Why Nishat Mills Ltd Does Not Adapt Marketing Essay

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1st Jan 1970 Marketing Reference this

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Nishat Mills Limited is the flagship company of Nishat Group. It was established in 1951. It is one of the most modern, largest vertically integrated textile company in Pakistan. Nishat Mills Limited has 198,120 spindles, 655 Toyota air jet looms. The Company also has the most modern textile dyeing and processing units, 2 stitching units for home texitle, one stitching unit for garments and Power Generation facilities with a capacity of 89 MW. The Company’s total export for the year 2011 was Rs. 36.015 billion (US$ 416 million). Due to the application of prudent management policies, consolidation of operations, a strong balance sheet and an effective marketing strategy, the growth trend is expected to continue in the years to come. The Company’s production facilities comprise of spinning, weaving, processing, stitching and power generation.(Nishat Mills Website)

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Nishat Mills is listed on all the three stock exchanges of Pakistan; Lahore Stock Exhange, Karachi Stock Exchange and Islamabad Stock Exhange. The company has shown constant over the last few decades and is among the top textile exporting and manufacturing companies in Pakistan.  It deals in yarn, linen, cloth and other goods andfabrics made from raw cotton, synthetic fibre and cloth and generate, accumulate,distribute and supply electricity.(Nishat Mills Website)

Events in History

Table Showing the Main Events in the History of Nishat Mills (Main Events in History)

Vision

To transform the Company into a modern and dynamic yarn, cloth and processed cloth and finished product manufacturing Company that is fully equipped to play a meaningful role on sustainable basis in the economy of Pakistan. To transform the Company into a modern and dynamic power generating Company that is fully equipped to play a meaningful role on sustainable basis in the economy of Pakistan.(Vision of NML)

Mission Statement

To provide quality products to customers and explore new markets to promote/expand sales of the Company through good governance and foster a sound and dynamic team, so as to achieve optimum prices of products of the Company for sustainable and equitable growth and prosperity of the Company.(Mission NML)

Businesses and Products

Spinning

Nishat Mills Spinning Division has over 198,120 spindles, which are operationally organized into 8 spinning units. The entire machinery is from world-renowned manufactures. All yarns made at Nishat are Ring Spun suitable for both knitting and weaving. Besides the best Pakistani cotton, long stapled American, Egyptian and US Pima cotton is also used for fine counts. For Nishat strong belief in product development and innovation we have Nishat own in house state of the art cotton and yarn testing laboratories. Nishat spinning is one of the most trusted brands in the market due to its efficient production and quality.

Spinning production capacity for both Cotton and Blended Yarns is 185 Tons / Day.

(Nishat Mill Annual Report, 2011)

Cotton Range

100% Cotton Carded

From Ne 05/1 to Ne 40/1

From Ne 05/2 to Ne 40/2

All double yarn in 100% knotless / auto splice

Blended Yarn

Poly Cotton 

Poly 52%

Carded Cotton 48%

Ne 10/1 to Ne 40/1

Poly 52%

Combed Cotton 48%

Ne 10/1 to Ne 80/1

Poly 65%

Carded Cotton 35%

Ne 10/1 to Ne 40/1

Poly 65%

Combed Cotton 35%

Ne 10/1 to Ne 80/1

Cotton Rich (CVC) 

Poly 45%

Carded Cotton 55%

Ne 10/1 to Ne 40/1

Poly 45%

Combed Cotton 55%

Ne 10/1 to Ne 80/1

Poly 40%

Carded Cotton 60%

Ne 10/1 to Ne 40/1

Poly 40%

Combed Cotton 60%

Ne 10/1 to Ne 80/1

Core Spun Yarn: 

20 D Lycra

Ne 8/1 to Ne 80/1

40 D Lycra

Ne 8/1 to Ne 60/1

70 D Lycra

Ne 8/1 to Ne 40/1

140 D Lycra

Ne 8/1 to Ne 16/1

 SNishat ce: (Nishat Mills Website)

Yarn Dyeing

 Nishat Yarn Dyeing is one of the latest exhaust dyeing units in Pakistan having installed production capacity of 5.0 tons per day. We are processing yarn and sewing thread in package. Also, we have set up facility for Beam Dyeing which is first of its kind in Pakistan.(Product Spinning)

Weaving

Nishat Mills Weaving division has 670 modern Air Jet and projectile looms which produce approximate 9.0 million meters of fabric per month and makes it the largest weaving facility of Pakistan catering to home textile and apparel fabrics.

Processing

Nishat fabric processing facility is one of the largest and most modern factories of Pakistan. With an array of custom-made machinery, it has the capacity to produce 90 million meters of fabric per annum. It is specially designed to handle heavy weight fabrics like twills, drills, canvases / poplins, fabrics with minimum tension such as stretch fabrics and all high density weaves. The advantage achieved by the customized design of its machines is the result of an extensive research work with the help of world renowned machine makers. To ensure that Nishat customers get the very best we use more than 75% dyes and chemicals of European origin.

The standards are higher than ever, dedicated by fashion, efficient productivity and further automation is engineered in the plant. To maintain quality and international standards, an on-line Quality Control (QC) Department has been setup. The QC department is augmented by a fully equipped Laboratory, which scrutinizes the fabric process flow at all levels. Nishat extra ordinary Research & Development work and highly trained marketing personal are pivotal to sustain long term business relationships.(Prouct Processing)

Home Textile

With an array of 938 modern new generation sewing machines, the Home Textile Division consists of 2 stitching facilities. The two facilities combined have an average production capacity of approximately 24 million meters per annum. The product line is customized to manufacture products of various styles and sizes according to the requirements of Nishat customers, wholesalers, retailers and contract textile business.(Nishat Mill Annual Report, 2011)

Nishat  Product Range:

Quilt Covers

Quilted Throw-over

Flat Sheet

Fitted Sheet

Pillow Cases

Cushions

Valances

Curtains

Baby Sets

Table Linen

Embroidery

(Product Home Textile)

Garments

Nishat Mills Limited has state of art garment manufacturing facility both for men and women. The Apparel division has deployed 1627 high end sewing machines such as Vibe Mac, Juki, Mitusibishi and Brother. The Division has the capacity to produce 7.20 million garments per annum.

