Analysis of Financial

Statements

Term Report

Submitted by: Muhammad Ayaz Moti

ID: 2006-01-11-6489

Submitted to: Sir Maqbool-ur-Rehman

Company: Din Textile Mills Limited

Letter of Acknowledgement
28th April 2010

I am really thankful to my Sir Mr. Maqbool-ur-rehman for his support and guidance
throughout the semester. Through his lectures and support we came across our
analysis of financial statement course.

Sincerely,

Muhammad Ayaz Moti,

Institute of Business Management.

28th December 2010

Mr. Maqbool-Ur-Rehman,

Professor,

Analysis of Financial Statements,

Institute of Business Management,

Karachi.

Letter of Transmittal
Dear Mr. Maqbool-Ur-Rehman,

I am pleased to submit you the report about detailed analysis of Din Textile Mills
Ltd. as a term report of analysis of financial statements.

I hope that report is upto what you required. It contains all the related information
about the company and my detailed analysis.

Any questions related to the report are always welcome.

Yours sincerely,

Muhammad Ayaz Moti.

 Company Profile

From the day of inception, Din Textile has been constantly striving to achieve
excellence and generate highest value for all its stakeholders. Today Din
Textile holds and unchallenged position at forefront industry, within the
country and overseas for its groundbreaking developments and innovative
products for exceeding customer expectations. This is a testimony to Din’s
unwavering commitment to total satisfaction of its customers.

Din Textile Mills Ltd. was founded in 1987 and in a very short time became an
icon for the spinning industry in Pakistan. With three state-of-the-art spinning
and 1 dyeing unit located in Chunian and Lahore having annual production
capacity of yarn 20.8 million Kgs and dyeing of Fiber and Yarn 2.8 million kgs.
With an annual turnover of Rs. 3.65 billion, today Din Textile mills Ltd.
employs over 2,200 employees. Din aims to create superior value for our
customer and stakeholders without compromising on commitments to safety,
environment, health, and other social responsibilities for the communities in
which we operate.

Our products range from:

• Combed Compact Yarn

• Slub Lycra Yarn

• Dyed Yarn

• Ply Yarn

• Core Spun Yarn

• Slub Yarn

• Melange Yarn

• Gassed Yarn

Our export products include, 100% cotton yarn, 100% cotton Melange yarn,
Cone dyed yarn, Slub yarn and Core Spun Lycra yarn (Din Komfort) of the
highest quality, our export volume is $16 million and our main markets are
North America, South America, Western, Europe, Eastern Europe, Eastern
Asia, Southeast Asia, Middle East, Africa, Oceania.

Current Share Price: Rs. 29.68

TEXTILE SECTOR-
OVERVIEW
ABOUT THE SECTOR
World

Textile industry in the world is pretty much diversified. There are several
countries who have a share in this industry like China, Pakistan, Turkey,
South Korea, Indonesia, Bangladesh, Mexico, India, United States etc.
Although textile sector is in bad condition due to the recession but still its
growth rate is about 3% per annum.

Asian Textile Industry

In the Asia Pakistan, China, Bangladesh, South Korea and India are the main
countries which are famous for textile products. But at the moment China is
leading this sector and there is a tough competition in Asian countries for this
sector. China is excelling in this field due to its low rate natural and human
resources. Then South Korea, India, Bangladesh are some other strong
dealers. Mainly textile processing industries are in Asia. Pakistan is the eighth
largest country to produce textile goods.

Textile Industry In Pakistan

The textile industry is one of the most important sectors of Pakistan. It

contributes significantly to the country’s GDP, exports as well as
employment. It is, in fact, the backbone of the Pakistani economy.

Established Capacity

The textile industry of Pakistan has a total established spinning capacity of

1550 million kgs of yarn, weaving capacity of 4368 million square metres of
fabric and finishing capacity of 4000 million square metres. The industry has
a production capacity of 670 million units of garments, 400 million units of
knitwear and 53 million kgs of towels.
The industry has a total of 1221 units engaged in ginning and 442 units
engaged in spinning. There are around 124 large units that undertake
weaving and 425 small units. There are around 20600 power looms in
operation in the industry. The industry also houses around 10 large finishing
units and 625 small units. Pakistani textile industry has about 50 large and
2500 small garment manufacturing units. Moreover, it also houses around
600 knitwear-producing units and 400 towel-producing units.

