ACKNOWLEDGEMENT

My report will remain incomplete if I do not mention the efforts of those

people who helped me in completing this work.

First of all I will thank my ALLAH ALMIGHTY Who enables me to make this
project. Second, I will thank to college authorities which make the internship
compulsory in any corporate body in order to make us able to get know-how
about the practical work. Third, I will thank to the teacher who provides me the
guidelines about the format of internship report. In the last, I will thank to my all
the teachers who teach me throughout the session, explore and enhance my
abilities, and make me able to work efficiently throughout internship period with
experienced persons.

I will also thank to the Chief Financial Officer (CFO) of ALMOIZ

INDUSTRIES LIMITED which organized all internship program in such a way so
that I could learn the practical work. In addition, I will also thank to the Mr. Amjad
Ali – AGM Finance of ALMOIZ INDUSTRIES LIMITED – who was my instructor
and guide me throughout the internship period while performing assigned duties.
I am really thankful for his co-operation during the internship.

At last, I would like to thank all those other persons who helped me in
completing this report.

1
I am also thankful to following persons:

Mr. Shamim Khan Chief Executive

Mr. Nauman Ahmed Khan Managing Director

Mr. Wasif Mahmood Chief Financial Officer

Mr. Amjad Ali AGM Finance

Mr. Muhammad Nazir Dy. Manager (Finance)

Mr. Shahid Nazir Dy. Manager (Accounts) 

Mr. Mehmood Zubair Asst. Manager (System Development)

Mr. Ahmed Hassan Accountant

Mr. Ahsan Aziz Accountant

Mr. Basit Hafeez Cashier

 

Furthermore all the other executives and staff members of Almoiz Industries Limited, Head
Office and Site deserve my thankfulness for their co-operation and guidance during the course
my internship at Almoiz Industries Limited. Finally I would like acknowledging the contributions
by many other sources of information used in preparation of this report.

MAJID NADEEM

Contents Page#
2
Executive Summary 4
History 5
Introduction 6
Overview of Organization 9
Detail of Sugar Mills in Pakistan 11
History of Organization 14
Company Information 15
Mission Statement 17
Organization Structure 17
Activities Performed 18
Ration Analysis 20
Liquidity Ratio 20
Debt Ratio 21
Time Interest Earned Ratio 22
Gross Profit Margin 23
Operating Profit Margin 24
Net Profit Margin 25
Earning Per Share 26
Return on Asset 27
Return on Equity 28
Inventory Turnover 29
Avg. Collection Period 30
Asset Turnover 31
Avg. Payment Period 32
Interpretation & Analysis 33
SWOT Analysis 40
Strengths 40
Weaknesses 42
Opportunities 44
Threats 46
Conclusion 53
Recommendation 53
Skills Acquired 54
Bibliography 55
Encl. Detail 55

Executive Summary
3
 　　

This report is based on the activities performed during the internship at ALMOIZ
INDUSTREIS LIMITED. Internship duration was 6 weeks and it provided practical
knowledge of working in professional environment. This learning experience is
described in detail n the various sections of this report.

In the first section, there is some detail about the company. The history and present
status of the company is explained. The organization structure and the details of its
management along with its location are also discussed.

The second section provides information about the activities that I performed during the
internship. I worked as an internee mainly in Finance/Accounts department.

The third section included the Ratio Analysis of 2 years and the interpretation of the
Ratio. There is also the SWOT analysis of the sugar industry and of the company.

The fourth and last section includes Conclusion and the recommendations.

ALMOIZ INDUSTREIS LIMITED

History

Pakistan is the 15th largest producer of sugar in the world, 5th largest in terms of area
under sugar cultivation and 60th in yield. The sugar industry is the 2 nd largest agro

4
based industry which comprises of 81 sugar mills. With this scenario, Pakistan has to
import sugar which exposes it to the effects of shortage and rising prices in the world.
The present sugar crisis has opened up new avenues for researcher to analyze the
performance and efficiency of the firms in this sector. Total factor productivity plays a
significant role in measuring the performance of a firm which ultimately affects the
shareholder’s value. This paper analyzes the performance of sugar firms in Pakistan
and estimate/calculate the Malmquist total factor productivity growth indices using non-
parametric approach. TFP growth is further decomposed into technical, scale and
managerial efficiency change using balanced panel data of 20 sugar firms listed on
Karachi Stock Exchange for the period 1998 to 2007. The results reflect a tormenting
picture for the sugar industry. Overall sugar industry improved technological progress by
0.8% while managerial efficiency change put a negative effect on the productivity by a
same percentage; as a result the overall total factor productivity during 1998-2007
remained almost static with a decline of 0.1%. If we see the TFP and its components in
individual year for overall sugar industry, it presents divergent trend. The research
suggests that sugar industry is facing serious productivity growth problems where no
increase is recorded in total factor productivity during 1998 to 2007. The sugar industry
is lacking in terms of managerial efficiency which could be explained by a general
reduction in the quality of managerial decision making among the best practice firms,
Regardless of the reason for this decline, it has potentially serious implications for the
longer-term financial viability of these sugar firms. The pattern of TFP growth tends to
be driven more by technical change (or technical progress) rather than improvements in
technical efficiency.

Introduction
Sugarcane is among the most valuable crops of Pakistan. It is a source of raw material
for entire sugar industry. At present, the sugar industry is second largest agro-based
industry in Pakistan. Production efficiency has become an important determinant for the
future of this industry in Pakistan due to declining competitiveness of the domestic

5
sugar industry because of increasing imports, and high costs of production. The
Development and adoption of new production technologies can improve productive
efficiency. But at present it is difficult due to limited income and credit to the out
growers. Therefore, this industry can improve the efficiency of its operations using
currently available technology. Measures of productivity, its growth and sources for the
sugar industry of Pakistan play a significant role for policy development. Productivity
growth can be decomposed into three components: technical change, scale effects, and
changes in the degree of technical efficiency (Coelli et al 2005). Technical change
means progress in technology not only physically in the form of improved machinery but
also innovations in the knowledge base. Regarding scale effects, it relate to economies
in production. If there exist increasing economies of scale it indicates that the production
of additional outputs will require a less than proportional increase in inputs.
Improvements in the degree of technical efficiency arise from situations where
resources can be used more efficiently by applying practices from the present stock of
knowledge.
The most comprehensive measure of aggregate or sectoral productivity is Total Factor
Productivity (TFP). However, given the paucity of good data, this area of research has
remained quite limited in Pakistan (Ali, 2004). There are some studies on manufacturing
sector of Pakistan which include Raheman et. al. (2008), where total factor productivity
and its components are estimated using Malmquist Productivity growth index for major
manufacturing industries of Pakistan using aggregate firm level financial data but sugar
industry is not among the industries analyzed. The results of the study highlighted the
role of efficiency change in the TFP growth while deficiencies in terms of technological
progress. The efficiency of the large scale manufacturing sector of Pakistan was
examined by Mahmood et. al. (2007) using the stochastic production frontier approach
for periods 1995-96 and 2000-01. The results of this study showed that there was some
improvement in the efficiency of the large scale manufacturing sector, although the
magnitude was small. The results were mixed at the disaggregated level, whereas a
majority of industries had gained in terms of technical efficiency and some industries
were also weaker in terms of their efficiency level. , Afzal (2006) also estimated total
factor productivity for the large scale manufacturing sector from 1975 to 2001 using

