Introduction

The Company and its operations

Nishat Mills Limited is a public limited Company incorporated in Pakistan under the Companies
Act, 1913 (Now Companies Ordinance, 1984) and listed on all Stock Exchanges in Pakistan. Its
registered office is situated at 53-A Lawrence Road, Lahore. The Company is engaged in the
business of textile manufacturing and of spinning, combing, weaving, bleaching, dyeing,
printing, stitching, apparel, buying, selling and otherwise dealing in yarn, linen, cloth and other
goods and fabrics made from raw cotton, synthetic fiber and cloth and to generate, accumulate,
distribute, supply and sell electricity.
Our Vision
To transform the Company into a modern and dynamic yarn, cloth and processed cloth and
finished product manufacturing Company that is fully equipped to play a meaningful role on
sustainable basis in the economy of Pakistan. To transform the Company into a modern and
dynamic power generating Company that is fully equipped to play a meaningful role on
sustainable basis in the economy of Pakistan.
Our Mission
To provide quality products to customers and explore new markets to promote/expand sales of
the Company through good governance and foster a sound and dynamic team, so as to achieve
optimum prices of products of the Company for sustainable and equitable growth and prosperity
of the Company.
Ratio Analysis
Profitability Ratios
Profitability Ratio
2013 2012
Net Profit
Margin 15.21083 13.0044
ROA 9.889594 10.31694
GPM 17.2519 15.11258
Assets turn over 0.650168 0.793342

The Nishat Mills Limited (NML) profitability is increases in 2013 comparative to last years. The
sale for the year is increases by 16.66%, from 44924101 to 52426030 thousand, gross margin by
14% from 15% to 17% and profit margin is by 17% from 13% to 15%, while return on assets and
Assets turnover has reduced by 4% and 18% respectively. The profit margin has increased due to
increase in sales efficient management of cost of sales and selling and admin expenses. The sales
increase because the company increases its operations and sales more on credit. The return on
assets and assets turnover has affected due to company increases its assets by about 42% but
sales have not increased considerably.
Liquidity Ratios
Liquidity Ratios
2013 2012
Current Ratio 1.505642 1.312091
Quick Ratio 0.813926 0.603798

The liquidity analysis shows the liquidity position improved in 2013. The current ratio improved
from 1.31 to 1.51whereas the quick ratio improved from 0.60 to 0.82. The current assets rose by
37% and quick assets rose by 64% as well for 2013 whereas current liabilities rose by 19%, thus
causing a rise in current ratio for NML. Although cash balances fell by 52%, yet the trade debts
rose by 78% and other receivables rose by 34%. The rose in current and quick assets is due more
sales on credit which shows the increase in debtors by 78%.
Gearing Ratio
Gearing Ratios

2013 2012
Debt to equity ratio 4.973206 8.013044
Interest coverage
ratio 4.929851 3.318357

The debt burden of the company has reduced form the last year. The debt to equity has decreased
from 8.01 to 4.97 and interest coverage is also improved from 3.31 to 4.92. This is due to the
increase in companys sales and profitability. The company generates sufficient revenues which
make some profit that may used to pay its long term debts as well as short term obligations as
well.
Efficiency Ratio
Efficiency Ratios

2013 2012
Stock turnover 86.83196 93.52011
Debt collection period 43.46868 28.34805
Credit Settlement Period 31.85013 32.51977

