Final Project On Mahmood Textile Mills Ltd k4y6

MAHMOOD TEXTILE MILLS LTD

Mahmood Textile Mills Ltd

FINANCIAL PROJECT DEPARTMENT BUSINESS MANAGEMENT SCIENCES

UNIVERSITY OF EDUCATION OKARA CAMPUS

UNIVERSITY OF EDUCATION OKARA CAMPUS [SUMAD PURA ROAD OKARA]

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SUPERVISOR

MR. RANA IMTIAZ RESEARCH AND DEVELOPED BY

SADAF AMBREEN BBA (HONS) FINANCE SESSION 2006-2010 ROLL NO 607(E) SEMESTER 8Th


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Dedication I dedicate this project to Almighty Allah, The Creator of worlds UNIVERSITY OF EDUCATION OKARA CAMPUS [SUMAD PURA ROAD OKARA]

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MAHMOOD TEXTILE MILLS LTD And Hazrat Muhammad (P.B.U.P), the cause of The creation of the Universe And To my parents, To the persons who loved me, persons whom I loved and for all those who prayed for me.

Acknowledgment First of all thanks to Almighty Allah, who have given me the strength and knowledge to complete this project. I would like to specially thank for the help of my finance teacher


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MAHMOOD TEXTILE MILLS LTD Sir IMTIAZ who helped me a lot regarding this project. I have learned a lot with the kind guidance of Sir IMTIAZ and I think I have achieved my goal of learning practical things.

SADAF AMBREEN BBA (Hons) Finance


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Table of Contents Sr. No 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20.

Description Executive Summary Vision Statement Mission Statement Company Achievement Production process Exports Purchases Personnel Management Organization Culture SWOT Analysis PEST Analysis BCG Matrix Analysis Summarized Balance Sheet Trend Analysis of Balance Sheet Vertical analysis of balance sheet Summarized Income Statement Trend Analysis of Income Statement Ratio Analysis Recommendations Conclusion


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EXECUTIVE SUMMARY


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Mahmood Textiles Mills Limited is a fully integrated organization. The company's shares are quoted on Stock Exchange. The company's ed Head Office is located at Mehr Manzil Lohari Gate Multan. The company's mills are situated at Mahmoodabad, Multan Road, Muzaffargarh, and Masoodabad, D.G. Khan Road, Muzaffargarh. The management body of the company consists of persons, who are highly qualified and have vast experience in the field of Textile. of the board are:

COMPANY PROFILE Chairman Chief Executive Directors

khawaja muhammad masood khawaja Muhammad iqbal khawaja

Muhammad

Ilyas

khawaja Muhammad Younus jalal -ud- din roomi Mrs.

Maher

fatima

Muhammad muzaffar iqbal


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Bankers The Bankers of the company are; 1. Muslim Commercial Bank Limited 2.

United Bank Limited and

3.

Habib Bank Limited.

Competitors In whole country, the company has many competitors who produce and sell Yarn and Fabric but the company considers the following as main competitors; •Fazal Cloth Mills. •Khokhar Mills. •Yahya Mills.

Target Markets The company does the activities of both. Export and Local Sale. In both the areas company doesn't considers any market as its specific, permanent market. Demand from any city from the country and any country from the world is welcomed. However in Export following countries are major customers of Mahmood Textile Mills; •Japan •Hong Kong and •Korea. The company has four Spinning units and one Weaving unit. For the process of Spinning, MAHMOOD TEXTILE MILLS fulfills its lint requirements from its own eight Ginning factories located in different cities. In addition to that the company also purchases lint from various outside, parties. In addition to producing the yarn, the company also purchases the | yam from its various suppliers including competitors to make sure that enough yarn is available for export. For the process of Weaving, the | company fulfills its Yarn requirement from its own Spinning units. In addition to that company also purchases the yam. The company produces both, 100% cotton and blended yarn and fabric. The company has a total of 103 looms in its weaving unit. Out of them 5 are big looms with a width of 165" and remaining are of 153" width. All are SULZER PROJECTILE


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MAHMOOD TEXTILE MILLS LTD LOOMS. Company has program to purchase 40 more looms to increase the capacity and soon the company is also going to start another Spinning unit. The company meets its electricity requirements from its own Electric Power Production Plant that is situated near Muzaffargarh.


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VISION STATEMENT


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VISION STATEMENT

To be recognized internationally and locally as dynamic, quality conscious and ever progressive Textile Product manufacturer in the Textile Industry Of Pakistan


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MISSION STATEMENT


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MISSION STATEMENT

We are committed to the achievement of excellence in the quality of our Product. We shall achieve quality by motivating all employees towards the satisfaction of our customers. Our motto: Honesty Fair Dealing Buyer Satisfaction Reliability


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COMPANY ACHIEVEMENT


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ISO 9002 In this era of rapid technological changes and new innovations, every customer has become quality conscious. Customers now days want the assurance of quality either through product design or through image or the personality of the product. In response to this trend, marketers all over the world are either offering to the customers, products with high quality design specifications or they are concentrating on the image marketing.The ISO 9000 is the answer of every customer demand through which the organizations can assure customers of their products' high quality. Coping with this Mahmood Textile Mills has also achieved "ISO 9002" Quality Award. It gives Mahmood Textile Mills the international recognition as the producer of High Quality Yam and Grey Cloth. In the whole world; it is now a general rule that without ISO Certificate, an organization cannot export. Hence for Mahmood Textile Mills, ISO has become a basic requirement. At MTM, management has a formal procedure to comply with the ISO 9002 requirements. The organization keeps formal record of establishing and maintaining procedures for every kind of activity starting from purchase of raw materials till the dispatch of finished products. All the procedures documented in the ISO 9002 requirements are thoroughly followed at each and every activity. Moreover MTM carries out periodic Quality Control Audits to confirm its compliance with the ISO 9002 requirements The Internal Audits are carried out almost once in a month, but the External Audits are carried out after six months (Each External Audit costs almost Rs.90, 000). In each External Audit, the auditors see the compliance of the organization with the ISO standards. They see the various clauses of ISO that whether the organization is implementing them. Moreover they see various ISO documents. They see people working, their awareness about ISO and their training levels. The company is implementing following clauses of ISO; 1. Management Responsibility. 2. Quality System. 3. Contract Review. 4. Document and Data Control.


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MAHMOOD TEXTILE MILLS LTD 5. Purchasing. 6. Control of Customer Supplied Products. 7. Product Identification and Traceability. 8. Process Control. 9. Inspection and Testing. 10. Control of Inspection, Measuring and Test Equipment. 11 .Inspection and Test Status. 12. Control of Non-Confirming Products. 13. Corrective and Preventive Action. 14. Handling, Storage, Packaging, Preservation and Delivery. 15. Control of Quality Records. 16. Internal Quality Audits. 17. Training 18. Statistical Techniques. MTM proud to have achieved this award and hopes to keep up its compliance with it in the long run.


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COMPANY ACHIEVEMENT


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WEAVING MAHMOOD TEXTILE MILLS is producing Grey Cloth. The process of Weaving starts from the Placement of Order by the buyer (The buyer places the order at the Head Office). When the buyer places the order he/she makes specifications in the order as; •Count specification for Warp and Weft. •Number of Ends and Picks per inch. •The Pattern of Warp and Weft •The ratio of chemicals used for Sizing. •Kind of packing required. •Net Weight and Gross Weight of the Packing. After the buyer places the order, the Director decides whether the yam should be purchased or it should just be transferred from MTM's one of spinning unit to the Weaving unit. Yarn Store When the yarn reaches the mills, it is sent to the Yarn Store. A Yarn Store Assistant is there who is responsible for receiving the yam and shifting it in the Yarn Store. He also maintains proper record for Yarn. The documentation of the Yarn Store is done in the following manner. Documentation for the Yarn Store (1). Yarn Store Ledger When the yarn reaches the mill, all the information is entered in the Yarn Store Ledger Such as; •Quality, Supplier, Count and Brand of Yarn. •Date of Receipt and Issuance. •Closing Balance and Opening Balance. (2). Yarn Received and Issuance Report In this report following type of information is inked. •Count and Brand of Yarn. •Date & Amount of Opening Balance, Receipt, Issued, Transfer, Closing Balance. •Remarks (If any). (3). Yarn Requisition


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To start any process, a requisition for yarn is sent to the Main Office of the Mill specifying the Quantity, Count and Brand of Yarn. Based on this requisition the Yarn is issued from the Yam Store and the production process starts which is as under.

PRODUCTION PROCESS Warping The production process starts from Warping. From here the Preparatory section starts. Yarn is transferred from the store to the Warping Department. In warping department, there are two machines; 1. Machine on which cones are attached i-e Creel. 2. Other one is warping machine. It takes the yarn from the cones and then according to the specification it wraps the yarn on the beams. Here only warping is done (lengthwise yarn is enrolled). On the machine every kind of detail about the requirement is fed. Also the workers do continuous reporting during the process of Warping. After Warping is performed for a certain quality, a detailed report is prepared about the whole process that explains; 1. For what Quality, Warping is done. 2. What was the Duration of the Process? 3. No. of Break Downs. 4. Workers' names. 5. Length of Yarn Enrolled. 6. No. Of Beams Produced. 7. Weight of Beams. 8. Date in which the Process was carried out. If in any case like when cotton sticks in the yarn or when yarns breaks, the machine automatically stops working so that the workers can correct the problem. During the process a Floor Cleaner cleans any cotton, which flies of from the machines and falls on the floor (Fluff). It causes disruption. After the process the cones left over, which are partially used, also called Short Cones are discarded off. The company also keeps control of Non UNIVERSITY OF EDUCATION OKARA CAMPUS [SUMAD PURA ROAD OKARA]

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MAHMOOD TEXTILE MILLS LTD Conforming Products. For Warping Department proper documentation is done which is explained as under; Reporting done for Warping Department (1). "Daily Yarn Performance on Warping” Report This is very important report. The success of the whole Warping process can be judged from this report because this report contains very important information. With the help of this report, one can calculate the Amount of Yam consumed for the process. Weight of Beams produced and the Amount of Yarn Wasted during the process etc. (2). Stock Report (Beam Stock) The Stock Report gives information as; •No. of Beams Produced. •Quality Code of the Beams and •Length of the Beams. Note On each beam a sticker is attached that conveys information about the beam.

Sizing Sizing department is the second department in Preparatory Section

Process Basically here two large types of activities are performed in the process. First, the ends of the Warped Beams are dipped into the Chemicals so that the yarn could become tense strong and it could bear any jerk in the next department. There are various chemicals used in this process. These are Maize Starch, PVA, Size CB, Wax, T.Wax, and Arkofil. After the ends are dipped into chemicals, they are separated from one another with the help of needle like pins. Second, the Warped Beams are converted into a Sized Beam. That is, the ends of all the warped beams are combined together and they are sized on a single beam. For example, if there are eight warped beams each of 625 ends; then the Sized Beam will be having 8*625=5000 ends.


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Boiler Boiler plays very important role in the Sizing department. The job of Boiler is to boil the water with the help of certain fuel to convert it in Steam. This steam is then sent to the Sizing department for the purpose of heating the Chemicals. Boiler is run by different things such as. Furnace Oil, Coal and Sui Gas but at MTM it is run by the Sui Gas. The Boiling Point is maintained at 100 degree centigrade. The pressure with which the steam is sent to the Sizing dept. is kept at 150 Pounds/Square Inch. An FD (Force Drive) fan is there to push the fuel into the Boiler. During the working of the Boiler, the level of water is kept at a certain level. The water of the steam comes back from the sizing department to the Boiling Room and is then reused.

Reporting for Sizing Department Reporting at the Production Spot Two types of reports are prepared at the production spot. (1). One report is prepared "Set Wise". When a certain set ends, then after that a report is prepared on which different information is listed such as; •No. of Beams produced with their specification. •No. of Beams brought in from the previous deptt . •Yam Count and Quality Code •Machine Stoppage. •Date and Duration of the Set etc. (2). A second report is prepared when the beam is issued to the Weaving dept. The information on the report contains details as; •No. of Beams moved to Weaving dept. along with their specification. •Weave (Drawing Department) . •Yam Count and Quality Code for each Beam.

