Final Report Tripack

Analysis of Profit/Loss Account,Balance Sheet,Statement in changes in equity and

Cash flow statement of any listed company

GROUP MEMBERS:

Muhammad Hassaan Ali (GR#)

Ammad Ahmed Khan (GR#)

SUBMITTED TO Mr.S.M Shabbir

DATED: 17TH April, 2012

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COMPANY PROFILE

Tri-Pack Films Limited (Tri-Pack), a public limited company, is a joint venture between Mitsubishi Corporation of Japan and Packages Limited of Pakistan.

Tri-Pack was incorporated in Pakistan in 1993 and commenced commercial production in 1995. The Company is listed on the Karachi, Lahore and Islamabad Stock Exchanges. It has a paid up capital of Rs 300 million and its revenue has exceeded Rs 7.1 billion in 2008.

Credit Rating

The Pakistan Credit Rating Agency (Pvt) Ltd. (PACRA), an affiliate of IBCA Limited, UK has assigned our company a long-term rating of “A+” (single A plus) and a short term rating of “A1” (single A one). This confirms a strong capacity of the company for timely payment of its financial commitments.

Production Facilities

In 1993,Tri-Pack started its operations with one plant having a capacity to produce 5,400 tonnes finished BOPP film per annum. To meet the rising demand of the country and to cater customer needs efficiently in time, the Company decided to go into expansion and added another line of BOPP film in 2001, thus increasing the installed capacity to manufacture BOPP film from 5,400 tonnes to 10,800 tonnes annually. In 2004 the Company installed its third manufacturing line of 16,000 tonnes per annum at Port Qasim Industrial Zone, Karachi. In 2007, the debottlenecking of line 3 increased the production facility by 1,000 tonnas per annum at Port Qasim Karachi. Thus increasing total installed capacity to 27,800 tonnes per annum. In 2008 the Company installed it Cast Polypropylene Film (CPP) manufacturing line of 7,000 tonnes per annum. While selecting plant and equipment, due care was taken to ensure that the new production line would be based on the latest technology available. The enhanced features in our new line of BOPP & CPP have further improved our operational efficiency and provided us with the technical capabilities to fully respond to the expectations of our customers.

Biaxially Oriented Polypropylene (BOPP) Film

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Tri-Pack’s BOPP films are the products of state of the art technology. This packaging film is available in four different grades ie Plain, Composite, Pearlized and Metalized, and its thickness ranges between 12 to 50 microns. The principal properties of our products are:

Good barrier to moisture

Excellent transparent gloss

Good printability

Good sealability

Cast Polypropylene (CPP) Film

CPP is an extrusion cast poly propylene film with treatment on one side. This film is available in different grades and its thickness ranges from 20-150 micron. This film is particularly well suited for coating, lamination, form fill seal and side weld bag manufacture. It offers improved seal strength and excellent sheet flatness for superior performance on high speed sealing equipment either by itself or in laminated form. CPP offers high gloss, low haze and good barrier properties.

OTHERS PRODUCTS  

MATT FINISH BOPP FILM MT

PLAIN NON HEAT SEALABLE BOPP FILM NS2W

SHEET LAMINATION PLAIN NON HEAT SEALABLE BOPP FILM NS1P

CIGARETTE GRADE HEAT SEALABLE (HIGH SHRINK) BOPP FILM BNC (HS)

COMPOSITE HEAT SEALABLE BOPP FILM BS2P

CIGARETTE GRADE HEAT SEALABLE BOPP FILM BNC

WEB LAMINATION PLAIN NON HEAT SEALABLE BOPP FILM NS2P

HIGH GLOSS PLAIN NON HEAT SEALABLE BOPP FILM NS2HG

TRANSPARENT LABEL NON HEAT SEALABLE BOPP FILM NS2PL

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PEARL WHITE LABEL HEAT SEALABLE BOPP FILM BS2LW (LD)

PEARL WHITE HEAT SEALABLE BOPP FILM BS2LW

PEARLIZED HEAT SEALABLE BOPP FILM BS2L (UT) BROAD SEAL

CIGARETTE GRADE HEAT SEALABLE (MEDIUM SHRINK) BOPP FILM BNC (MS)

WHITE OPAQUE HEAT SEALABLE BOPP FILM BS2PW

OVER WRAPPING GRADE HEAT SEALABLE BOPP FILM BNW (SS) (SHRINKABLE).

FORMICA GRADE PLAIN NON HEAT SEALABLE BOPP FILM NSF

ADHESIVE TAPE PLAIN NON HEAT SEALABLE BOPP FILM NS2T

PEARLIZED HEAT SEALABLE BOPP FILM BS2L

STRIP METALLIZED HEAT SEALABLE BOPP FILM SPZ

WHITE METALLIZED HEAT SEALABLE BOPP FILM B1S2WZ

METALLIZED HEAT SEALABLE BOPP FILM B1S2Z (BROAD SEAL RANGE)

METALLIZED HEAT SEALABLE BOPP FILM B1S2Z

METALLIZABLE HEAT SEALABLE BOPP FILM BS2M

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Vision

To increase the value for our customers, shareholders and employees by maintaining role of market leader in the country while at the same time operating internationally to mark our presence globally.

