ECONOMIC PLAN

GUL AHMED TEXTILE MILLS

Falak Zehra
 ECONOMIC PLAN

Table of Contents
INTRODUCTION.................................................................................................................................................. 2
GARMENT INDUSTRY OF PAKISTAN................................................................................................................... 2
PAKISTAN READYMADE GARMENTS MANUFACTURERS AND EXPORTERS ASSOCIATION...................................3
BUSINESS ENVIRONMENT.................................................................................................................................. 3
EXTERNAL FACTORS....................................................................................................................................... 3
A. TAXATION POLICIES........................................................................................................................... 3
B. ECONOMIC POLICIES.......................................................................................................................... 4
INTERNAL FACTORS........................................................................................................................................ 4
A. COMPANY LOCATION........................................................................................................................ 4
B. EMPLOYEES....................................................................................................................................... 4
SWOT ANALYSIS................................................................................................................................................. 5
STRENGTHS................................................................................................................................................ 5
WEAKNESSES.............................................................................................................................................. 5
OPPORTUNITIES......................................................................................................................................... 5
THREAT...................................................................................................................................................... 5
PORTER FIVE FORCES MODEL............................................................................................................................. 6
LOW........................................................................................................................................................... 6
MEDIUM.................................................................................................................................................... 6
HIGH........................................................................................................................................................... 6
EXPORT CONTRIBUTION OF READYMADE GARMENTS....................................................................................... 6
MARKET SHARE.................................................................................................................................................. 6
PERFORMANCE OVERVIEW................................................................................................................................ 6
OPERATIONAL AND FINANCIAL PERFORMANCE REVIEW...............................................................................7
FINANCIAL POSITION ANALYSIS...................................................................................................................... 7
5-YEAR STRATEGY.............................................................................................................................................. 7
REFERENCES....................................................................................................................................................... 8

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GUL AHMED TEXTILE MILLS

Introduction
The group began trading in textiles in the early 1900s. The group entered in the field of manufacturing with
the establishment of today’s iconic name of Gul Ahmed Textile Mills Limited (the Company) in the year 1953.
The Company was incorporated on April 1, 1953 in Pakistan as a private company with its liability limited by
shares. The Company was converted into a public limited company on January 07, 1955 and got listed on the
Karachi Stock Exchange (KSE). The Company is listed on Pakistan Stock Exchange Limited.

Gul Ahmed Textile Mills Limited is a subsidiary of Gul Ahmed Holdings (Private) Limited (GAHPL), which owns
67.10% shares. Gul Ahmed is playing a vital role not only as a textile giant, but has its strong presence in the
retail business as well. The opening of its flagship store – Ideas by Gul Ahmed– marked the group’s entry into
the retail business. Starting from Karachi, Gul Ahmed now has an extensive chain of more than 100 retail
stores across the country, offering a diverse range of products from home accessories to fashion clothing.
More than 60 years since its inception, the name Gul Ahmed is still globally synonymous with quality,
innovation & reliability.

Garment Industry of Pakistan

The Textiles and Garments is the largest industry of Pakistan with 46% total share in Pakistan's
manufacturing. It accounts for 67% exports, employment for 40% of the workforce and a 10.20% in GDP.
Pakistan textile industry is based on locally grown cotton, produces cotton yarn, cotton cloth, and made-up
textiles and apparel.

Pakistan is the fourth largest cotton producer in the world but still the value-added sector has a small number
of shares in exports because our industry's focus is towards producing large volumes rather than high quality.
Poor infrastructure, shortage of training facilities to enhance skills, outdated technology, old machinery and
etc. are also the reasons accounting for a low value-added sector. Garment manufacturing is one of the sub
sectors of textile value chain which is also suffering from acute problems in productivity, quality, machinery,
infrastructure, management and marketing skills. This has resulted in a reduced share of international
markets.

According to the World Bank's report on the impact of Quota Elimination in Pakistan, the effect on apparel
exports from Pakistan will be negative due to stronger competition from other countries. The implication
would be serious if no action is taken to improve productivity and efficiency.

In the garments sector, Pakistan's productivity is estimated to be only 37% of the benchmark established by
China. Compared to this, India's garments sector productivity is better, at 46%. For Pakistan, raising
productivity by improving production process efficiency is key to reap benefits after the Multi-Fiber
Agreement was abolished. If Pakistan is able to increase its productivity in textiles and clothing by 60% and
reach China's productivity level, the gain would likely be over US$ 1 billion per year.

