20000412

Brief

recordings

- BY SCANNER -

Textile Spinning

Aisha Cotton Mills Limited

Year Ended September 30, 1999

Overview.........

This textile spinning unit is equipped with 17,942 spindles and the unit is located in SITE Karachi. The company continues to produce adverse financial and operating results about which the external auditors have also made their observations in their report to the shareholders. Chief Executive Uzair Dawood made comments about the situation, "it is reported that the huge loss suffered by the company was due to continuity of financial crisis in textile industry specially in spinning units mainly because decline in sales and high incidence of financial expenses." During the year under review, the company posted loss after taxation at 118.34 million and accumulated deficit, reached Rs 561.74 million. The deficit wiped-out its share capital and at the same turned the shareholders' equity to negative figure of Rs 442.31 million.

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This relatively small textile spinning unit of SITE Karachi is equipped with 17,952 spindles. The installed production capacity has been rated at 5.344 million kgs of yarn converted into 20's count.

Aisha Cotton Mills Limited is a public limited company incorporated on July 14, 1988. The shares in the company are quoted at both Lahore and Karachi Stock Exchanges. The company was listed at Karachi Stock Exchange in 1992. Since 1994, the market value of the share never went above its par value. Apparently, the investors had the perception that the company has weak fundamentals so the yearly lowest prices remained much below the one-fifth of par value of Rs 10. During the fiscal year 1998-99, the share price remained within the price band of Re one and Re 0.50. At present the share has been quoted at Rs 2.

Since 1994, the company has not been able to pay dividend in any year.

During 1998-99, the period under review, the company has posted massive pre-tax loss at Rs 117.76 million which amount is very close to its paid-up share capital of Rs 119.43 million. The pre-tax loss has outpaced its sales revenue of Rs 115.55 million.

Sales revenue suffered downturn as compared to the preceding year's. The company was mostly spinning cotton textile yarn. But there was shift in its product policy. Chief Executive Uzair A. Dawood elaborated the strategic decision in his report to the shareholders. He said.

"The company has shifted its production from Cotton Yarn to Poly Cotton Yarn. The market of poly cotton yarn seemed to be good but your company was unable to get the share in the market due to over supply/production of poly cotton yarn in the industry. This also caused low sales prices of poly cotton yarn in the market.

Due to this reason your company has been forced to reduce its production and consequently decreased the sales which resulted in loss."

The company's installed capacity of production has remained grossly underutilised because of two basic and important reasons. First, the mills were shut down for two months during the year. Second, the shortage of working capital also forced the reduction in the output. The company spun 2.602 million kgs of yarn which was less than half of its installed capacity. Last year, the capacity utilisation was to the extent of 85%.

The annexed note revealed that this year the installed capacity figure has increased by 10% over preceding year's as this year all installed spindles were operative whereas last year only 16,320 spindles were operative as compared to 17,952 installed spindles.

The cost of sales was much higher than sales revenue, so the company turned large gross loss of Rs 57.87 million which was 50% of the sales revenue. The operating loss reached the amount of Rs 63.51 million. Then the large financial charges further aggravated the adverse situation. Financial charges were nearly identical to last year's. Debentures and long term loans at Rs 505.47 million have outpaced the balance sheet footing.

The mounting accumulated deficit reached Rs 561.74 million which has busted the equity base and the negative figure in the shareholders equity has zoomed to Rs 442.31 million.

Even the surplus on the revaluation of the fixed asset could not shore up the equity base. So the long term debt coverage remained precarious.

Liquidity crunch is ubiquitous and more pronounced in the current ratio of 0.22.

The external auditors, have made serious observations about many aspects of its financial weaknesses and have confirmed that "no adjustments, if any, have been made in these accounts, that may be necessary, should the company be unable to continue as going concern."

The directors reported that running finance facility sanctioned in 1993 was paid off but not renewed. "For the next year the company has succeeded in maintaining the repayments to the restructured lows and hope for the renewal of Running Finance Limit from the banks. This will help your company to procure raw materials in bulk and hence able to reduce cost of production" stated the Chief Executive.

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Performance Statistics (Million Rupees)

September 30 1999 1998

Capital & Liabilities.........

Paid-up Capital: 119.43 119.43

Accumulated (Loss): (561.74) (443.40)

Equity: (442.31) (323.97)

Surplus on Rev. F/A: 208.99 208.99

L.T. Debts: 506.59 318.01

Other Non Current Liabilities: 0.29 0.73

Current Liabilities: 179.41 273.77

Assets.........

Fixed Assets: 412.60 426.33

Other Non Current Assets: 0.84 0.83

Current Assets: 39.52 50.36

Total Assets: 452.96 477.53

Sales, Profit & Payout.........

Sales: 115.55 193.30

Gross (Loss): (57.87) (19.00)

Operating (Loss): (63.51) (26.00)

Other Income: 0.68 0.08

Depreciation: 13.95 18.15

Financial Charges: (52.59) (53.69)

(Loss) Before Taxation: (117.76) (101.18)

(Loss) After Taxation: (118.34) (102.40)

(Loss) B/F: (443.40) (340.99)

Financial Ratios.........

Share Price (Rs) 4/4/2000: 2.00 -

Book Value Per Share (Rs): (37.03) (27.13)

Price/Book Value Ratio: (-) -

Debt/Equity Ratio: (-) (-)

Current Ratio: 0.22 0.18

Asset Turnover Ratio: 0.25 0.40

Days Receivables: 38 48

Days Inventory: 48 26

Gross (Loss) (%): (50.01) (9.82)

Operating (Loss): (54.96) (13.45)

Net (Loss) to Sales (%): (102.41) (52.97)

EPS (Rs): (9.91) (8.57)

Price/Earning Ratio: (-) -

A) Plant Capacity & Production (Million Kgs).........

Yarn 20's Count.........

Capacity: 5.344 4.858

Production: 2.602 4.110

Capacity Utilisation (%): 48.69 84.60

B) "Reasons for shortfall - shutdown of mills for two months during the year - shortage of working capital during the year."

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Company information: Chairman: Aziz A. Dawood. Chief Executive: Uzair A. Dawood. Directors: S. Saleem Iqbal/Asif Ahmed/Malik Aman/Safdar Ali/M.A. Siddiqui (NIT Nominee). Company Secretary: S. Saleem Iqbal. Registered Office: A-57, SITE, Manghopir Road, Karachi. Factory: A-57, SITE, Manghophir Road, Karachi.