Based on continued excellent performance and commendable distribution to shareholders, Clariant Pakistan Limited (CPL) has been able to achieve a hat-trick and was selected for the third time in continuation by Karachi Stock Exchange for Top 25 Companies Award for 2001, 2002 and 2003. Profitability and cash dividend (at 130 %) during the year under review makes CPL a strong contender for KSE Top 25 Companies Award for 2004. CPL is one of the companies represented on the KSE 100 Index.
CPL has reported that its share with par value of Rs 10 has been transacted at its highest at Rs 256 on 8th January 2005 and lowest at Rs 130 during 2004.
CPL, a public limited company quoted on Karachi Stock Exchange, was incorporated in 1996 as a result of world-wide de-merger of Chemical Division of former Sandoz (Pakistan) Limited. Besides, manufacturing Textile and Leather Chemicals, Dyes, Pigment Preparations and Master-batches, CPL acts as indenting agents for the parent company and affiliates in Chemical, Dyes, Paper, Leather, Emulsions, Surfactants, Fine Chemicals, Pigments & Additives and Functional & Life Sciences. CPL's production during the year was 36,788 tonnes (2003: 29,581 tonnes).
According to CPL, its capacity is indeterminate because of multi-product plants involving varying processes of manufacture.
CPL is a subsidiary of Clariant International Limited incorporated in Switzerland. Based at Muttenz near Basel, Switzerland, Clariant is a global leader in the field of fine and specialty chemicals. Some 28,000 employees in more than 100 group companies on five continents are said to generate annual sales of over CHF nine billion. Clariant International holds 75% shares of CPL.
In all CPL has 885 shareholders, of which 836 shareholders are individuals who hold only 8% shares. NIT and ICP hold about 12 % shares while the rest about 5% are with public sector companies/corporations and financial sector companies and institutions.
CPL's total turnover for 2004 stood at Rs 5.026 billion showing a growth of 16% as compared to last year's turnover of Rs 4.340 billion. This growth is said to be the result of improvement in all business sectors of the company and is largely attributable to volume growth. Favourable sales growth in Textile, Leather and Paper Division has been recorded at 15% and for master-batches at 25% in comparison to last year.
Despite this significant volume growth the operating profit of CPL remained at the last year's level mainly on account of high rates of foreign currency compounded by the global surge in prices of petroleum based raw materials. Inflation has already adversely affected gross and operating margins, which were 23% and 15% respectively in 2004 as against 27% and 18% respectively in 2003.
However, the bottom line profit improved due to the refund of Sales Tax by the CBR to the tune of Rs 76 million on account of the decision of the Honourable High Court of Sindh in favour of the company.
The case was in dispute since last eight years. But for this large refund, CPL was unlikely to achieve net profit to equity at 37% for 2004 as against 38% in the previous year. During 2004, CPL contribution towards Government's exchequer by way of sales tax, income tax, etc was Rs 1.232 billion, which is nearly 25% of the Gross Sales. More details on its financial position and profitability are provided in Performance Statistics.
CPL's financial position-both short term and long term - is satisfactory. However, Inventory and trade debts are considerably high. At end of 2004, Inventory, in relation to Sales was for 89 days while Receivables were for 105 days. These have been financed largely through short-term finance which increased to 29% of total assets at end 2004 as against 23% for 2003. Level of Inventory and Receivables deserve attention of CPL management.
Generally, trading in CPL shares is not heavy. On 11-03-05 CPL share closed at Rs 192.05 as against per share Book Value of Rs 57.50 at end of 2004, yielding Price/Book Value Ratio at 3.34 times. This could partly be due to high dividend payout ratio maintained by the company during the last six years, with payout ratio ranging between 56 to 81% of annual profit.
Total number of employees at year end was 353 (2003: 367). Besides, focus to the individual requirements of its customers, CPL is looking after its employees. The value of investment of Provident and Gratuity Funds based on latest audited account at June 30, 2004 is reported at Rs 186 million and Rs 169 million respectively.
