FINANCIAL ANALYSIS OF NOON SUGAR MILLS; (2005, 2006 &2007)

Introduction
The Company was incorporated in 1964 as a public company listed on all the Stock Exchanges of Pakistan for setting up of a plant for manufacture of white sugar, in the province of Punjab. The plant went into production in 1996 with a daily crushing capacity of 1,500 MT of sugar cane, which has since been raised to 4,000 MT per day in 2002. Further extension to 9,000 TCD is underway which has become operative in 2006-2007 crushing season, Al-Hamdulillah. An Alcohol Distillery of French origin was added during 1986 with a production capacity of 50,000 liters/day in 2002. Another facility with an option to provide either 30,000 LPD Industrial of fuel Grade Ethanol was added in 2002. A new Fuel Ethanol plant of 100,000 LPD, based on Molecular Sieve technology has been added in 2005. The Distillery is ISO 9001 certified since 1998, which was upgraded to ISO-9001-2000. An Effluent Treatment Plant employing the Canadian technology of ABV Bio-Gas reactors has been installed since 1997, to use its bio-degradable waste water as a renewable source of energy to replace 70% of fuel oil / natural gas, for generation of process steam. This has also enabled the Company to fulfill its obligation towards reducing the environmental pollution. The present equity of the Company is Rs.992 Million, with total investment of around Rs.1, 877 Million. The Market Capitalization is over Rs.455 Million, and sales revenue amounts to over Rs.1.0 Billion, including exports of Rs.213 Million. The average number of employees is 691. The Company has a gratifying record of 40% average annual Dividend out to the shareholders in the last 10 years.

Balance Sheet
Equity & Liabilities

2007

2006

2005

Share Capital & Reserves

Authorized Capital 150,000 150,000 150,000

FINANCIAL ANALYSIS OF NOON SUGAR MILLS; (2005, 2006 &2007) 15,000,000 ordinary shares of Rs. 10 each Issued, subscribed and paid-up capital Reserves Inappropriate profit 136,508000 789,341,000 52,935,000 978,784,000 113,757,000 790,635000 88,048000 992,476000 113,756,580 830,842,584 36,683,647 981,282,811

Non-Current Liabilities
Long-term finances Liabilities against assets (to finance lease) Long-term deposits Staff retirement benefits gratuity Deferred taxation

361,155,000 --1,657,000 49,881,000 --412,693,000 108,645,000 536,778,000 98,651,000 22,606,000 5,477,000 772,157,000

430,254,000 799,000 1,795,000 51,090,000 15,840,000 499,778,000 43,545,000 239,900,000 71,426,000 10,330,000 19,563,000 384,764

10,525,202 2,782,495 2,124,708 50,599,399 9,951,136 155,317,592 7,267,305 12,356,888 110,515,221 3,365,407 48,316,183 181,821,004

Current Liabilities
Current portion of long-term liabilities Short term finances Trade and other payables Accrued Mark-Up Taxation

2,163,634,000 1,877,018,000 1,318,421,407

FINANCIAL ANALYSIS OF NOON SUGAR MILLS; (2005, 2006 &2007)

Assets Non Current Assets

Property, plant and equipments Investment property Investment Long term loans and advances Long term deposits

1,444,154,000 17,341,000 81,208,000 1,204,000 712,000 1,544,655,000

1,267,074,000 17,447,000 88,112,000 902,000 712,000 1,374,247,000

431,258,691 7,000,000 290,823,564 4,641,518 17,558,158 862,919,968

Current Assets
Stores, spare and loose tools Stock-in-trade Trade debtor-unsecured considered good Income tax refundable, advance income tax and tax deducted at source Loans and advances Deposits and prepayments Other receivables Bank balances

55,324,000 471,149,000 11,407,000 19,782,000 16,865,000 2,127,000 27,469,000 14,856,000 618,979,000

49,022,000 374,592,000 24,115,000 15,230,000 14,782,000 3,130,000 3,694,000 18,206,000 502,771,000

50,126,554 87,042,299 33,135,587 24,954,977 12,149,156 5,893,245 3,851,330 237,670,796 455,501,439

