20000315

Brief

recordings

- BY SCANNER -

Synthetic & Rayon

Dewan Salman Fibre Limited

Year Ended June 30, 1999

Overview.........

This PSF unit of Haripur NWFP is a joint venture of Dewan Mushtaq Group of Pakistan, Mitsubishi Corporation Japan, and Sam Yang Corporation Korea. At the apex of the Board of Directors, is the Chairman Akira Yamamura. While the executive head is Dewan Ziaur Rehman Farooqui as President/Chief Executive of the company, Dewan Asim Mushfiq Farooqui has the portfolio of the Managing Director of the company. High on the agenda of the AGM scheduled on 29th December were businesses for approval of share terms loan to Dewan Textile Mills and/or Dewan Khalid Mills and/or Dewan Mushtaq Textile Mills and approval for remunerations of Chief Executive and Managing Director both whole time directors, at Rs 500 thousand and Rs 300 thousand respectively per month. During the year under review the company's balance sheet remained robust and no obligations were in arrear. Net profit was posted at the higher amount of Rs 295 million (FY 1997-98: Rs 215.3 million). The directors recommended cash dividend at 7.5% (1997-98: Nil) and appropriation were also made for bonus issue at 12.5% (1997-98: 15%).

--------------

Dewan Salman Fibre Limited is a venture of Dewan Mushtaq Group of Pakistan. The company was incorporated in the province of Sindh. It was listed at the Karachi Stock Exchange in 1991. The shares are quoted on all stock exchanges of the country i.e. Karachi, Lahore and Islamabad.

It is engaged in the manufacture and sale of PSF (Polyester Staple Fibre). While its head office is located in the province of Sindh's capital and largest port Karachi, its registered office is in the Federal Capital, Islamabad. The factory office is located in Dewan Farooque Industrial Park in District Haripur in North Western Frontier Province.

Dewan Salman Fibre Limited (DSFL) is in the process of setting up an independent Unit No. 3 to manufacture Acrylic Fibre & Tow. It was exported that Unit No. 3 was expected to start commenced commercial operations by January 20. It has been also reported that separate books of accounts have been kept for each unit.

These accounts have been prepared under the historical cost convention except that certain exchange elements have been incorporated in the cost of relevant assets.

Exchange differences, in respect of foreign currency loans/bonds obtained/issued for acquisition of fixed assets and against which there is no practical means of hedging, are incorporated in the cost of relevant assets upto the settlement of redemption of such loans.

During 1998-99, at the close of the financial year under review, the company generated net sales of Rs 4,907.16 million reflecting 8.1% decline, as compared to the last year's figure of Rs 5,337.17 million. Gross profit in the sum of Rs 636.31 million was marginally lower by 0.4% as compared to the preceding year's 639.37 million.

Gross margin has continued to be under pressure since last year. The directors viewed this problem with apprehension and ascribed the reason of this phenomenon to "over capacity in the domestic market coupled with dumping by producers of recession hit Far Eastern economies mainly Korea, Thailand and Indonesia."

The company has been able to achieve enviable result due to effective cost control measures like prudent raw material procurement policy, improvement in the plant efficiencies. It has been able to post pre-tax net profit at Rs 206.77 million (FY 1997-98: Rs 215.26 million).

Net profit after tax was higher amount in the sum of Rs 295 million as compared to the preceding year's figure of Rs 215.26 million. The earning per share works out to Rs 1.84 which made improvement by paisas 30 over previous year's EPS at Rs 1.54.

The net profit, mainly improved because of provision for taxation of prior years written back to the tune of Rs 88.73 million.

It was noted that the Income Tax Assessments of the company were finalised upto and including Assessment year 1998-99. It was further noted, "the refund applications of Rs 107.262 million filed by the company are pending with the tax authorities for payments of turnover tax made in respect of prior years. These payments are reflected as Income Tax Refundable in these accounts. The provisions made in prior years' accounts, amounting to Rs 88.73 million has been written back this year."

The directors further informed that the Unit No. 1 of the company is exempt from Income Tax till December 1999 and Unit No. 2 till June 2003.

