20000418

Brief

recordings

Ñ BY SCANNER Ñ

Chemical & Pharmaceutical

Kausar Paints Limited

Year Ended June 30, 1999

OverviewÉÉÉ

This relatively small local paint manufacturing unit has not been able to withstand the effect of unprecedented recession. The company also faces stiff competition from large companies specially multinational. Then there are the paint manufacturers of unorganised sector who more of ten beat the small paint manufacturing units of organised sector in terms of price as these units of unorganised sector seldom pay taxes. The company has suffered massive loss, and carries large inventory and book debt balance. During the year its output of paints at 23.9 thousand litres declined by 82%, and sales at Rs 1.04 million was 20.9% of last year's sales. The company suffered gross loss at Rs 0.86 million whereas financial charges further increased to Rs 5.49 million from Rs 3.44 and in the preceding year's. It turned net loss at Rs 8.29 which works out to loss per share at Rs 6.63.

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Kausar Paints Limited was incorporated in the province of Sindh in 1979, as a private limited company. It was converted into a public limited company in December 1985 and was listed at the Karachi Stock Exchange in the following year. Its manufacturing facilities as well as registered office are located at SITE Karachi.

Its shares are quoted in the chemical and pharmaceutical sector but with prefix (D). This would mean that Karachi Stock Exchange has placed the share on defaulters' counter for the information of the investors. Under the KSE rules there can be one or more reasons to keep a company's share on the defaulters' list such as non-payment of listing fee or non-payment of dividend for a specified number of years.

At present the share in the company is quoted at Rs 2.25 at 77.5% discount. During the financial year under review, in 1998-99, the question was displayed on the 'D' list. The price was stagnant at Rs 3.20, but without transaction. Since 1994, the share in the company suffered massive diminution in value from Rs 28.50 in 1994 to Rs 2.25 at present.

Since 1994, there was not a single year when the company could afford profit distribution.

The company has relatively small capital base of Rs 12.50 million. A total of 850 individual shareholders held 85.62% of the company's share capital. Two investment companies held remaining 14.38% of the company's stock. Ninety nine percent of the shareholders were small investors who held maximum 10 thousand shares each and their aggregate holding works out to 29.4% of the total paid-up shares of the company.

Last year the company had suffered net loss after taxation at Rs 5.79 million. But the prior year's loss had enhanced the accumulated deficit to Rs 13.71 million which had completely wiped out its paid-up capital of Rs 12.5 million and substantially eroded its revenue reserve of Rs 1.50 million. Even then equity base had remained positive figure although with the nominal amount of Rs 0.28 million.

During the year under review, the company's loss after taxation reached Rs 8.29 million which was 797% of its sales. The loss amount works out to loss per share at Rs 6.63 as compared to loss per share at Rs 4.63 in the preceding year.

During the year under review, the company produced 23.9 thousand litres of paint which is only 18.2% of last year's output of 131.25 thousand litres. In spite of massive decline in the production the company rolled over to the forthcoming year massive quantity of inventory. This can be seen from the cost of inventory at the end of the year at Rs 19.7 million compared to cost of goods sold at Rs 1.90 million. It would mean that the inventory is almost 10 times of the cost of goods sold. On the one hand the stock of paint is likely to age towards deterioration both in terms of fragrance and glossiness. On the other hand large liquidity has been locked-in the inventory.

Book debts have been considered secured but the outstanding amount at Rs 4.27 million is nearly 4 times of the sales of the year.

It appears that the company's marketing efforts have received massive set back because of unprecedented recession on the economy. The company could generate sales revenue to the extent of nearly a million rupees only as compared to sales at Rs 4.97 million in the preceding year.

Chairman Mian S.M. Yousuf Baghpatee was obviously dissatisfied with sluggish demand and inroads of unorganised paint manufacturing units as they have price advantage as they do not pay taxes. He shared his perception about the market. He said, "On account of depressed economy and sanctions, there was slump in the mark of goods manufactured by your company, resulting in dampness in demand. Over and above it, the fixed tax scheme of the government also adversely affected your company being in the organised sector vis-a-vis the unorganised sector paint manufacturers who continued their unethical practices."

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Performance Statistics (Million Rupees)

June 30, 1999 1999 1998

Capital & LiabilitiesÉÉÉ

Paid-up Capital: 12.50 12.50

Revenue Reserves: 1.50 1.50

Accumulated (Loss): (22.01) (13.72)

Equity: (8.01) 0.28

Surplus Rev. F/A: 7.20 7.20

Current Liabilities: 33.02 28.16

AssetsÉÉÉ

Fixed Operating Assets: 7.16 7.51

Current Assets: 25.05 28.13

Total Assets: 32.21 35.64

Sales, Profit & PayoutÉÉÉ

Sales: 1.04 4.97

Gross (Loss)/Profit: (0.86) 0.46

Operating (Loss): (2.79) (2.21)

Depreciation: 0.36 0.40

Financial Charges: 5.49 3.44

(Loss) Before Taxation: (8.28) (5.67)

(Loss) After Taxation: (8.29) (5.79)

Loss B/F: (13.72) (7.93)

Financial RatiosÉÉÉ

Share Price (Rs) 4/4/2000: 2.25 Ñ

Book Value Per Share (Rs): (6.40) 0.22

Price/Book Value Ratio: Ñ Ñ

Debt/Equity Ratio: 0:100 0:100

Current Ratio: 0.75 0.99

Asset Turnover Ratio: 0.03 0.14

Gross Profit Margin (%): (0.82) 9.25

Operating Margin (%): (268.27) (44.47)

Net Profit Margin (%): (797.11) (116.50)

EPS (Rs): (6.63) (4.63)

Price/Earning Ratio: (Ñ) Ñ

Plant Capacity & ProductionÉÉÉ

Capacity: NA NA

Production (Litres): 23,902 131,254

Capacity Utilisation (%): NA NA

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Company information: Chairman: Mian Saheb S.M. Yousuf Baghpatee. Managing Director & Chief Executive: Mian S. Mohammed Yahya Baghpatee. Joint Managing Director: Mukhtaruddin Qureshi. Directors: Mian S. Zafar Shakil Baghpatee/Mian S. Javed Yousuf Baghpatee/Begum Saheba Ateeq Mian Yousuf Baghpatee/Begum Nargis Shahid. Secretary: Mehfooz Elahi. Registered Office: F-279, Workers' Avenue, SITE. Karachi.