CASE STUDY

In my case study, I want to discuss about textile industry. Textile industry is divided in small and
large industries, these industries are very important for our country, because more than 70%
export revenue is generated from them, but currently many textile investors reduce there capital
investment on this sector.
Textile industry is the back bone of the country’s economy by virtue of its size, For a long time,
textile exports have played an important role in the economic development of our country.
Textile industry faces ups and downs in different time phases.. The textile industries have vast
opportunities. Textiles and Clothing, no doubt is the largest industrial sector of Pakistan from the
investment, employment and export point of view. It accounts for approximately 27% of total
industrial output, absorbs about 38% of industrial labor force, and contributes around 60% to
export earnings. Textile industry is the major source of export earnings for Pakistan. Its share in
the total merchandise exports of Pakistan is still above 50 percent. As far as the share in world
total fell from 2.6 percent in 1970 to 1.9 percent in 1980. But since then it is rising and reached
2.7 percent in 1997. Apparel (clothing) exports are relatively new for Pakistan. The textile sector
has observed 6% growth in its exports in eight months of 2006-07 fiscal. The total export of
textile group from July 2006 to February 2007 amounted to $7.006 billion in comparison with
$6.609 billion export of the same period last fiscal.
More than 90% small industries shut down there business or reduce there capital spending on
this sector since 2007, due to many problems like electricity and gas shortage, current economy
and political situation etc. Due to all these crisis small industries are unable to get sufficient
amount of credit from banks, but even if they get credit from banks then they have no hope to
return them due to current situation so they try to avoid it, which is one of the main reason of
there wind up or reduce there investment on the sector.
Annual reports of Textile mills show that the export of home textile and garments are decreasing
but on the other hand the export of raw material cotton yarn and grey cloth are increasing
According to PTEA (Pakistan textile export association) many investor reduce there capital
investment on the different textile projects, specially on finished goods, due to the following
factors.
1EXPORT OF RAW MATERIAL
Major portion of raw material such as
Yarn
Polyester
Fiber,
Dyes etc

Is exported rather than utilizing for producing high value-added products like fabrics, or
garments. In later the investor has to purchase on high cost which increase the cost of
manufacturing

2High rates of Electricity and Gas

Compared with Bangladesh, Indonesia and China the cost of electricity and gas in
Pakistan is almost double and hence the increase in our production cost
 Cost of Gas
Fertilizer sector is provided gas at subsidized rates of Rs.87/- while Rs.262/- to
textile sector.

Cost of Electricity
Electricity is also provided on high cost to industrial units making Pakistani
exports uncompetitive with comparison to rival countries. A comparison is
appended below:-

Pakistan Bangladesh Indonesia China

Power (Cents/Kwh) 6.9 3.4 3.6 -3.58

3Cost of Petroleum
The petroleum products are important part of cost of production. The petroleum expenses
are incurred at different stages from purchases of raw material to processing &
manufacturing of the export goods & at the final stage of transportation from Factory to
port & shipment of buyer. High the cost of petroleum raises the charges of shipment to
consignee.

4Taxes and Levies

Large number of taxes and levies at federal, provincial and local level has added huge
burden on the cost of manufacturing goods.

5Productivity output shortage

Productivity output shortage of our workers is comparatively less. in China workers are
on duty for 12 hours and are giving out put one and half time more than our workers.

6Carriage Expenses
Rates of inward and outward carriage as well as sea freight charges are frequently
increased in the country which is also a factor contributing towards increase in cost.

7COST OF TRANSPORTATION
The cost of transportation both inland cargo charges up to the port of dispatch & sea
freight the charges of maritime services besides fuel & bunker surcharges heavily over-
burden the cost of exportable items from Pakistan.

8EXPROT ORIENTED MARKETING

The biggest weakness of Pakistani export trade is the lack of aggressive marketing. The
Pakistani exports have not fully come out of the old outdated mode of export marketing.

9RESEARCH & DEVELOPMENT

The research & development activity for promotion of exports is presently very low. In
the new international trade regime, research & development have assumed great
importance & have become necessary for survival for export trade.
 10CREDIT FACILITY FOR INVESTORS
The industrial activity in the Country is picking up. The provincial & federal
governments are settings up industrial estates, value-added cities & garments cities;
however, the cost of land in these projects is on the higher side which has disenchanted
the prospective investors.