The Garment wet process utilizes the modern techniques of Rinse, Enzyme Stone, Enzyme Wash, Super Bleach, Reducer Wash, Tint Wash and Raisin Wash. In order to obtain best results, Nishat facility is geared with Tonello Washing machines, Maino dryers, Wrinkle Curing Hangers and Barrel washing machines and Dryers for sampling. Nishat qualified team members utilize the equipment to obtain optimal results and cater to the specific needs of the client.(Product Garments)

Generation Facilities

Nishat Mills has established state of the art, modern, highly reliable and extremely efficient captive co-generation power plants to cater in house energy requirements at all its spinning, weaving, processing, stitching and apparel units. These facilities are using Wartsila, Caterpillar, Cummins, Daihatsu, Jenbacher & Mak engines for power generation. Gas, Furnace Oil, Diesel and Steam is being used as fuel for power generation.(Nishat Mill Annual Report, 2011)

Combined Heat and Power Plant

Nishat Mills Limited has lived up to its promise to be a vanguard in use of alternative fuels for energy requirements in the absence of fossil fuels. We have put up a new Combined Heat and Power plant at Nishat site in Lahore which will produce 6 M.W. of electricity and 65 tons/hNishat of steam. Coal will be the primary fuel but special aspect of this plant is its flexibility to use alternative input mix up-to 70% of bio-mass with 30% of coal. The plant is expected to be commissioned by May/June 2012. Two high performance, high efficiency, low pressure steam generating boilers are already in operation using rice husk, wood chips and corn cobs etc as main sNishat ce of locally available agri-waste fuels at two sites of Nishat company.

The Company is now planning to establish similar projects for Nishat spinning division at Faisalabad and Nishat weaving division at Sheikhupura. These plants will have the production capacity to cater for entire power and energy requirements of these divisions.(Nishat Mill Annual Report, 2011)

Synthetic Natural Gas Plant

Installation of Synthetic Natural Gas (SNG) Plant is nearing its completion phase. This plant will use LPG as raw material to produce synthetic gas. This synthetic gas will be used to run processing machines which are solely dependent on natural gas for their running and are non operational during gas load shedding days. A sizeable storage of LPG has also been established in the Company.(Power Generations)

Nishat Linen

Nishat Linen is a concern of Nishat Mills, the textile and home fashion retail chain that has redefined the industry with acute attention paid to quality, design and affordability. Nishat Linen prides itself on being the brand of preference for discerning customers who are in search of things, unique and chic without compromising on aesthetics or price. Unsurpassed customer service, including tailor-made orders, ensures Nishat clientele remains loyal to the Nishat family.

From bed linen to kitchen coordinates, upholstery to apparel, Nishat Linen has become a household name as a creator of stunning, high-quality designs at reasonable prices; a feat achieved by few.(Nishat Linen)

Revenue by Product Mix

Source: (Mills, 2011)

Overview Of Textile Industry

Textile industry contributes about 60% to the totalexport earnings of the country, accounts for 46% of the total manufacturing and provides employment to 38% of the manufacturing labNishat force. The availability of basic raw material for textile industry, cotton, has played a principal role in the growth of the industry. Pakistan is 4thlargest producer and 3rd largest consumer of cotton. The textile and clothing industry willcontinue to be the driving force of Pakistan’s economic growth; as there is no substitute industry or service sector that has the potential to benefit the economy with foreign currency earnings and new jobs creation. Pakistan’s textile industry had proved its strength in the global market during the last four decades. It has proved its strength in post-quota era by sustaining its position and growth.(Economics Survey of Pakistan, 2010-2011)

Global Overview

The textile and clothing trade has increased from US$ 355 billion in 2000 to $613 billion in 2008, but it shrank to $527 billion in 2009 due to global financial meltdown. Moreover, the clothing trade is growing at a faster rate than other textiles as world clothing export grew from $197 billion in 2000 to $316 billion in 2009. On the other hand world textile export expanded from $157 billion in 2000 to $211 billion in 2009. The global financial crisis since late 2007 adversely impacted the trade in textiles. The weaker demand in the developed economies limited the expansion of global trade, however, following series of economic stimulus packages, world trade started to pick-up again since March 2009 but world merchandise trade dropped by 23 per cent in 2009 (in nominal terms) which is the highest ever decline in more than 50 years. The recovery in world trade is currently fueling optimism for trade prospects for Pakistan. Pakistan exported textiles worth $ 6.5 billion and clothing worth $3 billion in 2009 as compared to textiles worth $ 7.4 billion and clothing worth $ 3.9 billion in 2008.

(Economics Survey of Pakistan, 2010-2011)

Domestic Overview:

The power and gas outages and ever-rising cost of doing business have deteriorated capacity utilization in domestic textile and clothing industry. The global shortage in availability of cotton was caused by the shortfall due to floods driven crop failures in China and Pakistan, which are the biggest producers and consumers of cotton in the world. However, demand for imported cotton soared after floods damaged crops in big producers China, Pakistan and Australia. Besides the foreign demand for Pakistan’s cotton yarn has risen exceptionally. Chinese, in particular, have procured huge quantities of yarn from Pakistan, even though they are the fiercest competitor of Pakistan in the world market. Therefore, the increased demand of yarn export created problem of yarn availability in the local market. To stay in the market, industry is making distress efforts. Closure, low capacity utilization and losses are the norms of the day. Resultantly the production and export performance of Textile sector had shown a mixed trend.(Economics Survey of Pakistan, 2010-2011)

Performance of Textile Industry

The prices of the raw cotton globally have increased and touched $2/Lb, the raw cotton prices as per KCA spot rate have varied from Rs. 7,116 /40 Kg minimum to Rs. 12,475 /40Kg maximum. Currently the prices range is of the Rs.10,500 to Rs.11,500, or around US$1.5/Lb. Based on the high cost of the cotton all the textile products have fetched higher unit prices and resultantly the export earnings of the textile products have increased from US$7,663.8 in 2009-10 to $9,956.5 million in 2010-11 implying an increase of 29.9 percent. Textile industry is a pre-dominantly export oriented industry and about 75-80 percent of total produce of cotton and synthetic textiles are exported in the form of yarn, fabric, readymade garments, bed wear and made Manufacturing and Mining 39 ups.