Transactions with Related Parties during 2004 amounted to Rs 1.119 billion, which work out to 22% of Gross Sales. Of this, Purchase of Goods and Machinery exceeded Rupees one billion. It has been stated in the annual accounts that CPL enters into transactions with related parties for sale of products, purchases of goods, indenting business and rendering of certain services.
Further, that consideration for purchase and sale of goods and services is determined based on mutual agreement considering the nature of goods and level of services provided. In the case of indenting business, CPL acts only as an agent for the supplier for which it receives indenting commission. In addition Royalty for the use of technical know-how is paid to Clariant International AG, Switzerland on the sale of such branded locally manufactured products as are included in the royalty agreement duly registered with the State Bank of Pakistan. Royalty payment for 2004 was Rs 20 million as against Rs 16 million for 2003.
CPL has an ESH (Environment, Safety, Health) management system in place, which is reportedly an integral component of its business processes. CPL has a 10-acre scientific lagooning facility for the purpose of effluent treatment at Jamshoro. CPL has already acquired the ISO 9001: 2000 Certificate for having the Quality Management System at all the operating sites.
In the face of recent changes in the pricing of CPL's products on account of growing inflation in raw material prices, the management is confident to improve products' profitability and continue to maintain market leadership in all the business sectors.
The ninth AGM of CPL is scheduled for 18th March 2005. Placement of quarterly accounts on the Company's group website instead of transmitting the same to the shareholders by post subject to approval of SECP has been included as Special Business. In this context it is suggested to make the website user-friendly for easy down-loading of information particularly the financials.
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Performance Statistics (Million Rupees)
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Balance sheet -As At-
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December 31
2004 2003
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Share Capital-Paid-up: 156 156
Reserves & Surplus: 741 601
Shareholders Equity: 897 757
L T Debt: 480 542
Capitalisation: 11,37 1,299
Current Liabilities: 1,565 1,169
Total Liabilities and Equity: 2,942 2,468
Tangible Fixed Assets: 547 584
L T Loans, Def. Assets, etc: 24 57
Current Assets: 2,371 1,994
Total Assets: 2,942 2,635
Ratios:
Current Ratio: 1.52 1.71
Debt-Equity Ratio: 35:65 42:58
Book Value per Share: 57.50 48.53
Share Price-Rs (11-3-05): 192.05 -
Price/Book Value Ratio: 3.34 -
Income Statement (Million Rupees)
Year Ending Dec 31: 2,004 2,003
Net Sales: 3,965 3,362
Gross Profit: 897 894
Operating Profit: 604 605
Profit Before Taxation: 546 463
Profit After Taxation: 336 284
Cash Dividends %: 130 110
Ratios:
Gross Profit to sales: 23% 27%
Operating profit to sales: 15% 18%
Profit after tax to sales: 8% 8%
Net profit to Equity: 37% 20%
ROA: 11% 11%
ROCE: 24% 22%
Earnings Per Share (Rs): 21.54 18.21
Inventory Turnover (times): 4.11 4.30
Receivable Turnover (times): 3.46 3.54
Cash Dividend - %: 130% 110%
Price/Earning Ratio: 8.92 -
Asset Turnover (times): 1.35 1.28
Days Inventory: 89 85
Days Receivable: 105 103
Debt Service Cove (times): 4.07 5.26
Actual Production (Tonnes): 36,788 29,581
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Capacity is indeterminable due to multi-product plants involving varying processes of manufacture.
COMPANY INFORMATION: Chairman: P Lindner (Alternate: Mazhar Hussain); Chief Executive & Managing Director: Farhat A Mirza; Director: Dr Herbert Wohlmann; Company Secretary: S.K. Mehdi; Auditors: A.F. Ferguson & Co, Chartered Accountants; Registered Office: 1-A/1, Sector 20, Korangi Industrial Area, Korangi, Karachi. Website: www.clariant.com.pk Share Registrars: Ferguson Associates (Pvt) Ltd; Factories: 1-Petaro Road, Jamshoro 2-Korangi Industrial Area, Karachi 3-Katarband Road, Thokar Niaz Baig, Lahore.
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