20000223

Brief recordings

BY SCANNER

Chemical & Pharmaceutical

Nimir Resins Limited

Year Ended June 30, 1999

Overview.........

The company was already struggling against yearly deficits until 1998. The adverse economic situation in the financial year July 1998 to June 1999, further increased its accumulated deficit as the raw material prices increased due foreign suppliers of raw materials who insisted for confirmed letters of credit. Then the economic recession dampened due demand triggering wholesalers and retailers' decision to drastically lower their inventory level. Inevitably, sales and production sharply declined. The company turned loss after taxation which increased to Rs 59 million from net loss of Rs 28 million in the preceding year. However, the sponsors are continuously injecting large funds in the company, forcing the operation to become cost efficient, focusing on products with higher contribution negotiating to reschedule margin and dropping negative contribution margin products, and restructure debts.

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Nimir Resins Limited (formerly: Ravi Resins Limited) was incorporated in the province of Punjab on December 17, 1964 as a private limited company with registered office in Lahore. The Company is engaged in the manufacture and sales of synthetic resins.

It was converted into a public limited company in 1991 and listed at Karachi Stock Exchange in 1992. Its shares are also quoted on Lahore Stock Exchange.

At the close of the financial year 1998-99, the period under review, sales in terms of value sharply declined by 37.15% to Rs 139.74 million as compared to sales at Rs 222.35 million posted in the preceding year 1997-98.

The Chairman of the company, Izzat Majeed lamented that the first half of the financial year 1998-99, was difficult for companies, particularly those which making products based on imported raw materials. The second half of the financial year 1998-99 followed the trend of first half year.

Foreign suppliers of raw materials pressurised for confirmed L/C's and local banks faced insurmountable difficulties in obtaining L/C conformations for their clients, from foreign banks.

The economic situation worsened and recession was rampant and there was collapse of general confidence. Resultantly, purchasing power severely eroded which in turn entailed reduction in the inventory level to the bare minimum by the wholesalers and retailers of industrial produces.

Nimir Resins was already under continuous spell of yearly losses but defiantly struggling to turn around in operating results for profit. But the adverse situation further accentuated. Inevitably, sales drastically diminished. Its margin dipped very low and turned gross loss at 6.11 million. The chairman further explained about better prospects in the forthcoming year.

"This year there has actually been an improvement in gross margins even as compared to 1998 when there was gross profit. Raw material costs in 1999 have gone down by 5% of sales. (The gross loss is due to very high depreciation which could not be absorbed by low sales). This improvement in the gross margins is due to the conscious effort of curtailing the production of low margin products and focusing attention on new higher margin products. The R&D involved in this process takes time. Had it not been for a further write off of inherited bad debts the net loss would have been much lower."

During the year under review production of Alkyd, Polyvinyl-acetate and acrylic, drastically declined by 39.2% to 2,820 metric tonnes from 4637 metric tonnes produced in the preceding financial year.

It was further reported about the planned change in the product range which continues to take shape. So the company is likely to reverse the sales set back of 1999. The directors hope that with the growth in sales the margins will also improve. The optimistic view for the forthcoming year can be glimpsed from the reduction in the expense of all categories including the financial charges.

During the year the company's operating results were negative with higher figure as compared to the preceding year's. The company's net loss after taxation increased to Rs 58.83 by 52.6% over the net loss of Rs 38.24 million, posted in the previous year.

So the accumulated losses zoomed to Rs 227.7 million from the accumulated deficit of Rs 168.93 million in the previous year.

The external auditors have made certain serious observations without qualifying the report and have also reviewed the strategic decisions and plans which the sponsors have undertaken. The note annexed to the account stated.

"The company has incurred a loss before tax of Rs 58,139,786 for the year ended June 30, 1999 and has accumulated losses of Rs 227,758,128 and its current liabilities exceeded its current assets by Rs 90,311,955 at the year-end. These financial statements have been prepared under going concern assumption due to following reasons.

*- The management has injected additional capital amounting to Rs 27 million in 1998 and Rs 45 million in 1999, which was primarily used to repay certain outstanding debts.

*- Company further plans to inject additional equity of Rs 60 million in the year 2000.

*- Negotiations with banks for rescheduling/restructuring of existing overdue loans are in progress.

*- The management plans to launch new products with higher contribution and discontinue production of certain existing products with negative contribution.

*- The management plans to sell certain assets which are not required any more".

During the year the shares in Nimir Resins were quoted at a very low price. In 1994, highest price of the share was quoted at Rs 72. At present its share in trading at Rs 4 per 10-rupee of the par value.

Its parent company Nimir Chemicals Company Limited UK has 53.49%, stake in its equity.

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Performance Statistics (Million Rupees)

June 30 1999 1998

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

Paid-up Capital: 269.32 197.32

Share Premium Reserves: 3.58 3.76

Share Deposit Money: - 27.00

Accumulated (Losses): (277.76) (168.93)

Shareholders Equity: 45.14 59.15

L.T. Debts: 34.41 38.87

Other Non Current Liabilities: 1.82 7.01

Current Liabilities: 173.02 184.58

Assets.........

Fixed Assets: 170.45 186.36

Other Non Current Assets: 1.23 3.92

Current Assets: 82.71 99.33

Total Assets: 254.39 289.61

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

Sales: 139.74 222.35

Gross (Loss)/Profit: (6.11) 1.67

Operating (Loss): (27.56) (20.68)

Other Income: 11.57 14.44

Depreciation: 16.84 18.61

Financial Charges: 26.39 30.32

(Loss) Before Taxation: (58.14) (37.03)

(Loss) After Taxation: (58.83) (38.24)

Accumulated Loss B/F: 168.93 117.32

Financial Ratios.........

Share Price (Rs) 16/2/2000: 4.00 -

Book Value Per Share (Rs): 1.68 3.00

Price/Book Value Ratio: 2.39 -

Debt/Equity Ratio: 40:60 40:60

Current Ratio: 0.48 0.54

Asset Turnover Ratio: 0.55 0.77

Days Receivables: 86 73

Days Inventory: 75 40

Gross Profit Margin (%): (4.37) 0.75

Operating Margin (%): (19.72) (9.30)

Net Profit Margin (%): (42.10) (17.20)

(Loss) Per Share (Rs): (2.18) (1.94)

Price/Earning Ratio: (-) -

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

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

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

Plant Capacity & Production (Metric Tonnes).....

Alkyd, Polyvinyl Acetate & Acrylic

(A) Actual Production 2,820 4,637

(B) Capacity "The plant production capacity for individual products is indeterminable because these are multi products plans involving varying processes of manufacture".

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Company information: Chairman: Izzat Majeed. Chief Executive: Sh. Amar Hameed. Director: Abdul Jalil Jamil. Director (Nominee NIT) Hussain Aqa Naqvi. Company Secretary: Shamshad A Naushahi. Head Office/Registered Office: 51-N Industrial Area Gulberg-II Lahore. Phone 5718001-9, Fax 5718013. Factory: Bhikki 14-km Sheikhupura-Faisalabad Sheikhupura.