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ANALYSES OF FINANCIAL STATEMNENTS
DAWOOD LAWRENCEPUR LTD. BASED ON A 2009 STUDY
INSTITUTE OF BUSINESS MANAGEMENT
ANALYSES OF FINANCIAL STATEMENTS
DAWOOD LAERENCEPUR LTD.
BASED ON A 2009 STUDY
PRESENTED TO: Sir Maqbool-ur-rehman Course Instructor, Analysis of financial statements
PRESENTED BY: Wajiah Rahat (7211) Student
DATE: 7TH December 2009
LETTER OF ACKNOWLEDGEMENT
Course Instructor IoBM, Karachi
Dear Readers: This report was authorized to us by our course instructor. This report was assigned to analyze the financial statements of any one of the textile composite company. This report provides us an opportunity to analyze the financial statements in a way we have lean-to I thank Sir Maqbool who imparted us the necessary knowledge of Portfolio Management so that we could reach correct conclusions. This report has enabled me to apply most of what I studied in class and gave me chance to enhance my knowledge.
Sincerely, Wajiah Rahat,
DATE: 7TH December’2009
LETTER OF TRANSMITTAL
Wajiah Rahat. DATE: 7TH December 2009 TABLE OF CONTENTS 4 . I hope that you will find this report comprehensive and interesting. The report as per your instruction has covered all areas to analyze the financial statements of the company.Sir Maqbool-ur-rehman Course Instructor IoBM. Karachi Respected Sir: I am pleased to inform you that the final report you assigned to us on start of this fall semester has been completed and is ready for your examination. For any queries regarding the report you can reach me at email@example.com Sincerely.
.35 • Vertical and Horizontal Common Sizing and Analysis……………………………………36 • Ratio Analysis……………………………………………………………………… …………40 • Analysis of Financial Statements………………………………………………………….8 About the sector Porter Five Forces Analysis Pest Analysis Other Driving Forces Influencing the Industry Demand & Supply Pricing Government Policies Problems faced by the sector Financial Analysis of The Sector Forecasts & Future Outlook Conclusion • Company Introduction………………………………………………………………… ……..24 SWOT Analysis PEST Analysis demand & supply (also mention about exports) Contribution to Sectoral GDP Position among other Companies in the Sector Sales And Growth ( Both real & nominal) • Analysis of Director’s Report (for each year) ………………………………………………34 List of Important Findings • Analysis and Comment on Auditor's Report………………………………………………...21 About the company Mission & Vision Plant Location Capacity Product Line • Analysis of Company Outlook……………………………………………………………..• Sectoral Outlook……………………………………………………………………… ……….42 5 .
Moderate....64 • Analysis of depreciation method employed by the company……………………………..70 • Conclusion…………………………………………………………… ……………………….…….66 • Policy Analysis (Conservative..67 • Insight and Recommendation for Investors & Creditors…………………………………. or Aggressive) ……………………………….……………….... ………………………………………………………………………………… ….....68 • Forecast & Future Outlook………………………………………………………………….60 • Analysis of bad debt estimation method used by the company…………………………63 • Dawoods comparison with Industrial Averages…………………..70 • References………………………………………………………… ………………………….Income Statement Analysis of basic elements of income statement Analysis of special income statement item (if present) Balance Sheet Analysis and insight on Assets Analysis and insight on Liabilities and Shareholder’s Equity Analysis and insight on Shareholder’s investment Cash Flow Statement Analysis of Statement of Changes in Equity • Analysis of Capital Structure of The firm.72 6 ....65 • Analysis of cost flow assumption employed by the company………………………….
Out of it. Pakistan is the 8th largest exporter of textile products. At 8 . The annual volume of total world textile trade is US$18 trillion which is growing at 2. 30% of the country work force of about 49 million. Pakistan’s share is less than one per cent.5%.Sectoral outlook About the sector The textile sector enjoys a pivotal position in the exports of Pakistan. the development of a Textile Industry making full use of its abundant resources of cotton has been a priority area towards industrialization.5 per cent. For Pakistan which was one of the leading producers of cotton in the world. The development of the Manufacturing Sector has been given the highest priority since Pakistan’s founding with major stress on Agro-Based Industries. It provides employment to about 15 million people. In Asia. The contribution of this industry to the total GDP is 8.
comprising dyeing.221 ginning units.e. Over 75% of the units comprise small sized units.present. Currently these products constitute 57% of the total textile exports. able to process large quantities while the rest of the units operate as small and medium sized units. only a part of this sector is operating in an organized state. The industry consists of large-scale organized sector and a highly fragmented cottage / small-scale sector. High value added products i. During early nineties the textile exports were dominated by yarn and greige fabric which had a share of almost 56% in the total exports. The printing segment dominates the overall processing industry followed by textile dyeing and fabric bleaching. 442 spinning units. As far as the markets are concerned 60% -70% of the merchandise is exported to the USA and the EU. most of the spinning industry operates in an organized manner with in-house weaving. The clothing sectors both woven and knits are mainly clustering in Karachi– Lahore and Faisalabad where sufficient ladies labor is available. there are 1. The knitwear industry mostly consists of factories operating as integrated units (knitting + processing + making up facilities). The Textile Industry in Pakistan Is Divided Into Six Major Sub-Categories • • • • Ginning Industry Spinning Industry Weaving Industry Knitting Industry 9 . Weaving comprises of small and medium sized entities. dyeing and finishing facilities. The various sectors that are a part of the textile value chain are: Spinning. The garments manufacturing segment generates the highest employment within the textile value chain. printing and finishing sub-sectors. 124 large spinning units and 425 small units which produce textile products. The processing sector. garments and textile made-ups have over the years progressively increased their share in the textile export portfolio.
Contribution to exports According to recent figures. weaving capacity of 4368 million square metres of fabric and finishing capacity of 4000 million square metres. which amounts to around 5. The industry has a total of 1221 units engaged in ginning and 442 units engaged in spinning. In Asia.5%. There are around 124 large units that undertake weaving and 425 small units. Pakistan is the 8th largest exporter of textile products. The industry contributes around 46% to the total output produced in the country. the Pakistan textile industry contributes more than 60% to the country’s total exports. Moreover.2 billion US dollars. which amounts to a 10 . 400 million units of knitwear and 53 million kgs of towels. it also houses around 600 knitwear-producing units and 400 towel-producing units. It provides employment to 38% of the work force in the country. The industry has a production capacity of 670 million units of garments. Contribution to GDP and employment The contribution of this industry to the total GDP is 8. Pakistan’s textile industry has about 50 large and 2500 small garment manufacturing units.• • Garment Industry Polyester Fiber Industry Established capacity The textile industry of Pakistan has a total established spinning capacity of 1550 million kgs of yarn. There are around 20600 power looms in operation in the industry. The industry also houses around 10 large finishing units and 625 small units.
the sector is today well poised to capture growth opportunities. Porter's five model analyses One of the worst hit sectors during the skyrocketing interest rate scenario in the late 90s and early 2000s. the proportion of skilled labor is very less as compared to that of unskilled labor. restructuring packages from financial institutions and the recent dismantle of quotas. Infect.5%. Opportunities available The world demand for textiles is rising at around 2. Aided by lower interest rates. In 2005. the sector contributed 20% to industrial production. Here we analyze the sector's dynamics through Porter's five-factor model. Organisations in the industry All Pakistan Textile Mills Association is the chief organization that determines the rules and regulations in the Pakistan textile industry. nearly 20% to the country's total export earnings and 4% to the GDP. 11 . due to which there is a greater opportunity for rise in exports from Pakistan. 18% of employment in industrial sector. However.figure of 15 million. the debt-laden Indian textile industry has spun many turn-around stories since then. 9% to excise collections. The textile sector employs nearly 35 m people and is the second highest employer in the country. it is estimated that one out of every six households in the country directly or indirectly depend on this sector.
Although China is likely to become the 'supplier of choice'. other low cost producers like India would also benefit as the overseas importers would try to mitigate their risk of sourcing from only one country. efforts 12 . Nonetheless. US and European markets dominate the global textile trade accounting for 64% of clothing and 39% of textile market.Bargaining power of customers (demand scenario) Global textile & clothing industry is currently pegged at around US$ 440 bn. a key raw material in the textile and garment industry. With the dismantling of quotas. wherein it has competitive edge against its neighbor. global textile trade is expected to grow (as per Mc Kinsey estimates) to US$ 650 bn by 2010 (5 year CAGR of 10%). India. a rapid slowdown in the denim cycle poses risks to fabric players. is likely to benefit from the rising demand in the home textiles and apparels segment. like China and Pakistan. accounts for about 30% of the fabric cost and 13% of the garment cost. Bargaining power of suppliers (supply scenario) India is the third largest producer of cotton in the world after China and US and has the largest area under cultivation. The twofold increase in global textile trade is also likely to drive India's exports growth. low cotton prices due to a bumper cotton crop would enable India to lower its production cost and sustain pricing pressure. capturing a market share of close to 8% by 2010. Other countries. Cotton. Moreover. India has an abundant supply of locally grown long staple cotton. India's textile export (at US$ 15 bn in 2005) is expected to grow to US$ 40 bn. Further. have relatively lower supply of locally grown long staple cotton. in particular. which lends it a cost advantage in the home textile and apparels segments.