The Pakistan Textile Industry has an inbuilt potential for performing better both in production as well as in exports by virtue of its inherent competitiveness in the international market for its conventional products. However, to sustain its position and to move in high value added products as well as for the increased market share, a large investment in machinery and BMR of existing and embracing new technology is critically important. Investment in awareness of virgin markets, training of labor force, improvement in labor productivity, marketing, product and brand development are the immediate areas to expand the export base. (Economics Survey of Pakistan, 2010-2011)

General Market Review and Future Prospects

Globally 2010 – 2011 was marked as year of recovery from the worst economic recession seen

in decades. Road to recovery is slow but steady because of sheer intensity of the downfall.

Domestically, nothing changed for the textile industry as compared to previous years. Industry

had been compelled to put up with high cost of production resulting from higher cotton prices,

rising energy costs, increased prices of imported inputs due to depreciation of Pakistani rupee,

double digit inflation and prolonged power cuts. We have witnessed extinction of small and cottageindustry fighting these demons and if the situation prolongs another year or two, medium sizedentities will also start to disappear.

Nishat company did extremely well during the current financial year and achieved 54 % growth in

total net revenues from the corresponding previous year. As we have stated on many occasions

previously, Nishat’s vertical integration, mass and modern production capability, effective marketing policies and campaigns, strong customer base and diversified product range allows us to grow even more when everyone else is facing decline.

We are keeping a close eye on the unfolding of events and devise strategy accordingly. We have

formulated a multi-dimensional strategy to tackle all these issues. In house power production and exploration into alternative fuels e.g. coal, rice husk, biomass and LNG will help us take care of energy shortage problem. We are focusing on diversification of Nishat’s product range and consolidating good business done in work wear fabric is another dimension of this strategy.

Nishat strength lies in Nishat strategic planning and marketing capabilities along with Nishat’s vertically

integrated production facilities that can turn raw cotton to a final finished consumer product which has always attracted customers’ attention all over the world. Nishat strategy is to expand and diversify Nishat’s product range by adding value added products and systems.(Nishat Mill Annual Report, 2011)

Share of Textiles in Pakistan’s Economy

Generates

54 % of exports

Constitutes

46 % of Manufacturing Industry

Employs

38 % of country’s working force

Contributes

8.5% to the total GDP

Drives

Banking, Shipping ,Transport , Insurance, Machinery &the ancillary industry.

Source: TCO

Share of Textiles in Pakistan’s Exports

Source: TDAP

Financial Analysis

Financial Highlights

2011

2010

Increase %

Net sales (Rs. ‘000’)

48,565,144

31,535,647

54.00

Gross profit (Rs. ‘000’)

7,846,447

5,980,185

31.21

Pre-tax profit (Rs. ‘000’)

5,411,912

3,286,069

64.69

After tax profit (Rs. ‘000’)

4,843,912

2,915,461

66.15

Gross profit ratio to sales (%)

16.16

18.96

After tax profit ratio to sales (%)

9.97

9.24

Earnings per share (Rs.)

13.78

10.50

Source: (Nishat Mill Annual Report, 2011)

During the year, the Company has achieved excellent growth in its revenues and profits. Aftertax profit of Nishat Company for the year ended 30 June 2011 has significantly increased toRs. 4,843.912 million as compared to Rs. 2,915.461 million for the corresponding previous yearended 30 June 2010, showing an increase of 66.15 %. Similarly, the gross profit for the currentyear has significantly increased to Rs. 7,846.447 million as compared to Rs. 5,980.185 million forthe corresponding previous year.(Nishat Mill Annual Report, 2011)

The significant increase in gross profit and net profit is mainly attributable to increase in sale quantities, good sales mix of products and increase in sale prices of the products manufactured and sold by the Company. All business segments of the Company have been able to realize benefit during the current yearand have contributed towards the excellent results. In particular spinning and weaving businesses of the Company have performed tremendously well in the current year by generating higher profits. Nishat spinning business through effective planning, timely investment in cotton and modern production facilities has grasped optimum benefits offered by the sharp rise in demand of cotton yarn and its selling prices even though later in the year the sales margins were negatively affected because of decline in cotton prices.

The significant increase in sales in 2011 by 54% over 2010 is in line with the Company’s policy of yearly growth trend in sale quantities together with the significant increase in sale prices.(Nishat Mill Annual Report, 2011)

SNishat ce: (Nishat Mill Annual Report, 2011)

However, the gross profit margin of the Company has decreased to 16.16 % in the current year from 18.96 % in the previous year. The decrease in gross profit margin is mainly due to increase in raw material prices for Nishat value added business which could not be fully passed on to Nishat value added business customers and increase in electricity generation cost due to excessive use of diesel and furnace oil during the frequent shutdown of gas supply.

SNishat ce: (Nishat Mill Annual Report, 2011)

The finance cost of the Company has increased by 42.07% (June 2010: Rs. 1,126.922 million, June 2011:Rs. 1,601.048 million) in the current year compared to the corresponding previous year owing to increase in borrowing rate of the Company which is due to increase in export refinance rates by the State Bank of Pakistan and excessive borrowing of the Company to meet the need of increased working capital requirement due to hike in raw material prices.

