Analysing Financial Statement of Gul Ahmed Textile Mill LTD Essay

OBJECTIVEObjective of our analysis is that we atomic number 18 a bank and we lead provide loan to Gul Ahmed because Gul Ahmed has applied for a loan, so we argon vent to check the credit worthiness of Gul Ahmed by analyzing their financial statements in detail to give away whether providing loan to Gul Ahmed will be appropriate or not.COMPANY PROFILEGul Ahmed is one of the declamatoryst home fabric manufacturing companies in Pakistan. Since its fountain in 1953, the company has been a trend-setter in the Pakistani cloth application and has serviced a respective(a) range of customers across the globe.Gul-Ahmed is a completely vertical textile mill comprising ofstate-of-the- art spinning, weaving, recite-dyeing, piece-dyeing, printing (pigment and antiphonal on rotary as well as flat bed), stitching, embroidery and quilting facilities. The vertical anatomical structure gives Gul Ahmed much best(p) visualise over the quality of its products as comp ard to other mills.Apar t from the state of the art production facilities, Gul Ahmed is in like manner equipped with the latest effluent treatment correct, caustic reco in truth, steam recovery and waste material heat recovery plants. This makes Gul Ahmed one of the greenest and most socially responsible textile mills in the region.Gul-Ahmeds product range is quite diverse, and includes sheets, comforters, multi needle quilts/duvets, decorative pillows, window hangings, table & Kitchen Linen etc. Gul Ahmed also has the capability to do foam-back/black-out curtains and lining, as well as acrylic coating and flocking.TEXTILE INDUSTRIES OF PAKISTANThe Pakistan textile assiduity count export is around 9.6 gazillion US dollars. The textile industry contri furtheres approximately 46 percent to the total output or 8.5 percent of the country gross domestic product. In Asia, Pakistan is the 8th largest exporter of textile products providing employment to 38 percent of the work force in the country. However, the textile industry currently faces massive challenges. The textile domain enjoys a pivotal position in the exports of Pakistan. In Asia, Pakistan is the 8th largest exporter of textile products. The contribution of this industry to the total gross domestic product is 8.5%. It provides employment to active 15 jillion people, 30% of the country work force of most 49million. The annual volume of total world textile trade is US$18 trillion which is increase at 2.5 percent. Out of it, Pakistans shell out is less than one per cent. The victimization of the Manufacturing Sector has been given the highest antecedency since Pakistans instituteing with major stress on Agro-Based Industries.For Pakistan which was one of the lead-in producers of cotton in the world, the suppu symmetryn of a framework Industry making full-of-the-moon use of its abundant resources of cotton has been a antecedence argona towards industrialization. At present, there are 1,221ginning units, 442 spinnin g units, 124 large spinning units and 425 small units which produce textile products. Pakistans textile sector earned US$5.77 billion during the 2003 course of study, compared with US$5.577 BILLION OF 2000-2001 indicating a offshoot of 0.69%. The total exports of textile sector in 2004 were US 5.7 billion which shows 2.5% suppuration it increase to 4% ripening in 2005 as compared to 2004.The textile sector shows 8% negative return in 2006.The negative growth continue in 2007 aslo with the value of 5%.The textile sector shows 15% growth in 2008. without delay we will discuss the main efforts of crisis in textile industry step by step in detail.a. Lack of Modernize EquipmentMoreover, critics argue that the textile industry has obsolete equipment and machinery. The inability to timely in advance(p)ize the equipment and machinery has direct to the decline of Pakistani textile competitiveness. Due to obsolete technology the cost of production is higher in pakistan as compared to other countries like India, Bangladesh & china.b. Raw material outlaysPrices of cotton & other raw material utilize in textile industry flicker rapidly in Pakistan. The rapid increase in the equipment casualty raw material effect the cost of production badly. The increase in raw material outlays fluctuate rapidly over referable to double digit inflation. Sealand Logistics Solutions is helping textile oriented comanies with the help of logistics solutions in import modern equipment and make valuable connections with reliable leading raw material provider at very competitive prices.INDUSTRY OVERVIEWTextile industry has the biggest share of Pakistan exports from raw material to blameless earnests in contrary global markets. During FY 2011-12 the countrys textile exports relieve oneself drastically reduced by 10% to $12.529 billion against $13.975 billion of FY 2010-11. One of the major causes of under surgical procedure is the persistent electricity and gas load shedding pl aguing the industry which has hindered the performance and competitiveness of the textile industry. The consumer sentiments in US and EU remained bearish, causing a decline in textile related procures. Up money box March 2012,global textile exports declined by 9.4 %. A major reason for this was excess contains built up by the retailers and stuck up within the supply chain. It took almost a course for the supply chain to free itself from legacy stocks. Finally activity has started to pick up across large retailers in the west and