Contribution to Exports

According to recent figures, the Pakistan textile industry contributes more

than 60% to the country’s total exports, which amounts to around 5.2 billion
US dollars. The industry contributes around 46% to the total output produced
in the country. In Asia, Pakistan is the 8th largest exporter of textile products.

Contribution to GDP and Employment

The contribution of this industry to the total GDP is 8.5%. It provides

employment to 38% of the work force in the country, which amounts to a
figure of 15 million. However, the proportion of skilled labor is very less as
compared to that of unskilled labor.

Competitors

Pakistan must compete with other producers similar in conditions and

comparative advantage. The Pakistani Textile industry's biggest competitors
are China, India, Indonesia and Turkey. The cost of power in Pakistan is
comparatively high to these countries plus the current situation of the
country is worst as compared to these countries so buyer feel more secure to
buy from these countries.

OTHER DRIVING FORCES INFLUENCING THE INDUSTRY

Technology

Integrated government science and technology departments, enterprises,

research institutions and other forces at home and abroad, and actively
building a regional innovation system of open, integration of resources at
home and abroad, fundamentally enhance the enterprises and
clusters. Textile technology services to encourage small and medium-sized
enterprises, innovation and entrepreneurship in science and technology
elements of the formation of clusters within the market. Increase the input of
independent research and development to enhance the competitiveness and
technological capability. Through the acquisition of overseas R & D center to
build or strengthen the independent innovation capacity of enterprises to
compete for the market of new products the right to speak.

During the 1960s and 1970s, light industry expanded rapidly—

especially textiles, sugar refining, fertilizers, and other manufactures
derived from local raw materials. Despite steady overall industrial
growth during the 1980s, the sector remains concentrated in cotton
processing, textiles, food processing and petroleum refining.

The share of textile industry in the economy along with its contribution to
exports, employment, foreign exchange earnings, investment and value
added makes it the single largest manufacturing sector for Pakistan. It
contributes around 8.5 percent to GDP, employs 38 percent of the total
manufacturing labor force, and contributes between 60-70 percent to total
merchandise exports. Indeed, with exports reaching about $8.6 billion in
2004-05, Pakistan is one of the largest textile exporters in the world.

Cotton textile production is the most important of Pakistan's industries,

accounting for about 19% of large-scale industrial employment, and
60% of total exports in 2000/01. Pakistan has become self-sufficient in
cotton fabrics and exports substantial quantities. Some long and extra-
long staple cotton is imported to meet demand for finer cottons. About
80% of the textile industry is based on cotton, but factories also
produce synthetic fabrics, worsted yarn and jute textiles. Jute textile
output amounted to 70,100 tons in 1999/00. The textile industry as a
whole employs about 38% of the industrial work force, accounts for
8.5% of GDP, 31% of total investment, and 27% of industrial value-
added.

 Reforms in the Textile Sector

The government is providing support for the local production of textile
machinery. A wide ranging campaign to produce contamination free cotton in
the country with a view to promoting value addition has already been started.
As a result, the cotton prices are now being quoted on a PSCI grade standard
basis. To ensure an abundant supply within the country, cotton is allowed to
be imported and exported freely. To stabilize prices in the domestic market,
the Trading Corporation of Pakistan (TCP) has been intervening as and when
required.

In order to prepare the textile industry in the post quota regime the
government has set up a high level Federal Textile Board with Textile
Commissioner’s Organization serving as its Secretariat. The Board has been
entrusted the task of looking into the issues of clean cotton, labor, social and
environment laws, modernization of ginneries, rationalization of tariffs,
facilitation in sales tax issues and developing a package to promote garment
sector, especially by improving their competitiveness in international market.

TEXTILE POLICY

Pakistan textile sector is passing through a difficult time and facing

many serious difficulties including a severe energy crunch, lack of
modern technology, shortage of gas and high costs of production. The
policy will go a long way in resolving some of the serious issues

The government has announced its first ever national textile policy for
five years. It set the export target of $25 billion to be achieved within
next five years. The policy focuses on export promotion measures,
textile and other sectors instead of steps to increase production and
revive the ailing industry.

