RAVI TEXTILE MILLS Ltd

Ravi textile mills ltd.

By AMANULLAH BASHAR
Mar 17 - 23, 2003
 

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.

VISION

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 2001.

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 2001.

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.