Executive Summary
Zahidjee Textile Mills Limited is incorporated in Pakistan as public limited Company as on July 17, 1990 under the Companies Ordinance 1984. The Company is listed on Karachi and Lahore Stock Exchanges. The registered office of the Company is situated at 20 Bilal Road, Civil lines, Faisalabad. The weaving unit is located at Satyana, District Faisalabad. The spinning unit is located at Jaranwala, District Faisalabad. The list of the directors of the Company is as follows:
Mr. Muhammad Zahid Chief Executive Officer
Muhammad Qasim Director
Mst. Huma Zahid Director
Mst. Fouzia Shahani Director
Mr. Naveed Ahmed Director
Mr. Chand Sohail Director
Mr. Muhammad Hafeez Farooqi Director
Other executive of the company are as follows:
* Muhammad Asif GM Finance & Accounts
* Mr. Shahab - ud - din Khan Secretary & Legal Advisor
* M. Yousaf Adil Saleem & Co. Auditors
Pursuant to a scheme of arrangement approved by Lahore High Court, assets, liabilities and reserves of Zahidjee Fabrics Limited, previously a related party, have been merged with Zahidjee Textile Mills Limited with effect from July 01, 2006. According to the scheme arrangement members of Zahidjee Fabrics Limited will receive ordinary shares of Zahidjee Textile Mills Limited in the ratio determined in the scheme of arrangement. The s of year 2007 reflect the combined s of both companies and the s of year 2006 reflect the s of Zahidjee Textile Mills Limited only prior to merger.
Introduction
Zahidjee Textile Mills Limited is engaged in manufacturing of valuable yarn all over the Pakistan serving the textile procurement needs of textile importers worldwide for the last 8 years. In doing so, it has gained the trust and respect of textile importers all over the country as a well - reputed organization among the leading traders of textile products in Pakistan.
With an in - house composite textile production unit, Zahidjee Textile Mills Limited has qualified and experienced production and quality control professionals that see to it that the buyers are satisfied at every step of the business deal starting from the day the contract is signed till the time delivery of goods is made. They also care the customers regarding post delivery problems.
Zahidjee Textile Mills Limited is located in Faisalabad, the textile city of Pakistan. Its production facilities include the whole manufacturing process starting from Mixing, Carding, Drawing and Packing.
Zahidjee Textile Mills Limited is certified for ISO 9001 and ISO 14001 towards its excellent Quality Management System and Environmental Management System respectively.
The company has consistently been conferred awards by Yarn Market of Pakistan for its contribution to the Yarn market of yarn products. This success can be attributed to the mission Zahidjee Textile Mills Limited that aims toward enhancing customer satisfaction by means of supplying quality goods on time.
Departmental Hierarchy
Comments On Organization Structures
All department heads are ultimately reportable to CEO. Department heads are responsible for the performance of their departments. The personnel in each department are answerable to their department head. The implementation of information technology in production sector is very limited as compare to finance and accounts.
Finance Department Operations
Finance is running blood for the any organization. Without proper Finance Department no organization can survive. Financing activities includes the following three types of decisions:
Working capital Decision.
Capital Structure Decision.
Capital Budgeting Decision.
Share Holding
Nature Of Share Holder Shares %Age Shareholding
Directors, CEO & their Spouse 30,925,922 90.82
Financial Institutions 00,003,800 00.01
Individuals 03,121,182 09.17
Although Zahidjee Textile Mills Limited is a public limited company listed in stock exchange, however directors / CEO of the company are holding 90.82 % of equity. Vertical organization structure further strengthens influence of directors / CEO in management. 09.17% individual shareholders and 00.01% Financial Institutions are at the mercy of directors / CEO who are holding 90.82 % holdings.