It consists of many incentives. Gas and electricity load management,

export refinance at low rates and relief on existing long-term loans are
the few main incentives of national textile policy. The government
claimed it as result-oriented and further that the policy was prepared
in consultations with all major stakeholders including exporters,
industrialists, investors, agriculture experts, State Bank of Pakistan and
other related public and private sectors. It speaks highly about the
restructuring and reorganisation of the textile sector. It includes
drawback of local taxes refund of past R&D claims and magnetisation
of PTA.

Existing challenges

Pakistan textile sector is passing through a difficult time and facing

many serious difficulties including severe energy crunch, lack of
modern technology, shortage of gas, high cost of production, shortage
of water, global economic recession, skilled manpower and the last,
deteriorating law and order situation. Lack of export diversification,
value-addition, limited market access creating problems for the
exporters. According to FBS last year, Pakistan's total exports were
down by 6.7 per cent and textile exports 9.5 per cent mainly because
of severe global economic recession.

Key initiatives

(a) Creation of textile investment support fund (TISF).

(b) Technology up-gradation fund (TUF). It will contribute up to 20 per

cent of capital cost as a grant. The government allocated Rs1.6 billion,
which will increase to Rs17 billion by 2014.

(c) Infrastructure development. The government would provide Rs1

billion for infrastructural development.

(d) Skill development. 0.5 million skilled manpower would be trained

during next five years with the help of industry to overcome the
shortage of skilled manpower - Rs1 billion allocated for the skill
development.

(e) The government would enact a law for the standardisation of value
chain to ensure production of quality products.

(f) All textile machinery imports will be zero-rated to encourage new

investments.

(g) Rationalisation of tariff structure.

(h) Textile sector would enjoy Rs42 billion in subsidies and incentives
during the fiscal year 2009-10.

(i) It exempts the textile industry from load shedding and allows it
prioritised gas supply.

(j) The government has also subsidised the export refinance with a
reduced rate of 5 per cent and Rs2.5 billion allocation. The policy
allocates Rs5 billion relief on the existing long term loans of the textile
industry.

(k) It offers duty drawbacks of between 1 and 3 per cent for a two year
period for value-added textile exports to help the sector offset its
direct and indirect costs.

(l) Technically viable units to be offered loan restructuring, interest

rate relief

(m) Pollution problems in cotton would be resolved under cotton

standardisation and cotton control.

Salient Features of the Policy

(a) Market access and support

The policy stressed the need to have easy market access to the USA
and EU markets. The textile exports and its related items have already
badly hit from the ongoing global economic recession. It is estimated
that easy market access would increase our exports up to US$ 2
billion. It remained one of the key reasons for our low turn textile
exports.

International marketing strategies plays very important role in

achieving the desired targets of exports, capturing of market share,
market access and the last not the least increase overall profitability.
The government will provide every possible market support to exports
so that the target of US$ 25 billion could be achieved within next five
years.
(b) Export house scheme

The announced policy also promised to provide export house facility to

exporters which further included marketing insurance scheme and
improving Information and communication technology. The
government believed these diversified but integrated efforts would pay
the dividends in the days to come. The government would establish
industrial estates in line with garments and textile cities and would
provide all necessary facilities.

(c) Support and facilities

Economics works in integration that is why the policy initiated many

meaningful measures to activate the sub-sectors which include fibres,
ginning, filament yarn, shipping, weaving and knitting, non-woven,
processing, home textiles, garments, fashion and design, technical
textiles, handlooms and handicrafts, carpets.

The main focus of the policy is human resource management and

optimal utilisation of available resources. The policy promised to
support local industries and domestic talent for the promotion of textile
exports. It also encouraged women employment support programme,
support for disabled and handicapped employees. The government
would every possible facility for setting up effluent treatment plant and
government would also encourage establishment of storage,
warehousing and marketing. Furthermore, free trade agreement (FTAs)
would be signed with different countries to seek market access and the
government would also help labelling and branding of products to
enhance local trade.

Missing connection

It seemed that policy lacked to tackle some important issues:

(a) It failed to provide any concrete measure to boost the exports of

textile. There is no fund or measure for resolving the burning issue of
energy deficit, lack of value addition and sector consolidation.

(b) It kept silent about the massive flight of human and financial capital
from domestic textile industry towards more attractive and profitable
regional markets. Even the proposed LTTF facility has little to offer to
exporters/investors/borrowers.
Mixed reactions

Many termed the new national textile policy friendly and result-
oriented, while others labelled it without any clear-cut vision and
strategy to promote exports. Majority appreciated the allocation of
Rs.42 billion to support the different packages announced for the first
year of the policy. The textile manufacturers appreciating the policy
said it had laid down a basis for sound growth of textiles and clothing
sector of the country.