2,163,634,000 1,877,018,000 1,318,421,407

Income Statement
2007 Rupees 2006 Rupees 2005 Rupees

FINANCIAL ANALYSIS OF NOON SUGAR MILLS; (2005, 2006 &2007)

Sales Net Cost of Sales Gross profit Administrative Expenses Distribution And Marketing Expenses Operating Profit/(Loss) Other Operating Income Interest & Mark-Up

1,088,775,000 1,018,495,000 70,280,000 (55,906,000) (29,940,000) (15,556,000) 10,494,000 215,000 (4,857,000) (51,529,000) (293,000) (51,822,000)

894,339,000 1,079,377,968 821,266,000 845,900,093 73,073,000 233,900,093 (50,809,000) (21,905,000) 359,000 11,620,000 1,927,000 13,547,000 (25,968,000) (6,028,000) (31,996,000) (50,393,974) (29,814,722) 80,208,696 12,227,403 3,454,889 168,951,471 (3,187,551) (2,350,279) (5,537,830)

Finance Cost Other Operating Expenses

Loss for the year before Liabilities Write-Back, share of Profit of Associated Company & Taxation Liabilities Written-Back: Provision for cane quality premium Short term borrowings & accrued interest thereon Share of Profit/(Loss) of an associated Company-Net Taxation Profit/(Loss) Before Taxation Taxation Current year Prior Years Deferred Profit/(Loss) After Taxation (Loss)/Earnings per share (Rupees)

(56,679,000)

(18,090,000)

(7,162,075)

-----

79,335,000 10,270,000

-----

(4,390,000) (61,069,000) 5,477,000 (14,955,000) (15,840,000) (35,751,000) (2.62)

9,370,000 80,885,000 4,480,000 (6,269,000) 5,889,000 76,785,000 5.62

153,398,173 39,000,000 (24,567,498) 7,694,535 131,271,136 19.32

Calculation & Interpretations

Liquidity Ratios:

FINANCIAL ANALYSIS OF NOON SUGAR MILLS; (2005, 2006 &2007)

Current Ratio: Current Ratio=Current Assets/Current Liabilities For the year 2005: Current Ratio=455501439/181821004=2.51 For the year 2006: Current Ratio=502771000/384764000=1.31 For the year 2007: Current Ratio= 618979000/727157000=0.80 Interpretation The firms liquidity is decreasing as the years are fleeting, the current liquid ratio was in good position in 2005, but it goes on decreasing as the passing years. In 2007, the firm has 0.80 current assets to payoff 1 liability. Quick Ratio (Acid-Test Ratio): Quick Ratio=(Current Assets Inventory Prepays)/Current Liabilities For the year 2005: Quick Ratio=(455501439-8704229-5893245)/181821004=1.99 For the year 2006: Quick Ratio=(502771000-471149000-3130000)/384764000=0.33 For the year 2007: Quick ratio= (618979000-471149000-2127000)/727157000=0.19 Interpretation The firms quick ratio has also dropped off by the passing years. It was in good position in 2005, but as we move to 2007 the liquidity position is quite appalling.

Activity Ratios:
Inventory Turnover: Inventory Turnover=Cost of Goods Sold/Average Inventory For the year 2005: Inventory Turnover=845900093/87042299=6.94 times For the year 2006: Inventory Turnover=821266000/374592000=2.19 times For the year 2007: Inventory Turnover=1018495000/471149000=2.16 times Interpretation The firm Inventory turnover is also lessening year by year. The inventory turnover was 6.94 in 2005, but this is decreased to 2.16 in 2007. Currently, the firm is converting their inventory into sales 6 times. Average Age of Inventory: Average Age of Inventory=Number of days in a year/Inventory Turnover For the year 2005: Avg. Age of Inventory=360/6.94=51.87 days For the year 2006: Avg. Age of Inventory=360/2.19=161.43 days For the year 2007: Avg. Age of Inventory=360/2.16=190.48 days

FINANCIAL ANALYSIS OF NOON SUGAR MILLS; (2005, 2006 &2007)

