Analysis of Financial Statement

Azgard 9 Limited
30 _05 _2011
Submitted to
Mr. Umar Safdar Kayani
Submitted By
Faizan Idrees
(Ciit/Sp09-MBE-014-LHR)
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Acknowledgment

First of all, I would like to say Alhamdulillah, for giving me the strength and health to do this
project work until it done Not forgotten to my family for providing everything, such as money, to
buy anything that are related to this project work and their advise, which is the most needed for
this project. Internet, books, computers and all that as my source to complete this project. They
also supported me and encouraged me to complete this task so that I will not procrastinate in
doing it.

Then I would like to thank my teacher Mr. Umar Safdar Kayani for guiding me throughout this
project. I had some difficulties in doing this task, but he taught me patiently until i knew what to
do. He tried and tried to teach me until i understand what i supposed to do with the project work.

Last but not least, my friends who were sharing our ideas. They were helpful that when we
combined and discussed together, we had this task done.

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Tables of contents

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Executive summary

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Introduction
The Origins and the inception in the ancient legend “AZGARD” was one of none worlds in Norse
Mythology- it was protected by “Heimdall” the son of nine different Mothers each attributing him with a
particular skill and power – and thus He would protect Azgard from the powers that be.

The Azgard Nine Limited Group was started as a family business over four generations ago. The Sheikh
family, Now in its Forth generation, in one of the oldest business families in the sub continent with
experience in many different sectors and having a proven track record of successful leadership in four
continents. The gamily began its first operations in 1886 in shamkot, in the Asian sub continent.

Although, now, A Public company the family still remains behind the company in every way, supporting
and nurturing its growth into the future and beyond.

The current specialized yarn operation was set up in 1972 with the open end spinning and denim
weaving operations following in 1995. The final frontier was the garments operation, which came in to
being in 1997.

The concept behind the group’s textile ambitions was to be a fully vertical apparel solution provider
based in a country that would be able to maintain its competitive advantage in this field for the yards to
come (Pakistan is the fourth largest denim producer in the world with an annual production of
200,000,000 meters). This has now been achieved and Azgard in able to offer these services as a single
source supplier for all denim and specialized yarn customers.

The future is squeezing the brand customers toward a sourcing solution that stems from as small a
global map as will allow. We believe it is feasible, in order to not be spread too thin’, to consolidate a
position in as few regions as possible in the quest of r practical and economical global sourcing – Azgard
Nine limited is that perfect vehicle which can accommodate and achieve this position, therefore
realizing the vision that was incepted so many years ago by the guardians of the Azgard group bring the
resultant advantages to you the customer.

Mission
To retain a leadership position as the largest value added denim Products Company in Pakistan.

Vision
To become a major global fashion apparel company.

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Country analysis
Pakistan is a developing country and its economy is the world’s 27 th largest economy based on its
purchasing power. However, the country remained impoverished due to internal political disturbances
and negligible foreign investment, since independence. With rise in development spending by
Islamabad, the country’s poverty levels reduced by 10% from the year 2001 to 2007. The economy grew
between 2004-07 due to rise in GDP from 5 to 8%. This was largely due to development in industrial and
services sector irrespective of severe electricity shortfalls. However, the year 2007 witnessed a lot of
political and economic instability leading to depreciation of Pakistani rupee. The growth of the economy
was affected once again during the 2008 global economic recession.

Inflation remains the top concern among the public, climbing from 7.7% in 2007 to more than 13% in
2010. In addition, the Pakistani rupee has depreciated since 2007 as a result of political and economic
instability. The government agreed to an International Monetary Fund Standby Arrangement in
November 2008 in response to a balance of payments crisis, but during 2009-10 its current account
strengthened and foreign exchange reserves stabilized - largely because of lower oil prices and record
remittances from workers abroad. Record floods in July-August 2010 lowered agricultural output and
contributed to a jump in inflation, and reconstruction costs will strain the limited resources of the
government. Textiles account for most of Pakistan's export earnings, but Pakistan's failure to expand a
viable export base for other manufactures has left the country vulnerable to shifts in world demand.
Other long term challenges include expanding investment in education, healthcare, and electricity
production, and reducing dependence on foreign donors.

GDP (purchasing power parity)

 $451.2 billion (2010 est.)
 $439.4 billion (2009 est.)

GDP (official exchange rate)

 $174.8 billion (2010 est.)

GDP (Real growth rate)

 2.7% (2010 est.)
 4.3% (2009 est.)

GDP (per capita) PPP

 $2,400 (2010 est.)
 $2,400 (2009 est.)

GDP (composition by sector)

 Agriculture: 21.8%
 Industry: 23.6%
 Services: 54.6% (2010 est.)

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Labor force
55.77 million

 Extensive export of labor, mostly to the Middle East, and use of child labor (2010 est.)

Labor force _ by occupation

 Agriculture: 43%
 Industry: 20.3%
 Services: 36.6% (2005 est.)

Unemployment rate
 15% (2010 est.)
 14% (2009 est.)

Population below poverty line

24% (FY05/06 est.)

Household income or consumption by percentage share

 lowest 10%: 3.9%
 highest 10%: 26.5% (2005)

Distribution of family income

 30.6 (FY07/08)
 41 (FY98/99)

Investment (gross fixed)

15% of GDP (2010 est.)

Budget
 Revenues: $25.33 billion
 Expenditures: $36.24 billion (2010 est.)

Inflation rate (consumer prices)

 13.4% (2010 est.)
 13.6% (2009 est.)

Central bank discount rate

 12.5% (31 December 2009)
 15% (31 December 2008)

Market value of publicly traded share

 $33.24 billion (31 December 2009)
 $23.49 billion (31 December 2008)

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Agriculture_ products
Cotton, wheat, rice, sugarcane, fruits, vegetables; milk, beef, mutton, eggs

Industries
Textiles and apparel, food processing, pharmaceuticals, construction materials, paper products,
fertilizer, shrimp

Industrial production growth rate

4.9% (2010 est.)

Electricity _ Production
90.8 billion kWh (2007 est.)

Electricity _ consumption
72.2 billion kWh (2007 est.)

Oil _ production
59,140 bbl/day (2009 est.)

Oil _ consumption
373,000 bbl/day (2009 est.)

Oil _ proved reserve

436.2 million bbl (1 January 2010 est.)

Natural gas _ production

37.5 billion cu m (2008 est.)

Natural gas _ consumption

37.5 billion cu m (2008 est.)

Natural gas _ proved reserve

840.2 billion cu m (1 January 2010 est.)

Current account balance

 $-2.641 billion (2010 est.)
 $-3.583 billion (2009 est.)

Exports
 $20.29 billion (2010 est.)
 $18.33 billion (2009 est.)

Exports _ commodities
Textiles (garments, bed linen, cotton cloth, yarn), rice, leather goods, sports goods, chemicals,
manufactures, carpets and rugs

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Exports _ Partners
US 15.87%, UAE 12.35%, Afghanistan 8.48%, UK 4.7%, China 4.44% (2009)

Imports
 $32.71 billion (2010 est.)
 $28.53 billion (2009 est.)

Imports _ commodities
Petroleum, petroleum products, machinery, plastics, transportation equipment, edible oils, paper and
paperboard, iron and steel, tea

Imports _ partners
China 15.35%, Saudi Arabia 10.54%, UAE 9.8%, US 4.81%, Kuwait 4.73%, Malaysia 4.43%, India 4.02%
(2009)

Reserve of foreign exchange and gold

 $16.1 billion (31 December 2010 est.)
 $13.77 billion (31 December 2009 est.)