11LACK OF SKILLED WORKERS & TECHNICIANS

While the industry in the country is up-grading & modernizing its manufacturing &
productive techniques with new & state of the art machinery, but there is not a lot of
skilled labour available to operate this technology.

12DUTY ON MACHINERY IMPORT

5% import duty on machinery is hindering the industrialization & balancing
modernization & replenishment projects of export based industry

EXTERNAL FACTORS

13TRADE BARRIERS
The exports of the country are facing tariff barriers in Europe & American markets such
as antidumping duty & excessive custom duties. and also include

14High Tariff rates on Pakistani textile by USA.

 CRESCENT TEXTILE
Company History

Upon incorporation of the company on May 01, 1950, Mr. Haji Muhammad Shafi was appointed
as the 1st Chief Executive who served the company in this position till he breathed his last in
1978.

Under his leadership, the company managed to produce quality products as per specification of
the buyers in international market and started exporting its products in 1956. Progressive
approach and prudent management policies of Mr. Nasir Shafi, Deputy Chief Executive enabled
the company to become the 1st composite textile company of Pakistan which received ISO 9002
certification on July 07, 1997. Company has also been certified by “Oeko-tex standard 100” on
December 13, 2000. His personal interest in development of the management systems for the
company helped in evolution of the corporate culture within the company. He also created a
happy blend of partnership with his elder brother in running the affairs of the company in highly
disciplined manner.

The main architect of the Crestex business expansion its Chief Executive, Mr. Muhammad
Anwar, who took over this position after the death of his father. He has led the company from the
front. It was he who not only managed to win awards for the company on account of highest
sales of yarn and cloth in 1987-88, 1993-94 and 1994-95 but also has the distinction of
recognition as "The Businessman of the Year" from the Pakistan Federation of Chambers of
Commerce and Industry. Crestex has also been awarded the
“President of Pakistan Export Trophy” for three consecutive years in the mid nineties.
CRESCENT TEXTILE MILLS LIMITED IS A FAISALABAD BASED TEXTILE UNIT. THE COMPANY WAS LISTED AT

STOCK EXCHANGE IN 1951. CRESCENT TEXTILE MILLS LIMITED IS ENGAGED IN THE BUSINESS OF TEXTILE

MANUFACTURING OF SPINNING, WEAVING, DYEING, BLEACHING, PRINTING, MADE UPS AND OTHERWISE DEALING

IN YARN AND FABRICS.

AS A COMPOSITE UNIT HAVING ISO-9002 CERTIFICATION ON 1997, WHICH IS ENGAGED IN SPINNING, WEAVING,
PROCESSING AND IS ONE OF THE LARGEST EXPORTERS OF COTTON YARN IN PAKISTAN. THE PIONEER OF CRESCENT
TEXTILE MILLS WAS MIAN MUHAMMAD SHAFI, WHO BELONGED TO CHINIOT. CRESCENT TEXTILE MILLS
STARTED AS A WEAVING UNIT WITH 500 SEMI AUTO LOOMS. NOW THE PRESENT PICTURE OF CRESCENT TEXTILE
MILLS IS THAT IT IS THE ONE OF THE LARGEST TEXTILE UNITS IN PAKISTAN.
THE ELECTRICITY CONSUMED BY CRESCENT TEXTILE MILLS IS PRODUCED BY ITS OWN POWER STATION LOCATED
WITHIN THE BOUNDARY OF CRESCENT TEXTILE MILLS. ALL SPINNING, WEAVING, TOWEL, PROCESSING AND

GARMENT UNITS ARE LOCATED WITHIN THE SAME BOUNDARY.

CRESCENT TEXTILE MILLS WAS CONVERTED INTO A PUBLIC LIMITED COMPANY IN 1958. THE COMPANY IN

EFFECTIVELY CONTROLLED BY THE CRESCENT GROUP. IN THE CONTEXT OF PAKISTAN, CRESCENT TEXTILE MILLS
STANDS OUT FOR THE COMPOSITE NATURE OF US ACTIVITIES. SUPERIOR QUALITY STANDARDS WITH ISO 9002
CERTIFICATE MANAGEMENT IS COMMITTED TO EXPAND INTO THE HIGHER VALUE ADDED AREAS OF INDUSTRY.

