1.

Company introduction

Sapphire textile mills limited I vertically integrated campsite textile unit, manufacturing
cotton, yarn, fabric and home textile products. Sapphire textile mills limited is the flagship
company of the sapphire group and also on the lead players in the textile campsite sector and
enjoying more than 10% share in the sector’s sales (listed companies only).

Sapphire textile mills limited was incorporated as a public limited company in Pakistan 1969
and its share are listed in Karachi stock exchange manufacturing unit of the company are
located in sign and Punjab and consist of 120.632 spinals, 3,120 rotor, 292 looms and 215
stitching machines.

Sapphire textile mills limited is principally engaged in manufacturing and sales of yarn,
fabric, home textile products and energy sales.

1.1. Vision

Sapphire Textile Mills Limited is one of the premier textile company recognized for
leadership in technology, flexibility, responsiveness and quality. Our customers will share in
our success through innovative manufacturing, certifiable quality, exceptional services and
creative alliances. Structured to maintain in depth competence and knowledge about our
business, our customers and worldwide markets. Our workforce will be the most efficient in
industry through multiple skill learning, the fostering of learning and the fostering of
teamwork and the security of the safest work environment possible recognized as excellent
citizen in the local and regional community through our financial and human resources
support and our sensitivity to the environment.

1.3. Mission

Our mission is to be recognized as premier supplier to the markets we serve by providing

quality yarns, fabrics and other textile products to satisfy the needs of our customers.

Our mission will be accomplished through excellence in customer service, sales and
manufacturing supported by teamwork of all associates.

We will continue our tradition of honesty, fairness and integrity in relationship with our
customers, associates, shareholders, community and stakeholders.

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1.4. Company information

Board of Directors

Chairman: Mr. Mohammad Abdullah

Chief Executive : Mr. Nadeem Abdullah

Director : Mr. Shahid Abdullah

Mr. Amer Abdullah

Mr. Yousuf Abdullah

Mr. Shayan Abdullah

Mr. Nadeem Karamat (Independent Director)

Audit Committee

Chairman : Mr. Yousuf Abdullah

Member : Mr. Nabeel Abdullah

Member : Mr. Nadeem Karamat

Human Resource
& Remuneration Committee

Chairman : Mr. Amer Abdullah

Member : Mr. Nabeel Abdullah

Member : Mr. Yousuf Abdullah

Chief Financial Officer : Mr. Abdul Sattar

Secretary : Mr. Zeeshan

Auditors : Mushtaq & Company, Chartered Accountants

Management Consultant: M. Yousuf Adil Saleem & Company, Chartered Accountants

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Bankers : Allied Bank Limited, Habib Bank Limited Standard Chartered Bank (Pakistan)
Limited United Bank Limited, MCB Bank Limited, Citi Bank N.A.

Registered Office : 212, Cotton Exchange Building, I. I. Chundrigar Road,

Karachi

Mills : S. I. T. E. Kotri, S. I. T. E. Nooriabad, Chunian, District

Kasur

Feroze Watwan, Bhopattian, Lahor

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2. Industry Overview

The Textile industry in Pakistan is the largest manufacturing industry in Pakistan. . The
textile industry continues to be the second largest employment generating sector in Pakistan.
Pakistan is the 8th largest exporter of textile products in Asia. This sector contributes 8.5% to
the GDP and provides employment to about 15 million people or roughly 30% of the 49
million workforce of the country. Pakistan is the 4th largest producer of cotton with the third
largest spinning capacity in Asia after China and India, and contributes 5% to the global
spinning capacity at present, there are 1,221 ginning units, 442 spinning units, 124 large
spinning units and 425 small units which produce product of textile.

The Textile Industry is dominated by Punjab. 3% of United States imports regarding clothing
and other form of textiles is covered by Pakistan. Textile exports in 1999 were $5.2 billion
and rose to become $10.5 billion by 2007In the period July 2007 – June 2008, textile exports
were US$10.62 billion. Textile exports share in total export of Pakistan has declined from
67% in 1997 to 55% in 2008, as exports of other textile sectors grew .The major reason of
decline of textile export of Pakistan is the Govt unhealthy policies. Head of All Pakistan
Textile Mills Association of Enterprises Anis-ul-Haq has expressed concern about the
decision

2.2. Strategic Objective

The Textiles Policy 2014-19 is based on actionable plans to make the textiles sector
competitive and sustainable. The Government will make sure that the benefits of Textiles
Policy 2014-19 are spread at the national level and have a positive impact on small and
medium enterprises through various measures including development of clusters.

