During the year under review, despite impressive growth in sales, which were the historic best the company's profitability was seven years lowest. The breakdown of expenses and profit have been shown towards the end of this "Brief" to know the various stages of weakening profit profile.
The Chairman of the company Dr Willi Flamm stated that the company's profitability declined significantly due to very high C&F prices of raw materials and low prices of the competitors (mainly tyre importers). Cheaper tyres continued to be brought into the country both legally and illegally which restricted the company's ability to recover raw material and other inflationary cost increases, through market prices. Depreciation and financial charges also increased significantly due to capitalisation of the BMR and Expansion Project and mark up on loans taken by the company.
On the positive side, record production of 1,500,055 tyres was made achieving maximum capacity utilisation. New presses were installed during the year which along with reduced bottlenecks and improvement initiatives helped to further increase the capacity of the plant.
The company is preparing itself to compete on the basis of tyre quality, competitive pricing and just-in-time delivery to retain OEM customers and increase replacement market share.
The General Tyre and Rubber Company of Pakistan Limited was incorporated in Pakistan on March 7, 1963 as a private limited company and was subsequently converted into a public limited company. The company's shares are quoted on the Karachi and Lahore Stock Exchanges. The registered office and factory of the company is situated at H-23/2 Landhi Trading Estate, Landhi Karachi.
The main business of the company is manufacture and sale of tyres for passenger cars, light trucks and vans, trucks and buses. The company supplies tyres to OEM (Original Equipment Manufacturing) and to Replacement markets.
It has elaborate dealers network across the country which is supported by head office at Karachi, branch offices at Lahore and Islamabad, customer care and service centres at Karachi and Lahore, warehouse at Multan and Liaison office at Islamabad.
Its prominent clients are Adam Motors, Alghazi Tractors, Dewan Farooque Motors (Kia Hyundai), Ghandhara Industries (Isuzu), Honda Atlas Cars (Honda), Millat Tractors, Pak Suzuki Motors (Suzuki), Ghandhara Nissan (Nissan), Indus Motors (Toyota, Daihatsu), Nexus Automobile (Chevrolet) etc.
The company is manufacturing under the brand name of "General Tyre" which is a global brand produced in five continents. The technology has been provided to the company by "Continental, AG Germany which is Germany's largest tyre manufacturer.
It has been mentioned in the company's Annual Report 2006, that the company had entered into a Royalty Technical Service Agreement dated September 1 1984 (TSA) with General Tire International Company (GTIC) USA, a subsidiary of Continental Tire North America Inc (CTNAI), USA, whereby the company was allowed to use the trade marks such as "General", "General Tire" and the logo big "G".
The company had concluded a new Royalty Technical Service Agreement with CTNAI on May 29, 2002 which became effective from September 1, 2002. Under the agreement, the company shall continue to be entitled to use the aforementioned trademarks, logo for a period of seven years from September 1, 2002.
As regards, ownership of its equity, the company directors own 1% of the company's total 59.77 million paid-up shares of Rs 10 each. Its associated undertakings and related parties, namely, Pakistan Kuwait Invest Company (Pvt) Ltd own 28.06%, Bibojee Services (Pvt) Ltd hold 27.78% and Continental A.G. (Germany) owns 9.78% of the company's stock. Among the institutional shareholders, NBP has largest shareholding of 12.79% remaining shares are held by other individual and institutional investors.
The company's shares have been priced high invariably. During the last 52 weeks, the market value of the share has remained within Rs 26 and Rs 50 per share. On November 6, 2006 the market value of the share was quoted at Rs 26 per 10-rupee share. At this price its market capitalisation increased to Rs 1.554 billion from its paid up capital of Rs 597.71 million. The break up value of the share is Rs 21.67 carrying quite high premium.
According to the seven-year financial statistics published in the Annual Report the company maintains steady streams of attractive dividend payouts. For the year under review (FY 2005-06) the directors proposed cash dividend @20% (FY2004-05: @17.5%).
