The Textile Industry Of Pakistan Finance Essay
The employee turnover rate is what determines the consistency in any organization; here this paper focuses its implications in the Textile Industry of Pakistan, specifically Shahzad Textile Mill. Research carries a primary and a secondary research where the survey questionnaire where designed and were filled by the available employees of the organization. Moreover, to establish a detailed prospective, literature review enables the understanding of the concerned topic.
In overall the Textile Industry of Pakistan has faced a declining trend due to economic situations prevalent; however, the paper also focuses on the human resource determinant in shifting the organizational operations. Regression model has been set up based on the questionnaire designed, which suggests the influence on the employee turnover rate and hence the shift in the production cost, since textile industry like agricultural sector is labor oriented one. It is believed that a company loses an asset when an employee has to leave either voluntary or involuntary.
Continuous growths in the textile industry lead to high revenues but it also lead to high human resource problems. Due to high employee turnover ratio it leads to the need of establishing new infrastructure for human resource management and employee sustainability. In the past 25 years textile industry has experience immense growth but due to high influx of international competition this industry is currently facing low growth and low economics profits. Spanned over 50 years, Shaheen Cotton Mills has a long history of successful business operations in Pakistan based on highly professional and ethical practices focused to achieve total customer satisfaction. Shahzad Textile is one of the companies that come under the umbrella of Shaheen Textile. Shahzad Textile Mills Limited, renowned locally as well as in the foreign export markets for the impressive quality of yarn productions, highly competitive prices and matchless professional services. With a total installed capacity of 30,720 spindles, the company is engaged in the productions of ring spun cotton and synthetic blended yarns since its inception in 1980. With the passage of time, the company continuously adopted latest and advanced technologies to ensure the best possible quality standards and efficient workings.
Shahzad Textile Mills Limited is comprised of two production units, built in the heart of cotton growing belt in Pakistan at convenient locations and are fully equipped with highly sophisticated and most modern spinning machinery with a capacity to produce around 50 x40’FCLs per month.
Shahzad Textile Mills has two operational production units which are involved in the production of ring spun yarn. The first unit is involved in production of their brand “Super Unicorn” which is polyester blended ring spun yarn while the second unit produces “Dynacon”, which is their premium quality brand. Shahzad Textile Mills Limited is meeting the local requirements of yarn as well as exporting to developed markets of America, Europe and East Asia. The company has imported the best quality machinery from all around the world which could manufacture the high quality products meeting the international standards. The company wants to satisfy customer needs so they have the best quality control systems which are ensured by the state of the art laboratory equipment present at their quality control department. Packaging is also done with utmost care by trained employees to ensure the best quality delivery of the finished products.
Shahzad Textile Mills Limited also has ISO 9001 and 2000 Certifications which is a guarantee of best quality products for its customers in Pakistan and all around the World. They are also trying to get more certifications in order to get more trust of their customers.
“We aim at seeing our mills to be a model manufacturing unit producing high quality yam by complying with the requirements of Quality Management System and continuously improving its effectiveness for total customer’s satisfaction. We wish to play a leading role in the spinning sector by keeping a substantial presence in the export and local markets.”
“To install state of the art machinery and to acquire sophisticated process technology to achieve highest quality levels in the competitive business environment.
To make strenuous efforts to enhance profitability of the company and ensuring a fair return to the investors, shareholders and employees.
To exercise maximum care for improvement of quality of our products by employing a team of highly skilled technicians and professional managers/supervisors.
To strive hard to develop new markets for the sale of our products both in export and local markets.
To improve customer satisfaction level by adhering strictly to quality requirements of our customers in local and export markets and by improving communications with customers for receiving prompt feed backs about quality of our products.
To attend to the prompt resolution of customer complaints by taking timely corrective & preventive measures to address the quality complaints.
To improve logistic facilities for our customers dispatch plan and issue all shipments / delivery documents well in time.
To make comprehensive arrangements for the training of our workers / technicians.
To promote team work, sense of transparency, creativity in our professionals and technical people.”
Shaheen Cotton Mills
Cost of Sales
Selling and Distribution Costs
Operating Profit \ (Loss)
Other Operating Charges
Other Operating Income
Loss and Share of Associated
Share of Net Profit \ (Loss)
Profit \ (Loss) before Taxation
Provision for Taxation
Profit \ (Loss) after Taxation
Accumulated Loss brought Forward
Share of realised undertaking's surplus
Accumulated Profit \ Loss
Earnings Per Share – Basic
Source: Shaheen Cotton Mills Annual Reports
Sales of Shaheen Cotton Mills are showing an increasing trend from year 2007 to year 2010 and then decreased in 2011. But Gross Profit has decreased over the years. Financial charges are increasing which means that the due interest payments have been accumulating over time. The net income of the company has been declining hugely in the Five years and the company even suffered huge losses in last three years. The EPS has been increasing over the period but it is still very low which is not good.
Property, Plant and equipment
Long Term Investment
Long Term security deposits
Stores and Spares
Stock in Trade
Short term investments
Advances, Trade Deposits, Prepayments, Tax refunds
Asset held for Disposal
Investment held for Sale
Tax refunds due from Government
Cash and bank balances
CAPITAL AND LIABILITIES
Shares Capital and Reserves
Issued, Subscribed and paid up capital
Investment revaluation reserve
Surplus on Revaluation of Fixed Assets
Non Current Liabilities
Long Term Loans
Liabilities against assets subject to finance lease
Trade and other payments
Accrued interest on loans, borrowingsand finance lease
Short term borrowings
Current maturity of long term loans and liabilities
Provision for Taxation
Total Liabilities and Owner's Equity
Source: Shaheen Cotton Mills Annual Reports
Shaheen Cotton Mills Assets are showing a significant increasing trend over the last five years except for 2010. . On the other hand long term finances are showing mixed trends. Current assets of the company are not showing a good sign of liquidity and profitability as there is significant and consistent decrease in current assets.
