FINANCIAL STATEMENT ANALYSIS OF CRESCENT TEXTILE MILLS LIMITED

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(No Transcript)
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FINANCIAL STATEMENT ANALYSIS OF CRESCENT TEXTILE
MILLS LIMITED
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• FINANCIAL STATEMENT ANALYSIS
• Presented To
• Mr. Hamza Mukhtar
• Presented By
• NAMRA IQBAL
• I-D 2005-AG-4166
• AYESHA ANEES
• I-D 2005-AG-4190

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OVERVIEW OF THE PRESENTATION
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OVERVIEW OF THE PRESENTATION

• BREIF ANALYSIS OF THE ECONOMY
• INDUSTRY ANALYSIS OF THE TEXTILE INDUSTRY
• INTRODUCTION TO CRESCENT TEXTILE MILLS
• RATIO ANALYSIS
• DECISIONS WITH REFERENCE TO
• Lenders
• Investors
• Manager

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• Financial Statements Analysis
• We will done our analysis in three Steps
• Economic Analysis
• Industry Analysis
• Firm Analysis
• Common size analysis
• Vertical analysis
• Horizontal analysis
• Ratios Analysis
• Peer Group Analysis

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OVERVIEW OF THE ECONOMY OF PAKISTAN
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ECONOMIC OVERVIEW OF PAKISTAN

• MONETORY POLICY
• FISCAL POLICY
• INFLATION
• UNEMPLOYMENT
• GROWTH AND INVESTMENT
• AGRICULTURE SECTOR
• MANUFACTURING
• MONEY AND CREDIT
• EXTERNAL DEBT AND LIABILITIES
• EDUCATION
• ENERGY

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MONETORY POLICY

• IT IS A MEASURE USED BY THE SBP TO MANAGE AND
  CONTROL THE ECONOMIC AND FINANCIAL SECTOR OF THE
  COUNTRY.
• TOOLS USED BY THE SBP TO MANAGE AND CONTROL THE
  ECONOMY AND FINANCIAL SECTOR ARE
• INTEREST RATES
• SUPPLY OF MONEY
• CASH RESERVE REQUIREMENT
• BY DECREASING AND INCREASING THE INTEREST RATES
  AND MONEY SUPPLY THE SBP CAN MANAGE CONTROL THE
  ECONOMY AND FINANCIAL SECTOR.

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FISCAL POLICY

• IT IS A POLICY USED BY THE GOVERNMENT TO BOOST UP
  THE ECONOMY AS WELL AS TO MANAGE AND CONTROL THE
  OVERALL ECONOMY.
• TOOLS USED IN FISCAL POLICY BY THE GOVERNMENT ARE
• TAXES (DIRECT INDIRECT)
• INTERNAL AND EXTERNAL BORROWINGS
• BY INCREASING AND DECREASING THE MARK-UP/INTEREST
  RATES AND BORROWING MONEY, A GOVERNMENT CAN
  MANAGE AND CONTROL THE ECONOMY.

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INFLATION

• Inflation is the general rise in the prices of
  all the commodities. There are three major types
  of inflation.
• Consumer Price Index
• Whole Sale Price Index
• Sensitive Price Index
• The inflation rate as measured by the changes in
  Consumer Price Index (CPI) stood at 10.3 percent
  during the first ten months (July-April) of the
  current fiscal year, 2007-08, as against 7.9
  percent in the comparable period of last year.
• The food inflation is estimated at 15.0 percent
  and non-food 6.8 percent, against 10.2 percent
  and 6.2 percent in the corresponding period of
  last year.

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INFLATION

• The Wholesale Price Index (WPI) during
  July-April, 2007-08 have increased by 13.7
  percent, as against 6.9 percent of last year.
• The Sensitive Price Indicator (SPI) has recorded
  an increase of 14.1 percent during July-April,
  2007- 08, as against 11.1 percent of last year.
• The increase in inflation rate during the current
  year 2007-08 is attributable to the increase in
  food price inflation which has been due to
  increase in prices of wheat, edible oil, rice,
  pulses, milk, poultry, meat, fresh vegetables

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UNEMPLOYMENT

• Unemployment is a central problem because when
  unemployment is high, resources are wasted and
  people's incomes are depressed during such
  periods, economic distress also spills over to
  affect people's emotions and family lives.
• Unemployment rate in Pakistan is increased by
  5.3 from previous year.
• Unemployment in rural areas is higher then the
  unemployment in urban areas due to industries.
  Mostly industries are established in urban areas.
  Thats why the unemployment rate in urban areas
  is low as compared to rural areas.

