Ellcot Spinning Mills Presentation

7/31/2019 Ellcot Spinning Mills Presentation

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INTRODUCTION

Ellcot Spinning Mills Limited engages in themanufacture and sale of yarn primarily in Pakistan. It

produces cotton, synthetic, and polyester/cotton

blends comprising carded and combed yarns for weaving and knitting application. The company alsoinvolves in the generation and sale of electricity.Ellcot Spinning Mills was incorporated in 1988 and is

based in Lahore, Pakistan.


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902085932

892181004

Current Ratio 2009

Current Assets

CurrentLiabilities

831558529

691250570

Current Ratio 2010

Current Assets

CurrentLiabilities

ANALYSIS

= 1.00 (2008) = 1.01 (2009) = 1.20 (2010)

Current Ratio is increases from 2008-2010 due toincrease in their production(Inventory).


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0100200300400500600700800900

1000

2008 2009 2010

M i l l i o n s

CA

CL

Inventory

ANALYSIS:-

2008 = 0.33 2009 = 0.36 2010 = 0.34

QUICK RATIO

Due to Inventories is their main part of theCurrent Assets so Quick Ratio decreases from2009-2010 due to 0.38% less production ascompared with the previous year.


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0

500

1000

1500

2000

2008 2009 2010

M i l

l i o n s

Total Debts to Total Assets

Total Debts

Total Assets

ANALYSIS:-

2008 = 0.7319 2009 = 0.7432

2010 = 0.65

There is a dip in the ratio because TotalDebts decreased in 2010 from Rs.1.356bn to 1.136bn. This is a decreaseof 16.22%.


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0

50

100

150

200

250

300

350

2008 2009 2010

M i l l i o n s

Operating IncomeInterest Expense

ANALYSIS:-

2008 = 1.89 2009 = 1.029 2010 = 2.27

In 2009, the Time Interest Earned wasquite alarming situation, which means

that company were nearly about tocome on 1, due to the repayment of interest on short term borrowings,but subsequently in 2010 TimeInterest Earned increased to 2.27 times which ensures that company

would not default on its loans.


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0

500

1000

1500

2000

2500

3000

3500

2008 2009 2010

M i l l i o n s

Net Sales

Total Assets

ANALYSIS:-

2008 = 1.84 2009 = 1.33 2010 = 1.01

Total Assets Turnover

Total Assets are slightly decreasing at 5.4% During the year

2009-2010, net sales value of their yarn increases up to 33.84%over the previous year and stood at 85.81% sales.

Average sales price per kg also increased by 33.43% over the previous year. This Significant increase in sales is attributing toincrease in yarn prices due to increase in the price of the Cottondue to demand in local and as well as in International market.


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0

500

1000

1500

2000

2500

3000

3500

2008 2009 2010

M i l l i o n s

Net Sales

Net Worth

ANALYSIS:-

2008 = 3.77 2009 = 5.17 2010 = 5.40

Net Worth Turnover

Net Worth is slightly increased with rate of 20.4%, thus it

implies that management utilizing its stockholders equityquite efficiently.


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2441020123

902085932

892181004

Net Working Capital Turnover2009

Net Sales

CurrentAssets

CurrentLiabilities

3186159

742

831558529

691250570

Net Working Capital Turnover2010

Net Sales

CurrentAssets

ANALYSIS

= 603 (2008)= 245 (2009)

= 22.70 (2010)Net Working Capital Turnover isdecreasing usually becausecompanys Net Sales value of their

products and inventories areincreasing and due to the high rateof cotton resulting from flood, their liabilities are also increasingbecause they are purchasing raw-material more in order to meet thedemand both locally and internationally. And their Current

Assets are increasing due to purchasing of Inventories, which

resulting in high Net WorkingCapital.


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0

20

40

60

80

100

120

140

0

500

1000

1500

2000

2500

3000

3500

2008 2009 2010

M i l l i o n s

M i l l i o n s

Net Sales

Net Profit

ANALYSIS:-

2008 = 3.55% 2009 = 0.041% 2010 = 4.03%

Profit Margin

Low profit margin resulting in 2009 was due to imposed

export ban for two months by the Government and due tothe flood arising in 2009.


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0

20

40

60

80

100

120

140

1660

1680

1700

1720

1740

17601780

1800

1820

1840

2008 2009 2010

M i l

l i o n s

M i l l i o n s

Total Assets

Net Profit

ANALYSIS:-

2008 = 3.60% 2009 = 0.054%

2010 = 7.45%

Return on Total Assets

Total Assets are decreasing in 2010 because of Deferred tax provision for current year amounts toRs.21, 994,443/= (2008-09:Rs. 3,025,398/=). Tax provision for the current yearamounts to Rs.16, 049,465/= (2008-09: Rs.

5,305,981/=).


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0100

200

300

400

500

600

700

2008 2009 2010

M i l

l i o n s

Net Profit

Net Worth

ANALYSIS:- 2008 = 13.43% 2009 = 0.21% 2010 = 21.8 %

Return on Net Worth


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-20

020

40

60

80100

120

140

160

2008 2009 2010

M i l l i o n s

Net Profits

Net Working Capital

ANALYSIS:-

Return on Net Working Capital


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0

10

2030

40

50

60

0

50

100

150

2008 2009 2010

M i l

l i o n s

Price to Earnings

EarningsPrice

ANALYSIS:-

4.58 475.68 7.446

The unexpected year of 2009 inwhich company managed to earnonly 9lacs was the reason for theratio in 2009 to be distorted, as

the price declined only Rs. 1.42but earnings declined by amassive Rs. 99.2%


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0

20

4060

80

100

120

140

2008 2009 2010

M i l l i o n s

Dividends

Earnings

ANALYSIS:-

Retained profits used in 2009


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0.00%

0.50%1.00%1.50%2.00%2.50%3.00%3.50%4.00%4.50%5.00%

0

10

20

30

40

50

60

2008 2009 2010

Dividends

Price

Dividend Yield%

ANALYSIS:-

Price increases in more proportion than thedividend


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ANALYSIS:-

0

50

100

150

200

250

300

350

2008 2009 2010

Book Value per Share

Book Value per Share

Net worth (Equity) Decreases in 2009, but increases in 2010 with a rateOf 20.4% as compared it with the subsequent year.


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ELLCOT SPINNING MILL

THE HEDGING APPROACH Reasons:- Since all of their Current Assets are funded through

Current Liabilities. Fixed Assets are funded through Long Term

Liabilities.

The Current Ratio for all the 3 years are:- 2010 = 1.20 2009 = 1.01 2008 = 1.00 Therefore we can say that Current Ratio is nearly to

1. Firms cover its fluctuating financing requirement

with short term credit. Its Permanent Financing requirement with

Permanent Capital. Small Part of Current Assets are finance through

Permanent Capital and the rest through short term

liabilities, which shows that the firm is followingHedging Approach


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ALI ASGHAR TEXTILE MILLS LIMITED

Reasons:- Since Short Term Liabilities are being used to finance their long-term needs, we can easily

identify that the company is playing aggressively. The Current Liabilities for Ali Asghar is Rs. 559,914,740, where as their Current Assets are Rs.

255, 32,191, which clearly that Current Liabilities are almost twice of CA and are used to finance the permanent assets as well.


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FAZAL TEXTILE MILLS LIMITED

Reasons:- Because all the Current Assets are finance by Current Liabilities and a fraction of Fixed Assets

is also been financed by Short term Liabilities.

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Ellcot Spinning Mills Presentation