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Faisal Spinning Mills Limited

Overview
Faisal Spinning Mills Limited is a Pakistan-based company, which is involved in the
manufacture and sale of yarn and fabric. The Company's segments includes the following
procedures like Spinning, Weaving and Power Generation. Its production facilities are
located at Nooriabad, District Dadu in the province of Sindh, and Feroz Watwan, District
Sheikhpura in the province of Punjab. The Company offers textile products to local and
international markets.

Ratio Analysis
 Investor Ratios

1. Earnings Per Share


Years 2014 2015 2016 2017 2018
EPS-Basic 19,261.93 5,536.56 5,193.33 13,387.17 17,698.98
EPS- 19,261.93 5,536.56 5,193.33 13,387.17 17,698.98
Diluted

The above table shows that the EPS, both basic and diluted are the same indicating
that there are no convertible securities. EPS shows the allocation of profit to each share
of common stock. In 2014, it is 19,261.93 and subsequently decreases till 2016 and
then there is a slight increase in the next two years i.e. 2017 and 2018. The spinning
industry shows the EPS ratio as high as 160.72 and as low as 28.66 for the last 5 years.
By looking at the table above, we can see that the average EPS ratio of Faisal Spinning
Mills Limited over the five years is 12,215.59, which is relatively very low.

2. Dividend Per Share

Year 2014 2015 2016 2017 2018

DPS (1,717) (1,179) (1,717) (1,719) (5,927)


The table of Dividend per Share shows negative value for the 5 years. This
inconsistency over the period of time shows a very bad image and performance
of the entity to its shareholders.

3. Dividend Payout Ratio

Year 2014 2015 2016 2017 2018


Dividend 0 0 0 0 0
Payout Ratio

The Dividend payout ratio is 0 which clearly shows that no earnings in any form
of dividend is not given to any shareholders. Null payout ratio indicates that the
company is retaining all of its earnings to fuel its growth.

4. Retention Ratio

Year 2014 2015 2016 2017 2018


Retention 1 1 1 1 1
Ratio

As the Dividend payout ratio is 0, the retention ratio will obviously be 100% as
the company Faisal Spinning Mills Limited does not buy any dividend from the
shareholders. In the analysis of the year 2014 to 2018 it shows that there is no
dividend payout. Therefore giving the retention ratio of 100%.

5. Growth Rate:

Year 2014 2015 2016 2017 2018


Growth Rate 0.18 0.06 0.05 0.11 0.16

The growth rate in 2014 is 18% which means that the company has the ability to
or is trying to grow at this rate using its current resources but in the next two
years i.e. 2015 and 2016 its growth rate falls to 6% and 5% respectively.
However, it increases to 11% and 16% in the year 2017 and 2018 respectively
depicting an increased sustainability.

 Profitability Ratios
1. Net Profit Margin:
Year 2014 2015 2016 2017 2018
Net Profit 0.06 0.02 0.02 0.04 0.04
Margin

The net profit margin in 2014 shows that 6% of the net profit is being generated
from sales. The ratio decreases in the subsequent two years in 2015 and 2016
by 2%. However there is a gradual increase by 2% in the years 2017 and 2018.
This shows that the profit is being generated from other sources as the net profit
margin is extremely low in comparison with other companies’ net profit margin,
thus, depicting that the company is not doing well.

2. Operating Margin

Year 2014 2015 2016 2017 2018


Operating 0.08 0.05 0.03 0.06 0.07
Margin

In 2014, the company made only 8% profit on its revenue after paying off its
variable and direct expenses and before payment of its taxation and interest.
This means that only 8% of the revenue is available for the payment of non-
operating costs. Same goes for the ratios for the remaining four years, however,
if we do a relative comparison we would see that the ratio first decreased
relatively from 2015 to 2016 by 5% and then increased by 4% in 2018. The
overall profit of the above 5 years is actually less than the year 2014 showing
reduced sales of the company.

3. Pre-Tax Margin

Year 2014 2015 2016 2017 2018


Pre-Tax 0.14 0.05 0.03 0.08 0.10
Margin

The pre-tax margin of 0.14 indicates that 14% of the total revenue is taxable. The
higher this ratio is the more profitable a company is because it symbolizes the
companies’ ability of meeting all its expenses and still be profitable enough to
pay tax. In 2015 and 2016 the ratio decreases thus making the company less
profitable and then the ratio increases consecutively in the two following years
initially by 5% and then by a further 2%, thus showing that the companies’ profit
in terms of sales is slightly increasing. However, the average profit in terms of
sales has decreased from 2014.

4. Operating ROA

Year 2014 2015 2016 2017 2018


Operating 0 0 0 0 0
ROA

In the above table it shows that from the year 2014 to the year 2018 the
Operating Return on Asset is 0 indicating that the company Faisal Spinning Mills
Limited is not making income from the use of its assets.