The board of directors of the company has reommended 33% cash dividend (2010: 25%) and treansfering of Rs. 3.863 Billion (2010 : 2.063 Billion) to general reserves. (Nishat Mill Annual Report, 2011)

Earning Per Share

Source:(Nishat Mill Annual Report, 2011)

The earning per share of the compnay has increased from 10.5 to 13.58 Rupees per share in 2011 as compared to 2010. (Nishat Mill Annual Report, 2011)

Analysis of Financial Statements

Profit & Loss Statement

Profit &Loss

(Rupees in Thousands)

 

2011

2010

2009

2008

2007

Net Sales

48,565,144

31,535,647

23,870,379

19,589,804

17,180,192

Gross Profit

7,846,447

5,980,185

4,351,541

2,811,746

2,844,938

Profit before tax

5,411,912

3,286,069

1,561,501

6,118,687

1,356,208

Profit after tax

4,843,912

2,915,461

1,268,001

5,857,587

1,211,208

SNishat ce: (Nishat Mill Annual Report, 2011)

Cash Outflows

Cash Outflows

(Rupees in Thousands)

 

2011

2010

2009

2008

2007

Tax paid

(561,819)

(343,036)

(257,289)

(238,252)

(146,751)

Financial Charges Paid

(1,474,841)

(1,096,389)

(1,458,602)

(875,636)

(838,759)

Fixed capital expenditure

2,848,115

1,955,542

917,312

1,239,492

1,076,493

SNishat ce: (Nishat Mill Annual Report, 2011)

The most major factor in the cash outflow in the amount of financial charges paid by the company. This is consistently on the rise from 2006 to 2011.

Balance Sheet

Balance Sheet

(Rupees in Thousands)

 

2011

2010

2009

2008

2007

Current assets

18,441,959

11,732,928

8,294,838

8,818,379

13,309,087

Current liabilities

15,322,349

10,568,415

9,602,265

12,053,926

7,649,373

Operating fixed assets – Owned

12,107,389

11,476,005

11,102,355

11,188,560

10,309,611

Total assets

54,088,904

46,182,314

31,512,686

40,277,289

39,587,091

Long term loans and finances

2,861,956

2,980,694

2,334,411

1,321,912

1,773,820

Shareholders’Equity

35,393,959

31,376,313

19,330,767

26,492,070

30,163,898

SNishat ce: (Nishat Mill Annual Report, 2011)

Horizontal Analysis

Horizontal Analysis

 

2011

2010

2009

2008

2007

Balance Sheet

Total Equity

172%

152%

94%

122%

146%

Non-current Liabilities

112%

141%

86%

35%

59%

Current Liabilities

217%

150%

136%

166%

108%

Total Liabilities

186%

147%

121%

127%

94%

Total Equity And Liabilities

176%

151%

103%

124%

129%

Assets

Non-current Assets

170%

165%

111%

115%

126%

Current Assets

189%

120%

85%

143%

137%

Total Assets

176%

151%

103%

124%

129%

Profit And Loss Account

Sales

292%

189%

143%

116%

103%

Cost Of Sales

297%

187%

142%

119%

105%

Gross Profit

265%

202%

147%

100%

96%

Distribution Cost

242%

189%

145%

106%

103%

Administrative Expenses

248%

206%

164%

151%

121%

Other Operating Expenses

548%

367%

244%

141%

117%

 

262%

204%

155%

118%

107%

267%

201%

141%

88%

88%

Other Operating Income

304%

122%

74%

721%

83%

Profit From Operations

279%

176%

120%

291%

87%

Finance Cost

212%

149%

192%

120%

109%

Profit Before Taxation

308%

187%

89%

364%

77%

Provision For Taxation

451%

294%

233%

205%

115%

Profit After Taxation

297%

179%

78%

376%

74%

There are a few important to look here which have increased by a significant factor

In the liabilities, current liabilites have been increased by the most significant number and after that total liabiliteis which is not a good sign for the company.

In the asset sides, current assets have been increased over the year but not in the same percentage as current liabilities did.

In the profit and loss account, the most allarming thing for the company is the amount by which operating expenses have increased. In a very high proportion as compared to all other accounts.

Other operating also went well by a pretty good value which is a good sign for the company.

Sales and cost of sales have increased by the pretty much same factor but need to lower its cost of sales in order to increase the profit for the company.

Financing cost is looking not so good, company need to do well on that.

Income and profits have increased by pretty good percentages which is a pretty good sign for the company.

Vertical Analysis

Vertical Analysis

 

2011

2010

2009

2008

2007

Balance Sheet

Total Equity

65%

68%

61%

66%

76%

Non-current Liabilities

6%

9%

8%

3%

4%

Current Liabilities

28%

23%

30%

31%

19%

Total Liabilities

35%

32%

39%

34%

24%

Total Equity And Liabilities

100%

100%

100%

100%

100%

Assets

Non-current Assets

66%

75%

74%

63%

66%

Current Assets

34%

25%

26%

37%

34%

Total Assets

100%

100%

100%

100%

100%

Profit And Loss Account

Sales

100%

100%

100%

100%

100%

Cost Of Sales

84%

81%

82%

85%

83%

Gross Profit

16%

19%

18%

15%

17%

Distribution Cost

5%

5%

6%

5%

5%

Administrative Expenses

1%

2%

2%

2%

2%

Other Operating Expenses

1%

1%

1%

1%

1%

 

7%

8%

8%

8%

8%

9%

11%

10%

8%

9%

Other Operating Income

5%

3%

3%

30%

4%

Profit From Operations

14%

14%

13%

38%

13%

Finance Cost

3%

4%

6%

5%

5%

Profit Before Taxation

11%

10%

7%

33%

8%

Provision For Taxation

1%

1%

1%

1%

1%

Profit After Taxation

10%

9%

5%

32%

7%

Ratio Analysis

Profitability Ratios

Gross Profit Margin

Gross Profit Margin

 

2011

2010

2009

2008

2007

Net Sales

48,565,144

31,535,647

23,870,379

19,589,804

17,180,192

Gross Profit

7,846,447

5,980,185

4,351,541

2,811,746

2,844,938

GP Margin

16.157%

18.963%

18.230%

14.353%

16.559%

Chenab Group

-26.68%

-2.23%

21.83%

19.74%

18.96%

Sapphire

21.42%

20.68%

18.45%

16.75%

16.89%

Company is under performing as compared to its competitors primarily because of the reason that the cost of sales of the company is pretty high as compared to its competitors. Company need to cut down its cost of sales in order to do well in the long run.