Debt _ external
 $57.21 billion (31 December 2010 est.)
 $53.62 billion (31 December 2009 est.)

Stock of direct foreign investment _ at home

 $30.09 billion (31 December 2010 est.)
 $28.09 billion (31 December 2009 est.)

Stock of direct foreign investment _ abroad

 $1.047 billion (31 December 2010 est.)
 $1.017 billion (31 December 2009 est.)

Exchange rates
Pakistani rupees (PKR) per US dollar -

 85.27 (2010)
 81.71 (2009)
 70.64 (2008)
 60.6295 (2007)
 60.35 (2006)

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Industry Analysis

TEXTILE INDUSTRY OF PAKISTAN

When we think of manufacturing industry in Pakistan, it is the textile industry that immediately comes
to mid that is playing an important position in terms of the employment generation and value added
special contribution towards the exports. The textile industry which is endowed its strong base of raw
material has started its journey from non existence in 1947 with meager size of 78000 spindles and
merely 3000 looms that is too in the unorganized sector, with only one textile unit and it could supply
only 8% of the domestic demand derived from its population of 76 million people. The industry has gone
through a long way and now possesses 443 units, 8.4 million spindles and 166,000 rotors, 20,000
shuttles less looms, 200,000 power looms, over 600 processing units and over 2500 garments units. The
table given on the next page shows the contributions of textile sector in the economic development of
the country.

Economic Environment
The textile industry is one of the most important sectors of Pakistan. It contributes significantly to the
country's GDP, exports as well as employment. It is, in fact, the backbone of the Pakistani economy.

Established capacity
The textile industry of Pakistan has a total established spinning capacity of 1550 million kgs of yarn,
weaving capacity of 4368 million square metres of fabric and finishing capacity of 4000 million square
metres. The industry has a production capacity of 670 million units of garments, 400 million units of
knitwear and 53 million kgs of towels.

The industry has a total of 1221 units engaged in ginning and 442 units engaged in spinning. There are
around 124 large units that undertake weaving and 425 small units. There are around 20600 power
looms in operation in the industry. The industry also houses around 10 large finishing units and 625
small units.

Pakistan's textile industry has about 50 large and 2500 small garment manufacturing units. Moreover, it
also houses around 600 knitwear-producing units and 400 towel- producing units.

Contribution to exports
According to recent figures, the Pakistan textile industry contributes more than 60% to the country's
total exports, which amounts to around 5.2 billion US dollars. The industry contributes around 46% to
the total output produced in the country. In Asia, Pakistan is the 8th largest exporter of textile products.

Contribution to GDP and employment

The contribution of this industry to the total GDP is 8.5%. It provides employment to 38% of the work
force in the country, which amounts to a figure of 15 million. However, the proportion of skilled labor is
very less as compared to that of unskilled labor.

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PORTER’S FIVE FORCES

Azgard9 is a Pakistani textile manufacturing and marketing company has a primary target to textile for
an analysis using Michael Porter’s 5-Forces Model (“5-Forces”).

We have applied the 5-Forces analysis into the respective divisions:

1. Supplier Power
2. Barriers to Entry
3. Threat of Substitutes
4. Buyer Power and Degree of Rivalry
5. Competitive rivalry

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Suppliers Power
Suppliers in this industry are not concentrated. They act as separate groups competing for the same
project through the bid system that is prevalent in textile Industry. Volume is of significant concern. The
Azgard9 is the large textile industry and is not affected in terms of supply volume giving suppliers any
leverage.

Buyer Power
Azgard9 is a premier brand and nationwide presence ensures sellout production to Pakistani and
international customers, due to flexible demand delivery and low down payments.

Buyers have power over when they are concentrated, purchase a significant portion of new production,
and pose a credible threat to purchases from competitors.

Barriers to entry
Identifying the possibility and probability of new entrants in an industry is critical because they can
intrude on market share and profitability of existing competitors. Economies of scale, product
differentiation, capital requirements, switching costs and government policy all affect the textile
Industry.

The economies of scale realized by azgard9 make it almost impossible for new entrants. The
governmental red tape that must be overcome in this industry is paramount to the success of a
prospective textile Company.

Threats of substitute
The threat of substitutes entails a consideration of such things as switching costs, buyer inclination to
substitute and the price-performance trade-off of substitutes. Most individuals would like to make an
investment with the purchase of a particular product of an organization.

Degree of competitive rivalry

The growth rate of the textile market is tremendous especially azgard9; however, it is limited in many
respects. The growth for the demand and the production is enormous. We believe the growth in the
actual number of competitors is merely a related effect of the costly barriers to entry. In recent days, the
situation of textile industry is not very good as shutting down of power looms due to electricity disaster.

The market is both mature and developing at the same time. The maturity of the market can be
illustrated by the Interventions and helps to carry out a cost benefit analysis of a policy provided that
governments know the tradeoff between efficiency and non efficiency goals.

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External Environment

Pest Analysis

1. Political Changes
Political factors include government regulations and legal issues and define both formal and informal
rules under which the firms operate. The rule and regulations that the TEXTILE industry follows are as
follows:

Tax Policies
 General sales tax is enhanced from 15 % to 16 % including sales tax services under the Provincial
Sales Tax Ordinance, etc.
 Due to the increase in the general rates of sales tax, the rate sales tax on the natural gas has
been increased from 24 % to 25 %.
 The government has put special excise duty of 2 % as well.
 Duty on the services such as goods insurance, fire Insurance, theft Insurance, marine Insurance,
other Insurance, non-fund services provided by banking companies or non-banking companies
has been enhanced from 5 % to 10 %.
 The company confident that all pending issues will be ultimately resolved without any
additional liability.
The rate of tax for the collection at the import stage for all imports of goods has been reduced
to 2 % from 5 %.

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Employment Laws:
The labor policy issued by the Government of Pakistan lays down the parameters for the growth of trade
unionism, the protection of workers' rights, the settlement of industrial disputes, and the redress of
workers' grievances.

The policy also provides for the compliance with international labor standards ratified by Pakistan. At
present, the labor policy as approved in year 2002 is in force.

Environment regulations
At present Pakistan textile industries follow the Pakistan Environmental Protection Act, 1997.

 The Pakistan government has now become conscious of the environmental pollution.
 But still there are many factors that are prevailing up till now and are the cause of the unrest.
 Moreover, the geographical region where Pakistan is located, having the neighbors such as
India and Afghanistan, and the pertaining international situation regarding the war against
terrorism, not only the direct investors have stepped back even the investors who have made
investments in the country are backing up. These factors affected the textile industries in
Pakistan.

2. Economic Factors:

Pakistan, with a population of about 18 million people has undergone a remarkable macro economic
growth during the last few years but the main and the core problems of the economy are still
unsolved. Inflation is one of the core problems. The inflation in the year 2008 has recorded to be the
highest according to the Federal Bureau of Statistic. The consumers are mostly pessimistic about the
economic conditions of the country as the economy is going in downward direction these days.
Economic factors cannot be excluded for operating any business including textile. Following are the
factors affecting the macro economy.

