Financial Analysis of Nishat Mills Limited company for last two years

2. Hailey College Of Banking & Finance
Presentation Of Analysis of Financial
Statements
Presented to: Sir Idrees
Presented by:
Shumaila Iftikhar ____________
RollNo.M12BBA069

3. NISHAT MILLS LTD

4. 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 with annual
turnover of $575 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.

5. 1951
1959
1961
1989
Nishat Mills Limited commenced its business as partnership.
The company incorporated as private limited company.
Nishat Mills Limited was listed on Karachi Stock Exchange.
The Company was listed on Lahore Stock Exchange.
Over the Years

6. The Company was listed on Islamabad Stock Exchange.
Acquired the operating assets of Nishat Tek Limited and
Nishat Fabrics Limited.
Acquired the assets of Umer Fabrics Limited.
Acquired the assets of Nishat Apparel Limited.
1992
1996
2005
2008

7. 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.

9. PROJECT
SECURITY
ACT WITH
GOOD
GOVERNANCE
QUALITY
STRONG
RELATIONSHIP
Honest
INTEGRITY
TRUST
VALUE
PEOPLE

10. Spinning
Weaving
Processing
Home
textile
Garments
Power
generation
Nishat linen

12. Nishat
Power
Limited
Nishat
Linen
(Private)
Limited
Nishat
Spinning
(Private)
Limited
Nishat
Hospitality
(Private)
Limited
Nishat
Global
China
Company
Limited
Nishat
Internation
al FZE

13. Major competitors of
Nishat competitors are
• Crescent
• Chenab
• Arzoo
• Alkarms
• Sitara
• Kohinoor
• Amtex
But main competitors of Nishat Mill are
“Crescent Textile Mills”
“Chenab Textile”

16. RATIOS
Liquidity
ratio
Efficiency
ratio
Long term
solvency
ratio
Profitability
ratio

17. oCurrent Ratio
oQuickRatio
oWorkingCapital

18. Current Ratio
=
𝑪𝒖𝒓𝒓𝒆𝒏𝒕 𝑨𝒔𝒔𝒆𝒕
𝑪𝒖𝒓𝒓𝒆𝒏𝒕 𝑳𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆𝒔
(2013)
=
27204560
18068412
=1.51
(2014)
=
28774992
21553219
=1.34
Its bench mark is 2:1.
it measures whether or not a firm has enough resources to
pay its debts over the next 12 months. The liquidity position
of both year not match bench mark but in 2013 company
have better liquidity position then in 2014

19. Quick Ratio:
=
Current assets− (Inventories+𝑷𝑹𝑬𝑷𝑨𝒀𝑴𝑬𝑵𝑻𝑺)
𝑪𝑼𝑹𝑹𝑬𝑵𝑻 𝑳𝑰𝑨𝑩𝑰𝑳𝑰𝑻𝑰𝑬𝑺
(2013)
=
27,204,560−(1,285,371+10,945,439)
18,068,412
=0.83
(2014)
=
28,774,992−(1,316,479+12,752,495)
21,553,219
=0.68
Its standard is 1:1. It measures the firm's capacity to pay off current
obligations immediately and is more rigorous test of liquidity than the
current ratio. Nishat mills in 2013 have more capacity to pay off current
obligation immediately.

20. WORKING CAPITAL
=current assets-current liabilities
2013
27,204,560 - 18,068,412
=9,136,148
2014
28,774,992 - 21,553,219
=7,221,773
The working capital of the company satisfactory in 2013 because it has increased
than in 2012. This shows now the company has sufficient funds to meet its
routine expenses of the business.

21. 0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
CURRENT RATIO QUICK RATIO
1.51
0.83
1.34
0.68
LIQUDITY ANALYSIS
2013 2014
In Time series
comparison the
company short term
solvency position not
match bench mark
but in 2013 it is better
than 2014.