The main theme of the current Policy is to increase dependence on special factors which give
comparative advantage and to increase the use of new technologies especially ICT options,
for improving competitiveness of the entire textiles value chain

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2.3. SWOT Analysis

It is a way of evaluating the strengths, weaknesses, opportunities, and threats that affect
something.

Strengths

- Strong management

- Technology

- Pricing power

- Brand name

- Customer loyalty

Weaknesses

- Work inefficiency

- Lack of scale

Opportunities

- New market

- Expand their business

Threats

- Intense competition

- Global economy

- Tax changes

- Increase in labor

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3. RATIO ANALYSIS

3.1. Liquidity Ratios

2011 2012 2013 2014 2015

1.26738 1.43718 1.48723
Current ratio 2 2 2 1.4003 1.18027
0.61814 0.69413 0.76504 0.67143
Quick ratio 3 0.6924 9 8 7

Interpretation.

In the above graph show that the current ratio in first year is increase and in the next years
2012, 2013 is also increase .Quick ratios give the better measure of liquidity. In 2014 the
Quick ratio is increase but in 2011, 2012 the ratio is decrease .In 2013 the ratio recovers but
in 2015 the ratio is also decrease.

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3.2. Activity Ratios

2011 2012 2013 2014 2015

Inventory turnover -5.33704 -5.64165 -4.29464 -5.99098 -5.21689
0.53384 0.74117 1.14140 0.77637
Average collection period 9 4 4 2 2.285239

Interpretation

In above graph show that the inventory turnover is low in 2013 with respect to the turnover in
2011, 2012, 2014 or 2015.but Average Collection period is increase in 2015 as compared to
previous years.

3.4. Total Asset Turnover

2011 2012 2013 2014 2015

1.59361 1.52888 1.34184 1.15241 0.83008
Total asset turnover 3 8 2 1 8

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Interpretation.

This graph show that total asset turnover increase in 2011 and 2012 and decrease in 2015.

This show that the company work efficiently in 2015 and the performance in 2015 was not good.

3.5. Debt Ratios

2011 2012 2013 2014 2015

0.39138 0.31690 0.32843 0.26958 0.27773
DEBT RATIOS 5 8 9 3 1

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Interpretation.

This ratio represent that this company is able to generate enough funds or cash to satisfy

Its debt obligation and this company is normally taking advantage of increased profits.

3.6.Profitability

Ratios

2011 2012 2013 2014 2015

0.14900 0.10971
Gross profit margin 6 0.12905 0.166311 6 0.111846
0.11274 0.08576 0.07815
Operating profit margin 7 4 0.119847 3 0.079253

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 Interpretation:
In above graph in 2011, 2013 high gross profit margin indicates that the company can make a
reasonable profit, as long as it keeps the overhead cost in control. In year 2012 the GP is also
high as compare to last two years it means that the company profit is high after deducting the
cost of goods sold, and company can make a reasonable profit in every years .operating profit
margin indicate that the company can make reasonable profit margin as long as keeps the
overhead cost in control, the margin is also high in 2011,2013 as compare to two next year.

3.6. Profitability Ratios

2011 2012 2013 2014 2015
0.10971
Net profit margin 0.149006 0.12905 0.166311 6 0.111846
0.07638 0.04255
Return on total assets (ROA) 0.111678 3 0.113388 7 0.036818

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Interpretation
Net profit Margin In third Year 2013 is increase as compare to 2014 or 2015 This indicate that the
company's pricing policies, cost structure and production efficiency. But in 2014, 2015 it’s
decreasing too much that is negative for company.

4. SAPPHIRE FIBER TEXTILE MILLS LIMITED

BALANCE SHEET
2011 2012 2013 2014 2015
ASSETS
Non-current
assets
Property plant
and equipment 4,695,228,219 5,161,762,107 5,773,038,211 8,080,933,699 8,751,209,578
Investment
property 200,483,053 186,904,254 164,424,860 163,273,406 162,237,097
Intangible assets 4,354,967 8,335,030 5,572,830 3,189,494 7,514,871
Long term
investment 2,291,028,525 2,231,675,922 3,593,059,918 5,346,291,863 9,823,448,087
Long term loans
and advances 39,234,707 36,223,204 43,443,630 70,905,506 58,202,397
Long term
deposits 23,352,066 29,500,666 58,874,594 61,936,668 78,083,220
Total 7,253,679,537 7,654,401,183 9,638,413,043 13,726,530,636 18,880,695,250
CURRENT
ASSETS
Stores, spares
and loose tools 209,111,346 250,799,409 228,908,839 270,214,278 309,958,010
Stock in trade 3,657,344,997 3,317,722,811 4,908,046,675 3,776,222,400 3,969,334,963
Trade debts 1,781,910,418 1,337,067,271 1,710,499,789 1,224,423,835 1,297,680,833
Loans and 114,828,760 117,723,889 175,007,817 191,781,695 167,965,261