Interpretation The average age of inventory has increase from the year 2005 to 2007. The firm was changing its inventory after every 52 days approximately in 2005, after 161.43 days in 2006 and 190.48 days in 2007. It shows a rising trend. Receivable Turnover: Receivable Turnover=Net Credit Sales/Average Receivables For the year 2005: Receivable Turnover=1079377968/49316073=21.89 times For the year 2006: Receivable Turnover=894339000/42591000=21.00 times For the year 2007: Receivable Turnover=1088775000/55741000=19.53 times Interpretation The firm is converting their receivables into sales 21.89, 21.00, 19.53 times in year 2005, 2006 and 2007, respectively.

Average Receivable/Collection Period: Average Receivable Period=Number of days in a year/Receivable Turnover For the year 2005: Average Receivable Period=360/21.89=16.49 days For the year 2006: Average Receivable Period=360/21.00=17.14 days For the year 2007: Average Receivable Period=360/19.53=18.43 days Interpretation The average receivables period is slightly extending by the year 2005 to 2006. In 2007, receivables are collected on the average every 18.43 days. Payable Turnover: Payable Turnover=Net Purchases/Average Payables For the year 2005: Payable Turnover=604492341/110515221=5.47 times For the year 2006: Payable Turnover=835899000/71426000=11.70 times For the year 2007: Payable Turnover=888499000/98651000=9.01 times Interpretation The payable turnover was 5.47 times in the year 2005, which increased in 2006 up to 11.70 times and again it decreased up to 9.01 times in 2007. The firm is converting payables into cash 9.01 times in 2007. Average Payment Period: Average Payment Period=Number of days in a year/Payable Turnover

FINANCIAL ANALYSIS OF NOON SUGAR MILLS; (2005, 2006 &2007) For the year 2005: Average Payment Period=360/5.47=65.81 days For the year 2006: Average Payment Period=360/11.70=30.77 days For the year 2007: Average Payment Period=360/9.01=39.69 days Interpretation The average payment period has decreased from the year 2005 to 2007. It shows a good trend as the firm is paying its payables quite early as compared to the previous years. After every 40 days approximately the firm is required to make the payments for the payables. Fixed Assets Turnover: Fixed Assets Turnover=Sales/Fixed Assets For the year 2005: Fixed Assets Turnover=1079377968/1318421407=0.82 times For the year 2006: Fixed Assets Turnover=894339000/1877018000=0.48 times For the year 2007: Fixed Assets Turnover=1088775000/2163634000=0.50 times Interpretation The firm is utilizing its fixed assets to generate sales 0.82, 0.48 and 0.50 times in 2005, 2006 and 2007, respectively. Net Fixed Assets Turnover: Net Fixed Assets Turnover=Sales/Net Fixed Assets For the year 2005: Net Fixed Assets Turnover=1079377968/1266573513=0.85 times For the year 2006: Net Fixed Assets Turnover=894339000/1823776000=0.49 times For the year 2007: Net Fixed Assets Turnover=1088775000/2110604000=0.52 times Interpretation The firm is utilizing its net fixed assets to generate sales 0.85, 0.49 and 0.52 times respectively in 2005, 2006 and 2007 respectively.

Debt Ratios:
Debt Ratio: Debt Ratio=Total Liabilities/Total Assets For the year 2005: Debt Ratio=337138596/1318421407=25.57 For the year 2006: Debt Ratio=884542000/1877018000=42.12 For the year 2007: Debt Ratio=1184850000/2163634000=54.76 Interpretation The firms indebtedness has increase in the current years. The firms total assets were financed 25.57% in 2005, 42.12% in 2006 and 54.76% in 2007 from the liabilities and remaining from the assets.