 Economic growth
 Inflation rate
 Interest rates
 Exchange rate

Economic Growth
The textile sector growth continued 7.85% in 2008-09, which is slightly more moderate than 7.12% for
the year 2007. Economic conditions are not very sound. The increasing inflation, imposition of new
taxes, rising fuel charges and changes in government economic policies has discouraged investment in
textile.

If Pakistan keeps on getting better grants and loans waivers or if any other economy boosting factor
such as controlled inflation rate and economic growth take place, it will benefit the entire industry and
also for azgard9 as well.

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Inflation Rate
Inflation is one of these core problems. This thing is really hurting the purchasing power of Pakistani
consumers. The inflation in year 2009 has recorded to be the highest according to the Federal Bureau of
Statistics. Consumer Price jumped to 17.86% in March 2009 according to the statistics given by Federal
Bureau of Statistics.

Interest rate
The monetary policy of Pakistan is controlled by the state bank of Pakistan. The state bank, in order to
control the inflation has taken measures and tightened up the monetary policies. Pakistan has raised its
main interest rate to 13.5 % to help fight inflation.

Exchange Rate
The exchange rates of Pakistan with respect to the U.S. dollar, has declined. The Pakistani rupee has
depreciated since the proclamation of emergency rule in November 2007 and especially in current
democratic govt. this rate is at very low side. In other words we can say that the value of the rupee has
fallen as the time passed by.

3. Social Change
 Health consciousness among the people of Pakistan has been increasing day by day.
 The citizens of Pakistan are getting aware of their duties in order to maintain the healthy
environment.
 Government is taking several steps in order to educate, how important it is for the people to
live in the healthy environment.
 The government discourages the operation of the industries within the city by charging these
factories with environmental charges. By the passage of time, the people as well along with the
government are discouraging such activities and demand for clean environment.

4. Technology Change
• The Pakistani industries not only have to compete among themselves but with the international
market as well.

• Pakistan is steadily automating particularly its manufacturing sectors to stir quality production and
ensure skilled management, as it would ensure a good place for the country in the global competitive
market.

• Technological factors can lower barriers to entry, reduce minimum efficient production levels, and
influence outsourcing decisions.

In recent years, technology has been seen to be progressing at very fast rate all over the world. It has
helped to raise income and alleviate poverty in the developing countries.

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Conclusion (PEST analysis and Azgard9)

As for as textile industry is concerned, there is much competition in political, economical, social and
technological factors especially price competition.

The political stability in Pakistan is at unrest. Due to this, the textile Factories along with Azgard9 are
facing problems regarding the investments they have made. The stock market has shown sheer down
fall since the political unrest. The day after day terrorist attacks and the suicidal bombing have caused
the unrest in the country as well. Along with creating a sense of non security among the citizens of
Pakistan, these activities have proved to be hazardous to the textile sector as well.

The minimum wages has been increased by the government of Pakistan which is another increase in the
expense on behalf of the textile producers. There aren’t specified strategies or labor laws that protect
the labor wages at the factory. Azgard9 considers employee satisfaction as a major contributor to their
success in the market and therefore has undertaken extensive planning to ensure the employed labor
force is happy with their salary packages.

The investors in the textile sector are well aware of the importance of technology in the present day and
they quite well realize the returns they can get using advance technologies.

Internal Environment SWOT Analysis

The SWOT analysis provides information that is helpful in matching the firm's resources and capabilities
to the competitive environment in which it operates. As such, it is instrumental in strategy formulation
and selection. The following diagram shows how a SWOT analysis fits into an environmental scan.

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Strength:
 The production of the textile products
(Cotton, Yarn, and Polyester) in Azgard9
is completely automated.
 The company has imported the
machinery for spinning process. The use
of this advance machinery has helped
the company produce good quality
garments with much efficiency.
 Azgard9 factory is the only garments
factory that produces both readymade
garments and finished products of yarn.
 Azgard9, having a good brand image,
has the advantage to charge their
customers at a higher price than the
other competitors
 The price of Azgard9 garments is high in the international market as compared to its local
competitors who are involved in the exports as well.
 The company brand image is very strong in the market, both local and international.
 The Azgard9 factory compensates its employees, better than all the other industries.

Weakness
The absence of certain strengths may be viewed as a weakness. For example, each of the following may
be considered weaknesses of AZGARD9:

 Delay in capacity expansion

 Large investment needed for business expansion
 Wastage of raw material
 Workers leave the organization after working short time
 Lack of online market facility to access international buyer
 Disputes between Middle level and Lower management
 Relative weak position in textile market as compare to the other textile mills in Pakistan
 The cost of freight charges further reduces the retention price of the garments, hampering the
profitability of the company.
 Wastes produce by the company may dangerous for human health.

OPPERTUNITIES
 Moving into new market segments that offer improved profits
 Large workshops for training and development.
 A developing market such as the Internet
 A market vacated by an ineffective competitor.
 Support of the power looms unions

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 Better Competitive Position.

 This has given Azgard9 a golden opportunity to capture the maximum market with very less
competition.
 The demand of garments and yarn outside Pakistan has been increasing rapidly, providing
Azgard9 a good chance to explore these markets.
 Azgard9 is also exploring new markets for the potential customers of readymade garments,
which will give Azgard9 a competitive edge against the competitors

Threats
 Price wars with competitors.
 A new competitor in the home market.
 Fear of Privatization.
 Tuff Competition
 Globalization is the factor which brings the strong companies in Pakistan
 A competitor has a new, innovative product or service.
 The export to international market highly depends on diplomatic relations between the
countries.

BCG MATRIX

The BCG growth-share Matrix is a portfolio planning model developed by Bruce Henderson of the
Boston Consulting Group in the early 1070’s. It is based on the observation that a company’s business
units can be classified into four categories based on combinations of market growth and market share
relative to the largest competitor, hence the name “growth-share”. Market growth serves as a proxy for
industry attractiveness, and relative market share serves as a proxy for competitive advantage. The
growth-share matrix thus maps the business unit positions within these two important determinants of
profitability.

For more effective planning and operations, a multi-business or multi-product organization should be
divided according to its major markets or products. Each such entity is called a strategic business unit
(SBU).

Using this matrix, an organization classified each of such SBU according to the factor such as:

 Relative Market Share

 Business Growth Rate

The BCG matrix is shown below:

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Conclusion;

Under the light of BCG matrix, I can examine that Azgard9 is existing in the category of Question
MARK because of low market share 20% and high business growth rate. In order to be the market
leader, Azgard9 has to improve its market position.

Presently Azgard9 has 9% of the market share and is one of the leading brands in Pakistan with a
diverse customer base. Form above given information we can say that Azgard9 has strong potential
for growth but low market share .So product lines of Azgard9 secured in category “Question marks”
having high growth and low market share.