high cost of shipments and longer lead-time coupled with lack of infrastructure facility may prove to be major hindrances. Taiwan (US$ 7.on improving the yield per hectare would ensure higher productivity and production. Technology Upgradation Fund Scheme (TUFS) was launched in FY99 for a period of five years (later extended upto FY07) to promote the upgradation of the textile and jute industry.7) and China (US$ 0. India also enjoys a significant lead in terms of labor cost per hour (US$ 0. thus impacting their incremental volume off-takes. Be it denim (Arvind Mills). players like Arvind Mills have already started feeling the pinch as overseas buyers have started shifting to 'alternative sources'. which are located in relatively close vicinity to major global markets of US. capacity expansion is the name of the game in the textile sector. The fragmented structure of the industry has also stood in the way of achieving true integration between the various links in the supply chain. new capex and consolidation with international players is also not likely to safeguard margins for the larger players. which could give Indian companies significant margin advantage. Resultantly. South Korea (US$ 5. Competitive rivalry India's logistic disadvantage due to its geographical location can give it a major thumbs-down in global trade.1). Textiles being a fairly regulated sector till the recent past (quota regime). The sector has one of the longest and most complex supply chains in the world. unless they can tap a significant pie of the overseas markets.6 in 2004). Threat of substitutes Low cost producing countries like Pakistan and Bangladesh (labor cost 50% cheaper) are also posing a threat to India's exports demand. As a result. Europe and Japan. another indispensable leg of the above analysis is government regulations. Turkey and China. Infact. smaller players who cannot venture into the global markets are flooding the domestic markets with excess supply.1) and newly industrialized economies like Hong Kong (US$ 5. which the larger players are trying to correct by integrating their operations and improving efficiency levels.9).1). The scheme aimed at providing loans to the sector at internationally comparable rates of interest (5% lower than the domestic interest rates). over developed countries like US (US$ 15. India is rich in traditional workers adept at value-adding tasks. which enabled the players to upgrade their technology at lower cost 13 . Threat of new entrants In the quota free regime. home textiles (Welspun and Alok Industries) or branded apparels (Raymond). The country is distant from major markets as compared to its global competitors like Mexico. thus weakening the pricing scenario. Also. thereby providing the much-needed security of raw-material supply to textile producers.
Establishment of 'Apparel Export Parks' and fiscal incentives in the recent budgets also indicate the government's resolve to aid the sector's growth and international competitiveness. inflation rate. labor costs. The rupee depreciation during the year has been beneficial for the exporters. As one can comprehend from the above analysis. These steps did prove to be a successful in motivating an already depressed and low paid labor force but at the same time increased the threats from labor unions for meeting their demands and cost of production for already suffering textile industry. living standards. the potential for the sector's growth are ample. Social Analysis – Demographics. exchange rates. consumer behavior. This benefits the companies in competing in terms of cost. income distribution. consumer spending. The factors negatively affect all businesses. industrial safety and environmental regulations. IP rights. so many bread earners move out to find a better earning opportunities. Economic Analysis – Economic growth. fashion & lifestyle changes In rural areas of Pakistan there are fewer opportunities to earn a living. They mostly find jobs in different sectors including textiles and also prove to be low cost labor. health consciousness.26% and the SBP has decreased interest and is expected to further cut the interest rates. employment laws. trade regulations. as unit prices in PKR have increased for the textile segment. Consolidation of the industry and delivery of better quality at effective rates and minimum lead time would certainly help the players surmount all competitive pressures PEST analyses Political Analysis – Political stability.of capital. The monthly wages were increased. but the trick lies in competing effectively against rivals. government expenditure. leisure interests. interest rates. tax policies. However the inflation rate is stabilizing and is at 10. including the political wars among the parties etc. The inflationary pressures as noted in the year 2006 influences the company sales. 14 .
Since decades many incentives were given to the local industry such as tax rebates. The domestic companies took advantage of such policies but were not able to add value to the textile exports due to which Pakistan exports are falling sharply. Due to this many textile units have completely shut down and many units have to cut down production. information technology Pakistan is facing serious power crises in terms of electricity shortage and gas shortage as well. Environment and Health standards Quality of products Focus on low value added products e.5% Demand and supply Global textile & clothing industry is currently pegged at around US$ 440 bn. g.Technological Analysis – Technological developments. new inventions. With the dismantling of quotas.around 4-5% Availability of machinery but shortage of skilled operators . spinning than on . US and European markets dominate the global textile trade accounting for 64% of clothing and 39% of textile market.Lack of Marketing efforts Duty imposed on the import of bed linen by EU 7. R&D support in 2007. global textile trade is expected to grow (as per Mc Kinsey estimates) to US$ • • • • • • • • 15 . automation. Other Driving Forces Influencing the Industry Security concerns (refrained international buyers to visit (Pakistan Compliance with Social.composites Insufficient product diversification The wastage of material during production is among 16-18 • % which is very high in relation to competitors where wastage is .
efforts on improving the yield per hectare would ensure higher productivity and production. Pricing 16 . a rapid slowdown in the denim cycle poses risks to fabric players. wherein it has competitive edge against its neighbour. India is the third largest producer of cotton in the world after China and US and has the largest area under cultivation. accounts for about 30% of the fabric cost and 13% of the garment cost. The two-fold increase in global textile trade is also likely to drive India's exports growth. in particular.650 bn by 2010 (5 year CAGR of 10%). a key raw material in the textile and garment industry. other low cost producers like India would also benefit as the overseas importers would try to mitigate their risk of sourcing from only one country. Other countries. is likely to benefit from the rising demand in the home textiles and apparels segment. Further. Moreover. thereby providing the much-needed security of raw-material supply to textile producers. India has an abundant supply of locally grown long staple cotton. which lends it a cost advantage in the home textile and apparels segments. Nonetheless. have relatively lower supply of locally grown long staple cotton. low cotton prices due to a bumper cotton crop would enable India to lower its production cost and sustain pricing pressure. Although China is likely to become the 'supplier of choice'. India's textile export (at US$ 15 bn in 2005) is expected to grow to US$ 40 bn. Cotton. capturing a market share of close to 8% by 2010. India. like China and Pakistan.
This has resulted in decline of sale and closure of industries converting them in warehouses. oil prices and other inputs cost. the government changed its policies and started making frequent upward revision of power. Problems Faced By the textile Industry 1. He said that Bangladesh and China are supplying fabrics at very low price in international market owing to huge export of yarn from Pakistan as well as low cost of production in these countries. 4. additions 18 . 3. Lost competitiveness in the global market Lack of awareness of global trends and changing rules and The reinvestment and introduction of the latest technology Sector did not focus on the emerging trend of the value regulation. He urged the government to take appropriate measures to stop export of yarn and its prices should be kept at reasonable level.Government policies However. its nonavailability. gas tariffs. Former Vice President KCCI. He feared that government revenue collection would also suffer to a large extent if the present trend remains continue and government failed to reduce cost of doing business as well as overcome the smuggling. He claimed that over 60 lakhs dollars' export orders of towel have been cancelled due to high prices and non -availability of yarn. Abdullah Zaki said that the textile sector facing serious problems owing to increase in price of yarn in local market. 2. which affected the local industries seriously and manufacturing costs have gone up tremendously making locally products goods uncompetitive in international as well as local market.
8. Pakistan's textile exports were hit hard due to intense competition 19 . 20. 18. 15. 11. regulations) US and EU FINANCIAL ANALYSES The fiscal year 2008-09 was a year of recession for most businesses including textile sector worldwide. 23. 22. 19. 21. 10. 7. Energy costs 20% Interest on Bank Loans Tariff hikes of Gas Tariff hikes of Electricity Frequent Interruption in supply of electricity and Gas High Freight Cost Demand Of drastic cut on textile products from their buyers from manufacturing technical training institutions) practical market. (Branding & grading) Unorganized vendor base Limited access to information (availability of finance. 13. 9. 14. 17.5. 16. Deep recession in the US and European markets led to lower sales at retail levels together with stiff competition for suppliers. More dependence on cotton Poor infrastructure Unstable political situation Obsolete technology machinery and equipment used for Availability of raw material and inconsistent raw material prices Unskilled labor (only 1% workers have certificate / diploma from Absence of research and development culture Lack of synergies between Govt. 6. technological know-how & Govt. support institutions and Lack of standardization and quality control Non-sophisticated marketing sense. 12.
FUTURE OF TEXTILE INDUSTRY Demand of textile products is increasing every year to almost 3%.with regional countries in FY09. In short Textile Industry of Pakistan has a great potential. So Pakistan can also capture some share from this but the industrialists and the government needs to focus on this sector. Decelerated business volumes and electricity crisis have taken its toll and many small and medium size production houses have shut down already or at the verge of closure. the year was also one of the most volatile due to a number of reasons. But I am sure Textile industry of Pakistan will grow and will keep its big share in the world textile. A record increase in the prices of cotton and yarn in the first quarter and steep rise in interest rates had impacted the sector on varying degrees. Domestic textile units gained as well as lost in all these volatilities as per their strengths and relative positioning in the market. This. alongside rising interest rates and prolonged power cuts proved to be a hindrance to earnings of the textile industry in FY09. it is lacking in some natural resources like power and some political instability of the country is also playing a vital role in the reverse gear of Textile sector. Textile Industry of Pakistan can kick its competitors far off and can contribute up to 90% in the total GDP of Pakistan. 20 . For textile sector in Pakistan. as depicted by a decline of 57% YoY. Textile industry just needs a good leader in the government which can drive the industry in a right direction.