Operating Profit Margin:

Operating Profit Margin

 

2011

2010

2009

2008

2007

Net Sales

48,565,144

31,535,647

23,870,379

19,589,804

17,180,192

EBIT

5,411,912

3,286,069

1,561,501

6,118,687

1,356,208

OP Margin

11.144%

10.420%

6.542%

31.234%

7.894%

Chenab Group

-65.33%

-21.90%

-0.15%

-0.18%

1

Nishat Mills Limited is the flagship company of Nishat Group. It was established in 1951. It is one of the most modern, largest vertically integrated textile company in Pakistan. Nishat Mills Limited has 198,120 spindles, 655 Toyota air jet looms. The Company also has the most modern textile dyeing and processing units, 2 stitching units for home texitle, one stitching unit for garments and Power Generation facilities with a capacity of 89 MW. The Company’s total export for the year 2011 was Rs. 36.015 billion (US$ 416 million). Due to the application of prudent management policies, consolidation of operations, a strong balance sheet and an effective marketing strategy, the growth trend is expected to continue in the years to come. The Company’s production facilities comprise of spinning, weaving, processing, stitching and power generation.(Nishat Mills Website)

Nishat Mills is listed on all the three stock exchanges of Pakistan; Lahore Stock Exhange, Karachi Stock Exchange and Islamabad Stock Exhange. The company has shown constant over the last few decades and is among the top textile exporting and manufacturing companies in Pakistan.  It deals in yarn, linen, cloth and other goods andfabrics made from raw cotton, synthetic fibre and cloth and generate, accumulate,distribute and supply electricity.(Nishat Mills Website)

Events in History

Table Showing the Main Events in the History of Nishat Mills (Main Events in History)

Vision

To transform the Company into a modern and dynamic yarn, cloth and processed cloth and finished product manufacturing Company that is fully equipped to play a meaningful role on sustainable basis in the economy of Pakistan. To transform the Company into a modern and dynamic power generating Company that is fully equipped to play a meaningful role on sustainable basis in the economy of Pakistan.(Vision of NML)

Mission Statement

To provide quality products to customers and explore new markets to promote/expand sales of the Company through good governance and foster a sound and dynamic team, so as to achieve optimum prices of products of the Company for sustainable and equitable growth and prosperity of the Company.(Mission NML)

Businesses and Products

Spinning

Nishat Mills Spinning Division has over 198,120 spindles, which are operationally organized into 8 spinning units. The entire machinery is from world-renowned manufactures. All yarns made at Nishat are Ring Spun suitable for both knitting and weaving. Besides the best Pakistani cotton, long stapled American, Egyptian and US Pima cotton is also used for fine counts. For Nishat strong belief in product development and innovation we have Nishat own in house state of the art cotton and yarn testing laboratories. Nishat spinning is one of the most trusted brands in the market due to its efficient production and quality.

Spinning production capacity for both Cotton and Blended Yarns is 185 Tons / Day.

(Nishat Mill Annual Report, 2011)

Cotton Range

100% Cotton Carded

From Ne 05/1 to Ne 40/1

From Ne 05/2 to Ne 40/2

All double yarn in 100% knotless / auto splice

Blended Yarn

Poly Cotton 

Poly 52%

Carded Cotton 48%

Ne 10/1 to Ne 40/1

Poly 52%

Combed Cotton 48%

Ne 10/1 to Ne 80/1

Poly 65%

Carded Cotton 35%

Ne 10/1 to Ne 40/1

Poly 65%

Combed Cotton 35%

Ne 10/1 to Ne 80/1

Cotton Rich (CVC) 

Poly 45%

Carded Cotton 55%

Ne 10/1 to Ne 40/1

Poly 45%

Combed Cotton 55%

Ne 10/1 to Ne 80/1

Poly 40%

Carded Cotton 60%

Ne 10/1 to Ne 40/1

Poly 40%

Combed Cotton 60%

Ne 10/1 to Ne 80/1

Core Spun Yarn: 

20 D Lycra

Ne 8/1 to Ne 80/1

40 D Lycra

Ne 8/1 to Ne 60/1

70 D Lycra

Ne 8/1 to Ne 40/1

140 D Lycra

Ne 8/1 to Ne 16/1

 SNishat ce: (Nishat Mills Website)

Yarn Dyeing

 Nishat Yarn Dyeing is one of the latest exhaust dyeing units in Pakistan having installed production capacity of 5.0 tons per day. We are processing yarn and sewing thread in package. Also, we have set up facility for Beam Dyeing which is first of its kind in Pakistan.(Product Spinning)

Weaving

Nishat Mills Weaving division has 670 modern Air Jet and projectile looms which produce approximate 9.0 million meters of fabric per month and makes it the largest weaving facility of Pakistan catering to home textile and apparel fabrics.

Processing

Nishat fabric processing facility is one of the largest and most modern factories of Pakistan. With an array of custom-made machinery, it has the capacity to produce 90 million meters of fabric per annum. It is specially designed to handle heavy weight fabrics like twills, drills, canvases / poplins, fabrics with minimum tension such as stretch fabrics and all high density weaves. The advantage achieved by the customized design of its machines is the result of an extensive research work with the help of world renowned machine makers. To ensure that Nishat customers get the very best we use more than 75% dyes and chemicals of European origin.

The standards are higher than ever, dedicated by fashion, efficient productivity and further automation is engineered in the plant. To maintain quality and international standards, an on-line Quality Control (QC) Department has been setup. The QC department is augmented by a fully equipped Laboratory, which scrutinizes the fabric process flow at all levels. Nishat extra ordinary Research & Development work and highly trained marketing personal are pivotal to sustain long term business relationships.(Prouct Processing)

Home Textile

With an array of 938 modern new generation sewing machines, the Home Textile Division consists of 2 stitching facilities. The two facilities combined have an average production capacity of approximately 24 million meters per annum. The product line is customized to manufacture products of various styles and sizes according to the requirements of Nishat customers, wholesalers, retailers and contract textile business.(Nishat Mill Annual Report, 2011)

Nishat  Product Range:

Quilt Covers

Quilted Throw-over

Flat Sheet

Fitted Sheet

Pillow Cases

Cushions

Valances

Curtains

Baby Sets

Table Linen

Embroidery

(Product Home Textile)

Garments

Nishat Mills Limited has state of art garment manufacturing facility both for men and women. The Apparel division has deployed 1627 high end sewing machines such as Vibe Mac, Juki, Mitusibishi and Brother. The Division has the capacity to produce 7.20 million garments per annum.