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advances
Trade deposits
and short term
prepayment 17,159,059 14,815,702 6,646,973 13,555,061 15,139,318
Other receivable 33,547,935 43,639,601 79,063,838 54,051,052 145,975,668
Other financial
assets 823,673,619 810,341,353 1,457,039,126 1,915,019,331 2,145,664,201
Tex refunds due
for Government 396,150,988 434,008,678 535,065,386 781,038,372 1,105,311,136
Cash and bank
balance 105,783,179 75,986,808 103,436,686 97,713,627 50,080,021
Total 7,139,510,301 6,402,105,522 9,203,715,129 8,324,019,651 9,207,109,411
TOTAL ASSETS 14,393,189,838 14,056,506,705 18,842,128,172 22,050,550,287 28,087,804,661
EQUITY AND
LIABILITIES
SHARE CAPITAL
AND RESERVES
Authorised
share capital 350,000,000 350,000,000 350,000,000 350,000,000 350,000,000
Issued,
subscribed and
paid up capital 200,831,400 200,831,400 200,831,400 200,831,400 200,831,400
Reserves 7,320,105,385 8,126,289,918 11,210,980,625 13,139,783,777 14,169,339,753
Total 7,520,937,235 8,327,121,318 11,411,812,025 13,340,615,177 14,370,171,153
NON CURRENT
LIABILTIES
Long term
financing 952,144,668 1,094,621,651 1,001,498,908 2,352,644,005 5,013,027,494
Deferred
liabilities 286,835,352 180,139,384 240,331,249 412,834,886 472,127,414
long term
payable _ _ _ _ 431,631,479
1,238,980,020 1,274,761,035 1,241,830,157 2,765,478,891 5,916,786,387
CURRENT
LIABILITIES
Trade and other
payables 916,196,938 1,099,692,715 1,496,888,582 2,036,146,471 2,316,663,831
Accrued interest
/mark up 71,081,854 70,308,182 68,192,565 100,982,389 149,867,565
Short term
borrowings 4,183,003,703 2,850,756,103 4,057,673,933 3,201,433,835 4,718,214,518
Current portion
of long term
financing 196,485,224 213,468,649 369,206,566 394,749,068 489,359,511
provision for
taxation 266,504,864 220,398,703 196,524,344 211,144,456 126,741,696
5,633,272,583 4,454,624,352 6,188,485,990 5,944,456,219 7,800,847,121
CONTINGENCIES          
AND

12
COMMITMENTS
TOTAL EQUITY
AND
LIABILITIES 14,393,189,838 14,056,506,705 18,842,128,172 22,050,550,287 28,087,807,661

5. SAPPHIRE FIBBER TEXTILE MILLS LIMITTED

PROFIT AND LOSS ACCOUNT

2011 2012 2013 2014 2015

Sales and
services 22,937,176,131 21,490,830,237 25,283,151,486 25,411,301,753 23,315,336,620
Cost of sales - - - - -
and service 19,519,401,987 18,717,432,281 21,078,288,927 22,623,272,169 20,707,601,784

Gross profit 3,417,774,144 2,773,397,956 4,204,862,559 2,788,029,584 2,607,734,836

Distribution cost -896,241,505 -1,008,427,320 -1,075,341,922 -942,732,494 -921,944,772

Administrative
expenses -173,202,297 -180,104,904 -207,978,602 -239,517,075 -295,285,309
Other operating
expenses -213,905,111 -149,366,634 -285,862,499 -130,436,886 -121,811,077
Other operating
income 451,661,230 407,630,857 394,441,259 510,633,288 579,112,084

-831,687,683 -930,268,001 -1,174,741,764 -802,053,167 -759,929,074

Profit from
operation 2,586,086,461 1,843,129,955 3,030,120,795 1,985,976,417 1,847,805,762

Finance cost 812,051,433 713,187,731 -664,151,644 -715,768,385 -669,410,841

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profit before
taxation 1,774,035,028 1,129,942,224 2,365,969,151 1,270,208,032 1,178,394,921

Taxation

Current:

