Din Textile Mills Ltd (KSE: DINT) is a subsidiary of the Din group of companies that was incorporated three decades ago in 1987 and in a very short time became an icon for the spinning industry in Pakistan. It is headquartered in Lahore and has previously been awarded twice "The top 25 Companies award" by KSE.
Available company information shows that the firm is engaged in the manufacturing and export of cotton, mélange, core spun and slub yarn. It has four state-of-the-art spinning units and one dyeing unit located at Chunian and Lahore with an annual capacity of yarn 31.90 million kilograms. Also, it has a wholly-owned subsidiary, Ihsan Raiwind Mills (Pvt) Ltd. Furthermore, DINT has its own power plant to generate electricity for the spinning and dyeing units.
Latest information shows that DINT had a consolidated annual turnover of Rs 8.31 billion in last fiscal year, and it employed over 3,066 employees. DINT has an encouraging export sales mix and it has overall industry export market share of 0.5 percent. The company supplies its products to Europe, Middle East and other Asian countries. Its clients include brands such as H&M, C&A, Dockers, Tommy Hilfiger to name but a few.
PERFORMANCE FOR 1H FY14 The turnover of the company is constantly improving as compared to the corresponding period of the preceding year. During the first half of the ongoing fiscal year, net sales of Rs 4.4 billion improved significantly by 13 percent year on year against net sales of Rs 3.89billion attained in the same period of last year.
The improvement in the revenues was achieved by meeting the strong demand for premium quality yarn in the European and the local markets. Also, DINT managed the timely purchases of raw material at competitive prices. But, the company's cost of sales grew out-of-step with the top line growth, by 17.8 percent year on year. Consequently, these costs consumed 87 percent of net sales in 1H FY14.
Profit after tax clocked in at Rs 206 million due to increased top line and reduced provisions for tax. However, notable pressure to bottom line was witnessed from increased non-core operating costs (a summation of distribution, administrative and finance costs) of Rs 309 million, which were up significantly by 23 percent year on year.
The administrative and finance costs increased year on year by 7.4 percent and 41.6 percent, respectively. The increase in administration cost was likely due to continuous increase in wages because of inflationary economic conditions. There was a 6.5 percent decrease in distribution cost in 1H FY14, which is attributed to the better negotiation in prices of logistic and other means of distribution in spite of increases in oil prices and logistics rates.
During the period under review, DINT's current ratio increased by 1.28 and quick ratio also improved to 0.85, signifying that the company is meeting its short-term liabilities efficiently. DINT has been raising its long-term borrowings over the years, an upsurge of 355 percent year on year in 1H FY14. The loans were used to stay competitive in foreign markets by buying modern technology. With a decline in the company's profits in 1H FY14, the EPS fell to Rs 9.2, a decline of 27 percent for the same period in previous financial year.
FUTURE OUTLOOK The EU, the US and China represent the most important destinations for Pakistan exports. However, the textile industry of Pakistan continues to face various challenges in the shape of rising energy prices, political unrest and sharp movement in raw material prices that would not allow the local industry to fully reap benefits of higher volumes and keep the profitability margins under pressure.
Although the overall economy continues showing downward profitability, the management of DINT is aware of the challenges that are ahead. It expects that it will remain successful in improving the situation in the 2H FY14 by strategic planning, modernisation and diversification of yarn market from local to export and reduce the per unit input cost.
Moreover, the DINT management hopes to procure the cotton at lowest possible rates that will gear the company to benefit from GSP+ status of trade with EU nations.
1HFY12 1HFY13 1HFY14
Gross profit margin -13.4% 16.1% 12.7%
Operating profit margin -16.7% 13.2% 10.2%
Net profit margin -19.2% 7.2% 4.7%
ROE -49.1% 17.1% 9.5%
ROA -12.1% 5.8% 2.6%
Current ratio 1.01 1.13 1.28
Quick ratio 0.36 0.74 0.85
Total asset turnover 0.63 0.81 0.55
Fixed asset turnover 2.02 2.34 2.51
EPS - Rs (32.82) 12.53 9.2