6
three different approaches. Overall results showed that productivity was affected by
many factors like labor, capital, Gross National Product and per capita income. Further,
different economic models were applicable and predictable to the data of large scale
manufacturing sector of Pakistan and macroeconomic policies might help in improving
productivity of large scale manufacturing sector. Burki and Khan (2005) analyzed the
implications of allocative efficiency on resource allocation and energy substitutability for
large scale manufacturing. There are no reported productivity efficiency studies for the
sugar industry in Pakistan This study attempts to fill this gap by estimating firm level
efficiency and total factor productivity growth and its components for a sample of twenty
sugar firms in the sugar industry and to assess the variations in TFP growth between
firms and over Time. The
TFP growth is estimated for the period 1998 to 2007 using improved ideas of output and
inputs measures. This study, therefore, would provide a fresh perspective on the growth
of TFP in sugar sector for use in developing appropriate policy responses towards this
sector of Pakistan’s economy.
There are several techniques available, parametric and non-parametric, to estimate
total factor productivity. The most widely used example of a non-parametric technique is
DEA (Coelli, 1995; Seiford, 1996). Parametric techniques encompass stochastic frontier
techniques and Bayesian methods (Kalirajan and Shand 1999). In this paper we employ
DEA to estimate Malmquist TFP indices from panel data set. The reason for the choice
of DEA as the method of estimation is that the methodology has been employed widely
to conduct benchmarking analysis (for example, see Jaforullah and Whiteman 1999).
Most
of the existing studies that employs panel data for estimation of efficiency and
productivity change reports estimates for the entire data period, while in the present
study our focus is on the annual estimates because we wish to examine how
productivity changes through time at the firm level. The basic objective of this paper is
to use the data envelopment analysis as a tool for the measurement of total factor
productivity growth for sugar industry and sugar firms. The
objective is also to decompose TFP growth into technical change, technical efficiency
change and scale efficiency change for understanding the source of productivity for

7
Pakistani sugar firms listed at Karachi Stock Exchange. This decomposition enables
policymakers to trace lagging productivity to particular factors. For example, if slowing
technical progress causes declining TFP growth, the production frontier can be shifted
upward through investment in research and development (R&D); if slow productivity
growth is traced primarily to deteriorating technical efficiency (TE), learning-by-doing
processes and managerial practices can be targeted for this purpose; if there will be
benefits from SE, production scales should be adjusted toward optimum values. The
specific objective of the study is to consider implications for policy and strategies for
improving sugar firm’s production efficiency. Policymakers can recommend policies that
improve the productivity of firms only if they understand the sources of variation in
productivity growth. Studies on Productivity growth at the country level are usually
based on the overall or aggregate data; therefore, results of those studies are average
of the overall economy which comprises of different sectors. Hence contribution in each
country’s productivity has different proportion of sectors. This study uses financial data
of sugar firms extracted from annual reports obtained from different sources. This data
allows examination of the TFP performance of individual firms, which was not previously
done. The structure of this article is as follows. In the following section, an overview of
sugar industry of Pakistan is presented followed by the third section which describes the
data used in the analysis and methodology opted for analysis including discussion of
input and
output variables. Then the results of our Malmquist TFP estimates are presented. In the
final section we discuss the results presented and provide conclusions.

Overview of Sugar Industry of Pakistan

Sugarcane is an important industrial and cash crop in Pakistan. Pakistan is an important
sugarcane producing country and is ranked fifth in terms of area under sugar cultivation,
60th in yield and 15th in sugar production. Sugarcane is grown on over a million
hectares and provides the raw material for Pakistan’s 84 sugar mills which comprise the
country’s second largest agro-industry after textiles. The sugar sector constitutes 4.2%
of manufacturing. In size, the sugar sector atches the cement sector. Sugar industry has
an indirect socio-economic impact in overall terms which is significantly larger than its

8
direct contribution to GDP because of it’s backward (sugarcane growers) and forward
linkages (food processors) in the economy.
Egypt is the highest in terms of sugarcane yield per hector which is 110.8 tons per
hector while the Pakistan is the lowest in terms of this yield. As far as the sugar
recovery is concerned, Brazil has the highest percentage and again Pakistan is at the
lowest. If we analyze the sugar yield from sugarcane, Australia has the highest sugar
yield in these countries and again Pakistan is at the lowest with 3.54 tons per hector. It
indicates that in Pakistan, improvements can be made in terms of sugarcane yield,
sugar recovery and sugar yield.
During the year 2007/08 production of sugar was estimated at 61.5Million Metric Ton
(MMT), an increase of 12% over previous year due to increase in area under cultivation
and yield. While during 2008/09 sugar production is estimated at 5MMT a decline of
10% over the previous year. According to press reports, Pakistan's 2009-10 sugar
production is expected around 3 millions tons as against 3.2 million tons in the last year.
The country's annual sugar consumption fluctuates between 3.6 to 4.2 million tons, but
industry's officials say it has gone down since October, because of higher prices and an
economic slowdown that resulted in lower demand from industries such as drink
producers. According to farmers association, the area under sugarcane cultivation has
gone down slightly, but they are expecting better yield because of the better varieties of
seeds. With this scenario, Pakistan has to import sugar which exposes it to the effects
of shortage and rising prices in the world.
Sugar consumption has been showing an increasing trend for the last 15 years. It has
increased from 2.89 million tons in 1995-96 to 3.95 million tons in 2005-06. One of the
many reasons behind this increase is rise in the total population of the country, which
has reached 170 million. For 2008-09, the overall sugar consumption is forecast at over
4 million tons, which is less than the target production. According to a rough estimate,
the country will need approximately 5.5 million tons of sugar to meet the local demand
by year 2020. It will require about 1.5 million hectares of area under cultivation which is
at present about 1 hector. The per capita sugar consumption is around 25kg per year
which is highest in the developing countries. The demand of sugar will increase in the
coming years at the rate of about 2.3% because of growth in the population which is

9
about 2.3%. The sugarcane production in terms of sugarcane crushed, sugar made and
recovery percentage is presented in the table 3 for period 1997-98 to 2006-07.

DETAIL OF SUGAR MILLS IN PAKISTAN

PUNJAB

 Adam Chishtian Bahawalnagar

 Ashraf Ashrafabad Bahawalpur

 Baba Farid Okara Okara

 Brothers Pattoki Kasur

 Chanar Tandlianwala Faisalabad

 Choudary Pensara Road Gojra

 Chistia Sillianwali Sargodha

 Crescent Nishatabad Faisalabad

 Fatima Kot Addu Muzaffarghar

 Fauji Sheikhupura Sheikhupura

 Fecto Darya Khan Bhakkar

 Gojra Sam Gogra Faisalabad

10
 Haseeb Waqas Mirajabad Nankana Sahib

 Husein Jaranwala Faisalabad

 Hyesons Jetha Bhutta Rahimyar Khan

 Ittefaq Sahiwal Sahiwal

 JDW Mouza Sharin Rahim Yar Khan

 Kamalia Kamalia Tobatek singh

 Kohinoor Jauharabad Khushab

 Layyah Sugar Mills

 National Sargodha Sargodha

 Noon Bhalwal Sargodha

 Pasrur Pasrur Sialkot

 Pattoki Pattoki Ka

 Phalia Karmanwala Gujrat

 Punjab Man Channu Khanewal

 Pahirianwali Lalian Jhang

 Ramzan Chiniot Sargodha

 Shahtaj Mandi Bahauddin Gujrat

 Shakarganj Jhang Jhang

 Sheikhoo Kot Addu Muzafargarh

 Tandlianwala Kanjwani Faisalabad

 United Sadiqabad Rahimyar Khan

 Indus Kot Bahadur Rajan Pur

 Madina Chattah Khankah Hafizabad

 Qand Ghar Shahkot Faisalabad

 Yousaf Shahpur Sargodha

11
SINDH

 Al-Abbas Mirwah Gorchani Mirpurkhas

 Al-Asif Garho Thatta

 Al-Noor Moro Naushero Feroz

 Army Welfare Badin Badin

 Bawany Talhar Badin

 Dadu Piarogoth Dadu

 Dewan Budho Talpur Thatta

 Faran Sheikh Bhirkio Hyderabad

 Fauji-Kho Khoski Badin

 Fauji TMK Tando M. Khan Hyderabad

 Habib Nawabshah Nawabshah

 Kiran Rohri Sukkur

 Khairpur Khairpur Khairpur

 Larr Sajawal Thatta

 Matiari Matiari Hyderabad

 Mehran Tando M. Khan Hyderabad

 Mirpurkhas Mirpurkhas Mirpurkhas

 Mirza Kadhan Badin

 Pangrio Deh Rajauri-2 Badin

 Sakrand Sakrand Nawabshah

 Sanghar Sindhri Sanghar

 Shahmurad Jhok Sharif Thatta

 Sindabadgar Deenpur Hyderabad

 Thatta Deh Bijoro Thatta

 Consolidated Ranipur Khairpur

12
  Larkana Naudero Larkana

N.W.F.P

 Bannu Sarai Naurang Bannu

 Chshma D.I. Khan D.I. Khan
 Frontier Takht-I-Bhai Mardan
 Khazana Peshawar Peshawar
 Premier Mardan Mardan
 Saleem Charsadda Charsadda