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Although there is a huge potential for Pakistan's garment sector because people are creative and hard
working. It is imperative to have efficient and cost-effective production systems with minimum wastages to
attract buyers. There is an urgent need of reforms in the textile industry especially in garment manufacturing
and exporting because this is the most value-added sector. The major garment industries are located in
Karachi, Lahore, Multan, Sialkot and Faisalabad. The infrastructure of these industries is not able to fulfill the
requirement for skilled human resources to meet the immediate demand. In order to achieve the target of
ever-increasing demand in international markets, it has been proposed to hire foreign experts on long term
basis to upgrade the knowledge and skills of the workers employed in the garment industry.

For years, the textile sector has been the country’s backbone as it provides employment and export
revenues. However, this sector is losing its competitiveness at the international level due to a number of
challenges at global and domestic levels.

Pakistan Readymade Garments

Manufacturers and Exporters Association
PRGMEA is the premier trade organization representing the Readymade Garment Industry in Pakistan. It was
established in 1981 to provide advice and services to manufacturers and exporters and to promote a better
environment for trade. As a trade organization, it is recognized by the Government of Pakistan and affiliated
with the Federation of Pakistan Chamber of Commerce & Industry, and with the Employers' Federation of
Pakistan.

Although PRGMEA has taken steps to set up `Pakistan Apparels Export Council’ to facilitate business
community of the country. Also, it is making efforts for enhancing exports of garment sector up to US $8
billion by 2020 with the cooperation of the business community. Necessary arrangements are being finalized
for setting up state of Pakistan Readymade Technical Training Institute costing over Rs 175 million in Sialkot.
Suitable site for the proposed training institute had been selected and development work on the project will
soon be undertaken. The basic concept of setting up the training institute is to produce trained workforce in
the field of stitching, pattern designing, quality control, inspection, marketing and sewing machine
mechanics.

Business Environment
External factors
a.Taxation Policies
Federal income taxes are administered by the Federal Board of Reserve (FBR) in Pakistan.

Period from July 1st to June 30th is considered as a normal tax year for Pakistan tax law

purposes. Currently, the Corporate Income tax rate is 29% for tax year 2019 and onwards

whereas corporate tax rate is 35% for Banking Industry for TY 2019 The PM’s finance adviser said textile
makers who export will remain under a zero-rating regime, but those who sell locally will be taxed even if

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they are exporters. Under a zero-rating regime, exporters are exempt from taxes. The tax relaxation is only
for exports, not local sales as it is unfair to those who sell their products only in the local market

b.Economic Policies
According to the economic survey of Pakistan, exports of the clothing sector showed a negative growth rate
because the potential for exports had declined. Also due to unavailability of latest fabric locally, the garment
sector currently has a limited product line for the export market. More than 30 percent cash flow was
blocked since long in the shape of sales tax refund and Customs rebate, which is adversely damaging cash
liquidity. Our value-added products are unable to fetch high value due to poor packaging and, under these
circumstances, there is a need to set up a product and packaging center for ensuring better packaging.

Technological improvement is another aspect where Pakistan lags behind. Not enough investment has been
made in technology because of which the productive capacity of the sector remains stagnant. Research and
development are weak due to high cost of utility and allied factors.

Investors are also not willing to invest due to the high cost of doing business as there are abundance of taxes
and regulatory procedures. On the other hand, countries like China, India and Bangladesh are providing
extensive investment incentives to enhance investment and production activities. But for Pakistan, the
decline in investment further results in unemployment and production losses.

At present, there are 125 exporters of martial art apparel in Sialkot and the city is earning $400 million.
Although efforts are underway to boost exports up to $1 billion by 2020.

There are around 5,000 production units for garments.16 Trade Pakistan’s Textile Directory provides contact
data to exporters of clothing and textiles from Pakistan,

Internal Factors
a.Company Location
Geographical locations and addresses of all lands owned by the Company are as follow:

b.Employees
1. The Company has maintained a suitable working environment that provides appropriate training,
transparent career growth opportunities and competitive remuneration packages including benefits
which are also in compliance with the employment related laws and regulations of Pakistan as well
as other relevant countries.

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2. It is ensured that all the values and standards required by our business practices are communicated
to each employee.
3. Provide a clean, healthy and safe work environment, stressing the obligation on all employees to
take every reasonable precaution to avoid injury to themselves, colleagues and members of the
public.
4. Provide appropriate facilities to fulfill the needs of special employees.
5. The Company follows the laws that prohibit discrimination in employment practices. It is Company’s
policy to provide equal employment opportunities and to treat applicants and employees without
bias. It is our policy that no one is ever subject to discrimination on the basis of race, religion, color,
national origin, Age, sex, disability, personal/Political preference.

