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INTRODUCTION
Masood Textile is a very well known name in the textile industry. The company
has a significantly old history in the Middle East (more specifically in the Persian
Gulf) and the U.S.A. The company has nine units of garments manufacturing
currently operating in Pakistan all of which are situated at different places in
Faisalabad besides its units in U.A.E Jordan and Qatar. It emerged in the textile
scenario of Pakistan in 1998 and since then it has grown extensively even now
its revenues have increased from $7.83 million in 1998 to $102 million in the year
2006. Masood textile mills were the largest knitwear exporting company for the
year 2005. The company is also producing extensive employment opportunities
and its employees have grown from around sixteen hundred in 1998 to almost
sixteen thousand in 2006.These facts and figures are shown in the graphs 1.1
and 1.2 respectively.
FIG 1.1
FIG 1.2
DIVISIONS
Masood is a truly Vertically Integrated Textile Unit. It has in-house Yarn, Knitting,
and Fabric Dyeing, processing and Apparel Manufacturing. The Company has
four SBU's and a highly qualified experienced mills manager heads each unit. All
Mills Managers in turn report to the General Manager. The objective to operate in
this manner is that there is a close co-ordination and link between all the
divisions. Every unit operates in the most efficient manner in-order to achieve
competitive prices, timely delivery and quality products.
SPINNING
Masood Spinning is a well reputed and quality oriented spinning unit operating in
Pakistan. Systems and spinning techniques in operation provides useful learning
to textile industry specialists. They have a well maintained machinery setup
starting from blow room to packing, producing count range 10Ne - 40Ne. At
Masood, currently we have capacity of 14400 spindles. Spinning process
involves flow of raw material through mixing, blow room, carding, drawing,
combing, simplex, ring and auto cone.
KNITTING
The knitting Division of Masood has latest knitting machines from Mayer & Cie,
Terrot, MI (Mayer), Matsuya, Fukuhara & Vanguard. These machines are capable
of making Jersey, Pique, Fleece, Interlock and Rib in addition to the mini
Jacquard designs of Single Knit Jersey. The gauges range from 20 to 28 for
Single jersey Knit, 20 to 24 for Interlock and 14 to 18 for Rib machines. Most of
the machines are equipped with lycra attachment. Moreover, it has 13 flat bed
machines for welt collars and cuffs. 100% production is inspected and only 'A'
grade fabric is transferred to the subsequent operations.
FABRIC PROCESSING
APPAREL
Apparel division was established in 1995 to enter into value addition field. The
company started producing underwear briefs for Jockey U.K. Now it consists of
17 independent stitching units. An M.B.A Manager is responsible for each unit
from receiving of cut parts to packed garments. After the cutting of fabric, it is
sent for 100% cut parts inspection.
QUALITY ASSURANCE
There are quality checks at every stage of manufacturing starting from Raw
Cotton, Yarn, Fabric, Processing, Cutting, Stitching and Packing. Before the
fabric is cut, it is checked whether it conforms to the customer’s standards of
shrinkage, finished g/cm2 etc. After each lot of fabric is cut, 100% cut parts
inspection is conducted to ensure that only good quality pieces move to the
stitching units.
During the process of sewing, each and every process is inspected by inline
inspectors. The inspectors make sure that only good parts move to the next
stage. An individual tracking number is sewn inside each garment. After trimming
and pressing of the garments, highly experienced final inspectors inspect each
garment. The Quality assurance team monitors the performance of every
individual inspector by picking up the inspected garments and checking the
quality of these garments.
To ensure that the garments are packed as per the requirements of their valued
customers, they can even track & check, which case the garment, has been
packed in. With the help of this, they plan to achieve the Zero Defect Level.
The following are the quality awards for Masood Textiles over the years.
RATIO ANALYSIS
LIQUIDITY MEASURES
There is slight decrease in the ratio which is a not good sign for the firm
but the decrement in the ratio is very small.
Ratio figure has decreased because current assets have increased but not
so much in relation to Current liabilities, which makes the denominator low
and so the ratio is high.
Current assets has increased because firm’s short term prepayments &
deposits and other receivables have increased while current liabilities i.e.
trade and other payables have decreased, but short term financing has
also increased.
It means firm is now not that much able to pay its short term payables.
This figure has deceased .it shows firm most liquidity measure.
Although it has not so much decreased but still it is point of concern for the
firm.
Figure has declined because the increase in current assets was mostly
due to inventory and when we deduct it from the assets the effect of
increase in assets is almost diminished.
This ratio determines the firm’s ability to pay its interest obligations.
As the ratio has decreased to it’s not a favorable sign for the firm.
Previously firm was in better position to pay its interest liabilities.
This ratio has decreased because interest liabilities have increased.
Firm has financed more assets that’s why their financing cost has
increased.
This ratio has decreased which is better sign for the firm.
This means firm is now converting its inventory into sales after every 134
days against figure of previous year i.e. 176 days.