Chairman Pakistan Readymade garments manufacturers and exporters

association (Prgmea) said that it was for the first time that a
comprehensive policy been given to textile sector. Chairman Pakistan
towel manufacturers association (TMA) stressed the need for
implementing the policy in letter and spirit if the required targets set in
the policy are to be achieved. Pakistan apparel forum chairman said it
was the first serious attempt to sort out issues confronting different
segments of textile industry.

CURRENT SITUATION OF TEXTILE INDUSTRY IN PAKISTAN AND ITS

REASONS

The growth in the textile exports of Pakistan is gradually declining. Textile

exports in Pakistan grew from 8.92 billion USD in 2004-05 to 10.11 billion
USD in 2005-06, reflecting a growth rate of 18%. As against this, in the
current year, export growth has been only 5%. This is growing to be an issue
of concern for the Pakistani government. The exports of readymade garments
grew from 1.190 billion USD to 1.254 billion USD in the period July 2006 to
May 2007 as compared to the same period in the 2005-2006. This amounted
to a growth of 5.35%. The exports of knitwear also grew from 1.570 billion
USD to 1.773 billion USD during the same period, recording a growth rate of
12.94%. However, there was a decline in the growth rate of export in raw
cotton, bed clothes as well as cotton cloth during the same period. The export
growth rate of raw cotton fell by 21.73%, while that of bed clothes and cotton
cloth dropped by 3.10% and 4.10% respectively. In order to bring the
Pakistan textile industry out of its current crisis, it is necessary that certain
strict measures be taken to meet the challenges that the industry is facing.
The Pakistan textile industry is currently facing several challenges. According
to experts, there is a need for the industry to improve the quality of its
products. There is also the need for greater value addition in its products.

The textile machinery used in Pakistan is imported mainly from the countries
of Japan, Switzerland, Germany, China and Belgium. The technology that is in
use in the industry leaves a lot to be desired. It is necessary that the industry
undertake an up gradation in the technology used. Also, there is lack of
efficient R&D and training. The lack of R&D in the cotton sector of Pakistan
has resulted in low quality of cotton in comparison to rest of Asia. Because of
the subsequent low profitability in cotton crops, farmers are shifting to other
cash crops, such as sugar cane. In Punjab alone, the cotton area sown this
season was less by 1.14 percent as compared to the last year. Textile owners
argue that although the Cotton Vision 2015 targets 20 million bales till 2015,
it is an ambitious target as in reality cotton production is decreasing each
year. It is the lack of proper R&D that has led to such a state. They further
accuse cartels, especially the pesticide sector, for hindering proper R&D. The
pesticide sector stands to benefit from stunting local R&D as higher yield
cotton is more pesticide resistant. Another challenge is the high interest rate
as compared to India, China and Bangladesh. The Pakistan textile industry is
facing tough competition from the Indian, Bangladeshi and Chinese textile
industries. The cost of power in Pakistan is high as compared to that in other
countries. On account of these reasons, the Pakistan textile industry is going
through a critical condition.

Consequently, the country has become a semi-finished raw material source

for those nations involved in value addition and apparel production. It could
also be said that Pakistan is serving other nations to earn more foreign
exchange on export of value-added products. According to the National
Assembly Standing Committee on Textile Industry in Islamabad, "Pakistan
needs to improve bilateral relations with the US for greater market access.
PROBLEMS FACED BY TEXTILE INDUSTRY HIGHLIGHTED

 Lost competitiveness in the global market

 Lack of awareness of global trends and changing rules and regulation.
 The reinvestment and introduction of the latest technology
 Sector did not focus on the emerging trend of the value additions
 More dependence on cotton
 Poor infrastructure
 Unstable political situation
 Obsolete technology machinery and equipment used for manufacturing
 Availability of raw material and inconsistent raw material prices
 Unskilled labor (only 1% workers have certificate / diploma from
technical training institutions)
 Absence of research and development culture
 Lack of synergies between Govt. support institutions and practical
market.
 Lack of standardization and quality control
 Non-sophisticated marketing sense. (branding & grading)
 Unorganized vendor base
 Limited access to information (availability of finance, technological
know how & Govt. regulations)
 Energy costs
 20% Interest On Bank Loans
 Tariff hikes of Gas
 Tariff hikes of Electricity
 Frequent Interruption in supply of electricity and Gas
 High Freight Cost
 Demand Of drastic cut on textile products from their buyers from US
and EU