22. working capital…
0
1000000
2000000
3000000
4000000
5000000
6000000
7000000
8000000
9000000
10000000
9136148 7221773
WORKING CAPITAL RATIO

23. • Inventory Turnover Ratio.
• Debtors/Receivables Turnover Ratio.
• Assets Turnover Ratio

24. Inventory Turnover Ratio:
₌ 𝐶𝑜𝑠𝑡 𝑜𝑓 𝐺𝑜𝑜𝑑𝑠 𝑆𝑜𝑙𝑑
𝐴𝑣𝑔.𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 𝑎𝑡 𝑐𝑜𝑠𝑡
Avg. Inventory
=
𝑂𝑝𝑒𝑛𝑖𝑛𝑔 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦+𝐶𝑙𝑜𝑠𝑖𝑛𝑔 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦
2
2013
₌ 43,381,545
10,328,939
= 4.20 times
2014
₌ 46,580,317
11,848,967
= 3.93 times

25. Inventory Conversion Period:
=
𝑵𝒐.𝒐𝒇 𝑫𝒂𝒚𝒔 𝒊𝒏 𝒂 𝒚𝒆𝒂𝒓
𝑰𝒏𝒗𝒆𝒏𝒕𝒐𝒓𝒚 𝒕𝒖𝒓𝒏𝒐𝒗𝒆𝒓 𝒓𝒂𝒕𝒊𝒐
2013
=
𝟑𝟔𝟓
𝟒.𝟐𝟎
= 87 DAYS
2014
=
𝟑𝟔𝟓
𝟑.𝟗𝟑
= 93 DAYS
• Nishat Mills takes 87 days in
2013 & 93 days in 2014 to
sell it.
• With more no of days liquidity
risk is also increased. The
company will have to wait
longer to be paid, and it’s
money will be unavailable for
investment elsewhere.

26. Debtor’s/Receivables Turnover Ratio:
₌ 𝑨𝒏𝒏𝒖𝒂𝒍 𝒏𝒆𝒕 𝒄𝒓𝒆𝒅𝒊𝒕 𝑺𝒂𝒍𝒆𝒔
𝑨𝒗𝒈.𝑨𝒄𝒄𝒐𝒖𝒏𝒕𝒔 𝒓𝒆𝒄𝒆𝒊𝒗𝒂𝒃𝒍𝒆
Avg. Account Receivables
=
𝑶𝒑𝒆𝒏𝒊𝒏𝒈 𝑫𝒆𝒃𝒕𝒐𝒓𝒔+𝑪𝒍𝒐𝒔𝒊𝒏𝒈 𝑫𝒆𝒃𝒕𝒐𝒓𝒔
𝟐
2013 2014
₌ 52,426,030
48,866,302
54,444,091
45,862,294
= 10.77 times =11.87 times
Higher the turnover ratio better it is. In 2014 debtors turnover ratio is
higher that show NISHAT MILLS have speedy and effective collection.

27. Receivables Collection
Period:
=
𝑁𝑜.𝑜𝑓 𝐷𝑎𝑦𝑠 𝑖𝑛 𝑎 𝑦𝑒𝑎𝑟
𝐷𝑒𝑏𝑡𝑜𝑟′ 𝑠 𝑡𝑢𝑟𝑛𝑜𝑣𝑒𝑟 𝑟𝑎𝑡𝑖𝑜
2013 2014
=
𝟑𝟔𝟓
𝟏𝟎.𝟕𝟕
=
𝟑𝟔𝟓
𝟏𝟏.𝟖𝟕
=34 DAYS =31 DAYS
LOWER is better is its bunch mark.
Both year there is a slight change in
collection period that indicate that a
company receivable collection
management is improved.

28. Asset Turnover Ratio
=
𝐴𝑛𝑛𝑢𝑎𝑙 𝑛𝑒𝑡 𝑆𝑎𝑙𝑒𝑠
𝐴𝑣𝑔.𝑡𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠
(2013) (2014)
=
5,242,030
80,634,594
=
5,444,091
97,048,577
=0.65 times = 0.56 times
The Asset Turnover ratio
is an indicator how
efficiently a company is
using its assets. In 2013
company assets
turnover ratio is better
than 2014.

