financial analysis of noon sugar mills; (2005, 2006 &2007)

7/31/2019 Financial Analysis of Noon Sugar Mills; (2005, 2006 &2007)

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FINANCIAL ANALYSIS OF NOON SUGAR MILLS; (2005, 2006 &2007)

Introduction

The Company was incorporated in 1964 as a public company listed on all the Stock Exchanges of Pakistan for setting up of a plant for manufacture of white sugar, in the province of Punjab. The plant went into production in 1996 with a daily crushing capacity of 1,500 MT of

sugar cane, which has since been raised to 4,000 MT per day in 2002. Further extension to 9,000TCD is underway which has become operative in 2006-2007 crushing season, Al-Hamdulillah.

An Alcohol Distillery of French origin was added during 1986 with a production capacityof 50,000 liters/day in 2002. Another facility with an option to provide either 30,000 LPDIndustrial of fuel Grade Ethanol was added in 2002. A new Fuel Ethanol plant of 100,000 LPD,based on Molecular Sieve technology has been added in 2005.

The Distillery is ISO 9001 certified since 1998, which was upgraded to ISO-9001-2000.

An Effluent Treatment Plant employing the Canadian technology of ABV Bio-Gas

reactors has been installed since 1997, to use its bio-degradable waste water as a renewablesource of energy to replace 70% of fuel oil / natural gas, for generation of process steam. Thishas also enabled the Company to fulfill its obligation towards reducing the environmentalpollution.

The present equity of the Company is Rs.992 Million, with total investment of aroundRs.1, 877 Million. The Market Capitalization is over Rs.455 Million, and sales revenue amountsto over Rs.1.0 Billion, including exports of Rs.213 Million. The average number of employees is691.

The Company has a gratifying record of 40% average annual Dividend out to the shareholders in

the last 10 years.

Balance Sheet

Equity & LiabilitiesShare Capital & Reserves

Authorized Capital

2007 2006 2005

150,000 150,000 150,000


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15,000,000 ordinary shares of Rs. 10 each

Issued, subscribed and paid-up capitalReservesInappropriate profit

Non-Current LiabilitiesLong-term financesLiabilities against assets (to finance lease)Long-term depositsStaff retirement benefits gratuityDeferred taxation

Current LiabilitiesCurrent portion of long-term liabilitiesShort term financesTrade and other payablesAccrued Mark-UpTaxation

136,508000789,341,00052,935,000978,784,000

361,155,000---1,657,00049,881,000 ---412,693,000

108,645,000536,778,00098,651,00022,606,0005,477,000 772,157,000

2,163,634,000

113,757,000790,63500088,048000992,476000

430,254,000799,0001,795,00051,090,00015,840,000499,778,000

43,545,000239,900,00071,426,00010,330,00019,563,000384,764

1,877,018,000

113,756,580830,842,58436,683,647981,282,811

10,525,2022,782,4952,124,70850,599,3999,951,136155,317,592

7,267,30512,356,888110,515,2213,365,40748,316,183181,821,004

1,318,421,407


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Income Statement2007

Rupees2006

Rupees2005

Rupees

AssetsNon Current Assets

Property, plant and equipmentsInvestment propertyInvestmentLong term loans and advancesLong term deposits

Current Assets

Stores, spare and loose toolsStock-in-tradeTrade debtor-unsecured considered goodIncome tax refundable, advance

income tax and tax deducted at sourceLoans and advancesDeposits and prepaymentsOther receivablesBank balances

1,444,154,00017,341,00081,208,000

1,204,000712,0001,544,655,000

55,324,000471,149,00011,407,000

19,782,00016,865,000

2,127,00027,469,00014,856,000618,979,000

2,163,634,000

1,267,074,00017,447,00088,112,000

902,000712,0001,374,247,000

49,022,000374,592,00024,115,000

15,230,00014,782,000

3,130,0003,694,00018,206,000502,771,000

1,877,018,000

431,258,6917,000,000290,823,564

4,641,51817,558,158862,919,968

50,126,55487,042,29933,135,587

24,954,97712,149,156

5,893,2453,851,330237,670,796455,501,439

1,318,421,407


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Sales NetCost of SalesGross profit