Growth rates of five years:
Source: Shaheen Cotton Mills Annual Reports
Sales growth rate is 5.06% that means net sales have been increasing 5.06% compounded annually. The income growth rate has been negative i.e. (54.03%) which is not good and might be because of high expenses or high cost of goods sold. Shaheen Cotton Mills has not paid any dividends in any years except for in 2008 which are as low as 281 rupees so these growth rates for dividends are zero for all years. The growth rate for equity is -6.72 which means that the equity has been declining of the company.
Per Share Results
Proposed Final Dividend
Total Shares Outstanding
These are the per share results for some selected accounts. Staring from net sales, per share sales are showing increasing trend till 2010 then there is serious decline. Per share net income is constantly decreasing over the time. The company did not pay any dividends except in 2008. Book value is value of share at which shares are recorded on balance sheet. Here book value is calculated through dividing total equity by total outstanding shares. Per share book value has first increased and then there is some serious decline.
Short-Term Liquidity Analysis
Accounts Receivable turnover
Days sales in receivables
Days sales in inventory
Approximate conversion Period
Cash to Current Assets
Cash to Current Liabilities
Days purchases in Accounts Payable
Average net Trade Cycle
Cash provided by operations to
average current liabilities
Current ratio is the ratio of total current assets to total current liabilities. This is an indication of a company's ability to meet short-term debt obligations; the higher the ratio, the more liquid the company is. Current ratio for Shaheen Cotton Mills Ltd has been low and decreasing over the period. Initially in 2007 it was 1.01 which is far below an almost ideal industry average of 2.15 and further declined over the period and came to 0.62 by the end of 2009.
Acid test ratio is total cash and cash equivalents plus accounts receivable over total current liabilities. This ratio is the most stringent measure of how well the company is covering its short-term obligations, since the ratio only considers that part of current assets which can be turned into cash immediately (thus the exclusion of inventories). The ratio tells creditors how much of the company's short term debt can be met by selling all the company's liquid assets at very short notice. Quick Ratio for Shaheen cotton Mills Ltd has increased from 0.05 in 2007 to 0.09 in 2009 and then decreased to 0.02 by the end of 2011. This was throughout way below the industrial average of 1.1
Accounts receivable turnover is sales over average accounts receivable. An accounting measure used to quantify a firm's effectiveness in extending credit as well as collecting debts. The receivables turnover ratio is an activity ratio, measuring how efficiently a firm uses its assets. It is calculated by dividing net sales by average accounts receivables. It indicates the number of times that accounts receivable amount is collected throughout the year. A high accounts receivable turnover ratio indicates a tight credit policy. A low or declining accounts receivable turnover ratio indicates a collection problem, part of which may be due to bad debts. This ratio has been varying throughout the period and is considerably higher than the industry average of 5691. So this ratio is fine.
Inventory turnover is cost of goods sold over average stock. Inventory Turnover is a ratio showing how many times a company's inventory is sold and replaced over a period. A low turnover implies poor sales and, therefore, excess inventory. A high ratio implies either strong sales or ineffective buying. This ratio varied slightly over the period and is slightly higher than the industrial average of 5.77 times.
A measure of the average number of days that a company takes to collect revenue after a sale has been made. A low DSO number means that it takes a company fewer days to collect its accounts receivable. A high DSO number shows that a company is selling its product to customers on credit and taking longer to collect money. Due to the high importance of cash in running a business, it is in a company's best interest to collect outstanding receivables as quickly as possible. By quickly turning sales into cash, a company has the chance to put the cash to use again - ideally, to reinvest and make more sales. It is calculated through dividing 360 by relievable turnover. For Shaheen Cotton Mills Ltd. Days to collect receivables are less and have a decreasing trend and is far below the industrial average.
A financial measure of company's performance gives investors an idea of how long it takes a company to turn its inventory into sales. Generally, lower (shorter) the DSI the better. It is calculated through dividing 360 by inventory turnover ratio. This is substantially below the industrial average of 94.11 and is between 44 and 60 approximately.
Conversion period is showing the days of converting inventory into sales and then sales into cash. Increase in a year means that company is not converting its inventory into cash as quickly as it was doing earlier. This period is below the industry average and is lower which is better for the company and are between46 and 62.
Cash to current assets shows the percentage of cash to current assets. It increased till 2009 to 11.58% and then shows a decreasing trend, industrial average being 9%.
Cash to Current Liabilities is a ratio of Cash available to total current liabilities. The higher it is the more liquid is the company and the lower less liquid is the company. It is again increasing up till 2009 and then decreasing and is much lower than the industry average of 53%.
Liquidity Index is a guideline showing the number of days in which current assets are removed from cash. The fewer the days removed, the better the entity's liquidity. It is calculated by multiplying current assets with its estimated time of cash conversion and then summing them up and finally dividing it by total number of current assets. For analysis purpose cash is multiplied by zero and prepaid expense are multiplied by 100. Here this ratio is showing an increasing trend which means that the company has more liquidity every year but still it is way below the industry average of 150.
Working capital is a measure of liquidity; it shows the excess of current assets over current liabilities. This has been decreasing over the period and even after 2009 it is negative showing poor liquidity of the company. But the industrial average is also negative showing lesser current assets in the whole industry.
