INSTITUTE OF BUSINESS MANAGEMENT
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
Sir Maqbool-ur-rehman Course Instructor IoBM. I hope that you will find this report comprehensive and interesting.com Sincerely. The report as per your instruction has covered all areas to analyze the financial statements of the company.
DATE: 7TH December 2009
TABLE OF CONTENTS
. Wajiah Rahat. 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 wajiahrahat@live.
.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………………………………………………………………… ……....• Sectoral Outlook……………………………………………………………………… ……….21 About the company Mission & Vision Plant Location Capacity Product Line • Analysis of Company Outlook…………………………………………………………….42 5
.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………………………………………………..35 • Vertical and Horizontal Common Sizing and Analysis……………………………………36 • Ratio Analysis……………………………………………………………………… …………40 • Analysis of Financial Statements………………………………………………………….
.60 • Analysis of bad debt estimation method used by the company…………………………63 • Dawoods comparison with Industrial Averages…………………. or Aggressive) ………………………………....64 • Analysis of depreciation method employed by the company……………………………. ………………………………………………………………………………… ….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. Moderate....70 • Conclusion…………………………………………………………… ………………………..67 • Insight and Recommendation for Investors & Creditors…………………………………..70 • References………………………………………………………… …………………………..72
..68 • Forecast & Future Outlook…………………………………………………………………..……..66 • Policy Analysis (Conservative....65 • Analysis of cost flow assumption employed by the company………………………….……………….
In Asia. Pakistan is the 8th largest exporter of textile products. Out of it. The annual volume of total world textile trade is US$18 trillion which is growing at 2. The contribution of this industry to the total GDP is 8. The development of the Manufacturing Sector has been given the highest priority since Pakistan’s founding with major stress on Agro-Based Industries.Sectoral outlook
About the sector The textile sector enjoys a pivotal position in the exports of Pakistan. Pakistan’s share is less than one per cent. At
. For Pakistan which was one of the leading producers of cotton in the world. 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. 30% of the country work force of about 49 million. It provides employment to about 15 million people.5%.
most of the spinning industry operates in an organized manner with in-house weaving. The knitwear industry mostly consists of factories operating as integrated units (knitting + processing + making up facilities). garments and textile made-ups have over the years progressively increased their share in the textile export portfolio. The printing segment dominates the overall processing industry followed by textile dyeing and fabric bleaching. The processing sector. comprising dyeing. As far as the markets are concerned 60% -70% of the merchandise is exported to the USA and the EU. 124 large spinning units and 425 small units which produce textile products. able to process large quantities while the rest of the units operate as small and medium sized units.221 ginning units. High value added products i. The various sectors that are a part of the textile value chain are: Spinning. The industry consists of large-scale organized sector and a highly fragmented cottage / small-scale sector. Weaving comprises of small and medium sized entities. Over 75% of the units comprise small sized units. there are 1. Currently these products constitute 57% of the total textile exports. The clothing sectors both woven and knits are mainly clustering in Karachi– Lahore and Faisalabad where sufficient ladies labor is available. dyeing and finishing facilities. During early nineties the textile exports were dominated by yarn and greige fabric which had a share of almost 56% in the total exports. printing and finishing sub-sectors. only a part of this sector is operating in an organized state. The Textile Industry in Pakistan Is Divided Into Six Major Sub-Categories • • • • Ginning Industry Spinning Industry Weaving Industry Knitting Industry
.e. 442 spinning units. The garments manufacturing segment generates the highest employment within the textile value chain.present.
The industry contributes around 46% to the total output produced in the country. Moreover. Contribution to exports According to recent figures. It provides employment to 38% of the work force in the country. 400 million units of knitwear and 53 million kgs of towels.5%.2 billion US dollars. The industry has a total of 1221 units engaged in ginning and 442 units engaged in spinning. which amounts to around 5. The industry also houses around 10 large finishing units and 625 small units. In Asia. it also houses around 600 knitwear-producing units and 400 towel-producing units. weaving capacity of 4368 million square metres of fabric and finishing capacity of 4000 million square metres. There are around 20600 power looms in operation in the industry.• •
Garment Industry Polyester Fiber Industry
Established capacity The textile industry of Pakistan has a total established spinning capacity of 1550 million kgs of yarn. 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. which amounts to a
. Pakistan is the 8th largest exporter of textile products. There are around 124 large units that undertake weaving and 425 small units. the Pakistan textile industry contributes more than 60% to the country’s total exports. The industry has a production capacity of 670 million units of garments.
the debt-laden Indian textile industry has spun many turn-around stories since then. Here we analyze the sector's dynamics through Porter's five-factor model.5%. In 2005. nearly 20% to the country's total export earnings and 4% to the GDP. However. due to which there is a greater opportunity for rise in exports from Pakistan. Opportunities available The world demand for textiles is rising at around 2. Infect.
. the proportion of skilled labor is very less as compared to that of unskilled labor. 18% of employment in industrial sector.figure of 15 million. Aided by lower interest rates. the sector contributed 20% to industrial production. 9% to excise collections. restructuring packages from financial institutions and the recent dismantle of quotas. it is estimated that one out of every six households in the country directly or indirectly depend on this sector.
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 textile sector employs nearly 35 m people and is the second highest employer in the country. the sector is today well poised to capture growth opportunities. Organisations in the industry All Pakistan Textile Mills Association is the chief organization that determines the rules and regulations in the Pakistan textile industry.
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. low cotton prices due to a bumper cotton crop would enable India to lower its production cost and sustain pricing pressure. 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. The twofold increase in global textile trade is also likely to drive India's exports growth.Bargaining power of customers (demand scenario) Global textile & clothing industry is currently pegged at around US$ 440 bn. Nonetheless. India's textile export (at US$ 15 bn in 2005) is expected to grow to US$ 40 bn. is likely to benefit from the rising demand in the home textiles and apparels segment. Although China is likely to become the 'supplier of choice'. Cotton. in particular. which lends it a cost advantage in the home textile and apparels segments. like China and Pakistan. Other countries. With the dismantling of quotas. a rapid slowdown in the denim cycle poses risks to fabric players. global textile trade is expected to grow (as per Mc Kinsey estimates) to US$ 650 bn by 2010 (5 year CAGR of 10%). India. India has an abundant supply of locally grown long staple cotton. a key raw material in the textile and garment industry. capturing a market share of close to 8% by 2010. Further. accounts for about 30% of the fabric cost and 13% of the garment cost. have relatively lower supply of locally grown long staple cotton. Moreover. efforts
. wherein it has competitive edge against its neighbor. US and European markets dominate the global textile trade accounting for 64% of clothing and 39% of textile market.