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CAUSES OF UNEMPLOYMENT

• Agriculture sectors is not absorbing them due to
  adaptation of mechanical industries.
• Small scale industries are not working
  efficiently due to worse economic conditions.
• Poor Government policies are also increasing
  unemployment rate.

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GROWTH AND INVESTMENT

• Pakistans economy has grown at an average rate
  of almost 6.6 percent per annum during the last
  five years. Real GDP grew by 5.8 percent in
  2007-08 as against 6.8 percent last year and
  growth target of 7.2. The economy has shown
  great resilience against internal and external
  shocks of extraordinary nature during the out
  going fiscal year.
• Agriculture sector showed dismal performance and
  grew by 1.5 percent as against 3.7 percent last
  year and target of 4.8 percent.
• Large-scale manufacturing registered a growth of
  4.8 percent in 2007-08 against the target of
  10.9 and last years achievement of 8.6.
• Pakistans per capita real GDP has risen at a
  faster pace in real terms during the last six
  years (4.5 per annum on average in rupee terms)
  leading to a rise in average income of the
  people.

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GROWTH AND INVESTMENT

• Total investment could not sustain its record
  level of 22.9 percent of GDP of the last fiscal
  year and declined to 21.6 percent of GDP in
  2007-08.
• Overall Foreign Investment during the first ten
  months (July-April) of the current fiscal year
  has declined by 32.2 percent and stood at 3.6
  billion as against 5.3 billion in the comparable
  period of last year.

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AGRICULTURE SECTOR

• The agriculture growth this year is estimated at
  3.1 percent as compared with 1.5 percent during
  the previous year.
• Cotton production at 11.7 million bales has
  decreased by 10.5 percent in comparison to 12.9
  million bales of last year.
• Wheat production is estimated at 21.7 million
  tons as against 23.3 million tons last year,
  showing a decrease of 6.6 percent.
• Rice production has increased from 5.4 million
  tons in 2006-07 to 5.6 million tons in 2007-08,
  showing an increase of 2.3 percent.

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AGRICULTURE SECTOR

• Agriculture credit disbursement of Rs 138.6
  billion during July-March 2007-08 is higher by
  24.6 percent, as compared to Rs 111.2 billion
  over last year.

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MANUFACTURING

• Overall manufacturing posted a growth of 5.4
  percent during the first nine months of the
  current fiscal year against the target of 10.9
  percent and 8.1 percent of last year.
• Large-scale manufacturing, accounting for 70.0
  percent of overall manufacturing registered a
  growth of 4.8 percent in the current fiscal year
• Heightened political tension, deteriorating law
  and order situation, growing power shortages,
  cumulative impact of monetary tightening and
  rising cost of doing business are responsible for
  poor showing of manufacturing in 2007-08. Taking
  a longer term view, the manufacturing growth
  exhibits a moderating trend.

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MONEY AND CREDIT

• Overall developments in the money and credit
  sector during the fiscal year 2007-08 have been
  satisfactory.
• Net domestic assets have increased to Rs.656.7
  billion as compared to increase of Rs.395.5
  billion in the same period of last year
• Net foreign assets have recorded a contraction of
  Rs.289 billion against the increase of Rs.84.6
  billion in the same period of last year.
• Government borrowing for budgetary support has
  recorded an increase of Rs.362 billion as
  compared to Rs.212 billion in the same period of
  last year.
• Credit to private sector amounted to Rs.369.8
  billion during July-May 10,2007-08 as compared to
  Rs.263.4 billion in the same period last year.
• The Islamic Financial Industry has grown
  substantially and its assets has reached to a
  level of Rs.200 billion.