AZAD KASHMIR

 Mian Mohammad Mirpur Azad Kashmir

Introduction/Historical Overview

The name of the company is “ALMOIZ INDUSTRIES LIMITED” having its registered
office in the province of Punjab at 12-D-1 Gulberg III Lahore Pakistan. The Company
has incorporated on 5th of May, 2005 under company ordinance 1984 as a public
unlisted limited by shares. The company is engaged in production and sale of ultra
refined sugar and electricity.

SHARE CAPITAL & RESERVES

Authorized capital 

20,000,000 Shares of Rs. 10 each Rs. 200,000,000

Main product:

The main product of the Almoiz Industries Limited is white crystalline sugar.

13
BY PRODUCT:

The by products are following

1…………… BAGGASSES

2…………… MALLASSES

3…………… PRESS MUD

4…………… PULP

5………….. ELECTRICITY

DEPARTMENTS OF the ORGANIZATION

There are six main departments in Indus Sugar Mills.

I) Cane/ Agriculture
II) Mechanical
III) Chemical
IV) Electrical
v) Finance/ Accounts
VI) Administration

Company’s Information:

BOARD OF DIRECTORS:

CHAIRMAN/CEO: Mr. Muhammad shamim Khan

MANAGING DIRECTOR: Mr. Nauman Ahmed Khan

DIRECTORS:

Mrs. Qaiser Shamim Khan

  Mr. Muhammad Imran Khan

  Mr. Adnan Ahmed khan

  Mrs. Farrah Khan

14
   Mrs. Samreen khan

AUDIT COMMITTEE:

Mr.Adnan Ahmed Khan (Chairman)

Mrs. Qaiser Shamim Khan (Member)

Mr. Muhammad Khan (Member)

CHIEF FINANCIAL OFFICER & COMPANY SECRETARY:

Mr. Wasif Mehmood- CA

AUDITORS:
M/s.Rahman Sarfaraz Rahim Iqbal Rafiq Chartered Accountants

BANKERS:

Habib Bank limited.

MCB Bank Limited

National Bank Of Pakistan.

Allied Bank Limited

United Bank Limited

Kasb Bank Limted

Bank Al-Habib Limited

Bank Alfalah Limited

JS Bank Limited

Email: info@almoiz.com

Head Office:
2D-1, Gulberg III,
Lahore 54660
Pakistan.

15
 Ph: 92-423-5771066- 71
Fax: 92-423-5756687

Mills Site:
Almoiz Industries Limited,
26-KM Chashma Road,
Dera Ismail Khan
Pakistan
Ph: 92-454-720063 to 66
Fax: 92-454-720880

Mission Statement

We shall build on our core competencies and achieve in performance to become a

leading Procedure of best sugar quality. In doing so we aim to meet or exceed the
expectations of all our stake holders.

ORGANIZATIONAL STRUCTURE

CHAIRMAN
│
│
│
M.D. (Managing Director)
│
│
│
Board of Directors
│
│
│
│
G.M.
│
│
┌-------------┬----------┼-----------------┐
││││
││││
G.M. G.M. G.M. G.M.
(Cane) (Tech.) Production Administration
│
│
│
┌-------------┘
│
│
Technical Commercial Plant Production Electrical
Manager Manager Manager Manager Manager

16
│
│
│
Chief Engineer
│
│
┌--------------┴--------------┐
│
│
Shift Engineer Senior Engineer

ACTIVITIES PERFORMED

I joined ALMOIZ INDUSTRIES LIMITED as an internee on 05 July 2011 in Finance/ Accounts

Department. By the grace of Allah Almighty I completed it on 19 August 2011. During my
internship I worked in the head office of this company and I learned many things in this
department. All the staff of this company is very cooperative and helped me out in my every
problem during my internship.

During my internship program learnt the following things:

 Record Keeping;

o Established practices of record keeping to ensure proper documentation and

storage of information.
o Maintaining files of Bank Payment Vouchers
o Maintaining files of Cash payment Voucher
o Maintaining files of Bank Receipt Vouchers
o Maintaining files of Cash Receipt Vouchers
o Maintaining files of Journal Vouchers
o Maintaining files of Income tax Challan
o Maintaining files of Sales tax challan
o Maintaining files of Correspondence with Mills site
o Maintaining files of other misc. documents

 Sales;

17
 o Maintained the sales record of company and liaison with Marketing Department
for reconciliation.
o Maintained the Sales tax Invoices of Sugar
o Maintained the Sales tax Invoices of Pulp
o Maintained the Sales tax Invoices of Molasses
o Maintained the Sales tax Invoices of Mud
o Maintained the Sales tax Invoices of Scrap
o Maintained the Sales tax Invoices of Electricity
o Correspondence with Sugar & Molasses Debtors
o Correspondence with banks regarding Sales Payments
 Tax;
o Weekly updating of advance tax deducted on payments in online portal of
Federal Board of Revenue.
o Filing Monthly Return
o Learned how to calculate the Employees Salary Tax

 Finance;
o Liaoning with Banks for confirmation of amounts due from debtors and
preparation of reconciliations.
o Preparing Bank Reconciliations Statements at the end of the Month of more than
5 Banks.
o Posting all kinds of Vouchers

18
 Ratio Analysis
Liquidity Ratio

What Does Liquidity Ratios Mean?

A class of financial metrics that is used to determine a company's ability to pay off

its short-terms debts obligations. Generally, the higher the value of the ratio, the larger
the margin of safety that the company possesses to cover short-term debts.  

Liquidity Ratio
Ratio 2010 2009
Current 1.08 1.04
Quick 0.58 0.46

19
 Liquidity Ratio
1.20
1.00
0.80
0.60
Current
0.40 Quick
0.20
-
2010
2009

Debt Ratio
What Does Debt Ratio Mean?

A ratio that indicates what proportion of debt a company has relative to its assets. The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load.

A debt ratio of greater than 1 indicates that a company has more debt than assets,
meanwhile, a debt ratio of less than 1 indicates that a company has more assets than
debt. Used in conjunction with other measures of financial health, the debt ratio can
help investors determine a company's level of risk.

Debt Ratio
 Ratio 2010 2009
Debt Ratio 80 82

20
 Debt Ratio
82.5

82

81.5

81 Debt Ratio

80.5

80

79.5

79
2010 2009

Times Interest Earned Ratio Analysis

Times interest earned ratio measures a company’s ability to continue to service its debt.
It is an indicator to tell if a company is running into financial trouble. A high ratio means
that a company is able to meet its interest obligations because earnings are significantly
greater than annual interest obligations. However, a high ratio can also mean that a
company has an undesirably low level of leverage or pays down too much debt with
earnings that could be used for other
Investment opportunities to get higher rate of return.

A lower times interest earned ratio means fewer earnings are available to meet interest
payments. Failing to meet these obligations could force a company into bankruptcy. It is
used by both lenders and borrowers in determining a company’s debt capacity .