The Garment wet process utilizes the modern techniques of Rinse, Enzyme Stone, Enzyme Wash, Super Bleach, Reducer Wash, Tint Wash and Raisin Wash. In order to obtain best results, Nishat facility is geared with Tonello Washing machines, Maino dryers, Wrinkle Curing Hangers and Barrel washing machines and Dryers for sampling. Nishat qualified team members utilize the equipment to obtain optimal results and cater to the specific needs of the client.(Product Garments)

Generation Facilities

Nishat Mills has established state of the art, modern, highly reliable and extremely efficient captive co-generation power plants to cater in house energy requirements at all its spinning, weaving, processing, stitching and apparel units. These facilities are using Wartsila, Caterpillar, Cummins, Daihatsu, Jenbacher & Mak engines for power generation. Gas, Furnace Oil, Diesel and Steam is being used as fuel for power generation.(Nishat Mill Annual Report, 2011)

Combined Heat and Power Plant

Nishat Mills Limited has lived up to its promise to be a vanguard in use of alternative fuels for energy requirements in the absence of fossil fuels. We have put up a new Combined Heat and Power plant at Nishat site in Lahore which will produce 6 M.W. of electricity and 65 tons/hNishat of steam. Coal will be the primary fuel but special aspect of this plant is its flexibility to use alternative input mix up-to 70% of bio-mass with 30% of coal. The plant is expected to be commissioned by May/June 2012. Two high performance, high efficiency, low pressure steam generating boilers are already in operation using rice husk, wood chips and corn cobs etc as main sNishat ce of locally available agri-waste fuels at two sites of Nishat company.

The Company is now planning to establish similar projects for Nishat spinning division at Faisalabad and Nishat weaving division at Sheikhupura. These plants will have the production capacity to cater for entire power and energy requirements of these divisions.(Nishat Mill Annual Report, 2011)

Synthetic Natural Gas Plant

Installation of Synthetic Natural Gas (SNG) Plant is nearing its completion phase. This plant will use LPG as raw material to produce synthetic gas. This synthetic gas will be used to run processing machines which are solely dependent on natural gas for their running and are non operational during gas load shedding days. A sizeable storage of LPG has also been established in the Company.(Power Generations)

Nishat Linen

Nishat Linen is a concern of Nishat Mills, the textile and home fashion retail chain that has redefined the industry with acute attention paid to quality, design and affordability. Nishat Linen prides itself on being the brand of preference for discerning customers who are in search of things, unique and chic without compromising on aesthetics or price. Unsurpassed customer service, including tailor-made orders, ensures Nishat clientele remains loyal to the Nishat family.

From bed linen to kitchen coordinates, upholstery to apparel, Nishat Linen has become a household name as a creator of stunning, high-quality designs at reasonable prices; a feat achieved by few.(Nishat Linen)

Revenue by Product Mix

Source: (Mills, 2011)

Overview Of Textile Industry

Textile industry contributes about 60% to the totalexport earnings of the country, accounts for 46% of the total manufacturing and provides employment to 38% of the manufacturing labNishat force. The availability of basic raw material for textile industry, cotton, has played a principal role in the growth of the industry. Pakistan is 4thlargest producer and 3rd largest consumer of cotton. The textile and clothing industry willcontinue to be the driving force of Pakistan’s economic growth; as there is no substitute industry or service sector that has the potential to benefit the economy with foreign currency earnings and new jobs creation. Pakistan’s textile industry had proved its strength in the global market during the last four decades. It has proved its strength in post-quota era by sustaining its position and growth.(Economics Survey of Pakistan, 2010-2011)

Global Overview

The textile and clothing trade has increased from US$ 355 billion in 2000 to $613 billion in 2008, but it shrank to $527 billion in 2009 due to global financial meltdown. Moreover, the clothing trade is growing at a faster rate than other textiles as world clothing export grew from $197 billion in 2000 to $316 billion in 2009. On the other hand world textile export expanded from $157 billion in 2000 to $211 billion in 2009. The global financial crisis since late 2007 adversely impacted the trade in textiles. The weaker demand in the developed economies limited the expansion of global trade, however, following series of economic stimulus packages, world trade started to pick-up again since March 2009 but world merchandise trade dropped by 23 per cent in 2009 (in nominal terms) which is the highest ever decline in more than 50 years. The recovery in world trade is currently fueling optimism for trade prospects for Pakistan. Pakistan exported textiles worth $ 6.5 billion and clothing worth $3 billion in 2009 as compared to textiles worth $ 7.4 billion and clothing worth $ 3.9 billion in 2008.

(Economics Survey of Pakistan, 2010-2011)

Domestic Overview:

The power and gas outages and ever-rising cost of doing business have deteriorated capacity utilization in domestic textile and clothing industry. The global shortage in availability of cotton was caused by the shortfall due to floods driven crop failures in China and Pakistan, which are the biggest producers and consumers of cotton in the world. However, demand for imported cotton soared after floods damaged crops in big producers China, Pakistan and Australia. Besides the foreign demand for Pakistan’s cotton yarn has risen exceptionally. Chinese, in particular, have procured huge quantities of yarn from Pakistan, even though they are the fiercest competitor of Pakistan in the world market. Therefore, the increased demand of yarn export created problem of yarn availability in the local market. To stay in the market, industry is making distress efforts. Closure, low capacity utilization and losses are the norms of the day. Resultantly the production and export performance of Textile sector had shown a mixed trend.(Economics Survey of Pakistan, 2010-2011)

Performance of Textile Industry

The prices of the raw cotton globally have increased and touched $2/Lb, the raw cotton prices as per KCA spot rate have varied from Rs. 7,116 /40 Kg minimum to Rs. 12,475 /40Kg maximum. Currently the prices range is of the Rs.10,500 to Rs.11,500, or around US$1.5/Lb. Based on the high cost of the cotton all the textile products have fetched higher unit prices and resultantly the export earnings of the textile products have increased from US$7,663.8 in 2009-10 to $9,956.5 million in 2010-11 implying an increase of 29.9 percent. Textile industry is a pre-dominantly export oriented industry and about 75-80 percent of total produce of cotton and synthetic textiles are exported in the form of yarn, fabric, readymade garments, bed wear and made Manufacturing and Mining 39 ups.