Days Payables Outstanding is an indicator of how long a company is taking to pay its trade creditors. Higher ratio is better as company would delay in paying creditors and liquidity would improve. As the company does not have any purchases so this ratio is 0.
Net trade cycle show Days Company is taking to convert is inventory into cash net of cash that company is paying to creditors. It is calculated by multiplying DSO, DSI and DPO. It is showing an increasing trend consistently throughout the period and started below the industry average in 2007 and went past it in 2011.
The Final Percentage is the percentage of cash from operation to current liabilities. Its shows whether company can pay its current obligations through cash or not. It was low in 2007 but went up to around 48% which is close to the industrial average of 45%.
Analysis of Profit Margin Ratios
Cost of Goods Sold
Gross Profit Margin
Operating Profit Margin
Net Profit Margin
What remains from sales after a company pays out the cost of goods sold. To obtain gross profit margin, divide gross profit by sales. Gross profit margin is expressed as a percentage. It is the measure of company’s core profitability. In this case gross profit margin is showing a consistent decline over the years. It means company profitability is decreasing over the time. One major reason could be increasing cost of goods sold.
Operating margin is a measurement of what proportion of a company's revenue is left over after paying for variable costs of production such as wages, raw materials, etc. A healthy operating margin is required for a company to be able to pay for its fixed costs, such as interest on debt. Operating profit margin is showing a consistent decline over the years. This shows that profitability of the company is decreasing over the years.
A ratio of profitability calculated as net income divided by revenues, or net profits divided by sales. It measures how much out of every dollar of sales a company actually keeps in earnings. Net profit margin is showing a significant and consistent decline over time. It means company’s profitability is decreasing over time.
Price to Earning
Price to Book
Price to earnings ratio is a valuation ratio of a company's current share price compared to its per-share earnings. In general, a high P/E suggests that investors are expecting higher earnings growth in the future compared to companies with a lower P/E. In first 2 years it was fine but in and after 2009 it went to negative figures and as compared to the industry average of 38.17 it is very low.
Price to book ratio is used to compare a stock's market value to its book value. A lower P/B ratio could mean that the stock is undervalued. However, it could also mean that something is fundamentally wrong with the company so the company should be concerned about this as it is now in negative figures and industry average is more than 1.
The earnings yield (which is the inverse of the P/E ratio) shows the percentage of each dollar invested in the stock that was earned by the company. It is calculated by dividing EPS to average share price. On a whole the ratio is decreasing over time. It means the amount of earning to company due to the investment in stock is decreasing over time.
As Shaheen Cotton Mills does not pay any dividends so there is no Dividend payout Ratio.
The researchers tried to analyze how the global recession impacted the textile industry of Pakistan by analyzing the financial ratios i.e. profitability and liquidity ratios of various firms (Faisal Abbas, 2012). This is the biggest industry of the country contributing a large portion of Pakistan’s GDP. The Researchers took data of five years with the financial crisis in the middle of those five years. The purpose was to research the impact of the financial crisis on the financial performance of the industry so the next time it happens the industry can be better managed and the GDP of the country does not suffer. During their secondary research, the researchers found that various financial ratios had been disturbed during the recession; high cost of production due to high energy cost had also contributed to the decline in the growth rate. Other reasons were the high cost of imported inputs because of depreciation of Rupee, high inflation rate and higher cost of financing. Evidences which were found strongly suggested that the recession did have an impact on the textile sectors of various countries and also Pakistan. So the researchers investigated the effects of the global recession on return on equity, return on assets, earnings per share and the overall performance of the textile sector of the country by analyzing various financial ratios of selected firms like Return on assets (ROA), Return on equity (ROE), Assets Turnover Raito(ATR), Debt Equity Ratio (DER), Earnings per share (EPS), Net Profit Ratio (NPR)/NP to Sales ratio, External debts to total assets ratio, Current ratio, Inventory turnover ratio, Fixed assets turnover. The results of these ratios clearly showed that the financial performance of the overall textile industry has been good before and after the recession but the industry had negative returns and a declining growth rate during the 2008-09 recession periods. So for my research I would analyze the impact of the financial performance of the textile sector on employee turnover at shahzad textile mills. So if the company is not doing well because of recession and if they have not picked up the pace after the recession then one of the reasons of high employee turnover might be the financial condition of the company.
The researchers analyzed the impact of job satisfaction and job stress on the employee turnover intention. For this purpose they took a sample of 250 employees in the textile sector (Ahmad 2012). According to the researchers, textile firms had to cut costs because of the global recession, high costs of production and they were also forced to downsize their firms which caused uncertainties of employees about their future so they may decide to leave to secure their future. According to their research, satisfied employees are more productive and thus make their companies successful and dissatisfied employees tend to leave their firms and the loss of skilled workers adversely affects the product quality of an organization. They also found that voluntary turnover, where employees willingly leave their companies, is very harmful for the company. Also, job stress is caused due to bad working conditions, lesser rewards, high workload and lesser job satisfaction which also results in employees leaving their jobs. The results of this study showed that there was a significant relationship between job satisfaction and turnover intention of the employees suggesting that dissatisfied employees tend to leave their jobs which causes bigger problems for the organizations. Researchers also found that high job stress also causes skilled workers to quit their jobs for other opportunities which results in bad quality of the products which results in lower productivity and lower profitability of the organization. So, I would analyze if employees of Shahzad Textile are leaving their jobs because of lesser job satisfaction and higher job stress and also that if the company is suffering due to voluntary turnover of their employees.