29. 0
10
20
30
40
50
60
70
80
90
100
Inventory turnover
ratio
Debtors turnover
ratio
Assets turnover ratio Inventory conversion
period
Debtors collection
period
2013 2014
Efficiency Analysis

30. • Nishat mills inventory turnover in 2013 in greater
than in 2014 which show that in 2013 NISHAT
MILLS have efficient inventory control, sound sale
policies and better competitive capacity.
• Debtor turnover ratio of NISHAT mills in 2014 is
higher that signifies that in 2014 Nishat has speedy
and effective collection. In short receivable
collection management is efficient than in 2013.
• Nishat mills assets turnover ratio is greater than in
2013 than in 2014 which show company generating
more revenues per Rupee of assets in 2013.
NISHAT Assets are working quite efficiently in 2013
than in 2014.

31. o Gross Profit Ratio
o Operating Profit Ratio
o Net Profit Ratio
o Operating ratio
The ability of the business to generate return for the
owner is called profitability analysis.

32. In 2014 gross profit of NISHAT
MILLS is decrees & it does
not mean that sale of
company decrease it is due to
increase in cost of good sold

33. =
𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑃𝑟𝑜𝑓𝑖𝑡
𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠
∗ 100
Operating Profit Ratio
(2014)
=
𝟗,𝟏𝟐𝟓,𝟔𝟕𝟕
𝟓𝟒,𝟒𝟒𝟒,𝟎𝟗𝟏
∗ 𝟏𝟎𝟎
=16.76 %
(2013)
=
𝟗,𝟑𝟑𝟒,𝟔𝟖𝟗
𝟓𝟐,𝟒𝟐𝟔,𝟎𝟑𝟎
∗ 𝟏𝟎𝟎
=17.81%

34. 2013
=
𝟓,𝟒𝟔𝟖,𝟓𝟑𝟖
𝟓𝟐,𝟒𝟐𝟔,𝟎𝟑𝟎
∗ 𝟏𝟎𝟎
=11.15%
(2014)
=
𝟓,𝟓𝟏𝟐,𝟓𝟓𝟐
𝟓𝟒,𝟒𝟒𝟒,𝟎𝟗𝟏
∗ 𝟏𝟎𝟎
=10.13 %
Net Profit Ratio
= 𝑵𝒆𝒕 𝑷𝒓𝒐𝒇𝒊𝒕 𝒂𝒇𝒕𝒆𝒓 𝒊𝒏𝒕𝒆𝒓𝒆𝒔𝒕 & 𝑻𝒂𝒙
𝑵𝒆𝒕 𝑺𝒂𝒍𝒆𝒔
∗ 𝟏𝟎𝟎
Net profit ratio of the overall profitability of company Company’s net profit
decrease in 2014 It shows that company has generated less profit as
compare to previous year.
higher is the ratio higher is the profitability of the business.

35. Lower the ratio the
better the position of
company because
greater is the
profitability and
management efficiency.
In both year there is a
slight difference.

36. gross profit ratio
operating profit ratio
net profit ratio
Operating ratio
0
10
20
30
40
50
60
70
80
90
2013 2014
17.25
14.44
17.81
16.76
11.15
10.13
82.19
83.24
Profitability Ratios

37. • Profitability Ratios are showing overall a Decreasing trend and
profitability of company as compare to previous years. It in not
that the performance of company decrease due to management
policies it is due to Serious internal country issues that
effected Pakistan’s textile industry very badly.
• Cotton is the basic raw material of the textile industry. Due to
local or international factors, the price of cotton can fluctuate
which affects the profitability and share price of the company.
• Power is the second largest manufacturing cost of the textile
sector. Change in tariff of electricity and gas has a major effect
on the Company’s profitability.
Interpretation