5. Return on Assets

Year 2014 2015 2016 2017 2018


ROA 0.10 0.03 0.02 0.05 0.06

The ratio for 2014 is 0.10, which indicates that 10% of the net income of the
company is generated by the total assets of the company. This ratio is seen to be
decreasing from 2014 to 2016, and decreases by a total of 8% and increases in
the year 2017 and 2018 by 4%. The ratio depicts a bad profitability spectrum for
the company.

6. Return on Equity

Year 2014 2015 2016 2017 2018


ROE 0.17 0.04 0.04 0.10 0.12

This ratio signifies, how good the company is in generating returns on the
investment it has received. The company has a return of 17% of the net profit to
the equity holders. This ratio however, decreases in the year 2015 and 2016 by
13% which means that the rate of return to the shareholders is decreasing and
then an increase is observed in 2017 and 2018 by 8%. This indicates that there
the incredibly less return on the equity portion of the company.

7. Administrative Expenses to PBT


Year 2014 2015 2016 2017 2018
Admin Exp 0.12 0.33 0.61 0.22 0.20
to PBT

The ratio of 2014 tells us that 12% of the EBT is taken up by the administrative
expenses. This ratio shows the percentage with which the administrative
expenses have an effect on EBT. The ratio increases then in the year 2015 and
2016, and then decreases in 2017 and 2018. This decrease shows the increase
in the administrative expenses in the relative years.

8. Return on Change in Equity

Year 2014 2015 2016 2017 2018


ROCE 0.20 0.10 0.06 0.11 0.12

The ratio of 2014 is 20%. The EBIT is directly in relation with the operations of
the business, and determines the effective utilization of capital available for
running the business. This ratio is seen to be decreasing over the next four years
till 2018, during which it falls by 8%. Showing an overall bad performance of the
company.

9. Operating Expense Ratio

Year 2014 2015 2016 2017 2018


Operating 0.05 0.04 0.04 0.04 0.04
Expense Ratio

The ratio is 0.05, which means that 5% of the total income is utilized for dealing
with the operating expenses of the company. This ratio is relatively low,
therefore, indicating towards a greater income and less operating expenses.
There is relatively less fluctuation in the ratio for the next four years, during which
the ratio only decreases by 1% in 2015 and then remains constant till 2018. This
shows the stability in the maintenance of the operating expenses of the
company.

 Liquidity Ratios

1. Acid-Test Ratio
Year 2014 2015 2016 2017 2018
Acid-Test 0.55 0.86 0.79 1.00 1.23
Ratio

The acid-test ratio of the company is sufficient as per the standard of 1 or


greater. According to the ratio of 2014, it is 55% and increases in 2015. Further it
decreases in 2016 and reaches the standard in 2017 by being 1. In 2018, the
company can pay off all its liabilities using its current assets, excluding stocks
and will still be left with 23% of the current assets.

2. Cash Ratio

Year 2014 2015 2016 2017 2018


Cash Ratio 0.22 0.33 0.33 0.50 0.37

The current ratio of 2014 shows that the company have only invested 22% of it in
its assets which is low as per the standard. We can see that in the following
years this cash ratio increases till 2017 to 50% and then decreases to 37% in
2018. This trend depicts inflow of cash in the three years from 2014 till 2016 and
then the outflow of cash in the year 2017 and 2018 from the company.

3. Current Ratio

Year 2014 2015 2016 2017 2018


Current Ratio 2.48 2.78 2.01 2.59 2.84

According to the standard of 2:1, the above 5 years have a very high current ratio
i.e. from 2.48 till 2.84, depicting that a lot of investment is done in the current
assets which is not a good thing for the company, regardless of the fact that it
increases the companies’ ability to pay of its current liabilities.

4. Net working capital

2014 2015 2016 2017 2018

Rs.1,673,739,350 Rs.1,578,895,687 Rs.1,649,415,713 Rs.2,005,832,156 Rs.2,749,202,143


The net working capital first decreases from year 2014 to 2015 but then it increases
from 2016 till 2018 thus depicting that the company has the potential to invest and to
grow. The working capital increases by Rs.1,075,462,793. This potentially hints
towards greater and greater investment in the current assets over the five years,
which is particularly not a good thing.

 Activity Ratios

1. Receivable Turnover ratio

Year 2014 2015 2016 2017 2018


Receivable Turnover Ratio 31.89 38.39 24.27 23.65 16.55
(in times)

So, according to these ratios it is seen that the receivables are circulated or turned into
cash more in the initial years rather than later. In the financial year of 2014, the
receivables pertaining to sales were turned 31 times and so on. However, the decrease
in this ratio is of 15.34 times by 2018, thus indicating towards either a decrease in
receivables pertaining to sales or late payments. This further supports the decrease in
sales as observed earlier.