FUTURE OF TEXTILE INDUSTRY

Demand of textile products is increasing every year to almost 3%. So

Pakistan can also capture some share from this but the industrialists and the
government need to focus on this sector. Textile industry just needs a good
leader in the government which can drive the industry in a right direction.
Textile Industry of Pakistan can kick its competitors far off and can contribute
up to 90% in the total GDP of Pakistan. In short Textile Industry of Pakistan
has a great potential, it is lacking in some natural resources like power and
some political unstability of the country is also playing a vital role in the
reverse gear of Textile sector. But I am sure Textile industry of Pakistan will
grow and will keep its big share in the world textile.

MAJOR PLAYERS IN THE TEXTILE INDUSTRY OF

PAKSITAN
Company Name Rs. in Rs. in Rs. in
Million Net Million Net Million Net
Worth Income Profit
A.A. Textiles Ltd. 223.2 822.3 53.9
Ahmad Hassan Textile Mills 209.8 659.4 101.8
Ltd.
Al-Abid Silk Mills Ltd. 352.3 2033.1 80.8
Al-Hamad Textile Mills 96.3 380.2 28.2
Allawasaya Textile 7 Finishing 77.6 589.4 28.9
Mills Ltd.
Apollo Textile Mills Ltd. 213.3 968.8 18.8
Artistic Denim Mills Ltd 321.2 917.2 55.4
Ayesha Textile Mills Ltd. 152.8 1211.6 118.2
Bengal Fibre Industries Ltd. 91.8 389.5 19.3
Bhanero Textile Mills Ltd. 325 1308.3 165.2
Blessed Textile Ltd. 215.8 693 116.4
Burewala Textile Mills Ltd. 337.9 431.1 60.5
Chanab Fiber Ltd. 108.6 478.6 47.8
Colony Textile Mills Ltd 96.4 683.3 147.7
Crescent Textile Mills Ltd 1425.9 4632.5 246
Dares Salaam Textile Mills Ltd 92.3 452.1 82.5
Dewan Khalid Textile Mills Ltd 254.7 560.6 31.9
Dewan Mushtaq Textile Mills 124.8 761.7 38.5
Ltd
Dewan Salman Fibre Ltd 458.4 6723.7 514.2
Dewan Textile Mills Ltd 685.4 2282 121.6
Dilon Ltd 100.7 186.6 18.5
Faisal Spinning Mills Ltd 387.9 714.3 127.9
Fateh Textile Mills Limited 585.2 3636.2 21.9
Fazal Cloth Mills Ltd 257.5 1553 107.2
Gadoon Textile Mills Ltd 1332.5 3438.6 485.4
Gatron Industries Ltd 1709.6 4924.9 349.9
Gul Ahmed Textile Mills Ltd 1322 4516 558
Gulistan Spinning Mills Ltd 214.5 592.8 76.8
Gulistan Textile Mills Ltd 875.8 2323.6 120.2
Gulistan Spinning Mills Ltd 512.2 4373.4 99.8
Hussein Industries Ltd 276.1 1188.6 35.7
Ibrahim Fires Ltd 5138.1 6944.2 474.8
Ibrahim Textile Mills Ltd 239.9 1161.6 52.8
ICC Textiles Ltd 147 629 31.8
Ideal Spinning Mills Ltd 137.2 536.5 22.8
Indus Dyeing & Manufacturing 281.2 2184.7 134.6
Co Ltd
Ishaq Textile Mills Ltd 218.7 742.8 10.8
Khalid Siraj Textile Mills Ltd 144.6 367.4 46.5
Kohat Textile Mills Ltd 96.2 532.3 27.7
Kohinoor Raiwind Mills Ltd 525.4 1372.9 132.0
Kohinoor Textile Mills Ltd 502.8 2251.8 97.7
Kohinoor Weaving Mills Ltd 741.8 2140 308.7
Landmark Spinning Industries 121.2
Ltd
Lawrencepur Textile Mills Ltd 245.6 298.7 29.8
Liberty Mills Ltd 193.3 1455.7 35.1
Mahmood Textile Mills Ltd 816.1 2936 421.3
Maqbool Textile Mills Ltd 146.7 640.7 34
Main Textile Industries Ltd 114.3 807.6 51.4
N.P. Spinning Mills Ltd 155.8 922.3 61
Nadeem Textile Mills Ltd 188.5 406.7 54.4
Nakshbandi Industries Ltd 262.6 1067.2 27.6
Nayab Spinning & Weaving 251.6 413.5 12.3
Mills Ltd
Nina Industries Ltd 352.3 892.4 16.3
Nishat Chunian Ltd 595.5 2367.0 357.5
Nishat Mills Ltd 4569.6 10134 700.9
Paramount Spinning Mills Ltd 286.6 830.7 3
Prosperity Weaving Mills Ltd 244 1141.1 78.5
Quetta Textile Mills Ltd 245.9 1792.9 110.4
Reliance Cotton Spinning Mills 236.1 701.3 40.3
Ltd
Reliance Weaving Mills Ltd 313.4 1306.9 143.1
Rupali Polyster Limited 1374.1 2175.2 140.4
S.G. Fibre Ltd 417 808 66
Saif Textile Mills Ltd 506.1 1066 28
Samin Textile Mills Ltd 256.5 1012.9 32.1
Sapphire Fibres Ltd 1305.7 2499.6 500.9
Sapphire Textile Mills Ltd 1108.3 4128.1 650.2
Shahpur Textile Mills Ltd 161.2 416.6 24.6
Shahtaj Textile Mills Ltd 146.8 474 39.6
Sunrays Textiles Mills Ltd 91.9 861.6 87
Tata Textile Mills Ltd 223.5 793.3 120.7
Thal Jute Mills Ltd 331.2 1406.4 68.6
Towellers Ltd 384.2 1766.4 43.3
Yousaf Weaving Mills Ltd 225.9 1271.9 47.9
Yusuf Textiles Mills Ltd 122 603 89.1
Zainab Textiles Mills Ltd 261.1 991.5 61.1
Zaman Textile Mills Ltd 89.4 407.2 21.6

