PROJECT

FINANCIAL STATEMENT
ANALYSIS
GROUP MATES
•KALEEM ULLAH KHAN
•MISS NAZIA KANWAL
•Project targeted firm : CHENAB LTD
•Supervisor of the project:
HAMZA MUKHTAR
 INTRODUCTION
• Mian Muhammad Latif
• Mian Ashfaque 1975,
• Chen One has 7 outlets

• While Chenab Group is an 8 Export Trophy winner,

its Chief Mian Latif has won the `Businessman of the
Year award on four different occasion 4 various
business bodies.
• Chenab is licensed to the Swedish Texcote
Technology in the manufacturing
Fixed Charge Coverage 13.22 10.28 10.62 7.22
• World real GDP
• 3.0 3.9 5.0 5.1
• SALES
• 2008 2007 2006 2005      
 
• 145.09 139.20 118.67 100
• INVESTMENTS
• 108.70 105.71 140.94 100
 FIRM LIQUIDITY ANALYSIS
LIQUIDITY RATIO TREND

1.50
1.00
TIMES CR
0.50
2008 2007 2006 2005 QR
0.00
CASH RATIO
2008 2007 2006 2005
Current
YEARS
Ratio 0.86 0.90 1.02 1.04

Quick Ratio 0.42 0.42 0.54 0.44 net working capital

15,000,000,000
Cash Ratio 0.01 0.01 0.13 0.02 10,000,000,000
curent assets
5,000,000,000
0 current
liabilities
2008 2007 2006 2005
years

Ratios throughout the years are showing downward trend

so company’s liquidity going worse
In current ratio major portion is of inventory that is about
50%
 FINANCE COST INCREASES

1,500,000,000
1,000,000,000 CLL
500,000,000
INTERST/MARKUP
0
2008 2006 PAYABLLE

YEARS

Finance cost
Interest cost and current portion of long term liabilities are
increased but more in recent years.
Its showing recovery period of most of long term loans is been
started since 2006.
Its worsening the liquidity ratios as well as net working capital.
In August 2003, the Chenab Group signed a Rs 900 million
loan facility with the National Bank of Pakistan.
Revenue reserves are diminishing from 2006 due to payments of
dividends.
Capital reserves are increased showing forecosting the large capital
investments in2006 but these are still increasing and no capital
investment seen instead of long term deposits in 2007.
RESERVES
600,000,000
500,000,000

PERCENTAGE
150.00 CAPITAL
400,000,000 Capital
300,000,000 Reserve 100.00 RESERVES
200,000,000 REVENUE
50.00
100,000,000 RESREVES
0 0.00
2008 2007 2006 2005 Revenue 2008 2007 2006 2005
Reserve
YEARS
YEARS

non current assets growth tangible fixed assets

8,000,000,000
10,000,000,000
6,000,000,000
5,000,000,000 non current assets tangible fixed
4,000,000,000
assets
0 2,000,000,000
0
08

07

06

05

2008 2007 2006 2005

20

20
20

20

years years
 TOTAL INVESTMENT

20,000,000,000
15,000,000,000
10,000,000,000 CURRENT
5,000,000,000 ASSETS
0
NON CURRENT
ASSET

YEARS

Current assets as well as non current assets showing high growth but its major
portion is because of inventory and inventory’s cost is higher due to high
inflation in world economy and due to food shortage, removing subsidies,
higher cost of production, (lack of water storage, quality seeds availability,
expensive pesticides, unfavorable climatic situations low production) formers
interests are shifted towards other agri products forming
 INDUSTRY ANALYSIS
KSE
Dec 26, 2008, 18:29
• Sector: TEXTILE COMPOSITE
• SYMBOL( RATES) OPEN HIGH LOW CURRENT CHANGE
VOLUME
• Azgard Nine 20.29 19.28 19.28 19.28 -1.01   500
• Chenab Ltd 2.23 2.75 2.25 2.59 0.36  65,000
• Hafiz Textile 18.65 19.00 17.65 17.65 -1.00  2,000
• Kohinoor Textile 3.20 4.20 3.25 4.17 0.97  417,500
• Mian Textile 0.27 0.89 0.89 0.89 0.62  7,500
• Mohd.Farooq 2.30 2.50 2.50 2.50 0.20  2,000
• Nishat (Chun) XR 8.33 9.33 8.20 9.27 0.94  77,000
• Nishat Mills XR 25.10 23.85 23.85 23.85 -1.25  55,300
• Usman Tex. 3.61 4.61 4.00 4.60 0.99  10,000
 DEBT TO EQUITY RATIO

