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2013

Sana Industries
Financial Forecasting

Sohaib Rasool (9076)


Zaheer Khan (12714)
Hassan Dedhi (13347)
Haider ()
Sana Industries
8/15/2013

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Contents
Introduction: ................................................................................................................................................. 3
Company Description:............................................................................................................................... 3
Business Philosophy: ................................................................................................................................. 3
Financial Forecasting:.................................................................................................................................... 4
Income Statement: ................................................................................................................................... 4
Sales: ..................................................................................................................................................... 4
Cost of Sales: ......................................................................................................................................... 4
Gross Profit Margin: .............................................................................................................................. 4
Selling & Distribution Expenses: ........................................................................................................... 4
Admin Expenses: ................................................................................................................................... 4
Other Expenses: .................................................................................................................................... 4
Profit on PLS Account:........................................................................................................................... 5
Gain on Disposal: .................................................................................................................................. 5
Finance Cost: ......................................................................................................................................... 5
Taxation: ............................................................................................................................................... 5
Payout Ratio: ......................................................................................................................................... 5
Balance Sheet:........................................................................................................................................... 6
Tangible Fixed Assets: ........................................................................................................................... 6
Long Term Deposits: ............................................................................................................................. 6
Share Capital & Reserves: ..................................................................................................................... 6
Diminishing Mushariqa: ........................................................................................................................ 6
Deferred Taxation: ................................................................................................................................ 6
Murabaha:............................................................................................................................................. 6
Other Assumptions: .................................................................................................................................. 7
Installed Capacity: ................................................................................................................................. 7
Capacity Utilization: .............................................................................................................................. 7
Creditors:............................................................................................................................................... 7
Appendix: ...................................................................................................................................................... 8
Assumption Sheet: .................................................................................................................................... 8

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Introduction:
Company Description:
SANA INDUSTRIES LIMITED is an entity of Sanaulla group of companies, an old
established and dynamic business group of Pakistan.
Sana Industries Limited (the Company) was incorporated in Pakistan as a public limited
Company under the Companies Ordinance, 1984. The shares of the Company are
quoted on the Karachi, Lahore and Islamabad Stock Exchanges.
Sana Industries was established in 1988 with the strategy of diversifying from retailing
to manufacturing of man-made blended Fiber Yarns and becomes a member of Karachi
Stock Exchange in 1989.
Sana Industries is a well known Industry in Yarn Market of Pakistan. Initially it started
with the capacity of 12,000 spindles and now its capacity is 26,000 spindles. It
innovates rapidly new products and due to this customers cater it in top and best
category in the Yarn Manufacturing in Pakistan.
In the year 2006 Sana Industries expanded and diversified its business activities by
entering into a new line of business i.e. "Ammonia based temperature controlled
warehouse".
It is the first International based Ammonia temperature controlled warehouse of
Pakistan which has Hazard free ammonia based refrigeration system.

Business Philosophy:
From our humble beginnings to the present day, we have always exceeded our
customers expectations, by providing them with excellent service and quality goods at a
reasonable price. This has been a cornerstone of our success and is our paramount
business philosophy.
We pride ourselves in on time deliveries. Our return policies are liberal and are tailored
to exceed your customers demand for full and unconditional satisfaction of our
products.
We have been members of the International House wares Association soon after our
inception. Weve been regular exhibitors at the International House wares Show in
Chicago.

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Financial Forecasting:
As we interviewed the company representative, we were provided with very few general
assumptions and were provided with assumption sheet, which are used by the company
to forecast their financials, which are mentioned in each of the section below.

Income Statement:
Sales:
-

No of units sold are to be increased by 5%, the reason they told was they expect
the sales to increase by this percentage based on previous market averages.
10% of total sales will be on credit.
Increase in average selling price will be 14% keeping in correspondence with the
annual expected inflation.

Cost of Sales:
-

Increase in Cost of goods sold will be 14%, due to expected annual inflation
adjustment.
Cost of sales will be kept at a margin of 86%, totally based upon historical data
analysis of their past records.

Gross Profit Margin:


-

Gross Profit Margin remains constant at 14% keeping in mind the historical
trends of companys financial data.

Selling & Distribution Expenses:


-

Selling and Distribution Expenses are in accordance with 0.65% of total turnover.

Admin Expenses:
-

Admin Expenses will be recorded at 2.25% of sales.

Other Expenses:
-

Other Expenses will be kept at 0.50% in relation with total turnover.

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Profit on PLS Account:


-

Expected profit on PLS account is 8%, based on the information from Financial
Institution.
Keeping in mind the average annual deposit of 10,000,000.

Gain on Disposal:
-

Gain on disposal of an asset is expected at 10% of the cost of an asset.

Finance Cost:
-

Last year the finance cost they bore was 11%, keeping that as base half percent
will be increased for each next of the coming years for forecasting purposes.
Keeping loans and Financing fixed at 400,000,000

Taxation:
-

Profit before tax will be taxed at conventional 35%.

Payout Ratio:
-

Payout Ratio is estimated to be 80% for forecasted years.

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Balance Sheet:
Tangible Fixed Assets:
-

Expected addition of 34 million worth of fixed assets every year.

Long Term Deposits:


-

Long Term Deposits are to be remained constant at 800,000

Share Capital & Reserves:


-

Share capital and Reserves remains constant

Diminishing Mushariqa:
-

Diminishing Mushariqa kept nil.

Deferred Taxation:
-

To ease the calculation deferred taxation is ignored.

Murabaha:
-

Murabaha arrangement will be fully utilized to show a more prudent approach.

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Other Assumptions:
Installed Capacity:
-

Installed capacity will remain constant at 4,426,565 units

Capacity Utilization:
-

Capacity utilization will remain constant at 56%

Creditors:
-

Creditors to remain constant at 0.58% of cost of sales.

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Appendix:
Assumption Sheet:
Assumptions

No. units to be sold increase by


10% of the total sales would be on credit
Increase in the Average selling price and cost of good sold
Gross Profit Margin remains constant at
Cost of Sales to Turnover
S & D Expenses to Turnover
Admin Expense to Turnover
Other Expenses to Turnover
Profit on PLS Rates at
Gain on Disposal at 10% of the cost of an asset
Finance cost at 12% in 2011, increasing by 0.50% then onwards
Taxation at conventional 35% of the Profit
Capital Expenditure (i.e. addition to the fixed assets)
Effective Depreciation (weighted average)
Long term deposits to remain constant at 0.8 million
Share Capital and Reserves Remain Constant
To ease the calculation deferred taxation impact is ignored
Diminishing Mushariqa remains nil due to heavy cash inflow forecast
Murabaha arrangement to be fully utilized to show a more prudent approach
Payout ratio is estimated to be 80% for forecasted years

5%
10%
14%
14%
86%
0.65%
2.25%
0.50%
8%
10%

* equivalent to annual Infalation

35%
34million annually
15%