COMPANY INTRODUCTION • About the company Dawood Lawrencepur Limited. "The Company" is a duly incorporated public limited company formed as a result of scheme of arrangement for amalgamation in terms of provisions of section 284 to 287 of the 21 .I.
following operations of the Company are now classified under discontinued operations: .Dawoodabad Mills .Dilon Mills . 1984 between Dawood Cotton Mills Limited.Karachi (Landhi Synthetic) . due to continuous losses of its Dawoodabad unit located at Burewala. The shares of the Company are listed on the Karachi and Lahore Stock Exchanges. the operations relating to the closed down plant and machinery have been classified as discontinued operations. Mission: 22 .Landhi Mills . Accordingly in line with IFRS-5 Non current assets held for sale and Discontinued Operations. Dilon Limited. Burewala Textile Mills Limited. District Vehari.Karachi . During the year the Company.Companies Ordinance. has also suspended its operations of the said unit effective March 2008. Based on the above. The assets and liabilities related to discontinued operations have been transferred to assets held for disposal and liabilities directly associated with the assets classified as held for sale. Shahrah-e-Abdul Hameed Bin Baadees (Empress Road). The registered office of the Company is situated at 35-A. The Company is principally engaged in the business of manufacture and sale of yarns and fabrics made from natural and man-made fibers and blends thereof.Burewala • Vision: Mission And Vision To pursue sustained growth through a diversified business portfolio For enhancing stakeholder value. Lawrencepur Woollen and Textile Mills Limited and members of the said companies. Lahore.
• • • • • •
To be a responsible corporate citizen with respect for the To achieve safe & healthy business environment. To provide excellent working environment and growth potential To strive for excellence through commitment, integrity, honesty To make honest and ethical behavior a way of life. To improve quality of life for the employees.
for the employees. and teamwork.
The mills of the Dawood Lawrencepur are located in the Landdhi Mills in the Landhi Industrial Area, Karachi. The Landhi synthetic is also situated in the Landhi Industrial Area. The registered office of the Company is situated at 35-A, Shahrah-e-Abdul Hameed Bin Baadees (Empress Road), Lahore. During the year the Company, due to continuous losses of its Dawoodabad unit located at Burewala, District Vehari, has also suspended its operations of the said unit effective March 2008. Accordingly in line with IFRS-5 Non current assets held for sale and Discontinued Operations, the operations relating to the closed down plant and machinery have been classified as discontinued operations. The assets and liabilities related to discontinued operations have been transferred to assets held for disposal and liabilities directly associated with the assets classified as held for sale. Based on the above, following operations of the Company are now classified under discontinued operations: - Landhi Mills - Karachi - Dilon Mills - Karachi (Landhi Synthetic) - Dawoodabad Mills - Burewala
The total production capacity uptil 2008 has includes the following: Capacity (KGS) '000 Polyester Yarn Yarn Cloth 1400 25619 5060 1400 25619 5060 1400 1050 1400 2008 2007 2006 2005 2004 200 3 200 1 2000
25619 17135 22847 12355 5060 6396 17179 8698
The Capacity production as we can see from the above table of Polyester was same throughout the eight year except for in 2005. The Figure for 205 is change as due to the change in the accounting year. Yarn has had the most capacity among the three product lines. However that of the Cloth capacity decreased drastically from the year 2004 and reach to 5060'000 Kgs. •
The Company is principally engaged in the business of manufacture and sale of yarns and fabrics made from natural and man-made fibers and blends thereof
II. ANALYSES OF THE COMPANY OUTLOOK
• SWOT Analysis
The availability on economical, reliable and sustainable energy is the key Issue that companies face globally today. Countries all over the world are Grappling ways in which millions of households, industries and other Businesses can be provided with energy that is dependable and does not tax 24
Our future generations. STREGNTHS Dawood Lawrencepur have decided that with technical and financial capabilities within the company and the group, they can play an instrumental role in an effort to the national objective of reliable, economical, sustainable energy for sustainable economic development, creating an environment where everyone can turn reach grow. WEAKNESS The weakness of the company includes the power shortages, due to the increased cost of which the company re THREATS In Pakistan we face a slightly different challenge. While the world Figures out a way to power the economic growth of the future, we at home Are concerned with the issue of inadequate energy today. Demand has Outgrown supply massively in the past, the resulting in prolonged power Breakdowns and gas load shedding. Pakistan's energy scarcity is indeed disconcerting. It is seen as the single biggest impediment to the growth for our industrial sector. Frequent power outages render our exports uncompetitive, as idle factories cannot deliver goods so desperately needed to Be produce on time. This is the issue of reliable energy. OPPORTUNITIES The company currently generates over 6500 MW from renewable hydel energy, but have the capacity to generate 32000 MW more. According to latest figures Dawood has the potential to generate up to 43,000 MW through wind energy alone, a source already producing electricity at commercially viable levels. The location in the tropics gives Dawood Lawrencepur an added advantage to use the sun to power our homes, with technologies becoming increasingly competitive with conventional methods of power generation.
so many bread earners move out to find a better earning opportunities. The rupee depreciation during the year has been beneficial for the exporters. • Political PEST Analysis The factors negatively affect all businesses. Social In rural areas of Pakistan there are fewer opportunities to earn a living. including the political wars among the parties etc.Pakistan possesses over 180 billion tones of coal. 26 . This benefits the companies in competing in terms of cost.26% and the SBP has decreased interest and is expected to further cut the interest rates. All of these factors have coupled together for us to look back and turn. as unit prices in PKR have increased for the textile segment. We also have the lowest drilling densities and highest success ratios suggesting tremendous potential In hydrocarbon exploration. On top of that we are located in the region that has provided much of the world with cheap energy and is forecasted to do so for next few decades. However the inflation rate is stabilizing and is at 10. They mostly find jobs in different sectors including textiles and also prove to be low cost labor. The monthly wages were increased. These steps did prove to be a successful in motivating an already depressed and low paid labor force but at the same time increased the threats from labor unions for meeting their demands and cost of production for already suffering textile industry. Economic The inflationary pressures as noted in the year 2006 influences the company sales.
Technology Pakistan is facing serious power crises in terms of electricity shortage and gas shortage as well. Due to this many textile units have completely shut down and many units have to cut down production. Condition of the country where the end product is to be exported 3 Global financial conditions If we take an example of current situation of textile sector we’ll come to know that the demands are much more then supply. 1. 27 . 2. Unrealistic hike in fuel prices The textile industry can supply more then it is already supplying if the above mentioned problems get solved. R&D support in 2007. • Demand & supply The demand and supply of a Dawood textile industry depends upon few main factors. Internal Conditions of the home country 2. Some of them are mentioned below. Improper law and order situations 6. Problems of Electricity Shortage 4. Reason for less supply from industry is 1. Unavailability of Skilled Labor 3. The domestic companies took advantage of such policies but were not able to add value to the textile exports due to which Pakistan exports are falling sharply. Since decades many incentives were given to the local industry such as tax rebates. Problems of Gas shortage 5. Shortage of Cotton.
5.3 53. For example: 1. IN RS. Due to the present changes in the company. COMPANY NAME RS. Chemicals of all types used in dyeing and finishing processs 4. Plastic Resin: Which is used for making plastic bags 2.9 A. • Contribution to Sectoral GDP & Position among other Companies in the Sector The Ranking of Dawood Lawrencepur according to its sector can be seen from the below table which shows that the company has Rs. In future if our government can provide the better fuel including power and natural gas then much of the problems of a textile industry will get solved in this way. IN MILLI MILLI MILLI ON ON ON NET NET NET WORT INCO PROF H ME IT 822.2 28 . Transportation charges.Regarding past if we compare then the demands were high but the supply was low because of hike in freight charges and also the raw material which depends upon oil or we can say due to hike in the prices of all petrochemical products which are necessary for a textile industry.7 million and net profit of 29.A.6 million of net worth and a net income of 289. IN RS. Dyes: Used as colorants 3.8 million rupees. 223. 245. Lubricants. Fuel ( which is some what stable now then before ) 6. TEXTILES LTD. that is selling off of the plant and discontinued operations the companies earning has suffered a major downfall as compared to the industry.
8 MILLS 321.2 589.6 31.8 28. BLESSED TEXTILE LTD. AL-ABID SILK MILLS LTD.8 1211.5 TEXTILE 337.9 29 .8 2033.4 101. 215.9 LTD DARES SALAAM MILLS LTD DEWAN KHALID TEXTILE 92.3 1308.7 CRESCENT TEXTILE MILLS 1425.3 659.2 55.4 AYESHA TEXTILE LTD.8 18.3 4632.2 917. BUREWALA MILLS LTD.8 147. ARTISTIC LTD DENIM MILLS 213.8 INDUSTRIES LTD.5 19.6 118.5 TEXTILE 254.6 MILLS 96.8 389.4 80.3 968. 352.6 683. APOLLO TEXTILE LTD.4 478.2 BENGAL FIBRE 91. BHANERO TEXTILE MILLS 325 LTD.3 ALLAWASAYA TEXTILE 7 77.1 116.9 CHANAB FIBER LTD.AHMAD HASSAN TEXTILE 209. MILLS 152.8 MILLS LTD.9 AL-HAMAD TEXTILE MILLS 96.2 28.1 82.2 693 431. COLONY LTD TEXTILE 108.1 380.3 47.5 246 452.7 560.6 FINISHING MILLS LTD.3 165.4 60.