FINANCIAL ANALYSIS OF NOON SUGAR MILLS; (2005, 2006 &2007) Debt Equity Ratio: Debt Equity Ratio=Long term debts/Stockholders Equity For the year 2005: Debt Equity Ratio=155317592/981282811=15.83 For the year 2006: Debt Equity Ratio=499778000/992476000=50.36 For the year 2007: Debt Equity Ratio=412693000/978784000=42.16 Interpretation The firm debt equity ratio increased to 50.36% in 2006 as compared to 15.39% in 2005. Whereas, in 2007, it again decreased to 42.16% In 2007, 42.16% of the companys stockholders equity is financed by long-term debts and remaining from the equity. Times Interest Earned Ratio: Times Interest Earned Ratio=Earning Before Interest & Taxes/Interest For the year 2005: Times Interest Earned Ratio=153269179/3187551=48.08 times For the year 2006: Times Interest Earned Ratio=359000/25968000=0.014 times For the year 2007: Times Interest Earned Ratio=(15566)/51529000=0 times (as answer is in negative) Interpretation The firms times interest earned ratio has decreased by the passing years. It has gone to nil by the current year. The firm had 48.08 and 0.014 times earned interest in 2005 and 2006. There is a very rapid decline in times interest earned.

Profitability Ratios:
Gross Profit Margin: Gross Profit Margin=Gross Profit/Sales For the year 2005: Gross Profit=233477875/1079377968=21.63 For the year 2006: Gross Profit=73073000/894339000=8.17 For the year 2007: Gross Profit=70280000/1088775000=6.45 Interpretations The firm earned gross profit margin of 21.63% in 2005, 8.17% in 2006 and 6.45% in 2007. This is showing a declining tendency. Operating Profit Margin: Operating Profit Margin=Earning Before Interest & Taxes/Sales For the year 2005: Operating Profit Margin=153269179/1079377968=14.20

FINANCIAL ANALYSIS OF NOON SUGAR MILLS; (2005, 2006 &2007) For the year 2006: Operating Profit Margin=359000/894339000=0.04 For the year 2007: Operating Profit Margin=(15566000)/1088775000= -1.43 Interpretation The operating profit margin had decreased by the year 2007 and became negative. The firm was earning 14.20%, 0.04% and -1.43% of O.P of sales in 2005, 2006 and 2007 respectively. Net Profit Margin: Net Profit Margin= Earning After Taxes/Sales For the year 2005: Net Profit Margin=131271136/1079377968=12.16 For the year 2006: Net Profit Margin=76785000/894339000=8.59 For the year 2007: Net Profit Margin=(35751000)/1088775000= -3.28 Interpretation Furthermore, the net profit margin also showed the declining drift by the passing years. The firm is earning 12.16%, 8.59% and -3.28% net profit on sales in 2005, 2006 and 2007, respectively. Earning Per Share: Earning Per Share= Earning available for Common Stock Holders/Total C.S. Shares For the year 2005: Earning Per Share=131271136/13650789=9.62 For the year 2006: Earning Per Share=76785000/13650789=5.62 For the year 2007: Earning Per Share=(35751000)/13650789=(2.62) Interpretation The firms earning per share has decreased gradually, as a person was earning 9.62 per share in 2005, 5.62 in 2006 and (2.62) in 2007. Return on Assets (ROA): Return on Assets= Earning After Taxes/ Total Assets For the year 2005: ROA=131271136/1318421407= 10 For the year 2006: ROA=76785000/1877018000= 4 For the year 2007: ROA=(35751000)/2163634000= -1.7 Interpretation In 2005, the firm was earning 10% ROA, 4% in 2006 and 1.7% in 2007. It demonstrates that the firm earned 10, 4, -1.7 paisas on each rupee of asset investment in 2005, 2006 and 2007; respectively. Return on Equity (ROE): Return on Equity= Earning After Taxes/Total Stockholders Equity

FINANCIAL ANALYSIS OF NOON SUGAR MILLS; (2005, 2006 &2007) For the year 2005: ROE=131271136/981282811= 13 For the year 2006: ROE=76785000/992476000= 8 For the year 2007: ROE=(35751000)/978784000= -3.7 Interpretation We can see the same decline on ROE as ROA; the ROE has become negative in 2007 becoming 3.7%. It shows that the firm is earned -3.7 paisas on each rupee of stockholders investment in 2007.