Balance sheet

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ITEMS 2005 2006 2007 2008 2009

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CURRENT ASSETS    

Cash and bank balances 45,642,358 580,905,624 45,433,316 82,073,810 204,345,114

Short term investments 670,927,050 3,788,315,521 3,838,444,830 4,018,853,586 2,942,047,710

current maturity of long term
investment 9,637,121 - - - -

Current tax asset - 3,342,068 51,050,683 63,948,605 70,842,910

Advances, deposits, prepayments 895,807,879 754,181,252 1,004,944,292 789,515,062 1,163,125,222

Derivative financial assets - 555,680,244 388,993,278 175,673,993 -

Fair value derivative financial
instruments 13,458,916 - - - -

Trade debts 1,013,883,584 1,134,897,149 1,657,196,735 1,777,232,612 3,126,881,285

Stock in trade 2,034,180,550 2,022,510,924 2,246,132,173 4,034,103,119 4,414,852,668

Stores, spares and loose tools 87,790,355 101,762,487 125,468,877 201,693,270 404,451,110

TOTAL CURRENT ASSETS 4,771,327,813 8,941,595,269 9,357,664,184 11,143,094,057 12,326,546,019

FIXED ASSETS    
Long term deposits and
receivables 29,745,135 19,906,757 20,239,502 19,777,502 30,723,041

Derivative financial assets - - - - 45,298,097

Long term investment 93,517,562 6,303,488,906 6,391,905,201 7,521,644,051 12,052,756,447

Intangible assets 73,937,276 60,544,809 51,142,669 33,536,216 15,396,765

Capital work in progress 2,459,655,906 55,622,444 167,987,854 918,670,893 -

Property, plant and equipment 3,113,043,032 7,601,895,866 7,643,649,558 7,734,950,547 14,054,500,286

TOTAL FIXED ASSETS 5,769,898,911 14,041,458,782 14,274,924,784 16,228,579,209 26,198,674,636

10,541,226,72 22,983,054,05 23,632,588,96 27,371,673,26 38,525,220,65

TOTAL ASSETS 4 1 8 6 5
CURRENT LIABILITIES    

Dividend payable - - - - 63,183,986

Unclaimed dividends

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362,062 22,312,061 9,694,014 14,686,046 -

Due to related parties_
Unsecured - - - 426,768,193 1,245,555,096

Mark up accrued on borrowings - 297,242,597 317,690,929 466,226,443 657,422,644

Provision for taxation 79,679,935 - - - -

Trade and other payables - 1,015,763,845 1,030,875,769 1,350,500,115 1,776,603,962

Creditors, accrued and other
liabilities 791,641,172 - - -  

Derivative financial liabilities - 32,021,606 34,369,582 50,536,909 -

Liabilities against assets subject to
finance lease 68,343,306 - - - -

Long term Financing 365,437,468 - - - -

Short term borrowings 3,142,402,324 5,936,699,317 3,820,688,516 6,574,080,304 8,911,333,573

Current portion of non-current
liabilities - 450,047,125 981,049,256 1,470,921,493 2,356,508,078

TOTAL CURRENT LIABILITIES 4,447,866,267 7,754,086,491 6,194,368,066 10,353,719,503 15,010,607,339

LONG TERM LIABILITIES    

Long term payables - 1,643,889 - - -

Long term deposits 2,907,643 - - -

Liabilities against assets subject to
finance lease 40,173,972 9,622,618 14,357,005 25,210,944 56,638,407

Long term financing 2,678,232,532 3,519,216,988 2,973,551,252 2,686,842,500 1,891,312,500

Redeemable capital - 2,266,955,064 4,491,185,372 3,962,461,561 3,096,956,918

TOTAL LONG TERM LIABILITIES 2,721,314,147 5,797,438,559 7,479,093,629 6,674,515,005 5,044,907,825

TOTAL LIABILITIES 7,169,180,414 13,551,525,050 13,673,461,695 17,028,234,508 20,055,515,164

EQUITY    

Issued, subscribed and paid up 1,737,308,680 3,788,838,900 3,788,822,900 3,827,118,540 4,879,343,880

Reserves 403,331,469 3,578,262,182 3,530,626,122 3,532,469,002 6,943,648,200

Unappropriated profit 952,462,490 1,807,067,052 2,400,605,174 2,764,494,959 2,677,561,193

3,093,102,639 9,174,168,134 9,720,054,196 10,124,082,501 14,500,553,273

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Surplus on revaluation of
property, plant and equipment 278,943,671 257,360,867 239,073,077 219,356,257 3,969,152,218

10,541,226,72 22,983,054,05 23,632,588,96 27,371,673,26 38,525,220,65

Total Liabilities and Equity 4 1 8 6 5

Vertical analysis

ITEMS V 05 V 06 V 07 V 08 V 09
Vertical Analysis (Values in %)
CURRENT ASSETS    
Cash and bank balances 0.43% 2.53% 0.19% 0.30% 0.53%
Short term investments 6.36% 16.48% 16.24% 14.68% 7.64%
current maturity of long term investment 0.09% 0.00% 0.00% 0.00% 0.00%
Current tax asset 0.00% 0.01% 0.22% 0.23% 0.18%
Advances, deposits, prepayments 8.50% 3.28% 4.25% 2.88% 3.02%
Derivative financial assets 0.00% 2.42% 1.65% 0.64% 0.00%
Fair value derivative financial instruments 0.13% 0.00% 0.00% 0.00% 0.00%
Trade debts 9.62% 4.94% 7.01% 6.49% 8.12%
Stock in trade 19.30% 8.80% 9.50% 14.74% 11.46%
Stores, spares and loose tools 0.83% 0.44% 0.53% 0.74% 1.05%
TOTAL CURRENT ASSETS 45.26% 38.91% 39.60% 40.71% 32.00%
FIXED ASSETS    
Long term deposits and receivables 0.28% 0.09% 0.09% 0.07% 0.08%
Derivative financial assets 0.00% 0.00% 0.00% 0.00% 0.12%
Long term investment 0.89% 27.43% 27.05% 27.48% 31.29%
Intangible assets 0.70% 0.26% 0.22% 0.12% 0.04%
Capital work in progress 23.33% 0.24% 0.71% 3.36% 0.00%
Property, plant and equipment 29.53% 33.08% 32.34% 28.26% 36.48%
TOTAL FIXED ASSETS 54.74% 61.09% 60.40% 59.29% 68.00%
TOTAL ASSETS 100.00% 100.00% 100.00% 100.00% 100.00%
CURRENT LIABILITIES    
Dividend payable 0.00% 0.00% 0.00% 0.00% 0.16%
Unclaimed dividends 0.00% 0.10% 0.04% 0.05% 0.00%
Due to related parties_ Unsecured 0.00% 0.00% 0.00% 1.56% 3.23%
Mark up accrued on borrowings 0.00% 1.29% 1.34% 1.70% 1.71%
Provision for taxation 0.76% 0.00% 0.00% 0.00% 0.00%
Trade and other payables 0.00% 4.42% 4.36% 4.93% 4.61%
Creditors, accrued and other liabilities 7.51% 0.00% 0.00% 0.00% 0.00%
Derivative financial liabilities 0.00% 0.14% 0.15% 0.18% 0.00%
Liabilities against assets subject to finance lease 0.65% 0.00% 0.00% 0.00% 0.00%

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Long term Financing 3.47% 0.00% 0.00% 0.00% 0.00%