COMPANY HAS ALSO BEEN CERTIFIED BY "OEKO-TEX STANDARD 100" ON

DECEMBER 13, 2000. THE COMPANY ALSO WIN AWARD OF HIGHEST SALE OF YARN AND CLOTH IN 1987-88,
1993-94 AND 1994-95. THE COMPANY IS THE WINNER OF "PRESIDENT OF PAKISTAN EXPORT TROPHY"
FROM FPCCI FOR HIGHEST EXPORTS, SPECIAL MERIT, BEST EXPORT PERFORMANCE AWARDS SINCE 1986-87.
CHIEF EXECUTIVE (MR. M.ANWAR) HAS BEEN HONORED WITH GOLD MEDAL FOR BEST "THE BUSINESSMAN
OF THE YEAR" AWARDS IN 1993-94 AND IN 1994-95.
CRESCENT TEXTILE MILLS IS PLAYING A VITAL ROLE IN THE DEVELOPMENT OF PAKISTAN SPECIALLY BY EARNING
A HUGE FOREIGN EXCHANGE THROUGH EXPORTS. CRESCENT TEXTILE MILLS SELLS MORE THAN 60% OF ITS

PRODUCTS TO THE FOREIGN MARKET. THREE YEARS BEFORE CRESCENT TEXTILE MILLS WAS AWARDED THE

PRESIDENT OF PAKISTAN TROPHY FOR EXPORT, GIVEN TO THE LARGEST EXPORTER FROM PAKISTAN IN ANY

CATEGORY.

Product and Services

CTM exports more than 80% of its products and remaining they sell in the local market. They
sell those products in the local market, which produce in cross quality than the export order. All
the products are produced according to the requirement of customer order. CTM has also the
distinction of being the only private Sector Company in the Textile sector, which has entered
into a partnership with M/s DCHINO, produce and export towels.
Yarn Products
1Cotton Yarn
2Polyester cotton

Fabric Products
1Greig Fabric
2Processed Fabric
3Bed Sheets
4High Quality fabric
5Made ups

CRESENT TEXTILE EXPORT ANALYSIS

overall yarn export is increased as compared with last year, The annual 2007 report of crescent
textile shows that the export of the raw material like fiber and gray cloth are increasing while the
stitching product are decreasing. Crescent has reduce its capital budgeting on different finished
goods projects, and invest them in some other projects, due to many reasons
1) Have to pay higher gas rates as compared with their international competitors, China, India,
Bangladesh. Therefore they reduce there investment on finished goods this year

2) Due to the current economy position it is difficult for CTM (Crescent textile mill) to get
sufficient credit from banks to invest in finished goods projects therefore export of grey cloth
and raw material is increasing. Rather than finished goods. They are investing lesser capital
projects.
3) Government increase 5% duty on the import of new machinery, which is now becoming
hurdle towards finished product, because there is a stiff competition in international market, you
have to be one step a head of your competitors, if you will not invest on new technology or
machinery than how can you compete them, exactly the case with crescent, they are not investing
more on new machinery due to high cost.