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EXTERNAL DEBT LIABILITIES

• External debt and liabilities (EDL) at the end of
  March FY08 were US 45.9 billion. The net
  addition of 5.4 billion represents a 13.3
  percent increase over the stock at the end of
  FY07.
• EDL were 236.8 percent of foreign exchange
  earnings (FEE) but declined to 127.1 percent in
  the same period. The EDL were nearly 5.8 times
  foreign exchange reserves (FER) at the end of
  FY02 but have decline to 3.4 percent by end-March
  2008.
• Interest payments on external debt were 7.8
  percent of current account receipts but declined
  to 2.5 percent during the same period.
• Given the negative sentiment surrounding capital
  markets, Pakistan has not issued any new
  instruments in FY08. However, the country is
  still pursuing a comprehensive external borrowing
  strategy.

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EDUCATION

• Education is essential for the maintenance and
  development of the quality of human life as well
  as for economic activities therefore, the
  government has adopted this sector as one of the
  pillars for poverty reduction and benefit to
  masses.
• The government has decided to double the
  education budget (as percentage of GDP) as
  visualized in Fiscal Responsibility and Debt
  Limitation (FRDL) Act, 2005. This means an extra
  spending of 1.8 percent of GDP over and above the
  existing funding will be on hand during the next
  five years.
• The overall literacy rate (10 years above) was
  45 percent in 2001 which has increased to 55
  percent in 2006-07, indicating a 10 percentage
  points increase over period of only six years.
• According to the Ministry of Education, there are
  currently 231,289 institutions in the country.
  The over all enrolment is recorded at 34.84
  millions with teaching staff of 1.37 million.

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ENERGY

• Crude Oil
• Production of crude oil per day has increased to
  70,166 barrels during July-March 2007-08 from
  66,485 barrels per day during the same period
  last year, showing an increase of 5.54 percent.
• On average, the transport sector consumes 50.9
  percent of the petroleum products, followed by
  power sector (32.8 percent), industry (11.0
  percent), household (1.9 percent), other
  government (2.2 percent), and agriculture (1.2
  percent) during last 10 years.

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ENERGY

• Natural Gas
• The average production of natural gas per day
  stood at 3,966 million cubic feet during the
  year.
• On average, the power sector consumer 36.8
  percent of gas, followed by fertilizer (20.7
  percent), industrial sector (19.8 percent),
  household (17.4 percent), commercial sector (2.7
  percent) and cement (1.1 percent) during last 10
  years.
• Electricity
• The total installed generation capacity has
  increased to 19,566 MW during July-March 2007-08
  from 19,440 MW during the same period last year,
  showing a marginal increase (0.65 percent).
• Total installed capacity of WAPDA stood at 11,654
  MW during July-March 2007-08 of which, hydel
  accounts for 55.6 percent or 6,474 MW, thermal
  accounts for 44.4 percent or 5,180 MW. During
  first three quarters of current fiscal year
  74,032 GWh electricity has been generated as
  against 71,033 GWH in the same period last year,
  showing an increase of 4.22 percent.

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TEXTILE INDUSTRY ANALYSIS
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TEXTILE INDUSTRY OUT LOOK

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

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TEXTILE INDUSTRY OUT LOOK

• The world demand for textiles is rising at around
  2.5, due to which there is a greater opportunity
  for rise in exports from Pakistan.

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CONTRIBUTION TO EXPORTS

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

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SWOT ANALYSIS OF TEXTILE INDUSTRY
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SWOT ANALYSIS OF TEXTILE INDUSTRY

• STRENGHTS
• It is an Independent Self-Reliant industry.
• Demand Driven Industry (more than 2000 units for
  textiles alone).
• Strong presence in local market as well As in
  international markets.
• Availability of Low Cost and Skilled Manpower
  provides competitive advantage to industry
• Availability of large varieties of cotton fiber
  and has a fast growing synthetic fiber industry.
• Pakistan has great advantage in Spinning Sector
  and has a presence in all process of operation
  and value chain.

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SWOT ANALYSIS OF TEXTILE INDUSTRY

• Weaknesses
• Obsolete technology machinery and equipment used
  for manufacturing.
• Availability of raw material and inconsistent raw
  material prices
• Unskilled labor for modern equipments
• Absence of research and development culture
• Lack of synergies between Govt. support
  institutions and practical market.
• Pakistan Textile Industry is highly Fragmented
  Industry.
• Industry is highly dependent on Cotton.
• Lower Productivity in various segments.
• Lack of Trade Membership, which restrict to tap
  other potential market.
• Lacking to generate Economies of Scale.
• Higher Indirect Taxes and Interest Rates.

