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Island Textile Mills Ltd.

Annual Report 2.003

CONTENTS

COMPANY INFORMATION

BOARD OF DIRECTORS

CHAIRMAN:

Mr. Anwar Ahmed Tata

CHIEF EXECUTIVE OFFICER:

Mr. Shahid Anwar Tata

DIRECTORS:

Mr. Shahzada Alam

Mr. Shafiq Alam

Mr. Kausar Ejaz

Mr. Javed Ahmed

Mr. Farooq Advani

AUDIT COMMITTEE

CHAIRMAN:

Mr. Anwar Ahmed Tata

MEMBERS:

Mr. Shahzada Alam

Mr. Shafiq Alam

COMPANY SECRETARY &

Mr. Farooq Advani

CHIEF FINANCIAL OFFICER:

BANKERS:

Soneri Bank Limited

Metropolitan Bank Limited

Bank Al Falah Limited

Habib Bank A.G. Zurich Limited

AUDITORS:

Mis. M.Yousuf Adil Saleem & Co.

Chartered Accountants

LEGAL ADVISOR:

Dr. Raees M. Mushtaq & Co.

Advocate.

SHARE REGISTRAR:

Syed Husain & Co.

(Chartered Accountants)

Share Registration Department

1st floor, Modern Motors House, Beaumont

Road, Karachi i-75530

Tel# 5210516 ,5210517 ,5210736 ,55210765

REGISTERED OFFICE:

8,8th floor Textile Plaza,

M. A. Jinnah Road Karachi.

Tel#241 2955-3 Lines 2426761-2-4

Fax#2417710

MILLS:

A/12, S.I.T.E. Kotri (Sindh)

Distt. Dadu

VISION STATEMENT

While keeping our fundamentals correct we shall build upon our

recognition as a very good company known and established for our

principled and honest business practices and higher quality standards

with niche products and specialty items with a sustained growth in

our capacities.

MISSION STATEMENT

We are committed to the higher expectations of our customers. We

strive for the production of best quality yarns for high value products.

CHAIRMAN'S REVIEW

Assalam-o-Alaikum,

Welcoming the shareholders of the company to the 34th Annual General Meeting gives me great pleasure

for consideration of the operational and financial results for the year ended September 30, 2003.

We bow our heads in front of Almighty Allah for again guiding us to the right path and enabling our company

to make profits.

During the period under review the company has made a pre-tax profit of Rs.49.284 Million as compared

to a pre-tax profit of Rs.28.115 Million during the preceding year.

Year Under Review:

AI-Hamdolillah; I am pleased to report that the financial results are satisfactory. By the grace of

Almighty Allah; we have been able to bring a phenomenal improvement at Island Textile Mills Limited.

Today; as we all understand that spinning is a very competitive business and had we not been able to

undertake BMR steps (Balancing, Modernization and Replacement); we would not have been in a position

to survive the present day of severe competitiveness.

Salient feature of the year's accounts are as under:

Sales, in Rupee has increased by Rs. 133.597 million (26.18%) while the sales quantity has also

increased by 1,026,379 kgs (19.15%). On the other hand the average selling price has also increased

by Rs.5.62/kg (5.90%).

The Raw material consumption cost per kg has increased by Rs.5.05 (9.78%).

The Actual production in quantitative terms has increased by 1,278,781 kgs (24.45%).

The Gross Profit amount has increased from 71.139 million to 101.718 million, the G.P. Rate to

sales has also increased i.e. from 13.94% to 15.80%.

The Administrative expenses have increased by Rs.0.640 million, i.e. by 4.39%.

* The Selling and Distribution expenses have increased by Rs.0.436 million, i.e. by 9.90%.

* The Financial charges have decreased by Rs.5.129million (15.65%), due to Long Term Investment

in Plant & Machinery.

* The net profit amount before tax has increased by Rs.21.169 million (75.29%).

* The net profit amount after tax has increased by Rs.10.447 million (50.07%).

* The period of Trade Debts (receivable) has decreased from 57 days to 52 days.

4 The inventory of raw material has decreased from 52 days to 35 days.

* The inventory of finished goods has decreased from 14 days to 11 days.

Addition to Fixed Assets

During the year under review the following addition has been made.

Particulars Nos.

Schlafhorst Auto Cones (Germany) 2

FUTURE PROSPECTS:

Having come a long way we still feei that there is a tremendous potential growth and improvement at Island

Textile Mills. Within the current year; we shall Insha Allah venture upon production of value added Polyester

cotton yarn catering tor niche markets by providing specialized products to the customers / buyers.

Spinning being one of the most organized in Pakistan; the capacity increase after a few good years is always

sudden and abrupt. The sudden increase in the spinning volume leads to oversupply situation but hopefully

this excessive supply situation that we are confronting these days will be adjusted and absorbed as our

down stream sector and made-ups industry has also embarked upon major investment.

COTTON SCENARIO:

During the beginning of the cotton season we had good news that our cotton crop shall exceed 11 Million

bales but with the passage of time it was revealed that cotton produced in our country shall not even be

sufficient to meet our domestic requirements. Due to the shortfall created, the price of raw cotton has gone

up even higher than the international parity.

As such; the next year will see an erosion of profits, tougher and severe competition and we shall not be

able to increase the price of yarn correspondingly with the high price of cotton procured during the cotton

season. The average purchase price of the Mills is approximately Rs.1300/- higher per mound than cotton

procured during the year under review.

In the coming year; we have planned to add the following machines to our existing capacity.

Particulars

Nos.

Combers

Rieter- Germany

Draw Frames

Rieter - Germany

Filter unit for comber

Air Plus - China

Laboratory Equipment AFIS

Uster - Switzerland

Let us pray to Almighty Allah for guiding us on the correct path and towards achievement of better results.

ACKNOWLEDGMENT

I am pleased to place on record my appreciation for our entire Team consisting of General Managers,

Managers, Staff Members and Workers for their cohesive efforts and sincerity.

ANWAR AHMED TATA

Chairman

Karachi

Dated: November 22, 2003

DIRECTOR'S REPORT TO THE SHAREHOLDERS

The Directors have pleasure in presenting before you the 34th Annual Report together with the Audited

Accounts for the year ended September 30, 2003.

FINANCIAL RESULTS

The Company made a Pre tax Profit of Rs. 49,284,1157- after charging costs, expenses and depreciation

for the year.

(Rupees)

Pre Tax Profit for the Year

49,284,115

Taxation

-17,970,966

Profit after Taxation

31,313,149

Accumulated Profit Brought Forward

10,341,623

Transfer from surplus on revaluation of fixed assets

On account of incremental depreciation for:

Prior Year

23,223,420