Debt Ratio
Ratio 2010 2009
Time Interest Earned
Ratio 1.82 2.65

21
 Time Interest Earned Ratio
3.00

2.50

2.00

1.50

1.00
Time Interest
Earned Ratio
0.50

-
2010 2009

Profitability Ratio

What Does Gross Profit Margin Mean?

A financial metric used to assess a firm's financial health by revealing the proportion of

money left over from revenues after accounting for the cost of goods sold. Gross profit
margin serves as the source for paying additional expenses and future savings.

For example, suppose that ABC Corp. earned $20 million in revenue from producing
widgets and incurred $10 million in COGS-related expense. ABC's gross profit margin
would be 50%. This means that for every dollar that ABC earns on widgets, it really has
only $0.50 at the end of the day.

Profitability Ratio
Ratio 2010 2009

Gross Profit Margin 10.51 17.34

22
 Gross Profit Margin (In %)
20
18
16
14
12
10
8
Gross
6 Profit
4 Margin
2
0
2010 2009

What Does Operating Margin Mean?

A ratio used to measure a company's pricing strategy and operating efficiency.

perating margin is a measurement of what proportion of a company's revenue is left

over after paying for variable costs of production such as wages, raw materials, etc. A
healthy operating margin is required for a company to be able to pay for its fixed costs,
such as interest on debt.
Also known as "operating profit margin" or "net profit margin".

Operating margin gives analysts an idea of how much a company makes (before

interest and taxes) on each dollar of sales. When looking at operating margin to
determine the quality of a company, it is best to look at the change in operating margin
over time and to compare the company's yearly or quarterly figures to those of its
competitors. If a company's margin is increasing, it is earning more per dollar of sales.
The higher the margin, the better.

Profitability Ratio
Ratio 2010 2009
Operating Profit Margin 8.1 13.65

23
 Operating Profit Margin (In %)
16
14
12
10
8
6
4 Operating
Profit
2 Margin
0
2010 2009

What Does Profit Margin Mean?

A ratio of profitability calculated as net income divided by revenues, or net profits

divided by sales. It measures how much out of every dollar of sales a company actually
keeps in earnings.

Looking at the earnings of a company often doesn't tell the entire story. Increased
earnings are good, but an increase does not mean that the profit margin of a company
is improving. For instance, if a company has costs that have increased at a greater rate
than sales, it leads to a lower profit margin. This is an indication that costs need to be
under better control.

Profitability Ratio
Ratio 2010 2009
Net Profit Margin 3.59 8.07

24
 Net Profit Margin (In %)
9
8
7
6
5
4
3
2
Net Profit
1 Margin
0
2010 2009

What Does Earnings Per Share - EPS Mean?

The portion of a company's profit allocated to each outstanding share of common

stock. Earnings per share serves as an indicator of a company's profitability.

When calculating, it is more accurate to use a weighted average number of shares

outstanding over the reporting term, because the number of shares outstanding can
change over time. However, data sources sometimes simplify the calculation by using
the number of shares outstanding at the end of the period.

Earnings per share is generally considered to be the single most important variable in

determining a share's price. It is also a major component used to calculate the price-to-
earnings valuation ratio. 

Profitability Ratio
Ratio 2010 2009
Earning Per Share 7.93 13.04

25
 Earning Per Share
14

12

10

2 Earnin
g Per
0 Share
2010 2009

What Does After-Tax Return On Assets Mean?

A profitability measure that indicates how well a company uses its capital resources to
generate income. To calculate after-tax return on assets, divide the company's total
after-tax income by the value of its total assets. The resulting figure, multiplied by
100, will be a percentage; the higher the percentage, the more efficiently the company
uses its assets.

The after-tax return on assets ratio can be helpful in comparing the profitability of
different-sized companies because it allows investors to see how efficiently a company
works with what it has, regardless of how big the company is. If a company has $20
million in net income and $100 million in total assets, its after-tax return on assets would
be 20%. A smaller company might only bring in $5 million after taxes, but if its assets
totaled $20 million, it would have a superior after-tax return on assets of 25%.

Profitability Ratio
Ratio 2010 2009
Return on Asset 3.96 6.59

26
 Return on Asset (In %)
7

2
Return
1 on
Asset
0
2010 2009

What Does Return On Equity - ROE Mean?

The amount of net income returned as a percentage of shareholders equity. Return on

equity measures a corporation's profitability by revealing how much profit a company
generates with the money shareholders have invested.  

The ROE is useful for comparing the profitability of a company to that of other firms in
the same industry.

Profitability Ratio
Ratio 2010 2009
Return on Common Equity 19.53 37.60

27
 Return on Common Equity (In %)
40
35
30
25
20
15
10
Return
5 on
Commo
0 n Equity
2010 2009

Activity Ratio
What Does Inventory Turnover Mean?

A ratio showing how many times a company's inventory is sold and replaced over a
period.
The days in the period can then be divided by the inventory turnover formula to
calculate the days it takes to sell the inventory on hand or "inventory turnover days".
Although the first calculation is more frequently used, COGS (cost of goods sold) may
be substituted because sales are recorded at market value, while inventories are
usually recorded at cost. Also, average inventory may be used instead of the ending
inventory level to minimize seasonal factors.

Activity Ratio
Ratio 2010 2009
Inventory Turnover 9.73 4.52

28
 Inventory Turnover
12

10

2
Inventory
Turnover
0
2010 2009

What Does Average Collection Period Mean?

The approximate amount of time that it takes for a business to receive payments owed,
in terms of receivables, from its customers and clients.

Due to the size of transactions, most businesses allow customers to purchase goods or
services via credit, but one of the problems with extending credit is not knowing when
the customer will make cash payments. Therefore, possessing a lower average
collection period is seen as optimal, because this means that it does not take a
company very long to turn its receivables into cash. Ultimately, every business needs
cash to pay off its own expenses (such as operating and administrative expenses).

Activity Ratio
Ratio 2010 2009
Avg. Collection Period 11 10

29
 Avg. Collection Period (In Days)
11.2
11
10.8
10.6
10.4
10.2
10
9.8
Avg.
9.6 Collectio
9.4 n Period
2010 2009

What Does Fixed-Asset Turnover Ratio Mean?

A financial ratio of net sales to fixed assets. The fixed-asset turnover ratio measures a
company's ability to generate net sales from fixed-asset investments - specifically
property, plant and equipment (PP&E) - net of depreciation. A higher fixed-asset
turnover ratio shows that the company has been more effective in using the investment
in fixed assets to generate revenues.
his ratio is often used as a measure in manufacturing industries, where major purchases
are made for PP&E to help increase output. When companies make these large
purchases, prudent investors watch this ratio in following years to see how effective the
investment in the fixed assets was.

Activity Ratio
Ratio 2010 2009
Asset Turnover 2.17 1.28

30
 Asset Turnover
2.5

1.5

1
Asset
Turnover
0.5

0
2010 2009

What Does Average Payment Period Mean?

The approximate amount of time that it takes for a business to receive payments owed,
in terms of receivables, from its customers and clients.

Due to the size of transactions, most businesses allow customers to purchase goods or
services via credit, but one of the problems with extending credit is not knowing when
the customer will make cash payments. Therefore, possessing a lower average
collection period is seen as optimal, because this means that it does not take a
company very long to turn its receivables into cash. Ultimately, every business needs
cash to pay off its own expenses (such as operating and administrative expenses).

Activity Ratio
Ratio 2010 2009
Avg. Payment Period 13 11

31
 Avg. Payment Period
13.5

13

12.5

12

11.5

11

10.5 Avg.
Payment
10 Period
2010 2009

Interpretation of Financial Ratios

PERFORMANCE OF THE COMPANY

Despite the fact that sugarcane crop was around 25% short as compared to last
year, your company was able to crush 1,154,967 M. Tons sugarcane and produced 99,829
M. Tons white refined sugar at an average recovery of 8.556% as compared to last year’s
sugarcane crushing of 1,142,669 M. Tons sugarcane, produced 105,601 M. Tons white
sugar at an average recovery of 9.24%.

