20000329

Brief recordings

BY SCANNER

Cement

Essa Cement Industries Ltd.

Year Ended June 30, 1999

Overview

This cement unit of Nooriabad has expanded its production capacity to 450 thousand metric tons from 150 thousand tons. The company has fixed asset base of Rs 1,427 million which includes additions in the fixed assets account to Rs 887.57 million and capital work-in-progress at Rs 287.26 million which add upto Rs 1.174 billion and it is quite an impressive figure. This expanded facility will provide the company cutting edge in competition and improvement in the operating results. The improvement is already visible as the company's cement sales in terms of volume aggregated to 174,785 metric tons as compared to 87,069 metric tons. Gross sales in terms of value shot up to Rs 641.98 million by 119.2% over preceding year's Rs 292.9 million and at the bottom line the profile transferred to profit from the previous year's loss.

Essa Cement Industries Limited has a fixed asset base of Rs 1.783 billion at cost (Rs 1.427 billion at book value). Its manufacturing facilities are located in Nooriabad Industrial Area District Dadu of Sindh province whereas its registered office is located at Gulshan-e-Iqbal Karachi (Sindh).

The shares in the company are trading at Rs 13.15 at 31.5% premium over its par value. Its shares are quoted on two stock exchanges, in Karachi and Lahore.

During the year the installed capacity of cement production was raised to 450 thousand metric tons from 150 thousand metric tons. So the average installed production capacity works out to 225 thousand metric tons. The capacity was raised on April 1, 1999.

The unit produces three kinds of cements, ordinary portland cement, slag cement and sulphate resistance cement. Out of the total output of cement at 178.532 thousand metric tons, the company produced 139.422 thousand tons of ordinary portland cement, 32.440 thousand tons of slag cement and 6.670 thousand tons of sulphate resistance cement.

During the year, the company's all kinds of cement output registered 125% growth over the preceding year's output of 79.107 thousand metric tons. The increase in output has not only moved up its output but also capacity the utilisation as the company reached capacity utilisation of 79.35% from the preceding year's 52.74%. This has enabled the company to improve the economies of scale. However, there is still wide gap between the capacity and output for which the relevant notes annexed to the account has clarification.

"The shortfall in production was due to closure on account of synchronising of existing plant with expansion of new unit and slump in the market."

The Chairman Abdul Aziz Essa feels satisfied with the going on stream of the expanded facility. He expressed his gratitude to Almighty Allah and congratulated his team of engineers, directors, managers, erection team "who enthusiastically committed themselves for months to set up expansion plant."

He also shared his optimism with the shareholders that, "the expanded capacity will be able to substantially improve its performance and operating results in the years ahead."

The directors expressed that the cement industry as a whole is facing two major problems i.e. growth gap between supply and demand and secondly low economic activities, which have exerted exceptional problem on the cement producers. However it seems that nothing daunted the management as not only they increased the output but also turned the table by replacing last year's loss to profit in the year under review.

Cement sales by the company aggregated to 174,785 metric tons as compared to 87,069 metric tons last year.

Gross Sales Revenue reached Rs. 0.642 billion (1997-98: Rs 0.292 billion) out of which Rs. 0.264 billion went to the exchequer.

Net sales in terms of value increased by 118.98% to 377.90 million (1997-98: Rs 172.57 million) and gross profit improved by 443.4% over the preceding year's, so resultantly both gross and operating margins beefed up.

The company posted Net Profit at Rs 48.92 million which replaced the preceding year's loss after taxation at Rs. 11.04 million.

At the ruling price of its share and earning per share at Rs. 1.41, the PER is placed at 9.3x reflecting increased confidence of the investors in the shares of Essa Cement Industries.

The agenda for the AGM of the shareholders of the company had special business to consider 10% bonus stock dividend.

Performance Statistics (Million Rupees)

June 1999 1998

Capital & Liabilities:

Paid-up Capital: 346.30 346.30

Reserves: 222.57 173.65

Equity: 568.87 519.95

L.T. Debts: 692.24 661.23

Current Liabilities: 451.63 364.56

Assets:

Fixed Assets - Tangible: 1,427.26 1,312.13

L.T.D. Deposits: 4.14 4.19

Current Assets: 281.34 229.42

Total Assets: 1,712.74 1,545.74

Sales, Profit & Payout:

Net Sales: 337.90 172.57

Gross Profit: 77.66 14.29

Operating Profit: 68.45 6.30

Other Income: 0.13 0.03

Depreciation: 49.07 31.26

Financial Charges: 14.88 15.72

Profit/(Loss) Before Taxation: 50.92 (10.14)

Profit/(Loss) After Taxation: 48.92 (11.04)

Dividend Bonus Stock 10% (1998: Nil): 34.63 Ñ

Financial Ratios:

Share Price (Rs) 25/3/2000: 13.15 Ñ

Book Value Per Share (Rs): 16.43 15.01

Price Book Value Ratio: 0.80 Ñ

Debt/Equity Ratio: 55:45 56.54

Current Ratio: 0.62 0.63

Asset Turn Over Ratio: 0.22 0.11

Gross Profit Margin (%): 20.55 8.28

Operating Margin (%): 18.11 3.65

Net Profit Margin (%): 12.94 (6.40)

EPS (Rs): 1.41 (0.32)

Price/Earning Ratio: 9.32 Ñ

R.O.E. (%): 8.60 (Ñ)

R.O.A. (%): 2.86 (Ñ)

R.O.C.E. (%): 3.87 (Ñ)

CEMENT CAPACITY & PRODUCTION (000 M. TONS)

Installed Capacity: *** 150.00

Capacity (Average Available): 225.00 Ñ

Production: 178.53 79.11

Capacity Utilisation (%): 79.35 52.74

*** Installed Capacity upto March 31, 1999 was 150 thousand metric tons, since April 01, 1999 capacity increased to 450 thousand metric tons.

Company Information:

Chairman & Chief Executive: Abdul Aziz Essa; Directors: Ms Humera Essa/Ms Jamila Younus Dada/Zaitoon Hamza Dada/Jawed Aziz Essa/Irfan Aziz Essa/Zafar Uddin Siddiqui; Company Secretary: Jawed Aziz Essa; Registered Office: FL-2/1, Block-6, Gulshan-e-Iqbal, Karachi. Phone/Fax: NA; Email-NA; Factory: Deh Kalo Kohar, Nooriabad Industrial Area, District Dadu (Sindh).