Short term borrowings 29.81% 25.83% 16.17% 24.02% 23.13%
Current portion of non-current liabilities 0.00% 1.96% 4.15% 5.37% 6.12%
TOTAL CURRENT LIABILITIES 42.19% 33.74% 26.21% 37.83% 38.96%
LONG TERM LIABILITIES    
Long term payables 0.00% 0.01% 0.00% 0.00% 0.00%
Long term deposits 0.03% 0.00% 0.00% 0.00% 0.00%
Liabilities against assets subject to finance lease 0.38% 0.04% 0.06% 0.09% 0.15%
Long term financing 25.41% 15.31% 12.58% 9.82% 4.91%
Redeemable capital 0.00% 9.86% 19.00% 14.48% 8.04%
TOTAL LONG TERM LIABILITIES 25.82% 25.22% 31.65% 24.38% 13.10%
TOTAL LIABILITIES 68.01% 58.96% 57.86% 62.21% 52.06%
EQUITY    
Issued, subscribed and paid up 16.48% 16.49% 16.03% 13.98% 12.67%
Reserves 3.83% 15.57% 14.94% 12.91% 18.02%
Unappropriated profit 9.04% 7.86% 10.16% 10.10% 6.95%
29.34% 39.92% 41.13% 36.99% 37.64%
Surplus on revaluation of property, plant and equipment 2.65% 1.12% 1.01% 0.80% 10.30%
Total Liabilities and Equity 100.00% 100.00% 100.00% 100.00% 100.00%

Horizontal Analysis

ITEMS H 05-06 H 06-07 H 07-08 H 08-09

Horizontal Analysis _ Moving Base Method (Values in %)

CURRENT ASSETS    
Cash and bank balances 483.74% -92.39% 55.97% 76.90%
Short term investments 158.97% -1.46% -9.60% -47.99%
current maturity of long term investment -100.00%  
Current tax asset   1385.53% 8.15% -21.29%
Advances, deposits, prepayments -61.39% 29.59% -32.17% 4.67%
Derivative financial assets   -31.92% -61.01% -100.00%
Fair value derivative financial instruments -100.00%  
Trade debts   42.01% -7.41% 25.00%
Stock in trade -54.40% 8.00% 55.07% -22.25%
Stores, spares and loose tools -46.84% 19.91% 38.79% 42.47%
TOTAL CURRENT ASSETS -14.05% 1.78% 2.81% -21.41%

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FIXED ASSETS    
Long term deposits and receivables
-69.30% -1.12% -15.63% 10.37%
Derivative financial assets    
Long term investment 2991.51% -1.38% 1.60% 13.85%
Intangible assets -62.44% -17.85% -43.38% -67.38%
Capital work in progress -98.96% 193.71% 372.16% -100.00%
Property, plant and equipment 12.00% -2.21% -12.63% 29.10%
TOTAL FIXED ASSETS 11.62% -1.13% -1.84% 14.70%
TOTAL ASSETS 0.00% 0.00% 0.00% 0.00%
CURRENT LIABILITIES    
Dividend payable    
Unclaimed dividends 2726.44% -57.75% 30.80% -100.00%
Due to related parties_ Unsecured   107.36%
Mark up accrued on borrowings   3.94% 26.71% 0.19%
Provision for taxation -100.00%  
Trade and other payables   -1.30% 13.11% -6.53%
Creditors, accrued and other liabilities -100.00%  
Derivative financial liabilities   4.38% 26.95% -100.00%
Liabilities against assets subject to finance lease -100.00%  
Long term Financing -100.00%  
Short term borrowings -13.35% -37.41% 48.56% -3.69%
Current portion of non-current liabilities   112.00% 29.45% 13.82%
TOTAL CURRENT LIABILITIES -20.04% -22.31% 44.31% 3.00%
LONG TERM LIABILITIES    
Long term payables   -100.00%  
Long term deposits -100.00%  
Liabilities against assets subject to finance lease -89.01% 45.10% 51.61% 59.62%
Long term financing -39.73% -17.83% -21.99% -49.99%
Redeemable capital   92.67% -23.82% -44.47%
TOTAL LONG TERM LIABILITIES -2.29% 25.46% -22.95% -46.30%
TOTAL LIABILITIES -13.30% -1.87% 7.52% -16.32%
EQUITY    

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 Azgard Nine Limited

Issued, subscribed and paid up 0.03% -2.75% -12.79% -9.42%

Reserves 306.91% -4.04% -13.62% 39.66%
Unappropriated profit -12.98% 29.19% -0.57% -31.19%
36.04% 3.04% -10.07% 1.76%
Surplus on revaluation of property, plant and equipment -57.68% -9.66% -20.78% 1185.59%
Total Liabilities and Equity 0.00% 0.00% 0.00% 0.00%

Analysis of Balance Sheet

1. Current, Non & Total Assets

C.A, Non_ C.A, & T.A

45,000,000,000
40,000,000,000
35,000,000,000
30,000,000,000 C.A
25,000,000,000 Non_ C.A
T.A
20,000,000,000
15,000,000,000
10,000,000,000
5,000,000,000
-
2005 2006 2007 2008 2009

Total assets increased in the year of 2006 as compared to 2005. In the year 2006 the short term
investment and long term investment increased as compared to previous year. And in the year
2009 the total assets again increased we see there is an increase in the long term investment of
the company. Short term investment decrease in three years it shows a negative trend analysis
from 2006 to onwards.

Cash and bank balance; cash and bank balance increased from previous year. Due to this
company made more investment of short term and long term investment in different sectors.
This also causes an affect of increase in total assets in the year 2009 as compared to previous
years. Cash show a negative trend analysis in the year 2006_2007.

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Capital work in progress; The capital work in progress has been reduced in the year 2006
because the investment that has been made on the assets that are under construction now are
completed or no further investment are made in this year so no need for further investment. It
increases bank balance which is use in further investment of the company so the assets increase
in the current year. In the year 2006 the capital work in progress decrease by 23.09% and it
reach to 0% in the year 2009. In the year 2005_06 it shows a negative trend analysis.

Then from the year 2006 to 2008 there is no a big change in the total assets and in the year 2009
total assets and total noncurrent assets both are again increase. In this year cash account also
increase and capital work in progress also decrease which cause increase in assets of the
company. Long term investment also increases from previous year. Property, plant and
equipment also increase in this year.

2. Current, Non, Total Liabilities and Owner Equity

C.L, Non_ C.L, T.L, & O.E

25,000,000,000

20,000,000,000
C.L
Non_ C.L
15,000,000,000
T.L
O.E
10,000,000,000

5,000,000,000

-
2005 2006 2007 2008 2009

Current liability increased from previous year, trade and other payable increase in this year.
There is no long term financing in this year. Long term financing of assets also decrease and we
see there is an increase in redeemable capital which also cause an increase in liabilities of the
company. In the year 2007 decrease in current liability as there is a decrease in payables and
shot term borrowing. And then both are increased constantly increased for next years.

Noncurrent liability increased for three years and then decrease as we see that long term
financing and redeemable capital increased for three years and then decrease.

Owner equity increased in the year 2006 as we see that there is an increase in reserve in this
year. This can be happen due to this that company has not made any long term financing in this

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 Azgard Nine Limited

year. Due to increase in reserve in 2009 owner equity again increase. Again no long term
financing and there is no unclaimed dividends in this year.

3. Current Assets & Current Liabilities

C.A & C.L

16,000,000,000
14,000,000,000
12,000,000,000
10,000,000,000 C.A
C.L
8,000,000,000
6,000,000,000
4,000,000,000
2,000,000,000
-
2005 2006 2007 2008 2009

Current assets are increased from 2005 to 2006 because more investment in the year 2006 as
compared to previous year and then in 2009 minor decrease because there is minor decrease in
investment.

Current liabilities are increased in the year 2006. If we check we see that there is increased in
payables. There is no long term financing against liabilities. These are some factor cause
increase in current liabilities. And after 2006 a minor change in payables. We have more assets
against liabilities in the year 2007. After this liability again increase. Because increase in payable
and short term borrowings of the company.

