20000403

Brief

recordings

- BY SCANNER -

Textile Spinning

Latif Cotton Mills Ltd

Year Ended September 30, 1999

Overview.........

This Nooriabad spinning unit has outperformed the last year's operating and financial results and there is no more chilling signal in the accounts of the company although the equity base reflects large capital deficiency. Net sales reached Rs 0.82 billion reflecting 27.7% rise over previous year's. Gross profit and operating profit were beefed up by 2.70 and 2.72 percentage points over the previous year's. The company generated profit before tax at Rs 22.06 replacing previous year's pre-tax loss of Rs 19.14 million. Even after provisioning of large deferred taxation the enterprise posted profit after taxation at Rs 8.79 million (1997-98: Net loss at Rs 19.14 million). The company improved its current ratio, repayment of loan instalments were made and there were no defaults. Above all the results for the period following the balance sheet date has shown the improved position.

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This textile spinning unit of Nooriabad is equipped with 17,136 spindles and 384 rotors.

Latif Cotton Mills Limited was incorporated in the province of Sindh in 1985 and listed at Karachi Stock Exchange in 1994.

The company is entitled to tax holiday, as spelled out in clause 118D of the second schedule of the Income Tax Ordinance 1979, upto 25th January, 2000. Provision for taxation for the remaining period has been made in the accounts as clarified in the relevant note annexed to the accounts.

After long spell of losses, the company has been able to turn the table and post profit replacing the previous year's loss. During 1998-99, the period under review, the company's out put significantly maintained capacity utilisation much over its designated.

The production capacity of the spindles section of the plant, has been rated at 5.398 million kgs of yarn at 20 single count based on 350 days. Actual production converted into single count yarn works out to 6.228 million kgs as compared to 6.157 million kgs in the preceding year. Thus registering 1.15% rise in output over preceding year's and improving the capacity utilisation to 115.4% over preceding year's capacity utilisation of 114.06%.

In the rotors section of the plant, the production capacity has been rated at 0.476 million kgs of yarn of 10 single count based on 350 days. In this section, the output also increased. The company's actual production of yarn converted into 10 single count showed 1.17% rise to 0.533 million kgs over previous year's output of 0.524 million kgs. This has been instrumental in the increase of production efficiency to 112% as compared to 110.08% in the preceding year.

"It is a matter of great satisfaction that the company has performed better than last year and has achieved an over all growth, both in terms of volume and value" rejoiced the Chief Executive of the company Junaid Haji Latif.

Net sales increased by 27.72% to Rs 823.24 million over the previous year's figure of Rs 644.56 million. The leadership in the company is highly optimistic about maintaining growth in the ensuing financial year 1999-2000. About the future prospects they shared their perception with the shareholders.

"The present government is trying very hard to improve worsening economic condition by presenting various reform packages, but the desired results of these measures will however take time.

On the other hand, the performance of the company has significantly improved over the previous years', but still requires a monumental effort. We hope that we would be able to achieve much better results in the future and increase our profitability and financial strength with the help of better productivity and strict cost controlling measures".

During the year under review the gross and operating margins beefed up and works out to 15.16% (1997-98: 12.46%) and 12.95% (1997-98: 10.23%) respectively.

Higher operating profit at Rs 106.63 million has been able to leave much cushion for moderate pre-tax profit despite onerous financial charges at Rs 83.6 million.

Pre-tax profit at Rs 22.06 million replaced the preceding year's pre-tax loss of Rs 19.12 million.

However, the deferred tax provisioning has started so the after tax profit was dwarfed by it. So could not leave that impact on the balance sheet. However the negative equity was reduced to Rs 56.68 million after the net profit at Rs 8.79 million. Last year, loss after taxation at Rs 19.14 million had further escalated the capital deficiency to Rs 65.47 million.

The note annexed to the account certificates that despite large accumulated losses, which has wiped out the capital, the accounts have been prepared on "going concern" basis because the validity of going concern basis is substantiated by improved current ratio, earning of pre-tax profit replacing previous year's loss, arrangement of finance whenever required, repayments of loans and no defaults and above all, "the results for the period following the balance sheet date has shown improved position."

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Performance Statistics (Million Rupees)

September 30 1999 1998

Capital & Liabilities.........

Paid-up Capital: 124.72 124.72

Accumulated Loss: (181.40) (190.19)

Equity: (56.68) (65.47)

Surplus on Revaluation: 225.40 225.40

L.T. Debts: 207.33 228.08

Deferred Liabilities: 15.11 3.48

Current Liabilities: 387.22 330.65

Assets.........

Operating Fixed Assets: 461.08 487.48

L.T. Deposits: 1.97 2.28

Current Assets: 315.33 232.28

Total Assets: 778.38 722.14

Sales, Profit & Payout.........

Sales: 823.24 644.56

Gross Profit: 124.83 80.31

Operating Profit: 106.63 65.93

Other Income: 0.33 0.14

Depreciation: 35.64 20.65

Financial Charges: 83.56 85.19

Profit/(Loss) Before Taxation: 22.06 (19.12)

Profit/(Loss) After Taxation: 8.79 (19.14)

Acc. Loss B/F: (190.19) (171.05)

Financial Ratios.........

Share Price (Rs) 31/3/2000: 7.50 -

Book Value Per Share (Rs): (4.54) (5.25)

Price/Book Value Ratio: (-) -

Debt/Equity Ratio: 55:45 59:41

Current Ratio: 0.81 0.70

Asset Turnover Ratio: 1.06 0.89

Days Receivables: 74 52

Days Inventory: 62 74

Gross Profit Margin (%): 15.16 12.46

Operating Margin (%): 12.95 10.23

Net Profit Margin (%): 1.07 (2.97)

EPS (Rs): 0.70 (1.53)

Price/Earning Ratio: 10.7 -

R.O.E. (%): (-) (-)

R.O.A. (%): 1.13 (-)

R.O.C.E. (%): 2.25 (-)

Plant Capacity & Production (Million Kg).........

A (i) 20 Single Count Yarn.........

Capacity: 5.398 5.398

Production: 6.228 6.157

Capacity Utilisation (%): 115.38 114.06

(ii) Spindles: 17,136 17,136

B (i) Rotors: 384 384

(ii) 10 Single Count Yarn......... - -

Capacity: 0.476 0.476

Production: 0.533 0.524

Capacity Utilisation: 111.97 110.08

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Company information: Chairman: Yasin Haji Kassam. Chief Executive: Junaid Haji Latif. Directors: Aminullah Haji Latif/Siaraj Haji Kassam/Mohammad Asif A. Ghaffar/Suhail Haji Younus/Mustafa Abdul Razzak. Chief Accountant & Company Secretary: Zaheer Ahmad. Registered Office: 37-FA, Block-6, PECH Society, Karachi. Phone: NA. Fax: NA. E-mail: NA. Factory: C-101, SITE Nooriabad, Distt. Dadu.