4) Availability of raw material is also a problem, although CTM store raw material in there store
room but at the end of the session when the stock is finished than it is difficult to get it. Due to
this reason they cut down there finished goods quantity.
5) our labor is not much productive and skill full, therefore as we go from spinning to finished
product there efficiency decrease with every step they are not much educated as well, so now
crescent is trying to reduce these steps more towards spinning and weaving.
 FINANCIAL ANALYSIS
The Crescent Textile Mills
Balance Sheet
As on June, 30th
(Rupees in ‘000)
2007 2008
Equity and Liabilities:
Share capital and reserves
Authorized share capital 1000000 1000000
100000000 shares of Rs.10 each
Issued subscribed & paid up capital 406693 447362
Revenue reserves 1628860 1676007
Unrealized gain on revaluation of investment 426266 865863
Total Equity 2461819 2989232
Surplus on revaluation of fixed assets --------- 1640409
Non Current Liabilities
Deferred income on sale & lease back of fixed 683 137
assets
Long term financing 1209833 953333
Term finance certificates 399940 299955
Bills payable ----------- 420419
Liabilities against assets subject to finance lease 13351 ----------
Deferred tax liabilities 89361 70854
1713168 1744698
Current liabilities
Trade &other payables 224361 321688
Accrued interest on loans financing 85002 114319
Short term finances 2322238 3070846
Current portion of long term liabilities 325169 369867
2956770 3876720
Total Liabilities 4669938 5621418
Total equity & liabilities 7131757 10251059
Assets
Non Current assets
Property plant & equipment 1820119 4404416
Asset subject to finance lease-tangible 105869 36414
Capital work in progress 226289 6589
4447419 2152277
Long term investment available for sale 1120161 1153175
Long term loans and advances 1364480 1491611
Long term deposits & prepayments 5459 3235
4675391 7062426
Current assets
Stores, spares & loose tools 192039 203450
Stock in trade 962695 978266
Trade debts 994676 1258121
Loans and advances 79980 76950
Trade deposits, prepayments 22745 5346
Balance with statutory authorities 55304 54186
Interest accrued 2731 7605
Other receivables 20910 71564
Short term investments --------- 498644
Sales tax recoverable 84716 27136
Cash & bank balances 40570 7365
2456366 3188633
Total assets 7131757 10251059

1) As we can see in liabilities that CTM has reduce there long term investment due to
current market situation. They are now investing on short term projects, rather in long
term projects.
2) As in the asset side we can see that they increase there long tern advances and loans,
which shows they are now investing more on other projects

The Crescent Textile Mills

Profit & Loss Account
As On June, 30th
(Rupees in ‘000)
2007 2008
Sales net 4973370 5730397

Cost of sales 4449094 5201126

Gross profit 524276 529271

Distribution cost 207011 232050

Administrative expenses 139521 119556

Other operating expenses 9931 93546

356473 445352
167803 83919
Other operating income 172137 497587
339940 581506
Financial cost 356960 464397
Profit /(loss) before taxation (17020) 117109
Taxation 40000 29301
Profit /(loss) after taxation (57020) 87808
Earning /loss per share- basic & diluted (in rupee) (1.27) 1.96

HORIZONTAL ANALYSIS

An analysis of percentage financial statements where all balance sheet or income statement
figures for a base year equal 100% and subsequent financial statement items are expressed as
percentages of their values in the base year. It is also called Index Analysis.

The Crescent Textile Mills

Balance Sheet
As on June, 30th
(Rupees in ‘000)
 2007 2008
Equity and Liabilities:
Share capital and reserves
Authorized share capital 100% 100%
100000000 shares of Rs.10 each
Issued subscribed & paid up capital 100% 109.99%
Revenue reserves 100% 102.89%
Unrealized gain on revaluation of investment 100% 203.13%
Total Equity 100% 121.42%
Surplus on revaluation of fixed assets --------- ----------
Non Current Liabilities
Deferred income on sale & lease back of fixed assets 100% 20.06%
Long term financing 100% 78.79%
Term finance certificates 100% 75%
Bills payable ----------- ----------
Liabilities against assets subject to finance lease 100% 0.00%
Deferred tax liabilities 100% 79.29%
100% 101.84%
Current liabilities
Trade &other payables 100% 143.38%
Accrued interest on loans financing 100% 134.49%
Short term finances 100% 132.24%
Current portion of long term liabilities 100% 113.75%
100% 131.11%
Total Liabilities 100% 120.37%
Total equity & liabilities 100% 143.74%
Assets
Non Current assets
Property plant & equipment 100% 241.99%
Asset subject to finance lease-tangible 100% 34.39%
Capital work in progress 100% 2.91%
100% 48.39%
Long term investment available for sale 100% 102.95%
Long term loans and advances 100% 109.32%
Long term deposits & prepayments 100% 59.26%
100% 151.06%
Current assets
Stores, spares & loose tools 100% 105.94%
Stock in trade 100% 101.62%
Trade debts 100% 126.49%
Loans and advances 100% 96.21%
Trade deposits, prepayments 100% 23.50%
Balance with statutory authorities 100% 97.98%
Interest accrued 100% 278.47%
Other receivables 100% 342.26%
Short term investments --------- ---------
Sales tax recoverable 100% 32.03%
Cash & bank balances 100% 18.15%
100% 129.81%
Total assets 100% 143.74%

INTERPRETATION

Horizontal analysis is done using fixed base method. In this analysis, values of the year 2007are
taken as base.
Formula
= Current Year x100
Base year
conclusion

We can also see from this analysis that long term liabilities are decrease as compared with last
year and long term advances on other projects increases.