6 120.7 MILLS 387.9 558 GULISTAN MILLS LTD SPINNING 214.2 21.MILLS LTD DEWAN MUSHTAQ 124.8 76.6 GUL AHMED MILLS LTD TEXTILE 1322 4924.5 127.2 1161.8 30 .9 FAZAL CLOTH MILLS LTD GADOON LTD TEXTILE 257.6 DILON LTD FAISAL SPINNING LTD FATEH TEXTILE LIMITED 100.2 2323.5 GATRON INDUSTRIES LTD 1709.6 6944.9 MILLS 585.9 1188.9 186.8 GULISTAN TEXTILE MILLS 875.6 107.2 3636.8 TEXTILE MILLS LTD DEWAN LTD DEWAN LTD SALMAN FIBRE 458.2 TEXTILE MILLS 685.5 6723.7 474.5 592.8 52.7 38.6 35.4 MILLS 1332.2 4373.5 1553 3438.9 4516 349.1 IBRAHIM FIRES LTD IBRAHIM TEXTILE 5138.8 HUSSEIN INDUSTRIES LTD 276.4 761.7 514.1 MILLS 239.4 2282 121.6 714.4 99.8 LTD GULISTAN MILLS LTD SPINNING 512.3 18.2 485.
2 INDUSTRIES LTD LAWRENCEPUR 245.8 22.3 27.8 1455.8 97.7 34 31 .6 TEXTILE MILLS LTD LIBERTY MILLS LTD MAHMOOD MILLS LTD 193.2 629 536.7 134.7 29.7 LANDMARK SPINNING 121.6 MILLS 218.8 2140 308.7 RAIWIND 525.1 421.6 367.7 WEAVING 741.8 INDUS DYEING MANUFACTURING LTD ISHAQ TEXTILE LTD KHALID SIRAJ MILLS LTD KOHAT TEXTILE LTD KOHINOOR MILLS LTD KOHINOOR MILLS LTD KOHINOOR MILLS LTD & 281.LTD ICC TEXTILES LTD IDEAL SPINNING LTD 147 MILLS 137.2 532.3 298.8 2251.1 MAQBOOL TEXTILE MILLS 146.5 31.7 2936 35.2 CO 2184.3 TEXTILE 816.4 1372.8 10.0 TEXTILE 502.5 MILLS 96.8 TEXTILE 144.4 46.7 640.9 132.7 742.
6 WEAVING MILLS LTD NINA INDUSTRIES LTD NISHAT CHUNIAN LTD NISHAT MILLS LTD PARAMOUNT MILLS LTD PROSPERITY MILLS LTD QUETTA LTD 352.4 417 506.8 NADEEM LTD TEXTILE MILLS 188.9 3 SPINNING 286.3 40.5 700.3 1306.4 NAKSHBANDI INDUSTRIES 262. SPINNING MILLS LTD 155.5 12.5 807.5 TEXTILE MILLS 245.9 1792.6 51.P.3 406.4 922.1 2175.4 701.7 61 54.9 143.6 1067. FIBRE LTD SAIF TEXTILE MILLS LTD WEAVING 313.1 78.6 WEAVING 244 1141.4 2367.2 140.G.3 357.1 SPINNING MILLS LTD RELIANCE MILLS LTD RUPALI LIMITED S.1 808 1066 66 28 32 .5 4569.LTD MAIN TEXTILE 114.9 110.3 595.6 413.2 27.7 16.1 POLYSTER 1374.0 10134 830.4 RELIANCE COTTON 236.3 892.3 INDUSTRIES LTD N.6 LTD NAYAB SPINNING & 251.
5 1012.5 61.1 SAPPHIRE FIBRES LTD 1305.4 1271.SAMIN TEXTILE LTD MILLS 256.9 861.6 87 TATA TEXTILE MILLS LTD THAL JUTE MILLS LTD TOWELLERS LTD 223.2 SAPPHIRE TEXTILE MILLS 1108.6 SUNRAYS MILLS LTD TEXTILES 91.3 47.2 384.3 LTD SHAHPUR TEXTILE MILLS 161.6 4128.3 1406.4 1766.6 24.6 474 39.2 LTD SHAHTAJ LTD TEXTILE MILLS 146.5 331.1 991.7 68.9 32.1 MILLS 89.8 416.7 2499.4 407.9 LTD YUSUF TEXTILES LTD ZAINAB TEXTILES LTD ZAMAN LTD TEXTILE MILLS 122 603 89.1 MILLS 261.6 33 .2 793.9 120.1 500.6 43.9 650.9 YOUSAF WEAVING MILLS 225.2 21.
Accordingly. • • • Earnings per share of the Group were Rs. with the acquisition of 100% share holding in The company has decided to re-measure its investment Rs.84 million (inclusive of turnover from 'discontinued operations' of Rs. as required under the International Financial Reporting Standard (IFRS) 5 “Non Current Assets held for sale and Discontinued Operations'. 31.36 as compared to During the year. all closed down operations are classified under 'discontinued operations'.629. Analysis of Director’s Report • The textile operations and the polyester staple fiber operations at Landhi were closed down during the year 2006-07. • DLL Group's turnover for the year was Rs.60 million of the previous year. DLL became a holding company of TGL.81 per share of the similar period last year. TGL. This change has been applied retrospectively. • In January 2008 acquired 100% shareholding in Tenaga Generasi Limited.III. 1. This company holds an LOI from the Alternate Energy Development Board and has a Generation License from NEPRA for setting up a 50 MW Wind Energy Farm. 689. 34 . the operations at Burewala had to be closed down in March 2008.323. in associate at Cost.88 million) as against the turnover of Rs. 1.
accordance with the company ordinance accordance with the business objectives ordinance. IV. Analysis and Comment on Auditors’s Report • • • • • The report has been conducted in accordance with the auditing The books of account has been kept by the company in The expenditures incurred were for the purpose of business The expenditures and investments made were also in The Zakat was deductable at source under the zakat and ushr standards applicable in Pakistan. 35 .• The Company's profitability during the year was significantly impacted by the inflationary pressures. the Company name was changed ' Dawood Lawrencepur Limited' to so as to take advantage of the goodwill associated with the name of Lawrencepur. • In May 2004. power tariff hike and by the need to rationalize old inventories in 2006. • The figures for the past three years (2001-2003) represent the period when the Merger had not taken place and those of previous year 2005 are of nine months because of the change in accounting year from September to June. This report being the first annual report of the merged entity. demonstrates the commitment to be better prepared in the post WTO scenario.
019 11.48 0.5 10.17 33.16 0.11 27.61 100 100 100 100 100 2.629 6. Vertical and Horizontal Common Sizing Analysis VERTICAL ANALYSES (2008-2003) In Percentage terms BALANCE SHEET 2008 NON CURRENT ASSETS Fixed Assets Property.49 19.26 2.15 7.94 9.16 4.63 0. prepayments and other receivables Cash and bank balances Assets of disposal group classified as held for sale Total Assets SHARE CAPITAL AND RESERVES 2.71 0.911 32.75 5.01 2.579 42.32 2.7 10.87 3.8602 3.62 1.9 15.76 33.46 24.622 77.91 19.115 1.78 0.21 0.196 31.44 0. plant and equipment Operating Asset Capital Work in Progress Intangible assets Long Term Investments Long term loans and advances Long Term Deposits CURRENT ASSETS Stores and spares Stock-in-trade Trade debtors Short term investments Loans and advances Deposits.014 0.79 3.03 4.015 0.86 50.44 2007 2006 2005 2004 2003 36 .7 21.5 68.44 4.88 8.43 15.115 9.5 0.52 0.91 0.5 11.04 0.676 63.31 6.329 67.792 51.57 0.24 0.V.035 1.34 100 3.73 6.943 4.26 22.48 10.0002 27.156 1.29 36.71 1.091 59.29 51.675 3.619 0.735 0.931 4.89 83.94 2.09 5.075 1.
