Assessing The Financial Performance Of The Textile Industry Finance Essay

Dawood lawrencepur limited is the largest fabric group in Pakistan working since 1954 in the karachi metropolis. Dawood lawrencepur are the maker and exporter of assorted quality of narration in cotton ( combed & amp ; carded ) , polyester and polycotton from 7/s to 100/s. Dawood lawrencepur offers good quality and really competitory prices.A

Dawood lawrencepur founded with a vision to be a supplier of advanced fabric solutions worldwide. DLL is the maker and provider of distinguished cloth for dress, place and industrial markets with clients all over the universe. DLL has ability to make forward-thinking solutions that give clients a competitory advantage is what sets up apart. DLL nucleus services include:

Fiber fabrication

Spining

Weaving

Kniting

Dying and printing of woven and knitted cloths Planing

Cuting and Sewing

With a constructed country of over one million square pess, DLL has the capacity to carry through little, medium and big graduated table orders. DLL is one of the few vertically incorporate operations in Pakistan. Offering a diversified scope of merchandises, clients can blend and fit from a broad assortment of print, yarn dyed, solids, dobby and Jacquard. DLL besides deals in twill, sateen, basket weave and percale, knitted to woven cloth ; and thread counts runing from 130 to 1000.

In an industry where deadlines are a manner of life, DLL is proud to hold a proved path record of service quality and on-time bringing. For convenience DLL besides maintain a comprehensive order tracking system, so you can remain on top of your order at all times.A

OVERVIEW OF PAKISTAN TEXTILE INDUSTRY

Pakistan ‘s fabric industry ranks amongst the top in the world.A PakistanA is World ‘s 4th largest cotton manufacturer and the 3rd largest consumer of the same. Cotton based fabrics contribute over 60 % to the entire exports, histories for 46 % of the entire fabrication and supply employment to 38 % fabricating labour force. The handiness of inexpensive labour and basic natural cotton as natural stuff for fabric industry has played the chief function in the growing of the Cotton Textile Industry inA Pakistan.

The public presentation of fabric industry during the last five old ages has been satisfactory. The market was antiphonal, the Government policy was supportive and inputs were feasible. The industry made net incomes and re-invested in new machinery for equilibrating, modernizing, and restructuring ( BMR ) and enlargement. The industry made an investing 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 investing has been made in spinning, Weaving, Textile Processing and doing up sectors. Approx.454,000 new direct occupations have been created and industry has been able to do addition production and exports. Import of textile machinery, which is the individual largest point in the machinery group, accounted for $ 771.500 million in 2005-06. This shows that investing for modernisation of fabric industry, which started four old ages ago, still continues. This resulted into significant addition in capacities of all merchandises. Consequently, yarn production has increased by 12 % and cloth production by 7 % . The exports showed positive betterments and cotton fabric export grew from $ 9.20 billion in 2004-05 to $ 10.37 billion in 2005-06 and is expected to transcend $ 12 billion in 2006-07.

Investing in Textile Sector

Fabric industry has made an investing of about $ 6.0 billion during the last six old ages. This investing includes both investings through bank loans every bit good as ain beginnings. This investing has been made in the signifier of BMR enlargement and new capacity. Textile machinery worth US $ 0.6 billion has been imported during 2005-06. the import of textile machinery for the last old ages 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

Net income BEFORE AND AFTER TAX

PROFITABILITY RATIOS

The first half of FY09 was comparatively tough for DLL but it recovered slightly in the 2nd half of the twelvemonth. Still there was a lessening in the entire gross by 4.87 % and reached the degree of Rs 350.37 million in FY09 from Rs 368.29 million in FY08. A 4.8 % diminution in gross, with the increased disbursals of the company combined with greater allowance for possible rental losingss have led to an 8.1 % rise in before revenue enhancement net income for the period at Rs 222.39 million. The net income after revenue enhancement for the period stood at Rs 378.48 million, which is 4.5 % greater than the net net income of FY08.

Sing the profitableness of the company, since FY04, the Gross Profit Margin has remained between 9.05 and 20.3. the lone exclusion being a gross net income border of -24.21 % in FY08. A similar tendency has been seen in net income border, between FY04 to FY06 which remained between a scope of 5.3 % and 9 % , and falling to -24.21 % in FY08. In FY09 gross net income shootup to 20.38 % this addition is due to better public presentation in 2009 by the company.

