Analysis of Financial Statements

Term Report

Submitted by: Muhammad Ayaz Moti

ID: 2006-01-11-6489

Submitted to: Sir Maqbool-ur-Rehman

Company: Din Textile Mills Limited

Letter of Acknowledgement

28th April 2010

I am really thankful to my Sir Mr. Maqbool-ur-rehman for his support and guidance throughout the semester. Through his lectures and support we came across our analysis of financial statement course.

Sincerely,

Muhammad Ayaz Moti,

Institute of Business Management.

28th December 2010

Mr. Maqbool-Ur-Rehman,

Professor,

Analysis of Financial Statements,

Institute of Business Management,

Karachi.

Letter of Transmittal

Dear Mr. Maqbool-Ur-Rehman,

I am pleased to submit you the report about detailed analysis of Din Textile Mills Ltd. as a term report of analysis of financial statements.

I hope that report is upto what you required. It contains all the related information about the company and my detailed analysis.

Any questions related to the report are always welcome.

Yours sincerely,

Muhammad Ayaz Moti.

Company Profile

From the day of inception, Din Textile has been constantly striving to achieve excellence and generate highest value for all its stakeholders. Today Din Textile holds and unchallenged position at forefront industry, within the country and overseas for its groundbreaking developments and innovative products for exceeding customer expectations. This is a testimony to Din’s unwavering commitment to total satisfaction of its customers.

Din Textile Mills Ltd. was founded in 1987 and in a very short time became an icon for the spinning industry in Pakistan. With three state-of-the-art spinning and 1 dyeing unit located in Chunian and Lahore having annual production capacity of yarn 20.8 million Kgs and dyeing of Fiber and Yarn 2.8 million kgs. With an annual turnover of Rs. 3.65 billion, today Din Textile mills Ltd. employs over 2,200 employees. Din aims to create superior value for our customer and stakeholders without compromising on commitments to safety, environment, health, and other social responsibilities for the communities in which we operate.

Our products range from:

Combed Compact Yarn Slub Lycra Yarn Dyed Yarn Ply Yarn Core Spun Yarn Slub Yarn Melange Yarn Gassed Yarn

Our export products include, 100% cotton yarn, 100% cotton Melange yarn, Cone dyed yarn, Slub yarn and Core Spun Lycra yarn (Din Komfort) of the highest quality, our export volume is $16 million and our main markets are North America, South America, Western, Europe, Eastern Europe, Eastern Asia, Southeast Asia, Middle East, Africa, Oceania.

Current Share Price: Rs. 29.68

TEXTILE SECTOR- OVERVIEW

ABOUT THE SECTOR

World

Textile industry in the world is pretty much diversified. There are several countries who have a share in this industry like China, Pakistan, Turkey, South Korea, Indonesia, Bangladesh, Mexico,

India, United States etc. Although textile sector is in bad condition due to the recession but still its growth rate is about 3% per annum.

Asian Textile Industry

In the Asia Pakistan, China, Bangladesh, South Korea and India are the main countries which are famous for textile products. But at the moment China is leading this sector and there is a tough competition in Asian countries for this sector. China is excelling in this field due to its low rate natural and human resources. Then South Korea, India, Bangladesh are some other strong dealers. Mainly textile processing industries are in Asia. Pakistan is the eighth largest country to produce textile goods.

Textile Industry In Pakistan

The textile industry is one of the most important sectors of Pakistan. It contributes significantly to the country’s GDP, exports as well as employment. It is, in fact, the backbone of the Pakistani economy.

Established Capacity

The textile industry of Pakistan has a total established spinning capacity of 1550 million kgs of yarn, weaving capacity of 4368 million square metres of fabric and finishing capacity of 4000 million square metres. The industry has a production capacity of 670 million units of garments, 400 million units of knitwear and 53 million kgs of towels.

The industry has a total of 1221 units engaged in ginning and 442 units engaged in spinning. There are around 124 large units that undertake weaving and 425 small units. There are around 20600 power looms in operation in the industry. The industry also houses around 10 large finishing units and 625 small units. Pakistani textile industry has about 50 large and 2500 small garment manufacturing units. Moreover, it also houses around 600 knitwear-producing units and 400 towel-producing units.