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4. Non_ C.A & Non_ C.L

Non_ C.A & Non_ C.L

30,000,000,000
25,000,000,000
20,000,000,000 Non_C.A
Non_C.L
15,000,000,000
10,000,000,000
5,000,000,000
-
2005 2006 2007 2008 2009

Noncurrent assets are increase in the year 2006. As we see there is a great increase in long term
investment in this year. The investment in under process assets are decrease and increased
bank balance and increase in sale due to this assets are increases. They remain almost constant
within two years and then in 2008 again increase, bank balance increases and assets under
construction almost zero investment again increases so there is an increase in noncurrent
assets.

There is increase in noncurrent liabilities because there is no long term financing in this year and
also there is an increase in redeemable capital. As liabilities increases assets are not increases in
this way so that’s way there is an increase in noncurrent liabilities. Liabilities almost same within
two years and in 2008 it start decreases. In 2008 the decrease in the redeemable capital and
there was no payables, assets are greater amount against liabilities so liabilities decrease in
2009 as compared to previous years.

Profit and loss Account

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ITEMS 2005 2006 2007 2008 2009

   
Sales-Net 4,422,472,357 4,889,681,966 6,628,341,926 10,113,499,351 11,737,856,887
Cost of
sales (3,288,786,063) (3,703,361,406) (4,620,988,950) (6,660,223,767) (8,546,363,383)
GROSS PROFIT 1,133,686,294 1,186,320,560 2,007,352,976 3,453,275,584 3,191,493,504

Selling and distribution expenses - - - - (322,815,305)

Administrative and general expenses - - - - (499,909,441)

ADMINISTRATIVE AND SELLING
EXPENSES 320,622,883 391,290,338 435,185,073 (603,529,743) -

Net other income - - - - 197,547,696

OPERATING PROFIT 813,063,411 795,030,222 1,572,167,903 2,849,745,841 2,616,316,454

Other income 305,852,832 1,122,601,656 641,224,883 620,148,589 -

1,118,916,243 1,917,631,878 2,213,392,786 3,469,894,430  
OTHER CHARGES    

Finance Cost 290,508,556 648,649,925 (1,061,933,212) (2,470,391,655) (2,424,424,504)

Workers' Profit Participation Fund 24,509,700 7,753,166  

Others 11,761,051 1,144,983 (13,169,055)

326,779,307 657,548,074    

Profit before taxation 792,136,936 1,260,083,804 1,151,459,574 999,502,775 178,722,895

Provision for taxation (50,843,271) (115,569,082) (72,007,073)  

Taxation - - - (102,218,852) (118,191,533)

PROFIT AFTER TAXATION 741,293,665 1,144,514,722 1,079,452,501 897,283,923 60,531,362

Earning per share - basic 7.42 4.97 3.26 2.65  

Earning per share -
diluted 6.47 4.67 3.25 2.65  
Earnings per share - Basic and diluted         0.003

Vertical Analysis

ITEMS V 05 V 06 V 07 V 08 V 09
Vertical Analysis (Values in %)  
Sales-Net 100.00% 100.00 100.00% 100.00% 100.00

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% %
Cost of sales -74.37% -75.74% -69.72% -65.85% -72.81%
GROSS PROFIT 25.63% 24.26% 30.28% 34.15% 27.19%
Selling and distribution expenses   -2.75%
Administrative and general expenses   -4.26%
ADMINISTRATIVE AND SELLING EXPENSES 7.25% 8.00% 6.57% -5.97%  
Net other income         1.68%
OPERATING PROFIT 18.38% 16.26% 23.72% 28.18% 22.29%
Other income 6.92% 22.96% 9.67% 6.13%  
25.30% 39.22% 33.39% 34.31%  
OTHER CHARGES    
Finance Cost 6.57% 13.27% -16.02% -24.43% -20.65%
Workers' Profit Participation Fund 0.55% 0.16%  
Others 0.27% 0.02% -0.11%
7.39% 13.45%  
Profit before taxation 17.91% 25.77% 17.37% 9.88% 1.52%
Provision for taxation -1.15% -2.36% -1.09%  
Taxation   -1.01% -1.01%
PROFIT AFTER TAXATION 16.76% 23.41% 16.29% 8.87% 0.52%
Earning per share - basic 0.00% 0.00% 0.00% 0.00%  
Earning per share - diluted 0.00% 0.00% 0.00% 0.00%  
Earnings per share - Basic and diluted         0.00%

Horizontal Analysis

ITEMS H 05-06 H 06-07 H 07-08 H 08-09

Horizontal Method _ Moving Base Method (%)
Sales-Net 0.00% 0.00% 0.00% 0.00%
Cost of sales 1.85% -7.95% -5.54% 10.56%
GROSS PROFIT -5.36% 24.82% 12.75% -20.37%
Selling and distribution expenses    
Administrative and general expenses    
ADMINISTRATIVE AND SELLING EXPENSES 10.38% -17.96% -190.89% -100.00%
Net other income    
OPERATING PROFIT -11.56% 45.88% 18.80% -20.90%
Other income 231.97% -57.86% -36.61% -100.00%
55.01% -14.85% 2.75% -100.00%
OTHER CHARGES    

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Finance Cost 101.95% -220.77% 52.47% -15.44%

Workers' Profit Participation Fund
-71.39% -100.00%  
Others -91.19% -100.00%  
81.99% -100.00%  
Profit before taxation 43.87% -32.59% -43.11% -84.59%
Provision for taxation 105.59% -54.04% -100.00%  
Taxation   -0.38%
PROFIT AFTER TAXATION 39.64% -30.42% -45.52% -94.19%
Earning per share - basic -39.42% -51.61% -46.72% -100.00%
Earning per share - diluted -34.72% -48.66% -46.56% -100.00%
Earnings per share - Basic and diluted        

Analysis of Profit & loss Account

1. N.S, G.P, EBIT, EBT, & Net Income

N.S, G.P, EBIT, EBT & N.I

14,000,000,000
12,000,000,000 N.S
10,000,000,000 G.P
8,000,000,000 EBIT
EBT
6,000,000,000 N.I
4,000,000,000
2,000,000,000
-
2005 2006 2007 2008 2009

Net sale of the company increased continuous three years and there is minor cost of sale
fluctuates in this year. And increase in admin and selling expenses in this year. And increase in

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bank balance and reserve which use in other investments and also cause in increase in sale. In
year of 2009 again increase in sale due to increase in reserve which is used in making profit.

EBIT are increased for four years and then a minor decrease. The other charges and workers
participation funds decrease in the year 2006 and so on due to this EBIT and also increase in
these years. The cost of sale also decreases in this year. Company uses how much equity or loan.

Key Financial Ratio& Analysis

The term "accounting ratios" is used to describe significant relationship between figures shown
on a balance sheet, in a profit and loss account, in a budgetary control system or in any other part of
accounting organization. Accounting ratios thus shows the relationship between accounting data.

Ratio analysis is very important while measuring the performance of the business. These ratios
are carried out from the Income statement and balance sheet. Many parties including management,
investors and Government are interested in these ratios. The purpose of analysis is to measure the
performance of the company and financial health of the organization.