The country is distant from major markets as compared to its global competitors like Mexico. which could give Indian companies significant margin advantage.1). The sector has one of the longest and most complex supply chains in the world. smaller players who cannot venture into the global markets are flooding the domestic markets with excess supply.on improving the yield per hectare would ensure higher productivity and production.9). India is rich in traditional workers adept at value-adding tasks. unless they can tap a significant pie of the overseas markets. India also enjoys a significant lead in terms of labor cost per hour (US$ 0. Threat of new entrants In the quota free regime. thereby providing the much-needed security of raw-material supply to textile producers. Competitive rivalry India's logistic disadvantage due to its geographical location can give it a major thumbs-down in global trade. which the larger players are trying to correct by integrating their operations and improving efficiency levels. South Korea (US$ 5.6 in 2004). capacity expansion is the name of the game in the textile sector. over developed countries like US (US$ 15. Also. Textiles being a fairly regulated sector till the recent past (quota regime). thus impacting their incremental volume off-takes. 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. another indispensable leg of the above analysis is government regulations. The scheme aimed at providing loans to the sector at internationally comparable rates of interest (5% lower than the domestic interest rates).1). Turkey and China. high cost of shipments and longer lead-time coupled with lack of infrastructure facility may prove to be major hindrances. As a result. Europe and Japan. Resultantly.7) and China (US$ 0. which enabled the players to upgrade their technology at lower cost
. new capex and consolidation with international players is also not likely to safeguard margins for the larger players. players like Arvind Mills have already started feeling the pinch as overseas buyers have started shifting to 'alternative sources'. home textiles (Welspun and Alok Industries) or branded apparels (Raymond). thus weakening the pricing scenario.1) and newly industrialized economies like Hong Kong (US$ 5. Taiwan (US$ 7. which are located in relatively close vicinity to major global markets of US. 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. Be it denim (Arvind Mills). The fragmented structure of the industry has also stood in the way of achieving true integration between the various links in the supply chain. Infact.
industrial safety and environmental regulations. 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. However the inflation rate is stabilizing and is at 10. tax policies. leisure interests. consumer spending. 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. consumer behavior.
. trade regulations.
Social Analysis – Demographics.of capital. They mostly find jobs in different sectors including textiles and also prove to be low cost labor. government expenditure. health consciousness. labor costs. inflation rate. The factors negatively affect all businesses. exchange rates. The inflationary pressures as noted in the year 2006 influences the company sales. so many bread earners move out to find a better earning opportunities. 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. As one can comprehend from the above analysis. living standards. interest rates. including the political wars among the parties etc. 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. employment laws. The rupee depreciation during the year has been beneficial for the exporters. Economic Analysis – Economic growth. The monthly wages were increased. the potential for the sector's growth are ample. as unit prices in PKR have increased for the textile segment. but the trick lies in competing effectively against rivals. IP rights. fashion & lifestyle changes In rural areas of Pakistan there are fewer opportunities to earn a living. income distribution.
US and European markets dominate the global textile trade accounting for 64% of clothing and 39% of textile market. Due to this many textile units have completely shut down and many units have to cut down production. spinning than on . new inventions. global textile trade is expected to grow (as per Mc Kinsey estimates) to US$ • • • • • • • •
. Since decades many incentives were given to the local industry such as tax rebates. automation.5% Demand and supply Global textile & clothing industry is currently pegged at around US$ 440 bn.Technological Analysis – Technological developments.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 . Other Driving Forces Influencing the Industry Security concerns (refrained international buyers to visit (Pakistan Compliance with Social. information technology Pakistan is facing serious power crises in terms of electricity shortage and gas shortage as well. g.Lack of Marketing efforts Duty imposed on the import of bed linen by EU 7. With the dismantling of quotas. R&D support in 2007. Environment and Health standards Quality of products Focus on low value added products e. 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.around 4-5% Availability of machinery but shortage of skilled operators .
capturing a market share of close to 8% by 2010. low cotton prices due to a bumper cotton crop would enable India to lower its production cost and sustain pricing pressure. which lends it a cost advantage in the home textile and apparels segments. Further. Other countries. have relatively lower supply of locally grown long staple cotton. a key raw material in the textile and garment industry. Nonetheless. 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. 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. Cotton. in particular. like China and Pakistan. Moreover. efforts on improving the yield per hectare would ensure higher productivity and production. India. 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.
India is the third largest producer of cotton in the world after China and US and has the largest area under cultivation. The two-fold increase in global textile trade is also likely to drive India's exports growth. thereby providing the much-needed security of raw-material supply to textile producers. wherein it has competitive edge against its neighbour. accounts for about 30% of the fabric cost and 13% of the garment cost.
. Although China is likely to become the 'supplier of choice'.650 bn by 2010 (5 year CAGR of 10%).
3. 4. 2.
. 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. oil prices and other inputs cost. 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. 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. This has resulted in decline of sale and closure of industries converting them in warehouses. Abdullah Zaki said that the textile sector facing serious problems owing to increase in price of yarn in local market.Government policies However. He urged the government to take appropriate measures to stop export of yarn and its prices should be kept at reasonable level. 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. its nonavailability.
Former Vice President KCCI. gas tariffs. the government changed its policies and started making frequent upward revision of power. Problems Faced By the textile Industry 1. He claimed that over 60 lakhs dollars' export orders of towel have been cancelled due to high prices and non -availability of yarn.
19. Deep recession in the US and European markets led to lower sales at retail levels together with stiff competition for suppliers.
technological know-how & Govt. 20. 15. 9. (Branding & grading) Unorganized vendor base Limited access to information (availability of finance. 21. 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
technical training institutions)
practical market. 22. 10. 8. 17. 13. 7. 6. 14. 23.
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.5. regulations)
US and EU
FINANCIAL ANALYSES The fiscal year 2008-09 was a year of recession for most businesses including textile sector worldwide. 16. support institutions and Lack of standardization and quality control Non-sophisticated marketing sense. Pakistan's textile exports were hit hard due to intense competition 19
. 18. 12. 11.
But I am sure Textile industry of Pakistan will grow and will keep its big share in the world textile. 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. FUTURE OF TEXTILE INDUSTRY Demand of textile products is increasing every year to almost 3%. So Pakistan can also capture some share from this but the industrialists and the government needs to focus on this sector. Textile industry just needs a good leader in the government which can drive the industry in a right direction. alongside rising interest rates and prolonged power cuts proved to be a hindrance to earnings of the textile industry in FY09.