During FY 2005-06 the company generated net sales at 3.732 billion (FY 2004-05: Rs 3.198 billion registering 16.71% growth and this year's figure is the historic best. Despite impressive growth of sales the company's gross profit sharply declined by 10.6% gross profit to sales ratio drastically declined to 13.97% from 18.25% in the previous year.
With the rise in sales, the distribution cost was naturally on the higher side. Fortunately administrative expenses were closely monitored so went down by 15.8% compared to the preceding year's.
Finance cost went up 5 times and depreciation charges were 46% higher than preceding year's.
The company earned profit before taxation at Rs 210.83 million (2005-06: Rs 328.36 million) and posted after tax profit at Rs 127 million (2005-06: Rs 203.70 million) showing decline by 35.8% and 37.6% respectively as compared to the corresponding figures of last year.
But the financial backbone of the company remained robust as evidenced from the solvency and liquidity ratios appended below.
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Performance Statistics (Million Rupees)
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30th June 2006 2005
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Share Capital-Paid-up: 597.71 597.71
Reserves: 697.59 675.19
Shareholders Equity: 1,295.30 1,272.90
L.T. Debts: 466.80 389.82
Staff Benefits: 119.35 107.27
Deferred Credit: 0.43 0.58
Deferred Taxation: 33.30 7.72
L.T. Deposits from Dealers: 9.35 9.20
Current Liabilities: 1,468.83 913.18
Fixed Assets: 1,456.30 1,019.27
Intangible Assets: 0.48 0.55
L.T. Loans & Advances: 4.24 5.17
L.T. Deposits & Prepayments: 7.56 8.52
Current Assets: 1,924.82 1,667.16
Total Assets: 3,393.40 2,700.67
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Sales Profit & Pay Out
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Net Sales: 3,731.99 3,197.72
Gross Profit: 521.47 583.48
Operating Profit: 289.31 345.87
Other Operating Income: 29.13 26.40
Financial (Cost): (86.97) (17.08)
(Depreciation): (107.32) (73.44)
Profit Before Taxation: 210.83 328.36
Profit After Taxation: 127.00 203.70
Earnings Per Share (Rs): 2.12 3.41
Dividend (Cash) (%): 20.00 17.50
Share Price (Rs) on 06-11-2006: 26.00 -
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Financial Ratios
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Price/Earning Ratio: 12.26 -
Book Value Per Share: 21.67 21.30
Price/Book Value Ratio: 1.20 -
Debt/Equity Ratio: 26:74 23:77
Current Ratio: 1.31 1.83
Asset Turn Over Ratio: 1.10 1.18
Days Receivables: 40 37
Days Inventory: 115 123
Gross Profit Margin (%): 13.97 18.25
Net Profit Margin (%): 3.40 6.37
R.O.A. (%): 3.74 7.54
R.O.C.E. (%): 6.60 11.40
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Plant Capacity & Actual Production (Number of Units)
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Capacity Tyre Sets: 1,400,000 1,300,000
Production Tyre Sets: 1,500,055 1,391,988
Capacity Utilization (%): 107.15 107.08
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COMPANY INFORMATION: Chairman: Dr Willi Flamm; Chief Executive: Lieutenant General Ali Kuli Khan Khattak (Retd); Director: Tasnim-ul-Haq Farooqui; Company Secretary: S. Ehtesham Taqi; Registered Office & Factory: H-23/2 Landhi Industrial Trading Estate, Landhi Karachi; Website: www.gentipak.com ; Branch Office: Jinnah Road Lahore, Kurang Road, Islamabad; Customer Care & Service Centers: Ceasars Tower Shahrah-e-Faisal Karachi; Jinnah Road Lahore; Warehouse: Khanewal Road Multan; Liaison Office: 6, Agha Khan Road, F-6/4 Islamabad.