Administrative ExpensesDistribution And Marketing ExpensesOperating Profit/(Loss)

Other Operating IncomeInterest & Mark-Up

Finance CostOther Operating Expenses

Loss for the year before LiabilitiesWrite-Back, share of Profit of Associated Company & Taxation

Liabilities Written-Back:

Provision for cane quality premiumShort term borrowings &accrued interest thereon

Share of Profit/(Loss) of an associatedCompany-Net TaxationProfit/(Loss) Before TaxationTaxation

Current year Prior Years Deferred

Profit/(Loss) After Taxation

(Loss)/Earnings per share (Rupees)

1,088,775,0001,018,495,000

70,280,000

(55,906,000)(29,940,000)(15,556,000)

10,494,000215,000

(4,857,000)

(51,529,000)(293,000)

(51,822,000)

(56,679,000)

---

---

(4,390,000)(61,069,000)

5,477,000(14,955,000)(15,840,000)

(35,751,000)

(2.62)

894,339,000821,266,000

73,073,000

(50,809,000)(21,905,000)

359,000

11,620,0001,927,000

13,547,000

(25,968,000)(6,028,000)

(31,996,000)

(18,090,000)

79,335,000

10,270,000

9,370,00080,885,000

4,480,000(6,269,000)

5,889,000

76,785,000

5.62

1,079,377,968845,900,093233,900,093

(50,393,974)(29,814,722)

80,208,696

12,227,4033,454,889

168,951,471

(3,187,551)(2,350,279)(5,537,830)

(7,162,075)

---

---

153,398,173

39,000,000(24,567,498)

7,694,535

131,271,136

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Calculation & Interpretations

Liquidity Ratios:


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Current Ratio:

Current Ratio=Current Assets/Current Liabilities

For the year 2005: Current Ratio=455501439/181821004=2.51For the year 2006: Current Ratio=502771000/384764000=1.31For the year 2007: Current Ratio= 618979000/727157000=0.80

Interpretation The firms liquidity is decreasing as the years are fleeting, the current liquid ratio was in goodposition in 2005, but it goes on decreasing as the passing years. In 2007, the firm has 0.80current assets to payoff 1 liability.

Quick Ratio (Acid-Test Ratio):

Quick Ratio=(Current Assets Inventory Prepays)/Current LiabilitiesFor the year 2005: Quick Ratio=(455501439-8704229-5893245)/181821004=1.99For the year 2006: Quick Ratio=(502771000-471149000-3130000)/384764000=0.33For the year 2007: Quick ratio= (618979000-471149000-2127000)/727157000=0.19

InterpretationThe firms quick ratio has also dropped off by the passing years. It was in good position in 2005,but as we move to 2007 the liquidity position is quite appalling.

Activity Ratios:

Inventory Turnover:

Inventory Turnover=Cost of Goods Sold/Average Inventory

For the year 2005: Inventory Turnover=845900093/87042299=6.94 timesFor the year 2006: Inventory Turnover=821266000/374592000=2.19 timesFor the year 2007: Inventory Turnover=1018495000/471149000=2.16 times

InterpretationThe firm Inventory turnover is also lessening year by year. The inventory turnover was 6.94 in

2005, but this is decreased to 2.16 in 2007.Currently, the firm is converting their inventory into sales 6 times.

Average Age of Inventory:

Average Age of Inventory=Number of days in a year/Inventory Turnover

For the year 2005: Avg. Age of Inventory=360/6.94=51.87 daysFor the year 2006: Avg. Age of Inventory=360/2.19=161.43 daysFor the year 2007: Avg. Age of Inventory=360/2.16=190.48 days


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InterpretationThe average age of inventory has increase from the year 2005 to 2007. The firm was changing itsinventory after every 52 days approximately in 2005, after 161.43 days in 2006 and 190.48 daysin 2007. It shows a rising trend.

