SHEZAN INTERNATIONAL LIMITED

Commitment to Quality

MUHAMMAD AQEEL KHAN
Research Associate
July 23 - 29, 2007

GROUP OVERVIEW

Shezan International Limited was established in 1963 as a joint venture with Alliance Industrial Development Corporation of U.S.A. In 1971 the Shahnawaz Group purchased all the shares of Alliance Industrial Development Corporation with the permission of Pakistan Government and from a joint venture company it became a fully Pakistani owned company. The Shezanís company is a public limited company integrated in Pakistan and in listed on KSE and LSE. The Group's principal activities is to manufacture and distribute juices, beverages, pickles, preserves and flavorings derived from fresh fruits or vegetables. The products of the Group are distributed under the brand name ëShezaní. Products include tetrapak juice, mango juice, pickles, custards, vegetables, jellies, jams and Tomato Ketchup. The companyís major export products markets are Mid-East, Western Europe and Asia.

FUTURE PROSPECTS

Keeping in view the improvement in the current year, company is confident that with correct emphasis on the marketing efforts, they would be able to improve sales and profitability as the Shezan brand is well known in the country also maintain their position as leading processors of fruits & vegetables in Pakistan. The Companyís continue to make their contribution to the national exchequer, by contributing Rs. 402 mn in the shape of sales and income tax for the year ended June 30, 2006

GROWTH PATTERN

On its ten years road to success, Shezan International Limited achieved an average net sale of Rs.90.86mn showing an impressive growth of 13.36%. During fiscal year performance of Shezan International Limited, net sales has recorded Rs.17.98 million in 2006 as compared to 2005 was Rs.13.67mn, due to the increased volume sale in domestic and export markets, showing a growth of 13.53%. The decade wise average growth of profit after tax was recorded at 23%. The growth in profit is attributed to the improvement in all areas of operations, cost reduction initiatives, supply chain benefits and competitive market strategies. In the fiscal year 2006 the profit after tax was Rs.116, 128mn as compared to Rs. 103,637mn last year showing an impressive growth of 56.72%. The earnings per share were also improved to 12% in 2006.

TEN YEARS FINANCIAL GROWTH

Rs. In Thousands

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Income Sales

536,428

591,166

657,119

695,119

738,391

772,186

833,991

1,096,586

1,367,736

1,798,005

Others

2,154

14,144

5,847

3,643

32,064

17,184

24,401

8,740

11,737

18,608

 

538,582

605,310

662,966

698,762

770,455

789,370

858,392

1,105,326

1,379,473

1,816,613

Cost of sales

415,481

468,348

517,477

528,989

572,604

598,075

650,198

772,217

910,769

1,237,566

Distribution cost & administrative expenses

82,819

92,362

93,552

100,569

110,894

114,246

132,870

205,375

248,430

332,889

Finance cost

1,986

953

898

1,995

2,857

3,270

3,019

5,340

4,112

8,942

Other operating expenses

15,606

15,003

14,290

16,332

17,775

18,592

19,538

29,478

40,391

50,786

 

515,892

576,666

626,217

647,885

704,130

734,183

805,625

1,012,410

1,203,702

1,630,183

Profit before taxation

22,690

28,644

36,749

50,877

66,325

55,187

52,767

92,916

175,771

186,430

Taxation

4,000

6,500

10,500

19,500

14,800

7,951

11,359

26,788

72,134

70,302

Profit after taxation

18,690

22,144

26,249

31,377

51,525

47,236

41,408

66,128

103,637

116,128

Paid-up capital

50,000

50,000

50,000

50,000

50,000

50,000

50,000

50,000

50,000

50,000

Reserves & unappropiated profits*

102,226

106,870

108,119

109,555

131,080

148,316

162,224

362,907

428,894

490,022

Unrealized gain / (loss) on remeasurement of investments

-

-

-

-

-

-

-

-

(250)

50

Shareholders equity*

152,226

156,870

158,119

159,555

181,080

198,316

212,224

412,907

478,644

540,022

Break up value per share in Rupees*

30.44

31.38

31.62

31.91

36.22

39.66

42.44

82.58*

95.73

108.01

Earning per share - Basic (Rupess)

3.74

4.43

5.25

6.29

10.31

9.45

8.28

13.23

20.73

23.23

Cash distribution per share in Rupees*

3.00

3.50

5.00

6.00

6.00

6.00

5.50

-

7.50

11.00

EXPANSION PLAN

Shezan International Limited has started the process of transforming Shezan in mango juice product to a more broadly based company with variety of juice manufacturing and vegetables products. In this regards Shezan International Limited setup another unit in Sunder Industrial Estate. In this unit the company install a PET bottle plant for juice products, commission a Tetrapak line for juice in paper-package and place production facilities for jams, Ketchup and snack food manufacturing. The cost of this project is estimated at Rs. 275mn.

NINE MONTHS FINANCIAL REVIEW

Shezan International Limited was achieving solid growth in sales while continuing to contain costs and strengthen the profitability. The profit after tax of Rs. 81,952 mn (EPS Rs.16.39) recorded during July-March 2007 as compared to Rs.65, 725 mn (EPS Rs13.15) during the same period of last year, showing increase net profit by 24.69%, due to the higher input costs. The outlook shows potential for third quarter of current year. The improvement reflects in sales in third quarter and first nine months of 2006-07 with increase of 19.78% and 17.65% respectively. The improvement in sales is due to the sizeable investment made by the companyís in infrastructure to sustain growing demand of juice products in the markets. Financial charges during third quarter have significantly increased to Rs.3, 811mn in 2007 from Rs.2, 750mn in 2006 showing an increase of 38.58%.

NINE MONTHS RESULTS

RS. IN '000

JULY - MARCH

%

2007

2006

Sales

1,339,107

1,138,260

17.65

Cost of sales

942,269

797,523

18.15

Gross profit

396,838

340,737

16.46

Distribution cost

176,124

162,554

8.35

Administrative expenses

46,749

39,851

17.31

Other operating expenses

39,176

32,236

21.53

Other operating income

(7,427)

(11,686)

(36.45)

 

254,622

222,955

14.20

Operating profit

142,216

117,782

20.75

Finance cost

10,264

6,023

70.41

Profit before taxation

131,952

111,759

18.07

Taxation

50,000

46,034

8.62

Net profit for the period

81,952

65,725

24.69

Earnings per share - basic (Rupees)

16.39

13.15

24.64