-for the year 266,504,864 220,398,703 -196,524,344 -211,144,456 -126,741,696

-prior year 1,525,438 28,743,065 _ 46,157,048 265,629

Deferred 98,349,467 135,392,126 32,977,320 -121,815,730 -17,783,393

-166,629,959 -56,263,512 -229,501,664 -286,803,138 -144,259,460

Profit after
taxation 1,607,405,069 1,073,678,712 2,136,467,487 938,404,894 1,034,135,461
Earnings per
share -basic and
diluted 80 53.46 106.38 48.97 51.49

6. Vertical Analysis Of Balance Sheet

2011 2012 2013 2014 2015
ASSETS
Non-current assets
Property plant and equipment 32.62% 36.72% 30.64% 36.65% 31.16%
Investment property 1.39% 1.33% 0.87% 0.74% 0.58%
Intangible assets 0.03% 0.06% 0.03% 0.01% 0.03%
Long term investment 15.92% 15.88% 19.07% 24.25% 34.97%
Long term loans and advances 0.27% 0.26% 0.23% 0.32% 0.21%
Long term deposits 0.16% 0.21% 0.31% 0.28% 0.28%
50.40% 54.45% 51.15% 62.25% 67.22%
CURRENT ASSETS
Stores, spares and loose tools 1.45% 1.78% 1.21% 1.23% 1.10%
Stock in trade 25.41% 23.60% 26.05% 17.13% 14.13%
Trade debts 12.38% 9.51% 9.08% 5.55% 4.62%
Loans and advances 0.80% 0.84% 0.93% 0.87% 0.60%
Trade deposits and short term prepayment 0.12% 0.11% 0.04% 0.06% 0.05%
Other receivable 0.23% 0.31% 0.42% 0.25% 0.52%
Other financial assets 5.72% 5.76% 7.73% 8.68% 7.64%
Tex refunds due for Government 2.75% 3.09% 2.84% 3.54% 3.94%
Cash and bank balance 0.73% 0.54% 0.55% 0.44% 0.18%
49.60% 45.55% 48.85% 37.75% 32.78%
TOTAL ASSETS 100.00% 100.00% 100.00% 100.00% 100.00%
EQUITY AND LIABILITIES
SHARE CAPITAL AND RESERVES

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Authorised share capital 2.43% 2.49% 1.86% 1.59% 1.25%
Issued, subscribed and paid up capital 1.40% 1.43% 1.07% 0.91% 0.72%
Reserves 50.86% 57.81% 59.50% 59.59% 50.45%
52.25% 59.24% 60.57% 60.50% 51.16%
NON CURRENT LIABILTIES
Long term financing 6.62% 7.79% 5.32% 10.67% 17.85%
Deferred liabilities 1.99% 1.28% 1.28% 1.87% 1.68%
long term payable - - - - 1.54%
8.61% 9.07% 6.59% 12.54% 21.07%
CURRENT LIABILITIES
Trade and other payables 6.37% 7.82% 7.94% 14.15% 8.25%
Accrued interest /mark up 0.49% 0.50% 0.36% 0.46% 0.53%
Short term borrowings 29.06% 20.28% 21.54% 14.52% 16.80%
Current portion of long term financing 1.37% 1.52% 1.96% 1.79% 1.74%
provision for taxation 1.85% 1.57% 1.04% 0.96% 0.45%
39.14% 31.69% 32.84% 26.96% 27.77%
CONTINGENCIES AND COMMITMENTS
TOTAL EQUITY AND LIABILITIES 100.00% 100.00% 100.00% 100.00% 100.00%
7. Horizontal Analysis Of Balance Sheet

2011 2012 2013 2014 2015

ASSETS
Non-current assets
Property plant and equipment 100.00% 109.94% 122.96% 172.11% 186.39%
Investment property 100.00% 93.23% 82.01% 81.44% 80.92%
Intangible assets 100.00% 191.39% 127.96% 233.36% 172.56%
Long term investment 100.00% 97.41% 156.83% 233.36% 428.78%
Long term loans and advances 100.00% 92.32% 110.73% 180.72% 148.34%
Long term deposits 100.00% 126.33% 252.12% 265.23% 334.37%
100.00% 105.52% 132.88% 189.24% 260.29%
CURRENT ASSETS
Stores, spares and loose tools 100.00% 119.94% 109.47% 129.22% 148.23%
Stock in trade 100.00% 90.71% 134.20% 68.71% 108.53%
Trade debts 100.00% 75.04% 95.99% 68.71% 72.83%
Loans and advances 100.00% 102.52% 152.41% 167.02% 146.27%
Trade deposits and short term prepayment 100.00% 86.34% 38.74% 79.00% 88.23%
Other receivable 100.00% 130.08% 235.67% 161.12% 435.13%
Other financial assets 100.00% 98.38% 176.90% 232.50% 260.50%
Tex refunds due for Government 100.00% 109.56% 135.07% 197.16% 279.01%
Cash and bank balance 100.00% 71.83% 97.78% 92.37% 47.34%
100.00% 89.67% 128.91% 116.59% 128.96%
TOTAL ASSETS 100.00% 97.66% 130.91% 153.20% 195.15%
EQUITY AND LIABILITIES
SHARE CAPITAL AND RESERVES
Authorised share capital 100.00% 100.00% 100.00% 100.00% 100.00%