Contribution to Exports

According to recent figures, the Pakistan textile industry contributes more than 60% to the country’s total exports, which amounts to around 5.2 billion US dollars. The industry contributes around 46% to the total output produced in the country. In Asia, Pakistan is the 8th largest exporter of textile products.

Contribution to GDP and Employment

The contribution of this industry to the total GDP is 8.5%. It provides employment to 38% of the work force in the country, which amounts to a figure of 15 million. However, the proportion of skilled labor is very less as compared to that of unskilled labor.

Competitors

Pakistan must compete with other producers similar in conditions and comparative advantage. The Pakistani Textile industry's biggest competitors are China, India, Indonesia and Turkey. The cost of power in Pakistan is comparatively high to these countries plus the current situation of the country is worst as compared to these countries so buyer feel more secure to buy from these countries.

OTHER DRIVING FORCES INFLUENCING THE INDUSTRY

Technology

Integrated government science and technology departments, enterprises, research institutions and other forces at home and abroad, and actively building a regional innovation system of open, integration of resources at home and abroad, fundamentally enhance the enterprises and clusters. Textile technology services to encourage small and medium-sized enterprises, innovation and entrepreneurship in science and technology elements of the formation of clusters within the market. Increase the input of independent research and

development to enhance the competitiveness and technological capability. Through the acquisition of overseas R & D center to build or strengthen the independent innovation capacity of enterprises to compete for the market of new products the right to speak.

During the 1960s and 1970s, light industry expanded rapidly— especially textiles, sugar refining, fertilizers, and other manufactures derived from local raw materials. Despite steady overall industrial growth during the 1980s, the sector remains concentrated in cotton processing, textiles, food processing and petroleum refining.

The share of textile industry in the economy along with its contribution to exports, employment, foreign exchange earnings, investment and value added makes it the single largest manufacturing sector for Pakistan. It contributes around 8.5 percent to GDP, employs 38 percent of the total manufacturing labor force, and contributes between 60-70 percent to total merchandise exports. Indeed, with exports reaching about $8.6 billion in 2004-05, Pakistan is one of the largest textile exporters in the world.

Cotton textile production is the most important of Pakistan's industries, accounting for about 19% of large-scale industrial employment, and 60% of total exports in 2000/01. Pakistan has become self-sufficient in cotton fabrics and exports substantial quantities. Some long and extra-long staple cotton is imported to meet demand for finer cottons. About 80% of the textile industry is based on cotton, but factories also produce synthetic fabrics, worsted yarn and jute textiles. Jute textile output amounted to 70,100 tons in 1999/00. The textile industry as a whole employs about 38% of the industrial work force, accounts for 8.5% of GDP, 31% of total investment, and 27% of industrial value-added.

Reforms in the Textile Sector

The government is providing support for the local production of textile machinery. A wide ranging campaign to produce contamination free cotton in the country with a view to promoting value addition has already been started. As a result, the cotton prices are now being quoted on a PSCI grade standard basis. To ensure an abundant supply within the country, cotton is allowed to be imported and exported freely. To stabilize prices in the domestic market, the Trading Corporation of Pakistan (TCP) has been intervening as and when required.

In order to prepare the textile industry in the post quota regime the government has set up a high level Federal Textile Board with Textile Commissioner’s Organization serving as its Secretariat. The Board has been entrusted the task of looking into the issues of clean cotton,

labor, social and environment laws, modernization of ginneries, rationalization of tariffs, facilitation in sales tax issues and developing a package to promote garment sector, especially by improving their competitiveness in international market.

TEXTILE POLICY

Pakistan textile sector is passing through a difficult time and facing many serious difficulties including a severe energy crunch, lack of modern technology, shortage of gas and high costs of production. The policy will go a long way in resolving some of the serious issues

The government has announced its first ever national textile policy for five years. It set the export target of $25 billion to be achieved within next five years. The policy focuses on export promotion measures, textile and other sectors instead of steps to increase production and revive the ailing industry.