384 2005 100 -89.78 9.69 10.204 1.09 23.87 13.6 0.01 -0.339 -4.737 -1.76 2.12 17.052 1.63 83.875 -0.23 100 -79.27 0.95 9.3 -4.488 -6.45 1.99 2006 100 -94.51 38.43 5.51 10.786 1.72 -0.26 51.568 10.42 5.751 1.1 2007 100 -95.5 2.7 -1.954 0.979 -3.69 3.15 86.432 2004 100 -90.94 13.prior Deffered (Loss)/Profit for the year after tax -53.52 0.139 0.01 2.47 9.68 -81.27 12.2 0.07 6.22 -2.246 0.222 -1.32 15.89 76.32 16.58 65.83 60.8685 39.937 0.6679 -50.0026 -0.952 10.03 0.27 77.81 2.059 -4.47 6.7083 37 .13 100 0.49 41.98 17.658 -0. subscribed & paid up Reserves Unappropriated profit Fair value reserve on investment 26.92 10.48 19.61 -4.506 -0.56 8.96 2.17 10.69 12.0157 -2.16 5.2 0.99 10.244 100 100 100 100 VERTICAL ANALYSES (2008-2003) In Percentage terms BALANCE SHEET 2008 Sales net Cost of goods sold Gross profit Operating expenses Administrative and general Selling and distribution Loss from discontinued operations Operating (loss) Finance cost Other income Other charges Donation to Earthquake relief fund (Loss) / Profit before tax Taxation current .479 9.316 2.46 -5.228 -0.643 -1.2 44.43 22.56 0.16 -3.92 -9.236 2.11 -2.47 -3.41 23.425 3.23 7.66 1.61 100 1.934 -4.1685 40.476 0.28 -1.06 62.3 17.14 -4.875 13.38 4.32 7.1 0.74 0.31 2.621 16.634 -0.05 2003 100 -90.03 13.768 -2.68 -73.3 12.9 20.97 3.36 NON CURRENT LIABILITIES Liabilities against assets subject to finance lease Deferred Liabilities CURRENT LIABILITIES Trade and other payable Short term bank finances-secured Current portion of lease liabilities Interest / markup on short term bank finances Provision for taxation dividend Total CONTINGENCIES AND COMMITMENTS Total Liabilities and Equities 11.56 1.06 -0.35 1.43 18.892 0.01 87.26 0.992 -2.74 2.72 3.53 7.Issued.71 -5.72 88.616 5.37 1.15 -3.01 4.
0515 152.13421 0 169.550 249. prepayments and other receivables Cash and bank balances Assets of disposal group classified as held for sale Total Assets SHARE CAPITAL AND RESERVES Issued.987.84008 0 168. plant and equipment Operating Asset Capital Work in Progress Intangible assets Long Term Investments Long term loans and advances Long Term Deposits CURRENT ASSETS Stores and spares Stock-in-trade Trade debtors Short term investments Loans and advances Deposits.3025 210.6152 0 221.286.8206 152.264 89.1 121 110 100 100 59.39726 16.94338 221.474139 3.18373 242.2335 129.85453 36.HORIZONTAL ANALYSES (2008-2003) In Percentage terms BALANCE SHEET 2008 NON CURRENT ASSETS Fixed Assets Property.699.869506 99.1174 212.1495 128.1817 118.284 39.5597 148.430 543.3281 103.433 68.523559 121.1821 127.7119 243.74004 5.363.0375 13.29559 136.99244 1.4301 2007 2006 2005 2004 2003 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 38 .157 83.1545 112.5154 126.55825 758.421 22.372 138.4685 17.0466 6900 29.3741 143.1839 6.40362 6.97681 376.7135 165. subscribed & paid up 133.002 64.322 136.7853 6.5686 22.16137 44.60145 124.36852 66.85479 23.5519 84.766.668 47.13287 184.337458 565.81101 20.924.3697 144.0908 124.1303 76.24372 113.59441 81.
67091 146.38 300825659 908.1158 100 100 100 100 100 100 0 29.3727 100 Sales .59669 1521.10717 226.6761 76.28082 546.16 65.99 7.98 94.13287 128.791 96.47 1.05 8.238 607.000 12432869 81.9798 94.917 84.42893 0 312.23 37.06 170.Deffered (Loss)/Profit for the year after HORIZONTAL ANALYSES (2008-2003) In Percentage terms INCOME STATEMENT 2008 2007 2006 2005 27.35 114.4 52.23 119.7532 5945176 104.41 36.49 50.38 80.22472 200.33764 85.85 231.19 0 0 82.1745 216.26 90.9327 65.1488 100 100 100 100 37.79 90.2396 100 100 100 100 47.63 89.38 23.0177 184.61 0 0 7.64982 47.5751 298.04591 285.33 0 36.59 196.54 174.87 48.6346 86.5 8.90944 141.6 78.1637 100 243.41 116.2123 262.665 614.7376 103.76 150.Reserves Unappropriated profit Fair value reserve on investment Captal and Reserves NON CURRENT LIABILITIES Liabilities against assets subject to finance lease Deferred Liabilities CURRENT LIABILITIES Trade and other payable Short term bank finances-secured Current portion of lease liabilities Interest / markup on short term bank finances Provision for taxation dividend Total CONTINGENCIES AND COMMITMENTS Total Liabilities and Equities 185.57 76.83 68.9525 51.1859 1089.88 2003 100 100 100 100 100 100 100 100 100 100 100 100 70.1495 48.19 81.4704 100 117.60145 64.96072 55.93 104.11 120.99817 94.41 137.61793 18.35 72349185 372.29 0 149.9 2004 119.net Cost of goods sold Gross profit Operating expenses Administrative and general Selling and distribution Loss from discontinued operations Operating (loss) Finance cost Other income Other charges Donation to Earthquake relief fund (Loss) / Profit before tax Taxation current .64 102.1221 94.3668 0 118.193 511.73 55.5 105.06 48.7002 106.6286 100 230.28 217.06013 315.7745 140.43 73.71 51.7407 1078.7881 95.24 1.1817 118.85 38.8914 105.35947 100 100 100 83.prior .44461 245.08809 18.15 58.58 55.95 69.01 100 100 100 100 100 100 39 .085 0 0 202.09 169.99 206.61 143.46 424.80581 762.92 19.32074 52.
745 (0.603 0.35 2.70 3.033 64.228 260.tax VI.762 0.322 0.98 2.041 298.72 171.553) 2.179 1.133 0.705 0. Ratio Analysis 2008 Liquidity Ratios Current Ratio Quick Ratio Cashflow Ratio Average collection period Average inventory per day Average payable in days Turnovers Recievable Inventory Payable Fixed Asset Total Asset Leverage Debt Ratio Long term debt to 40 169.09 5.235 0.922 0.050 35.37 3.246 0.125 152.224 0.288 2.320 1.661 1.51 1.368 61.052 43.362 0.769 1.225 83.86 144.506 0.359 0.187 0.145 1.083 1.945 2.584 1.027 47.24 0.1269 0.197 3.335 66.269 0.170 2.916 4.253 0.775 4.27 7.695 4.066 48.116 0.839 1.50 338.0232 39.25 4.206 0.946 0.488 3.125 2.76 3.32 0.1698 0.043 0.574 3.909 1.171 1.82 0.855 46.479 4.324 0.786 2007 2006 2005 2004 2003 .637 0.7584 0.49 55.95 1.
535) (0.145 0.22) (33.732 (0.035 4.45 (4.86 5.0636 0.45 19.026) (0.Capital Debt to equity Profitability Ratios CashFlow Margin Gross profit margin Operating margin Net Profit Margin ROA Roe EPS P/E Dividend Yield 0.2036 0.028 0.0198 0.33 2.0489 0.58 4.17786 0.22 0.1526 VII.0969 0.56) 0.307 0.008 0.258 0.12 1.381) (0.99 0.1009 13.30 0.00868) 0.0108 (0.090 0.66 11.394) 0.11) 12.42 195.03 1.051 0.0256 0.3986 0.43 18.1043 0.046 5.0656) (0.01 13. Analysis of Financial Statements Income Statement 41 .71 0.01622) 0.72 0.24 1.36 3.88 5.053 (0.91 0.242) (o.289 0.0127 0.90 13.41 (0.131 0.047 5..
323.41 million for last year. 271.During 2008.873. 111.35 Million).70 million as against loss of Rs.629.88 million) against the sales of Rs.84 million (inclusive of turnover from 'discontinued operations' of Rs. the operating loss of the company stood at Rs. 1. 136. 1. 20. 1. 223. 31.36 as compared to Rs.04 million as compared to profit of Rs. 111. 689.60 million (2007: Rs. DLL Group's turnover for the year was Rs. 1. The loss before taxation is Rs.81 per share of the similar period last year. 323. 1. 300. Earnings per share of the Group were Rs.629. After taking into account the loss from the closed down operations of Rs. • Analysis of basic elements of income statement NET SALES Sales and Growth ( Both real & nominal) During 2008.88 million) as against the turnover of Rs.83 million (2007: Rs. the company achieved sales of Rs.22 million. 689.24 million as against profit of Rs. 323.64 million as against Rs.60 million for the previous year OF 2008.84 million (inclusive of sales from 'discontinued operations' of Rs.629. With the share of profit from associate of Rs.46 million) the profit before tax was Rs.88 million) against the sales of Rs.84 million (inclusive of sales from 'discontinued operations' of Rs. 187. 72.41 million.11 million of the similar period last year.60 million for the previous year. The operating loss of the company stood at Rs. the company achieved sales of Rs.646.60 million of the previous year. 271. 689. 1. 42 .
41 2006 137.23 2003 100 43 .23% in 2004 and declined to 90. From the FY 2003 the sales increased upto 119.38% in FY2005. Sales . This declined is explained by the discontinued operation of the company. however in 2005 it consists of computation of 9 months due to the change in Accounting year.38 2004 119. The textile operations and the polyester staple fiber operations at Landhi were closed down during the year 2006-07.net 2008 27.26 2007 90. so this explains the drastic fluctuation in the net sales.79 2005 90.26%.2000 1500 1000 500 0 Sales Growth 2008 2007 2006 2005 2004 2003 The sales of the company as we can conclude from the horizontal and vertical analyses show a very fluctuating trend. In 2006 ithe sales reached upto 137. the operations at Burewala had to be closed down in March 2008.79% and den took a drastic decline to 27.
