RATIO ANALYSIS

LIQUIDITY RATIOS

2002 2003 2004 2005 2006 20072008 2009 2010

Current Ratio 1.87 1.222 1.41 1.491.415 1.16 1.01 1.02 1.03

Quick Ratio0.852 0.52

0.264 0.211

0.212 0.37 0.3 0.18 0.18

2002 2003 2004 2005 2006 2007 2008 2009 20100

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

2

Current RatioQuick Ratio

Analysis:The liquidity position of the company which has been decreasing from 2005 has now started to stabilize. The current ratio of the company has increaed by 0.01 each year from 2008 to 2010 as is currently standing at 1.03 which is significantly lower than the industry which stands at 2.05. wheras the quick ratio has remained the same from 2009 to 2010 at 0.18 also relatively lower than the industry.

EFFICIENCY RATIOS

2002 2003 2004 2005 2006 2007 2008 2009 2010Inventory turnover 3.22 3.6 2.28 2.61 2.5 2.11 3.04 3.1 3.83Receivables turnover 16.54 22.2 71.44 181.5 181 10.61 54.62 69.81 123.81Inventory turnover in days 113 101.4 159.7 140 146 172.7 120.12 117.75 95.26Receivables turnover in days 22.1 16.44 5 2 2 10.61 6.68 5.23 3.04Total asset turnover 1.24 1.1 1.1 1.43 1.53 1.28 1.48 1.37 1.55A/P turnover 14.3 14.5 3.5 8.31 4.1 5.02 4.66 3.65 5.69A/P turnover in days 25.5 25 104 43.9 89 72.6 78.33 99.78 64.11

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Fixed asset turnover 2.81 1.81 1.86 2.43 2.75 2.97 2.86 2.35 2.4

Operating Cycle 135117.84 164.7 142 148

183.31 126.8 122.98 98.3

20022003

20042005

20062007

20082009

20100

0.5

1

1.5

2

2.5

3

3.5

Total asset turnoverFixed asset turnover

20022004

20062008

20100

20

40

60

80

100

120

140

160

180

200

Inventory turnover in daysReceivables turnover in daysA/P turnover in daysOperating Cycle

Analysis:The company’s overall efficieny has increased. The company’s managemnt has been able to reduce its inventory turnover from the previous year from 117.75 days in 2009 to 95.26 days in 2010. Moreover its receivable turnover and its payable turnover has also declined from the past years and currently stand at 3.04 days and 64.11 days respectively. All of this has led to the decrease in the operating cycle of the company from 122.98 days in 2009 to 98.3 days in 2010.The company’s management has also managed its assets efficiently as both the fixed asset turnover and the total asset turnover of the company has increased. The fixed asset turnover has improved slightly from 2.35x in 2009 to 2.4x in 2010, whereas the total asset turnover of the company has seen a reasonable hike of 13% from 1.37x in 2009 to 1.55x in 2010.

PROFITABILITY RATIOS

2002 2003 20042005 2006 2007 2008 2009 2010

Gross margin 31.33 31.23 37.1 40 41 38.8 31.96 30.02 30.03Operating margin 10.65 3.9 3.43 1.75 4.25 2.48 1.3 2.43 8.32Return on equity 20.4 6.9 5.8 3.9 10.82 7.18 4.44 3.66 14.38Return on asset 18.72 7.33 5.5 4.33 8.68 4.55 3.14 3.31 10.19

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2002 2003 2004 2005 2006 2007 2008 2009 20100

5

10

15

20

25

30

35

40

45

Gross marginOperating marginReturn on equityReturn on asset

AnalysisThe overall profitability of the company is strengthening which shows a positive sign about the company in the future. With its operating margin, return on assets, and return on equity increasing significantly by 242%, 208% and 293% respectively. The company is trying their best to earn the faith of their investors after the financial turmoil of 2008. The company’s operating margin has gone up from 2.43 in 2009 to 8.32 2010. Similarly the company’s return on assets has shifted upwards from 3.31 in 2009 to 10.19 in 2010 alongwith the increase in the company’s return on equity from 3.66 in 2009 to 14.38 in 2010. However the company’s gross margin has remained all most the same at 30.02% in 2009 to 30.03% in 2010. This is due to high cost of sales which the company is incurring mainly due to double digit inflation, energy crisis in the country and high production costs.

LEVERAGE RATIOS

2002 2003 2004 2005 2006 2007 2008 2009 2010

Total debt to total asset 34.9439.54 35.04

35.25 39.95 55.79 56.7 63.23 63.38

Debt to equity 8.7810.39 9.33

11.58 14.22 15.22

20.02 59.47 81.8

Time interest ratio 11.6428.05 9.1 9.13 5.22 2.39 1.8 2.18 6.21

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2002 2003 2004 2005 2006 2007 2008 2009 20100

10

20

30

40

50

60

70

80

90

Total debt to total assetDebt to equityTime interest ratio

Analysis:The company has increased its leverage position significantly. From the 2008 the company has relyied heavily on debt as a source of financing since its debt to equity ratio has increased tremendously from 20.02 in 2008 to 81.8 in 2010 an overall increase of more than 300% within the tw years. However this debt has served the company well as they have been able to increase their assets and increase their sales over the last two years. This can be seen by the company’s total debt to total assets which has been stable from 63.23 in 2009 to 63.38 in 2010 whereas its times interest earned ratio has shot up from 2.18x in 2009 to 6.21x in 2010.

EQUITY RATIOS

2002 2003 2004 2005 2006 2007 2008 2009 2010Dividend payout 0.71 0.84 - - 0.33 0.4 0.52 - 0.18EPS 6.96 2.38 2.12 1.47 4.47 3.08 1.92 1.61 5.68Book value 34.1 34.48 36.4 38.07 41.29 42.87 43.29 43.9 39.44Dividend/share 5 2 - - 1.5 1.25 1 - 1

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2002 2003 2004 2005 2006 2007 2008 2009 20100

1

2

3

4

5

6

7

8

Dividend/shareEPS

AnalysisThe company’s equity has improved from the past year however its book value per share has dropped down Rs.43.9 in 2009 to Rs.39.44 in 2010. During the year 2010 the company earning per share increased by 350% from Rs. 1.61 in 2009 to Rs. 5.68 in 2010 particularly due to high sales and high profits that the company earned during the year 2010. As a result the company announced the dividend of Rs. 1/share in 2010 as opposed to 2009 where the company declared no dividends.

CONCLUSION

The company has boosted high net profit margin for the year 2010 which shows the strength of the company’s management in controlling its assets as well its liabilities along with controlling cost and increasing its operating capacity. The company shows bright prospects in the years to come if the management keeps on working the way it has during the time of difficulty both in Pakistan and across the globe.

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