Reporting at the Main Office of the Mills At the Main Office of the Mills, "Stock Report of Sized Beams" is prepared. Along with this a "Material Statement" is made which gives all the detail about the chemicals used in the Sizing process.


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Note On each beam a sticker is attached that conveys information about the beam.

Drawing In "Drawing" the activities are performed manually. In this department, the Drawers work on the Sized Beams. Basically in this department, the Weave is given. The yarn is ed in the reed frame according to the requirement of the design of the fabric. It is actually the drawing section which has to take care of the construction of the cloth. In the drawing section specific reeds are used for specific order. For an average order the reed requires six to eight hours to be prepared. The supervisors produce different beams of different specifications, under their supervision, for the Weaving Department actually, here the drawers work on the part of a loom that is temporarily separated from the loom for drawing purpose. This part contains following basic things; •Reed •Droppers •Heild 1The yam (single) es through, first, droppers and then Heild I (single yam). After that according to the requirement of the quality, yarn is weaved i-e in Reed, the weave is given. If weave is 3/1, then from reed single yam es through dent of reed and from next dent, 3 yarns . All this is done manually. After this whole work is done, the whole pattern is carried to the Weaving Department and fixed on the loom.

Weaving Introduction Weaving department is the most important department for any textile mill. The basic and huge investment of installation I-e LOOMS is done in this department. Scale of operation is dependent on the working of this department. Efficiency of the whole unit depends upon the efficiency of the looms in this department.


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Process A loom prepares the “Fabric". On every loom, maximum two beams can be attached. The loom draws the yam from the beams and then weaves it and the finished Grey Cloth is then, wrapped on a rod called "Cloth Roll".

Here, the system of Reed, Heilds,

Droppers along with manually adjusted yam in them is brought from the drawing dept. by a machine and is fixed over the looms. The loom weaves the cloth in the same manner as it is designed by the drawers. So the design and construction of cloth made on looms depends upon the design and construction that the workers of drawing department give to it. Here basically the activity of "Wafting" is performed i-e "PICKS" are made here. The weave (3/1 or 4/1 etc) depends upon the order. As described earlier the drawers make weave by ing yarn through "Dents". When the loom starts working the weaving is done by the "Projectile", which takes the yam and es it through ends according to the weave. "CAM" which is on the upper side of the loom facilitates this process. During the process, there is a machine called “AIR JET OVERHEAD CLEANER", which moves in paths between the looms and sucks any wasted cotton or yam. This is to ensure that nothing sticks in the looms. Under each shed there are usually 3 or 4 Air Jet Cleaners. Loom Stoppage The loom stops due to following reasons; •When a yarn breaks, the loom stops. •When a cone ends, the loom stops. The workers put on new cone. •When a beam ends, the loom stops and the "Knotting" or “Article is done. •The loom can stop in case of malfunctioning. Every loom has got its own meter where Different information is available as; 1. No. of rounds' completed. (In shift A, B, C) 2. RPM of the loom. 3. No. of rounds completed during the year i-e T counts. In this department special attention is paid on each and every loom to avoid down time and supervisors and foremen play main role here.


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Knotting One beam usually takes ten days to become empty. After that a new beam is attached to it. This process is called "Knotting". In Knotting, the beam replaced is of same quality.

Article When a beam becomes empty, then when the new beam of another quality is attached to it, this process is called "Article".

Reporting for Weaving Department Following reports are prepared to view the working of the Weaving Department. (1). Efficiency Report It is the most important report for any weaving unit. It tells the Efficiency of Looms, on which efficiency of whole weaving unit depends upon. It is a daily report in which Efficiency is calculated as: Actual Picks / Total Picks

* 100

(2). Article Report This report is prepared daily by the sizing department to form a link between the sizing and weaving department. This report specifies the Old and New Quality replaced on a loom along with the Quality specification. It also tells the reading of the loom in all three shifts, on which Article is done. (3). Reading Report A third kind of report is made by taking continuous information from the Weaving Dept. A person called “Time Keeper" informs the Main Office about the reputation of the Weaving dept. For every loom, this report gives it's •Present and Previous Reading. •Difference of the two readings. •T counts* and •RPM


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Folding Next to the weaving department, is the Folding Department? After the cloth is prepared on the looms, it is thoroughly inspected to ensure quality. Inspection, Cutting and Packing is done in the same shed i-e "Folding Department".

Inspection Unrolling the Cloth First of all, in Inspection, the cloth is unrolled on the Unrolling Machine. Then this unrolled cloth is taken to the machines where "Inspection Supervisors" check, correct and mark the faults in the cloth. If the fault can be corrected at the spot, it is fine otherwise it is marked and ed on to the cutting area. The workers on the unrolling machine list various details about the process. Whenever a Cloth Roll enters the Folding department, all the information related to it is listed in a report. A Daily Roll Cutting Card is also made. This card gives details about the length of certain quality cloth cut in a day and other related information. After the cloth is unrolled, it is sent for inspection. There, the Inspection Supervisors inspect the cloth on machines and give points to the faults in the cloth. On a chart called” Cloth Inspection Chart", they write different information as •Inspector name •Shift •Loom no •Quality •Width •Total yards/meters •Type of faults and their points •Grade of cloth. Also the amount of cloth inspected by each inspector is written there. There is a formal procedure for "Fabric Inspection”. The procedure follows one of two choices of standards. One is "Ten Point Standard (J.I.S. Standard)". It is followed by Japanese. The


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MAHMOOD TEXTILE MILLS LTD other is "Four Point Standard". It is followed by Americans. In both the standards the "Grading" done is different.


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Hence when the cloth is inspected, it is graded by counting the number of points in a specific count of yards. More are the Points, lower is the Grade. Note that the fault which is corrected at the inspection spot is not given any point. Only the fault that cannot be corrected is given point. There are 17 kinds of faults that can be in a cloth if the fault is serious and repetitive, and then an "Action Slip" is made. This is to take strict notice of the fault so that B and C quality cloth must be avoided.

Folding After the inspection activity is performed. Folding, Cutting and Packing is done. But first the Folding activity is performed. Folding is done on the Folding Machine. A Folder is there to do that activity on the machine. Every fold of cloth is of one meter.

Cutting After folding, Cutting is performed. The Inspection Supervisors give the Cloth Inspection Chart to the personnel of the cutting area that specifies the fault i-e place from which the cloth is to be cut. Hence at the time of cutting, in order to ensure quality, the faulted fabric (that is of either B or C quality) is separated from A Grade fabric. At a place of fault, the Inspection Supervisors attach a Strip that gives the detail about the fault. Moreover, whenever the buyer places an order, he specifies the cutting of the cloth. For example he can say that he wants his fabric in ten cuttings each of 110 meters, or he can say that the cloth should be in ten cuttings each one greater than 100 meters. Hence according to this specification the cloth is cut. When the cutting activity is performed, all its detail is entered in a . For example; Quality of Cloth, Cutting Length (specified by the buyer). Loom number. •Length of A Grade Cloth. •Length of B Grade Cloth. •Length of C Grade Cloth. •Length of Fents and •Total Length. Folding is done on the Folding Machine. A Folder is there to do that activity on the machine. Every fold of cloth is of one meter.


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Packing When the cutting is done, then "Packing" starts but before packing, the cloth is weighted to calculate its "Net Weight". After that according to the buyer's requirement the cloth is packed either in the form of a Roll or Bail. After the packing the cloth is again weighted to calculate its "Gross Weight". Before packing, cloth is first pressed to bring it in proper shape. This activity is carried out by the "Hydraulic Pressing Machine". After the packing is performed, a list is made that is called the "Packing List". It is given to the buyer when the cloth is dispatched. Moreover on the bale or roll a Sticker is attached that gives information about the packing. For the organization's proper record, a "Daily Summary of Packing" is made to know the amount of cloth made with reference to the Quality. A "Damage Report” is prepared daily. It explains the cloth damaged in daily production (in every shift). Based on this report the performance and efficiency of employees in every shift is calculated and Rewards are given. Dispatch After the packing, the cloth is shifted to the “Fabric Godown". There, proper record is kept about the amount of cloth and its quality and weight. At the day of dispatch, the cloth is dispatched from the mill.

Spinning The procedure for making "Yarn" is called Spinning. Spinning is a delicate process because the yarn produced in this process should be exactly of the same quality and count as specified by the buyer. There are many technical aspects involved in this process. At each and every stage of yarn production, one has to take care of all the instructions and technical things to produce a good quality yam.

Issuance of Bales The production process starts from the issuance of cotton bales. Based on the order (Contract) of yam, an estimate is made for the amount of cotton required for the process. The cotton is then transferred from one of the Ginning factories to the Spinning unit or it is purchased from the outside parties. When the cotton reaches the unit, the bales are weighted and their moisture is checked. After that they are shifted to the Cotton Godown.


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The moisture of cotton bales is again checked when they are issued for the production process. At this time the laboratory personnel came to know that exactly how much cotton would be needed for the production process with a particular amount of moisture. Relating to this a Daily Moisture Report is also prepared

Blow Room Blow Room is the first stage in the making of Yarn. Here there are different machines on which different activities are performed in order to clean the cotton. So, the basic objective of this room is to clean the cotton to assure quality in the product. First of all in the blow room, there is a machine called “Plucker". In this, 20 bales of 20 different lots are placed. It means that from every one lot one bale is taken. The role of this machine is to separate the cotton layers because the cotton is in form of layers when the ginning factory packs it. The machine does this role by sucking the cotton into it, sending it in a "Condenser" which forwards the cotton to other place. The dust in the cotton is sent outside the blow room through a pipe. After the Plucker has done its job then the job of women start who clean the cotton by removing different impurities from it. Impurities may include jute, leaves, plastic bags and other impurities. The cotton cleaned by ladies is gathered on one side. Near this gathering of cotton there is a machine that is called "Breaker". In this, cotton is loaded which is cleaned and its wastage called "Dropping" is removed. It is first wastage that is removed with the help of machines. After that the cotton moves along a path and reaches another machine called "Exi Flow". This machine also cleans the cotton. After this the cotton reaches another machine called "Multi Mixer". In this machine cotton is mixed. As explained before that cotton taken is from 20 different bales. So the cotton is mixed together so that the mixed variety produced should be good enough to produce a high quality yarn. After that the cotton reaches a machine called “RM" which further purifies the cotton. After this machine has done its job there are two workers who remove any impurity like jute left over by the machine. After this, there is another machine, which is called “TX". This machine exerts a very strong pressure on the cotton in order to remove any impurity and then sends it to the “Filter Room". In the Filter room there are different machines that clean the cotton very thoroughly to make sure that the cotton ed to the


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MAHMOOD TEXTILE MILLS LTD "Carding Section" is clean to produce a high quality yam.

Lacreen- Dropping Lacreen is the cotton containing different things such as leaves. Dropping is same as Lacreen but it is worse than Lacreen. Other wastages are Card Fly and Filter Fan. So the job of blow room is to clean the cotton to make sure that fine quality lint is there for the production of Yam.

Carding Department After the blow room, the job of carding department starts. Basically in this department three different major activities are performed. They are "Carding, Drawing and Simpering".

Carding In Carding "Slivers" are made. These are long, soft and thick ropes of cotton. These Slivers are placed in drums called "Cans". The cotton ed to the "Carding Section" is clean to produce a high quality yam. Here cleaning the cotton gets different kinds of wastage. These are

DRAWING In the drawing section, a process is there where the lengths of the slivers is increased. This process is called "Drafting". Twelve (12) canes of slivers are placed in a sequence and after that slivers from these canes are combined to form a single sliver of larger length. Here, thus, the slivers are combined to form a single sliver of a larger length.