And the Below chart of 2004 shows that cotton yarn consisted around 80% of the total yarn value in the sales value.. 44 . We can see from the above graph of 2006 that 70% of the sales value was dues to the yarn.
3% and further it declined to 1. it takes into account only nine months data.1%.88% at the year end 2008. The sales had a direct impact on the Gross Profit Margin of the company.08% in FY2007 due to the discontinued operation and in 2008 it reached to negative 24. In FY 2003 the gross profit margin was 6.The sales also have a direct impact n the company's Gross profit margin which declined to a negative 24. 38.i. The operating margin of the company is the lowest in 2008 . power tariff hike and by the need to rationalize old inventories in 2006. The Company's profitability during the year was significantly impacted by the inflationary pressures. The company hence must increase its sales of the continuing operations so as to secure its previous profitable position 45 .36% which increased to 9% in FY2004. The gross profit of the company declined to 58. In 2006 The GPM Declined to 5. As well as the Net profit margin.2%.2%.e. The behavior of continuous decline explains that the companies discontinued operations were a part of major sales and growth of the company. In 2005 due to the change in accounting policy the GPM was estimated to 10%.
OPERATING EXPENSES The operating expenses of the company reached to a12. This can again be justified by the affect of discontinued operations.14% since the year 2003. which can be referred to as the highest the company reached in the last six years. OTHER OPERATING REVENUE The income from other sources has been fluctuating through out the 6 years which increased to 231.9% of the sales. which has declined to 59.98%. Also the company Average inventory per day increased to 298. As compared to 2003 the cost of goods sold declined to 23.36% of the sales in 2008. it was 79.855 in 2003.COST OF GOODS SOLD the cost of goods sold of the company throughout 2003 to 2007 remained around 90% of the sales. It comprises of 23.16% and 44.99% of the companies sales which gradually incread throughout the years and reached to 10%.86 as compared to 152. This explains the lower cost of goods sold in the year 2008.45% in the year 2008. however in 2008.35% and eventually fell to 38. Which can be explained by the increasing cost of goods sold as compared to the change in the increase in the inventory.9% in the year 2004 and declined 55.39% of the sales and is an important reason of the income to not falls as much as it could have due to the discontinued operations. 46 . The textile operations and the polyester staple fiber operations at Landhi were closed down during the year 2006-07.48% in 2005 then reached to 76. The main components influencing the decreasing Cost of Goods sold are stocks and spared in part. As compared to the company initial year 2003 the operating expense only comprised of 6. the operations at Burewala had to be closed down in March 2008.
change in accounting year from September to June.0026% and the donation comprises of 0. the operations at Burewala had to be closed down in March 2008. In 2008 the Operating profit margin is (38. • • Of previous year 2005 are of nine months because of the The sale of the disposal held for sale in the year 2007 and 2008.1%) as compared to the operating profit of 2003 which is 2. Analysis of special income statement item • Discontinued operations in 2008 and 2007 are the major reasons of a loss in the profits of the company. The textile operations and the polyester staple fiber operations at Landhi were closed down during the year 2006-07. This report being the first annual report of the merged entity.This has impact on the operating loss or gain of the company. OTHER EXPENSES Other charges is minor as in the year 2006 which also includes donation to the earthquake relief fund. Other charges are only 0.56% which is the highest the company achieved in this six year. so this explains the drastic fluctuation in the net sales. the Company name was changed ' Dawood Lawrencepur Limited' to so as to take advantage of the goodwill associated with the name of Lawrencepur.66% of the total sales in the year 2006. demonstrates the commitment to be better prepared in the post WTO scenario. PROFITABLITY 47 . • The figures for the past three years (2001-2003) represent the period when the Merger had not taken place • In May 2004. The operating expenses had a major impact on reducing the operating profit margin through out the year.
The Major reasons for the decline in the Net profit are mentioned above. power tariff hike and by the need to rationalize old inventories in 2006.9%.8% however in the year 2005 Dawood Lawrencepurs NPM increased to 39.2 2007 2006 2005 2004 2003 -0.6 The Companies Profitability margins can be assessed from the graph above.4 -0.The Company's profitability during the year was significantly impacted by the inflationary pressures. In the year 2003 that is the initial year the companies margins were all positive. 48 .4 CashFlow Margin Gross profit margin Operating margin Net Profit Margin 0.5% in the year 2008 due to abandonment of the companies few operations.8 0. The figures for the past three years (2001-2003) represent the period when the Merger had not taken place and those of previous year 2005 are of nine months because of the change in accounting year from September to June. The Net profit margin declined to a negative 28. this is due to the merger as well as due to the change is accounting period. with the net profit margin as 11. 0.2 0 2008 -0.6 0.
In 2004 the company's cash flow margin declined to a negative 39.08% in FY2007 due to the discontinued operation and in 2008 it reached to negative 24. The company needs to utilize its current operations to a maximum. the operating loss reached to 908% in 2008 and 372% in 2007 as compared to a positive operating margin of the year 2003.2%.88% at the year end 2008. In FY 2003 the gross profit margin was 6.2%. In 2005 due to the change in accounting policy the GPM was estimated to 10%. it takes into account only nine months data. Which lead to the conclusion that the discontinued operations had a major impact on the operating profit margin of the company. The discontinued operations were the major reason. 49 . The gross profit of the company declined to 58.4% due to the substantial selling of the shares.36% which increased to 9% in FY2004. The operating margin remained positive for the first 3 initial years. The sales had a direct impact on the Gross Profit Margin of the company. The operating margin of dawood Lawrencepur remained weak through out the six years of the analyses.3% and further it declined to 1. The sales also have a direct impact n the company's Gross profit margin which declined to a negative 24.The Company Cashflow margin peaked to 73.1% . In 2006 The GPM Declined to 5. The margin reached its negative value in 2008 to 38.2% in the last 6 years.
14 12 10 8 6 4 2 0 -2 2008 2007 2006 2005 2004 2003 ROA Roe The Chart above shows that the company ROA is weak throughout the years of our analyses and goes negative in the year 2008 of 11%. The net income increased to 202% in the year 2005 and then declined to 7. This again shows the impact of discontinued operations. The Net income over the total assets ratio.05% in the year 2008.28% in 2006 and eventually declined to 82. Dawood Lawrencepur needs to increase in total income. Which indicates that the companies net income is not increase in pace with the increase in the total asset. the company's nets income suffered a major decline due to the discontinued operations. However from the analyses done. 50 .
56%. the merger that took place) the EPS of the company declined drastically to 5. The company needs to concentrate on improving its earnings.22%) in the year 2008. EPS in the year 2005 reached its peak to13.16 14 12 10 8 6 4 2 0 -2 -4 -6 EPS 2008 2007 2006 2005 2004 2003 The Chart above shows the EPS which confides with the earning patterns of the company analyzed throughout. The earning made the investors 51 . The EPS since showed no improvements eventually the market share of the company also declined.88% however after that (due to the discontinued operations and the inflationary pressure. 200 100 0 -100 P/E 2008 2007 2006 2005 2004 2003 P/E Dawood Lawrencepur P/E shows a stable and a positive pace throughout the 6 years of analyses and peaked in the year 2007 to 195.24% and then went negative in the year 2008 that is -33.96% in 2006 and further to a negative (4. This is due to a good market share of the company.
34%. But after discontinuing certain operation in the year 2007 and 2008 the company assets declined drastically to 1791 million. In 2007 52 .e. Dividend Yield % 0.72% and then it declined substantially in 2004 to 2. Also the increased trend in the assets from 2004 can be explained by the company merger which resulted in the increased assets.loose faith in their investment due to the declining trend of the company's EPS. We can see from the analytical analyses that the company's non current assets have been more as compared to the current assets of the company. This is due to the DPS given and declining EPS.91% in 2004 and kept declining to 0.91 11.i.30 1.22 1.71 1. 42. Balance Sheet • Analysis and insight on Assets The companies Assets as we can see from the below graph were the Highest in the year 2006.72 12 10 8 6 4 2 0 2008 2007 2006 2005 2004 2003 Dividend Yield The company had a dividend yield of 11. The assets in 2003 were 3762 million which increased gradually till the year 2006.71 % in the year 2008.41 2. However in 2008 the major part of the asset of the company were the assets of disposal held for sale .
and then 66% and 36% in the year 2007 and 2008. In the NON CURRENT ASSETS. in 2006 the currents assets were only 19.60% in the year 2008.597% as compared to 2003.04%. The assets increased to 184. the company's assets have increased at a substantial rate till 2006 and then declined from there onwards to 47. IN 2008 long term deposits were reached upto169. In CURRENT ASSETS. IN the first 3 initial years the current assets composed around 30% part of the total asset.the Non current assets ratio reached 50. 7000 6000 5000 4000 3000 2000 1000 0 2008 2007 2006 2005 2004 2003 Assets From the Horizontal analysis of the company. in 2008 and 2007 its acquisition declined to 22 and 29%. 113% in 2006. the operating assets reached to 249. it shows a declining trend from 2004 which increased to 136.23% of the total assets of the company.6% of the total assets which 53 . And the long term deposit were 222. As compared to the increasing long term investments in the previous year.322% in 2004.89% in the year 2006. Intangible assets were acquired by the company in 2007 and 2008. 2009 and 2006.34% No long term loan and advances were taken in the year 2007. after the merger the rate declined to 127% in 2005.