Sindh Abadgars Sugar Mills(SASM) Ratios in 2007:

Liquidity Ratios Current Ratio = 0.76 Quick Ratio = 0.45 Activity Ratios Inventory turnover = 9.95 times Average Age of Inventory = 36.18 days Receivable Turnover = 4.95 times Average Collection Period = 72.73 days Payable Turnover = 1.89 times Average Payment Period = 190.38 days Fixed Assets Turnover = 2.88 times Total Assets Turnover = 2.14 times Debt Ratios Debt Ratio = 26.95% Debt equity Ratio = 52% Times Interest Earned Ratio = 0.27 times Profitability Ratios Gross Profit Margin = 5.8% Operating Profit Margin = 1.24% Net Profit Margin = -2.13% Return on Assets = -2.60% Return on Equity = -1.3% Earning Per Share = (1.53)

Comparison of Noon Mills Sugar LTD. with Sindh Abadgars Sugar Mills :
Liquidity Comparison:

FINANCIAL ANALYSIS OF NOON SUGAR MILLS; (2005, 2006 &2007) The over Noon Mills Sugar LTD liquidity doesnt seem to exhibit a reasonably stable trend. It has not been maintained at a consistent level in the former years. Nevertheless, the other industry i.e. SASM liquidity position is quite better than that of Noon; but both the industries have less than 1 current asset to payoff 1 liability.

Activity Ratios:
In contrast to Noon Sugar Mills LTD., SASM inventory appears to be in a good shape. Their inventory turnover is 7.79 times more than that of Noon Sugar Mills. Opposite to it, there seems to be problem with SASM in getting receivables; a much greater difference of 53.30 days exist between Noon mills And SASM. This gives a vivid picture that Noon Sugar Mills average collection period is more proficient and effective than that of SASM. There is a same tendency in giving payments as receiving. The Noon Sugar Mill is again more proficient in giving payments than SASM. The average payment period of Noon Mills is 39.96 days to the very high 190.38 days of SASM. Noon Sugar Mills doesnt use their fixed assets and net fixed assets efficiently to generate sales. On the contrary, SASM is generating sales 2.88 times from fixed assets and 2.14 times from the net fixed assets.

Debt Comparison:
Noon Sugar Mills indebtedness increased over the past few years. Although, this increase in the debt ratio could be a cause for alarm; but currently it is near to the ideal ratio of 60:40. As judged against SASM, Noon Mills has a greater rate of indebtedness i.e. 54.76% almost the double of the only 26.25% of SASM in 2007 Looking at the times interest earned ratio, Noon Mill is earning nil as compared to 0.27 times interest earnings of SASM in 2007.

Profitability Comparison:
The Gross Profit Margin of Noon is better than that of SASM. It is 0.65% greater than that of SASM. Both the companies are earning negative net profit margin. This situation is faced by all the sugar industry during the pervious year. Noon sugar mills is also earning declining operating profit margin; whereas SASM is getting 1.24% of it. The ROA and ROE is also in negative terms of both industries, due to financial calamity. The EPS for Noon is (2.62) and (1.53) is of SASM.

FINANCIAL ANALYSIS OF NOON SUGAR MILLS; (2005, 2006 &2007)

Conclusions and Recommendations:

For the first time, Noon Sugar Mills for faced financial turmoil and negative fiscal results; same as the sugar industry did. The industry liquidity ratio is quite low; it must increase its current ratio and quick ratio to be more effective in paying its liabilities. The overall activity ratio of Noon Sugar Mills appears to be in a good position. Its average receivable and payable periods are more efficient and effective than the other firm. There is only the need to maintain it. The indebtedness of the firm has increased our last few years. Nonetheless, this increase is near to ideal ratio of 60:40, but this much increase year by year could be alarming for the firm. Now, the firm must sustain its debt ratios and increase its times earned interest ratio, as they are at nil. The profitability ratios seem to be very poor. They are very low and most of them are even negative. The firm must enhance them or its survival will be difficult will. Though, 2007 was the first time when the firm experienced negative financial results.