At Present, the industry consists of large-scale organized sector and a highly

fragmented

cottage / small-scale sector. The organized sector comprises integrated

textile mills i.e. spinning units with Shuttle-less looms. The down stream
industry (Weaving, Finishing, Garments, Towels & Hosiery), with great export
potential, is mostly in the unorganized sector.
SWOT ANALYSIS OF TEXTILE INDUSTRY PAKISTAN:

Strengths:

1. 4th largest Cotton producer

2. 64% of country’s export volume
3. 1.4m people employed with 50% in apparel
4. Availability of cheaper labor at US$ 0.39 per hour
5. Raw Material Base
6. Rich Heritage
7. Demand Driven Industry (more than 4000 units for textiles alone)
8. Strong presence in local market
9. Geographically situated at ideal location (near end users)
10.Most setups are self employed and have simpler management
structure

Weaknesses:
11.Low Price Image
12.Lower marketing initiatives
13.Limited use of modern technology
14.Confusion in political / religious scenario
15.Low levels of managerial capabilities
16.More dependence on cotton
17.Poor infrastructure
18.Obsolete technology machinery and equipment used for manufacturing
19.Availability of raw material and inconsistent raw material prices
20.Unskilled labor (only 1% workers have certificate / diploma from
technical training institutions)
21.Absence of research and development culture
22.Lack of synergies between Govt. support institutions and practical
market.
23.Lack of standardization and quality control
24.Non-sophisticated marketing sense. (branding & grading)
25.Unorganized vendor base
26.Limited access to information (availability of finance, technological
know how & Govt. regulations)
27.Energy costs
28.20% Interest On Bank Loans
29.Tariff hikes of Gas
30.Tariff hikes of Electricity
31.Frequent Interruption in supply of electricity and Gas
32.High Freight Cost

Opportunities:

33.Better laid down factories on ‘best practices’

34.Potential of improving confidence in buyer by working directly &
closely
35.Home Furnishing from Pakistan have made a big name worldwide
36.Women’s wear has a huge potential
37.Pakistan Textile City
38.Marketing
39.Collaboration with foreign countries
40.Re-engineering of Product system
41.Producing high value products

Threats:
 42.Rising Cotton Prices
43.China and India being considered as countries for high value added
garments
44.Price Pressures

Financial Analysis

Liquidity ratios:

Liquidity is basically a firm’s ability to meet its obligations. It depicts the

company’s overall resources to pay off its resources where ever needed. We
look at the picture of liquidity ratios and come across that almost every year
the liquidity position of the company is declining and is getting worse off
every year. In year 2002 which is the base year from where we started our
analysis it depicts that year 2004 was comparatively doing great business as
compared to year 2009. We came across that in year 2009 the liquidity
position of crescent textile company is not showing good results. 2007 and
2008 were considered as better records in terms of liquidity of the company.