Receivable Turnover:

Receivable Turnover=Net Credit Sales/Average Receivables

For the year 2005: Receivable Turnover=1079377968/49316073=21.89 timesFor the year 2006: Receivable Turnover=894339000/42591000=21.00 timesFor the year 2007: Receivable Turnover=1088775000/55741000=19.53 times

InterpretationThe firm is converting their receivables into sales 21.89, 21.00, 19.53 times in year 2005, 2006

and 2007, respectively.

Average Receivable/Collection Period:

Average Receivable Period=Number of days in a year/Receivable Turnover

For the year 2005: Average Receivable Period=360/21.89=16.49 daysFor the year 2006: Average Receivable Period=360/21.00=17.14 daysFor the year 2007: Average Receivable Period=360/19.53=18.43 days

InterpretationThe average receivables period is slightly extending by the year 2005 to 2006. In 2007,receivables are collected on the average every 18.43 days.

Payable Turnover:

Payable Turnover=Net Purchases/Average Payables

For the year 2005: Payable Turnover=604492341/110515221=5.47 timesFor the year 2006: Payable Turnover=835899000/71426000=11.70 timesFor the year 2007: Payable Turnover=888499000/98651000=9.01 times

InterpretationThe payable turnover was 5.47 times in the year 2005, which increased in 2006 up to 11.70 timesand again it decreased up to 9.01 times in 2007. The firm is converting payables into cash 9.01times in 2007.

Average Payment Period:

Average Payment Period=Number of days in a year/Payable Turnover


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For the year 2005: Average Payment Period=360/5.47=65.81 daysFor the year 2006: Average Payment Period=360/11.70=30.77 daysFor the year 2007: Average Payment Period=360/9.01=39.69 days

Interpretation

The average payment period has decreased from the year 2005 to 2007. It shows a good trend asthe firm is paying its payables quite early as compared to the previous years. After every 40 daysapproximately the firm is required to make the payments for the payables.

Fixed Assets Turnover:

Fixed Assets Turnover=Sales/Fixed Assets

For the year 2005: Fixed Assets Turnover=1079377968/1318421407=0.82 timesFor the year 2006: Fixed Assets Turnover=894339000/1877018000=0.48 timesFor the year 2007: Fixed Assets Turnover=1088775000/2163634000=0.50 times

InterpretationThe firm is utilizing its fixed assets to generate sales 0.82, 0.48 and 0.50 times in 2005, 2006 and2007, respectively.

Net Fixed Assets Turnover:

Net Fixed Assets Turnover=Sales/Net Fixed Assets

For the year 2005: Net Fixed Assets Turnover=1079377968/1266573513=0.85 timesFor the year 2006: Net Fixed Assets Turnover=894339000/1823776000=0.49 timesFor the year 2007: Net Fixed Assets Turnover=1088775000/2110604000=0.52 times

InterpretationThe firm is utilizing its net fixed assets to generate sales 0.85, 0.49 and 0.52 times respectively in2005, 2006 and 2007 respectively.

Debt Ratios:

Debt Ratio :

Debt Ratio=Total Liabilities/Total Assets

For the year 2005: Debt Ratio=337138596/1318421407=25.57 For the year 2006: Debt Ratio=884542000/1877018000=42.12 For the year 2007: Debt Ratio=1184850000/2163634000=54.76

InterpretationThe firms indebtedness has increase in the current years. The firms total assets were financed25.57% in 2005, 42.12% in 2006 and 54.76% in 2007 from the liabilities and remaining from theassets.