The Pakistan Textile Industry has an inbuilt potential for performing better both in production as well as in exports by virtue of its inherent competitiveness in the international market for its conventional products. However, to sustain its position and to move in high value added products as well as for the increased market share, a large investment in machinery and BMR of existing and embracing new technology is critically important. Investment in awareness of virgin markets, training of labor force, improvement in labor productivity, marketing, product and brand development are the immediate areas to expand the export base. (Economics Survey of Pakistan, 2010-2011)

General Market Review and Future Prospects

Globally 2010 – 2011 was marked as year of recovery from the worst economic recession seen

in decades. Road to recovery is slow but steady because of sheer intensity of the downfall.

Domestically, nothing changed for the textile industry as compared to previous years. Industry

had been compelled to put up with high cost of production resulting from higher cotton prices,

rising energy costs, increased prices of imported inputs due to depreciation of Pakistani rupee,

double digit inflation and prolonged power cuts. We have witnessed extinction of small and cottageindustry fighting these demons and if the situation prolongs another year or two, medium sizedentities will also start to disappear.

Nishat company did extremely well during the current financial year and achieved 54 % growth in

total net revenues from the corresponding previous year. As we have stated on many occasions

previously, Nishat’s vertical integration, mass and modern production capability, effective marketing policies and campaigns, strong customer base and diversified product range allows us to grow even more when everyone else is facing decline.

We are keeping a close eye on the unfolding of events and devise strategy accordingly. We have

formulated a multi-dimensional strategy to tackle all these issues. In house power production and exploration into alternative fuels e.g. coal, rice husk, biomass and LNG will help us take care of energy shortage problem. We are focusing on diversification of Nishat’s product range and consolidating good business done in work wear fabric is another dimension of this strategy.

Nishat strength lies in Nishat strategic planning and marketing capabilities along with Nishat’s vertically

integrated production facilities that can turn raw cotton to a final finished consumer product which has always attracted customers’ attention all over the world. Nishat strategy is to expand and diversify Nishat’s product range by adding value added products and systems.(Nishat Mill Annual Report, 2011)

Share of Textiles in Pakistan’s Economy

Generates

54 % of exports

Constitutes

46 % of Manufacturing Industry

Employs

38 % of country’s working force

Contributes

8.5% to the total GDP

Drives

Banking, Shipping ,Transport , Insurance, Machinery &the ancillary industry.

Source: TCO

Share of Textiles in Pakistan’s Exports

Source: TDAP

Financial Analysis

Financial Highlights

2011

2010

Increase %

Net sales (Rs. ‘000’)

48,565,144

31,535,647

54.00

Gross profit (Rs. ‘000’)

7,846,447

5,980,185

31.21

Pre-tax profit (Rs. ‘000’)

5,411,912

3,286,069

64.69

After tax profit (Rs. ‘000’)

4,843,912

2,915,461

66.15

Gross profit ratio to sales (%)

16.16

18.96

After tax profit ratio to sales (%)

9.97

9.24

Earnings per share (Rs.)

13.78

10.50

Source: (Nishat Mill Annual Report, 2011)

During the year, the Company has achieved excellent growth in its revenues and profits. Aftertax profit of Nishat Company for the year ended 30 June 2011 has significantly increased toRs. 4,843.912 million as compared to Rs. 2,915.461 million for the corresponding previous yearended 30 June 2010, showing an increase of 66.15 %. Similarly, the gross profit for the currentyear has significantly increased to Rs. 7,846.447 million as compared to Rs. 5,980.185 million forthe corresponding previous year.(Nishat Mill Annual Report, 2011)

The significant increase in gross profit and net profit is mainly attributable to increase in sale quantities, good sales mix of products and increase in sale prices of the products manufactured and sold by the Company. All business segments of the Company have been able to realize benefit during the current yearand have contributed towards the excellent results. In particular spinning and weaving businesses of the Company have performed tremendously well in the current year by generating higher profits. Nishat spinning business through effective planning, timely investment in cotton and modern production facilities has grasped optimum benefits offered by the sharp rise in demand of cotton yarn and its selling prices even though later in the year the sales margins were negatively affected because of decline in cotton prices.

The significant increase in sales in 2011 by 54% over 2010 is in line with the Company’s policy of yearly growth trend in sale quantities together with the significant increase in sale prices.(Nishat Mill Annual Report, 2011)

SNishat ce: (Nishat Mill Annual Report, 2011)

However, the gross profit margin of the Company has decreased to 16.16 % in the current year from 18.96 % in the previous year. The decrease in gross profit margin is mainly due to increase in raw material prices for Nishat value added business which could not be fully passed on to Nishat value added business customers and increase in electricity generation cost due to excessive use of diesel and furnace oil during the frequent shutdown of gas supply.

SNishat ce: (Nishat Mill Annual Report, 2011)

The finance cost of the Company has increased by 42.07% (June 2010: Rs. 1,126.922 million, June 2011:Rs. 1,601.048 million) in the current year compared to the corresponding previous year owing to increase in borrowing rate of the Company which is due to increase in export refinance rates by the State Bank of Pakistan and excessive borrowing of the Company to meet the need of increased working capital requirement due to hike in raw material prices.

The board of directors of the company has reommended 33% cash dividend (2010: 25%) and treansfering of Rs. 3.863 Billion (2010 : 2.063 Billion) to general reserves. (Nishat Mill Annual Report, 2011)

Earning Per Share

Source:(Nishat Mill Annual Report, 2011)

The earning per share of the compnay has increased from 10.5 to 13.58 Rupees per share in 2011 as compared to 2010. (Nishat Mill Annual Report, 2011)

Analysis of Financial Statements

Profit & Loss Statement

Profit &Loss

(Rupees in Thousands)

 

2011

2010

2009

2008

2007

Net Sales

48,565,144

31,535,647

23,870,379

19,589,804

17,180,192

Gross Profit

7,846,447

5,980,185

4,351,541

2,811,746

2,844,938

Profit before tax

5,411,912

3,286,069

1,561,501

6,118,687

1,356,208

Profit after tax

4,843,912

2,915,461

1,268,001

5,857,587

1,211,208

SNishat ce: (Nishat Mill Annual Report, 2011)

Cash Outflows

Cash Outflows

(Rupees in Thousands)

 

2011

2010

2009

2008

2007

Tax paid

(561,819)

(343,036)

(257,289)

(238,252)

(146,751)

Financial Charges Paid

(1,474,841)

(1,096,389)

(1,458,602)

(875,636)

(838,759)

Fixed capital expenditure

2,848,115

1,955,542

917,312

1,239,492

1,076,493

SNishat ce: (Nishat Mill Annual Report, 2011)

The most major factor in the cash outflow in the amount of financial charges paid by the company. This is consistently on the rise from 2006 to 2011.