Comber and Carded Yarn After the Drawing activity, the mill either makes "Carded Yam" or "Comber" or, both, based on the order. Comber is finer than the Carded Yarn. For Comber, a special process is there in a comber section where "Laps” are made. These are made by making rolls from the slivers and removing any further waste (Comber Noil) to ensure quality. After


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removing the waste, again the slivers are made to prepare them for the "Simplexing” process. Another waste (Short Fiber) goes outside the process with the help of pipes.


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SIMPLEXING In the Simplexing section the Frames of carded yarn and comber are separately run. Here, from slivers, “Roving” is made. This is basically thick yarn from which later the yam with specified counts is made. These roving are wrapped on specially made thing called "Bobbins". These roving are then carried over to the Ring department.

Ring Department Here at the ring department, the yam with specified count is made. The Bobbins made in the previous department are carried to this department where these are run on "Spindles". At spindles the yarn is made which is of the count specified by the buyer. These Spindles are run in frames. Each frame is of 480 spindles.

Auto Cone Department After the yam is made on "Rings", it is carried over to this department which is called "Auto Cone". Basically in the previous department the yam has been made and the only objective of this department is to the yarn and bring it on the cones. The "Rings" are placed on the machines that draw the yam from them one by one, s it and wraps it on the cones. Packing Department Here at the Packing dept, the cones are packed. The packing is of two types. One is the Export Packing and the other is the Local packing. Export packing is finer than the Local packing. At this department a certain amount of moisture is maintained to add a certain amount of weight to the yarn. Note that a certain amount of temperature is also maintained in all the departments to avoid some technical problems.

Yarn Godown After packing, the yarn is transferred to the Yam Godown. In this Godown, all the record is kept about the amount of yarn, its quality and the count.


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Laboratory The laboratory plays very important role in Spinning. Its role starts from the issuance of the bales. When the bales are issued, the laboratory checks their moisture and a Moisture Report are prepared for that. In each department the raw material is checked by the laboratory for its moisture. More over the laboratory also prepares report of various wastage for different departments. It keeps record of daily production, monthly production and wastage etc.

Documentation for Spinning Like Weaving, for Spinning unit proper documentation is done. The managers keep record of each and every activity. For each and every order, the record about raw material inventory, work in process inventory and finished good inventory is kept. The laboratory prepares different reports relating with the production process. But in contrast to Weaving, the reports prepared in the Spinning unit are less. Now, let’s have a view of the reports that are prepared in the documentation of the Spinning. (1). Cotton Stock Report This report is prepared about the daily stock of cotton. This report contains information as; •Daily Incoming Cotton • Cotton in Opening Balance • Previous Outgoing Cotton • Daily Outgoing Cotton and • Remaining Stock of Cotton (2). Daily Cotton Issuance Report This report is prepared when the bales are issued to the Blow Room. This report contains information as; •Date of Issuance of Cotton. •No. of Bales Issued. Station (Ginning factory from which the bales are transferred or purchased).


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MAHMOOD TEXTILE MILLS LTD •Purchase Weight of Bales • Mills Weight of Bales. • Shortage or Excess in Weight of the Bales (due to the moisture). (3). Shortage and Excess Report Due to the moisture in the bales Shortage or Excess occurs in the bales. Shortage occurs when the moisture is lessened due to heat in the mills. Excess occurs if the bales are kept exposed to any rain in the mills. That is why a report is prepared about "Shortage and Excess". This report contains information as; •Lot No. • No. of Bales. •Shortage. •Excess. •Station and Moisture. (4). Cotton Summary Report This report is about the Opening, Received and Issuance of cotton which is prepared in a summary form. This report contains information as; •Opening Balance of Cotton. •Cotton Received. •Total Balance . •Cotton Issued to B/R (Blow Room). •Closing Balance. (5). Yarn Stock Report This report gives information about the amount of Yarn in the Opening Balance, Yarn Produced, yarn Packed (Export and Local) and yarn in the Closing Balance, in one day. This report also contains other small reports about yarn as; •Yarn's Clearance Report. • Yarn's Production Report. • Yam's Doubling Report. • Hard Waste Report and •Shut Down Report. (6). Production s of each Month


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In Production s for a month, two reports are prepared. (1). One report contains information as; •No. of Spindles, Installed, Available and Worked. •Moisture in Cotton and Yam. •Cotton Opening Work in Process. •Cotton Issued. •Net Cotton Consumed


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. •Recovery of Cotton from the Waste and •Detail of Cotton Waste.


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EXPORTS


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EXPORT Introduction Export is the most distinctive recognition of Mahmood Textile Mills. It is the most powerful weapon that MTM has got in the field of Textile. It is due to the export that today MTM has got a distinction in the production of textile products. MTM exports both, the Yarn and the Grey Cloth but major export is in the field of yarn. Hence yarn is the major contributor to the earnings from the export. Currently Mahmood Textile Mills has four brands of yarn. They are; 1. Cotton King 2. Palm 3. Zaitoon 4. Engine In Fabric MTM have 214 qualities of grey cloth.

Export at Mahmood Textile Mills The activity of Export is carried out at the Head Office of Mahmood Textile Mills. For export, there is a separate department for export known as Export Department.

Procedure for Export at Mahmood Textile Mills There are various steps involved in export. These are explained below.

1) Receipt and Checking of Letter Of Credit (Loc) At Mahmood Textile Mills, the export procedure begins by the Sales Contract. After the contract, the buyer opens Letter Of Credit (explained below). The concern person of MTM studies the Letter Of Credit on receipt and makes sure that its particulars are according to the sales contract. If there is any discrepancy between the sales contract and LC, it is removed.

2) Letter of Credit: After the contract is developed, the buyer opens Letter of Credit in his bank (foreign bank) and that LC is sent to MTM's bank by that foreign bank. Then MTM's bank forwards the LC to it. It is a document that is cashed when exporter hands over the


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negotiable documents to its bank. In an LC the buyer quotes following important explanation; •Product Specification. •Amount of the transaction in US dollars. •Shipment detail •Packing detail. •Bank detail (that opens LC) Note that LC has an expiry date. If the shipment cannot be made on time, then the LC cannot be cashed and it is expired. Hence the expiry date compels the exporter to send shipment on date. 2). Finalization of Production and Shipment Schedule Then the preceding procedure is over, and then the concern responsible person f the export department prepares the Shipment Schedule keeping in view i.e. booking. This schedule is finalized by the director and then it is sent to i.e. GM at the mill who makes the Production Schedule by keeping in view i.e. Shipment Schedule. 3). Custom Clearance, Shipment, Buyer Information •When the goods are produced, the Office Manager finalizes and discusses all programs with Manager Export before dispatching the goods from mills and makes arrangements accordingly. •When the goods are dispatched from mills the office manager informs the export manager about the dispatch and gives Performa Detail of Dispatch (It is a small report that gives the details about the dispatched products) which is used in maintaining the export record. •The Clearing Agent is also informed accordingly about the dispatch and all the documents are sent to him after they are checked by the Audit Department. •When the goods are dispatched from the mills, the buyer is informed •The clearing agent arranges custom clearance and sends the Bill of Lading to the export department.


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3) Bill Of Lading: When the goods are cleared from the custom and reach shipment, then the ipping company issues Bill of Lading to the exporter. Bill of Lading intains following important information; •Shipper and Consignee's particulars. •Place of Receipt, Loading and place of Delivery. •Forwarding Agent. •Country of Origin of Goods. •Port of Discharge. •Description of Goods and Packages. •Container Numbers. •Weight of Goods and •Total Freight (in US $ and local currency). 4) Checking of bill of lading and Buyer Information •against the Letter of Credit to make sure that there is no discrepancy between them. If there is some, then it is the job of the agent to get it removed from the Shipping Company. •An Export is maintained where all the information is entered about When the agent sends the Bill of Lading to export department, it is checked the documents. •After checking the Bill of Lading, the buyer is also informed about the shipment by Fax or by Phone. Now, before explaining the next step, it is necessary to tell you about the

Negotiable and Non-Negotiable Documents. Negotiable Documents These are the documents without which exporter cannot take payment from its bank. These are the documents without which the buyer cannot receive the goods he imports. Exporter transfers the negotiable documents to its bank and receives the payment which is specified in the LC. This process is called Negotiation of Documents.


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MAHMOOD TEXTILE MILLS LTD Our bank sends the documents to the foreign bank and the foreign bank transfers them to the buyer and the buyer receives the goods from the shipping company and gets them cleared from the custom. Following documents are the Negotiable Documents', •Letter of Credit. •Bill of Lading. •Invoice. •Bill of Exchange. •Packing List. •Certificate of Origin. •Insurance Policy. •Form E and •Beneficiary Certificate.

Non-Negotiable Documents These are the non-original documents (either photocopies or faxes) of negotiable documents that are given to the buyer just for providing him information about different steps. With the help of these documents, exporter cannot take the payment from the bank and the buyer cannot receive the goods. These documents are sent directly to the buyer while the Negotiable documents are always sent via banks. Negotiation of Documents •After receipt/correction of Bill of Lading, export department prepares the documents for negotiation/collection of the payment and sends them to the audit department for checking. •If the documents are ed by the audit dept., the director and the export manager sign the bill of exchange. After their approval, the documents are sent to the bank for the negotiation. Two copies of the Invoice and Bill of Lading are sent to the section for Freight and Sale Booking. •After this, a person appointed by the export department follows up the documents in the bank, removes any discrepancy, if pointed out by the bank and receives the payment from the bank on the same day.


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MAHMOOD TEXTILE MILLS LTD •After this, negotiation file is sent to the Rebate Assistant for the preparation of the rebate cases.

Bill of exchange Bill of exchange is a document that is used to draw money from the foreign bank. Exporter sends this bill to its bank which forwards it to the foreign bank that opens LC. Invoice In MTM the invoices prepared are of two types; (1). First, the invoice that is prepared is for the purpose of "Custom Clearance". Its only objective is to clear the goods from custom checks. From the two types of Invoices, this one is prepared first. The basic difference between the two is that, in first one, the information about; Description of Goods, Unit Price and Amount of goods (in any currency) is given to small extent for secrecy purposes. Only that much of information is given that can serve the purpose of Custom Officers. (2). the second type of Invoice is prepared for the purpose of "Negotiation of Documents". This Invoice is submitted to the bank. Each and every information about the transaction is given in full detail here.

Settlement/Payment of Expenses •With each shipping company, the Director or the Export Manager settles the rate of Sea Freight in American dollars for each destination. •After or before receipt of Bill of Lading, Sea Freight Payment Performa•(explained below) is filled by the export department which is then sent to the section for necessary action. •The Performa is checked by the and audit department and is sent to the Director for approval of Demand Draft Issuance. After approval section arrange Demand Draft. •After that the Demand Draft is sent to the shipping company along with •the Performa and its two copies are kept at the export department for recording purposes. Sea Freight Payment Performa It is a Performa made by the export department specifying the of transactions with the shipping company. It is sent with the Demand Draft and contains following important information;


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MAHMOOD TEXTILE MILLS LTD •Containers' Numbers. •Number and Date of Issuance of Bill of Lading. •Invoice number. •Destination. •Freight in Rupees and US$.

Payment of Foreign Commission •The export department prepares the Outstanding Commission Report and sends it to the s department for the issuance of Demand Draft. •After the verification s dept. hands over the documents to the audit dept. •If the audit department es the documents, then they are sent to the director for the issuance of Demand Draft and the payment is made.

Payment of Local Commission After the shipment is made, the agent sends request for the payment of Local Commission. Export Manager checks the contents of the request and sends it to the department for payment along with some other concerned files. When the department checks it, it then sends it to the audit department for further verification. After audit department's verification, department gets the Demand Draft issued from the director and sends it directly to the agent. CF, CIF, AND FOB In Mahmood Textile Mills, there are three different conditions in which the freight is paid. These are; •CF •CIF and FOB •CF Means "Cost and Freight". It means that exporter will pay the freight till destination.