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Debt Equity Ratio:

Debt Equity Ratio=Long term debts/Stockholders Equity

For the year 2005: Debt Equity Ratio=155317592/981282811=15.83

For the year 2006: Debt Equity Ratio=499778000/992476000=50.36 For the year 2007: Debt Equity Ratio=412693000/978784000=42.16

InterpretationThe firm debt equity ratio increased to 50.36% in 2006 as compared to 15.39% in 2005.Whereas, in 2007, it again decreased to 42.16%In 2007, 42.16% of the companys stockholders equity is financed by long -term debts andremaining from the equity.

Times Interest Earned Ratio:

Times Interest Earned Ratio=Earning Before Interest & Taxes/Interest

For the year 2005: Times Interest Earned Ratio=153269179/3187551=48.08 timesFor the year 2006: Times Interest Earned Ratio=359000/25968000=0.014 times

For the year 2007: Times Interest Earned Ratio=(15566)/51529000=0 times (as answer isin negative)

InterpretationThe firms times interest earned ratio has dec reased by the passing years. It has gone to nil by thecurrent year. The firm had 48.08 and 0.014 times earned interest in 2005 and 2006.There is a very rapid decline in times interest earned.

Profitability Ratios:

Gross Profit Margin:

Gross Profit Margin=Gross Profit/Sales

For the year 2005: Gross Profit=233477875/1079377968=21.63 For the year 2006: Gross Profit=73073000/894339000=8.17 For the year 2007: Gross Profit=70280000/1088775000=6.45

InterpretationsThe firm earned gross profit margin of 21.63% in 2005, 8.17% in 2006 and 6.45% in 2007. Thisis showing a declining tendency.

Operating Profit Margin:

Operating Profit Margin=Earning Before Interest & Taxes/Sales

For the year 2005: Operating Profit Margin=153269179/1079377968=14.20


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For the year 2006: Operating Profit Margin=359000/894339000=0.04 For the year 2007: Operating Profit Margin=(15566000)/1088775000= -1.43

InterpretationThe operating profit margin had decreased by the year 2007 and became negative. The firm was

earning 14.20%, 0.04% and -1.43% of O.P of sales in 2005, 2006 and 2007 respectively.

Net Profit Margin:

Net Profit Margin= Earning After Taxes/Sales

For the year 2005: Net Profit Margin=131271136/1079377968=12.16 For the year 2006: Net Profit Margin=76785000/894339000=8.59 For the year 2007: Net Profit Margin=(35751000)/1088775000= -3.28

Interpretation

Furthermore, the net profit margin also showed the declining drift by the passing years. The firmis earning 12.16%, 8.59% and -3.28% net profit on sales in 2005, 2006 and 2007, respectively.

Earning Per Share:

Earning Per Share= Earning available for Common Stock Holders/Total C.S. Shares

For the year 2005: Earning Per Share=131271136/13650789=9.62For the year 2006: Earning Per Share=76785000/13650789=5.62For the year 2007: Earning Per Share=(35751000)/13650789=(2.62)

InterpretationThe firms earning per share has decreased gradually, as a person was earning 9.62 per share in2005, 5.62 in 2006 and (2.62) in 2007.

Return on Assets (ROA):

Return on Assets= Earning After Taxes/ Total Assets

For the year 2005: ROA=131271136/1318421407= 10 For the year 2006: ROA=76785000/1877018000= 4 For the year 2007: ROA=(35751000)/2163634000= -1.7

InterpretationIn 2005, the firm was earning 10% ROA, 4% in 2006 and 1.7% in 2007. It demonstrates thatthe firm earned 10, 4, -1.7 paisas on each rupee of asset investment in 2005, 2006 and 2007;respectively.

Return on Equity (ROE):

Return on Equity= Earning After Taxes/Total Stockholders Equity


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For the year 2005: ROE=131271136/981282811= 13 For the year 2006: ROE=76785000/992476000= 8 For the year 2007: ROE=(35751000)/978784000= -3.7

Interpretation

We can see the same decline on ROE as ROA; the ROE has become negative in 2007 becoming 3.7%. It shows that the firm is earned - 3.7 paisas on each rupee of stockholders investment in2007.