The research analyzes the potential of the textile industry and helps to determine the endangering factors of it (Rizwan 2011). The major drawback for the Government of Pakistan lies in major downfall in tax revenues and a multiplier effect in the economic downfall. The prevalent socio-economic, law and order situation are such factors which are demoralizing the economy as a whole, where the textile industry has suffered most. Moreover, there have been restrictions to trade which further discourages profitability. Energy Crisis has deteriorated the entire manufacturing sector in Pakistan, where a situation has been raised of complete shutdown as well. Financial Crises and Global Recession resulting in decline of purchasing power again is one of the factors accounted as a contribution to employee turnover rate. Tax Structure is not even supportive to encourage continuous operations. Despite of heavy load-shedding, inflation has led the electricity rate to an unaffordable rate such that the production costs have gone too high, and to top it with a cherry, the electricity bills are supported with the electricity tariffs as well. Few mill owners have also used the generators as an alternate energy to remain operational which again increases the production cost. It has been claimed that more than 60% of the mills in the Pakistan have been affected by the energy crises prevalent. The issue of ‘two-day weekend’ also raises the agenda of high production costs, where either energy resources are not available or either their cost of utilization becomes unapproachable. Compliance of International Protocols in reference of environment control is also where different environmental organizations keep on pushing up the mill owners, bringing in the challenge of installing new technology machines which require heavy investment.
Textile Industry is a labor oriented and contributes in economic growth by having a share of 8.5% in GDP (Nawaz 2009), but the employee turnover incurs an additional expense of recruitment and training costs, and hence companies tend to keep up employees for longer a period, which has become an ultimate challenge. It is not only because that there is deficiency in the Human Resource Departments’ potential in the industry, rather the external factors have a stronger influence. Companies are providing employees with better allowance plans, career prospective of growth, and train them to keep them up-to-date. People who tend to take lesser risks with their careers opt for jobs, but it is believed that no one comes with an intention of staying in any firm for a longer time. Employees after achieving certain skillful knowledge believes that company is under-realizing their rewards for their skills. When raised expectations of promotions are not met, employees become dissatisfied. Now the companies are becoming consistent in performance appraisal programs and involuntary employee turnover is also building up its pace for non performers. Voluntary employee turnover is which occurs in all hierarchical structure of an organization, but it is found more in the below level, because of the phenomenon of low job safety among them. It’s the later one, which incurs a harsh negative impact on the organizational productivity or growth. According to the authors of the study, how big we may dig into details, it is found that industrialist make such policies that are own beneficial which neglects the labor force, where different philosophical theories are used to describe occurrence of voluntary employee turnover. The agenda of reducing employee turnover rate can be only achieved by influencing the factors which would cause the employee’s intension to shift the job from the textile sector. Job satisfaction tends to have a positive relationship with high employee turnover rate, and hence positive results coming out of the employee’s performance appraisal would not only avoid their termination but also result in encouraging them to remain in the job. Organizational Commitment is also directly related to employee turnover rate where factors such as ethical behavior of top management, performance, absenteeism and job involvement regulate the attitude of employees towards an organization. Human Resource department must provide with trainings and employee development to enhance the loyalty among employees. Work Environment reflects a position of employee that how they look towards the working climate of the organization, where it would be preferred to work along with cleanliness, and new sophisticated technology.
The researcher tries to find the problems faced by the Pakistani Textile industry in the Global markets (Malik, 2006). The biggest problem she came across was the restrictions imposed by the developed nations especially the European countries on the textile industries of the lesser developed countries like Pakistan. Another problem was that the Pakistani businessmen did not have enough resources to import the latest technology for their spinning mills or they were not adapting to the changing market demands of the international markets. This is one the biggest sectors contributing to the GDP of the country but in share of Pakistan’s textile products is minute in the global markets which is partially due to the tariff and non tariff barriers being imposed by the developed countries and high competition from textile industries of other countries and partially because of the lack of innovation and inflexibility from our textile industry. This sector has been contributing more than 50% to the GDP of Pakistan for Decades. But globally our textile industry only contributes only around 2% of the total textile exports and this is because of high competition from the more advanced exporters like China and South Korea. Plus the good quality yarn produced here in Pakistan is directly exported while it should be used to produce value added products like garments which, if exported, would produce more revenue but the lack of technology and lack of initiative from investors is not being done. Capacity utilization has been decreasing over the years in the spinning mills which are presenting more challenges for the industry in the future. The trade of garments is increasing so our industry should move into production of garments.
Negative impact on the industry is recognized due to high employee turnover rate (Jaffari, 2011). Intention of leaving the current job is the factor which must be given much importance, as research shows that the real cost of falls behind the reason where it starts resulting in the loss of productivity. It may affect employees at micro level but the society is affected at a macro level, where society bears the opportunity cost of funds used to raise that employee whose intention is to leave the industry. If the career growth is concerned to have such an intention then the company must establish such an attitude and develop an environment where employees could see their future prospects in it. Alternative opportunities must be taken into account to realize the processing work where all kind of respondents to foresee must be analyzed with reasoning.