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Issued, subscribed and paid up capital 100.00% 100.00% 100.00% 100.00% 100.00%
Reserves 100.00% 111.01% 153.15% 179.50% 193.57%
100.00% 110.72% 151.73% 177.38% 191.07%
NON CURRENT LIABILTIES
Long term financing 100.00% 114.96% 105.18% 247.09% 526.50%
Deferred liabilities 100.00% 62.80% 83.79% 143.93% 164.60%
long term payable - - - - 100.00%
100.00% 102.89% 100.23% 223.21% 477.55%
CURRENT LIABILITIES
Trade and other payables 100.00% 120.03% 163.38% 222.24% 252.86%
Accrued interest /mark up 100.00% 98.91% 95.94% 142.06% 210.84%
Short term borrowings 100.00% 68.15% 97.00% 76.53% 112.79%
Current portion of long term financing 100.00% 108.64% 187.91% 200.91% 249.06%
provision for taxation 100.00% 82.70% 73.74% 79.23% 47.56%
100.00% 79.08% 109.86% 105.52% 138.48%
CONTINGENCIES AND COMMITMENTS
TOTAL EQUITY AND LIABILITIES 100.00% 97.66% 130.91% 153.20% 195.15%

8. VERTICAL ANALYSIS of PROFIT AND LOSS

ACCOUNT
  2011 2012 2013 2014 2015
Sales and services 1 1 1 1 1
Cost of sales and service -0.851 -0.8709 -0.8337 -0.8903 -0.8882
Gross profit 0.149 0.1291 0.1663 0.1097 0.1118
Distribution cost -0.0391 -0.0469 -0.0425 -0.0371 -0.0395
Administrative expenses -0.0076 -0.0084 -0.0082 -0.0094 -0.0127
Other operating expenses -0.0093 -0.007 -0.0113 -0.0051 -0.0052
Other operating income 0.0197 0.019 0.0156 0.0201 0.0248
  -0.0363 -0.0433 -0.0465 -0.0316 -0.0326
Profit from operation 0.1127 0.0858 0.1198 0.0782 0.0793
Finance cost 0.0354 0.0332 -0.0263 -0.0282 -0.0287
profit before taxation 0.0773 0.0526 0.0936 0.05 0.0505
Taxation          
Current:          
-for the year 0.0116 0.0103 -0.0078 -0.0083 -0.0054
-prior year 0.0001 0.0013 _ 0.0018 0
Deferred 0.0043 0.0063 0.0013 -0.0048 -0.0008
           
           
Profit after taxation 0.0701 0.05 0.0845 0.0369 0.0444

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9. HORIZONTAL ANALYSIS PROFIT AND LOSS ACCOUNT
2011 2012 2013 2014 2015
101.65
Sales and services 100.00% 93.69% 110.23% 110.79% %
106.09
Cost of sales and service 100.00% 95.89% 107.99% 115.90% %
Gross profit 100.00% 81.15% 123.03% 81.57% 76.30%
102.87
Distribution cost 100.00% 112.52% 119.98% 105.19% %
170.49
Administrative expenses 100.00% 103.99% 120.08% 138.29% %
Other operating expenses 100.00% 69.83% 133.64% 60.98% 56.95%
128.22
Other operating income 100.00% 90.25% 87.33% 113.06% %
100.00% 111.85% 141.25% 76.79% 91.37%
Profit from operation 100.00% 71.27% 117.17% 76.79% 71.45%
Finance cost 100.00% 87.83% -81.79% -88.14% -82.43%
profit before taxation 100.00% 63.69% 133.37% 71.60% 66.42%
Taxation
Current:
-for the year 100.00% 82.70% -73.74% -79.23% -47.56%
#VALUE
-prior year 100.00% 1884.25% ! 3025.82% 17.41%
Deferred 100.00% 137.66% 33.53% -123.86% -18.08%
100.00% 33.77% 137.73% 172.12% 86.57%

Profit after taxation 100.00% 66.80% 132.91% 58.38% 64.34%

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