It is remarkable that this privatised institution has made a success story not only by bringing turn around but also by stamping the seal of irreversible success.
However it has skipped the profit distribution this year because of continued expansion in its fixed asset base which is required to avail of opportunities due to buoyant economy and gradually unfolding the northern neighbour's market. It is also expanding its authorised capital to enable to increase its paid-up capital required to garner sources of finance.
Ittehad Chemicals Limited was incorporated in the province of Punjab on September 28, 1991 to take-over the assets of Ittehad Chemicals and Ittehad Pesticides under Scheme of Arrangement dated June 18, 1992. Resultantly, the company became wholly owned subsidiary of Federal Chemical and Ceramics Corporation (Private) Ltd.
The company was privatised on July 03, 1995 when 90% of its shares were transferred to the buyer. The company was listed on Karachi Stock Exchange on April 14, 2003 when sponsors of the company offered 25% of the issued, subscribed and paid up shares of the company to the general public. The registered office of the company is situated at 39, Empress Road, Lahore.
The company is engaged in the business of manufacturing and selling of caustic soda and other allied chemicals. Its product portfolio include caustic soda, liquid chlorine, hydrochloric acid, sodium hypochlorite, bleaching earth, sulphuric acid and zinc sulphate.
The company has decided to install a captive power plant within the factory premises comprising five Wartsila Engines (Gas) having total output of 28.765 MW for which letters of credit has been established. The project at the capital outlay of approx. Rs 600 million is expected to come on stream by the current financial year. Its financing has been arranged through syndicated term finance facility. Nearly 66% of the power requirement of the company will be met from this plant after completion.
Electricity is the main input for manufacturing of caustic soda which is evident from the fact that approximately 70% of the total cost of production is incurred in terms of fuel and power.
The installed capacity of caustic soda increased during the year under review, at 106.05 thousand tonnes from 64.02 thousand tonnes in the preceding year by 66%. But actual production increased by 8.7% only and utilised capacity reached merely 62.1%.
The shortfall in capacity utilisation was because production at IEM (Ion Exchange Membrane) plant was kept under close observation during trial run period. Also sanctioned power load was not available for IEM plant.
The demand for caustic soda is expanding due to the growth of textile industry because of huge investment in BMR. In future, the growing population and rise in per capita income will further increase the use of textile products, and oil.
Similarly the demand for caustic soda in Afghanistan is expanding because of increase in use of soap and vegetable oil as the peace and rehabilitation process is accelerating there. Afghanistan has remained a traditional market for Pakistani goods.
Ittehad Chemicals Ltd's management is also focusing on plant modernisation which will provide enabling environment to avail of the opportunities. In order to further increase the production capacity of caustic, the company has decided to install more cells in its IEM Plant.
During July 2003-June 2004, the company generated sales at Rs 1.514 billion as against Rs 1.321 billion posted in the preceding year, FY 2002-03, showing increase by Rs 193 million. Gross Profit Margin improved to 15.09% as compared to 12.49% last year.
The contributory factor for the increase of gross margin was reduction per ton utilisation of power as a result of production at IEM plant. Profit before taxation amounted to Rs 88.12 million (2002-03: Rs 76.06 million) posting an increase of 15.86% as compared to previous year. Although pretax profit increased, but the profit after tax was lower because of higher provision for deferred tax.
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Performance Statistics (Million Rupees)
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Balance sheet -As At-
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June 30
2004 2003
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Share Capital-Paid-up: 250.00 250.00
Reserves & Surplus: 206.19 160.87
Shareholders Equity: 456.19 410.87
L T Debts: 507.69 619.06
Deferred Liabilities: 63.39 27.49
Current Liabilities: 461.02 522.44
Tangible Fixed Assets: 878.57 778.28
L T Investments: 57.71 57.54
L T Security Deposits: 11.96 6.80
Deferred Cost: 3.45 3.27
Current Assets: 536.60 733.97
Total Assets: 1,488.29 1,579.86
Sales, Profit & Pay Out:
Sales: 1,513.92 1,321.12
Gross Profit: 228.46 165.05
Other Income: 2.67 2.71
Operating Profit: 129.89 88.93
Financial (Charges): (41.76) (12.87)
(Depreciation)/Amortization: (65.45) (18.18)
Profit Before Taxation: 88.12 76.06
Profit After Taxation: 45.16 47.14
Earning Per Share (Rs): 1.81 1.89
Dividend Cash Nil
(2003: @ 1.50/Share): - (37.50)
Share Price (Rs) Dated 27/01/05: 26.00 -
Financial Ratios
Price/Earning Ratio: 14.4 -
Book Value Per Share: 18.24 16.43
Price/Book Value Ratio: 1.42 -
Debt/Equity Ratio: 53:47 60:40
Current Ratio: 1.22 1.40
Assets Turn Over Ratio: 1.02 0.83
Days Receivables: 50 41
Days Inventory: 11 13
Gross Profit Margin (%): 15.09 12.49
Net Profit Margin (%): 2.98 3.57
R O A (%): 3.03 2.98
R O C E (%): 4.40 4.46
Production (Tonnes)
(A) Caustic Soda: 65,961 60,677
(B) Liquid Chlorine: 9,141 8,219
(C) Hydrochloric Acid: 82,777 77,757
(D) Sodium hypochlorite: 42,161 34,348
(E) Bleaching Earth: 2,524 2,011
(F) Sulphuric Acid: 1,132 1,247
(G) Zinc Sulphate: 175 -
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COMPANY INFORMATION: Chairman: Usman Ghani; Chief Executive: Ghulam Mustafa Khatri; Director: Abdul Sattar Khatri; Chief Financial Officer: Javed Iqbal; Company Secretary: Noor Zaman Khan; Registered Office/Head Office: 39-Empress Road P.O. Box 1414 Lahore-54000 Web Address: www.ittehadchemicals.com Plant: G.T. Road Kala Shah Kaku, District Sheikhupura.