The operating cycle has increased from 121 days to 130 days. The inventory turnover in days has
decreased from 93 days to 87 days. But the outstanding sales days has increased from 28 days to
43 days. This shows that company manage its inventory not so efficiently and an inefficient
credit policy towards in debtors. But on the other hand the creditor settlement period is slightly
reduced from 32.5 days to 31.85 days. This may show that company have good relation with
suppliers and pay for its material purchased at time.
Conclusion
From the above discussion it is concluded that the company sales and profit margin increases
16.66% and 17% respectively and cost of sales and operating expenses are managed efficiently.
The company also increased its assets by 42%. This shows that company going to increase its
operations. For paying of its short term obligation it has sufficient current assets. The operating
cycle of company is become longer than last year from 121 days to 130 days. The longer time
take operating cycle to complete means the inventory management and credit policy toward
debtors is not efficient. The overall view is that NML is going on profitable and increases its
sales and assets, which means the growth of company.
Recommendation
The NML performing well in the market but I suggest some things which I think help the
company in some extent. The company sales and profitability showing increasing trend but as
the assets increases the company not increases its sales by the same rate. Management need to
concentrate and invest more in marketing sector to increase sales. The company also need to
change its credit policy toward debtors because longer operating cycle will may make some
liquidity problems for the company.
References
Brecorder.com. (2010, November 01). Retrieved June 12, 2014, from Brecorder.com:
http://www.brecorder.com/top-stories/single/595/0/1119344/
NML. (2013). Annual Report of Nishat Mills Limited for the year ended june 30, 2013. Lahore:
Nishat Mills Limited.
Sharif, M. (2010, June 11). Retrieved June 13, 2014, from scribed:
http://www.scribd.com/doc/32892270/CHENAB-TEXTILE-MILLS-FAISALABAD

Appendixes
Profit and Loss Account
For the Year ended June 30, 2014


Balance Sheet
As at June 30, 2013

2013 2012
Equity and liability
Share capital and reserves
Authorize Share Capital 1100000000 ordinary share of Rs
10 each 11000000 11000000
Issues , subscribed and paid up share capital 3515999 3515999
Reserves 55401036 34246750
Total equity 58917035 37762749
Liabilities
Noncurrent liabilities
Long term financing 3083410 3289538
Liabilities against assets subject to finance lease 66322 137040
Deferred income tax liability 499415 310305
3649147 3736883
Current liabilities
Trade and other payable 3785501 3397640
2013 2012
Sales 52426030 44924101
Cost of Sales (43381545) (38134910)
Gross Profit 9044485 6789191
Distribution Cost 2529455 2555327
Admin Expenses 870269 731740
Other Expenses 409429 343699
(3809153) (3630766)
5235332 3158425
other Income 2739102 2683685
Profit form operation 7974434 5842110
Finance Cost (1617581) (1760543)
Profit before taxation 6356853 4081567
Taxation (510000) (553000)
Profit after taxation 5846853 3528567
Earnings per share basic and diluted (Rupees) 16.63 10.04
Accrued markup 300755 269579
short term borrowing 11939028 9665849
Current portion of noncurrent liabilities 1310769 1106902
Provision for taxation 732359 686781
18068412 15126751
Total Liabilities 21717559 18863634
Total liabilities and equities 80634594 56626383
Assets
Noncurrent Assets
Property plant and equipments 15530320 14318639
Investment properties 394745 241969
Long term investment 37378224 21912790
Long term loans 84997 268330
long term deposits and prepayments 41748 36984
53430034 36778712
Current assets
stores spare parts and loose tools 1285371 1019041
stock in trade 10945439 9695133
Trade debts 6243535 3489070
Loan and advances 1898334 867631
Short term deposits and prepayments 40018 41008
other receivables 1019164 758077
Accrued Interest 13550 30062
Short term investments 4362880 1589093
Cash and bank balances 1128862 2358556
26937153 19847671
Noncurrent Assets held for sale 267407
27204560 19847671
Total Assets 80634594 56626383


Changes during the year from last Year
2013 2012 % Change
Sales 52426030 44924101 16.69911881
Cost of Sales 43381545 38134910 13.75808937
Gross Profit 9044485 6789191 33.21889162
Selling and Admin Expenses 3809153 3630766 4.913205643
Profit form operation 7974434 5842110 36.49921005
Finance Cost 1617581 1760543 -8.120335601
Reserves 55401036 34246750 61.77020009
Total equity 58917035 37762749 56.01892489
Long term financing 3083410 3289538 -6.266168684
Trade and other payable 3785501 3397640 11.41560024
Current liabilities 18068412 15126751 19.44674702
Total Liabilities 21717559 18863634 15.12924286
Noncurrent Assets 53430034 36778712 45.27434783
stock in trade 10945439 9695133 12.89622329
Trade debts 6243535 3489070 78.94553563
other receivables 1019164 758077 34.44069666
Cash and bank balances 1128862 2358556 -52.1375791
Current Assets 27204560 19847671 37.06676214
Total Assets 80634594 56626383 42.39757111