CIF Means "Cost, Insurance and Freight". It means that along with paying freight till destination, the exporter will also get the goods insured on his/her own expense.

FOB UNIVERSITY OF EDUCATION OKARA CAMPUS [SUMAD PURA ROAD OKARA]

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Means "Freight on Board". In this the exporter will pay the freight till boarding only. Remaining freight is paid by the buyer. Getting Rebate from the Government When the above steps are over, the job of Rebate Assistant starts. •With the help of some documents such as Shipping Bill, he prepares the rebate case and sends it to the custom for payment after the checking of audit department and export manager. •He then follows the case till receipt of payment. •After the receipt of payment, he maintains its record and hands over the check to the s department. Shipping Bill It is given to the exporter by the shipping company when the ds are shipped on board. Its important contents are; •Export Registration Number •FOB in foreign currency •Freight •Rate of Exchange •Exporter's and Consignee's particulars. •Name of Vessel or Aircraft •Port of Discharge. •Country of Final Destination. •Packages (description, marks and numbers)•Quantity (units and amount)•Description of Goods. •Export Value and •Other information (Form E No., Unit Price, Vessels name etc.)

Other documents involved in Export Form E Form E is attached with the documents when the goods are being cleared from the custom. In this Form, the exporter informs the government that its specified bank will collect the payment from the buyer within 120 days. It is so because there is a law in our country that the proceeds from exports should be realized within 120 days after shipment, otherwise State Bank of Pakistan takes strict notices to know, where is the foreign


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exchange going. On this Form, exporter's specified bank also gives its statement about the exporter that it knows the exporter and will collect the proceeds within 120 days. In case of no realization, it will inform the State Bank about the circumstances. On Form E, other information is made available as; •Description of Goods in detail. •Quantity (In bales, bundles, pieces, tons, Ibs, etc.)•Invoice Value (In $) and . •Destination, Port, Station. •Name and Address of Consignee •Name of Steamer or Air Company. •Reference of Bill of Lading or Airway Bill. •Port of Shipment/Post Office of Dispatch. •Land Custom Post.


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Packing List For the purpose of Custom Clearance and later on providing it to the buyer, a Packing List is prepared. It contains information as; •Description of Goods. •Bales numbers. •Measurement. •Total number of Packages. •Total Gross Weight •Total Net Weight. It is a negotiable document and is sent via bank. Shipment Detail to the Buyer When the goods are shipped, a detail of dispatch is sent to the buyer that contains all the information about the Goods and their Packing. It is a non-negotiable document and is only for buyer information.

Certificate of Origin Certificate of Origin, as it is clear from the name is to certify that the goods being exported to the importing country are of Pakistan origin. There are some countries in which goods of certain other countries are banned. Hence this is to make sure that the imported goods are not banned in the importing country, by the government. This is also a negotiable document and is sent via bank.

Bill of Export When the exporter submits different documents to the custom office for the purpose of Custom Clearance, the Custom Office, issues a Bill of Export. Based on this bill, goods are cleared from the custom. It contains each and very information about all the transactions. Buy-Back-Cum-Indemnity for Export/Inland Bills After the exporter has negotiated the documents it signs a "Buy-Back-Cum-Indemnity for Export/Inland Bills". In this it accepts that it will buy the negotiated documents back from its bank. at the amount of bill of exchange plus all the bank charges and mark up at the rate specified by


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the bank within settled number of days, in the event of the said documents being refused to the bank by the bank opening/confirming the credit or dishonored by the drawee after acceptance, insolvency of the drawee or the bank that has opened the LC or any other reason whatsoever.


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PURCHASES


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PURCHASE Every organization has the need to purchase the raw material, heavy machinery, daily used products etc., so has Mahmood Textile Mills. At MTM there is a separate department for purchase known as "Purchase Department" At MTM the purchase falls in four categories. 1. Import 2. General Purchase 3. Cotton Purchase and 4. Yarn Purchase Let's first have a look on MTM's Import.

Import Mahmood Textile Mills imports the goods that are not produced locally. So far Import a proper procedure is followed at MTM. or every organization to import, it has to, first, itself in the list of importers. After that, the Importer can import. MTM is also ed in importer's list.

Import at Mahmood Textile Mills •The necessity to Import arises from the need. When the need of some thing arises at the mills, they make Purchase Demands and send it to the Import Department. •When Purchase Demand reaches the Import Department, the Import In charge studies the demand carefully and then sends the detailed information about the required item(s) to the Indenture (Agents of foreign Manufacturers. They act as middleman) for Indent/Performa Invoice. •When the Indenture sends the Indent/Performa Invoice to the Import In charge. The Import In charge sends it to the concerned department at the mills for the verification and the confirmation of the demanded goods. The Head of the concern department evaluates it after his approval sends it back to the Import In charge. •When the Performa Invoice is confirmed. Import In charge sends application for opening of Letter of Credit to the bank along with insurance Cover Note (Insurance is necessary


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MAHMOOD TEXTILE MILLS LTD for import. Without insurance, bank refuses to open LC). The Indenture informs the manufacturer about it and asks him to send the items. •When the shipment clearing documents come at the bank, the Import in Charge receives them from the bank and gives them to the Clearing Agent or Custom Clearance. •The Clearing Agent, after clearing the document form the custom, makes delivery Challan and sends them to the mills. Import In charge notes each and every detail about the Import in the import .

Performa Invoice The Performa Invoice is made by the Indenture to confirm the goods and r particulars, the organization is demanding. Moreover it tells the importer about the Price, Payment, and other and Conditions. Forma Invoice has following contents;  •Exporter's Name and Address.  •Importer's Name and Address.  •Description of items.  •Quantity.  • and Conditions.  •Country of Origin.  • Delivery Date.  • Mode of Payment.

Other Documents Involved In Import Open Bond Manufacturing Certificate (OBM) It is an incentive that the government offers to the importers. It is only for the goods which are not manufactured in the local market (and must be imported).According to this incentive, when the Importer imports the goods, then the government doesn't receives Import duty on the goods, provided that the goods manufactured by the Imported machinery or part, later on, must be then exported. Later, the excise department is responsible to see whether the organization is fulfilling its obligations.


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Form I Form I is an application for permission under the Foreign Exchange Regulation Act, 1947 to purchase Foreign Exchange for payment of Imports. In this Form, the Importer declares; •That the mentioned payment is due and that he has not already obtained exchange for payment for Imports nor he has made any other application for this purpose. •That the amount of Foreign Exchange mentioned represents the correct prevailing marker price for the goods on the date of contract in the exporting country. •That he is neither connected with the exporter abroad directly nor indirectly nor do he has any financial or other interest in the exporters. The Importer certifies that; The imports are covered by a valid Import License/Import Permit/Sub unauthorization/Authorization duly ed with the State Bank of Pakistan. Importer undertakes that the remittances being made shall be utilized for e Import mentioned and he shall clear the goods for consumption in Pakistan with in four months from the date of application. A part of this Form I is completed by the Authorized Dealer who certifies that the statements made by the applicant in the form are to the best of its knowledge correct and it has seen documentary evidence in there of. The dealer also certifies that the remittance has been made in accordance with method of payment as per existing Exchange Control Regulations.

Bill Of Entry The Bill of Entry is just like Shipping Bill. With the help of this document, import department clears the goods from the custom. It carries all the information about; •The Importer. •Letter Of Credit. •Freight. •Goods (Their price, units, weight, packages). •Shipment detail. •Sales Tax, Income Tax, Custom and Excise Duty.


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Invoice When the exporter negotiates the documents, he sends Invoice to Import department that specifies; •Goods imported by MTM •Air Freight and Forwarding Charges. •Port of destination. •Payment (in importing country's currency). •Type of Packing

Airway Bill When the goods are sent by ship. Bill of Lading is made. When the goods are sent by Air, Airway Bill is made. Airway Bill possesses following information; •Airport of destination. •Flight/Date. •Amount of Insurance. •Handling Information •Number of pieces of goods •Gross Weight and Net Weight. •Rate/Charge. •Nature and Quantity of Goods. It is a negotiable document. The exporter also sends Certificate of Origin and Letter of Credit to the Import department which are both negotiable documents.

General Purchase The Purchase department of Mahmood Textile Mills purchases different parts and daily used products from the local market too. But Installations and other heavy machinery are imported, because they offer high-class quality and prolong warranty periods. The goods purchased locally, fall in the category of General Purchase. General Purchase at Mahmood Textile Mills


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MAHMOOD TEXTILE MILLS LTD •Whenever some locally produced thing is required at the mills, the concern department incharge checks that whether the thing lies in Mill's Store. If it is there, he gets it issued from the store. If it is not there, then Purchase Demand (Purchase Demands contain detailed information about required items like Quantity, Quality and other specification) is made, which after approval of the Head of the department goes to the Purchase department. •After analyzing the Purchase Demand, Purchase In charge asks for Quotations from various suppliers and makes Comparative Statements. Based on them he makes Purchase Order which is then sent to the director for his approval. •After Director's Approval, Purchase order is sent to the Approved Supplier. •When the goods are received, they are sent to the mills with a Delivery Challan •Store sends Goods Receipt Note after receiving the goods, to the Purchase Department. Note that Chemicals and Packing Material for Weaving and Packing Material for Spinning is purchased on the basis of Daily Stock Report. For them Purchase demand is not raised from mills. In Mahmood Textile Mills, the goods are only purchased from Approved Suppliers. There is a formal system for the evaluation of the Suppliers/Subcontractors. After the suppliers are evaluated the Approved Suppliers' names are entered in Approved Supplier List. Those items that do not affect the quality of the product can be purchased from unapproved suppliers. Also in case of emergency this can be done.

Yarn Purchase As mentioned earlier, Mahmood Textile Mills also purchase the yarn from outside parties inspite of its own Spinning units. The yarn is only purchased from the approved suppliers and it is made sure that the yarn purchased is of high quality to produce a good high quality fabric.

Yarn Purchase at Mahmood Textile Mills •Yarn Purchase is responsibility of the Director for Weaving. He receives


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MAHMOOD TEXTILE MILLS LTD •Daily Yam Requirement and Daily Yam Stock Report (explained later) from weaving mills and based on them he finalizes the purchase of yarn. The Brand is selected by the Director •Yam Purchase Assistant prepares the Purchase Order of Yam with concern of Director and the Director approves the order after analyzing it. •After Director's approval, order is placed to the supplier. •When the goods reach at mills. Yam Go down In charge receives them and sends confirmation of receipt of goods to the Head Office. Note that the order is made in anticipation. Hence no shortage of yarn occurs at the mills. Daily Yarn Requirement Report The Daily Yarn Requirement Report carries information as; •Amount of Yam (in meters) required for Warp. •Amount of Yarn (in meters) required for Weft. •Total Yarn (of different Counts) required for production of different qualities. Daily Yarn Stock Report Daily Yarn Stock Report carries information about yarn available for production. It specifies the; •Yam (of different Counts) available for production. •Brands. •Percent PC. •Opening Balance. •Receipt (Purchase, Return) •Issued (for Warp and Weft)•Transfer and •Closing Balance. Cotton Purchase MTM also carries the activity of Cotton Purchase. Inspite of the owners' own Ginning factories, cotton is purchased from outside parties due to heavy requirement of cotton for four (4) spinning units. Cotton Purchase at Mahmood Textile Mills


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MAHMOOD TEXTILE MILLS LTD •For Cotton Purchase, Director selects Ginning factories based on their Site Location. On demand of cotton from the mills, he calls for sample from his selected Ginning factories and sends the sample to the mills for testing. • After testing, the sample is sent back to director for approval/disapproval along with the Cotton Testing Report. •In case of approval, the Assistant for Cotton Purchase makes Purchase Order for Cotton. Note that Purchase Order is only for outside parties. For owners' own ginning factories, cotton is just transferred from one of ginning factory to the mill by a Transfer Notice. •After the Director's approval of the order, the order is sent to the supplier and the Godown Keeper is also informed about the purchase order at the mill. •When the Cotton reaches the mill, Godown Keeper receives it and informs at the Head Office about the receipt of goods. Local Sale In addition to Export, Mahmood Textile Mills also sells the Yarn and Fabric in the

Local Market. The Local Sale Director makes the contract and he is responsible for sale of cloth in the local market. He takes help of the Local Sale Assistant. Usually, A Grade products are exported and B and C Grade products are sold in the local market. Obviously the rate for B and C Grade products is less than the A Grade products but these are also easily sold in the local market as compared to the foreign market because foreign market is more quality conscious than the local market.