. This. For textile sector in Pakistan. the year was also one of the most volatile due to a number of reasons. 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. In short Textile Industry of Pakistan has a great potential.with regional countries in FY09. Textile Industry of Pakistan can kick its competitors far off and can contribute up to 90% in the total GDP of Pakistan. Domestic textile units gained as well as lost in all these volatilities as per their strengths and relative positioning in the market. as depicted by a decline of 57% YoY. 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.
I. "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
. COMPANY INTRODUCTION
• About the company
Dawood Lawrencepur Limited.
Based on the above. Lahore.Burewala
Mission And Vision
To pursue sustained growth through a diversified business portfolio For enhancing stakeholder value. Dilon Limited.Landhi Mills . The shares of the Company are listed on the Karachi and Lahore Stock Exchanges. During the year the Company. Burewala Textile Mills Limited. The registered office of the Company is situated at 35-A. Mission:
. Lawrencepur Woollen and Textile Mills Limited and members of the said companies. Accordingly in line with IFRS-5 Non current assets held for sale and Discontinued Operations. Shahrah-e-Abdul Hameed Bin Baadees (Empress Road). District Vehari. 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. following operations of the Company are now classified under discontinued operations: .Dilon Mills .Karachi . due to continuous losses of its Dawoodabad unit located at Burewala.Karachi (Landhi Synthetic) . 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. the operations relating to the closed down plant and machinery have been classified as discontinued operations. has also suspended its operations of the said unit effective March 2008.Companies Ordinance. 1984 between Dawood Cotton Mills Limited.Dawoodabad Mills .
• • • • • •
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.
as unit prices in PKR have increased for the textile segment.
The factors negatively affect all businesses. All of these factors have coupled together for us to look back and turn. 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. We also have the lowest drilling densities and highest success ratios suggesting tremendous potential In hydrocarbon exploration. including the political wars among the parties etc. The rupee depreciation during the year has been beneficial for the exporters.
Social In rural areas of Pakistan there are fewer opportunities to earn a living. so many bread earners move out to find a better earning opportunities. The monthly wages were increased. Economic The inflationary pressures as noted in the year 2006 influences the company sales.Pakistan possesses over 180 billion tones of coal. This benefits the companies in competing in terms of cost. 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. 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.26% and the SBP has decreased interest and is expected to further cut the interest rates.
Unavailability of Skilled Labor 3. R&D support in 2007.
Demand & supply
The demand and supply of a Dawood textile industry depends upon few main factors. Shortage of Cotton. Reason for less supply from industry is 1.Technology Pakistan is facing serious power crises in terms of electricity shortage and gas shortage as well. Improper law and order situations 6. Problems of Electricity Shortage 4. 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. Internal Conditions of the home country 2. 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. Some of them are mentioned below. Unrealistic hike in fuel prices
The textile industry can supply more then it is already supplying if the above mentioned problems get solved. 1. Problems of Gas shortage 5. 2. Since decades many incentives were given to the local industry such as tax rebates.
Dyes: Used as colorants 3.8 million rupees. 5.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.2
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.
223. IN RS.A. that is selling off of the plant and discontinued operations the companies earning has suffered a major downfall as compared to the industry. TEXTILES LTD. Fuel ( which is some what stable now then before ) 6.7 million and net profit of 29. 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. Transportation charges. Chemicals of all types used in dyeing and finishing processs 4. Plastic Resin: Which is used for making plastic bags 2.
IN RS.6 million of net worth and a net income of 289. 245. IN MILLI MILLI MILLI ON ON ON NET NET NET WORT INCO PROF H ME IT 822.3 53. For example: 1.9
A. Due to the present changes in the company.
18. AL-ABID SILK MILLS LTD.4
968. BHANERO TEXTILE MILLS 325 LTD.2
AYESHA TEXTILE LTD.6 MILLS 96.8 MILLS LTD.7
560.8 28.8 147.3 ALLAWASAYA TEXTILE 7 77.8
116. BLESSED TEXTILE LTD.AHMAD HASSAN TEXTILE 209.3
80. 352. ARTISTIC LTD DENIM MILLS 213.3
AL-HAMAD TEXTILE MILLS 96.2 28.2 589.6 683.
CHANAB FIBER LTD.8 INDUSTRIES LTD. COLONY LTD TEXTILE
CRESCENT TEXTILE MILLS 1425. BUREWALA MILLS LTD.6
4632. APOLLO TEXTILE LTD.9 LTD DARES SALAAM MILLS LTD DEWAN KHALID TEXTILE 92.3
TEXTILE 254.6 FINISHING MILLS LTD.5
BENGAL FIBRE 91.4
2 1161.1 MILLS 239.8
DILON LTD FAISAL SPINNING LTD FATEH TEXTILE LIMITED
GULISTAN MILLS LTD
514.6 6944.8 52.8
HUSSEIN INDUSTRIES LTD 276.2
186.8 LTD GULISTAN MILLS LTD SPINNING 512.9 4516
35.1 IBRAHIM FIRES LTD IBRAHIM TEXTILE 5138.2 485.6 GUL AHMED MILLS LTD TEXTILE 1322
FAZAL CLOTH MILLS LTD GADOON LTD TEXTILE
GATRON INDUSTRIES LTD 1709.8
GULISTAN TEXTILE MILLS 875.6
107.7 474.7 MILLS 387.2
99.6 714.5 127.4 761.2
592.8 TEXTILE MILLS LTD DEWAN LTD DEWAN LTD SALMAN FIBRE 458.7 38.6
1553 3438.MILLS LTD DEWAN MUSHTAQ 124.4
MILLS 218.2 INDUSTRIES LTD
LAWRENCEPUR 245.2 629 536.0
TEXTILE 502.7 2936
MAQBOOL TEXTILE MILLS 146.LTD ICC TEXTILES LTD IDEAL SPINNING LTD 147 MILLS 137.7
LANDMARK SPINNING 121.8
1455.6 TEXTILE MILLS LTD
LIBERTY MILLS LTD MAHMOOD MILLS LTD 193.8
INDUS DYEING MANUFACTURING LTD ISHAQ TEXTILE LTD KHALID SIRAJ MILLS LTD KOHAT TEXTILE LTD KOHINOOR MILLS LTD KOHINOOR MILLS LTD KOHINOOR MILLS LTD
RELIANCE COTTON 236.5
POLYSTER 1374.P.G.8 NADEEM LTD TEXTILE MILLS 188.3
892.LTD MAIN TEXTILE 114. FIBRE LTD SAIF TEXTILE MILLS LTD WEAVING 313.3 357.5
12.4 2367.3 406.4
701.6 LTD NAYAB SPINNING & 251.4
NAKSHBANDI INDUSTRIES 262.3
110.6 WEAVING MILLS LTD NINA INDUSTRIES LTD NISHAT CHUNIAN LTD NISHAT MILLS LTD PARAMOUNT MILLS LTD PROSPERITY MILLS LTD QUETTA LTD 352.6
1141.3 INDUSTRIES LTD N.2
143.5 4569.6 51.5 807.9 3
SPINNING 286.1 SPINNING MILLS LTD RELIANCE MILLS LTD RUPALI LIMITED S.0 10134 830.4
922.5 700. SPINNING MILLS LTD 155.