Balance Sheet

Balance Sheet

(Rupees in Thousands)

 

2011

2010

2009

2008

2007

Current assets

18,441,959

11,732,928

8,294,838

8,818,379

13,309,087

Current liabilities

15,322,349

10,568,415

9,602,265

12,053,926

7,649,373

Operating fixed assets – Owned

12,107,389

11,476,005

11,102,355

11,188,560

10,309,611

Total assets

54,088,904

46,182,314

31,512,686

40,277,289

39,587,091

Long term loans and finances

2,861,956

2,980,694

2,334,411

1,321,912

1,773,820

Shareholders’Equity

35,393,959

31,376,313

19,330,767

26,492,070

30,163,898

SNishat ce: (Nishat Mill Annual Report, 2011)

Horizontal Analysis

Horizontal Analysis

 

2011

2010

2009

2008

2007

Balance Sheet

Total Equity

172%

152%

94%

122%

146%

Non-current Liabilities

112%

141%

86%

35%

59%

Current Liabilities

217%

150%

136%

166%

108%

Total Liabilities

186%

147%

121%

127%

94%

Total Equity And Liabilities

176%

151%

103%

124%

129%

Assets

Non-current Assets

170%

165%

111%

115%

126%

Current Assets

189%

120%

85%

143%

137%

Total Assets

176%

151%

103%

124%

129%

Profit And Loss Account

Sales

292%

189%

143%

116%

103%

Cost Of Sales

297%

187%

142%

119%

105%

Gross Profit

265%

202%

147%

100%

96%

Distribution Cost

242%

189%

145%

106%

103%

Administrative Expenses

248%

206%

164%

151%

121%

Other Operating Expenses

548%

367%

244%

141%

117%

 

262%

204%

155%

118%

107%

267%

201%

141%

88%

88%

Other Operating Income

304%

122%

74%

721%

83%

Profit From Operations

279%

176%

120%

291%

87%

Finance Cost

212%

149%

192%

120%

109%

Profit Before Taxation

308%

187%

89%

364%

77%

Provision For Taxation

451%

294%

233%

205%

115%

Profit After Taxation

297%

179%

78%

376%

74%

There are a few important to look here which have increased by a significant factor

In the liabilities, current liabilites have been increased by the most significant number and after that total liabiliteis which is not a good sign for the company.

In the asset sides, current assets have been increased over the year but not in the same percentage as current liabilities did.

In the profit and loss account, the most allarming thing for the company is the amount by which operating expenses have increased. In a very high proportion as compared to all other accounts.

Other operating also went well by a pretty good value which is a good sign for the company.

Sales and cost of sales have increased by the pretty much same factor but need to lower its cost of sales in order to increase the profit for the company.

Financing cost is looking not so good, company need to do well on that.

Income and profits have increased by pretty good percentages which is a pretty good sign for the company.

Vertical Analysis

Vertical Analysis

 

2011

2010

2009

2008

2007

Balance Sheet

Total Equity

65%

68%

61%

66%

76%

Non-current Liabilities

6%

9%

8%

3%

4%

Current Liabilities

28%

23%

30%

31%

19%

Total Liabilities

35%

32%

39%

34%

24%

Total Equity And Liabilities

100%

100%

100%

100%

100%

Assets

Non-current Assets

66%

75%

74%

63%

66%

Current Assets

34%

25%

26%

37%

34%

Total Assets

100%

100%

100%

100%

100%

Profit And Loss Account

Sales

100%

100%

100%

100%

100%

Cost Of Sales

84%

81%

82%

85%

83%

Gross Profit

16%

19%

18%

15%

17%

Distribution Cost

5%

5%

6%

5%

5%

Administrative Expenses

1%

2%

2%

2%

2%

Other Operating Expenses

1%

1%

1%

1%

1%

 

7%

8%

8%

8%

8%

9%

11%

10%

8%

9%

Other Operating Income

5%

3%

3%

30%

4%

Profit From Operations

14%

14%

13%

38%

13%

Finance Cost

3%

4%

6%

5%

5%

Profit Before Taxation

11%

10%

7%

33%

8%

Provision For Taxation

1%

1%

1%

1%

1%

Profit After Taxation

10%

9%

5%

32%

7%

Ratio Analysis

Profitability Ratios

Gross Profit Margin

Gross Profit Margin

 

2011

2010

2009

2008

2007

Net Sales

48,565,144

31,535,647

23,870,379

19,589,804

17,180,192

Gross Profit

7,846,447

5,980,185

4,351,541

2,811,746

2,844,938

GP Margin

16.157%

18.963%

18.230%

14.353%

16.559%

Chenab Group

-26.68%

-2.23%

21.83%

19.74%

18.96%

Sapphire

21.42%

20.68%

18.45%

16.75%

16.89%

Company is under performing as compared to its competitors primarily because of the reason that the cost of sales of the company is pretty high as compared to its competitors. Company need to cut down its cost of sales in order to do well in the long run.

Operating Profit Margin:

Operating Profit Margin

 

2011

2010

2009

2008

2007

Net Sales

48,565,144

31,535,647

23,870,379

19,589,804

17,180,192

EBIT

5,411,912

3,286,069

1,561,501

6,118,687

1,356,208

OP Margin

11.144%

10.420%

6.542%

31.234%

7.894%

Chenab Group

-65.33%

-21.90%

-0.15%

-0.18%

1

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