The Return on Equity had been runing from 4.5 % to 5.86 % until 2006, merely leaping in 2009 to the degree of 28.95 % chiefly due to the phenomenal growing in after-tax net income for that twelvemonth. If compared to the industry, DLL has been successful in holding a steady ROE.

In that regard, DLL has performed better than norm for its rivals. In FY08, the ROE declined to 12.45 % . This was chiefly because the company s equity grew by 13 % on the dorsum of issue of fillip portions and increase in financess of capital and general militias. This growing was greater than that in the net income, climaxing in a diminution in this old ages ROE. In the FY09 company had highest ROE of 28.95 % .

Upon analysing the Earning per portion value of Dawood Lawrencepur Limited, we see that it has been comparatively increased from 4.45 in FY04 to 13.88 in FY05.A But since FY05 gaining per portion is invariably following the diminishing tendency. Least gaining per portion observed in the last 6 old ages is 0.42 in FY07. Since last 2 old ages company is confronting intense competition and force per unit area from emerging vesture and fabric trade names and company net income is extremely affected.

More investors are purchasing portions of rivals like gulahmed fabrics, lakhani fabrics e.t.c. due to worsening tendency of gross revenues and net income after revenue enhancement, EPS has declined. Decrease in net income after revenue enhancement besides decreases ordinary portion holders right in the net income. EPS in FY08 is -4.22 and in FY09 is -3.28. it has been somewhat improved but still company ‘s stockholders are in loss.

Upon analysing the dividend payout ratio of Dawood Lawrencepur Limited, we see that it has been comparatively increased from 56.18 in FY04 to 238.1 in FY07.A But since FY07 dividend ratio is invariably following the diminishing tendency. Least dividend payout ratio observed in the last 6 old ages is -23.7 in FY08. Since last 2 old ages company is confronting intense competition and force per unit area from emerging vesture and fabric trade names and company net income is extremely affected.

More investors are purchasing portions of rivals like gulahmed fabrics, lakhani fabrics e.t.c. due to worsening tendency of gross revenues and net income after revenue enhancement, EPS has declined. Decrease in net income after revenue enhancement besides decreases ordinary portion holders right in the net income. DPS in FY08 is -23.7 and in FY09 is 0. it has been somewhat improved in the sense that company is non demoing negative dividends now but still company ‘s stockholders are in loss.

LIQUIDITY RATIOS

CURRENT RATIO

The liquidness place of the company has been increasing. The Current Ratio in FY08 was 1.27 and now lift to 1.502 in FY09. In contrast, the industry s Current Ratio has been really increasing for the last few old ages from 0.96 in FY05 to 1.25 in FY08. Yet, DLL s current ratio is still above the industrial norm. Furthermore, the tendency of a worsening current ratio is besides seen in rivals of DLL. In FY09, the current ratio of the company nevertheless rose to 1.502. This was aided by a rise in the Current Assets by 5.99 % compounded by a autumn in the Current Liabilities by 10.17 % .

This current shows that DLL can bring forth a greater income while incurring a lower degree of outgo compared to other companies. The Income-to-Expense Ratio improved marginally to in FY09. Although Administrative and General Expenses did increase, but selling disbursals decreased. fiscal and bank charges, which form a greater part of the entire disbursals increased. But since the income constituent exceeded the disbursals growing by merely 1.25 % , the income-to-expense ratio merely somewhat improved.

DEBT RATIO

In old old ages Dawood lawrencepur limited relied largely on debts for financing its assets instead than financing through equity.A

Since the fiscal twelvemonth 2004, the Debt-to-Assets Ratio of Askari Leasing Ltd has been runing from 0.60 or 0.75. it can be noted that a much greater part of DLL s assets is financed by debt. The undistinguished alterations in entire assets and entire liabilities in FY09 consequence in care of the ratio at its historical degrees. This debt ratio is somewhat declined because of company ‘s altering policies of funding. Company is seeking to cut down debt funding to keep its credibleness in the market. As a consequence, DLL ‘s debt ratio has been declined from 0.078 in FY 08 to 0.075 in FY09.