1. Short Term Debt-Paying Ability

Receivables 2005 2006 2007 2008 2009

1 Days' Sales in Receivables 83.68 84.72 91.26 64.14 97.23

2 Account Receivable turnover 4.52 4.55 4.75 5.89 4.79

3 Account Receivable turnover in days 80.84 80.20 76.88 61.97 76.25

Receivables
120.00

100.00
Days' Sales in Receivables
80.00 Account Receivable
Turnover
60.00 Account Receivable
Turnover in Days
40.00

20.00

-
2005 2006 2007 2008 2009

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 Azgard Nine Limited

In the table and chart we see that day’s sales in receivables are 83.68 days and it further increase in the
year of 2006 and 2007. An internal analyst compares day’s sales in receivables with the company credit
terms as an indication of how efficiency the company manages its receivables. We see that company
have high sales in the years 2006 and 2007 but due to low credit policy day’s sales in receivables are
increased in the years 2006 and 2007. In the year 2008 the days sales in inventory were 64.14 which
mean company control its credit policy. In the year 2009 receivables reached its highest position of
97.23 days which shows against company low credit policy and poor management. In the year 2008
company have 64.14 days of minimum days and shows a good credit policy within five years. If day’s
sales in receivables are materially more than the credit terms, the company has a collection problem. An
effort should be made to keep the days sales in receivables close to the credit terms.

We see that company have increased account receivables turnover from 2005 to 2008, which shows a
good credit policy and efficient management. In the year of 2009 receivables decrease which shows
company inefficiency low credit policy. In the year 2005 receivables turnovers are 4.52 times which
shows a low credit policy and poor management.

We see that account receivables turnover in days decrease from 2005 to 2008, which shows a good
credit policy of the company. In the year 2008 turnover in days are 61.97 days which are minimum days
in receivable turnover. In the year 2009 receivables turnover in days were 76.25 days which shows
company low credit policy.

Inventory 2005 2006 2007 2008 2009

4 Day's sales in inventory 225.76 199.34 177.42 221.08 188.55

5 Inventory turnover 1.92 1.83 2.17 2.12 2.02

6 Inventory turnover in days 190.28 199.91 168.58 172.09 180.42

Inventory
250.00

200.00
Days Sale in Inventory
150.00 Inventory Turnover
Inventory Turnover in Days
100.00

50.00

-
2005 2006 2007 2008 2009

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 Azgard Nine Limited

We see that day’s sale in inventory decrease from 2005 to 2007, which shows company efficiency and
good management .in the year 2007 inventory was 177.42 days which shows efficient management and
good company policy in this year. And it shows a positive trend. In the year 2008 days sales in inventory
reach to 221.08 days which shows a company bad policy and management. In the year2005 company
have day’s sales in inventory of 225.76 days which mean that company in this year take more days to
sell the current inventory. In the year 2009 days sale in inventory again decrease to 188.55 days which
again shows company good management and efficiency.

Inventory turnover increase in the year 2006 to 199.91 day’s shows a positive trend. In the year 2007 it
decrease which shows inefficiency and in last year it again increase, which mean company sale more
inventory in days.

2005 2006 2007 2008 2009

7 Net Working 323,461,546 1,187,508,778 3,163,296,118 789,374,554 (2,684,061,320)

Capital

Net Working Capital

4,000,000,000

3,000,000,000

2,000,000,000

1,000,000,000 Net Working Capital

-
2005 2006 2007 2008 2009
(1,000,000,000)

(2,000,000,000)

(3,000,000,000)

As we know that working capital is equal to current assets minus current liabilities so From the above
table and charts we see that current asset are increased from 2005 to 2007 as it shows current assets
were 45.26% in 2005 and liabilities were 42.19% in this year, and it shows a highest current assets in this
year and lowest of 38.91&% in the year of 2006. Current assets are increased because company made
more investments in these years. In the year 2009 current liabilities are greater than current assets
shows 32% current assets and 38.96% current liabilities. There is increase in payables in this year. It
shows a negative trend in the company.

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2005 2006 2007 2008 2009

8 Current Ratio 1.07 1.15 1.51 1.08 0.82

9 Acid-test Ratio 0.41 0.80 0.99 0.61 0.45

10 Cash Ratio 0.01 0.07 0.01 0.01 0.01

Current, Acid test & CASH Ratio

1.60
1.40
1.20 Current Ratio
1.00 Acid _ Test Ratio
0.80 Cash Ratio
0.60
0.40
0.20
-
2005 2006 2007 2008 2009

From the above table and chart we see that current ratio shows a positive trend from 2005 to 2007.
current asset are increased from 2005 to 2007 as it shows current assets were 45.26% in 2005 and
liabilities were 42.19% in this year, and it shows a highest current assets in this year and lowest of
38.91&% in the year of 2006. Current assets are increased because company made more investments.
Company has a good current ratio of 1.51 in the year of 2007 which shows of company efficiency. In the
year 2009 current liabilities are greater than current assets shows 32% current assets and 38.96%
current liabilities. There is increase in payables in this year. It shows a negative trend in the company. In
2009 current ratio remains 0.82.

The acid test ratio relates the most liquid assets to current liabilities. And inventory is removed from
current assets when computing the acid test ratio. So we can see that from above table and chart that
acid test ratio increase from 2005 to 2007. And it has a maximum position of 0.99 in the year of 2007.
And in last year it decrease to 0.45 in 2009.

When we need to view liquidity of a firm from an extremely conservative point of view, then we use
cash ratio. We see that it minor increase of .07 in the year of 2006 and then decrease onwards, and
remain at .01 in the last year.

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2. Long-term Debt Paying Ability

2005 2006 2007 2008 2009

11 Times Interest Earned 2.80 1.23 1.48 1.15 1.08

12 Fixed Charge Coverage 2.80 1.23 1.48 1.15 1.08

Time Interest Earned & Fixed Charge Coverage Ratio

3.00

2.50
Time interest Earned
2.00 ratio
Fixed Charge Coverage
1.50 Ratio
1.00

0.50

-
2005 2006 2007 2008 2009

From the table and chart we see that time interest earned ratio and fixed charge coverage ratio both are
decreased in the year of 2006. These ratios indicate the firm’s long term debt paying ability and in this
situation we see a change from 2.80 times to 1.23 times show that the firm will not be able to meet its
interest obligation. In the year 2007 firm little betters its ratio to 1.48 times than before. And again it’s
decreased to 1.08 times per year in the year 2009. A relatively high, stable coverage of interest over the
year indicate has a good record and a low fluctuating coverage from year to year indicate a poor record.
In this situation we see that company has a ratio of 2.80 times shows a good record and debt paying
ability and 1.08 times show a bad performance and record of the company.

In 2005 a good record shows that the company has a high proportion of debt in relation to stockholders
equity and at the same time, obtains funds at the favorable rates. Fixed charge coverage ratio indicate
that a firm’s ability to cover fixed charges.

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 Azgard Nine Limited

2005 2006 2007 2008 2009

13 Debt Ratio 0.68 0.59 0.58 0.62 0.52

14 Debt/Equity Ratio 2.32 1.48 1.41 1.68 1.38

15 Debt to Tangible Net Worth Ratio 2.37 1.49 1.41 1.69 1.38

Debt, Debt/Equity & Debt to Tangible net Worth Ratio

2.50

2.00
Debt Ratio
1.50 Debt/Equity Ratio
Debt to Tangible Net
1.00 Worth Ratio

0.50

-
2005 2006 2007 2008 2009

Debt ratio indicates the firm’s long term debt paying ability. This ratio indicates the percentage of assets
financed by the creditors, and it helps to determine how well creditors are protected in case of
insolvency. If creditors are not well protected, the company is not in a position to issue additional long
term debt. So from table and chart we see that debt ratio is decreased in 2006 indicates a better
company position. In 2008 it again increases to .62%. in last year it again decrease to 0.52%.