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SWOT ANALYSIS OF TEXTILE INDUSTRY

• Weakness
• There is Declining in Mill Segment.
• Lack of Technological Development that affect the
  productivity and other activities in whole value
  chain.
• Infrastructure Bottlenecks and Efficiency such
  as, Transaction Time at Ports and transportation
  Time.
• Unfavorable labor Laws.
• Lack of standardization and quality
  controlNon-sophisticated marketing sense.
  (branding grading)
• Political instability in the country.
• Limited access to information (availability of
  finance, technological know how Govt.
  regulations)
• Energy costs

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SWOT ANALYSIS OF TEXTILE INDUSTRY

• Opportunities
• Import substitution. Pakistan imports machinery
  worth approximately US 600 million annually for
  textiles only.
• Large, Potential Domestic and International
  Market.
• Product development and Diversification to cater
  global needs.
• Elimination of Quota Restriction leads to greater
  Market Development.
• Market is gradually shifting towards Branded
  Readymade Garment.
• Free trade agreements like SAFTA and Pakistans
  recent attempt to get included in ASEAN.
• Research and development and reverse engineering

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SWOT ANALYSIS OF TEXTILE INDUSTRY

• Threats
• Competition from countries like India China,
  which have more advanced engineering technology
  base.
• Lagging in technology, hence producing
  substandard goods that hamper consumer perception
  about local engineering products.
• Non-organized manufacturing and vendor base and
  unhealthy competition.
• Uncertainty in inputs cost
• Continuous Quality Improvement is need of the
  hour as there are different demand patterns all
  over the world.
• Elimination of Quota system will lead to
  fluctuations in Export Demand Threat for
  Traditional Market for Power loom and Handloom
  Products and forcing them for product
  diversification.
• Geographical Disadvantages.
• International labor and Environmental Laws.
• To make balance between price and quality.

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THE CRESCENT TEXTILE MILLS LIMITED
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THE CRESCENT TEXTILE MILLS LIMITED

• HISTORICAL BACKGROUND
• The CTM was formed in may 01, 1950 and , MR.
  HAJI MUHAMMAD SHAFI was appointed as the 1st
  chief executive who served the company in this
  position till he breathed his last in 1978.
• Under his leadership, the company managed to
  produce quality products as per specification of
  the buyers in international market and started
  exporting its products in 1956.
• The main architect of the Crestex business
  expansion its Chief Executive, Mr. Muhammad
  Anwar, who took over this position after the
  death of his father. He has led the company from
  the front. It was he who not only managed to win
  awards for the company on account of highest
  sales of yarn and cloth in 1987-88, 1993-94 and
  1994-95 but also has the distinction of
  recognition as "The Businessman of the Year" from
  the Pakistan Federation of Chambers of Commerce
  and Industry. Crestex has also been awarded the
  President of Pakistan Export Trophy for three
  consecutive years in the mid nineties.

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THE CRESCENT TEXTILE MILLS LIMITED

• Progressive approach and prudent management
  policies of Mr. Nasir Shafi, Deputy Chief
  Executive enabled the company to become the 1st
  composite textile company of Pakistan which
  received ISO 9002 certification on July 07, 1997.
• Company has also been certified by Oeko-tex
  standard 100 on December 13, 2000.

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THE CRESCENT TEXTILE MILLS LIMITED

• Current Scenario
• The Crescent Textile Mills Limited (The Company)
  is a public limited company  incorporated in
  Pakistan Under the  Companies Ordinance 1984. The
  registered office of the Company is located at
  40-A, Off Zafar Ali Road, Gulberg-V, Lahore.
• Its shares are quoted on all the Stock Exchanges
  in Pakistan. The Company is engaged in business
  of textile manufacturing comprising of spinning,
  combing, weaving, dyeing, bleaching, printing,
  stitching, buying, selling and otherwise dealing
  in yarn, cloth and other goods and fabrics made
  from raw cotton and synthetic fiber(s).
• The company also operates a cold storage and a
  power generation house.
• In June 1995, the company also signed a joint
  venture agreement with Greenwood Mills Inc., USA
  and set up a composite denim garment
  manufacturing unit at Bahuman, District Hafizabad
  under the name and style of Crescent Greenwood
  Ltd, (now called Crescent Bahuman Limited), the
  first largest of its kind in Asia.