The current ratio for the company has been on the decline throughout the six
years in question. It was around 1.84 times in 2002, which fell to almost 0.95
times in 2009. This indicates that the company can pay off its current
liabilities from its current assets 0.95 times over in 2009, as compared to
1.84 times over in 2002.

The Payable Days refers to the number of days it takes the firm to pay its
bills. Payable days of ‘Din Textile Mills Ltd’ has decreased from 32 days in
year 2002 to 20 days in the year 2009. It means that the company is paying
off its liabilities in 12-13 days. Whereas industry averages show a payable of
52.6 days. Din Textile Mills Ltd is paying off their liabilities quickly and as
soon as possible. Too large a ratio can mean that you are becoming a bad
debt for your debtors, and too low a ratio could mean that you may run out of
cash when you need it for investment purposes at some point-opportunity
cost.

Efficiency ratios:

Efficiency ratio is to evaluate the overhead structure of a financial institution.

The surviving companies are those that keep costs down. The efficiency ratio
gives us a measure of how effectively a company is operating. It is
considered that the higher the efficiency ratios are for a company, in relation
to the industry average, the better and more effectively it is used to control
its assets and to generate earnings.

Receivable turnover basically depicts that whether the company is facing any
problems while receiving its collectible or not. Receivable turnover of the
company has decreased from year 2004 to year 2009. In year 2002 6.75
times whereas in year 2009 it dropped to 6.72 times. The higher the
receivable turnover the more efficient is the company whereas due to slight
decline in receivable turnover it depicts that company has lost its little
efficiency. Whereas when we compare the receivable turnover with the
industry which is 17.41 times, we come across that it is much higher and
industry is running at a very efficient pace and the crescent textile is not that
efficient.

Inventory turnover of the company has decreased in year 2009 to 6.45 times
whereas in year 2002 it was 7.79 times. This shows that efficiency of the
company has Decreased. Industrial average for inventory turnover is near
about to company’s average which is 7.7 times. Therefore in year 2009 Din
Textile Mills Limited has become a bit inefficient.

The fixed-asset turnover ratio measures a company's ability to generate net

sales from fixed-asset investments - specifically property, plant and
equipment (PP&E) - net of depreciation. A higher fixed-asset turnover ratio
shows that the company has been more effective in using the investment in
fixed assets to generate revenues. Considering the ratios of 2009 ratios have
slightly changed from year 2002. In year 2009 fixed asset turn over ratios
were 2.13 times whereas in year 2004 it was 2.39 times, whereas industrial
ratios in year 2009 were 1.33 times and in year 2002 they were 2.55 times.
This shows that fixed asset turnover ratio of crescent textile was higher than
the industrial ratio of the sector which reflects that company is more
effectively using the investment in fixed assets to generate revenues.

Efficiency of the company is showing good records in year 2009 as for the
reason of investment done by the company and additional input increment
made by the company as compared to average industrial ratios.

Solvency ratios:
The solvency ratio measures the size of a company's after-tax income,
excluding non-cash depreciation expenses, as compared to the firm's total
debt obligations. It provides a measurement of how likely a company will be
to continue meeting its debt obligations. Solvency ratios measure the
relationship between debts and owners equity and examine the proportion of
debt the company is using.

A debt ratio indicates what proportion of debt a company has relative to its
assets. The measure gives an idea to the leverage of the company along with
the potential risks the company faces in terms of its debt-load. In year 2002 it
shows that 37% of the debt were financed through the assets whereas
industrial ratio was comparatively lower in year 2002 and was about 54.76%.
In year 2009 debt ratio was 65% whereas industrial ratio showed the figure of
61.52%.

Long term debt to capital has increased in year 2009 as compared to 2002,
28% to 43% whereas industrial average ratios of these years are
comparatively higher.