2. Average Collection Period

Year 2014 2015 2016 2017 2018


Avg Collection period 11 10 15 15 22
(in days)

According to the analysis, the company receives its receivables from sales within the
duration of 11 days, however, this period increases steadily over the period of the next
four years, and reaches almost a duration of 22 days. This means that the company is
giving the debtors more time to payoff, thus reducing the frequency of cash circulation.

3. Inventory Turnover Ratio


Years 2014 2015 2016 2017 2018
Inventory 3.99 4.37 4.65 4.75 4.77
Turnover Ratio
(in times)

The company has a relatively minimum inventory turnover, though it increases


during the first three years under consideration, but decreases for the next two
years. In 2018, the inventory is only sold and restocked approximately four times.

4. Day Sales in Inventory

Years 2014 2015 2016 2017 2018


Days sales 92 84 79 77 76
in inventory

The days for which the inventory in stock is kept in hand is decreasing over the five
years. From 92 days in 2014, its goes down to 76 days in 2018. This indicates an
increase in sales.

5. Account Payables Turnover Ratio

Years 2014 2014 2016 2017 2018


Ratio 17.75 15.33 11.46 10.34 17.36
( in times)

This ratio for the first year shows that the company pays off its suppliers almost
17 times a year, however this ratio decreases till 2017 regardless of the increase
in the cash ratio but then increases back to almost 17 times in the year 2018.
This means that the company is paying off its suppliers less frequently till 2017
but in 2018 the company paid off its suppliers more frequently.

6. Average Payment days

Year 2014 2015 2016 2017 2018


Avg payment days 21 24 32 35 21

The company in 2014 pays off its suppliers within almost 21 days, however, this
ratio increases till the years 2017 and becomes 35 days in 2017, with an
increase of almost 14 days but further decreases back to 21 days in 2018.
7. Operating Cycle

Year 2014 2015 2016 2017 2018


(in days) 103 93 94 92 99

The operating cycle decreases over the five years by 4 days. This means that the time
required to generate cash from resources has decreased substantially, which is quite
beneficial to the company relatively.

8. Cash Conversion Cycle

Year 2014 2015 2016 2017 2018


(in days) 82 69 62 57 77

The cash conversion cycle is not good for over five years as it means that there’s
particular no pressure from suppliers and that it is not generating revenue before the
due payment time. This has substantially decreased from 82 till 77 over the years which
is good.

9. Asset Turnover Ratio

Year 2014 2015 2016 2017 2018


Ratio 1.68 1.71 1.32 1.44 1.42

In 2014, 168% of the net profit is generated from the total assets and this ratio
decreases over the period of the next four years by 26%. This ratio trend is high
which measures the efficiency of a company’s use of asset and this company’s
ratio is quite beneficial.

10. Interest Coverage Ratio

Year 2014 2015 2016 2017 2018


Ratio 3.55 2.12 2.10 3.91 5.76

The ratio decreases over three years from 2014 to 2017 but increases in the
remaining year until it becomes 5.76 in 2018. The companies’ ability of paying off
the expense increases in year 2018.
11. Effective Tax Rate

Year 2014 2015 2016 2017 2018


Ratio 0.06 0.33 0.06 0.14 0.22

The company is initially taxed at a low rate in 2014 by 6% of EBIT, but increases
in 2015 to 33% and then decreases back to 6% in the year 2016. A further
escalation is seen in the later years by 16%.

 Capital/Leverage Ratios

1. Capital Ratio

Year 2014 2015 2016 2017 2018


Ratio 0.61 0.67 0.54 0.57 0.55

The ratio increases initially by 6% but then it decreases down to 55% in the year 2018.

2. Breakup Value per Share

Year 2014 2015 2016 2017 2018


(in rupees) 123,366.08 127,235.62 131,607.72 144,826.80 158,857.14

The amount of rupees invested by each shareholder increases over the five
years, with a total increase of approximately Rs.35,491 by 2018.

3. Debt To Asset Ratio

Year 2014 2015 2016 2017 2018


Ratio 0.64 0.48 0.85 0.76 0.83

The average debt to asset ratio is 0.712 for the five years. The ratio has
increased over time. At present, 83% of the assets are financed by the creditors.
4. Debt to Capital Ratio

Year 2014 2015 2016 2017 2018


Ratio 0.39 0.33 0.46 0.43 0.45

The average ratio is 0.412 and the ratios are following an increasing trend over
time. In 2018, the ratio is increasing which means that the company is using
more of debts to finance its operations.