Sindh Abadgars Sugar Mills(SASM) Ratios in 2007:

Liquidity Ratios Current Ratio = 0.76 Quick Ratio = 0.45

Activity Ratios Inventory turnover = 9.95 times Average Age of Inventory = 36.18 days Receivable Turnover = 4.95 times Average Collection Period = 72.73 days Payable Turnover = 1.89 times Average Payment Period = 190.38 days Fixed Assets Turnover = 2.88 times Total Assets Turnover = 2.14 times

Debt Ratios Debt Ratio = 26.95% Debt equity Ratio = 52% Times Interest Earned Ratio = 0.27 times

Profitability Ratios Gross Profit Margin = 5.8% Operating Profit Margin = 1.24% Net Profit Margin = -2.13% Return on Assets = -2.60% Return on Equity = -1.3% Earning Per Share = (1.53)

Comparison of Noon Mills Sugar LTD. with Sindh AbadgarsSugar Mills :

Liquidity Comparison:


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The over Noon Mills Sugar LTD liquidity doesnt seem to exhibit a reasonably stabletrend. It has not been maintained at a consistent level in the former years.

Nevertheless, the other industry i.e. SASM liquidity position is quite better than that of Noon; but both the industries have less than 1 current asset to payoff 1 liability.

Activity Ratios:In contrast to Noon Sugar Mills LTD., SASM inventory appears to be in a good shape.

Their inventory turnover is 7.79 times more than that of Noon Sugar Mills.

Opposite to it, there seems to be problem with SASM in getting receivables; a muchgreater difference of 53.30 days exist between Noon mills And SASM. This gives a vivid picturethat Noon Sugar Mills average collection period is more proficient and effective than that of SASM.

There is a same tendency in giving payments as receiving. The Noon Sugar Mill is againmore proficient in giving payments than SASM. The average payment period of Noon Mills is

39.96 days to the very high 190.38 days of SASM. Noon Sugar Mills doesnt use their fixed assets and net fixed assets efficiently to generatesales. On the contrary, SASM is generating sales 2.88 times from fixed assets and 2.14 timesfrom the net fixed assets.

Debt Comparison:Noon Sugar Mills indebtedness increased over the past few years. Although, this increase

in the debt ratio could be a cause for alarm; but currently it is near to the ideal ratio of 60:40.

As judged against SASM, Noon Mills has a greater rate of indebtedness i.e. 54.76%almost the double of the only 26.25% of SASM in 2007

Looking at the times interest earned ratio, Noon Mill is earning nil as compared to 0.27times interest earnings of SASM in 2007.

Profitability Comparison:The Gross Profit Margin of Noon is better than that of SASM. It is 0.65% greater than

that of SASM. Both the companies are earning negative net profit margin. This situation is facedby all the sugar industry during the pervious year.

Noon sugar mills is also earning declining operating profit margin; whereas SASM isgetting 1.24% of it. The ROA and ROE is also in negative terms of both industries, due tofinancial calamity.

The EPS for Noon is (2.62) and (1.53) is of SASM.


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Conclusions and Recommendations:

For the first time, Noon Sugar Mills for faced financial turmoil and negative fiscalresults; same as the sugar industry did.

The industry liquidity ratio is quite low; it must increase its current ratio and quick ratioto be more effective in paying its liabilities.

The overall activity ratio of Noon Sugar Mills appears to be in a good position. Itsaverage receivable and payable periods are more efficient and effective than the other firm.There is only the need to maintain it.

The indebtedness of the firm has increased our last few years. Nonetheless, this increaseis near to ideal ratio of 60:40, but this much increase year by year could be alarming for the firm.Now, the firm must sustain its debt ratios and increase its times earned interest ratio, as they areat nil.

The profitability ratios seem to be very poor. They are very low and most of them areeven negative. The firm must enhance them or its survival will be difficult will. Though, 2007was the first time when the firm experienced negative financial results.

financial analysis of noon sugar mills; (2005, 2006 &2007)

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