From chart and table we see that debt/equity ratio of the company was 2.32% in the year 2005. And it
decrease to 1.48% in 2006 indicate the company good performance. 2005 shows a very danger position
and it shows that creditors are not protected and they are going to insolvency. In the last year 2009 ratio
reach to 1.38% indicates a good position of the company and debt paying ability. In 2005 company have
more debt ratio then equity ratio indicate a danger sign for creditors and in 2009 lower this ratio give
protection to the creditors.

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3. Profitability Ratios

2005 2006 2007 2008 2009

16 Net Profit Margin 0.17 0.23 0.16 0.09 0.01

17 Return on Assets 0.06 0.87 0.64 0.59 0.07

18 Operating Income Margin 0.18 0.16 0.24 0.28 0.21

19 Return on Operating Assets 0.18 0.51 - - -

20 Gross Profit Margin 0.26 0.24 0.30 0.34 0.27

1.00
0.90
0.80
0.70
Net Profit Margin
0.60
Return on Asset
0.50 Operating income Margin
0.40 Return on operating
Assets
0.30 Gross Profit Margin
0.20
0.10
-
2005 2006 2007 2008 2009

From above table and chart we see that net profit margin increase in the year 2006. And then it
continuously decreases. Different factors like competitive force within the industry, economic condition,
debt financing, and high fixed cost affect the net profit margin. Due to some increase in debt ratio and
other factors profit margin reach to .01% in last year.

Return on assets increase from .06% to .87% which shows that the firm’s best utilize its assets to create
profits by comparing with the assets that generate the profits. In the year 2007 it start decreases and in
th year 2009 it reach to .07% which mean that firm inefficiency in utilization of its resources to generate
profit. In the year 2005 company have a very low return on assets then some growth and then again

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 Azgard Nine Limited

decrease till the last year which shows that company was not in the position to maintain its policies,
better management and best use of resources.

Operating income margin shows a minor fluctuation within years. At 2008 it was at high position of
0.28%. Gross profit margin equal the difference between sale revenue and cost of goods sold. From the
following data it shows that gross profit margin decreases in 2006 and then some increase in two years
then it again decrease. It shows a high profit margin in 2008 of .34%. Some factors like cost of buying
inventory, selling price decline and other situation in the company cause effect on the gross profit
margin.

2005 2006 2007 2008 2009

21 Total Assets Turnover 0.38 0.22 0.19 0.27 0.25

22 Operating Assets Turnover 1.00 3.14 - - -

23 Sales to Fixed Assets 0.75 0.38 0.31 0.45 0.40

Total Assets , Operating Asset Turnover& Sales to

Fixed Assets
3.50

3.00

2.50
Total Asset Turnover
Operating Asset
2.00 Turnover
Sale to Fixed Assets
1.50

1.00

0.50

-
2005 2006 2007 2008 2009

From above table and chart we see that operating assets turnover are increased in the year 2006 reach
to 3.14 times. It shows that company use of utilizing operating assets to generate sale. And company in

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 Azgard Nine Limited

good position in this year. And then it starts to decrease and reach to zero in the years of 2007 to 2009.
Because company were not able to use its assets properly to generate sales.

Sale to fixed assets decreases from 2005 and reach to .31. In the year 2005 sale to fixed assets was .75
times which mean that company has a better ability to make productive use of its property, plant and
equipment by generating sale dollars. And in the year 2007 company have ratio of .31 times which
shows company were not use fixed assets to generate sales.

2005 2006 2007 2008 2009

24 Return on Investment 0.20 0.15 0.11 0.15 0.09

25 Return on Total Equity 0.24 0.12 0.11 0.09 0.00

26 Return on Common Equity 0.28 0.32 0.19 0.16 0.01

27 Return on Total Assets Variation 0.09 2.92 1.82 1.47 0.67

3.50

3.00

2.50
Return on
Investment
2.00 Return on Total
Equity
1.50 Return on Comman
Equity
Return on Total Asset
1.00 Variation

0.50

-
2005 2006 2007 2008 2009

From the above table and chart the return on investment decreasing within two years and then
increase in 2008 and then again decrease in last year. It shows high ratio at year 2005 which mean the
ability of the firm to reward those who provide long term funds and to attract providers of future funds.

Return on total equity was .24% in the year 2005 and then it starts decrease and become negative in
2009. It measure the both return to common stock and preferred stockholder.

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 Azgard Nine Limited

Return on common equity show the common stockholder, the residual owner. It has the same case as
with the return on total equity.

Conclusion

The textile & apparel sector is amongst the largest and most significant in Pakistan’s economy,
accounting for over 60% of total merchandise exports and providing employment to 38% of large scale
manufacturing sector workforce.

There is an abundant supply of local raw material as Pakistan is the 4th largest producer in the world.
There is also an abundance of local labor available at a competitive cost when benchmarked against
regional competitors.

Against this backdrop the industry remains largely fragmented with few large scale integrated players.
Worldwide denim production capacity is over 6 billion linear meters. Denim is the world’s largest cotton
textile product with estimated per annum global sales of 4 billion units.

Azgard Nine is Pakistan’s largest denim products business by sales with a fully vertically integrated
Manufacturing chain. From cotton to retail ready apparel products. In house capability for spinning.
Weaving, Design, finishing and stitching enables control over the entire value chain and provides a
significant competitive advantage in facilitating faster speed to market and control over product quality.

With Longstanding relationship with global retailers and brands, and an ability to rapidly build up
manufacturing capacity, Azgard nine is well poised to cater to an expected increase in global demand for
denim products.

The year 2008 proved very challenging due to a globally recessionary climate affecting all facets of the
business. While the business remained under pressure, Azgard Nine was able to protect its value added
services to its products portfolio. The key focus remained on meeting and indeed finding ways to exceed
customer expectations.

In addition to Azgard Nine’s vertical manufacturing capabilities which were already providing customers
solution concepts was added. The company now offers the client a choice of full product development,
product design and a complete logistics solution. Traditionally the customer has been sourcing supply of
the product only. Now the client has the option to source a full supply chain solution directly from the
Company. This value enhancement helped Azgard Nine to grow with its existing customers and add new
customers as well during a difficult period.

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 Azgard Nine Limited

Recommendation

 The most important thing for improvement is that Company should Re-arrange the
responsibilities and authorities of all the major departments. Along with this there should be a
proper check and balance system in order avoid from any sort of departmental overlapping.
 The location of Head office is very critical for Company. It should near to Factory in order to
handle all the operations in better way.
 Company should remove unionized employees which are providing problems to management.
For this purpose they should use Golden Hand Shake or other options.
 The selection criteria should also be improved. The company should select the educated and
experienced employees and along with there should be a proper training system for them.
 The Company should be maintain and established the internal audit and accounting system
according to the standard and requirement of the company ordinance 1984.

The implementations of all these points can lead the company towards more productive way and after
this its market growth and market share will enhance.

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