6.00
5.00
4.00
TIMES

INDUSTRY
3.00
CHENAB
2.00
1.00
0.00
1
2008
 EARNING PER SHARE
• INDUSTRY 2008 2007 2006 2005 2004
• 4.6 .83 .01 .67 1.25 1.04

.
 sales
SALES PROPORTIONS
10,000,000,000
100% 8,000,000,000

Rupees
6,000,000,000
GP sales
50% 4,000,000,000
CGS 2,000,000,000
0% 0

2008 2007 2006 2005 2008 2007 2006 2005

YEARS years

Sales volume is increasing rampantly almost achieving targets of

10 billions sales
Reasons: There may be increase in
1 G P margin
2COP
3 Units of sales (a little bit)
4 Inflation in targeted markets
5 Foreign currency gains
There is no doubt in management’s operating efficiency because its operating
profits are continuously increasing but problem is with finance cost.
2 reasons for increasing finance cost
1 Increase in markup rates because of increase in KIBOR (unavoidable).
2 Increase in debt burdens
no .
FINANCE COST operating efficiency

1200000000
1,500,000,000
1000000000
800000000
1,000,000,000
500,000,000 EB IT
600000000 FINANCE COST
400000000 0 Finance cost
200000000 2008 2007 2006 2005 tax provision
0
years
2008 2007 2006 2005
PROFIT

300,000,000
Operating asset turn over ratio
graph? 200,000,000
100,000,000 PROFIT &
0 LOSS
-100,000,000 2008 2007 2006 2005
-200,000,000
YEARS
 PROFITABILITY AND EFFICIENCY
ANALYSIS

GP Margin(%) 19.74 18.96 22.54 19.72

CGS Margin(%) 80.26 81.04 77.46 80.28

Operating Profit
Margin(%) 13.04 12.24 13.72 11.19

Net Profit Margin(%) 1.13 0.92 2.16 3.18

Fixed Charge
Coverage 13.22 10.28 10.62 7.22

Chenab ltd a big emerging group in textile sector is in

growth phase and phasing huge capital investment
expenditures
High fixed cost is a 2 way sword
 actual capacity percentage
retained capacity p.a p.a efficiency

plant capacity

fabrics 9,000,000 7,382,391 82.03

made ups 59,000,000 50,700,710 85.93

garments 3,500,000 2,775,433 79.30

 conclusion
• Q #1
• As an creditor to loan to company or not
• Ans:
• By analyzing the whole analysis especially
from short term liquidity and long term
solvency, I deny to make loan to the company
because normely
• No business risk
• Finance risk
• Q2
• From investor point of view
•  
• Investor’s are bearing capital losses.
• Company’s ordinary shares issued at Rs.10 par value but now it is
selling in market 2.59.
• Now dividend is distributed among shares holders in recent years.
• No investor would like to invest in such company poor conditions
• Company is not in a well position to issue new security like stocks
because of reasons mentioned above and bonds because it will
increase finance cost and debt burden
 Suggestions
 
• it should avoid more borrowing
• More concentrate on marketing sector to increase sales in units
• Use plants at maximum level to reduce per unit fixed cost
• Company’s operating cost is almost same throughout the 4 years.
• While company is lacking in getting maximum international market share.
• Company should invest more in marketing its marketing department.
• I personally recommend the company as well as our government to move
towards Value addition as well as handicrafts trend in all over the Pakistan.
• Due to religion and social restrictions many of the women which are more than
50 percent of Pakistan Human Resource could not perform active role, so their
participation with low fixed cost can be increased abruptly