(Mathur, 1993) Personnel management and labor welfare in the book devotes itself to discuss over the issue of absenteeism and reasons and consequences of it. Employee turnover rate is voluntary or involuntary but an employee mostly prefers to remain absent without notification, where reason is usually involuntary where factors such as sickness, rural exodus, festivals and industrial accidents are found. The case of Indian Cotton Textile Industry is discussed which truly depicts the scenario of Pakistan’s industrial employees’ situation as well. Sickness is led by poor diet, insanitation and bad working conditions which cause our employees to become a quarry of many diseases. Agricultural background of employees not only has their interest in agriculture but also a responsibility to look after their crops being harvested. The necessity to remain in touch with their families also tends them to remain absent. Workers working in night shifts also tend to remain absent as they measure their opportunity cost in terms of discomfort of working in nights. Industrial accidents also tend to relate with sickness, but where due to mill’s mismanagement and lack of employees’ training any accident occurs. The author identifies the macro level cost for the society to be the less productive and quantitative output for the public due to turnover rate. Moreover, this also results in high per unit cost of production reflecting in the increased prices for consumers. Revenues are lost not only for the mill but also for the government in the form of excise duties and other taxes on production.
Managing any industry requires the management of its resources such as ‘raw-materials, man-power, machinery, adopt modern manufacturing techniques, mange all activities efficiently to achieve optimum results, market the products at competitive prices and ensure a fair margin of return on investment (Dr. H.R. Sheikh, 2009).’ This management is failing and textile industry is falling as HRM is inadequately practiced. Factors explaining the predictor are such as lack of commitment among owners and senior officials, believe in HRM to find capable employees and retaining them within the organization is not found among the top managers, owners believe not to give away an authority within the HRM department, tangible monetary return is not seen by the existence of HRM department and owners foresee a quick return on their investment, non-abidance of labor laws, and incompetency of HRM managers.
Gender discrimination within the company’s environment is one of the factors which may even cause the females to feel uncomfortable among the male domination. Whereas females are the one who are more satisfied as compare men when research conducted as factor of having a loyal attitude is found more in them (Kumar, 2011). Analysis of research shows that employees of age 20 to 30 reflect in high turnover rate due to better job offers and ones age 41 to 50 tend to leave the organization due to compensation plans. Departments such as finance, quality control, administration, technical, weaving, spinning and production planning were given different levels of satisfaction ratios, however, it was concluded that people from different departments cannot be materialistically categorized as the certain reason of causing high employee turnover rate. The study also empirically states that people who tend to leave an organization are usually high performers and are experienced.
A positive relationship between HRM practices and the non-managerial employee intention to turnover is developed (Sujeewa, 2011). Policies for export also matter, as rigid policies would definitely discourage the production of potential capacity. Employee work-related concerns and grievances if not effectively solved leads to low productivity, lower quality, deviation from goals, confidence loss, ineffective communication between employees, low morale, increased employee turnover rate, loss of reputation, mismanagement in complaints, potential legal action and damages. Discipline attributes must be defined in a fair and justifiable manner, which could help in achieving objectives, but if not then it would lead to employee turnover rate. Inappropriate career development resulting in employees’ dissatisfaction by not achieving individual and organizational performance would tend the employees to leave that organization. Physical health and safety practice must of concern in any organization where medical plans must be introduced and training must be provided in regard to employees’ safety from any accident to happen.
The Rupali group is one of the leading business groups in Pakistan with varied business ranging from manufacturing, exporting, indenting to banking and trade financing. Rupali is Pakistan’s largest producer of polyester filament yarn and also a leader in production of staple fiber. Ruapli group is being managed by Feerasta family. Company is committed to contribute towards the emerging needs of economy of Pakistan. Company philosophy is to take advantage of external opportunities by capitalizing on its strengths, while maintaining high level of quality standards and reliability.
Rupali Polyester limited was incorporated as public limited company on Karachi stock exchange in May 1980. It owns and operates composite facilities to manufacture Polyester Fiber and Filament Yarn. Company always tries to incorporate latest technology in its business to produce best quality raw material. Rupali is also considered to be one of the pioneers in Pakistan for manufacture of staple fiber of highest quality. Since its inception, the Company has been growing steadily through expansion and diversified operations. The assets of the Company have increased to over Rs. 3,973 million from the initial capital outlay of Rs. 150 million. The Company has a polymerization unit with a capacity of 105 metric tons per day, polyester filament yarn capacity of 30 metric tons per day and a polyester staple fiber capacity of 65 metric tons per day. The various products of Rupali are in fact import substitution as these were previously imported from Japan, Indonesia, Taiwan and Korea. Now the Company is importing the basic raw materials only and through value addition is producing the highest quality products locally.
Since inception, the philosophy of the Company’s management is to grow on the strength of quality and reliability. To achieve this objective, it is maintaining a well-equipped Research & Development Centre for standard maintenance, innovative improvements in its products and achieving economies in production techniques without compromising on standard and quality of products. Products and services offered by the Company are acknowledged by the customers as quality and reliable products and are the first preference of customers.
Rupali's research and development team has developed variations of filament yarn to counter the less than ideal operating conditions of weaving in the country, while its finest quality fiber is excellently processed under local conditions. The local R&D efforts continue to bear results and the Rupali brand is the preferred choice of local weavers and processors.
The Company's innovative approach to R&D continues to be one of its strengths. We also implement extensive quality control at all levels of the organization to maintain our reputation for excellence. The Company gives high priority to customer's satisfaction, tries to maintain uninterrupted supply for its products and provides after sales services, technical support for the trouble shooting.
The Company gives high priority to customers’ satisfaction, tries to maintain uninterrupted supply of its products and provides after sales services, technical support for trouble shooting. The Company enjoys high prestige and reputation in the business community, banks, financial institutions and customers. It is also amongst major contributors to the national exchequer.