It is because the firm’s ITR (Inventory Turnover Ratio) has increased
which made this ratio low.
All the things that we discussed in inventory turnover ratio are responsible
for declining this ratio.
ITR = Inventory Turnover Ratio
Receivables turnover ratio has also decreased which is not good sign for
the firm.
It means firm is collecting its A/R less frequently than previous year.
It maybe because of changes in credit policy.
One of the reason for this ratio to be low is that firm has greater amount of
A/R this year.
We see that this ratio might be decreased due to increase in sales or it
can be that firm has extended the credit period just to increase the sales.
PROFITABILITY MEASURES
There is little decrease in net profit margin which means firm is earning
now less money sales than previous year.
We see that firm’s sales has increased but even than net profit margin
decreased.
The reason behind low profitability or net income is the increases in
expenses which we can see from income statement.
Income statement shows that financing costs and administrative expenses
have increased which made the figure low.
Increase in administrative expenses may be due to poor management.
As we saw in NPM ,The net profit margin of the firm declined which cause
a decline in ROA also
The reasons behind low profitability have already been discussed.
As the assets increased we have a low return on firm’s assets and that’s a
harmful sign for the firm
Return on Equity :( Net income / *Total Equity)
This ratio has increased but very slightly that’s because the equity is the
same but profitability has increased.
So we have only that much increment in ROE which occurred due to
increase in profitability.
As it has increased investor will now be motivated to invest in this firm but
other measures do not support this.
MARKET RATIOS
P/E ratio has decreased which means investors are now wiling to pay Rs
4.49 on each Rupee of earning.
This shows investors trust have decreased, investor are now not willing to
pay much.
If its earning continued to fall the than P/E ratio would be high but here
investors trust would not be high.
Obviously P/E ratio would be high but investors would not be attracted
towards this firm.
Current Share price = 20 PKR
Market - To - Book Ratio :( Market value / Book Value)
Book Value:
DU PONT ANALYSIS
For 2006
ROA FLM
0.0201 21.445
ROE
0.4310(43.1%)
FOR 2007
ROA FLM
0.0182 24.42
ROE
0.443(443%)
Current liabilities
Trade & other payables 9.20% 11.63%
Accrued mark up 1.059% 1.00%
2007 2006
ASSETS
Current Assets
Stores & spare parts 3.90% 4.31%
Stock in trade 24.76% 29.39%
Trade debts 21.99% 21.99%
Loans & advances 1.77% 1.79%
Short term deposits & prepayments 1.49% 2.26%
Other receivables 6.29% 5.70%
Cash & bank balance 1.03% 0.92%
2007 2006
INDEX ANALYSIS
BALANCE SHEET
Authorized capital 2007 2006 Index Analysis
40000000 ordinary shares of rupees 10 each 400000 400000 100%
60000000 preference shares of rupees 10 each 600000 600000 100%
Total 1000000 1000000 100%
Issued, subscribed and paid up share capital
reserves 900000 900000 100%
Reserves 639530 616469 103.74%
Total 1539530 1516469 101.52%
TOTAL EQUITY
Surplus on revolution of operating fixed assets 379420 61967 612.29%
Deferred income or sale back of operating fixed
assets 5639 7700 73.23%
NON-CURRENT LAIBILITIES
Long term financing
financing 321759 297933 107.99%
Deferred liability for gratuity 90180 76082 118.53%
Liabilities against assets subject to financing lease 276138 387515 71.25%
Total 688077 761530 90.35%
CURRENT LIABILITEIS
Trade and other payables 674138 748578 90.05%
Accrued markup 77642 64189 120.95%
Short term finances 3684328 2912069 126.51%
Current portion of long term liabilities 220115 256596 85.78%
Provision for taxation 57243 104518 54.76%
Total 4713466 4085950 115.35%
TOTAL LIABILITIES 5401543 4847480 111.42%
TOTAL EQUITY AND LIABILITIES 7326132 6433616 113.87%
ASSETS
NON-CURRENT ASSETS
In the end the value of earning per share basic and diluted in rupees are
102.7714 and 110.9091.
CONLCUSION
After briefly analyzing the financial statement of MASOOD TEXTILE MILLS we
came to conclusion that firm’s profitability or other ratios have not been changed
so much, change in liquidity measures is almost neglible because current ratio
increased while quick ratio has decreased because of increase in assets. Long
term solvency measures have not been changed also the debt ratio almost
remain the same while in other ratios such as interest coverage ratio and cash
coverage ratio have been changed a bit. In assets management firm had not
been efficient because firm’s inventory turnover has decreased and also firm is
now less efficient in collecting the account receivables due to the decrease in
ATR. The firm’s net profit margin has decreased even net income has increased
that’s because the sales level has increased more than the net income it
generates. Its ROA has decreased and ROE has increased because firm has the
same level of common stock equity that they have previous year. Firm’s EPS and
P/E ratio has increased but by a very tiny amount.