FINANCIAL HIGHLIGHTS

The pretax profit during the fourth quarter was recorded at Rs. 130.882 million as compared
to the third quarter pretax profit of Rs. 13.596 million. This increase in the profit was mainly
attributed to increase in the sugar price in local market & as well as in international market.
During the financial year under review the company earned pretax profit of Rs. 234.591
million and after tax profit of Rs. 119.191 million as compared to last year pretax profit of
Rs. 307.071 million and after tax profit of Rs. 195.874.

1. Statement of capacity utilization of the plant:

32
The installed capacity, its actual utilization and reasons of variance between the two

2. Statement of stock in trade:

The statement of quantity and cost of each item included in stock at the year end
distinguishing between;

I. Stock of raw material and components.

ii. Stock of work in process
iii. Stock of finished products, and
iv. Other stocks.

3. PARTICULARS TO BE INCLUDED IN THE REPORT:

1) Capacity:

a. Licensed installed and utilized capacities of the factory for the products under reference.
b. If the company is engaged in other activities besides the manufacture of the product
under reference, give a brief note on the nature of such other activities.

2) Cost accounting system:

Brief comments on the cost accounting system and its adequacy or otherwise to determine
correctly the cost of products under reference

3) Production:

I. Production in quantities of each type of product under reference.

ii. Percentage of production of the product under reference in relation to installed capacity. If
there is any shortfall in production as compared to capacity, brief comments as to the
reasons for shortfall.

iii. If there is any addition to the production capacity during the year under review or in the
immediately preceding two years this may also be mentioned.

33
4) Raw materials:

a. The cost of major raw material consumed in terms of both quantity and value. Where the
cost of transport etc. of raw material is significant, specify the same separately.

b. Consumption of major raw material per unit of production compared with the standard
requirement, if any.

c. Explanation for variances, if any, in the consumption of major raw material per unit of
production as compared to the preceding two years, and with standard requirement, if any.

d. Comments on method of accounting followed for recording the quantities and values of
the
Receipts, issues and balances of all material directly used in production.

5) Wages and salaries:

a. Total wages and salaries paid for all categories of employees, separately in respect of
each of the following namely:

 Direct labor cost on production;

 Indirect employees’ cost on production;
 Employees’ cost on administration;
 Employees’ cost on selling and distribution;
 Bonus to workers and employees;
 Other employees’ cost, if any (including taxes and levies); and
 Total employees’ cost {total of items (i) to (iv) above}

b. Salaries and perquisites of directors and Chief Executive.

c. Total man-days of direct labor available and actually worked for the year.

34
d. Average number of workers employed for the year.

e. Direct labor cost per ton of output of product (give information in respect of each).

f. Brief explanations for variance in item (e) above, if any, as compared to

g. the previous two years.

h. Comments on incentives schemes, if any, with particular reference to its contributions

towards increasing productivity and its effect of cost of production.

6) Stores and spare parts:

a. The expenditure per unit of output on stores, etc. b. Comments on the system of stores
accounting for recording receipts, issues and balances, both in quantities and values. c. If
practicable, the proportion of closing inventory of stores representing items, which have not
moved for over twenty four months.

7) Depreciation:

a. The method of depreciation adopted by the company, e.g., straight line or diminishing
balance, etc. b. The basis of allocation of depreciation on common assets to the different
departments. c. The basis of charging depreciation to the cost of products.

8) Overheads:

a. The total amount of the following overheads and a break-up of items (i), (ii) and (iii)
below: i. Factory overheads. ii. Administration overheads. iii. Selling and distribution
overheads. iv. Financial Charges. b. Reasons for any significant variances in the
expenditure incurred against the item, included in the overheads as compared with previous
two years. c. The basis of allocation of overheads to cost centers and absorption to
products with brief comments, if any, on the basis of allocation adopted by the company. d.
Cost of packing, if any, of the products under reference to be shown separately with details
to the extent possible.

9) Royalty / technical aid payments:

35
The total amount of royalty / technical aid fees payable for the year and the amount
chargeable per unit of the product.

10) Abnormal non-recurring features:

a. If there were any abnormal features affecting production during the year, e.g. strikes,
lockouts, major breakdown in the plant, substantial power cuts, serious accidents, they
shall, wherever practicable, be briefly mentioned indicating their impact on the cost of
production.
b. If there are special expenses which have been directly allocated to products under
reference, the total amount as also incidence per unit of product shall be shown.

11) Cost of production:

The cost per unit of different categories, or qualities of each of the products under reference
with comparative figures for the previous year and comments on the reasons of difference.

12) Sales:

a. The sales in quantities and net sales realization of the different categories, varieties or
quantities of product under reference showing the average sales realization per unit.
b. If product under reference is exported, quantity exported, net realization per unit,
countries to which exported, indicating the profit or loss incurred in export.

13) Profitability:

The profit per unit earned on each category, variety or quantity of the products, comments
on the comparative profits of different categories of the products per unit as well as in term
of per machine hour etc. and comments on the adequacy or otherwise of product for
maximization of profit.

14) Cost auditors’ observations and conclusions:

a. Matters which appear to him to be clearly wrong in principal or apparently unjustifiable.

b. Cases where the company funds have been used in a negligent or inefficient manner.
c. Factors which could have been controlled but have not been done resulting in increase in
the cost of production.

36
PRODUCTION

Scope:
 Production in quantities of each type of product under reference.
 Percentage of production of the product under reference in relation to installed capacity.
If there is any shortfall in production as compared to installed capacity, brief comments
as to the reasons for shortfall.
 If there is any addition to the production capacity during the year under review or in the
immediately preceding two years this may also be mentioned.

Suggestion for improvements in performance by:

 Rectification of general imbalance in production facilities.

 Fuller utilization of installed capacity.
 Comments on areas offering scope for:

i. Cost reduction;
ii. Increased productivity;
iii. Key limiting factors causing production bottle-necks;
iv. Improved inventory policies; or
v. Energy conservancy.
 iv. State of technology, whether modern or obsolete.
 Plant, whether new or second hand when installed.

RAW MATERIAL

Scope:

 The cost of major raw material consumed in terms of both quantity and value. Where the
cost of the transport, etc., of raw material is significant, specify the same separately.
 Consumption of major raw material per unit of production compared with the standard
requirements, if any.

37
 Explanations for variances, if any, in the consumption of major raw material per unit of
production as compared to the preceding two years, and with standard requirement, if
any.

 Comments on the method of accounting followed for recording the quantities and values
of the receipts, issues and balances of all material directly used in production.

SALARIES AND WAGES

Scope:

 Total wages and salaries paid for all categories of employees, separately in respect of
each of the following namely:

 Direct labour cost on production;

 Indirect employees’ cost on production;
 Employees’ cost on administration;
 Employees’ cost on selling and distribution;
 Bonus to workers and employees;
 Other employees cost, if any (including taxes and levies); and
 Total employees cost [total of items (i) to (iv) above].
 Salaries and perquisites of directors and Chief Executive.
 Total man-days of direct labour available and actually worked for the year.
 Average number of workers employed for the year.
 Direct labour cost per unit of output of the product. (give information in respect of each)
 Brief explanations for variance in items (e) above, if any, as compared to the previous
two years.
 Comments on the incentive schemes, if any, with particular reference to its contributions
towards increasing productivity and its effect on cost of production.