While, the year under review saw, dumping products and over capacity and the situation has no sign of any improvement so far. But happily the local markets' demand has expanded for polyester. The polyester blends with other man made fibres and 100% polyester spun yarn preferences has stimulated greatly.

The outlook for the polyester industry, as reported by the directors, generally looks promising in the short term. However the large cotton crop in the country has exerted pressure on the cotton prices locally, and will compete with polyester fibre in terms of price.

Resultantly, in the forthcoming year 1999-2000, the demand and price for polyester is likely to be affected. With the rise in the price of petrochemical chain internationally due to rise in petroleum prices, the higher prices of polyester product is likely to threatened by lower cotton prices. But the directors have a feeling that this is a short term phenomenon as according to them, "long term trends are expected to remain stable due to sustained customer preference for polyester products in the local and international markets."

The size of the balance sheet as well as the equity base expanded substantially. Long term debt to equity ratio at 59:41 exhibited manageable debt coverage. Current ratio at 1.22 improved from previous year's 1.17. Hence the liquidity position was also easier.

The financial obligations, in the year under review, were fulfilled except for the two instalments of long term foreign currency loan obtained from Mitsubishi Corporation Japan due in October '98 and April '99 due to non receipt of requisite approval from the State Bank of Pakistan. However, these instalments were remitted, subsequently after receipt of SBP approval.

Instalment due in October '99 could not be remitted till the Directors' Report dated 6/12/99. The funds were made available with bank but SBP approval was not in place. It was reported that funds will be remitted after approval from SBP.

The interest on Euro Convertible Bonds was also remitted on due date. So was the case with instalment of Al-Tawfeek Company for Investment Funds. So there were no other financial obligations in arrear.

--------------

Performance Statistics (Million Rupees)

June 30 1999 1998

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

Paid-up Capital: 1,603.82 1,394.63

Reserves & Profit: 1,359.07 1,393.05

Equity: 2,962.89 2,787.68

L.T. Debts: 4,214.14 2,175.00

Other Non Current Liabilities: 45.12 34.23

Current Liabilities: 2,562.82 2,686.78

Assets.........

Tangible - Fixed Assets: 3,901.82 4,123.83

Capital W.I. Progress (Acrylic Fibre & Tow Unit): 2,701.77 366.32

L.T. Investments: 50.00 50.00

Current Assets: 3,131.38 3,143.54

Total Assets: 9,784.97 7,683.69

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

Net Sales: 4,907.16 5,337.17

Gross Profit: 636.31 639.37

Depreciation: 468.10 497.41

Financial Charges: 270.32 276.41

Net Profit Before Taxation: 206.77 215.26

Net Profit After Taxation: 295.50 215.26

Dividend Cash 7.5% (1998: Nil %): 120.29 -

Reserve for Bonus Stock 12.5% (1998: 15 %): 200.48 209.19

Financial Ratios.........

Share Price (Rs) 29/2/2000: 32.65 -

Book Value Per Share (Rs): 18.47 19.98

Price/Book Value Ratio: 0.56 -

Debt/Equity Ratio: 59:41 99:56

Current Ratio: 1.22 1.17

Asset Turnover Ratio: 0.50 0.69

Gross Profit Margin (%): 12.96 11.98

Net Profit Margin (%): 6.02 4.03

EPS (Rs): 1.84 1.54

Price/Earning Ratio: 17.74 -

R.O.E. (%): 9.97 7.72

R.O.A. (%): 3.01 2.80

R.O.C.E. (%): 4.09 4.30

Plant Capacity & Production ('000 Tonnes).........

A) Capacity - Installed: 108.500 108.500

Actual Production: 101.804 102.506

Capacity Utilisation (%): 93.83 94.48

B) "The shortfall in production is due to shut down of units for periodic overhauling."

--------------

Company information: Chairman: Akira Yamamura. President/Chief Executive: Dewan Ziaur Rehman Farooqui. Managing Director: Dewan Asim Mushfiq Farooqui. Secretary: Tariq Mohammad Khan. Registered Office: Dewan Centre, 17, Street-84, Sector G-6/4, Islamabad-44000. Factory: Address N.A.