Generally speaking, the economies of the developed
as well as the developing countries experienced the stagnant growth
during the year 2002 essentially as the fall out of 9/11 events of
terrorist attack in New York and the Washington.
Hence the state of the economy in Pakistan too was
not an exception.
The textile sector which plays a key role in the
economy of Pakistan despite all odds and even has managed to come out
of the crisis is likely to attain new heights with concerted efforts
in the years to come, said Mohammad Aslam Khan, the Corporate
Secretary of Ravi Textile Mills Ltd. During the year 2002, the export
receipts from spinning sector had to suffer drastically due to a
persistent decline in international prices. However, in contrast to
the previous two years, the export volume during financial year 2002
also posted a marginal fall. Consequently, export revenues at $929.7
million showed a significant decline of 13.4 per cent. The textile in
export volume may be attributed to the rising domestic consumption in
high value-added textile sector.
As far as the performance of Ravi Textile during
the said year was concerned, Aslam Khan said that the impact of 9/11
had adversely affected economic and business conditions thus creates
an overall recession. This had direct effect on the local
sales/prices, which declined considerably giving negative effect on
the profitability of the company.
The devaluation of US Dollar against Pak Rupee had
also created pressure on the business activity of the country. As a
result of re-fixation of minimum wages, raising the social security
benefits to workers, increase in electricity charges altogether
inflated the cost of production.
The third quarter of the year 2002, however, saw
revival with some positive effects on local sales/prices.
The company, therefore, did manage to earn a small
net profit of Rs1, 886 million during the year after accounting for
all operational expenses. Aslam Khan feels that the textile margins
are likely to remain under pressure mainly because of increasing cost
of inputs such as the price of raw material specially the cotton
already registering an upward trend both in the domestic and
international market. It may be noted that contrary to the usual trend
of 50 cent currently the cotton prices in the international market
have gone up to 60 cents. Hence, the increased cost along with reduced
selling prices will further lead to reduction in profitability during
the forthcoming period.
Khawaja Omer Farooq, the Chief Executive of the
company observed that in order to meet the challenges for increasing
the profitability, the company is preparing a plan for BMR and
expansion of the project which would achieve the mission of producing
high quality yarn for local and export sales. The Chief Executive has
a passion to accomplish, built up and sustains a good reputation of
the project in textile sector locally and globally by marketing high
quality of yarn through team work by means of honesty, integrity and
commitment by each member of the team.
OPERATIONAL/ FINANCIAL RESULTS
Based on the net profit for 2002, the earnings per
share at the year ended are Rs0.27 as compared to Rs0.40 per share in
The pattern of the net profit earned by the company
during the past six years shows the profits declined when compared
with the performance of the last two years, yet it indicates company's
ability to sustain the pressures.
It is worth mentioning that the profitability of
the company has been improved from the losses of Rs37, 022 million in
1997 to gradual increase in profits of Rs12, 504 million in 1998. Rs1,
676 million in 1999, Rs28, 923 million and Rs2, 798 earned during
The over all improvement in the textile sector
specially due to huge investment for expansion and BMR it is likely to
show even better performance in the coming years.
An overall view of the textile performance during
2002 indicates that total export earnings of textile manufactures
increased merely by 0.3 per cent to $5.8 billion. However, what is
more encouraging is the enhanced share of high value added items
within the textile group which went up from 54.2 per cent to 57.5 per
cent despite depressed prices in the international market. This
clearly indicates the success of the
Balancing-Modernization-Replacement (BMR) drive currently underway to
revitalize the textile sector to face the challenges of a quota free
environment from 2005. Exports of textile manufactures are generally
subject to quota restriction in four markets i.e. USA, European Union,
Canada and Turkey. During 2002, quota exports accounted for 39.8 per
cent of total exports of textile manufacturers and earned $2.3
billion, registering a 1.7 per cent rise over 2001.
Exports of non quota textile items earned an
additional $1.4 billion from these quota countries, showing a 5.3 per
cent increase over 2001. Interestingly, during the second half of the
financial year 2002, quota exports to EU depicted a slightly higher
growth of 11.5 per cent, which clearly shows the impact of 15 per cent
quota increase from January 2002. On the other hand, the impact of
quota enhancement by the USA is not clearly visible.
It may be mentioned that under the vision 2005, a
massive BMR drive is underway in the textile sector since 2000.
Textile mills are investing huge amounts to improve
the quality of the products and efficiency of the textile mills in
order to stand with major competitors like India, China and Vietnam in
the world markets.