Training Need Assessments
The company understands the importance of training and is totally committed to the training aspects to enhance the skills and capabilities of its employees. A fully equipped Human Resource Development center has been established at Zahidjee Textile Mills Limited to conduct regular in - house courses and training sessions. Sometime Zahidjee Textile Mills Limited qualified staff conducts these sessions and at times experts from outside Institutions are invited to impart training to employees of various trades.
Structure Of Finance And Accounts Department
Finance and Accounts department consist of 18 to 20 employees and two functional units Accounts and Finance headed by General Manager Finance and Accounts. Organization structure of this department is as
There are total 18 to 20 employees in Accounts and Finance Department. However turnover ratio is significantly high. The activity / transaction volume is increasing day by day with enhancement in production capacity, however sanctioned strength has not been revised accordingly. That is why Accounts and Finance department is facing a lot of stress and tension rustling in job dissatisfaction and high turn over. There is immediate need to revise sanctioned strength.
Inventory Procurement procedures
SOLVENCY RATIOS
Current Ratio
Current Assets
Current Ratio = ----------------------
Current Liabilities
Year
2004
2005
2006
2007
Current Assets
665082
1812482
2215870
10758835
Current Liabilities
657371
1662092
1788683
11108528
Ratio
1.01
1.09
1.24
0.97
Current ratio shows entity's ability to cover its current liabilities with its current assets. In year 2005 Current liabilities increased as compare to 2004, as a result of increase in short term borrowings. On the other hand current assets also increased as a result of short-term investments. However there was no significant variation in 2005. In year 2006 current ratio was more favourable which was mainly due to increase in short term investments. In year 2007 current ratio became unfavourable. Current liabilities increased significantly due to merger with Zahidjee Fabrics Limited.
Liquidity Ratio:
Liquid Assets
Liquidity Ratio = ----------------------
Current Liabilities
Year
2004
2005
2006
2007
Liquid Assets
64,642,251
193,784,932
251,794,293
895,635,074
Current Liabilities
90,059,830
227,706,716
245,049,571
1,521,868,340
Ratio
0.72
0.85
1.03
0.59
Liquid ratio shows Enterprises ability to cover its current liabilities with highly convertible assets into cash or which can transfer easily. . In year 2005 Current liabilities increased as compare to 2004, as a result of increase in short term borrowings. On the other hand liquid assets also increased as a result of short-term investments. However liquid ratio was more favorable than previous year. In year 2006 liquid ration was more favorable which was mainly due to increase in short term investments. In year 2007 liquid ratio became unfavorable. Current liabilities increased significantly due to merger with Zahidjee Fabrics Limited.
ACTIVITY RATIOS
Debtor Collection Period
Average Debtors
Debtor Collection Period Ratio = ------------------------------- X 365
Credit Sales
Year
2004
2005
2006
2007
Average Debtors
29,281,897
16,834,956
34,829,134
280,801,125
Credit Sales
586,587,048
422,327,179
604,143,411
1,827,522,004
Days
18
15
21
56
This ratio shows that the organization-received payments from debtors .In year 2005 debtors collection period decreased to 15 days because of decrease in average debtors and credit sales than the year 2004. However in year 2006 they both increased, as a result debtors collection period also increased by 5 days. In year 2007 significant variation occurred in debtors collection period. Merger with Zahidjee Fabrics Limited affected the ratio significantly.
Creditors Payment Period
Average Creditors
Creditors Payment Period Ratio = ------------------------------ X 365
Credit Purchase
Year
2004
2005
2006
2007
Average Creditors
11,082,987
15,341,973
19,683,285
74,576,152
Credit Purchase
428,486,399
303,677,628
407,279,279
1,249,207,370
Days
9
18
18
22
This ratio shows that the organization made payments to suppliers. In year 2005 creditors payment period doubled as a result of increase in creditors and less payments to them and the reason for less payments was most of the purchases were at the year-end. However in year 2006 there was no variation in payment period. In year 2007 there was a variation of 4 days, which in circumstances of merger with Zahidjee Fabrics Limited, is not significant.
