The Financial Performance of the Textile Industry Essay Online for Free

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Dawood lawrencepur limited is the largest textile group in pakistan working since 1954 in the karachi city. Dawood lawrencepur are the manufacturer and exporter of various quality of yarn in cotton (combed & carded), polyester and polycotton from 7/s to 100/s. Dawood lawrencepur offers good quality and very competitive prices.A Dawood lawrencepur founded with a vision to be a provider of innovative textile solutions worldwide. DLL is the manufacturer and supplier of distinguished fabric for apparel, home and industrial markets with clients all over the world. DLL has ability to create forward-thinking solutions that give clients a competitive advantage is what sets up apart. DLL core services include: Fiber manufacturing Spinning Weaving Knitting Dyeing and printing of woven and knitted fabrics Designing Cutting and Stitching With a constructed area of over one million square feet, DLL has the capacity to fulfill small, medium and large scale orders. DLL is one of the few vertically integrated operations in Pakistan. Offering a diversified range of products, customers can mix and match from a wide variety of print, yarn dyed, solids, dobby and jacquard. DLL also deals in twill, sateen, basket weave and percale, knitted to woven fabric; and thread counts ranging from 130 to 1000. In an industry where deadlines are a way of life, DLL is proud to have a proven track record of service quality and on-time delivery. For convenience DLL also maintain a comprehensive order tracking system, so you can stay on top of your order at all times.A

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OVERVIEW OF PAKISTAN TEXTILE INDUSTRY

Pakistan’s textile industry ranks amongst the top in the world.A PakistanA is World’s fourth largest cotton producer and the third largest consumer of the same. Cotton based textiles contribute over 60% to the total exports, accounts for 46% of the total manufacturing and provide employment to 38% manufacturing labor force. The availability of cheap labor and basic raw cotton as raw material for textile industry has played the principal role in the growth of the Cotton Textile Industry inA Pakistan. The performance of textile industry during the last five years has been satisfactory. The market was responsive, the Government policy was supportive and inputs were viable. The industry made profits and re-invested in new machinery for balancing, modernizing, and restructuring (BMR) and expansion. The industry made an investment of approx. $ 6.0 Billion during the period 1999-2006. Textile Machinery worth $.0.8 billion has been imported during 2005-06 (see Table below). The major investment has been made in spinning, Weaving, Textile Processing and making up sectors. Approx.454,000 new direct jobs have been created and industry has been able to make increase production and exports. Import of textile machinery, which is the single largest item in the machinery group, accounted for $ 771.500 million in 2005-06. This shows that investment for modernization of textile industry, which started four years ago, still continues. This resulted into substantial increase in capacities of all products. Consequently, yarn production has increased by 12% and cloth production by 7%. The exports showed positive improvements and cotton textile export grew from $ 9.20 billion in 2004-05 to $ 10.37 billion in 2005-06 and is expected to exceed $12 billion in 2006-07.

Investment in Textile Sector

Textile industry has made an investment of about $6.0 billion during the last six years. This investment includes both investments through bank loans as well as own sources. This investment has been made in the form of BMR expansion and new capacity. Textile machinery worth US$ 0.6 billion has been imported during 2005-06. the import of textile machinery for the last years are documented in TableA A below.

Import of Textile Machinery

Year

MillionA USA $

% Change

1999-2000 210.9 28.6 2000-01 370.2 75.5 2002-04 406.2 9.9 2004-06 531.9 30.7 2006-08 597.9 12.4 2008-09 928.6 55.3