9 650.2 LTD SHAHTAJ LTD TEXTILE MILLS 146.6
MILLS 261.3 LTD SHAHPUR TEXTILE MILLS 161.7 68.3 1406.9 LTD YUSUF TEXTILES LTD ZAINAB TEXTILES LTD ZAMAN LTD TEXTILE MILLS 122
24.SAMIN TEXTILE LTD
SAPPHIRE FIBRES LTD
2499.4 1766.6 43.2
SAPPHIRE TEXTILE MILLS 1108.9
YOUSAF WEAVING MILLS 225.5 331.6
SUNRAYS MILLS LTD
TATA TEXTILE MILLS LTD THAL JUTE MILLS LTD TOWELLERS LTD
60 million of the previous year. all closed down operations are classified under 'discontinued operations'. Accordingly. • In January 2008 acquired 100% shareholding in Tenaga Generasi Limited.III. This change has been applied retrospectively. 1.629.
.81 per share of the similar period last year. TGL. Analysis of Director’s Report
• The textile operations and the polyester staple fiber operations at Landhi were closed down during the year 2006-07. the operations at Burewala had to be closed down in March 2008.88 million) as against the turnover of Rs.84 million (inclusive of turnover from 'discontinued operations' of Rs. • DLL Group's turnover for the year was Rs. 31. 1. with the acquisition of 100% share holding in The company has decided to re-measure its investment Rs.36 as compared to During the year.323. DLL became a holding company of TGL. in associate at Cost. 689. • • • Earnings per share of the Group were Rs. 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. as required under the International Financial Reporting Standard (IFRS) 5 “Non Current Assets held for sale and Discontinued Operations'.
The Company's profitability during the year was significantly
impacted by the inflationary pressures.
IV. accordance with the company ordinance
accordance with the business objectives ordinance. power tariff hike and by the need to rationalize old inventories in 2006. • In May 2004. This report being the first annual report of the merged entity. • 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. demonstrates the commitment to be better prepared in the post WTO scenario.
. 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. the Company name was changed ' Dawood Lawrencepur Limited' to so as to take advantage of the goodwill associated with the name of Lawrencepur.
24 0.71 1.014 0.78 0.57 0.49 19.94 2.26 22.7 10.61 100 100 100 100 100 2.34 100 3. 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.8602 3.17 33.15 7. Vertical and Horizontal Common Sizing Analysis
VERTICAL ANALYSES (2008-2003) In Percentage terms BALANCE SHEET 2008 NON CURRENT ASSETS Fixed Assets Property.76 33.32 2.5 11.86 50.31 6.16 0.44 4.26 2.29 36.87 3.16 4.62 1.622 77.52 0.01 2.115 9.015 0.629 6.V.579 42.89 83.619 0.94 9.196 31.44 2007 2006 2005 2004 2003
.79 3.48 10.43 15.75 5.035 1.911 32.329 67.09 5.115 1.9 15.88 8. prepayments and other receivables Cash and bank balances Assets of disposal group classified as held for sale Total Assets SHARE CAPITAL AND RESERVES 2.019 11.7 21.71 0.21 0.5 0.63 0.73 6.91 0.29 51.943 4.156 1.91 19.0002 27.03 4.075 1.48 0.792 51.675 3.5 68.931 4.44 0.11 27.04 0.735 0.46 24.5 10.676 63.091 59.
059 -4.139 0.58 65.1685 40.63
83.94 13.616 5.2 44.751 1.36 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 11.6679 -50.506 -0.204 1.23 100 -79.26
87.43 18.875 13.06
-0.49 41.72 3.43 22.22
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 .052 1.2
0.15 86.8685 39.339 -4.05 2003 100 -90.13 100
0.38 4.768 -2.97 3.prior Deffered (Loss)/Profit for the year after tax -53.68 -73.737
-1.979 -3.222 -1.98 17.15 -3.69 3.488 -6.658 -0.06 62.16 -3.892
0.5 2.634 -0.78 9.3 12.6 0.51 38.56 0.87 13.316 2.2 0.47 6.92 -9.16 5.934 -4.9 20.76 2.92 10.07 6.48 19.45 1.72
88.246 0.61 -4.432 2004 100 -90.74 0.0157
-2.61 100 1.27 0.66 1.01 2.35 1.32 16.875 -0.43
0.26 51.32 7.0026 -0.71 -5.37 1.72 -0.68 -81.786
17.425 3.47 -3.643 -1.568 10.14 -4.937 0.27 12.52 0.81 2.17 10.53
7.28 -1.89 76.01 4.03
0. subscribed & paid up Reserves Unappropriated profit Fair value reserve on investment
26.384 2005 100 -89.32 15.476
0.74 2.46 -5.12 17.96
9.3 -4.03 13.1 2007 100 -95.952 10.621 16.69 10.992 -2.7083
.99 10.09 23.69 12.99 2006 100 -94.Issued.42 5.27 77.23
7.95 9.01 -0.41 23.11 -2.236 2.83 60.56 8.
85453 36.0908 124.699.40362 6.8206 152.81101 20.13421 0 169. 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.99244 1.39726 16.0466 6900 29.55825 758.1303 76.36852 66.97681 376. subscribed & paid up 133.74004 5.18373 242.264 89.430 543.3741 143.7135 165. prepayments and other receivables Cash and bank balances Assets of disposal group classified as held for sale Total Assets SHARE CAPITAL AND RESERVES Issued.322 136.157 83.1839 6.337458 565.421 22.3025 210.433 68.85479 23.5154 126.5519 84.1821 127.29559 136.6152 0 221.3697 144.5686 22.84008 0 168.002 64.286.550 249.5597 148.0515 152.1 121 110 100 100 59.668 47.13287 184.1495 128.94338 221.HORIZONTAL ANALYSES (2008-2003) In Percentage terms BALANCE SHEET 2008 NON CURRENT ASSETS Fixed Assets Property.7119 243.1174 212.4685 17.869506 99.372 138.1545 112.523559 121.7853 6.924.16137 44.474139 3.59441 81.363.60145 124.766.24372 113.3281 103.987.1817 118.284 39.4301 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
.0375 13.2335 129.