38
 SWOT ANALYSIS

STRENGTHS

Research on productivity growth is very important because economic growth cannot be

sustainable without improvement in the Total Factor Productivity. From a policy point of
view, the assessment of TFP growth is important as it serves as a guide for resource
allocation and invest not decisions. This paper applied DEA approach to estimate the
total factor productivity growth, technical efficiency change and technological progress
in Pakistan’s sugar industry using panel data for twenty sugar firms from 1998 to 2007.
Malmquist productivity index was used to measure the productivity growth. Following
Fare et. al. (1994), this paper decomposed the Malmquist productivity index into
technical efficiency and technical change component. This decomposition helped us to
identify improvement in efficiency and contribution of technological progress and
innovation to productivity growth in sugar industry. Most of the studies of productivity
growth efficiency which are based on panel data discuss the estimates of overall
sample or sector. However, we have presented the estimated TFP growth, efficiency
change and technical change at each firm level and for each year during 1998 to 2007
which shows that these estimates varies widely at firm level during the data period.
The empirical estimates on the performance of sugar industry yielded several striking
results. The Malmquist TFP results reflect a tormenting picture for the sugar industry.
Overall sugar industry improved technological progress by 0.8% while managerial
efficiency change put a negative effect on the productivity by a same percentage; as a
result the overall total factor productivity during 1998-2007 remained almost static with a
decline of 0.1%. If we see the TFP and its components in individual year for overall
sugar industry, it presents divergent trend.
The results from individual industries show that static TFP growth is mainly contributed
by technical efficiency which declined for nine sugar firms and remained equal to one
for nine sugar firms during period 1998 to 2007, while the technical change is positive
for eleven out of twenty sugar firms. It suggests that sugar industry is lacking in terms of
managerial efficiency which could be explained by a general reduction in the quality of
managerial decision-making among the best practice firms, Regardless of the reason
39
for this decline, it has potentially serious implications for the longer-term financial
viability of these sugar firms.
Further, year wise analysis highlights that there is divergence in all sugar firms over
1998-2007 in terms of total factor productivity, technical efficiency and technical change.
Except few firms which are relatively stable include Shakarganj mills limited and Al
Abass sugar mills limited, all sugar firms have a mix trend over 1998-2007 which affects
the productivity and ranking of firms.
The pattern of TFP growth tends to be driven more by technical change (or technical
progress) rather than improvements in technical efficiency. Shakarganj Mills Limited is
at the top in ranking in terms of TFP due to highest technical change and also due to
better performance in terms of managerial efficiency change. This firm has also
performed better in terms of stability over the period 1998 to 2007, where the total factor
productivity increased for seven out of nine years. Mirpurkhas sugar mill comes next in
ranking where again the major source is technical change. Sind Abadgar sugar mill and
Habib sugar mill are also relatively better performer where the technical change is the
main source while Sanghar sugar mill is also among the top ranking firms where the
main sources is managerial efficiency. The Frontier sugar mill is among the worst
performers
in terms of productivity over 1998 to 2007 where the problem lies in managerial
efficiency and also non adoption of new technologies. Similarly, The Thal Industries is
also one of the laggard firms in terms of total factor productivity where the major source
is non adoption of new technologies although top in ranking in terms of efficiency
change.
The research suggests that the Pakistani sugar industry is facing serious productivity
growth problems where no increase is recorded in total factor productivity during 1998
to 2007. Therefore, this industry must increase total factor productivity in most of the
firms under study and efforts must be made to provide a stable pattern to the
productivity growth. In sugar industry, there is a need to improve both technical
efficiency and technological progress. Improvement in technical efficiency requires
improvement in quality of input like capital and labor. The management aspect is also

40
very important in terms of capital. These strategies will improve the technical change as
well which also
relies on managing technology and adoption capability of firms. The research and
development (R & D) activities can play a vital role to bring technological progress.
Although there is very little increase in the technical change but for further considerable
increase in the productivity, efforts could be made to increase the research and
development (R & D) activities in this industry. Therefore firms in the sugar industry
need greater investment in (R & D) activities and adoption of new technologies.
Increase in skilled worker through human resource development reduces skills shortage
which hampers technological adoption.

WEAKNESSES

Sugarcane is an important crop of Pakistan. It occupies about 4 per cent of the cropped
area and contributes about 14 per cent to the value added by the crop sector in the
gross domestic product. This crop is the main supplier of sweeteners to the country's
population and is one of the major cash crop for the farmers. Except the southern zone,
the other parts of the country are not ideally suited to the cultivation of sugarcane but it
suits well in the crop rotations.

Sugarcane production has, since after independence been increasing at a rate which
favourably matched with the growth rate of the population. However, during the decade
ending 1989-90, its production has slowed down to about one per cent a year, on an
average, against the population growth of 3 per cent per annum. It is, therefore, quite
evident that the per capita production of sugarcane has been going down by about 2 per
cent a year during this period. This is a matter which merits concern for the policy
makers to review options in the matter. Should the domestic sugarcane production be
increased or greater reliance be placed on the import of sugar? If local production is the
option, should it be realised through accent on expansion in area or yield per acre? If
the answer lies in the area, to what extent the area should be allowed to increase so
that the areas under competing crops like cotton, rice and even wheat and oilseeds,
which are also important in their own rights, are not adversely effected? If only the yield

41
per acre is to be raised, what measures are necessary to achieve this objective without
allowing the mis-allocation of area to take place if at, all this would be possible? In this
article, an attempt is made to discuss and raise some of the issues that need careful
attention of the policy makers in the national interest.

Notwithstanding the yearly fluctuations, it is estimated that of the total sugarcane

production, about 10-15 per cent is used for seed, chewing and fodder. The rest of the
production is crushed either by the sugar mills for manufacturing of white sugar, or by
the farmers for making gur, shakkar or khandsari. With the production of sugarcane
increasing at a much lower rate than the population growth, the per capital availability of
domestically produced sweeteners has decreased. Meanwhile the demand for white
sugar has increased which has lead the fast expansion of the sugar industry. The
number of mills has gone up from 31 in 1979-80 to 45 in 1989-90, with the result that
the production of sugar has increased to over 1.8 million tonnes from about 600
thousand tonnes during the same period. Consequently more and more sugarcane has
been going to the mills for white sugar manufacturing thus leaving lesser quantities for
the production of other sweeteners. So if the consumption of the sweeteners is to be
kept at the present level, the country would need to import sweeteners at an increasing
rate every year provided the domestic sugarcane production does not keep pace with
the population growth. The import of gur, shakkar or khandsari is not practical because
of their availability abraod, their keeping quality, distribution system, and the local
demand. Therefore, the country has to resort to the import of white sugar to meet the
local needs. Upto August 1985, sugar was rationed, the demand remained restricted
and adjusted to the availability of sugar (domestic production plus imports). After the
rationing system was abolished in August 1985, the demand of white sugar increased
rapidly. According to one study, the per capita annual consumption of sugar which was
about 14 kgs. in 1984-85, has reached the level of 20 kgs a year. Domestic sugar
production being inadequate to meet the demand, the Government had to import to
meet the national requirements. For example, the country imported 258 thousand
tonnes in 1985-86, 750 thousand tonnes in 1986-87, about 210 thousand tonnes in
1987-88, and only about 25 thousand tonnes, an estimated for 1988-89, It is anticipated

42
that during 1989-90, the imports would be over 50 thousand tonnes; the exact quantity
to be imported would depend on the quantities domesitically produced during the
current crushing season and the volume of stocks to be maintained.

With the fast expansion of the refined sugar industry, when sugarcane production was
increasing only nominally, the availability of sugarcane for converting it to sugar,
"shakkar" and khandsari has been decreasing. According to an estimate, the annual
average availability of these three sweeteners has halved to about 10 kgs. per head as
compared with about

OPPORTUNITIES

The sugar industry plays an important role in the economy of the country. It is the
second largest industry after textiles. At the time of independence in 1947, there were
only two sugar factories in Pakistan. The output of these factories was not sufficient for
meeting the domestic requirements. The country started to import sugar from other
countries and huge foreign exchange was spent on this item. Need was felt to increase
the production of sugar. Keeping in view the importance of sugar industry, the
Government setup a commission in 1957 to frame a scheme for the development of
sugar industry. In this way the first sugar mill was established at Tando Muhammad
Khan in Sindh province in the year 1961. At present there are 76 sugar mills operating
in Pakistan.