It consists of many incentives. Gas and electricity load management, export refinance at low rates and relief on existing long-term loans are the few main incentives of national textile policy. The government claimed it as result-oriented and further that the policy was prepared in consultations with all major stakeholders including exporters, industrialists, investors, agriculture experts, State Bank of Pakistan and other related public and private sectors. It speaks highly about the restructuring and reorganisation of the textile sector. It includes drawback of local taxes refund of past R&D claims and magnetisation of PTA.

Existing challenges

Pakistan textile sector is passing through a difficult time and facing many serious difficulties including severe energy crunch, lack of modern technology, shortage of gas, high cost of production, shortage of water, global economic recession, skilled manpower and the last, deteriorating law and order situation. Lack of export diversification, value-addition, limited market access creating problems for the exporters. According to FBS last year, Pakistan's total exports were down by 6.7 per cent and textile exports 9.5 per cent mainly because of severe global economic recession.

Key initiatives

(a) Creation of textile investment support fund (TISF).

(b) Technology up-gradation fund (TUF). It will contribute up to 20 per cent of capital cost as a grant. The government allocated Rs1.6 billion, which will increase to Rs17 billion by 2014.

(c) Infrastructure development. The government would provide Rs1 billion for infrastructural development.

(d) Skill development. 0.5 million skilled manpower would be trained during next five years with the help of industry to overcome the shortage of skilled manpower - Rs1 billion allocated for the skill development.

(e) The government would enact a law for the standardisation of value chain to ensure production of quality products.

(f) All textile machinery imports will be zero-rated to encourage new investments.

(g) Rationalisation of tariff structure.

(h) Textile sector would enjoy Rs42 billion in subsidies and incentives during the fiscal year 2009-10.

(i) It exempts the textile industry from load shedding and allows it prioritised gas supply.

(j) The government has also subsidised the export refinance with a reduced rate of 5 per cent and Rs2.5 billion allocation. The policy allocates Rs5 billion relief on the existing long term loans of the textile industry.

(k) It offers duty drawbacks of between 1 and 3 per cent for a two year period for value-added textile exports to help the sector offset its direct and indirect costs.

(l) Technically viable units to be offered loan restructuring, interest rate relief

(m) Pollution problems in cotton would be resolved under cotton standardisation and cotton control.

Salient Features of the Policy

(a) Market access and support

The policy stressed the need to have easy market access to the USA and EU markets. The textile exports and its related items have already badly hit from the ongoing global economic recession. It is estimated that easy market access would increase our exports up to US$ 2 billion. It remained one of the key reasons for our low turn textile exports.

International marketing strategies plays very important role in achieving the desired targets of exports, capturing of market share, market access and the last not the least increase overall profitability. The government will provide every possible market support to exports so that the target of US$ 25 billion could be achieved within next five years.

(b) Export house scheme

The announced policy also promised to provide export house facility to exporters which further included marketing insurance scheme and improving Information and communication technology. The government believed these diversified but integrated efforts would pay the dividends in the days to come. The government would establish industrial estates in line with garments and textile cities and would provide all necessary facilities.

(c) Support and facilities

Economics works in integration that is why the policy initiated many meaningful measures to activate the sub-sectors which include fibres, ginning, filament yarn, shipping, weaving and knitting, non-woven, processing, home textiles, garments, fashion and design, technical textiles, handlooms and handicrafts, carpets.

The main focus of the policy is human resource management and optimal utilisation of available resources. The policy promised to support local industries and domestic talent for the promotion of textile exports. It also encouraged women employment support programme, support for disabled and handicapped employees. The government would every possible facility for setting up effluent treatment plant and government would also encourage establishment of storage, warehousing and marketing. Furthermore, free trade agreement (FTAs) would be signed with different countries to seek market

access and the government would also help labelling and branding of products to enhance local trade.

Missing connection

It seemed that policy lacked to tackle some important issues:

(a) It failed to provide any concrete measure to boost the exports of textile. There is no fund or measure for resolving the burning issue of energy deficit, lack of value addition and sector consolidation.

(b) It kept silent about the massive flight of human and financial capital from domestic textile industry towards more attractive and profitable regional markets. Even the proposed LTTF facility has little to offer to exporters/investors/borrowers.