PROFIT BEFORE AND AFTER TAX

PROFITABILITY RATIOS

The first half of FY09 was relatively tough for DLL but it recovered somewhat in the 2nd half of the year. Still there was a decrease in the total revenue by 4.87% and reached the level of Rs 350.37 million in FY09 from Rs 368.29 million in FY08. A 4.8% decline in revenue, with the increased expenses of the company combined with greater allowance for potential lease losses have led to an 8.1% rise in before tax profit for the period at Rs 222.39 million. The profit after tax for the period stood at Rs 378.48 million, which is 4.5% greater than the net profit of FY08. Considering the profitability of the company, since FY04, the Gross Profit Margin has remained between 9.05 and 20.3. the only exception being a gross profit margin of -24.21% in FY08. A similar trend has been seen in profit margin, between FY04 to FY06 which remained between a range of 5.3% and 9%, and falling to -24.21% in FY08. In FY09 gross profit shootup to 20.38% this increase is due to better performance in 2009 by the company. The Return on Equity had been ranging from 4.5% to 5.86% until 2006, only jumping in 2009 to the level of 28.95% mainly due to the phenomenal growth in after-tax profit for that year. If compared to the industry, DLL has been successful in having a steady ROE. In that respect, DLL has performed better than average for its competitors. In FY08, the ROE declined to 12.45%. This was primarily because the company s equity grew by 13% on the back of issuance of bonus shares and increase in funds of capital and general reserves. This growth was greater than that in the net income, culminating in a decline in this years ROE. In the FY09 company had highest ROE of 28.95%. Upon analyzing the Earning per share value of Dawood Lawrencepur Limited , we see that it has been relatively increased from 4.45 in FY04 to 13.88 in FY05.A But since FY05 earning per share is constantly following the decreasing trend. Least earning per share observed in the last 6 years is 0.42 in FY07. Since last 2 years company is facing intense competition and pressure from emerging clothing and textile brands and company profit is highly affected. More investors are buying shares of competitors like gulahmed textiles, lakhani textiles e.t.c. due to declining trend of sales and profit after tax, EPS has declined. Decrease in profit after tax also decreases ordinary share holders right in the profit. EPS in FY08 is -4.22 and in FY09 is -3.28. it has been slightly improved but still company’s shareholders are in loss. Upon analyzing the dividend payout ratio of Dawood Lawrencepur Limited , we see that it has been relatively increased from 56.18 in FY04 to 238.1 in FY07.A But since FY07 dividend ratio is constantly following the decreasing trend. Least dividend payout ratio observed in the last 6 years is -23.7 in FY08. Since last 2 years company is facing intense competition and pressure from emerging clothing and textile brands and company profit is highly affected. More investors are buying shares of competitors like gulahmed textiles, lakhani textiles e.t.c. due to declining trend of sales and profit after tax, EPS has declined. Decrease in profit after tax also decreases ordinary share holders right in the profit. DPS in FY08 is -23.7 and in FY09 is 0. it has been slightly improved in the sense that company is not showing negative dividends now but still company’s shareholders are in loss.

LIQUIDITY RATIOS

CURRENT RATIO

The liquidity position of the company has been increasing. The Current Ratio in FY08 was 1.27 and now rise to 1.502 in FY09. In contrast, the industry s Current Ratio has been actually increasing for the last few years from 0.96 in FY05 to 1.25 in FY08. Yet, DLL s current ratio is still above the industrial average. Moreover, the trend of a declining current ratio is also seen in competitors of DLL. In FY09, the current ratio of the company however rose to 1.502. This was aided by a rise in the Current Assets by 5.99% compounded by a fall in the Current Liabilities by 10.17%. This current shows that DLL can generate a greater income while incurring a lower level of expenditure compared to other companies. The Income-to-Expense Ratio improved marginally to in FY09. Although Administrative and General Expenses did increase, but selling expenses decreased. financial and bank charges, which form a greater portion of the total expenses increased . But since the income component exceeded the expenses growth by only 1.25%, the income-to-expense ratio only slightly improved.

DEBT RATIO

In previous years Dawood lawrencepur limited relied mostly on debts for financing its assets rather than financing through equity.A Since the financial year 2004, the Debt-to-Assets Ratio of Askari Leasing Ltd has been ranging from 0.60 or 0.75. it can be noted that a much greater portion of DLL s assets is financed by debt. The insignificant changes in total assets and total liabilities in FY09 result in maintenance of the ratio at its historical levels. This debt ratio is slightly declined because of company’s changing policies of financing. Company is trying to reduce debt financing to maintain its credibility in the market. As a result, DLL’s debt ratio has been declined from 0.078 in FY 08 to 0.075 in FY09.

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