262.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 .41 137.61 0 0 7.7002
118.06 48.61 143.60145
64.193 511.7376 103.59669 1521.88
2003 100 100 100 100 100 100 100 100 100 100 100 100
70.93 104.23 119.64 102.44461 245.64982 47.6 78.54 174.1859 1089.1745 216.7532 5945176
104.19 81.85 38.57 76.085 0 0 202.238 607.42893 0 312.58 55.38 300825659 908.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
185.71 51.33 0 36.9327 65.1221 94.16 65.76 150.96072
55.15 58.7881 95.22472 200.01
100 100 100 100 100 100
.92 19.90944 141.32074
100 117.26 90.Deffered (Loss)/Profit for the year after
HORIZONTAL ANALYSES (2008-2003) In Percentage terms INCOME STATEMENT 2008 2007 2006 2005 27.11 120.8914 105.10717 226.6286
100 230.19 0 0 82.000 12432869 81.0177 184.1637
100 100 100 100 100 100
0 29.83 68.2396
100 100 100 100
100 100 100
83.24 1.73 55.35 72349185 372.791 96.99 206.5 105.05 8.43 73.09 169.06013 315.67091
Sales .63 89.41 36.1488
100 100 100 100
2004 119.85 231.38 23.9798 94.04591
285.29 0 149.665 614.9525
51.4 52.06 170.33764 85.99817 94.5751 298.47 1.98 94.87 48.95 69.3668 0 118.28 217.41 116.6346
76.08809 18.61793 18.prior .23 37.7407 1078.79 90.80581
762.99 7.59 196.46 424.13287
128.38 80.35 114.5 8.917 84.49 50.
7584 0.855 46.206 0.574 3.187 0.24 0.49 55.922 0.179 1.066 48.359 0.839 1.70 3.171 1.tax
VI.479 4.133 0.72 171.125 152.09 5.637 0.288 2.043 0.322 0.050 35.0232 39.324 0.170 2.083 1.488 3.916 4.125 2.553) 2.145 1.98 2.116 0.052 43.197 3.769 1.50 338.1698 0.661 1.253 0.246 0.946 0.945 2.320 1.76 3.235 0.775 4.335 66.95 1.506 0.041 298.705 0.362 0.027 47.37 3.228 260.82 0.86 144.745 (0.603 0.1269 0.762 0.786 2007 2006 2005 2004 2003
.695 4.033 64.224 0.909 1. 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 40 169.27 7.51 1.584 1.35 2.32 0.25 4.225 83.269 0.368 61.
008 0.41 (0.381) (0.03 1.1043 0.45 19.22) (33.046 5.1526
VII.394) 0.00868) 0.307 0.131 0.01 13.0489 0.258 0.42 195.12 1.3986 0.0969 0.289 0.2036 0.Capital Debt to equity Profitability Ratios CashFlow Margin Gross profit margin Operating margin Net Profit Margin ROA Roe EPS P/E Dividend Yield 0.72 0.30 0.535) (0.242) (o.36 3.56) 0.17786 0.0636 0.035 4.053 (0.91 0. Analysis of Financial Statements
.026) (0.047 5.732 (0.0656) (0.88 5.0198 0.22 0.66 11..90 13.99 0.0127 0.028 0.090 0.86 5.43 18.0256 0.58 4.45 (4.051 0.0108 (0.24 1.71 0.01622) 0.1009 13.145 0.11) 12.33 2.
323.629.60 million of the previous year. DLL Group's turnover for the year was Rs. 271.11 million of the similar period last year.84 million (inclusive of sales from 'discontinued operations' of Rs. the company achieved sales of Rs.88 million) against the sales of Rs. 323. 1. 111.629. The loss before taxation is Rs.04 million as compared to profit of Rs. After taking into account the loss from the closed down operations of Rs.60 million for the previous year OF 2008.84 million (inclusive of sales from 'discontinued operations' of Rs.24 million as against profit of Rs.88 million) against the sales of Rs.
Analysis of basic elements of income statement
Sales and Growth ( Both real & nominal)
During 2008. 1. 1.81 per share of the similar period last year. 111. the company achieved sales of Rs.41 million. 1. 187.
. The operating loss of the company stood at Rs. 689.646.46 million) the profit before tax was Rs. 136.84 million (inclusive of turnover from 'discontinued operations' of Rs. 271. Earnings per share of the Group were Rs.873. 323. 300.83 million (2007: Rs. 1. the operating loss of the company stood at Rs.35 Million).During 2008.41 million for last year. With the share of profit from associate of Rs.629.60 million for the previous year. 20.88 million) as against the turnover of Rs. 31.22 million. 223. 689.36 as compared to Rs.70 million as against loss of Rs.60 million (2007: Rs. 72. 1.64 million as against Rs. 689.
Sales .23% in 2004 and declined to 90. This declined is explained by the discontinued operation of the company.23
. however in 2005 it consists of computation of 9 months due to the change in Accounting year.net
2008 27.26%.38% in FY2005.79% and den took a drastic decline to 27. so this explains the drastic fluctuation in the net sales. From the FY 2003 the sales increased upto 119.26
2007 90. In 2006 ithe sales reached upto 137.79
2004 119.2000 1500 1000 500 0
The sales of the company as we can conclude from the horizontal and vertical analyses show a very fluctuating trend.41
2006 137. the operations at Burewala had to be closed down in March 2008. The textile operations and the polyester staple fiber operations at Landhi were closed down during the year 2006-07.
And the Below chart of 2004 shows that cotton yarn consisted around 80% of the total yarn value in the sales value..
. We can see from the above graph of 2006 that 70% of the sales value was dues to the yarn.
The behavior of continuous decline explains that the companies discontinued operations were a part of major sales and growth of the company. The sales had a direct impact on the Gross Profit Margin of the company.The sales also have a direct impact n the company's Gross profit margin which declined to a negative 24. In FY 2003 the gross profit margin was 6.3% and further it declined to 1.08% in FY2007 due to the discontinued operation and in 2008 it reached to negative 24.2%. The gross profit of the company declined to 58. In 2006 The GPM Declined to 5. The operating margin of the company is the lowest in 2008 . it takes into account only nine months data. power tariff hike and by the need to rationalize old inventories in 2006.