we expect to see significant improvements this year.AUDITORSThe present auditor is Hyder Bhimji & Co. Chartered Accountant for Gul ahmed Textile retire and wait for other ap smearment, they have been winning the trust of Gul ahmed from 2009 to till today before that till 2007 were Gardezi & Co. Chartered Accountant. The Auditor statement for 2012 was as Balance sheet, P & L, Cash flow and other citywide income statement were in accordance with the Compa ny Ordinance 1984, in our assent proper books of account have been kept by the companys ordinance, 1984.IMPORTANT KEY POINTSMr.Zain Basheer, Director of GAMT and son of Muhommad Ali Basheer Chairman of GAMT when found out that price of yarn was about to increase at the start of the 2012 year, realized that purchase of yarn in bulk quantity can result in big profits.So, he decided to purchase yarn in big quantity and as he planned GAMT invest a great amount in buying yarn.But luck was not really in their favor and the price of yarn falls down with a big margin and they face a real unenviable time and as a result their Cost of Sales increases which results in big departurees in 2012 as compared to 2011 in which they hit the gigantic mark of 26 billion Rupee which make them the best(p) textile in this era.Their Expenses also increase because they paid the big amount in Murabaha also in 2012.Interest Expenses and Taxation also shows the clear difference in 2012 from 2011 that also was one of the reason of losses.If you see on the vertical analysis Equity section their Capital and Reserves increase that is why the loss which fall to -1.25 from positive figure 5.23 hard to figure in overall uprightness section but the reserves was at the beginning of 2012, which means it was covered in 2011 and by the end of 2012 their reserves are less because of huge loss.PERFORMANCE EXPECTATIONSPerformance expectation after analyzing the financial statement of Gul ahmed is very good compared to any other textile mill. The Companys sales amounting to Rs. 25,064 million is declined by 1.46% a compared to the check year. Drop in exports have been compensated by increase in local sales. Decline in gross profit is due to the inflation without any corresponding increase in transfering prices. During the fiscal year (FY) 2012 tight financial conditions, weak confidence and fiscal consolidation in various right economies hampered the economic progress. Many emerging economies we re also hit by decreased enthronization and anticipated growth uncertainty, which led to equity price declines, capital outflows and currency depreciation. As perth World Economic Forum, the world GDP growth on YoY basis will drop from 4% in 2011 to about 3.5% in 2012.Domestically, GDP for FY 2012 was 3.7% (FY 2011 3%) as per Economic Survey of Pakistan 2012. The increase was mainly due to the growth in commodity producing sectors, specially the agriculture sector in the country.Total investment and exports showed a significant contraction. The total investment, as a percentage of GDP, has fallen to 12.5% in FY 2012 (FY 201113.1%), which does not bode well for the future productive dexterity of the economy. fanfare in June 2012 was 11.3% (June 2011 13.1%) on YoY basis which was due to increase in brawniness and oil prices, supply disruptions due to heavy rains earlier at the start of the fiscal year and increased borrowings by the government. During the first one-half of the yea r 2012, State lodge of Pakistan (SBP) reduced the policy rate by 200 basis call for lowering it to 12% and kept the rate unchanged during the second half. The reduction of 200 basis point was made to improve the falling private investment which is compromising the medium term productive capacity of the economy, and to control future inflation. After assessing the impact of reduction in thefirst half, SBP realized that continued energy shortage is a major factor behind low demand for private credit for mend investment.Return on Equity shows also a clear increasing trend for GATM, Equity is increment as it is a growing industry and in 2011 it shows a great impact in equity as it was the year which change the history for GATM they cossed the gigantic mark of 25 billion rupee indeed in 2012 it is slightly decreasing.Sales in MillionsLawsuits and contingenciesThe sort owns and possesses a plot of land measuring 44 acres in Deh Khanto, which is appearing in the books at a cost of Rs . 64 million. The Group holds surname deeds of the land which are duly registered in its name. Ownership of the land has been challenged in the Sindh mellowed judgeship by some getants who claim to be the owners, as this land was previously sold to them and subsequently resold to the Group. The claim of the alleged owners is fictitious. The Group is confident that its title to the land is secure and accordingly no preparation has been made in these financial statements. The Group has filed a suit in the Sindh High woo for recovery of Rs.33.409 million (2011 Rs. 33.43 million) included in other receivables. The Groups management and its legal counsel are of the opinion that the case will be decided in the Groups favour and as much(prenominal) no provision has been made there against.The Group has filed a Petition in the Sindh High coquette against order passed by the Board of Trustees, Employees Old-Age Benefits Institution (EOBI) for upholding the unjustified additional deman d of payment raised by EOBI for accounting eld 2000-01 and 2001-02 amounting to Rs. 50.827 million (2011 Rs. 50.827 