38. DEBT EQUITY
RATIO
INTEREST
COVERAGE
RATIO
RETURN ON
SHAREHOLDER
FUND
Long term
solvency
ratio

39. =
𝑳𝒐𝒏𝒈 𝒕𝒆𝒓𝒎 𝒅𝒆𝒃𝒕𝒔
𝑺𝒉𝒂𝒓𝒆 𝒉𝒐𝒍𝒅𝒆𝒓𝒔 𝑭𝒖𝒏𝒅𝒔
Debt Equity Ratio
(2014)
=
𝟔,𝟒𝟑𝟏,𝟑𝟎𝟒
𝟔𝟖,𝟓𝟖𝟗,𝟏𝟕𝟔
=9.38
(2013)
=
𝟑,𝟔𝟒𝟗,𝟏𝟒𝟕
𝟓𝟖,𝟗𝟏𝟕,𝟎𝟑𝟏
=5.35 A higher debt to equity ratio
indicates that more creditor
financing (bank loans) is used than
investor financing
(shareholders).IN 2014 the
company use more creditors
finance.

40. Debt Service /Interest Coverage Ratio
=
𝒆𝒂𝒓𝒏𝒊𝒏𝒈 𝒃𝒆𝒇𝒐𝒓𝒆 𝒊𝒏𝒕𝒆𝒓𝒆𝒔𝒕 & 𝒕𝒂𝒙
𝒇𝒊𝒙𝒆𝒅 𝒊𝒏𝒕𝒆𝒓𝒆𝒔𝒕 𝒄𝒉𝒂𝒓𝒈𝒆𝒔
(2014)
=
𝟗,𝟏𝟐𝟓,𝟔𝟕𝟕
𝟏,𝟗𝟑𝟕,𝟓𝟏𝟏
= 4.71 times
(2013)
=
𝟗,𝟑𝟑𝟒,𝟔𝟖𝟗
𝟏,𝟖𝟗𝟑,𝟒𝟒𝟔
= 4.93 times
Ideally you want the
ratio to be over 1.5.
A ratio under 1 means
that the company is
having problems
generating enough
cash flow to pay its
interest expenses. But
both year company
having enough amount
to pay interest

41. =
𝑬𝒂𝒓𝒏𝒊𝒏𝒈 𝑨𝒇𝒕𝒆𝒓 𝒊𝒏𝒕𝒆𝒓𝒆𝒔𝒕 & 𝒕𝒂𝒙𝒆𝒔
𝒔𝒉𝒂𝒓𝒆𝒉𝒐𝒍𝒅𝒆𝒓 𝒇𝒖𝒏𝒅
* 100
(2013)
=
5,846,853
𝟓𝟖,𝟗𝟏𝟕,𝟎𝟑𝟏
= 10%
(2014)
=
5,512,552
𝟔𝟖,𝟓𝟖𝟗,𝟏𝟕𝟔
= 8.04%
ROE show how much profit
each dollar of common
stockholders' equity generates.
Higher ratios are almost always
better than lower ratios, IN 2013
Nishat Mills have more return on
equity than in 2014 and this is
because of high competition in
textile industry.

42. Debt to equity ratio Interest cover ratio RETURN ON EQUITY
5.35 4.93
10
9.38
4.71
8.04
LONG TERM SOLVENCY RATIO

43. • A higher debt to equity ratio as risky because it shows that the
investors haven't funded the operations as much as creditors have.
Lack of performance might also be the reason why the company is
seeking out extra debt financing. In 2013 Nishat use less external
debt than in 2014.
• The Company has successfully maintained its EBIT close to that of
the last year despite the squeeze in gross profit which help to
company to pay its interest expense.
• Due high competition in national and international level in textile
sector the return on equity is decrease in 2014.
Interpretation

44. EARNING PER SHARE
2013 2014
16.63 15.68
DIVIDEND PER SHARE
2013 2014
4 4
16.63
4
15.68
4

45. Conclusive Analysis
The performance of the Company remained satisfactory both
in terms of sales and profitability during the financial year
ended 30 June 2014. However Company has decreased as
compared to the last year due to severe competition in
international and local markets, unexpected appreciation of
Pak Rupee against US$ in the second half of the financial
year and higher cost of inputs. Despite all these challenges,
the top line grew by 3.85% due to the effective product mix
management, increased production efficiencies and better
financial planning. Other income grew by 33.37% as
compared to last year and made a significant contribution
towards the bottom line.