times in a year 1999 and
in 2000 the net fixed asset turnover is 2.29 times which shows that the higher fixed asset
turnover are preferred, since they reflect greater efficiency of fixed asset utilization. This
difference may be for operating efficiencies.
This is acceptable because of nominal change in the company’s therefore turn its assets
over 1.45 times a year.
Debt
The debt position of a firm indicates the amount of other people’s money being used in
attempting to generate profit. In general the financial analyst is most concerned with its
long-term debts, since these commit the firm to paying its interest over the long run as
well as eventually repaying the principle borrowed.
The more debt a firm uses in relation to its total assets, the greater its financial average a
term used to describe the magnificent of risk and return introduced through the used of
fixed cost financing such as debt and preferred stock. In other words the more fixed cost
debt, or
Financial average a firm uses, the greater will be its risk and expected return.
Debt Ratio
The debt ratio measures the proportion of total assets financed by the firm’s creditors.
Debit ratio can be measured as follow.
Debt ratio = total liabilities / total assets
1999 =388,797,910/396,161,034 =0.89 or 98%
2000 =433,525,717/457,589,874 =0.95 or 95%
This indicates the firm this year has financed 95% of its assets with debts. The higher this
ratio, the more financial leverage the firms have.
Analyzing Profitability
A firm’s profitability can be assessed relative to sales, assets, and equity or share value.
Return on Equity
It measure the return earned on the owner’s investment in the firm
Return on equity = net profit after tax / stockholder’s equity
1999 =5,189,659/7,363,124 =70.5%
2000 = 16,701,033 / 24,064,157 =69.4%
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