2019 Nishat Mills Limited Annual Report Accelerating focussed growth Accelerating focussed growth focussed FINANCIAL REVIEW Directors’ Financial Performance The financial performance of the Company was exceptional Report during the financial year ended 30 June 2019 as compared to the corresponding last year ended 30 June 2018. Profit after tax increased by 43% due to significant increase in revenue, efficient cost management and perfect investment portfolio. The Directors of Nishat summary of the key profitability measures is presented below. 2019 2018 Mills Limited (“the Financial highlights Rupees(000) Rupees(000) Company”) are Revenue 63,499,029 53,729,124 Gross profit 7,656,601 5,550,446 pleased to present EBITDA 11,211,441 8,395,775 Depreciation 2,646,227 2,444,824 the annual report of Finance cost 1,668,166 993,824 Dividend Income 3,029,845 3,391,397 the Company for Pre-tax profit 6,897,048 4,957,127 the year ended 30 After tax profit 5,859,048 4,097,127 6 June 2019 along Topline of the Company increased by 18.18% during the current with the financial year as compared to the corresponding last year. Export sales increased by Rs. 8,935.693 million in line with our marketing statements and strategy which is based on building long term relations with our customers by providing high quality products. Sales performance of all Divisions was remarkably well especially auditors’ report export sales of Weaving, Dyeing and Home Textile Divisions thereon. recorded a significant increase. Nishat Mills Limited Revenue Dividend Income 65,000,000 3,800,000 3,600,000 60,000,000 3,400,000 55,000,000 3,200,000 3,000,000 50,000,000 2,800,000 Rupees (000) Rupees (000) 45,000,000 2,600,000 2,400,000 40,000,000 2,200,000 2014-15 2015-16 2016-17 2017-18 2018-19 2014-15 2015-16 2016-17 2017-18 2018-19 Years Years Accelerating focussed growth focussed The gross profit increased by 37.95% due to less The finance cost recorded an increase of than proportionate increase in cost of sales (15.91%) Rs. 674.342 million (67.85%) mainly due to the effect as compared to increase in revenue (18.18%) due to of unprecedented hike of 575 basis points in bench better cost management and achievement of mark interest rate from 01 July 2018 to 30 June efficiency in production. Other reasons for increase 2019. Borrowings of the Company also increased in gross profit is unprecedented depreciation of Pak due to increase in working capital requirements and Rupee against USD by around 35% and availability delay in the disbursement of duty drawback of taxes of gas and electricity at subsidized rates of USD 6.5 and refund of sales and income taxes. per mmbtu and 7.5 cents per KWH w.e.f. 27 September 2018 and 01 January 2019 respectively. Finance Cost 2,000,000 1,800,000 Gross Profit 1,600,000 8,000,000 1,400,000 7,000,000 1,200,000 1,000,000 6,000,000 Rupees (000) 800,000 5,000,000 600,000 2014-15 2015-16 2016-17 2017-18 2018-19 Rupees (000) 4,000,000 Years 3,000,000 2014-15 2015-16 2016-17 2017-18 2018-19 Years Profit after tax of the Company increased by Rs. 1.762 billion which is the highest during the last Another proof of exceptional financial performance three years. Profit after tax percentage to sales is increase in EBITDA by Rs. 2,815.666 million from recorded an unprecedented growth of 1.60% from Rs. 8,395.775 million to Rs. 11,211.441 million. 7.63% to 9.23%. EBITDA to sales percentage increased by 2.03% which is the reflection of operational efficiency of the After Tax Profit % Company. 11% 10% 9% EBITDA 8% 12,000,000 7% 11,000,000 6% Percentage 10,000,000 5% 9,000,000 4% 8,000,000 2014-15 2015-16 2016-17 2017-18 2018-19 7,000,000 Years Rupees (000) 6,000,000 5,000,000 7 2014-15 2015-16 2016-17 2017-18 2018-19 Fixed Capital Expenditure Years The financial strength of the Company depends on The Company maintains a healthy investment operational efficiencies of our manufacturing portfolio which comprises of investment in shares of facilities which could produce high quality products all leading companies belonging to the major according to the latest trends for our customers. The sectors of Pakistani economy. Dividend income was Company invests heavily in the new and latest Rs. 3,029.845 million which made up significant technologies to meet above mentioned goal. The share in profit after tax of the Company. Company invested Rs. 3.558 billion on BMR during the financial year 2018-19 which is an increase of 20.89% over the last year. Annual Report 2019 Fixed Capital Expenditure Earnings Per Share 6,000,000 18 5,000,000 16 4,000,000 14 3,000,000 12 2,000,000 10 Rupees (000) 1,000,000 8 Rupees Per Share Per Rupees - 6 2014-15 2015-16 2016-17 2017-18 2018-19 2014-15 2015-16 2016-17 2017-18 2018-19 Years Years Accelerating focussed growth focussed Working Capital Management Appropriations The Company’s liquidity and short-term financial The Board of Directors of the Company has position remained steady in line with trend during the recommended 40% cash dividend (2018: 47.50%) last five years. It is a clear evidence of prudent and transferring of Rupees 4,386 million working capital management despite the financing (2018: Rupees 2,427 million) to general reserve. requirements of huge sales volume in this year. SEGMENT ANALYSIS Current Ratio 1.40 Spinning 1.35 1.30 1.25 Fluctuations in cotton yarn demand and prices 1.20 throughout the year created uncertainty and affected Ratio 1.15 the financial results of the Company. Moreover, yarn 1.10 1.05 prices in international market did not increase in 1.00 tandem with increase in local cotton prices. 