Mixed reactions

Many termed the new national textile policy friendly and result-oriented, while others labelled it without any clear-cut vision and strategy to promote exports. Majority appreciated the allocation of Rs.42 billion to support the different packages announced for the first year of the policy. The textile manufacturers appreciating the policy said it had laid down a basis for sound growth of textiles and clothing sector of the country.

Chairman Pakistan Readymade garments manufacturers and exporters association (Prgmea) said that it was for the first time that a comprehensive policy been given to textile sector. Chairman Pakistan towel manufacturers association (TMA) stressed the need for implementing the policy in letter and spirit if the required targets set in the policy are to be achieved. Pakistan apparel forum chairman said it was the first serious attempt to sort out issues confronting different segments of textile industry.

CURRENT SITUATION OF TEXTILE INDUSTRY IN PAKISTAN AND ITS REASONS

The growth in the textile exports of Pakistan is gradually declining. Textile exports in Pakistan grew from 8.92 billion USD in 2004-05 to 10.11 billion USD in 2005-06, reflecting a growth rate of 18%. As against this, in the current year, export growth has been only 5%. This is growing to be an issue of concern for the Pakistani government. The exports of readymade garments grew from 1.190 billion USD to 1.254 billion USD in the period July 2006 to May 2007 as compared to the same period in the 2005-2006. This amounted to a growth of 5.35%. The exports of knitwear also grew from 1.570 billion USD to 1.773 billion USD during the same period, recording a growth rate of 12.94%. However, there was a decline in the growth rate of export in raw cotton, bed clothes as well as cotton cloth during the same period. The export growth rate of raw cotton fell by 21.73%, while that of bed clothes and cotton cloth dropped by 3.10% and 4.10% respectively. In order to bring the Pakistan textile industry out of its current crisis, it is necessary that certain strict measures be taken to meet the challenges that the industry is facing. The Pakistan textile industry is currently facing several challenges. According to experts, there is a need for the industry to improve the quality of its products. There is also the need for greater value addition in its products.

The textile machinery used in Pakistan is imported mainly from the countries of Japan, Switzerland, Germany, China and Belgium. The technology that is in use in the industry leaves a lot to be desired. It is necessary that the industry undertake an up gradation in the technology used. Also, there is lack of efficient R&D and training. The lack of R&D in the cotton sector of Pakistan has resulted in low quality of cotton in comparison to rest of Asia. Because of the subsequent low profitability in cotton crops, farmers are shifting to other cash crops, such as sugar cane. In Punjab alone, the cotton area sown this season was less by 1.14 percent as compared to the last year. Textile owners argue that although the Cotton Vision 2015 targets 20 million bales till 2015, it is an ambitious target as in reality cotton production is decreasing each year. It is the lack of proper R&D that has led to such a state. They further accuse cartels, especially the pesticide sector, for hindering proper R&D. The pesticide sector stands to benefit from stunting local R&D as higher yield cotton is more pesticide resistant. Another challenge is the high interest rate as compared to India, China and Bangladesh. The Pakistan textile industry is facing tough competition from the Indian, Bangladeshi and Chinese textile industries. The cost of power in Pakistan is high as compared to that in other countries. On account of these reasons, the Pakistan textile industry is going through a critical condition.

Consequently, the country has become a semi-finished raw material source for those nations involved in value addition and apparel production. It could also be said that Pakistan is serving other nations to earn more foreign exchange on export of value-added products. According to the National Assembly Standing Committee on Textile Industry in Islamabad, "Pakistan needs to improve bilateral relations with the US for greater market access.

PROBLEMS FACED BY TEXTILE INDUSTRY HIGHLIGHTED

Lost competitiveness in the global market Lack of awareness of global trends and changing rules and regulation. The reinvestment and introduction of the latest technology Sector did not focus on the emerging trend of the value additions More dependence on cotton Poor infrastructure Unstable political situation Obsolete technology machinery and equipment used for manufacturing Availability of raw material and inconsistent raw material prices Unskilled labor (only 1% workers have certificate / diploma from technical training

institutions) Absence of research and development culture Lack of synergies between Govt. support institutions and practical market. Lack of standardization and quality control Non-sophisticated marketing sense. (branding & grading) Unorganized vendor base Limited access to information (availability of finance, technological know how & Govt.

regulations) 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 US and EU

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 need to focus on this sector. Textile industry just needs a good leader in the government which can drive the industry in a right direction. Textile Industry of Pakistan can kick its competitors far off and can contribute up to 90% in the total GDP of Pakistan. In short Textile Industry of Pakistan has a great potential, it is lacking in some natural resources like power and some political unstability of the country is also playing a vital role in the reverse gear of Textile sector. But I am sure Textile industry of Pakistan will grow and will keep its big share in the world textile.

