Synthetic & Rayon: RUPALI POLYESTER LIMITED - Year Ended 30 June 2006
The sponsors of the company were pioneers in the polyester industry and advanced the cause of import substitution which translates into conserving foreign exchange. The directors have raised various issues in the Annual Report 2006 of the company which are based on reliable statistics.
They have demonstrated as to how local polyester industry's profitability is eroding and how importers market share is increasing.
The accounts of the company show that its sales declined by 3.4% to Rs 3.526 billion gross profit by 36.2% to Rs 172.8 million and profit before tax decreased by 34.6% to Rs 170.2 million on year-to-year basis.
Despite declining profitability they continue to maintain excellent track record of regular and attractive profit distribution rate. For FY06, the period under review, the company declared cash dividend @25% as compared to @30% in FY05, last year.
This has provided enough justification to the investors to trade company's share at high market value.
In this connection the directors are confident and said that inspite of impediments, the overall performance of the company remained satisfactory. And for future they vowed to maximise sales and control costs to minimise the impact on declining margins.
Rupali Polyester Ltd was incorporated at Karachi (Sindh) in May 1980 as a public limited company. Its registered office is situated at IEP Building Gulberg III Lahore and manufacturing facilities are located at Lahore-Sheikhupura Road Sheikhupura in the province of Punjab.
Rupali Polyester shares are listed on all stock exchanges of Pakistan and are trading at quite high price. During the last one year the market value of the share ranged between Rs 33.30 and Rs 48.25 per share. Recently on January 22, the closing price of the share was quoted at Rs 33.30 per share which is more than three times of the par value.
The company is primarily engaged in the manufacture and sale of polyester products, namely polyester fibre and filament yarn. The company's products serve the purpose of import substitution, in others words directly saving foreign exchange for the country. The main raw material of its products are PTA & MEG which are petroleum based and sensitive to rise and fall of petroleum prices in the international market. The company's end product directly competes with imported products. Any change in import tariff of staple fibre and yarn hampers the main purpose of the import substitution.
In order to upgrade its production facilities in terms of more sophisticated technology the company continues to make heavy capital expenditure as continuing strategy to compete.
The directors of the company are unhappy as they say that in the Federal Budget 2006-07, government has not provided any direct tariff incentive to protect local polyester industry, rather the government through indirect measures has increased cost.
They also lament about volatility of raw material prices and at the same time about the import polyester yarn at dumping prices. This severely exerted pressure on their product's selling prices. They figured out that prices of chips fell by 10% and of fibre and yarn by 4% compared to the previous year's.
Their reasonings were based on realistic statistics. They said that quantity of chips sold declined by 22%. Although the company's sales volume of fiber and yarn registered nominal increase, it did not offset the effect of declining prices on revenues.
Consequently the company's profitability was under pressure as a result of rising input cost and decrease in sale prices.
Prices of PTA and MEG escalated by 10% and 9% respectively as compared to the previous year. The input cost also increased due to increase in furnace oil prices by 19% to Rs 23,070 from Rs 19,400 per ton.
They also raised the issue of rise in banking services charges and increase in minimum wage level which adds to the cost and hampers competitiveness in the face of imported product.
They are also unhappy about complicated refund rules of sales tax which has created departmental hurdles resulting in blockage of refund. Furthermore, they advocate that the government should exempt the purchase of furnace oil and packing materials from the levy of sales tax. They apprehend that these factors are hurting the local polyester industry and at the same time increasing the market share of importers who do not conserve foreign exchange and this is the case which has to be taken seriously by the concerned quarters.
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Performance Statistics (Million Rupees)
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30 June 2006 2005
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Share Capital-Paid-up: 340.69 340.69
Reserves: 1,690.45 1,681.88
Shareholders Equity: 2,031.14 2,022.57
Deferred Liabilities: 175.73 126.93
Current Liabilities: 197.32 204.02
Tangible Fixed Assets: 740.76 666.77
L.T. Investments: 77.35 60.72
L.T. Loans: 33.00 -
L.T. Deposits & Prepayments: 3.73 7.23
Current Assets: 1,549.44 1,618.80
Total Assets: 2,404.19 2,353.52
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Sales, Profit & Pay Out
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Sales: 3,525.96 3,649.63
Gross Profit: 172.82 270.88
Other Operating Income: 88.81 102.67
Profit From Operations: 170.22 260.51
Finance (Costs): (1.10) (1.79)
(Depreciation): (61.70) (45.16)
Profit Before Taxation: 169.12 258.72
Profit After Taxation: 110.77 182.27
Earnings Per Share (Rs): 3.25 5.35
Dividend Cash (%): 25.00 30.00
Share Price (Rs) on 22-1-2007: 33.30 -
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Financial Ratios
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Price/Earning Ratio: 10.25 -
Book Value Per Share: 59.62 59.37
Price/Book Value Ratio: 0.56 -
Debt/Equity Ratio: 0:100 0:100
Current Ratio: 7.85 7.93
Asset Turnover Ratio: 1.47 1.55
Days Receivables: 1 1
Days Inventory: 77 53
Gross Profit Margin (%): 4.90 7.42
Net Profit Margin (%): 3.14 4.99
R.O.A. (%): 4.60 7.74
R.O.C.E. (%): 5.02 8.50
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Plant Capacity & Actual Production
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(Thousand Metric Tonnes)
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A) Yarn Annual Capacity: 10.10 6.84
Actual Production: 9.46 8.22
Capacity Utilisation (%): 93.66 120.18
B) Fiber Annual Capacity: 12.00 12.00
Actual Production: 22.44 24.39
Capacity Utilisation (%): 187 203.25
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COMPANY INFORMATION: Chairman: Jafferali Feerasta; Chief Executive: Nooruddin Feerasta Sr.; Director: Muhammad Rashid Zahir; Secretary: S. Ghulam Shabbir Gilani; Registered Office: 4th Floor, IEP Building 97-B/D-1, Gulberg III Lahore 54660; Website: Not Reported; Plant: 30.2 KM Lahore-Sheikhupura Road Sheikhupura 39350.