The Sugar industry employs over 75000 people, including management experts,
technologists, engineers, financial experts, skilled, semiskilled and unskilled workers. It
contributes around 4 billion rupees only under the head of excise duty and other levies
to the Government are also paramount significance.

This research article firstly describes introduction, secondly cultivated area, production
and per hectare yield of sugar cane, thirdly examines per hectare yield with other
countries, fourthly crushing capacity of sugar mills, output and recovery percent of
sugar, fifthly projection of sugar demand with the increasing of population and lastly
conclusion.

43
At the time of independence in 1947, Pakistan got two sugar mills as its share. The
output of these mills was not sufficient for meeting the domestic requirements. Huge
amount of foreign exchange was being spent on the import of sugar. The cane
commission was setup in 1957 to form plan for increasing the output of cane and
establishing sugar mill in the country.

This research article analyses the position of sugar industry during the period 1990/91-
1999/2000. During this period the cultivated area under cane increased at average rate
of 10.7 percent, output of cane production rose at average rate of 24 percent and the
yield per hectare went up at the average rate 11.7 percent. But the per hectare yield
was lower in the country as compared to other cane growing countries.

Looking at Table 3, it was pointed out that the existing number of operating mills
reached to 71 in the year 1998-99 but again declined to 67 due to closure of certain
units. The crushing capacity of cane and production of sugar increased up to 1998-99
and again decreased which created shortage of sugar. This can be increased by
introducing new varieties of cane as well as starting the closure units.

THREATS

The sugar industry in Pakistan has continued to expand heavily in spite of negative
fundamentals and continuous advice of Pakistan Sugar Mills Association to the contrary
for the last six years. New units have been established and the number increased from
52 mills in 1991-92 to 74 in the current season which has commenced last month.
Besides, the mills already in operation have enhanced their sugarcane crushing and
sugar refining capacities through BMR. The increase in the number of sugar mills, in
such an unplanned manner, has been blamed by many on the government and the
financial institutions who have provided long-term loans and wasted limited resources.

The political angle

44
Initially the sugar mills in the country were established by the business community but
during the last 8 to 10 years establishment of sugar mills has become a prerogative of
people indulging in politics directly or indirectly. They were not only able to get the
permissions to establish sugar mills but to acquire huge credits from the financial
institutions as well. The cost of projects established after the mid-eighties was not only
very high but credits were disbursed at 80:20 resulting in very high financial cost.

All these new mills have been established in prime sugarcane growing areas where the
operating mills had spent resources to educate farmers in ahieving better yields and
had arranged soft-term credits for the farmers for the procurement of seed, fertilizer and
agricultural implements. With the establishment of mills by people enjoying political clout
and power, the growers were forced to sell their produce to these mills. During the last
season, industry sources said, one of the politicians ownng sugar mills was instrumental
in closure of a sugar mill as it was paying higher prices to the growers.

Cost of production

The shortfall in sugarcane availability resulting in under-utilization of capacity, coupled

with regular enhancement in its support price fixed by the government, have been
factors responsible for the increase in cost of production of sugar.

Since the nature of production is seasonal and consumption continues throughout the
year, the financial cost incurred on carrying for over six months squeezes profit margins
or increases accumulated losses of the mills.

Not only the government has been increasing sugarcane support price, the growers
have also started demanding prices higher than those fixed by the government.
Knowing the limited availability of sugarcane, the growers either completely stop the
supplies or curtail them to a large extent.

Succumbing to pressure from the growers, the mills are forced to pay price for
sugarcane much higher than those fixed by the government. The situation further

45
aggravates the mills' position as they are not in a position to recover even the season's
variable cost which affects repayment of loan installments and interest charges to the
financial institutions.

Factors affecting sugarcane supply

Over the years many factors have been responsible for shortfall in sugarcane supply. They
include increased consumption by the mills and failure of the growers to increase sugarcane
production. Production could be increased either by increasing the area under sugarcane
cultivation or more importantly by improving the yield per acre substantially.

A comparative analysis of sugarcane yield and recovery between India and Pakistan prepared
by the Pakistan Sugar Mills Association indicates that Pakistan is far behind India. While in
Pakistani Punjab farmers are able to get a yield of only 43 tonnes per acre, in the Indian
Punjabthe yield is over 63 tonnes per acre. The average recovery is 9.39% in Indian Punjab as
compared to an average recovery of 8.44% attained in the Pakistani Punjab.

Similarly, the average yield and recovery in Indian Gujrat is 89.6 tonnes per acre and 11.34%
respectively ascompared to 57.3 tonnes per acre and 9% recovery in Sindh.

In both the provinces, Sindh and Punjab, the sugarcane cultivation directly competes with
cotton. If the prices of cotton are better, the farmers switch over to it, or vice versa. When the
CLV attacks on cotton were common, a large number of farmers, originally growing cotton,
switched over to sugarcane cultivation. But with the improvement in cotton prices and
availability of virus resistant varieties, the farmers have gone back to cotton cultivation.

The area as well as production of sugarcane shrank by 5 and 4 percent respectively in 1995-96
as compared to last year.

In the past, the provincial governments used to ban production of 'gur ' during sugarcane
crushing season but lately its production has increased manifold. The percentage of sugarcane
consumed by the sugar mills in Sindh is still the highest as compared to the other two provinces.
'gur' making has progressed without paying any taxes and has therefore been consuming more
sugarcane to the detriment of the sugar industry.

The average utilization of sugarcane on countrywide basis touched the highest - 76.93% in
1993-94 but has gone down during the last two years.

46
In the Punjab the maximum utilisation was 81.87% in the same year but came down to 63.22%
during 1995-96. But the consumption of sugarcane by mills is NWFP was reduced to only 17%
in 1995-96. Contrary to this, Sindh has the highest sugarcane consumption record. The
maximum consumption touched 93.85% in 1992-93 and came down to 75.28% in 1995-96.

Myth behind massive expansion

Over the last few years most of the existing mills have enhanced their crushing
capacities 2- to 3-fold. They give two reasons for this: expansion is much cheaper as
compared to establishing new mills of equivalent size and they also want to achieve
better recovery by curtailing the number of crushing days. The recovery at the beginning
and at the tail-end of the season is low. Therefore it was considered to restrict the
crushing period to about 150 days to achieve a better rate of recovery and reduce the
variable cost of the season.

Incidentally, the hypothesis got some proof last year. Delay in commencement of
crushing in Sindh has been instrumental in achieving a higher recovery rate. Mills in
Sindh are thinking about beginning the crushing in November rather than in October.

Liquidity crunch

The commercial banks were directed by the State Bank of Pakistan to adjust by August
20, 1996, the balances of credit made available to the sugar industry against sugar
stocks. The action was based on information that the mills were hoarding the stocks.
Industry sources, however say that they prepare fortnightly reports pertaining to sugar
production, its lifting and stocks. Besides, the mills would never like to hoard the stocks
and their priority was to empty their godowns as quickly as possible as carrying a huge
inventory meant huge financial cost.

Existing problems

Sugar mills in Sindh pay quality premium regularly - while the mills located in the other
two province do not pay such premium - and paid Rs. 733 million to the farmers in
1995-96 alone resulting in additional cost of production.

47
Oblivious of the difficult situation faced by the sugar industry, federal, provincial and
local levels, persistently keep hanking for more revenue. Some of the revenue
measures imposed in Sindh lately are, imposition of market committee fee, road cess,
surcharge on sugarcane cess, varying rates of octroi, export tax and rawangi mahsool.