MAJOR PLAYERS IN THE TEXTILE INDUSTRY OF PAKSITAN

Company Name Rs. in Million Net Worth

Rs. in Million Net Income

Rs. in Million Net Profit

A.A. Textiles Ltd. 223.2 822.3 53.9Ahmad Hassan Textile Mills Ltd. 209.8 659.4 101.8Al-Abid Silk Mills Ltd. 352.3 2033.1 80.8Al-Hamad Textile Mills 96.3 380.2 28.2Allawasaya Textile 7 Finishing Mills Ltd.

77.6 589.4 28.9

Apollo Textile Mills Ltd. 213.3 968.8 18.8Artistic Denim Mills Ltd 321.2 917.2 55.4Ayesha Textile Mills Ltd. 152.8 1211.6 118.2Bengal Fibre Industries Ltd. 91.8 389.5 19.3Bhanero Textile Mills Ltd. 325 1308.3 165.2Blessed Textile Ltd. 215.8 693 116.4Burewala Textile Mills Ltd. 337.9 431.1 60.5Chanab Fiber Ltd. 108.6 478.6 47.8Colony Textile Mills Ltd 96.4 683.3 147.7Crescent Textile Mills Ltd 1425.9 4632.5 246

Dares Salaam Textile Mills Ltd 92.3 452.1 82.5Dewan Khalid Textile Mills Ltd 254.7 560.6 31.9Dewan Mushtaq Textile Mills Ltd 124.8 761.7 38.5Dewan Salman Fibre Ltd 458.4 6723.7 514.2Dewan Textile Mills Ltd 685.4 2282 121.6Dilon Ltd 100.7 186.6 18.5Faisal Spinning Mills Ltd 387.9 714.3 127.9Fateh Textile Mills Limited 585.2 3636.2 21.9Fazal Cloth Mills Ltd 257.5 1553 107.2Gadoon Textile Mills Ltd 1332.5 3438.6 485.4Gatron Industries Ltd 1709.6 4924.9 349.9Gul Ahmed Textile Mills Ltd 1322 4516 558Gulistan Spinning Mills Ltd 214.5 592.8 76.8Gulistan Textile Mills Ltd 875.8 2323.6 120.2Gulistan Spinning Mills Ltd 512.2 4373.4 99.8Hussein Industries Ltd 276.1 1188.6 35.7Ibrahim Fires Ltd 5138.1 6944.2 474.8Ibrahim Textile Mills Ltd 239.9 1161.6 52.8ICC Textiles Ltd 147 629 31.8Ideal Spinning Mills Ltd 137.2 536.5 22.8Indus Dyeing & Manufacturing Co Ltd 281.2 2184.7 134.6Ishaq Textile Mills Ltd 218.7 742.8 10.8Khalid Siraj Textile Mills Ltd 144.6 367.4 46.5Kohat Textile Mills Ltd 96.2 532.3 27.7Kohinoor Raiwind Mills Ltd 525.4 1372.9 132.0Kohinoor Textile Mills Ltd 502.8 2251.8 97.7Kohinoor Weaving Mills Ltd 741.8 2140 308.7Landmark Spinning Industries Ltd 121.2 Lawrencepur Textile Mills Ltd 245.6 298.7 29.8Liberty Mills Ltd 193.3 1455.7 35.1Mahmood Textile Mills Ltd 816.1 2936 421.3Maqbool Textile Mills Ltd 146.7 640.7 34Main Textile Industries Ltd 114.3 807.6 51.4N.P. Spinning Mills Ltd 155.8 922.3 61Nadeem Textile Mills Ltd 188.5 406.7 54.4Nakshbandi Industries Ltd 262.6 1067.2 27.6Nayab Spinning & Weaving Mills Ltd 251.6 413.5 12.3Nina Industries Ltd 352.3 892.4 16.3Nishat Chunian Ltd 595.5 2367.0 357.5