24% in 2006 and increasing to 23. The Major portion of stockholders Equity is the fair value reserve on the investment amounting to 60. From the Vertical and common size analyses of the company it is noted that the company contains more then 70% of the liabilities in the total liabilities and the stock holders equity sections of the company. Shows a bell shape pattern referring to 13.85% in the year 2008.65% in 2004.34% and in 2008 declined to the rate of 24.43% in the year 2005 and then declining substantially to 11.428% in the year 2008.244% of the total liabilities and stockholders equity in 2003.23% of the total liabilities and SHE in the year 2006. The total liabilities increased to 226. The stocks and spares held a major portion of the current assets throughout the 6 years amounting to 13. • Analysis and insight on Liabilities and Shareholder’s Equity The companies Liabilities and stockholders Equity has the same trend to that of the assets of the company. 54 .29559% in 2004 gradually decreasing to 13.579 of the total assets.94% of the current assets in the year 2008.increased in 2007 to 33. The dash and bank balances show a decreasing trend from 39. increasing to 22.. The Major portion that is the trade and other payable in 2006 was the highest 108. In 2008 and 2007 there was no fair value of reserve on the investment. The second major portion of the current assets is the trade debtors. In the total Liabilities section the company's current liability has heavy weight as to the weight of the non current liabilities.56% and then declined to 83. declined to 2005 in 2006 and eventually reached to 47% liabilities as in the year 2008 as compared to the year 2003.61 percent of the total liabilities and the stock holder's equity.
508 of current and quick ratio of the year 2001 to 2.43% and 23. 55 . power tariff hike and by the need to rationalize old inventories in 2006. The quick ratio for is showing a weak trend.802 and 0. The current assets during the year 2006.171 in the year 2008. The company at the year end shows that its liquidity position has increased as compared to the 1. The Company's profitability during the year was significantly impacted by the inflationary pressures. 2004 and 2005 amounted to 19. This is due to the change in the accounting period in the year 2005 and due to the merger of the company.36%. it means that the company is holding large amount of inventory and not utilizing it efficiently to pay off its current liabilities.762 in 2005 and following the pattern in 2006. In the year 2005 and 2004 the company's liquidity position went down to 1. 22.7000 6000 5000 4000 3000 2000 1000 0 2008 2006 2004 Liabilties and stockholders Equity LIQUIDITY The trend of the Dawood Lawrencepurs current and Quick ratio shows a fluctuating or a cyclical type pattern.47% in the year 2005 and 2004.69% in 2006.584 and 1. This low ratio can be understood by analyzing the current assets and current liabilities position.89% and 36.99% of the total assets whereas the current liabilities amounted to 12. 39.
26% which showed progress in collecting the receivables.5 0 2008 2007 2006 2005 2004 2003 2002 Current ratio 2001 Current ratio Quick Ratio 350 300 250 200 150 100 50 0 2008 2007 2006 2005 2004 2003 Average collection period Average inventory per day Average payable in days From the above chart.3 2. 56 . The receivables declined to 20. which increased to 83.49% in the year 2008.5 1 0.5 2 1.38% in this year due to the reduced sales in the year of 27. it can be analyzed that the companies Average collection period has maintained a steady pace fluctuating now and then.335% in the year 2005 and thereon declined to 46.25 days in the year 2003. The company is collecting its receivables in 61.
488% TURNOVERS 8 7 6 5 4 3 2 1 0 2008 2007 2006 2005 2004 2003 Recievable Inventory Payable Dawood Lawrencepur receivable turnover shows a fluctuating rate throughout the six year. which remains stable through out the coming year. The Cogs of the inventory are less as compared to the sales made.81% in the year 2008.86% in the year 2008. The stores and spares were the major portion of out inventory which reached to 55% and 44. The firm has an efficiency of selling 0.916 times inventory in the year 2003.32 receivables times in a year which is increasing every alternate year and reaches 3.The company's inventory per day shows a progressive impact as the companies cost of goods sold is increasing steadily with the increase or more to the increase in the inventory made per day which in 2003 was 152.23% and reached to 338% in the year 2005 and declined over the next 3 years but reached 298. The turnover is however weak which we have discussed above. The firm inventory turnover is less. 57 . In 2003 the company is collecting 3.187 times in the year 2008. The company is making its payable slow throughout the year in 40-50 days but in the year 2008 the payable per day increased to 169.
it shows the cash flow generated in the year 2003 and the year 2008 amounted to 217 and 62 million. The firm is utilizing less resources.7 times of the sales in the year 2008 The company needs to reduce its fixed assets.479 times in 2008.5 4 3. mergers. change in the accounting period. It reaches 7. hence the fixed asset turnover is much higher and covers up to 4.5 2 1. In the year 2007 it reached 0.288 times in the year 2006 and declines to 1. Cash Flow Statement Dawood Lawrencepur only generated positive cash flow in two years in the last six year.5 0 Fixed Asset Total Asset 2008 2007 2006 2005 2004 2003 The fixed assets as noted above had a more then 75% ratio in the totals assets.5 1 0.5 3 2. 5 4. As we can see from the table given below.The firms payable turn over shows sensitivity over the years. In the yea 58 . discontinuing operations. this is due to the result of three major things.506 times the sales. The cash suffered a drastic decline in 2004 amounting to a negative 359 million and then in 2005 it peaked to 594 million. The total asset turnover is less.
due to the inflationary pressures the company suffered losses and the cash generated was recovered in the year 2007 and 2008 as the company discontinued some of its operations which generated cash of about 62 million rupees. In 2004 the sale of shares for the merger resulted in generating huge cash flows for the company. The cash generated from investing activities is the only source which gave positive cash flows in all years except in the year 2005. the company suffered loss in its cash flows due to the merger with the other company.2004. the companies cash generated from the financing actives are negative through out. In 2006. Also in 2005 due to the change in accounting period. Where in the year 2008 and 2007 the most cash is generated for operation as a result of the sales of disposals and discontinued operations which brought positive cash flows for the 59 . Purchasing of shares and fixed capital expenditure was the major reason for the negative generation of cash from the investing activities in the year 2005. The dividend is paid less in the year 2008 and 2007 where as the finance lease payment increased as compared to the preceding years. 2003 2004 2005 Net cash flow 2006 2007 2008 -800 -600 -400 -200 0 200 400 On the further analyses of the cash flow statement.
The capital reserves were the major portion of the change (Mergers and disposition) accounting for the most part of the changes. 300 200 100 0 -100 -200 -300 -400 -500 -600 -700 2008 2007 2006 2005 2004 2003 Cashflow from Financing Casg flow from operations Cash from Investing Analysis of Statement of Changes in Equity In the year 2008 the statement of equity has changed to 1528 million rupees. 60 . The changes resulted in 3204 million rupees in the year 2004.company. from 6049 million in the year 2006. The portions considered here include the mergers. the capital reserve the share right etc.
which shows that throughout the six years the firm's capital structure consists of 75 – 89% of the contribution to it by the equity sector and the rest percentage is financed by the current and noncurrent liabilities of the firm. The amount relates to the 9 month data due to the chance in the accounting period.4% of the total assets are being financed by the debts of the company. 61 . after peaking to 184% in the year 2006. The contribution by the liabilities reached 22% in 2005 which was the highest in the considered analyses. Analysis of Capital Structure of The firm The Graph above shows the capital structure of the firm.69% and22. The firm's total liabilities and equities decreased to 47.60% in the year 2008. The total debt of the company increases to 245% and 226% as to change from 2003. 120 100 80 60 40 20 0 2008 2007 2006 2005 2004 2003 Equity Liabilities We can see from the graph below that in the year 2005 and 2004 12.VIII. Where as the Liability .
But the major financing of the 62 .01 0 2008 2007 2006 2005 2004 2003 Long term debt to Capital The graph above is the analyses of the company's long-term debt to capitalization ratio which shows that the long term debt is the major part of financing the business. Although the ratio throughout is less the major portion of financing is done by the current liabilities amounting to 9.2 0.6% in the 2008.25 0. Which reaches to 6.02 0.6% in the year 2004 due to the merger of the firm.07 0.06 0.04 0.03 0.0.1 0. The deferred liabilities are the major portion of the long term debt in the permanent financing of the debt.15 Debt Ratio 0.05 0 2008 2007 2006 2005 2004 2003 0.05 0.
35 0. IX.05 0 2008 2007 2006 2005 2004 2003 Debt to equity .e.3 0. The ratio increased to 30.25 0. Analysis of Bad Debt method used by the company Trade debts are carried at original invoice amount less provision for impairment.2 0. 0.7% in the year 2004 and declined gradually to 13.1% in the year 2008.15 0. 63 . while provisions are made against debts considered doubtful based on review of outstanding amount at the end of the year.1 0. Known bad debts are written off. The graph below shows the capital structure of the firm. current and non current ratios are less. as the result of discontinued operations and mergers.business is through equity hence the company's liabilities i.