Property, plant and equipment
Long term Investments
Long Term deposits and prepayments
Long term loans
Operating fixed assets
Capital work in progress
Total non-current assets
Stores, spares and loose tools
Loan and Advances
Trade deposits, prepayments
Investments fair value through profit and loss
Cash and bank balances
Total current Assets
Equity and Liabilities
Share Capital and reserve
Authorized Capital Ordinary Share of Rs. 10 each
Issued, Subscribed and paidup Capital
total owner's equity
Non Current Liabilities
Long Term Loan
Staff Retirement and Gratuity
Trade and other payables
Accrued Markup and Interest
Short term borrowing Secured
Current portion of Long term financing
Contingencies and Commitments
Total current Liabilities
Total Liab and OE
Source: Rupali polyester limited Annual Reports
Analysis of Rupali’s balance sheet shows that cash and bank balances of the company increased until 2009 and then it decreased in 2010 and after that it again showed an increasing trend. Accounts receivables for the company showed an unpredictable trend like they increase in one year then it showed a decreasing trend very next year. Stock in trade showed an overall decreasing trend except for year 2010. Total current assets increased till 2010 and then in 2011 it decreased drastically by around 20%. Total current liabilities increased till 2009 and after that they started to decrease. Total liabilities had shown a same trend as of total current liabilities. Net sales for the company had shown a mixed trend as they increased in one year and then decreased in very next year. Cost of product, admin expense and selling and distribution trends are same as of total current liabilities. Earnings before taxes increased until 2010 after that it decreased dramatically. Net income of the company increased till 2010 and after that in 2011 it decreased by almost around 41%.
Cost of Sales
Selling and Distribution Cost
Other Operating expense
Other Operating Income
Profit Before Tax
Profit after Tax
Earnings per share basic & diluted
Source: Rupali polyester limited Annual Reports
This table shows us the income statement. We can clearly see that cost product sold percentage is very high compared with talking sales as 100%. Cost of product sold for all of the five years is above 90% and for years 2008 and 2009 it is as high as 96% and 95% respectively. The gross profit after 2007 decreased from 7.42% to 4.9% in 2008 due to increase in the cost of product sold. After that cost of product sold started to come down caused gross profit to increase. Selling and distribution cost, administrating expense, other operating expense, other operating income and finance cost are fairly stable over time. The variance in operating profit, profit before tax and profit after tax is largely because of changes in the cost of product sold.
Five years growth rate:
Source: Rupali polyester limited Annual Reports
The sales of Rupali polyester have shown a growth rate of 3.03% from 2007 to 2011. This growth rate is not a satisfactory because for five years it is quite on lower side; it should have been 5-7% to be on a good side. Coming towards net income it showed a very poor growth rate of 1.52% in five years. It is not justifiable from the business perspective. Dividends showed a negative growth rate of -5.72%, this is because of the fact that company was using its cash in investing activities. Equity growth rate is also not good for the company i.e. 1.92% because company was using most its cash in other investing activities rather than increasing its equity
price to earning
price to book
dividends payout ratio
Source: Rupali polyester limited Annual Reports
Price to earnings ratio measures the multiple at which the market is capitalizing the earning per share of the company. This ratio for the company is very high. This shows that company’s price of share is overrated compared to earnings. It should not have been that high. Company’s price to book value is also very high. This is good for the company because it means that earnings are expected to grow quickly and return on equity is also expected to increase. Earning yield for the company is also on a higher side which shows that company is earning good per share than industry. Dividend yield is the cash return accruing to an investor on a share of stock based on current dividend rate and current price. Dividends yield rate is not good for the company as it is less than 1 and decreased over years. Dividends payout ratio is also on a higher which shows that company is paying more dividends out of its earnings.
Acid test ratio
Accounts receivable turnover
Days sales in receivables
Days sales in inventory
Approximate conversion period
Cash to current assets
Cash to current liabilities
Days purchases in accounts payable
Average net trade cycle
Source: Rupali polyester limited Annual Reports
Current ratio has been above way higher. It is not good sign, as it should not be too high for the company because it shows that company has underutilized their current assets and they are not in line with the current liabilities. Acid test ratio has gradually decreased for the first four years and then drastically increases in the last year which again is not a good sign because it has been too high. Accounts receivable turnover ratio has been low which is a good sign because it means that less sales are being made on credit and lot of cash payments are being done in the Rupali polyester. Inventory turnover ratio has been good for the company because our inventory has been clearing up 5.3 times a year. Our day sales in receivable are quite good. It means that our accounts receivable are being paid in less than 11 days in the year 2011. Our day sales in inventory is also quite remarkable and throughout the five years it has been on a lower which means that our sales department has been performing quite well and the product has been selling quite good in the market. Approximate conversion period is also less which basically indicates that we have tightened up the inventory and our inventory has been quite well maintained. Cash to current assets ratio has been higher which not a good sign is for the company because cash is not generating any returns and excess cash has been useless for the company. Other assets can be purchased with the excess cash which can help to increase the returns of the company. Cash to current liabilities ratio is also very high. It is also not a good sign for the company as cash doesn’t generate any return and excess holding of cash doesn’t contribute any return. So this ratio should not be as high as it is now.
Profit Margin Ratios:
Gross profit margin
Operating profit margin
Net profit margin
Source: Rupali polyester limited Annual Reports
The gross profit margin is very less for Rupali Polyester. It means that only around 7% of the total sales are gross profit margin which is quite less and cost of goods sold needs to decrease in order to keep it up. The operating profit margin for the company is fairly good, this means that company is able to restrict the other expenses and they are at their minimal level. Net profit margin is also high and company is making higher profits as per sales because of low debt financing of their operations.