million). This demand has been raised after lapse of more than two years although the records and books of the Group were verified by the EOBI to their entire satisfaction and finalization of all matters by EOBI. The Honorable Sindh High Court has already restrained EOBI from taking any action or proceedings against the Group. No provision has been made there against in these financial statements as the Group is confident of thefavorable outgrowth of the Petition. The Group has filed a Constitution Petition in the Sindh High Court against the City District Government of Karachi for big down the unjustified demand of payment of Ground Rent of Rs. 10 million. The Honorable Sindh High Court has already restrained the City District Government of Karachi from taking any coercive action against the Group. No provision has been made there against in these financial stateme nts as the Group is confident of the favourable outcome of the Petition.INVESTMENTSBy looking at the financial statements of GATM, we dont find any unwise investment made by the company. The following information from cash flow gives a clear idea about all current cash generating from cash flows for the following year. Addition to property,plant & equipment.Would you recommend a buy/sell/hold on stock given on the current price stock prices? Why? Price targeted have been updates at GATM, if you see the present condition as investors overview Earning per share at year ended 2012 was (1.89) and P/E ratio was (11.17), a negative EPS numbers are usually describe as not applicable for quarter on which company reporteda loss. Investor buying a company with negative P/E should be aware that they are buying a share of a company that has been losing money per share of its stock. For now it is hard to recommend buy of stock unless it is better to hold its stock for some time because gulahmed past performance had been better on scale.What is Companys secret?Gul-ahmed has always work on bringing innovation to the product development because they know the importace of being tech-savy and innovative from decades they have been working with the latest technology of that era. The installation of first full automatic wider width Air jet looms, 21 color rotatory printing machines and a modern laboratory in entering into 21st century, Another world-class idea came to our mind and retail take Ideas open in every part of the country. They have always been working on their U.S.P to make it better than others and it had paid off. At present they are working on high tech saving machines which is amply computerized and functions task of more than 20 men and this machine is only owned by GATM in Pakistan, this compete major part in crossing gigantic mark of 25 billion rupee in 2011 which is by far the best output by any textile industry in Pakistan. organism tech-savy is the spirit implies two opposing forces of providing fast and flexible response to customers, yet building efficient mechanisms and systems that are efficient and waste-free.The concept is to provide the right product and information, at the right time, in the right amount, in the right manner, while maintaining high standards of efficiency and cost control. IMC practices this contradictory idea in our daily activities to control their capital locked in inventory and to maintain a healthy customer relationship. Q7 Is it a growing/declining industry?It is a growing industy because if you see their progress from when they start they have reached the top of textile industry and inspection and repair its customer from more than last 50 years, they have always come up with naked as a jaybird technology and innovative ideas. One of the current creative idea is, a 136.17 MW private power plant at Korangi Industrial Area of Karachi. Theproject is a joint venture of Gul Ahmed Group, Toyoda Tsusho Cor poration of Japan, International finance Corporation (IFC) and Wartsila Diesel Oy of Finland. Gul Ahmed Energy Limited is backed by GUL AHMED GROUP which is one of Pakistans leading industrialist / business group since 1948 with a much diversified portfolio of trade, manufacturing, banking, industries, businesses and investments. Business ventures range from Finance, Energy, Beverages, Real Estate, Information engineering and Textile (the Groups main forte) The Group is involved in the manufacturing of cotton yarns, grey and finished cloth and textile made ups and is one of the leading exporters of textile products from Pakistan Some of the companies forming part of the Group are provided belowInterpretation Earnings per share is that amount you earn on every single ratio gulahmed is order to grab them and organization like gulahmed tries to maintain their goodwill with investor rather than giving them extra incentives and in 2012 they are negative, which is imposible for EPS becaus e no one can pay negative value.CONCLUSION & FINDINGSWe as a Bank have walked upon a decision that we should gave the loan to Gul-ahmed after studying their financial statements they are a very growing organization.If we see their present condition in 2012, they are in loss but this was due to one bad decision by Director of GAMT which was made to amazed the world once again after 2011 gigantic mark sales in 2012 but it did not paid off.Financial ratios shows a slight change except R.O.E, E.P.S and P/E Ratios which are negative in 2012 as GAMT was in loss in present year.Before that E.P.S was growing and in 2011 it was 9.42 which is a very healthy earning per share.