Nishat Mills Ltd 4569.6 10134 700.9Paramount Spinning Mills Ltd 286.6 830.7 3Prosperity Weaving Mills Ltd 244 1141.1 78.5Quetta Textile Mills Ltd 245.9 1792.9 110.4Reliance Cotton Spinning Mills Ltd 236.1 701.3 40.3Reliance Weaving Mills Ltd 313.4 1306.9 143.1Rupali Polyster Limited 1374.1 2175.2 140.4S.G. Fibre Ltd 417 808 66Saif Textile Mills Ltd 506.1 1066 28Samin Textile Mills Ltd 256.5 1012.9 32.1Sapphire Fibres Ltd 1305.7 2499.6 500.9Sapphire Textile Mills Ltd 1108.3 4128.1 650.2Shahpur Textile Mills Ltd 161.2 416.6 24.6Shahtaj Textile Mills Ltd 146.8 474 39.6Sunrays Textiles Mills Ltd 91.9 861.6 87Tata Textile Mills Ltd 223.5 793.3 120.7Thal Jute Mills Ltd 331.2 1406.4 68.6Towellers Ltd 384.2 1766.4 43.3Yousaf Weaving Mills Ltd 225.9 1271.9 47.9Yusuf Textiles Mills Ltd 122 603 89.1Zainab Textiles Mills Ltd 261.1 991.5 61.1Zaman Textile Mills Ltd 89.4 407.2 21.6

At Present, the industry consists of large-scale organized sector and a highly fragmented

cottage / small-scale sector. The organized sector comprises integrated textile mills i.e. spinning units with Shuttle-less looms. The down stream industry (Weaving, Finishing, Garments, Towels & Hosiery), with great export potential, is mostly in the unorganized sector.

SWOT ANALYSIS OF TEXTILE INDUSTRY PAKISTAN:

Strengths:

1. 4th largest Cotton producer2. 64% of country’s export volume3. 1.4m people employed with 50% in apparel4. Availability of cheaper labor at US$ 0.39 per hour5. Raw Material Base6. Rich Heritage7. Demand Driven Industry (more than 4000 units for textiles alone)8. Strong presence in local market

9. Geographically situated at ideal location (near end users)10. Most setups are self employed and have simpler management structure

Weaknesses:

11. Low Price Image12. Lower marketing initiatives13. Limited use of modern technology14. Confusion in political / religious scenario15. Low levels of managerial capabilities16. More dependence on cotton17. Poor infrastructure18. Obsolete technology machinery and equipment used for manufacturing19. Availability of raw material and inconsistent raw material prices20. Unskilled labor (only 1% workers have certificate / diploma from technical training

institutions)21. Absence of research and development culture22. Lack of synergies between Govt. support institutions and practical market.23. Lack of standardization and quality control24. Non-sophisticated marketing sense. (branding & grading)25. Unorganized vendor base26. Limited access to information (availability of finance, technological know how & Govt.

regulations)27. Energy costs28. 20% Interest On Bank Loans 29. Tariff hikes of Gas30. Tariff hikes of Electricity31. Frequent Interruption in supply of electricity and Gas32. High Freight Cost

Opportunities:

33. Better laid down factories on ‘best practices’34. Potential of improving confidence in buyer by working directly & closely35. Home Furnishing from Pakistan have made a big name worldwide36. Women’s wear has a huge potential37. Pakistan Textile City38. Marketing39. Collaboration with foreign countries40. Re-engineering of Product system41. Producing high value products

Threats:

42. Rising Cotton Prices43. China and India being considered as countries for high value added garments 44. Price Pressures

Financial Analysis

Liquidity ratios:

Liquidity is basically a firm’s ability to meet its obligations. It depicts the company’s overall

resources to pay off its resources where ever needed. We look at the picture of liquidity ratios

and come across that almost every year the liquidity position of the company is declining and is

getting worse off every year. In year 2002 which is the base year from where we started our

analysis it depicts that year 2004 was comparatively doing great business as compared to year

2009. We came across that in year 2009 the liquidity position of crescent textile company is not

showing good results. 2007 and 2008 were considered as better records in terms of liquidity of

the company.