To Establish the factor analysis grid to identify the factors that are responsible for the need of Human Resource management
To define the importance of employee benefits and management by objective processes
To identify the factors that lead the employees to resign
To find out the impact of the external environment on the human resource management techniques
The declining trends of profitability and hence performance determined from the financial analysis of the Shahzad Textile Mill inclined me to perform research on this company, where the economic reasons were though obvious but the human resource management potential was needed to be accessed to have better understanding.
Scope of the Study
This Study would help in the decision making for the Textile Industry as it highlights the major reasons why the employees in this industry quit and thus the companies would be able to focus on these problems and implement better HR policies to retain their employees.
Limitations of the Study
Sample size was very limited; hence the expected results can be of biased opinions. As the employees were currently working at Shahzad Textile, they may be not proposing the actual situation.
The research paper is a business research paper as it will aid the textile industry to have better decision making capabilities. This business research has been categorized on the two bases; firstly on the basis of the technique that is used for conducting the research and secondly on the basis of the nature or function of the research.
Research Technique: This research will include a survey research technique; where information is collected from a sample of the people using a questionnaire. This research is qualitative as different exploratory elements affecting the Human Resources of the Textile Industry will be qualitatively measured.
Data Type & Research Period:-
This research involves both Primary and Secondary research.
In primary data sources, the data has been collected through questionnaires. The questionnaire only includes structured questions, with no open-ended questions. These questionnaires were filled by employees of Shahzad Textile Mill.
In secondary data sources, Literature reviews of different research articles were written which helped in understanding the problems and in making the theoretical framework of the research. Questions were also mainly based on these previous researches.
The time period that is chosen for the research is cross-sectional time period; that is the various segments of a population has been sampled in a single point in time.
Information Gathering & Sampling procedure
The information will be gathered from survey techniques; questionnaires. Plus, the information will be gathered by various sampling techniques, as the size of the population is in Millions and it is too large to be studied as a whole. That is why only a few of the users will fill in the questionnaires in Natural Settings. And on the basis of the information gathered, the results will be deducted.
Population and Planned Sample:
Before we go on and determine the sample unit and size of our research it is very necessary for us to determine what our target population will be and how it can be defined. We have defined our population to be all the available employees of Shahzad Textile Mill.
The sample size that is will be chosen to conduct the research is thirty (30). Sixty questionnaires will be filled by different users (sample unit) of different service providers from various universities of Lahore to conduct the research.
Choice of Sampling Technique:
The sampling technique that has been chosen to follow for the research is non-probability sampling technique; the sample will be chosen on the basis of convenience of the researcher. Convenience Sampling is chosen because the data could be collected quickly, it has a lower cost, and it is convenient.
Estimation and Analysis
Independent Variable: Promotion
Employees out of the sample size were on majority who did not receive any promotion as yet, the ones were even there who have spend few number of years with this company, but the generalization to remove biasness refers to the point that promotion depends upon the nature of work on which employee is designated, and that designation relies on the qualification for it. However, this independent variable shows an adverse relationship with our dependent variable which is employee turnover rate, i.e., promotions encourages the reduction in the employee turnover ratio.
Independent Variable: Job Satisfaction
The data for the variable job satisfaction has been collected from the survey question of simply asking the sample size about their job satisfaction. Although, the sample consisted of employees who also got promoted and are the experienced ones as well, but still they gave their job satisfaction feedback as a negative impact reflected by their human resource department, where the company’s most important assets were not exactly looking their future prospects with this company. The independent variable of job satisfaction has a negative relationship with our dependent variable, i.e. job satisfaction increased would eventually decrease employee turnover rate.
Independent Variable: Training
Seventeen out of sample size of thirty employees said that there are no training programs for the new employees, but then why thirteen reported training programs existed for newly recruited? Sample included the middle management layer out of the organizational structure where the training programs are there only for the lower layer employees from the organizational structure, so the sample reported how they perceived the question. Since the middle layer of organizational structure is also involved in the most important positions and tasks assigned to them, it is essential that training is also provided to them. A negative relation is developed between this independent variable and dependent variable, i.e. increase in training programs would decrease the employee turnover rate, since company invests on human capital, the sense of job satisfaction is widened among employees.
The following graph of the risk association with the job shows that the employees agree to the point of job security to the job satisfaction.
Employees agree to the position of the company that additional costs are to be barred by the company if they quit the job, which eventually develops a sense of job security as well but the employees prefer the training as they want to get involved in their jobs producing qualitative output.
Independent Variable: Appreciation
Any person who contributes in any output requires motivation and appreciation is one of the biggest among the list. Hence there is a negative relationship between this independent variable over our dependent variable, i.e. work appreciation discourages employee turnover.
Independent Variable: Job Stress
The analysis shows that majority is stressed working within this company, which can be due to any factor, maybe work environment, job satisfaction, or job security. The relation however develops a theory that if job stress is there than the employee turnover tends to follow an increasing pattern.
Independent Variable: Job’s Treatment
The independent variable job’s treatment is of random dynamics, where treatment by the job is defined by the salary, supervisor’s behavior, working conditions and career growth. If the dynamics to these vectors are reflecting a negative impact on the employee then the variable job’s treatment would have a negative impact on the employee turnover variable.
Independent Variable: Monetary Incentives
If the monetary incentive which refers to the salary is high, which has not been diagnosed from the sample size of the company, than there would be a negative relation with the dependent variable of employee turnover.
Now what is the reason of not being satisfied from the salary package is very obvious but the results diagnosed from questionnaire refer to the exact recommendation that the company should realize that salary packages must provide real income rather that nominal, and therefore, inflation must be accounted when costing is made up.