2014-15 2015-16 2016-17 2017-18 2018-19 However, subsequent increase in later part of the Years year due to increase in cotton prices in international market was not enough to cover the cost of local Capital Structure cotton. US-China trade war and weak Chinese currency also negatively affected yarn business. The gearing ratio of the Company increased from China’s business dynamics in relation to 20.77% to 27.31% mainly due to the unrealized loss international markets resulted reduction in demand of Rs. 13.573 billion on equity investments as a of finished products so it eventually reduced the result of decrease in the market value of shares of demand of yarn in China which is our major market. the listed companies and decrease in the fair value Management of the Company closely monitored the of shares of the unlisted companies. Management of situation and made rational decisions due to which the Company believes share value of these profitability of Spinning Division increased during FY investments will improve as soon as economic 2018-19 as compared to the last year. indicators of the country improve. The new open-end yarn manufacturing unit located Gearing Ratio at Feroze Watwan has been commissioned into 30 production on 01 February 2019 which has shown 25 promising results. 20 15 The Company in accordance with its risk Ratio 10 8 management policy to mitigate cotton supply and 5 purchase risk completed the procurement of raw 0 2014-15 2015-16 2016-17 2017-18 2018-19 cotton in bulk by the end of 31 March 2019. Years Yarn Sales Value 12,000,000 Earnings per Share 10,000,000 8,000,000 Earnings per share, a very important performance 6,000,000 4,000,000 indicator, increased by 43% from Rs. 11.65 per Rupees (000) share to Rs 16.66 per share which is a remarkable 2,000,000 increase. - 2014-15 2015-16 2016-17 2017-18 2018-19 Years Nishat Mills Limited Yarn Sales Quantity (technical fabric) were the main reasons for this 40,000 remarkable growth. Timely purchase of yarn has also 30,000 contributed significantly to our profits though uncertainty in raw material prices created a lot of 20,000 confusion among our buyers. Kgs (000) 10,000 The Division heavily invested in BMR to expand and - diversify our product range during the current year. 2014-15 2015-16 2016-17 2017-18 2018-19 Years Acquisition of 22 specialized looms along with state-of-the-art sizing and warping machines has Accelerating enhanced operational flexibility to cater our growth focussed Yarn Sales Rate 400 customers’ needs. 350 300 Dyeing 250 200 150 Dyeing Division was the leading earning Division of 100 the Company during the FY 2018-19. The Division Rupees per kg 50 also performed exceptionally well during the - 2014-15 2015-16 2016-17 2017-18 2018-19 financial year as compared to the corresponding Years previous financial year. Despite relatively slow start in the first quarter, the performance of the Division Weaving significantly improved during the remaining part of the year. Profitability of the Division was the highest Profitability of the Division grew significantly during in FY 2018-19 since the commissioning of dyeing the FY 2018-19 as compared to the previous year and finishing plant in March 2001. despite slow down in demand due to global economic conditions. Our diversified product We foresee next financial years will be challenging portfolio and increase in sales of specialized fabric due to uncertain economic conditions in the country Grey Cloth Sales Value Processed Cloth Sales Value 16,000,000 18,000,000 14,000,000 16,000,000 12,000,000 14,000,000 10,000,000 12,000,000 10,000,000 8,000,000 8,000,000 6,000,000 Rupees (000) Rupees (000) 6,000,000 4,000,000 4,000,000 2,000,000 2,000,000 - - 2014-15 2015-16 2016-17 2017-18 2018-19 2014-15 2015-16 2016-17 2017-18 2018-19 Years Years Grey Cloth Sales Quantity Processed Cloth Sales Quantity 86,000 60,000 84,000 50,000 82,000 40,000 80,000 30,000 78,000 20,000 Meters (000) Meters (000) 76,000 10,000 74,000 - 9 2014-15 2015-16 2016-17 2017-18 2018-19 2014-15 2015-16 2016-17 2017-18 2018-19 Years Years Grey Cloth Sales Rate Processed Cloth Sales Rate 200 350 300 150 250 200 100 150 50 100 Rupees per meter 50 Rupees per meter - - 2014-15 2015-16 2016-17 2017-18 2018-19 2014-15 2015-16 2016-17 2017-18 2018-19 Years Years Annual Report 2019 and slowdown in growth of global economies.