Local Sale at Mahmood Textile Mills •Local Sale Assistant receives Daily Stock Report for Cotton and Yam to see that the stock is available for sale. •Local Sale Assistant discusses with the Director, daily, about the dispatch of products to inform him about the amount of yarn and cloth to be exported and the amount of yarn and cloth available for local sale.


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MAHMOOD TEXTILE MILLS LTD •When the buyer consults the director for purchase of either yam of cloth, the Local Sale Assistant makes Purchase Order Detail for Cotton or Yam explained later) and sends it to the buyer. •The buyer, after specifying his/her requirements in the Purchase Order, sends it back to the Local Sale Assistant. •Local Sale Assistant sends this Purchase Order to the Office Manager,

which then

sends the goods to the proper buyer. •Local Sale Assistant prepares the Invoice and sends it to the buyer after getting it approved from the Director.


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Purchase Order Detail for Cloth Purchase Order Detail for Cloth is made to know the buyer's requirements. It is then sent to the buyer and based on this the Cloth is prepared for dispatch. The Order contains following contents; •Date and Buyer's Reference. •Quality of Cloth required. •Quantity of Cloth required. •Dispatch Schedule. •Number of Bales or Rolls needed etc. Purchase Order Detail for Yarn Purchase Order Detail for Yarn is also made to know the buyer's requirements about yarn. It is sent to the buyer and based on this the Yam is prepared for dispatch. The Order contains following contents; •Order Number. •Buyer's Name. •Required Weight per Cone. •Required Net Weight per bag. •Required Cones per Bag. •Total Bags required. •Yarn Count(s) required. •Yam Quality required. •Required Brand(s). •Delivery Schedule: •Date of Delivery. •Bags per Container. •Type of Packing required.


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PERSONAL MANAGEMENT

PERSONNEL MANAGEMENT


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MAHMOOD TEXTILE MILLS LTD Personnel Management is a very important activity for any kind of organization. The personnel of any organization are its keys and with the help of them the organization can do miracles in its business. It is but up to the organization that how it manages its employees. Mahmood Textile Mills also does Personnel Management in its own particular way. Let us now see how this organization carries out various activities in the field of Personnel Management.

Recruitment and Selection Whenever some unit of Mahmood Textile Mills starts its working the recruitment is done on the basis of Sanction Strength. Sanction Strength is the estimate of the workers, middle and top managers. The recruitment and selection of middle and top managers, that occurs in a normal, day by day working is carried out in the Head Office. For workers it is in the concerned unit. GM (General Manager) or TM (Technical Manager) does that. A is maintained in the Time Office which gives information about;  No. of workers Enrolled.  No. of workers to be enrolled in future.  No. Of workers on Leave  No. of workers absent etc.

Orientation Orientation is necessary for any kind of worker and the manager. The concerned Officer or the Director is made responsible for conducting Orientation.

Training and Trail Training and Trail is only for entry level positions. When a worker is selected, he is, then, ed through a Trial Session for 6 or 7 days. The Foreman of the concerned department conducts the trial. He reports to concerned in charge. If the person is working well in trial, he is ed and in charge is informed that the person is fit for the job. When a worker has successfully ed the trial, he is then placed permanently and a "Worker Number" is allotted to him. His file is maintained with


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MAHMOOD TEXTILE MILLS LTD reference to his worker number in which every kind of information about him is inked. During the trial, the foreman also gives continuous training to the worker but long training sessions are not carried out in the organization. Hence, the worker is examined during his training that whether he can do the job.

Placement The placement of the worker is temporary when he is selected and placed in a trial session. The placement becomes permanent when the worker es the trial. The selection of the middle or the top managers is in the Head Office and at the time the managers are selected, they are placement as permanent. For them there is no trial. The job description is given to the worker or the manager after the selection and in this respect the documented procedures of ISO 9002 for job description are followed.

Salaries The salary of a single worker is Rs. 2100/- per month which is called Gross Salary. Overtime is paid according to the hours worked over and above one shift of eight hours. The salary of the middle and top managers is determined by the concerned Director. There is lot of variation in it.

Rewards The rewards given to the lower level are of two types 1. Rewards which are given to weavers. 2 .Rewards which are given to workers. (1). the amount of reward which is given to the weavers is based on their work done. When a certain weaver weaves the cloth, then the Time Keeper places a sticker (Tape) on the Cloth Roll which describes, 1

Length of cloth weaved.

2

Name of weaver.

3 Loom number. 4

Quality.

5

Efficiency of loom etc.


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MAHMOOD TEXTILE MILLS LTD After that at the Cloth Inspection level, the condition of the cloth is checked and based on the condition of cloth weaved, that is "number of faults" etc., the reward of weaver is determined. (2). for second type of rewards which is given to the workers of other depts. the cloth which is at the end inspected determines the rewards. From the cloth, the faults that are due to the workers of different departments is seen. For example, in case of Sizers, the managers see the faults in the cloth which are due to the sizers. The length of the faulted cloth is subtracted from the total length of the beam and then based on this length the reward is determined. Similarly the rewards given to the workers of Warping, Drawing departments etc. follows the same rule. On various reports prepared, different faults with respect to different departments are mentioned. Those are taken into . The rewards given to the middle and the top managers depend on the will of the concerned Director.

Bonus Bonus is given annually with respect to percentage of profit. (Percentage is determined by the concerned Director).

Facilities The facilities are provided to all the levels.• The GM of the unit as been given a good reasonable home and a car.• Middle managers have been allotted homes. •Lower Managers are also been provided homes but for four lower managers there is one home. •Moreover the personnel are provided free Electricity and Gas into their home Workers Union concept is different here. Union in at the mills (production units). Unit #1, 2 and 3 has one union. Unit no. 4 and 5 has another union. Union's President and Secretary are elected by the workers. But usually they are the persons whom the owners want to be president or secretary. They take 1% share from the workers' bonus but according to the workers they are of no use to them.


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Attendance For attendance every worker is given an "Attendance Card" and he brings it in the unit in the morning when he comes to work. From that card the attendance is shifted to a for the purpose of making "Daily Attendance Report for a Shift". This report contains information as; No. of workers that should be on work. No. of workers actually on work. No. of workers in trial. No. of workers present. No. of workers absent. No. of workers that have come on time. No. Of workers that have come late.

Leaves The company has a leave system for the benefit of the workers and the managers. In this system there are three kinds of leaves. They are; 1. Sick Leave (SL). They are 8 per year. 2. Casual Leave (CL). They are 10 per year. 3. Annual Leave or Earned Leave. They are 14 per year. If a person is on leave, then his salary is not deducted, but if a person has taken his all leaves and is now absent then his salary would be deducted for that day. According to the government's law; If a person has taken all the 18 (SL & CL) leaves in a year and is now absent, then he cannot take 14 Annual leaves the next year, even he was absent only once apart from his 18 leaves. But the company has extended this benefit to 4 absentees apart from 18 leaves. By working more than 8 hours a worker can take either; 1. Overtime or 2. L (Compensation Pay Leave). When ever a worker works more than 8 hours and does not takes overtime, then his L is noted and against this he can take one leave without marking himself absent. When a worker is newly selected, he cannot take leave for the first three months, but his leaves are deferred in the proceeding months


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Gratuity Gratuity is another benefit which is given to the employees. It is the one month's basic pay which is added to employees' Gratuity after completing his one year in service. For example if the basic pay of an employee is Rs. 1000 per month, then after one year Rs.1000 will be added to employees' Gratuity but it will not be given to him. When the employee will get resignation or he will get retirement then the whole gratuity will be given to him. If the above employee has retired after 25 years then his gratuity after retirement will be 25,000 rupees. There is no contract with the workers or managers for their job. However one has to inform one month before his resignation so that the mills can arrange another worker or the manager. Otherwise in case of no reporting, one month salary of that person is deducted. The Personnel Management of the company is good but it is not like a Multinational company. Especially the salaries of the middle managers are very low and the rewards and fringe benefits are limited


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ORGANIZATION CULTURE

ORGANIZATION CULTURE


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MAHMOOD TEXTILE MILLS LTD The culture of the organization is very hard working where teamwork is appreciated and there is no communication gap between the various levels of the hierarchy. As far as the rules and regulations are concerned, employees are expected to stick closely with them. No negligence on the part of the workers or the managers is tolerated. The organization values a safe, stable, and predictable and rule oriented environment. All the Owners of the mills have a very strong control on the behavior of the personnel. No one is seen sitting idle and having a chat with someone, rather every one is seen working hard and committed to the Quality. The organization encourages the workers and the managers towards commitment to quality. Every department carries boards and charts with beautiful messages like; •HARD WORK IS A KEY TO SUCCESS. •QUALITY IS THE ONLY WEAPON TO WIN CUSTOMERS' •LOYALTY. •COMMITMENT TO QUALITY IS OUR MOST DOMINANT TRAIT •CUSTOMER IS THE ULTIMATE JUDGE Hence whenever some one goes to the mills or at the Head Office, he finds every one working in a much disciplined environment, the environment that is very important for any good and successful organization.


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SWOT ANALYSIS


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SWOT ANALYSIS STRENGTHS:  The company has a vertical integration system  Adopting Farm-to-fabric strategy  Mahmood group consists of seven companies located in different cities of country  Company has many distinction certificates over the entire textile industry of Pakistan by ISO, Supima, Lycra and Oko-tex.  Its annual turnover ratio is US $ 215 million.  Company is playing a significant role in textile exports with 90% export ratio.  MTM has a strong dealer ship network and large sales force to cater to its needs.


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MAHMOOD TEXTILE MILLS LTD  Company is carrying its operations with the help of updated modern technology.  Broad production range.  Excellent environmental and working conditions.  Safety measures of international standard are exercised.  Significant contribution towards the economic and agricultural development of the country.  No deceptive n unethical practices in management.  It is also member of responsible corporate citizenship.  Company has own testing labs to maintain strict quality controls.  MTM enjoy fair dealing with competitive prices  It provides pre and post services to its customers.  Company also made an employee welfare and motivation association.

WEAKNESSES:  Lack of long term planning, decisions are made keeping in view the short term benefits.  Monetary sensitiveness to foreign exchange exposure.  Too much centralization beurucratic control effects timely decision making.  Less mobilization of resources.  There is a lack of t research and development activities.  Company has dearth of trained manpower.  Some little exposure of high-tech technology.  Improper methods of inventory management.


70

MAHMOOD TEXTILE MILLS LTD  Declines sales in economic zones of competitors.  More dependence on loans.  Fewer trends in long or short term investments in other sectors.

OPPORTUNITIES:  Great opportunities for t ventures.  More ease for internationally integration because of the lower tariff barriers and  Removal of quantitative trade restrictions.  Proper placement of warehouses, automated in future.  With the help of government subsidiaries, purchase of raw material in bulk form will cut company’s cost.  Company can hire specialized people with innovative approach will help to Differentiate its products and maintain an edge over competitors.  Opportunity to appear as a multifunctional textile mill because of globalization factor.  Expansion of plants to meet the demand more efficiently.

THREATS:  Crises of gas and water can effect its production.  High production cost can create problems for company.  Threat of entry of new competitors in market.  Low price of market share as compared to competitors’ will effect investments.  No strong brand name can decrease company’s sales level.  Company’s ed office located away from main business cities so it creates hurdles for company to carry its operations efficiently.