The current ratio for the company has been on the decline throughout the six years in question.

It was around 1.84 times in 2002, which fell to almost 0.95 times in 2009. This indicates that the

company can pay off its current liabilities from its current assets 0.95 times over in 2009, as

compared to 1.84 times over in 2002.

The Payable Days refers to the number of days it takes the firm to pay its bills. Payable days of

‘Din Textile Mills Ltd’ has decreased from 32 days in year 2002 to 20 days in the year 2009. It

means that the company is paying off its liabilities in 12-13 days. Whereas industry averages

show a payable of 52.6 days. Din Textile Mills Ltd is paying off their liabilities quickly and as soon

as possible. Too large a ratio can mean that you are becoming a bad debt for your debtors, and

too low a ratio could mean that you may run out of cash when you need it for investment

purposes at some point-opportunity cost.

Efficiency ratios:

Efficiency ratio is to evaluate the overhead structure of a financial institution. The surviving

companies are those that keep costs down. The efficiency ratio gives us a measure of how

effectively a company is operating. It is considered that the higher the efficiency ratios are for a

company, in relation to the industry average, the better and more effectively it is used to control

its assets and to generate earnings.

Receivable turnover basically depicts that whether the company is facing any problems while

receiving its collectible or not. Receivable turnover of the company has decreased from year

2004 to year 2009. In year 2002 6.75 times whereas in year 2009 it dropped to 6.72 times. The

higher the receivable turnover the more efficient is the company whereas due to slight decline

in receivable turnover it depicts that company has lost its little efficiency. Whereas when we

compare the receivable turnover with the industry which is 17.41 times, we come across that it

is much higher and industry is running at a very efficient pace and the crescent textile is not that

efficient.

Inventory turnover of the company has decreased in year 2009 to 6.45 times whereas in year

2002 it was 7.79 times. This shows that efficiency of the company has Decreased. Industrial

average for inventory turnover is near about to company’s average which is 7.7 times. Therefore

in year 2009 Din Textile Mills Limited has become a bit inefficient.

The fixed-asset turnover ratio measures a company's ability to generate net sales from fixed-

asset investments - specifically property, plant and equipment (PP&E) - net of depreciation. A

higher fixed-asset turnover ratio shows that the company has been more effective in using the

investment in fixed assets to generate revenues. Considering the ratios of 2009 ratios have

slightly changed from year 2002. In year 2009 fixed asset turn over ratios were 2.13 times

whereas in year 2004 it was 2.39 times, whereas industrial ratios in year 2009 were 1.33 times

and in year 2002 they were 2.55 times. This shows that fixed asset turnover ratio of crescent

textile was higher than the industrial ratio of the sector which reflects that company is more

effectively using the investment in fixed assets to generate revenues.

Efficiency of the company is showing good records in year 2009 as for the reason of investment

done by the company and additional input increment made by the company as compared to

average industrial ratios.

Solvency ratios:

The solvency ratio measures the size of a company's after-tax income, excluding non-cash

depreciation expenses, as compared to the firm's total debt obligations. It provides a

measurement of how likely a company will be to continue meeting its debt obligations. Solvency

ratios measure the relationship between debts and owners equity and examine the proportion

of debt the company is using.

A debt ratio indicates what proportion of debt a company has relative to its assets. The measure

gives an idea to the leverage of the company along with the potential risks the company faces in

terms of its debt-load. In year 2002 it shows that 37% of the debt were financed through the

assets whereas industrial ratio was comparatively lower in year 2002 and was about 54.76%. In

year 2009 debt ratio was 65% whereas industrial ratio showed the figure of 61.52%.

Long term debt to capital has increased in year 2009 as compared to 2002, 28% to 43% whereas

industrial average ratios of these years are comparatively higher.

Overall solvency has decreased which shows that company is being less solvent and resulting in

better position of the company.