Although the Sindh High Court declared collection of rawangi mahsool unconstitutional,
bad in law and without authority, and the Supreme Court also dismissed the appeal, yet
the district councils recover this tax by a novel procedure.

New deterrents

The central excise division of the Central Board of Revenue vide SRO 329(I)96 dated
May 30, 1996 curtailed the period of sugar storage, without payment of duty, to six
months from the date of production. However, the collectorate has been given discretion
to extend the period.

The custom & central excise division of the CBR during June 1996 directed the sugar
industry to manage clearance of sugar on the basis of 'first-in-first-out'. According to the
Association sources, stacking of sugar bags and clearance strictly on the prescribed
lines is not manageable and practical. The instructions seem to have been issued by
error of judgment and common sense. It looks as if the person who has issued the
directive has never visited a sugar mill and does not understand its operation.

Structure of sugar industry in the country

While sugar production is primarily confined to two provinces, Sindh and Punjab, and a
small quantity in the NWFP, the product is consumed in all the four provinces and Azad
Jammun and Kashmir. Every year a substantial quantity is smuggled to Iran and
Afghanistan and even goes as far as the newly- liberated Central Asian states.

Traditionally, Sindh has always had surplus production and fed Balochistan, lower
Punjab and at times supplies were made to the NWFP, upper Punjab and Azad

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Kashmir. However, over the years Punjab has attained self-sufficiency. Since the price
of sugar is more or less uniform throughout the country, higher cost of freight incurred
on dispatches to far-flung areas squeezes the profit margins of mills located in Sindh.

Imported sugar also enters Pakistan via Karachi, Sindh and since most of the quantity is
sold in the wholesale markets in Karachi, the prices remain subdued in the province.

Although a number of new mills with large capacities have been established in the
Punjab the fact remains that cultivation of sugarcane and production of sugar in the
province involves higher costs. The yield per acre and recovery are also low. It is mainly
because the climatic conditions are not conducive for cultivation of sugarcane in the
province. The climate in Punjab is dry and the average temperature is high which
reduces the moisture content in the standing crop.

Sugarcane needs high temperature and humid atmosphere. The conditions prevailing in
the lower Sindh are most conducive and therefore the yield per acre and average sugar
recovery percentage is the highest in the province.

The industry experts and agriculturists are strongly of the view that shift of sugar
production from Sindh to Punjab is one of the major reasons for increase in its cost of
production in the country.

Key players

The sugar mills in Punjab which produced over 60,000 tonnes of sugar in 1995-96
included the names of Brothers, waqas, Shakarganj, Tandlianwal and Shahtaj. Waqas
crushed the highest quaintly of sugarcane and also produced the highest quantity of
sugar.

In Sindh, Dewan crushed the highest quantity of sugarcane and also produced the
largest quantity of sugar exceeding 100,000 tonnes. The other mills which produced
over 50,000 tonnes were Bawany, Faran, Habib, Shahmurad and Sindh Aabadgar.

Dewan Sugar Mills started sugarcane crushing on October 18 and ended April 14
during the last season. By crushing 983,489 tonnes sugarcane during the period with an
average recovery of 10.15% it produced 100,008 tonnes of sugar. In the half-yearly
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report the directors' review expressed on the increase of sugarcane prices which
touched new heights as most of the mills entered into an open warfare for procurement
of sugarcane. Dewan has been declaring modest cash dividend in the past in spite of
persistent increase in the procurement prices of sugarcane. The mills located in prime
sugarcane growing area of Sindh was established in 1987.

Habib Sugar Mills established in Nawabshah in 1963 has not only tripled its crushing
capacity using in-house expertise but is among the few sugar mills which have been
declaring handsome dividends in the past. During 143 days of crushing during 1995-96
season it produced over 60,000 tonnes of sugar with an average recovery of 9.2%. It
also produces industrial alcohol. The modifications in the distillery has helped to
streamline its operating efficiency.

Shahtaj Sugar Mills worked for 157 days during the last season and achieved the
highest level of crushing and sugar production since the unit was established. According
to directors' report the company could have crushed larger quantity had there been no
shortage of sugarcane. The unit is located in Punjab and also suffered from shortage of
sugarcane and increase in sugarcane support price.

Mirpurkhas Sugar Mills also suffered from the shortage of sugarcane and the number of
days it worked was reduced to 157 as against 178 days during the last season. The
company exported 14,600 tonnes of sugar from last year production and earned over
half a million dollars.

Noon Sugar Mills produced lesser quantity of sugar mainly due to limited availability of
sugarcane and disruption of supplies for two weeks. The company supplied 59,000
bags of 50 kg each to the government for sale through utility stores during the last
season.

Import of sugar

Import of sugar is a short-term measure to ensure availability and stabilize its price in
the domestic market. However, the recent experiment proved a futile effort. In spite of
import of sugar, the government failed in arresting the upward trend of sugar prices.

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The industry experts have a valid point that increase in support price and quality
premium have failed in increasing yield per acre and recovery percentage but the cost
of sugarcane per tonne has been increasing over the years pushing up the cost of
production of sugar. Therefore, the farmers should improve yield per acre or the
industry would not be able to sustain further losses.

Conclusion
At present there is no such organization in the world that is free from problem and
challenges. Every concern has to strive and struggle a lot to be more profitable and to
get more competitive edge.

The management of ALMOIZ INDUSTRIES LIMITED is taking strategic steps to enable

the mill to become strong and progressive institution. It is continuing to make efforts to
refine its products and operations to make them more compatible.

As the business and economic conditions remain uncertain, ALMOIZ INDUSTREIS

LIMITED continues to develop the new products like it has been doing in past.

Recommendations

 There should be a safety department in the company to assure the safety of the
workers.
 A regular training program should be a permanent policy of the management so
as to provide not only the required skill to employees but also to help them
keeping their skills up to date.
 Balance should be at a distance of 5 kilo-meters from the cutters
 There should be card system for every employee from helper to manager for
punctuality.
 Wages of workers should not be less than Rs3000 per month.
 There should be family quarters for all married workers.
 There should be a high school and a college as well for boys and girls in the
factory area.

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  There should be transport facility for workers within the district.
 All the employees especially those associated with production should be
encouraged, and should be involved in decision making and empowered to make
innovative decisions. In this way employees can add to the organization, a lot.
e.g. a new cost effective production technique can result in comparatively huge
profits

SKILLS AQUIERED

During my internship program I learned many things. I leaned about the practical life. By
working with the professionals I learned how to communicate to the officials. I have also learned
the following skills;

Message Construction

 Can construct effective informative presentations (in various media)

 Can construct effective persuasive messages (in various media)

 Able to use a variety of message forms

 Can construct policy making cases and arguments

 Effective oral communication skills

 Effective written communication skills

 Strong abilities in layout and visual presentation of messages Strong research

skills for developing supporting materials for reports, presentations, etc.

Interpersonal / Organizational Skills

 Effective group communication and teamwork skills

 Knowledgeable in group decision-making techniques

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  Knowledgeable of conflict management techniques

 Skilled/experienced in managing conflict, building teams, etc.

 Strong interpersonal skills

 Experienced in working in teams

 Reasoning logically and critically

Technology

 Ability to use various types of software

 Ability to use specific features of software in interesting ways (e.g. mail merge,
video clips on web pages, email survey research, etc.)

 Ability to use other (than computer/software) technology

Performance Ability

 Effective oral communication skills

 Effective written communication skills

Personal

 organized, self-motivated, people-oriented, goal driven, energetic

BIBLIOGRAPHY

 Accounts Department
 Finance Department
 http://www.investopedia.com/terms/f/fixed-asset-turnover.asp#axzz1VS8QYT7Q
 Business Finance by Gitman

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Encl:

 Copy of Balance Sheet

 Copy of Income statement
 Copy of Statement of Cash Flows
 Copy of Statement of Changes in Owner’s Equity

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