71

MAHMOOD TEXTILE MILLS LTD  As company has its own cotton forms, so in case of low input, it can effect its production.


72


PEST ANALYSIS

PEST ANALYSIS OF Mahmood Textiles Political instability The political situation of Pakistan is not stable and after the war on terror it has gone worse especially for the business sector, and due to inconsistent policies of government every new government set different trade policies with make difficult for the businesses to grow and be consistent in their performance.


73


Govt. should apply sustainable policies for the beneficial of the exporters as well as the investors.

Economic situation The economic condition of Pakistan affect the textile industry directly and due to week economic condition textile industry is also not performing well. Increasing inflation rate make the cost of production high and thus reduce the profit margin of the investor.

Social situation The change in the lifestyle of the people affects the demand of MTM product and especially the demand for exports is affected by the changing fashions and style in the importing countries so the company is needed to be contemporary to meet the changing demand of customers.

Technological factor Technological advancement in all the sectors of the country has changed the entire socio-economic environment. Especially in the textile sector there is a lot of technological development, but we still need more development to meet the demand of outside world.


74



75


BCG MATRIX

THE BOSTON CONSULTING GROUP (BCG) MATRIX The BCG Matrix method is the most well-known portfolio management tool. It is based on product life cycle theory. It was developed in the early 70s by the Boston Consulting Group. The BCG Matrix can be used to determine what priorities should be given in the product portfolio of a business unit. To ensure long-term value creation, a company should have a portfolio of products that contains both high-growth products in need of cash inputs and low-growth products that generate a lot of cash. The Boston Consulting Group Matrix has 2 dimensions:


76

MAHMOOD TEXTILE MILLS LTD  Market share Market growth



The basic

idea

behind

it is:

if

a

product has a bigger market share, or if the

product's

market grows faster, it is better for the company.

The four segments of the BCG Matrix Placing products in the BCG matrix provides 4 categories in a portfolio of a company: Stars (high growth, high market share)

• o

Stars are using large amounts of cash. Stars are leaders in the business. Therefore they should also generate large amounts of cash.

o

Stars are frequently roughly in balance on net cash flow. However if needed any attempt should be made to hold your market share in Stars, because the rewards will be Cash Cows if market share is kept.

•

Cash Cows (low growth, high market share)


77

MAHMOOD TEXTILE MILLS LTD o

Profits and cash generation should be high. Because of the low growth, investments which are needed should be low.

o

Cash Cows are often the stars of yesterday and they are the foundation of a company. Dogs (low growth, low market share)

•

• o

o

Avoid and minimize the number of Dogs in a company.

o

Watch out for expensive ‘rescue plans’.

o

Dogs must deliver cash, otherwise they must be liquidated. Question Marks (high growth, low market share)

Question Marks have the worst cash characteristics of all, because they have high cash demands and generate low returns, because of their low market share.

o

If the market share remains unchanged, Question Marks will simply absorb great amounts of cash.

o

Either invests heavily, or sells off, or invests nothing and generates any cash that you can. Increase market share or deliver cas

The BCG Matrix and one size fit all strategies The BCG Matrix method can help to understand a frequently made strategy mistake: having a one size fits all strategy approach, such as a generic growth target (9 percent per year) or a generic return on capital of say 9.5% for an entire corporation. In such a scenario: •

Cash Cows Business Units will reach their profit target easily. Their management have an easy job. The executives are often praised anyhow. Even worse, they are often allowed to reinvest substantial cash amounts in their mature businesses.

•

Dogs Business Units are fighting an impossible battle and, even worse, now and then investments are made. These are hopeless attempts to "turn the business around".

•

As a result all Question Marks and Stars receive only mediocre investment funds. In this way they can never become Cash Cows. These inadequate invested sums of money are a waste of money. Either these SBUs should receive enough


78

MAHMOOD TEXTILE MILLS LTD investment funds to enable them to achieve a real market dominance and become Cash Cows (or Stars), or otherwise companies are advised to disinvest. They can then try to get any possible cash from the Question Marks that were not selected.

Other uses and benefits of the BCG Matrix •

If a company is able to use the experience curve to its advantage, it should be able to manufacture and sell new products at a price that is low enough to get early market share leadership. Once it becomes a star, it is destined to be profitable.

•

BCG model is helpful for managers to evaluate balance in the firm’s current portfolio of Stars, Cash Cows, Question Marks and Dogs.

•

BCG method is applicable to large companies that seek volume and experience effects.

•

The model is simple and easy to understand.

•

It provides a base for management to decide and prepare for future actions.

Limitations of the BCG Matrix Some limitations of the Boston Consulting Group Matrix include: •

It neglects the effects of synergy between business units.

•

High market share is not the only success factor.

•

Market growth is not the only indicator for attractiveness of a market.

•

Sometimes Dogs can earn even more cash as Cash Cows.

•

The problems of getting data on the market share and market growth.

•

There is no clear definition of what constitutes a "market".

•

A high market share does not necessarily lead to profitability all the time.

•

The model uses only two dimensions – market share and growth rate. This may tempt management to emphasize a particular product, or to divest prematurely.

•

A business with a low market share can be profitable too.

•

The model neglects small competitors that have fast growing market shares

BCG Matrix of Mahmood Textiles Mills


79


Mahmood Textiles Mills has strong market position in Pakistan because of their evergreen selling nature throughout the year that’s why it has large market share and its products has till very strong potential to grow and penetrate not only in local markets but also in foreign markets. Therefore according to BCG matrix product lines of Mahmood textiles lies in Cash Cows due to large market share and high potential to grow.

BALANCE SHEET UNIVERSITY OF EDUCATION OKARA CAMPUS [SUMAD PURA ROAD OKARA]

80


MAHMOOD TEXTILE LIMITED Balance Sheet


81

Assets Current Assets Cash and bank balances MAHMOOD Advances, deposits and other receivables Trade debtors (net) Stock-in-trade Raw material Work in process Finished goods Stock-intrade(net) Sales tax refundable Short term investments Stores, spares and loose tools Total current Assets Fixed Assets Operating Fixed Assets Investment Property capital work-inprogress Long term Investment Long term Deposits Total fixed Assets Total Assets

2005 Rs.

2006 Rs.

2007 Rs.

2008 Rs.

172,814,896

16,049,950

9,686,177

7,584,259

2009 Rs 1,486,068,648

TEXTILE MILLS LTD 97,068,120

169,580,242

117,185,853

88,430,076

2,310,941

48,589,001

67,760,129

44,812,703

69,394,339

187,557,975

69,433,646 24,855,609 126,440,912 220,730,167

239,587,504 31,738,172 117,640,324 388,966,000

678,544,478 29,227,518 146,632,574 854,404,570

813,116,252 30,807,354 95,951,990 939,875,596

1,085,638,458 21,007,454 92,354,018 1,198,999,930

45,952,942

9,680,642

55,484,417

169,036,865

138,494,733

53,646,568

65,443,171

97,176,451

696,002,889

1,260,569,339

1,386,908,396

594,686,601 708,267,837

57,739,692 2,942,357,828

701,075,042

738,093,535

1,665,827,350

14,058

14,058

19,626,598

11,370,049

444,708,159

146,806,000

146,806,000

146,806,000

134,804,956

207,547,729

1,644,030

1,833,030

1,180,685

3,771,143

4,347,499

876,344,465

861,098,179

1,330,802,437

1,804,403,449

1,775,523,737

1,471,031,066

1,557,101,06 8

2,591,371,77 6

3,191,311,84 5

6,493,405,302

1,563,628,509

Liabilities Short term liabilities 1,908,804 1,411,284 15,995,363 13,793,090 interest/markup on loans 75,310,394 26,536,600 53,108,029 74,679,405 current portion of long term liabilities 297,885 134,520,221 584,313,022 768,552,579 Short term finances 42,281,203 47,569,156 53,767,978 66,037,846 Creditors 86,325,079 94,848,370 177,473,542 131,461,316 accruals and other payables 1,745,999 2,291,263 3,266,410 1,300,650 Provision for taxation 40,326,746 Dividends 248,196,110 307,176,894 887,924,344 1,055,824,886 Total Current Liabilities Long Term Liabilities 66,341,447 39,804,847 366,446,223 550,618,900 Long term loans and finances 20,164,685 17,741,861 18,638,048 33,043,700 Long term Payables 86,506,132 57,546,708 385,084,271 583,662,600 Total Long term Liabilities Capital and UNIVERSITY OF EDUCATION OKARA CAMPUS [SUMAD PURA ROAD OKARA] 82 Reserves 99,739,890 99,739,890 99,739,890 99,849,890 Issued’ subscribed and paid-up capital

4 9,005,607 136,689,609 1,394,354,879 40,664,725 27,062,791 6,900,809 1,605,672,813

304,349,426 12,879,015

317,228,441

715,520,000


TREND ANALYSIS Assets Current Assets Cash and bank balances Advances, deposits and other receivables Trade debtors (net) Stock-in-trade Raw material Work in process Finished goods Stock-in-trade(net) Stores, spares and loose tools Total current Assets Fixed Assets Operating Fixed Assets Investment Property capital work-in-progress Long term Investment Long term Deposits Total fixed Assets Total Assets Liabilities Short term liabilities interest/markup on loans current portion pf long term liabilities Short term finances Creditors

2005 Rs. 100

2006 Rs. 9.287364904

2007 Rs. 5.604943338

2008 Rs. 4.388660454

2009 Rs 859.92

100 100

174.7023039 139.4556949

120.7253762 92.22808059

91.10104945 142.8190281

2.38 386.01

100 100 100 100

345.0596617 127.6901805 93.03976232 176.2178706

977.2560093 117.589225 115.9692474 387.0810146

1171.069501 123.9452793 75.88682214 425.8029651

1,563.56 84.52 73.04 543.20

100 100

96.68763033 117.0369213

117.9487405 211.9720432

175.1418799 233.2166882

104.06 494.77

100

98.98445269

104.2110762

235.1973735

-

100 100 100 100 100

57.93183821 100 111.4961406 98.26024051 105.8509983

2265.844335 100 71.81651186 151.8583719 176.1602345

0 91.82523603 229.3840745 205.9011634 216.9438783

141.38 264.44 202.61 441.42

100

73.93551145

837.9782838

722.6037875

100 100 100

35.23630483 45158.44067 112.5066285

70.51885693 196153.8923 127.167569

99.16214885 258003.115 156.1872447

181.50 468,084.96 96.18

accruals and other payables Provision for taxation Dividends Total Current Liabilities Long Term Liabilities Long term loans and finances Long term Payables

100 100 100 100

109.8734818 131.2293421 0 123.7637826

205.5874655 187.0797177 0 357.7511122

152.2863547 74.49316981 0 425.3994497

31.35 395.24 646.94

100 100

59.99996804 87.98481603

552.3639287 92.42915523

829.9772237 163.8691604

458.76 63.87

Total Long term Liabilities Capital and Reserves Issued’ subscribed and paidup capital capital reserve Inappropriate Profit

100

66.52327028

445.1525714

674.7066208

366.71

100

100

100

100.1102869

717.39

100

105.4070269

117.5608991

139.3854229

25.46 86

Total capital and reserves Total Liabilities and owner's equity

100

104.9324316

116.0195124

136.5647272

.20

100

105.8509983

176.1602345

216.9438783

.30

197


83


VERTICAL ANALYSIS OF BALANCE SHEET


84

MAHMOOD TEXTILE MILLS LTD Assets Current Assets Cash and bank balances Advances, deposits and other receivables Trade debtors (net) Stock-in-trade Raw material Work in process Finished goods Stock-in-trade(net) Sales tax refundable Short term investments Stores, spares and loose tools