Overall solvency has decreased which shows that company is being less
solvent and resulting in better position of the company.

Profitability ratios:

A class of financial metrics that are used to assess a business's ability to

generate earnings as compared to its expenses and other relevant costs
incurred during a specific period of time. For most of these ratios, having a
higher value relative to a competitor's ratio or the same ratio from a previous
period is indicative that the company is doing well.
Overall profitability of the company in year 2009 has increased in comparison
to all the previous years and is in line with the averages of industrial ratios of
the sector.

VERTICAL ANALYSIS:

A method of financial statement analysis in which each entry for each of the
three major categories of accounts (assets, liabilities and equities) in a
balance sheet is represented as a proportion of the total account. The main
advantage of analyzing a balance sheet in this manner is that the balance
sheets of businesses of all sizes can easily be compared. It also makes it easy
to see relative annual changes in one business.

Non- current assets have shown an improvement in year 2009 as compared

to 2008 whereas total current assets have decreased as compared to year
2008.

Non-current liabilities have decreased in year 2009 where as current

liabilities have increased.

Cost of product sold in 2009 is showing a better position by decreasing, which

indicates that sales in year 2009 have increased sufficient enough in order to
earn profit.

HORIZONTAL ANALYSIS:

A procedure in fundamental analysis in which an analyst compares ratios or

line items in a company's financial statements over a certain period of time.
The analyst will use his or her discretion when choosing a particular timeline;
however, the decision is often based on the investing time horizon under
consideration.
Considering this we took 2002 as a base year.

Considering balance sheet, total assets and liabilities have increased from
year 2005 which was 5.66% and in year 2009 its 57.9% which reflects that a
large number of assets have been acquired by the company in order to
generate revenues.

Considering the horizontal common-sizing, income statement, sales of the

company has jumped from 76.2% in year 2005 to 198.96% in year 2009.
Whereas net income in year 2005 was 193.74% which increased 3 times
more than 2005 and turns to 435.59% in year 2009. This shows that
company is generating more of the revenues.

FORECAST AND FUTURE OUTLOOK:

The improvement in demand for cotton on better international economic

outlook is likely to keep its prices firm. This will lead to reduced margins for
domestic industry which is already facing high interest rates, power/ gas
shortage and rising input costs. However, an early reduction in mark up rates,
implementation of positive steps in Textile Policy,2009 and last but not the
least any relaxation from EU on market access will greatly help improving
performance of the industry.

This company, however, has focused to improve performance of the company

through sustained growth in sale of value added products having good
margin and will strive to pursue this strategy through dedicated efforts by
reducing costs with efficient and better resource utilization.
CONCLUSION:

To achieve its VISION your management plans to speed-up its efforts towards
enhancing the performance of the company in future. In a tough business
environment and competitive times ahead the company is focusing on
lowering costs to achieve sustained profitability through growth in sales of
better product mix with improved margins. With all efforts on timely
execution of customers' orders and close monitoring of teams performance it
is hoped that financial position of the company will further strengthen to add
significant value for its shareholders.
To boost exports and improve foreign exchange reserves of the country the
Govt. had unveiled Textile Policy, 2009-14 on August 12, 2009 which aimed
at achieving US$25 billion textile exports in 05 years time against present
exports of US$10 billion. The policy envisages various measures and financial
package for the industry; which upon implementation will help in improving
performance of the Industry. Moreover, with improved cotton crop and stable
prices it is expected the industry will do better provided global recession
recedes earlier than expected.
The company has earned profit of Rs.9.81per share in the year 2009 as
against after tax proft of Rs.1.79 per share in previous year.
We give below the statement of Corporate and Financial Reporting framework
in compliance with Code of Corporate Governance:
a. Financial statements prepared by the management represent fairly and
accurately
company's state of affairs, results of its operation, cash flows and changes in
equity.
b. Proper books of accounts have been maintained.
c. Appropriate accounting policies have been consistently applied in
preparation of financial statements and accounting estimates are based on
reasonable and prudent judgment.
d. International Accounting Standards as applicable in Pakistan have been
followed in preparation of financial statements.
e. System of internal control is sound in design, has been effectively
implemented & being monitored continuously. On-going review will continue
in future for further improvement in controls.
f. The company has sound potentials to continue as going concern.
g. There has been no material departure from best practices of corporate
governance.