The company hence must increase its sales of the continuing operations so as to secure its previous profitable position
.e.2%.88% at the year end 2008. The Company's profitability during the year was significantly impacted by the inflationary pressures.1%.i. As well as the Net profit margin.36% which increased to 9% in FY2004. In 2005 due to the change in accounting policy the GPM was estimated to 10%. 38.
COST OF GOODS SOLD the cost of goods sold of the company throughout 2003 to 2007 remained around 90% of the sales. which can be referred to as the highest the company reached in the last six years.99% of the companies sales which gradually incread throughout the years and reached to 10%.86 as compared to 152. OPERATING EXPENSES The operating expenses of the company reached to a12.855 in 2003. 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 2008.48% in 2005 then reached to 76. It comprises of 23.35% and eventually fell to 38. Also the company Average inventory per day increased to 298.45% in the year 2008. which has declined to 59.39% 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.9% in the year 2004 and declined 55. This can again be justified by the affect of discontinued operations.14% since the year 2003. however in 2008.16% and 44. As compared to 2003 the cost of goods sold declined to 23.36% of the sales in 2008. 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 can be explained by the increasing cost of goods sold as compared to the change in the increase in the inventory.98%.
. it was 79. The textile operations and the polyester staple fiber operations at Landhi were closed down during the year 2006-07. This explains the lower cost of goods sold in the year 2008. The main components influencing the decreasing Cost of Goods sold are stocks and spared in part.
demonstrates the commitment to be better prepared in the post WTO scenario.56% which is the highest the company achieved in this six year. 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 Company name was changed ' Dawood
Lawrencepur Limited' to so as to take advantage of the goodwill associated with the name of Lawrencepur.This has impact on the operating loss or gain of the company.1%) as compared to the operating profit of 2003 which is 2. so this explains the drastic fluctuation in the net sales. OTHER EXPENSES Other charges is minor as in the year 2006 which also includes donation to the earthquake relief fund. The textile operations and the polyester staple fiber operations at Landhi were closed down during the year 2006-07. • The figures for the past three years (2001-2003) represent the
period when the Merger had not taken place • In May 2004. This report being the first annual report of the merged entity. change in accounting year from September to June. • • 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.
.0026% and the donation comprises of 0. The operating expenses had a major impact on reducing the operating profit margin through out the year.66% of the total sales in the year 2006. the operations at Burewala had to be closed down in March 2008. In 2008 the Operating profit margin is (38. Other charges are only 0.
4 CashFlow Margin Gross profit margin Operating margin Net Profit Margin
0 2008 -0.5% in the year 2008 due to abandonment of the companies few operations. with the net profit margin as 11.6
-0. The Major reasons for the decline in the Net profit are mentioned above.6
The Companies Profitability margins can be assessed from the graph above.8% however in the year 2005 Dawood Lawrencepurs NPM increased to 39. In the year 2003 that is the initial year the companies margins were all positive.The Company's profitability during the year was significantly impacted by the inflationary pressures. 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. power tariff hike and by the need to rationalize old inventories in 2006. this is due to the merger as well as due to the change is accounting period.2 2007 2006 2005 2004 2003
-0. The Net profit margin declined to a negative 28.
4% due to the substantial selling of the shares. Which lead to the conclusion that the discontinued operations had a major impact on the operating profit margin of the company. In 2006 The GPM Declined to 5. In FY 2003 the gross profit margin was 6.
. The discontinued operations were the major reason.1% .2%.88% at the year end 2008. The company needs to utilize its current operations to a maximum.3% and further it declined to 1. it takes into account only nine months data. The sales had a direct impact on the Gross Profit Margin of the company. The operating margin remained positive for the first 3 initial years. The gross profit of the company declined to 58.2% in the last 6 years. The sales also have a direct impact n the company's Gross profit margin which declined to a negative 24. the operating loss reached to 908% in 2008 and 372% in 2007 as compared to a positive operating margin of the year 2003. In 2004 the company's cash flow margin declined to a negative 39.2%. In 2005 due to the change in accounting policy the GPM was estimated to 10%.08% in FY2007 due to the discontinued operation and in 2008 it reached to negative 24.36% which increased to 9% in FY2004. The operating margin of dawood Lawrencepur remained weak through out the six years of the analyses.The Company Cashflow margin peaked to 73. The margin reached its negative value in 2008 to 38.
Which indicates that the companies net income is not increase in pace with the increase in the total asset. However from the analyses done.28% in 2006 and eventually declined to 82. Dawood Lawrencepur needs to increase in total income. The Net income over the total assets ratio. The net income increased to 202% in the year 2005 and then declined to 7.
.05% in the year 2008.14 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%. This again shows the impact of discontinued operations. the company's nets income suffered a major decline due to the discontinued operations.
16 14 12 10 8 6 4 2 0 -2 -4 -6
The Chart above shows the EPS which confides with the earning patterns of the company analyzed throughout. The company needs to concentrate on improving its earnings.22%) in the year 2008. The EPS since showed no improvements eventually the market share of the company also declined.96% in 2006 and further to a negative (4. EPS in the year 2005 reached its peak to13.88% however after that (due to the discontinued operations and the inflationary pressure. This is due to a good market share of the company.56%.
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. The earning made the investors
.24% and then went negative in the year 2008 that is -33. the merger that took place) the EPS of the company declined drastically to 5.
But after discontinuing certain operation in the year 2007 and 2008 the company assets declined drastically to 1791 million.loose faith in their investment due to the declining trend of the company's EPS. Dividend Yield % 0.e.72
12 10 8 6 4 2 0 2008 2007 2006 2005 2004 2003 Dividend Yield
The company had a dividend yield of 11.91 11.34%.41 2.30 1. In 2007
.71 % in the year 2008.71 1.
• Analysis and insight on Assets The companies Assets as we can see from the below graph were the Highest in the year 2006.72% and then it declined substantially in 2004 to 2.i. The assets in 2003 were 3762 million which increased gradually till the year 2006. 42.91% in 2004 and kept declining to 0. However in 2008 the major part of the asset of the company were the assets of disposal held for sale .22 1. This is due to the DPS given and declining EPS. Also the increased trend in the assets from 2004 can be explained by the company merger which resulted in the increased assets. 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.
04%. after the merger the rate declined to 127% in 2005.322% in 2004. in 2006 the currents assets were only 19. in 2008 and 2007 its acquisition declined to 22 and 29%.