X. The operating profit margin of the company is minimum as compared to the industry. The cash flow margin has also shown an upward trend mainly due to the sale of discontinued operations. The cash flow liquidity ratio is also showing a downward trend as compared to the industrial average of the textile sector. Not in 8 years does it reach close to the industry. The Net profit margin of the company although shows an upward trend through out the eight years of analyses.46%. POSITION OF DAWOOD COMPARED WITH THE INDUSTRIAL AVERAGE PROFITABILITY The gross profit margin is less as compared to the industrial average only in the year 2004 does the companies gross profit margin reaches close to the industrial average. LIQUIDITY The above chart shows that Dawood Lawrencepur is not competing very well to the industrial average of the textile sector. 64 . The current ratio shows a below average trend constantly throughout the 8 years of analyses. The return on equity shows an above average rate of growth specifically in the year 2008 to 12. However the company's quick ratio shows an upward trend as compared to the industry. The EPS of the company has also shown a below average trend as compared to the industry. The return on assets has remained negative through out the years as compared to the industry.
the change in accounting policy. EFFICIENCY The receivable turnover is below the industrial average of relievable turnovers.5 0 2008 2007 2006 2005 2004 2003 2002 INDUSTRY AVERAGE DAWOOD The average collection period of the company is greater which means its collecting its receivables in much more delaying period as compared to the industrial average of the companies.3 2. SOLVENCY The company's solvency position is below average to the industrial computed rates which shows that the company's debt financing is less and much dependence is on the equity financing as compared to the industrial average INVESTORS ANALYSES Dawood lawrencepur's Earning per share has remained positive through out the year but less then the industrial average. this is the result of the losses the company suffered in the few years of analyses. The payable turnover of the company is also below average although the companies fixed asset turnover shows an above average trend. but the company offers good perspective in the future. which means mean that the company is collecting its receivable fewer times in a year as compared to the industry. closing down of some operations and discontinued operations. The company's inventory turnover also shows a below-average trend.5 1 0. much below. 65 . The total asset turnover also shows a below average trend.5 2 1. The payables of the company are made in more then hundred days which mean that the company is slow is collecting as well as making payments as compared to the industrial average.
The related obligations of leased assets are accounted for as liabilities. Analysis of cost flow assumption employed by the company • Stores. For items which are slow moving and /or identified as surplus to the Company's requirements. Analysis of Depreciation method used by the company The Company reviews appropriateness of the rate of depreciation on plant and equipment. Depreciation is charged from the date the asset is put into operation and discontinued from the date the asset is retired. Depreciation is provided on a diminishing balance method at the rate mentioned in the relevant note except for lease hold land which is amortized on straight line method. Depreciation of leased assets is charged to income. spares and loose tools are valued at average cost except for items in transit which are stated at cost incurred upto the balance sheet date. XII. Further where applicable. an estimate of recoverable amount of assets is made for possible impairment on an annual basis. adequate provision is made 66 . useful life and residual value used in the calculation of depreciation.XI.
with the acquisition of 100% share holding in TGL. The carrying amount of the replaced part is derecognized. Policy Analysis During the year 2008. (b)Net realizable value signifies the estimated selling price in the ordinary course of business less cost necessary to be incurred to make the sale (c)Trading goods are accounted for on cost which is the invoice value plus other expenses incurred to bring them to the point of sale. XIII. • Stock in trade is valued at the lower of cost and net realizable value Cost incurred in bringing each product to its present location and condition are accounted for as follows. the company 67 . in the separate financial statements of the Holding Company. DLL became a holding company of TGL. Accordingly. (a) Items in transit/bond are valued at cost comprising invoice values plus other charges incurred thereon upto the balance sheet date. Previously the investments in associates where significant influence exist were measured under equity method of accounting as required under IAS 28. The Company reviews the carrying amount of stores and spares on a regular basis and provision is made for obsolescence. plant and equipment are recognized in profit or loss as they are incurred. In line with paragraph 35 of IAS 28. the investments in associates where significant influence exist are required to be measured under cost or fair value as envisaged in IAS 27. plant and equipment is recognized in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the company and its cost can be measured reliably. • Plant and equipment: The costs of replacing part of an item of property.for any excess book value over estimated realizable value. The costs of the day to day servicing of property.
3. but also to increase its sales so as to cover from the losses suffered from the discontinued operations as that are one reason they are increasing their debt and seem incapable to bear the rising inflation. XIV. company has to utilize its inventories to an optimum level to reduce its holding cost. Insight and Recommendation for Investors & Creditors • • In order to improve liquidity position.has decided to re-measure its investment in associate at Cost.59 million and reserves would be higher by the same amount.125. This change has been applied retrospectively. They should negotiate with government regulatory authorities to remove price freeze • • • • 68 . The company should try to reduce its equity and go for debt finance because with high equity comes high losses and that is one reason the company is suffering from losses Dawood Lawrencepur should either reduce its expenses. Had this policy been not changed the investments in associate would be higher by Rs. Company needs to improve its asset utilization to improve its liquidity position to pay off their current liabilities. Dawood lawrencepur should increase current assets to improve its liquidity position because it acts as a guarantee to the creditors for meeting its current liabilities.
This is reducing the attractiveness for investors in Dawood • • • • • • • 69 .26%. company should employ more efficient people who can get these receivables back on time. This can damage the confidence of the investors and also puts a question mark on company’s management abilities.• They should come up with finance mix that shifts towards debt financing Company’s sales are decreasing and so are the average collection period is not improving with this decrease. The earnings per share have declined sharply because of low earnings. company’s selling and distribution expenses have decreased to 36. Agency costs must also be taken care of so that management should work in best interest for the company rather than looking for their own personal benefits.95 and 69. Main issues are the discontinued operations which have dented the company’s profits. Top management must also think of downsizing to bring its administrative costs down to an acceptable level. The solutions for this can be to give executive stock options to the management which will motivate them to work for company’s own benefits which will benefit the management as well. but mostly it should increase its sales. To improve sales growth management will have to come up with some strategic solutions to increase the sales growth to attract more investors for the company and to have attractive gross and net profits in the coming years.38% at the same time sales decreased to 27. From management point of view profitability is also a major aspect because higher profitability will eventually help the managers in getting more benefits and higher salaries. In 2008. Looking at the profitability ratios we can say that company is getting itself into serious problems. To attract more investors the management should think of strategic solutions to bring its costs down and manage its operations well because with improvements in profits the company will be able to get improvements in its market price because profitability is one the major aspect on which investors keep a close look because it also reflects the ability of company’s management.
• In view of the escalating gas and oil prices. there is a major problem with earnings which should be improved and the Sales which should increase. the management has recently taken the necessary steps to bring about material improvement in the company's operations. XV. The increased focus on line efficiencies improvement and product rationalization. the Dawood Lawrencepur conceptualized on what role a traditionally textile driven company can play in the energy sector. We are actively pursuing this option. earnings per share should be improved by focusing on the earnings growth. XVI. This is because the earnings are declining. your 70 . So. should lead to improved results in future. So.. • After analyzing the market ratios for Dawood lawrencepur. a global competitive and commercially viable solution to generate power within everyone's reach. Conclusion The cotton textiles operations having become unsustainable on account of the continuing losses and to arrest the decline in shareholders value.Lawrencepur LTD. we need to employ alternative sources of energy. Therefore DAWOOD LAWRENCEPUR focused on wind power. we observe that the major market value indicators have been declining. The more Dawood lawrencepur studied the clearer it became that exploring opportunities in the renewable energy sector was indeed not only possible but desirable. Forecast & Future Outlook With a very difficult year behind the company. Having understood the issues that the nation faces.
The inflationary pressures was also one of the reason for the losses the company suffered Having understood the issues that the nation faces. all closed down operations are classified under 'discontinued operations'. Due to this the companies sales will increase as the discontinued operations was the major reason of the difficult year the company faced. The more we studied the clearer it became that exploring opportunities in the renewable energy sector was indeed not only possible but desirable. Accordingly. as required under the International Financial Reporting Standard (IFRS) 5 – “Non Current Assets held for sale and Discontinued Operations'. the operations at Burewala had to be closed down in March 2008.company has taken steps over the last 18 months to close down these operations in stages. at Dawood Lawrencepur management conceptualized on what role a traditionally textile driven company can play in the energy sector. a global competitive and commercially viable solution to generate power within everyone's reaches. 71 . Whereas the textile operations and the polyester staple fiber operations at Landhi were closed down during the year 2006-07. We therefore focused on wind power.
pdf+demand+and+supply+textile+industry&hl=en&gl=pk&sig=AHIEtbS2wtY vtnIgcNQ-oebVa8eKHIcXbw 72 .google.pk/Chapters/1872.com/Annual_2006_DLL.equitymaster.com/ http://www.dawoodlawrencepur.pdf http://www.dawoodlawrencepur.REFERENCES The Annual statements of the Dawood Lawrencepur Ltd.pdf http://www.pdf http://www.dawoodlawrencepur.asp?date=3/31/2006&story=1 http://docs.com/dll%20report%202008.com/viewer?a=v&q=cache:7fWq78polEJ:prr.gov.com/Annual%20Report%202004%20DLL.hec.dawoodlawrencepur. http://www.com/detail.
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