PROFITABILTY RATIOS
Gross Profit Ratio
Gross Profit
G P Ratio = ---------------------- X 100
Sale
Year
2004
2005
2006
2007
Gross Profit
14,583,408
25,147,777
37,886,674
229,418,740
Sale
586,587,048
422,327,179
604,143,411
1,827,522,004
Ratio
2.49%
5.95%
6.27%
12.55%
Gross Profit ratio is used to know the relation between cost of sales and sales. In 2005, G.P ratio is increased by 3.5% with previous year due to decrease in cost of sales. Cost of sales decreased due to better management and control over raw material and related cost of sales items. In 2006, G.P ratio increased by 0.3%, which is not significant. However in year 2007 G.P ratio doubled because of merger with Zahidjee Fabrics Limited, which brought more favorable changes in G.P ratio.
Net Profit Ratio
Net Profit after tax
N P Ratio = -------------------------------- X 100
Sale
Year
2004
2005
2006
2007
Net Profit
(5,027,824)
9,911,193
6,268,027
152,856,972
Sale
586,587,048
422,327,179
604,143,411
1,827,522,004
Ratio
-0.86%
2.35%
1.04%
8.36%
Net Profit ratio is used to know the relation between the all expenses of cost of sales, admin, selling and distribution and financial cost and sales. N.P ratio is affected by increase/decrease in G.P ratio. In year 2006 N.P ratio decreased by 1.31% due to increase in operating expenses. In year 2007 N.P ratio increased due to merger with Zahidjee Fabrics Limited merger with Zahidjee Fabrics Limited, which brought more favorable changes in G.P ratio.
Return on Equity (ROE):
Net Income after Tax
Return on Equity (ROE) = --------------------------
Total Equity
Year
2004
2005
2006
2007
Net Income
(5,027,824)
9,911,193
6,268,027
152,856,972
Total Equity
193,637,612
219,485,407
285,097,922
961,220,449
Ratio
-2.60%
4.52%
2.19%
15.9%
In 2005, the ratio improved because the organization earned net profit during the year. In year 2006, the ratio decreased as a result of decrease in net profit and increase in equity. In year 2007, the ratio improved significantly as a result of merger with Zahidjee Fabrics Limited.
Return on Asset (ROA):
Net Income after Tax
Return on Asset (ROA) = --------------------------
Total Assets
Year
2004
2005
2006
2007
Net Income
(5,027,824)
9,911,193
6,268,027
152,856,972
Total Assets
435,116,614
590,460,242
638,711,338
2,860,074,013
Ratio
-1.16%
1.68%
0.98%
5.34%
Return on Assets relates profitability to investment. In year 2005 ratio was favorable due to profit earned during the year. In year 2006 ratio decreased by 0.7% as a result of decrease in net income. However, in year 2007 the ratio improved significantly due to merger with Zahidjee Fabrics Limited, which brought more favorable changes.
INTEREST COVERAGE RATIO
Interest Coverage Ratio
Profit before interest and tax
Interest Cover Ratio = ---------------------------------------
Interest Expense
Year
2004
2005
2006
2007
Profit before Tax
(3,578,739)
11,388,882
4,293,989
148,905,127
Interest Expenses
6,314,244
15,005,024
30,831,888
154,172,653
Ratio
-56.68%
75.90%
13.93%
96.58%
This ratio shows that the organization's position to meet interest expense. In 2003, 2004, 2005, the organization is better to meet interest expense. And in 2006 the decreasing trend is due to the high interest rate on bank borrowing and high amount of bank borrowing obtain in year 2006.
LEVERAGE RATIOS
Leverage Ratio:
Equity
Leverage Ratio = ---------------------- X 100
Equity + Debt
Year
2004
2005
2006
2007
Equity
193,637,612
219,485,407
285,097,922
961,220,449
Debt+Equity
267,660,001
421,735,230
504,296,111
2,366,102,738
Ratio
72.34%
52.04%
56.53%
40.62%
This ratio shows comparison between equity and debt, to meet the business requirements. In 2005, bank browning increased due to which, this ratio is decreased. In year 2006, no major variation noted. However in year 2007, the ratio decreased by 15.91% which was due to merger with Zahidjee Fabrics Limited.