The following data representation reflect the feedback that the most important factor for employment opportunity is monetary benefits, conforming the issue not being satisfied from the monetary incentives the company is currently proposing.
Independent Variable: Perfomance
If the company is not performing well, than it’s per unit production cost would in due course increase, which therefore calls for cost cutting and this cost cutting causes the downsizing of employees, resulting its inverse relation with employee turnover, i.e. when company performance is not up to mark than the employees tend to leave instead of bearing a risk of being sacked.
The following data representation also confirms the focal points that if the company is not performing well then the employees tend to leave the company and if the economy is not in a stable position labor force tend to migrate.
Dependent Variable: Employee Turnover
The variable employee turnover is set as a dependent variable on which the fluctuation of independent variables is being studied. The data shows that majority is not interested in working with the current organization and employee turnover rate is high, precisely to be 40%, which is actually understated because of considered biased feedback of not having any plan, as it is assumedly expected from the sample size officials to do have a plan for their future.
Overall Analysis of Primary and Secondary Research
The primary research refers to our own data collected from the questionnaire and analyzed where as the secondary research focuses on the research work previously done of which analyses have been done in the literature review section.
The secondary research focused majorly on general falling trend of the textile industry of Pakistan, whereas primary research was based on the Shahzad Textile Mills particularly and reasons of its downfall. The fall of the Textile Sector in our research has been affiliated with the human resource practices, and has been found inefficient so far.
Textile sector has faced the downfall not only because of energy crisis, but also due to inapplicable macroeconomic policies, which has caused the businessmen of our country to suffer. On the top of it, the global recession was there which caused an increase in the production costs. The obvious intention of reducing costs has been to downsize the labor force, which generalizes the sense of insecurity in terms of career opportunities. This began with an issue of employee turnover problem, which is also a consequence of almost no more training programs for the employees. When any employee is hired, there are certain costs incurred, but these costs are passed on to the production if they intend to leave and this effect has multiplied in an essence that the trend of not working for any organization for more than year has been found prevalent.
How is an employee suppose to be committed to an organization, if the work environment is not found to be ethical, work appreciation is not there, monetary incentives are found not realistic, and most importantly job is not felt to be secured. Since our country lacks in advanced technology, there is machinery which is old fashioned, which is very low in the standards of health and safety. Textile Industry of Pakistan is a facet of all such scenario.
Keeping this entire, we constructed a questionnaire to gather data for the variables we intend to study for factors affecting the employee turnover rate. Promotion, job satisfaction, training, work appreciation, job stress, job’s treatment, monetary incentives, and organizational performance are the predictors, predicting the variation in the employee turnover. Our primary findings have been supportive to the employee turnover fluctuations.
The Employee Turnover Rate is high at Shahzad Textile Mills Limited as a big chunk of their employees want to quit their jobs at the company and want to switch in order to get better employment opportunities so the company should try to retain their skilled workforce by motivating them in any way. All the factors that are predicting the employee turnover should be looked upon and managed. Like, the employees are not satisfied with the monetary benefits being offered by the company so the company should try to offer them better pay packages. The only problem with this would be the financial situation of the company which is declining and the profit margins are shrinking so the company might not be able to invest in the monetary terms but they can still give their employees some non monetary incentives like better working conditions and motivating behavior of the supervisors and the bosses in order to provide some level of satisfaction to their employees. Shahzad Textile Mills Limited should invest in the employees so the employees feel a level of ownership in the company and a level of security that they would get growth by staying with the company and if they see a future with the company they would work harder for the company and be more productive members of the company.
The Profitability of Shaheen Cotton Mills on the whole is decreasing over the last few years according to the financial analysis and they are not paying any dividends also which means their sister companies are also suffering because of the financial situation of the whole world especially of Textile industry of Pakistan. Another reason for the decreasing profitability could be the inefficiencies in the management of the company including the mismanagement of their Human Resources. Our Researches indicated that there is high employee turnover in the company and there are a lot of reasons for this turnover including high stress and dissatisfaction among employees because of lesser monetary benefits, bad work conditions and lesser motivation because the bosses don’t appreciate the subordinate’s work. Also, the financial situation of the country because of high inflation and devaluation of the rupee are adding to the problems of the working class. So, the dissatisfied, underpaid employees of the company are continuously looking for better opportunities. They might not even find what they are looking for but they would eventually quit the job and that won’t be beneficial for either the employees or the company because the employees would have to start from the beginning at their new job and Shahzad Textile Mills would have to hire and train new replacements which would also cause inefficiencies and ineffectiveness for the company which is not good in the long term. So, Shahzad Textile Mills Limited should start focusing on their Human Resources as they are the biggest asset for the company and as most of their employees want to quit within a year, this could be big problem for the company so they should focus on improving their HR policies to help retain their employees so they don’t lose their valuable employees.
Qualitative research suggested that various variables like the recession, high inflation and high production costs due to the high energy prices contribute to decrease the productivity and profitability of the textile firms which directly affects the human resources of the company in terms of their dissatisfaction and high stress levels which results in voluntary turnover of these employees. The findings of the primary research state show that these variables do compound with each other and result in employees leaving the company. This voluntary turnover also affects the productivity of the company and may cause the quality of the products to go down as skilled employees leave the firm leaving a gap behind which is hard for the human resources department to cover so it is a cyclical process which is very hard to cover. So the textile firms in Pakistan have to be very careful in these times and make the HR policies keeping in view that their human resources are an irreplaceable asset which, if managed well in the times of crisis will be productive and profitable in the times of prosperity.
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