The Crescent Textile Mills

Profit & Loss Account
As On June, 30th
(Rupees in ‘000)
2007 2008
Sales net 100% 115.22%

Cost of sales 100% 116.90%

Gross profit 100% 100.95%

Distribution cost 100% 112.09%

Administrative expenses 100% 85.69%

Other operating expenses 100% 941.96%

100% 124.93%

100% 50.01%

Other operating income 100% 289.06%

100% 171.06%

Financial cost 100% 130.09%

Profit /(loss) before taxation (100%) 688.07%

Taxation 100% 73.25%

Profit /(loss) after taxation (100%) 153.99%

Earning /loss per share- basic & diluted (in rupee) (100%) 154.33%

VERTICAL ANALYSIS

Vertical analysis helps us to show the actual increase or decrease in various items of Profit and
Loss Statement with regard to a specific base as Markup Interest Earned and for balance sheet
items Total Assets are taken as base. This analysis is also called Common- size Analysis.
The Crescent Textile Mills
Balance Sheet
As on June, 30th
(Rupees in ‘000)
2007 2008
Equity and Liabilities:
Share capital and reserves
Authorized share capital 140.21% 9.76%
100000000 shares of Rs.10 each
Issued subscribed & paid up capital 5.70% 4.36%
Revenue reserves 22.84% 16.35%
Unrealized gain on revaluation of investment 5.98% 8.45%
Total Equity 34.52% 29.16%
Surplus on revaluation of fixed assets 0.00% 16.00%
Non Current Liabilities
Deferred income on sale & lease back of fixed 0.009% 0.001%
assets
Long term financing 16.96% 9.29%
Term finance certificates 5.61% 2.93%
Bills payable 0.00% 4.10%
Liabilities against assets subject to finance lease 0.19% 0.00%
Deferred tax liabilities 1.25% 0.69%
24.02% 17.02%
Current liabilities
Trade &other payables 3.15% 3.14%
Accrued interest on loans financing 1.19% 1.12%
Short term finances 32.56% 29.96%
Current portion of long term liabilities 4.56% 3.61%
41.46% 37.82%
Total Liabilities 65.48% 54.84%
Total equity & liabilities 100% 100%
Assets
Non Current assets
Property plant & equipment 25.52% 42.97%
Asset subject to finance lease-tangible 1.48% 0.36%
Capital work in progress 3.17% 0.06%
62.36% 20.99%
Long term investment available for sale 15.71% 11.25%
Long term loans and advances 19.13% 14.55%
Long term deposits & prepayments 0.08% 0.03%
65.56% 68.89%
Current assets
Stores, spares & loose tools 2.69% 1.98%
Stock in trade 13.49% 9.54%
Trade debts 13.95% 12.27%
Loans and advances 1.12% 0.75%
Trade deposits, prepayments 0.32% 0.05%
Balance with statutory authorities 0.78% 0.53%
Interest accrued 0.04% 0.07%
Other receivables 0.29% 0.69%
Short term investments 0.00% 4.86%
Sales tax recoverable 1.19% 0.26%
Cash & bank balances 0.57% 0.07%
34.44% 31.11%
Total assets 100% 100%

The Crescent Textile Mills

Profit & Loss Account
As On June, 30th
(Rupees in ‘000)
2007 2008
Sales net 100% 5730397

Cost of sales 89.46% 90.76%

Gross profit 10.54% 9.24%

Distribution cost 4.16% 4.05%

Administrative expenses 2.81% 2.09%

Other operating expenses 0.19% 1.63%

7.17% 7.77%
3.37% 1.46%
Other operating income 3.46% 8.68%
6.84% 10.15%
Financial cost 7.18% 8.10%
Profit /(loss) before taxation (0.34%) 2.04%
Taxation 0.80% 0.51%
Profit /(loss) after taxation (1.15%) 1.53%