Debt to Equity Ratio
Debt
Debt to Equity Ratio = ---------------------- X 100
Debt + Equity
Year
2004
2005
2006
2007
Debt
74,022,389
202,249,823
219,198,189
1,404,882,289
Debt+Equity
267,660,001
421,735,230
504,296,111
2,366,102,738
Ratio
27.66%
47.96%
43.47%
59.38%
This ratio shows comparison between debt and equity to meet the business requirements. In 2005, bank browning increased which was the cause of variation with year 2004. In year 2006, variation was not major. However, in year 2007, the ratio increased by 15.91% due to merger with Zahidjee Fabrics Limited.
SWOT ANALYSIS
The overall evaluation of a company's strength, weaknesses, opportunities and threat is called SWOT analysis
Strengths
Strength of a company is judged according to their management of marketing, finance, manufacturing and organization. Following are main strength of Zahidjee Textile Mills Limited.
Company Reputation
The company enjoys good reputation in textile sector.
Competitive Advantages
There are certain advantages, which Zahidjee Textile Mills Limited has over competitors including generation of revenue, economies of scale, environment safety.
Market Share And Strong Market Image
Market share is the major strength of the company. It also have strong market image.
Persistent Increase In Demand
There is annual increase of 7% to 10% in annual demand of the product of the company.
Product Quality
Zahidjee Textile Mills Limited has comparative quality advantage over its competitors. Every year a handsome budget is allocated for professional development and capabilities of these departments.
Other Strengths
Other strengths include high financial resources, awareness of product and ISO 9000 certification.
Weaknesses
Company is facing following weaknesses:
Cost Increase
Due to increase in the prices of raw materials and fuel and power the company is facing increasing cost.
High Turn Over
Company is facing tough time to control high turn over. Company's trained professionals are in great demand in process industry. This high turnover results in drain of valuable skill and experience.
Concentration Of Power Versus Delegation Of Powers
There is a need to delegate the powers down the hierarchy so that CEO could concentrate only on issues of strategic importance.
Others Weakness
Other weaknesses include less motivated staff and promotional activities are insufficient.
Opportunities
Company has a lot of opportunities to fulfill the requirement and demand of the customers to win market shares:
Plant Expansion
Company has opportunity to expand their plant. High prices in real estate have made this an opportunity for the company to expand.
Communication Can Be Improved Through Information Technology
There is a need to promote e-mail system of sending and receiving mails to reduce cost of stationery and storage.
Others
Potential in the market, modern technology, capturing the new market and product innovation are the other opportunities that the company has.
Threats
Every company has to face some threat it may be due to external environment.
WTO
Company meet up coming challenges that are threaten for any organization due to the world trade organization policies.
Political Instability In The Country
Political condition of the country is uncertainty, Government policies can disturb positions of the company and certain rule and regulations are imposed by the govt.
Others
Economic instability
Bibliography:
Text Books Referred:
* AT Foulks Lynch Edition
· BPP
Periodicals and other Publications:
* Annual financial statements of Zahidjee Textiles Mills Limited for the year 2003, 2004, 2005, 2006 & 2007.
* Directors' Report of Zahidjee Textiles Mills Limited for the year 2003, 2004, 2005, 2006 & 2007.
* Interim financial statements of Zahidjee Textiles Mills Limited for the interim periods ending 2003, 2004, 2005, 2006 & 2007.
* Annual financial statements of different other textile companies for general understanding about the entity's environment.
Internet browsing:
* http://www.zahidjee.com.pk
* http://www.finance.gov.pk
* http://www.kse.com.pk
* http://www.secp.gov.pk
* http://www.fbr.gov.pk