Profitability ratios:

A class of financial metrics that are used to assess a business's ability to generate earnings as

compared to its expenses and other relevant costs incurred during a specific period of time. For

most of these ratios, having a higher value relative to a competitor's ratio or the same ratio from

a previous period is indicative that the company is doing well.

Overall profitability of the company in year 2009 has increased in comparison to all the previous

years and is in line with the averages of industrial ratios of the sector.

VERTICAL ANALYSIS:

A method of financial statement analysis in which each entry for each of the three major

categories of accounts (assets, liabilities and equities) in a balance sheet is represented as a

proportion of the total account. The main advantage of analyzing a balance sheet in this manner

is that the balance sheets of businesses of all sizes can easily be compared. It also makes it easy

to see relative annual changes in one business.

Non- current assets have shown an improvement in year 2009 as compared to 2008 whereas

total current assets have decreased as compared to year 2008.

Non-current liabilities have decreased in year 2009 where as current liabilities have increased.

Cost of product sold in 2009 is showing a better position by decreasing, which indicates that

sales in year 2009 have increased sufficient enough in order to earn profit.

HORIZONTAL ANALYSIS:

A procedure in fundamental analysis in which an analyst compares ratios or line items in a

company's financial statements over a certain period of time. The analyst will use his or her

discretion when choosing a particular timeline; however, the decision is often based on the

investing time horizon under consideration.

Considering this we took 2002 as a base year.

Considering balance sheet, total assets and liabilities have increased from year 2005 which was

5.66% and in year 2009 its 57.9% which reflects that a large number of assets have been

acquired by the company in order to generate revenues.

Considering the horizontal common-sizing, income statement, sales of the company has jumped

from 76.2% in year 2005 to 198.96% in year 2009. Whereas net income in year 2005 was

193.74% which increased 3 times more than 2005 and turns to 435.59% in year 2009. This

shows that company is generating more of the revenues.

FORECAST AND FUTURE OUTLOOK:

The improvement in demand for cotton on better international economic outlook is likely to keep its prices firm. This will lead to reduced margins for domestic industry which is already facing high interest rates, power/ gas shortage and rising input costs. However, an early reduction in mark up rates, implementation of positive steps in Textile Policy,2009 and last but not the least any relaxation from EU on market access will greatly help improving performance of the industry.

This company, however, has focused to improve performance of the company through sustained growth in sale of value added products having good margin and will strive to pursue this strategy through dedicated efforts by reducing costs with efficient and better resource utilization.

CONCLUSION:

To achieve its VISION your management plans to speed-up its efforts towards enhancing the performance of the company in future. In a tough business environment and competitive times ahead the company is focusing on lowering costs to achieve sustained profitability through growth in sales of better product mix with improved margins. With all efforts on timely execution of customers' orders and close monitoring of teams performance it is hoped that financial position of the company will further strengthen to add significant value for its shareholders.

To boost exports and improve foreign exchange reserves of the country the Govt. had unveiled Textile Policy, 2009-14 on August 12, 2009 which aimed at achieving US$25 billion textile exports in 05 years time against present exports of US$10 billion. The policy envisages various measures and financial package for the industry; which upon implementation will help in improving performance of the Industry. Moreover, with improved cotton crop and stable prices it is expected the industry will do better provided global recession recedes earlier than expected.The company has earned profit of Rs.9.81per share in the year 2009 as against after tax proft of Rs.1.79 per share in previous year.We give below the statement of Corporate and Financial Reporting framework in compliance with Code of Corporate Governance:a. Financial statements prepared by the management represent fairly and accuratelycompany's state of affairs, results of its operation, cash flows and changes in equity.b. Proper books of accounts have been maintained.c. Appropriate accounting policies have been consistently applied in preparation of financial statements and accounting estimates are based on reasonable and prudent judgment.d. International Accounting Standards as applicable in Pakistan have been followed in preparation of financial statements.e. System of internal control is sound in design, has been effectively implemented & being monitored continuously. On-going review will continue in future for further improvement in controls.f. The company has sound potentials to continue as going concern.g. There has been no material departure from best practices of corporate governance.