2005

2006

2007

2008

2009

11.74787535 6.598645144

1.030758396 10.89076653

0.373785695 4.52215518

0.237653334 2.770963174

22.88581382 0.035589046

3.303057435

4.351684704

1.729304279

2.174476904

4.720066599 1.68967261 8.595393729 15.00513294 0 0 3.771804572

15.3867664 2.038285931 7.555085949 24.98013828 0 0 3.445284902

26.18475991 1.127878225 5.658492361 32.9711305 0 6.523064987 2.525425784

25.47905976 0.965350787 3.006662923 29.45107347 1.439938941 4.339743019 3.045031502

16.72 1.42 1.422274041 18.46488667 0.14908421 0 0.889205114

Total current Assets Fixed Assets Operating Fixed Assets Investment Property capital work-in-progress Long term Investment Long term Deposits Total fixed Assets Total Assets Liabilities Short term liabilities interest/markup on loans current portion pf long term liabilities Short term finances creditors accruals and other payables

40.42651544 0 48.14771444 0 1.334206901 9.979802833 0.111760386 3129801661 100 0 0 0.129759598 5.119565164

44.69863282 0 45.02437616 0.000902832 0.73020623 9.428161281 0.117720682 3075350639 100 0 0 0.09063535 1.704231058

48.64486642 0 28.4827342 0.000542493 17.16110992 5.665184801 0.045562162 4752865846 100 0 0 0.617254658 2.04941759

43.45888034 0 52.19882703 0 0 4.224123575 0.118169053 6444298032 100 0 0 0.432207527 2.34008485

45.31301669 0 0 24.08025429 0 3.196284836 0.066952528 6341156204 100 0 0 0 2.105052783

0.020250082 2.874256294

8.639145125 3.054981913 6.091343199

22.54840573 2.074884758 6.848632977

24.08265366 2.06930094 4.119350361

21.47339977 0.626246524 5.868338269

Provision for taxation Dividends Total Current Liabilities Long Term Liabilities Long term loans and finances

0.118692191 2.741393226 16.87225482

0.147149279 0 19.72748592

0.126049455 0 34.26464517

0.040755967 0 33.08435331

0.106274115 0 24.72774666

4.509860365

2.556343183

14.14101313

17.25368522

4.687054201

Long term Payables Total Long term Liabilities

1.370785802 5.880646167

1.139416147 3.69575933

0.719234815 14.86024794

1.035426859 18.28911208

0.198339922 4.885394123

6.780270812

6.405485941

3.848922448

3.128803917

11.01917972

0 70.4668282 77.24709901

0 70.17126881 76.57675475

0 47.02618444

0.223124544 45.27460615 48.62653462

0 4.064814203 15.08399392

100

100

100

100

100

Capital and Reserves Issued’ subscribed and paid-up capital capital reserve Inappropriate Profit Total capital and reserves

Total Liabilities and owner's equity


85



86


INCOME STATEMENT

MAHMOOD TEXTILE LIMITED INCOME STATEMENT


87


2005 Rs. 3,172,585,332

2006 Rs. 3,909,712,718

2007 Rs. 2,878,130,066

2008 Rs. 3,839,168,820

2,213,630,692 133,297,738 436,781,177 2,783,709,607 (4,450,373) (2,720,508) 2,776,538,726

3,173,235,325 132,789,205 351,691,836 3,657,716,366 (6,882,563) 1,735,461 3,652,569,264

2,111,626,689 121,751,406 270,811,260 2,504,189,355 4,936,003 (21,397,559) 2,487,727,799

2,730,669,961 193,020,389 466,581,883 3,390,272,233 (1,579,836) 46,424,394 3,435,116,791

1 ,036,163,837 131,332,709

396,046,606

257,143,454

390,402,267

404,052,029

257,905,297

expenses Selling expenses other operating expenses

29,651,107 89,978,928

32,247,865 95,151,804 5,879,609

28,621,516 88,692,539 36,433,230

46,198,337 73,696,732 22,201,896

20,909,963 63,697,327 497,111

total operating expenses

119,630,035

133,279,278

153,747,285

142,096,965

135,072,569

Operating Profit Add Other incomes Export rebate on packing material

276,416,571

123,864,176

236,654,982

261,955,064

122,832,728

3,424,297

1,657,745

697,730

4,321

5,437

Exchange fluctuation gainnet Income on bank deposits

1,324,990

59,957

153,432

20,419

135,759

1,255,303

438,693

75,546

123,921

321,834

3,407,400 9,411,990

6,169,977 8,326,372

7,078,700 280,967 8,286,375

4,121,025 38,699,414 42,969,100

4,704,749

Sales (Net) Cost of goods sold Material Labor Foh total factory cost Work in process Finished Goods Cost of goods sold Gross profit Less Operating Expenses

dividend income others total other incomes Less Other Expenses Profit before Interest and taxes Less Interest Expense

14,079,92 8 271,748,63 3

Less provision for taxation

8

Profit available for appropriation

116,065,43

50,075,47

8

229,479,65 42,349,30 6

97,769,63 4

28,683,08 192,990,07

36,209,67

5,167,779

17,623,607 110,376,90

19,349,547

67,553,74

150,920,67

91,027,35 3

4

0

21,007,454 92,354,018 1 ,450,247,795

177,681,66 6

5 56,048,64

2

106,915,86

187,130,34

41,720,99 2

432,691,811 564,024,520

0

8

5

1,708,153,092

284,597,53 4

18,295,80

221,673,15

20,326,63 0

1

0

0

15,461,70 6

4

5

profit before taxation

Profit after taxation Add inappropriate profit

16,125,11 4

2009

15,549,420

110,127,92 2

75,477,93 3

883,494,82 0 1,076,484,89 0

Less Appropriation

39,895,95 6

Inappropriate 1,036,588,93 OKARA CAMPUS [SUMAD PURA ROAD OKARA] UNIVERSITY OF EDUCATION profit (carried to 4 B/S)

-

EPS

9.56

19.35

5.62

15.13

11.03

88


TREND ANALYSIS INCOME STATEMENT

Sales (Net) Cost of goods sold Material Labour

200 5

2006

2007

2008

2009

Rs. 100

Rs. 3909712718

Rs. 2878130066

Rs. 3839168820

Rs. 1,708,153,092

100 100

3173235325 132789205

2111626689 121751406

2730669961 193020389

1 ,036,163,837 131,332,709


89

MAHMOOD TEXTILE MILLS LTD Foh total factory cost Work in process Finished Goods Cost of goods sold

100 100 100 100 100

351691836 3657716366 -6882563 1735461 3652569264

270811260 2504189355 4936003 -21397559 2487727799

466581883 3390272233 -1579836 46424394 3435116791

21,007,454 92,354,018 1 ,450,247,795

Gross profit

100

257143454

390402267

404052029

257,905,297

100 100 100

32247865 95151804 5879609

28621516 88692539 36433230

46198337 98500306 22201896

20,909,963 63,697,327 497,111

100

133279278

153747285

166900539

135,072,569

100 100

123864176

236654982

237151490

122832728

Export rebate on packing material Exchange fluctuation gain-net Income on bank deposits dividend income others total other incomes

100

1657745

697730

4321

5,437

100

59957

153432

20419

135,759

100

438693

75546

123921

321,834

100 100 100

6169977 8326372

7078700 280967 8286375

4121025 38699414 42969100

4,704,749

Less Other Expenses Profit before Taxation Less provision for taxation Profit after taxation

100

34420914

57811012

102438924

17,623,607

100

97769634

187130345

177681666

110376900

100

41720992

36209675

67553744

15,549,420

100

56048642

150920670

110127922

263,944,861

100

5.62

15.13

11.03

9.56

Less Operating Expenses expenses Selling expenses other operating expenses total operating expenses Operating Profit Add Other incomes

432,691,811 564,024,520

5,167,779

Add unappropriated profit Profit available for appropriation Less Appropriation Unappropriated profit (carried to B/S) EPS


90



91


RATIO ANALYSIS


92


Liquidity Ratios:

1. Net Working Capital Ratio: Formula: Current Assets - Current Liabilities Years

2005

2006

2007

2008

2009

Ratio

346,490,491

388825995

372644995

331083510

1336685015

"Working Capital" 1,600,000,000

1336685015

1,400,000,000 1,200,000,000 1,000,000,000 800,000,000 600,000,000 400,000,000

346,490,491 388825995 372644995 331083510

200,000,000 0 2005

2006

2007

2008

2009

INTERPRETATION: The working Capital is showing decreasing trend for the last two years because of rapid increase in payable and also due to short-term borrowings, hence decreasing its profitability. In year 2009 there is high increase in liabilities as compare to the current assets. Working capital is decreased in 2009 as compare to previous years


93


2. Current Ratio: Formula: Current Assets / Current Liabilities

Years

2005

2006

2007

2008

2009

Ratio

2.39

2.26

1.42

1.31

1.83

Current Ratio 3 2.5

2.39

2.26 1.83

2 1.42

1.5

1.31

1 0.5 0 2005

2006

2007

2008

2009

Interpretation: Current Ratio of the company has a decreasing trend. It was quite good in 2005 but then current liabilities of the company increased in the proceeding years so it went down. Over all although the current ratio is decreasing yet it is showing the good ability of firm to pay its current liabilities from current assets.


94


3. Quick (Acid-test) Ratio: Formula: Current Assets + marketable securities + A/R / Current Liabilities Years

2005

2006

2007

2008

2009

Ratio

0.89

0.27

0.06

0.07

0.05

Quick/Acid test ratio 1 0.9 0.8

0.89

0.7 0.6 0.5 0.4 0.3

0.27

0.2 0.1 0 2005

2006

0.06

0.07

0.05

2007

2008

2009

INTERPRETATION: Quick ratio of the company has a decreasing trend. In 2006 there is a significant decrease in the quick ratio which shows company has a very large portion of least liquid asset (inventory) in its current assets. It shows that the most liquid assets of the company are not in a position to payoff the current liabilities.


95


4. Cash Ratio: Formula: Cash+ Cash equivalent+ marketable securities / Current Assets Years

2005

2006

2007

2008

2009

Ratio

0.7

0.052

0.01

0.007

0.08

Cash Ratio 0.8

0.7

0.7 0.6 0.5 0.4 0.3 0.2 0.052

0.1

0.08 0.01

0.007

2007

2008

0 2005

2006

2009

INTERPRETATION: Cash ratio is showing a decreasing trend. A significant decrease can be seen in 2006. After this there is a continuous decrease which shows firm is using cash up to its best and maximum advantage.


96


4. s Receivable Turnover Ratio:

Formula:

Net Sales / Average Gross Receivables

Years

2005

2006

2007

2008

2009

Ratio

62.59

64.86

49.29

64.83

64.98

A/R Turn Over 70

62.59

64.86

60

64.83

64.98

2008

2009

49.29

50 40 30 20 10 0 2005

2006

2007

INTERPRETATION: A consistent trend in receivable ratio can be seen. As this ratio tells that hoe many times the credit sales are being converted into cash. So, the company is showing a very good trend which shows the good management of the company.


97


6. s Receivable Turnover in Days: Formula :( Average Gross Receivables / Net Sales) x365 Years

2005

2006

2007

2008

2009

Ratio

5.83

6.52

5.94

6.8

8.9

"Day's sales in A/R" 10 9 8 7 6 5 4 3 2 1 0

8.9

5.83

2005

6.52

2006

6.8 5.94

2007

2008

2009

INTERPRETATION: A mix trend can be seen. It is 5.83 days in 2005. Then in 2006 it is increased and became 6.52 days. Then it is again decreased and it became 6.8 days in 2008. The company’s overall collection period is good as there is a slight difference in figures.


98


7. Inventory Turnover Ratio:

Formula: Cost of Goods Sold / Average Inventory Years

2005 2006

2007

2008

2009

Ratio

12.58

2.91

3.65

2.89

9.39

Inventory Turnover Ratio 14

12.58

12 9.39

10 8 6

2.91

4

3.65

2.89

2 0 2005

2006

2007

2008

2009

INTERPRETATION: Inventory turnover ratio is showing random trend. This ratio has decreased in 2006. There is a significant decrease in 2007. Then in 2008 a slight increase can be seen. The reason behind this low turnover is the high fluctuation in cost of sales. The cost of sales showed a massive fluctuation because of intensive change in total factory cost.