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THE CRESCENT TEXTILE MILLS LIMITED

• Current Scenario
• CTM has 119,728 spindles, 288 MJS (Murata Jet
  Spinning) drums, 1,568 spindles for Doubling
  Twisting.
• The spinning capacity in 20s count based on 3
  shifts per day is 42 million kgs/yr.
• The company has 168 Air jet Looms to convert its
  own yarn into customer specific cloth.
• Fabric weaving capacity in 50 picks based on 3
  shifts per day is 65 million sq. meters/yr.
• The company has the capacity to process/finish
  nearly 4,000,000/month and 133,000 meters of
  cloth per day.
• Crestex is capable of converting 17 Million
  Meters of fabric into made-ups annually.

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CERTIFICATES

• The CTM has been awarded by the following
  certificates
• ISO 9001
• ISO 14001
• OEKO-TEX 100
• ORGANIC EXCHANGE OE 100
• GLOBAL ORGANIC TEXTILE STANDARD GOTS

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POLICIES

• CTM has adopted the following policies
• Provide consistent quality products and services
  with on time delivery to achieve and enhance
  customer satisfaction level.
• Provide safe conducive working environment to
  employees and encourage their involvement in the
  never ending effort to improve quality of our
  products and services.
• Minimize environmental impact through prevention
  of pollution, solid liquid waste management and
  conversation of natural resources.
• Promoting awareness and importance of Quality
  Environment among employees, community and
  suppliers.
• Ensure continual improvement and compliance with
  customer relevant environmental legislation
  regulations.

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COMPANY PROFILE

• .

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SWOT ANALYSIS

• Strength
• Weakness
• Opportunities
• Threats

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SWOT ANALYSIS

• STRENGHTS
• Vertical integration
• Best corporate report award 2007
• IT provides requisite leverage to the company to
  boost its performance.
• Better quality ( ISO 9001,ISO 14001 etc).
• Availability of Low Cost and Skilled Manpower
  provides competitive advantage to the company.
• Strong and intellectual management.
• CTM has large and diversified segments that
  provide wide variety of products.

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SWOT ANALYSIS

• WEAKNESSES
• Availability of raw material and inconsistent raw
  material prices.
• Lack of Technological Development that affect the
  productivity and other activities in whole value
  chain
• Infrastructural Bottlenecks and Efficiency such
  as, Transaction Time at Ports and transportation
  Time.
• CTM is operating in a highly Fragmented Industry.
  

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SWOT ANALYSIS

• OPPORTUNITIES
• Abandoning of textile manufacturing operations in
  developed countries.
• Creating self sufficiency by generating power.
• Greater Investment and FOREIGN DIRECT INVESTMENT
  opportunities are available.
• Emerging Retail Industry and Malls provide huge
  opportunities for the Apparel, Handicraft ETC.

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SWOT ANALYSIS

• Threats
• High cotton prices due an expected crop shortfall
  for FY2009
• Gas load shedding might increase energy cost
• Consistent increase in utilities cost
• Increase in minimum wage rates
• Lack of funds through export refinance finances
  from bank .
• Political instability
• Poor fiscal as well as monitory policies.
• WTO rules regulations
• International labor and Environmental Laws.

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FINANCIAL ANALYSIS OF C.T.M
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FINANCIAL ANALYSIS OF C.T.M

• Three types of financial analysis
• Ratio Analysis
• Common size/ vertical Analysis
• Index / Horizontal Analysis

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RATIO ANALYSIS

• Profitability Ratio
• Activity Ratio
• Liquidity Ratio
• Interest Coverage Ratio
• Leverages Ratio
• RATIO ANALYSIS

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Common size/ vertical Analysis
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Index / Horizontal Analysis
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DECISIONS

• Lenders
• Investors
• Manager

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LENDERS
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INVESTORS
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MANAGER
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THANKS YOU ALOT