7000 6000 5000 4000 3000 2000 1000 0 2008 2007 2006 2005 2004 2003 Assets
From the Horizontal analysis of the company. Intangible assets were acquired by the company in 2007 and 2008.23% of the total assets of the company. the company's assets have increased at a substantial rate till 2006 and then declined from there onwards to 47. the operating assets reached to 249. IN 2008 long term deposits were reached upto169.60% in the year 2008.34% No long term loan and advances were taken in the year 2007. In CURRENT ASSETS.6% of the total assets which 53
. it shows a declining trend from 2004 which increased to 136. As compared to the increasing long term investments in the previous year. And the long term deposit were 222.89% in the year 2006. 2009 and 2006.597% as compared to 2003. IN the first 3 initial years the current assets composed around 30% part of the total asset. In the NON CURRENT ASSETS. and then 66% and 36% in the year 2007 and 2008.the Non current assets ratio reached 50. The assets increased to 184. 113% in 2006.
244% of the total liabilities and stockholders equity in 2003.85% in the year 2008.94% of the current assets in the year 2008. Shows a bell shape pattern referring to 13.34% and in 2008 declined to the rate of 24. increasing to 22. declined to 2005 in 2006 and eventually reached to 47% liabilities as in the year 2008 as compared to the year 2003. In the total Liabilities section the company's current liability has heavy weight as to the weight of the non current liabilities. The second major portion of the current assets is the trade debtors.23% of the total liabilities and SHE in the year 2006.428% in the year 2008. In 2008 and 2007 there was no fair value of reserve on the investment. • 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.. The Major portion that is the trade and other payable in 2006 was the highest 108.579 of the total assets.24% in 2006 and increasing to 23.61 percent of the total liabilities and the stock holder's equity. The total liabilities increased to 226.increased in 2007 to 33. The dash and bank balances show a decreasing trend from 39.65% in 2004.43% in the year 2005 and then declining substantially to 11. The Major portion of stockholders Equity is the fair value reserve on the investment amounting to 60.
.29559% in 2004 gradually decreasing to 13. 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.56% and then declined to 83. The stocks and spares held a major portion of the current assets throughout the 6 years amounting to 13.
In the year 2005 and 2004 the company's liquidity position went down to 1. 39.584 and 1.36%.171 in the year 2008. This low ratio can be understood by analyzing the current assets and current liabilities position.508 of current and quick ratio of the year 2001 to 2.47% in the year 2005 and 2004. 22. The current assets during the year 2006. The quick ratio for is showing a weak trend. The company at the year end shows that its liquidity position has increased as compared to the 1.89% and 36.69% in 2006.
. This is due to the change in the accounting period in the year 2005 and due to the merger of the company. it means that the company is holding large amount of inventory and not utilizing it efficiently to pay off its current liabilities. The Company's profitability during the year was significantly impacted by the inflationary pressures.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. 2004 and 2005 amounted to 19.99% of the total assets whereas the current liabilities amounted to 12.802 and 0. power tariff hike and by the need to rationalize old inventories in 2006.43% and 23.762 in 2005 and following the pattern in 2006.
335% in the year 2005 and thereon declined to 46.25 days in the year 2003.26% which showed progress in collecting the receivables. it can be analyzed that the companies Average collection period has maintained a steady pace fluctuating now and then. The receivables declined to 20.3 2.5 2 1.
. which increased to 83.5 1 0.49% in the year 2008.5 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. The company is collecting its receivables in 61.38% in this year due to the reduced sales in the year of 27.
The Cogs of the inventory are less as compared to the sales made.86% in the year 2008.81% in the year 2008.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. 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. The firm has an efficiency of selling 0. The turnover is however weak which we have discussed above.32 receivables times in a year which is increasing every alternate year and reaches 3. The stores and spares were the major portion of out inventory which reached to 55% and 44. which remains stable through out the coming year. 57
.187 times in the year 2008.488%
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. The firm inventory turnover is less. In 2003 the company is collecting 3.916 times inventory in the year 2003.23% and reached to 338% in the year 2005 and declined over the next 3 years but reached 298.
5 4 3.5 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.7 times of the sales in the year 2008 The company needs to reduce its fixed assets.5 3 2. this is due to the result of three major things. mergers.5 1 0. it shows the cash flow generated in the year 2003 and the year 2008 amounted to 217 and 62 million. change in the accounting period. The total asset turnover is less.288 times in the year 2006 and declines to 1.506 times the sales. It reaches 7.
Cash Flow Statement
Dawood Lawrencepur only generated positive cash flow in two years in the last six year. hence the fixed asset turnover is much higher and covers up to 4. The firm is utilizing less resources. discontinuing operations.
5 4. In the year 2007 it reached 0.479 times in 2008.5 2 1. The cash suffered a drastic decline in 2004 amounting to a negative 359 million and then in 2005 it peaked to 594 million. As we can see from the table given below.The firms payable turn over shows sensitivity over the years. In the yea
Also in 2005 due to the change in accounting period. In 2006. 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. the companies cash generated from the financing actives are negative through out.2004. the company suffered loss in its cash flows due to the merger with the other company. 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
. In 2004 the sale of shares for the merger resulted in generating huge cash flows for the company.
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 cash generated from investing activities is the only source which gave positive cash flows in all years except 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. 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 capital reserve the share right etc. The capital reserves were the major portion of the change (Mergers and disposition) accounting for the most part of the changes.company.
. The portions considered here include the mergers. The changes resulted in 3204 million rupees in the year 2004. from 6049 million in the year 2006.
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.
The amount relates to the 9 month data due to the chance in the accounting period.69% and22.4% of the total assets are being financed by the debts of the company.
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. The contribution by the liabilities reached 22% in 2005 which was the highest in the considered analyses. after peaking to 184% in the year 2006. Analysis of Capital Structure of The firm
The Graph above shows the capital structure of the firm. The firm's total liabilities and equities decreased to 47.VIII. 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. Where as the Liability . 61
.60% in the year 2008. The total debt of the company increases to 245% and 226% as to change from 2003.
03 0.04 0. But the major financing of the
.6% in the year 2004 due to the merger of the firm.1 0.25 0. Although the ratio throughout is less the major portion of financing is done by the current liabilities amounting to 9.05 0. The deferred liabilities are the major portion of the long term debt in the permanent financing of the debt.2 0.01 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.15 Debt Ratio 0.02 0.06 0. Which reaches to 6.07 0.05 0 2008 2007 2006 2005 2004 2003
0.0.6% in the 2008.
The graph below shows the capital structure of the firm.
IX.7% in the year 2004 and declined gradually to 13.