99


8. Inventory Turnover in days:

Formula: (Average Inventory / Cost of Goods Sold) x365 Years

2005 2006

2007

2008

2009

Ratio

29.01

125.36

99.86

89.67

38.86

Day’s sales in inventory 140

125.36

120

99.86

100

89.67

80 60 40

29.01

38.86

20 0 2005

2006

2007

2008

2009

INTERPRETATION: A continuous increase can be seen. It is 29.01days in 2005. Then it is increased to 38.86 days in 2006. A significant increase can be seen in 2007 i.e. 125.36 days. Then there is a slight decrease in 2008 and it became 99.86 days. This shows the firms poor management to convert its inventory into sales.


100


Long Term Debt Paying Ability: 1. Time Interest Earned Ratio: Formula: Earning Before Interest and Tax / Fixed Finance charges Years

2005 2006

2007

2008

2009

Ratio

5.43

5.42

2.66

3.66

6.34

Time Interest Earned Ratio 7 6

6.34 5.43

5.42

5 3.66

4 2.66

3 2 1 0 2005

2006

2007

2008

2009

INTERPRETATION: The times interest earned ratio of the company was good in 2005 and in 2006. After 2006 a decreasing trend is shown in the ratio up to 2008. It is because of the increase in the interest expenses of the company. But in 2006, instead of massive decrease, company is still able to generate 2 times the expense of interest from its operations. In 2009 it’s again increasing.


101


2. Debt Ratio: Formula: Total Debts / Total Assets

Years

2005

2006

2007

2008

2009

Ratio

22.75%

23.42%

49.12%

51.37%

52.37%

Debt Ratio 60.00% 49.12%

50.00%

51.37%

52.37%

2008

2009

40.00% 30.00%

22.75%

23.42%

2005

2006

20.00% 10.00% 0.00% 2007

INTERPRETATION: Debt ratio of the company is increasing in all the years. It reached its highest of 52.37% in 2009. In 2006 there is a slight increase but in 2007 a significant increase can be seen. It is all because of a massive increase in the liabilities of the company.


102


3. Debt Equity Ratio: Formula: Total Debts / (L.T.Liabilities + Equity) Years

2005 2006

2007

2008

2009

Ratio

335%

1276%

1642%

1376%

365%

Debt to Equity Ratio 1800%

1642%

1600%

1376%

1276%

1400% 1200% 1000% 800% 600% 400%

335%

365%

2005

2006

200% 0% 2007

2008

2009

INTERPRETATION: The ratio indicates the proportionate claims of owners and the outsiders against the firm’s assets. This ratio shows that company is continuously increasing the debt portion in the business. This shows that the business is risky to make investments in such business.


103


Profitability Ratios: 1. Gross Profit Margin: Formula :( Gross Profit / Net Sales) x100 Years

2005

2006

2007

2008

2009

Ratio

12.48%

6.58%

13.56%

10.52%

9.54%

Gross Profit Margin 16.00% 14.00%

13.56%

12.48%

12.00%

10.52%

10.00%

9.54%

6.58%

8.00% 6.00% 4.00% 2.00% 0.00% 2005

2006

2007

2008

2009

INTERPRETATION: An Irregular trend of gross profit can be seen. In 2006 it is decreased to 6.50%. In 2007 it is increased to 13.56%. This increase is due to decrease in sales and in cost of goods sold. In 2008 it is again decreased. The reason behind this fluctuation is the change in cost of goods sold and in sales.


104


2. Operating Income Margin: Formula :( Operating Profit / Net Sales) x100 Years

2005

2006

2007

2008

2009

Ratio

8.71%

3.17%

8.22%

6.82%

5.17%

Operating Income Margin 10.00% 9.00% 8.00% 7.00% 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00%

8.71%

8.22% 6.82% 5.17% 3.17%

2005

2006

2007

2008

2009

INTERPRETATION: An irregular trend can be seen. In 2005 the operating profit is 8.71%. It is decreased significantly in 2006 to 3.71%. The reason behind this decrease is the increase in operating expenses of the company. In 2007 a great increase of 8.22% can be seen. Although the operating expenses are increasing but low cost of goods sold ed this increase. And in 2008 there is a slight decrease of 6.82%. and in 2009 its again decreasing from previous year. The reason behind this decrease is the increased cost of goods sold.

.


105


Net Profit Margin: Formula :( Net Profit / Net Sales) x100 Years

2005

2006

2007

2008

2009

Ratio

32.67%

1.43%

5.43%

2.87%

3.98%

Net Profit Margin 35.00%

32.67%

30.00% 25.00% 20.00% 15.00% 10.00%

5.43%

5.00%

1.43%

2.87%

3.98%

2008

2009

0.00% 2005

2006

2007

INTERPRETATION: A great Variation can be seen in net profit ratio. It is 32.67% in 2005. A significant decrease can be seen in 2006. Then there is a slight increase of 5.43%. Then it is again reduced to 2.87%. The reason is the great fluctuation in interest and tax expenses of the company. Another reason of this fluctuation can be that after 2003 there is no inappropriate profit.


106


4. Total Assets Turnover Ratio: Formula: Net Sales / Average Total Assets Years

2005

2006

2007

2008

2009

Ratio

2.16

2.51

1.11

1.2

1.3

Total Assets Turnover 3 2.5

2.51 2.16

2 1.5

1.11

1.2

1.3

2007

2008

2009

1 0.5 0 2005

2006

INTERPRETATION: An irregular trend can be seen. A good increase in turnover can be seen in 2006 which shows that the assets are being effectively used to generate sales. The reason of decrease in turnover in 2007 is that the assets have been increased but company is unable to increase its sales volume. In 2008 and 2009 there is a little bit improvement in turnover.


107


5. Fixed Assets Turnover Ratio: Formula: Net Sales / Fixed Assets Years

2005

2006

2007

2008

2009

Ratio

4.48

5.58

3.9

2.31

0.96

"Operating Assets Turnover" 6 5

5.58 4.48 3.9

4 3

2.31

2 0.96

1 0 2005

2006

2007

2008

2009

INTERPRETATION: The ratio has shown an increasing trend in 2006 but then it again started to decrease and it reached to 3.9 in 2007 and then in 2008 and 2009 there is again decrease but its not significant decrease. It is all because of the greater increase in fixed assets as compared to the sales of the company. This all shows that company is making productive use of its fixed assets by generating good volume of sales.


108


6. Return on Assets: Formula: Net Income / Average Total Assets *100 Years

2005

2006

2007

2008

2009

Ratio

70.50%

3.60%

5.80%

3.40%

3.97%

"Return on Assets" 80.00%

70.50%

70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00%

3.60%

5.80%

3.40%

3.97%

2006

2007

2008

2009

0.00% 2005

Interpretation: A random trend can be seen in this ratio. There is significant decrease in return in 2006 of 3.60%. In 2007 a slight increase can be seen. And in 2008 there is again decrease in return and it is 3.40% and in 2009 it is slightly increased. This fluctuation is due to the continuous increase in assets and an irregular change in income.


109


Investors Analysis: 1. Degree of Financial Leverage: % change in net income / % change in EBIT Years

2005 2006

2007

2008

2009

Ratio

3.81

0.658

0.387

0.376

0.483

"Degree of Financial Leverage" 4.5 4

3.81

3.5 3 2.5 2 1.5 1

0.483

0.5 0 2005

2006

0.658

2007

0.387

0.376

2008

2009

INTERPRETATION: The degree of financial in the year 2005 is 3.81 which indicate that as EBIT changes Net income will change y 3.81 times that amount. If EBIT increases the financial leverage ill be favorable and if EBIT decreases the financial leverage will be unfavorable. But in 2006 financial leverage decreased to 0.483 which shows that company is earning less on the borrowed funds than it pays to use them. A conservative investor would look for favorable financial leverage. In next years the degree of financial leverage has slight changes that are in 2007 it has slightly increased to 0.658 the in 2008 and 2009 again decreased to 0.387 and 0.376.


110


2. Earning per Common Share: Formula: Net income –Preferred Dividend / Wt. average no. of c/s, o/s Years

2005 2006

Ratio

103.93

5.62

2007

2008

2009

15.13

11.03

9.56

"Earnings Per Common Share" 120

103.93

100 80 60 40 15.13

20

5.62

11.03

9.56

2008

2009

0 2005

2006

2007

INTERPRETATION: A mix trend is there. In 2006 the E.P.S. has decreased. The reason is a huge reduction in net income. As the no. of shares is almost same over the years, the increase in E.P.S. is due to increase in net income. The income in 2008 is slightly decreased and there is small increase in number of shares that’s why E.P.S. has decreased.


111


3. Percentage of Retained Earnings: Formula: Net Income – All Dividends / Net Income * 100

Years

2005 2006

2007

2008

2009

Ratio

96%

100%

100%

100%

100%

"Percentage of Retained Earnings" 101% 100%

100%

100%

100%

100%

2006

2007

2008

2009

99% 98% 97% 96%

96%

95% 94% 2005

INTERPRETATION: The percentage of retained earnings is almost same in all the years. It is 96% in 2005 because the company has declared the dividend to its share holders. No dividend has been declared in rest of the years. That’s why a consistent trend can be seen.


112


4. Book Value per Share: Formula: Total share’s holder equity – p.s. equity / No. of c/c, o/s

Years

2005

2006

2007

2008

2009

Ratio

10

10

10

10

10

"Book Value Per Share" 12 10

10

10

10

10

10

2005

2006

2007

2008

2009

8 6 4 2 0

INTERPRETATION: There is no change in the company’s book value per share.


113


5. Price / Earning Ratio Market price per share Diluted EPS Years

2005 2006

2007

2008

2009

Ratio

3.1

6.48

10.9

9.89

13.34

"Price/Earning Ratio" 16 13.34

14 12

10.9

10 8

9.89

6.48

6 4

3.1

2 0 2005

2006

2007

2008

2009

INTERPRETATION: In the year 2005 the price earning ratio is 3.1. In 2006it has jumped up to 13.4. This increasing trend is favorable for these investors who are interested in capital gain. But in 2007 there is again decrease of 6.48 which is favorable for those investors who are interested in dividends. In the year 2008 it has again increased to 10.9 and in 2009 it decreased to 9.89.


114


RECOMMENDATIONS

RECOMMENDATIONS


115

MAHMOOD TEXTILE MILLS LTD Followings are the suggestions that we recommend to company:  The Company should utilize its resources properly.  The company must consider the long term benefits and should do long term planning for that.  The company should involve the low level management in decision making.  They should hire highly qualified and well trained people.  Training opportunity should be provided to the employees.  Modern methods of production must be used by the company to compete the others.  Inventory should be managed properly.  The company should be self sufficient in gas and water storage.  The company should cut its cost of production.  The company should not only depend on its own input resources rather it should make s with outside suppliers to meet any contingency.


116


CONCLUSION

CONCLUSION From this report I conclude that company is vertically based on integrated industries and started business in 1935, by setting up a tanning unit. Since then, the group has grown immensely in the fields of cotton ginning, spinning and weaving. Cotton is regarded as an


117

MAHMOOD TEXTILE MILLS LTD important crop of Pakistan. The Company is engaged in cotton ginning for the last 50 years and is running a number of ginning factories located in various parts of the country where best quality cotton is produced. Instead of all this, if we see the profitability of the company it is not satisfactory. A huge amount is being paid by the company in the form of interest; also the company is depending more on debts to run the business that’s why we can say the company position is very risky. The company is not using its debts in a proper manner to make any expansion in the business that’s why the investors are hesitant to invest in such a risky business. The company is not using its all assets efficiently that’s why they are not generating proper return. the company’s operating outflows are much more than their cash inflows. In short, the overall financial position of the company is not satisfactory.


118

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