SWOT Analysis
Strengths
1. Abundant availability of raw material as Pakistan is the world's 4th largest producer of cotton.
2. Availability of cheap labour.
3. Due to cultural diversity and rich heritage, designers come up with new different and attractive
designs which are appreciated worldwide.
4. Increase in domestic demand due to shift of the population from the agrarian society to the urban
areas, increased income levels and growth of population.

Weaknesses
1. No efforts are being made by the APTMA in the R&D to enhance the quality of its products, upgrade
the technology used, and encourage effective methods of production in order to compete
internationally.
2. Despite of the abundant supply of the labor, productivity of the labor is very low.
3. It is facing rising charges of the energy sector, which increases the cost of production.
4. Most of the medium and small sized units cannot ensure the reliable and consistent quality
standards.

Opportunities
1. Its products have large demand both at home and abroad.
2. If provided world class infrastructure, then it would be able to meet the global competitiveness and
challenges.
3. It is heavily tilted towards China. However, other markets like Africa and Russia can be explored,
which will not only broaden the export market but facilitate the enhancement of Pakistan’s exports
to suit the customer.
4. By making partners with the foreign companies, we will be able to learn a lot from them in terms
system orientation, supply chain and it would be feasible to import latest technology.

Threat
1. New competitors have emerged such as Bangladesh, Vietnam and Turkey.
2. As the quota system is ruled out by WTO, there is a threat by the Chinese and Indian manufacturers
to gain most of the market share.

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3. Lifecycle of fashion have become shorter due to which the buyer does not want to wait long for his
consignment because he is insecure that by the time it will reach to him, he will lose its demand due
to change in fashion. Therefore, they prefer to buy from neighboring countries even at higher cost to
get their products instantly rather than to wait weeks or months for their consignments to reach
them.

Porter Five Forces Model

LOW MEDIUM HIGH
Entry and Exit barrier

Level of competition

Bargaining power of buyers

Bargaining power of suppliers

Threat of substitute


Export Contribution of Readymade

Garments
Source: Ministry of Finance (2016-2017)
July-March 2016-17 July-March 2015-16 % Change
Quantity (M.Doz) 24.823 23.704 4.72
Value (M.US$) 1704.064 1608.717 5.93

Market Share
The Company is among the country’s largest composite textile mills and a leading exporter of value-added
textile products. The Company has contributed approximately 10% in the bed wear exports of the country.

Performance Overview
Key performance indicators (KPI’s) which we monitor include:

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Operational and Financial Performance

Review
Your Company was blessed with the required volume of export orders as well as extended demand in local
and retail sector which helped in full utilization of operational capacities and absorption of fixed production
overheads. During FY 2017-18, the management focused on profitable avenues, maximizing efficiency in
production activities and cost rationalization through various measures. These endeavors as well as BMR
investments made in the past few years proved beneficial as sales increased by 14% and gross profit margin
increased by 3% as compared to last year. Accordingly, profit before tax increased by 188% exhibiting an
increase from Rs. 809 million to Rs. 2,328 million, while profit after tax increased from Rs. 818 million to Rs.
2,075 million. Resultantly, the Company’s EPS improved from Rs. 2.50 to Rs. 5.82.

Financial Position Analysis

The management continued with its policy of taking advantage of historically low & subsidized mark-up rates
which would remain locked over the period of loan. Hence, net long-term financing was enhanced by 6%
during the year to fund BMR investments and acquire latest technology in various production areas as the
Company invested Rs. 2,217 million in property, plant and equipment during the year. As at the year ended
June 30, 2018, debt to equity and financial leverage ratios were at 0.55 (2017: 0.65) and 1.85 (2017: 1.81)
respectively. Considering the Rupee Dollar subsequent parity and prices of raw material, management
invested substantial amount in building raw material inventories which has increased the amount invested in
working capital. At the year ended June 30, 2018, working capital was Rs. 3,192 million as compared to Rs.
2,088 million as at last year end while the current ratio stood at 1.14 (2017: 1.11). The investment has yielded
extra margin to the Company both during the year under review and should yield favorable results in the first
quarter of the ensuing financial year as well.

5-Year Strategy

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References
 About Gul Ahmed Textile Mills. https://gulahmed.com/wp/wp-content/uploads/2018/10/Annual-Report-
2018.pdf
 Taxation in garment industry. https://www.samaa.tv/news/2019/06/govt-wondering-why-it-hasnt-
taxed-pakistani-textiles-yet/
 Economic Policies of Pakistan. http://www.oocities.org/textiledirectory/.