.05 0 2008 2007 2006 2005 2004 2003 Debt to equity
. current and non current ratios are less.3 0.business is through equity hence the company's liabilities i. as the result of discontinued operations and mergers. The ratio increased to 30. Known bad debts are written off.35 0. while provisions are made against debts considered doubtful based on review of outstanding amount at the end of the year.15 0.e.1 0.1% in the year 2008. Analysis of Bad Debt method used by the company
Trade debts are carried at original invoice amount less provision for impairment.25 0.2 0.
X. The EPS of the company has also shown a below average trend as compared to the industry. The cash flow margin has also shown an upward trend mainly due to the sale of discontinued operations. LIQUIDITY The above chart shows that Dawood Lawrencepur is not competing very well to the industrial average of the textile sector. The operating profit margin of the company is minimum as compared to the industry. Not in 8 years does it reach close to the industry. The return on equity shows an above average rate of growth specifically in the year 2008 to 12. 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. The current ratio shows a below average trend constantly throughout the 8 years of analyses. The return on assets has remained negative through out the years as compared to the industry. The cash flow liquidity ratio is also showing a downward trend as compared to the industrial average of the textile sector.
. However the company's quick ratio shows an upward trend as compared to the industry.46%. The Net profit margin of the company although shows an upward trend through out the eight years of analyses.
much below. 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. EFFICIENCY The receivable turnover is below the industrial average of relievable turnovers. The payable turnover of the company is also below average although the companies fixed asset turnover shows an above average trend. The total asset turnover also shows a below average trend.5 2 1. 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 change in accounting policy.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.
. The company's inventory turnover also shows a below-average trend. 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. but the company offers good perspective in the future.5 1 0. this is the result of the losses the company suffered in the few years of analyses.
Depreciation of leased assets is charged to income.XI. Analysis of cost flow assumption employed by the company
• Stores. useful life and residual value used in the calculation of depreciation. 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. Further where applicable. an estimate of recoverable amount of assets is made for possible impairment on an annual basis. The related obligations of leased assets are accounted for as liabilities. 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. 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. adequate provision is made 66
XII. Depreciation is charged from the date the asset is put into operation and discontinued from the date the asset is retired.
The costs of the day to day servicing of property. Accordingly. 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. Previously the investments in associates where significant influence exist were measured under equity method of accounting as required under IAS 28. • Plant and equipment: The costs of replacing part of an item of property. DLL became a holding company of TGL. with the acquisition of 100% share holding in TGL.
XIII. Policy Analysis
During the year 2008. In line with paragraph 35 of IAS 28. The carrying amount of the replaced part is derecognized.for any excess book value over estimated realizable value. the company
. the investments in associates where significant influence exist are required to be measured under cost or fair value as envisaged in IAS 27. (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. plant and equipment are recognized in profit or loss as they are incurred. in the separate financial statements of the Holding Company. (a) Items in transit/bond are valued at cost comprising invoice values plus other charges incurred thereon upto the balance sheet date. The Company reviews the carrying amount of stores and spares on a regular basis and provision is made for obsolescence. • 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.
Insight and Recommendation for Investors & Creditors
• • In order to improve liquidity position. 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.59 million and reserves would be higher by the same amount. 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.has decided to re-measure its investment in associate at Cost. Company needs to improve its asset utilization to improve its liquidity position to pay off their current liabilities.125. 3. 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. This change has been applied retrospectively. They should negotiate with government regulatory authorities to remove price freeze
XIV. company has to utilize its inventories to an optimum level to reduce its holding cost.
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. 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. Main issues are the discontinued operations which have dented the company’s profits. company should employ more efficient people who can get these receivables back on time. 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.26%. Looking at the profitability ratios we can say that company is getting itself into serious problems. company’s selling and distribution expenses have decreased to 36. This is reducing the attractiveness for investors in Dawood
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. In 2008. This can damage the confidence of the investors and also puts a question mark on company’s management abilities. Top management must also think of downsizing to bring its administrative costs down to an acceptable level. 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.95 and 69. 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. The earnings per share have declined sharply because of low earnings.38% at the same time sales decreased to 27.
This is because the earnings are declining. the Dawood Lawrencepur conceptualized on what role a traditionally textile driven company can play in the energy sector. should lead to improved results in future. earnings per share should be improved by focusing on the earnings growth. •
view of the escalating gas and oil prices. The more Dawood lawrencepur studied the clearer it became that exploring opportunities in the renewable energy sector was indeed not only possible but desirable.
After analyzing the market ratios for Dawood lawrencepur. the management has recently taken the necessary steps to bring about material improvement in the company's operations. So. The increased focus on line efficiencies improvement and product rationalization. So.. we observe that the major market value indicators have been declining. We are actively pursuing this option. a global competitive and commercially viable solution to generate power within everyone's reach.
XVI. Therefore DAWOOD LAWRENCEPUR focused on wind power. there is a major problem with earnings which should be improved and the Sales which should increase. your
.Lawrencepur LTD. Conclusion
The cotton textiles operations having become unsustainable on account of the continuing losses and to arrest the decline in shareholders value. we need to employ
alternative sources of energy.
XV. Forecast & Future Outlook
With a very difficult year behind the company. Having understood the issues that the nation faces.
The more we studied the clearer it became that exploring opportunities in the renewable energy sector was indeed not only possible but desirable. Due to this the companies sales will increase as the discontinued operations was the major reason of the difficult year the company faced. all closed down operations are classified under 'discontinued operations'. the operations at Burewala had to be closed down in March 2008.
. Whereas the textile operations and the polyester staple fiber operations at Landhi were closed down during the year 2006-07.company has taken steps over the last 18 months to close down these operations in stages. as required under the International Financial Reporting Standard (IFRS) 5 – “Non Current Assets held for sale and Discontinued Operations'. at Dawood Lawrencepur management conceptualized on what role a traditionally textile driven company can play in the energy sector. The inflationary pressures was also one of the reason for the losses the company suffered Having understood the issues that the nation faces. a global competitive and commercially viable solution to generate power within everyone's reaches. Accordingly. We therefore focused on wind power.
.com/ http://www.equitymaster.com/Annual_2006_DLL.com/detail.pk/Chapters/1872.pdf http://www.google.com/Annual%20Report%202004%20DLL.dawoodlawrencepur.REFERENCES The Annual statements of the Dawood Lawrencepur Ltd.dawoodlawrencepur. http://www.asp?date=3/31/2006&story=1 http://docs.com/dll%20report%202008.dawoodlawrencepur.pdf http://www.pdf http://www.com/viewer?a=v&q=cache:7fWq78polEJ:prr.hec.dawoodlawrencepur.gov.