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STATEMENT OF ETHICS

Tri-Pack Films Limited shall endeavor to promote fair business practices and conduct the business with the principles of integrity, objectivity and financial prudence.

It is the policy of Tri-Pack Films Limited to observe all applicable laws, rules and regulations of the Government. Accordingly every director and employee will obey the law of the land. Any director and employee guilty of violation will be liable to disciplinary consequences.

All employees are expected to adhere to all internal corporate rules and policies in the performance of their jobs.

Employees must avoid conflicts of interest between their private financial activities and conduct of company business.

All managers and supervisors shall be responsible to see that there is no violation of laws within their area of responsibility which proper supervision could have prevented. The manager and supervisor shall still be responsible if he/she delegates particular tasks.

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HIGHLIGHTS

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Value added and its Distribution

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BALANCE SHEETAs at December 31, 2010

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Vertical and Horizontal Analysis

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PROFIT AND LOSS ACCOUNTFor the year ended December 31, 2010

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STATEMENT OF CHANGES IN EQUITYFor the year ended December 31, 2010

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CASH FLOW STATEMENTFor the year ended December 31, 2010

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Summary of Cash Flow Statement

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1) What Cash Flow Statement indicates?

A company can use a cash flow statement to predict future cash flow, which helps with matters in budgeting. For investors, the cash flow reflects a company's financial health: basically, the more cash available for business operations, the better. However, this is not a hard and fast rule. Sometimes a negative cash flow results from a company's growth strategy in the form of expanding its operations.

By adjusting earnings, revenues, assets and liabilities, the investor can get a very clear picture of what some people consider the most important aspect of a company: how much cash it generates and, particularly, how much of that cash stems from core operations.

When we look at the cash flow statement of Tri Pack by the end of the year December 31st 2010 we find tremendous growth ,Let’s see step by step

Cash flow from operating activities

Cash generated from operation has an increase of about 45.3 % from the last yearPayment on account of accumulated compensated absences has been reduced by 17.3 %We can see there is also a increase in staff retirement benefits and income taxes which are paid but due to increase in cash due to operations we are able to see our Net cash inflow from operating activities increased by 418,432(000) which is an increase of about 46.9% from the previous year 2009. Cash flow from investing activities

Company has not done any major investment its fixed capital expenditure cost has been reduced by 54 %.Acquisition on intangible has also been reduced by 62.2%.Profit on bank balances which may be in form of interest has been received with an increase of 25.3%Sales of some disposed fixed asset have been carried out in which company had some earning of about 3,046(000).Over all the net cash flow from investing activities has been reduced to 154,661(000) which is about 53% from the previous year 2009.

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Cash flow from financing activities

Company is coming in to stable position from the previous year there is no change in long term finances. Finance cost has been paid in which there is a little reduction. Dividends are paid more which is bringing out a positive picture of organization, whereas net cash out flow from financing activities has been increased by 18.9 %.In the end of the year company had the cash and cash equivalents in the hand of about 54,337(000) while in previous year they have a negative figure of about (376546) (000) which is a remarkable change of about 114 % from the last year 2009.

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2)Keeping in view capital structure of company, what changes it may face?

In finance, capital structure refers to the way a corporation finances its assets through some combination of equity, debt, or hybrid securities. A firm's capital structure is then the composition or 'structure' of its liabilities. For example, a firm that sells $20 billion in equity and $80 billion in debt is said to be 20% equity-financed and 80% debt-financed. The firm's ratio of debt to total financing, 80% in this example, is referred to as the firm's leverage. In reality, capital structure may be highly complex and include dozens of sources. Gearing Ratio is the proportion of the capital employed of the firm which come from outside of the business finance, e.g. by taking a short term loan etc.

Tri Pack is going on a positive way it’s on a right track it has 34% of reserves and 8 % of liabilities. The company has reduced its liabilities to 13 % to 8 % there is percentage change of -38 % which is a good sign. It has a big amount of capital. If the current finance management keeps doing their work in this way they can get huge profits, their earning per share has also been increased by 6 % in current year 2010 .They must utilize their finance is expansion of projects.

Net Sales Increases in the current year from 5,685,687 to 7,620,571 Gross Profit increases from 990,652 to 1,219,751 in the current year. Increment on net sale defines that company is in Boom phase.

Investors can invest their capital in that company. Share capital of this company is also increases.

Operating Profit increases from 778,929 to 956,070 in the current year.

Reserves increase in the current year end from 1,296,280 to 1,491,125 indicates that amount of Retained earnings increases.

Debt to equity ratio maintains on the basis of noncurrent liabilities i.e. 608,000 to 375,000

Current liabilities & provision shows that amount decreases in the current year from 2,035,195 to 2,001,096 shows that current ratio & liquidity position are in stable position.

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Non-Current asset Decreases from 2,096,745 to 1,873,582 in the current year shows that depreciation involves in this scenario.

Current Asset increases in the current year from 2,420,082 to 2,526,163 in the current year , overall impact of this scenario is that liquidity ratio maintains & the financial position of the company are in a boom phase.

3)Financial Planning - What should company undertake to pursue growth?

If we look at company from different angles we find company is in a very good position it is reducing its liabilities its reserves are also increasing it also have a good capital in hand. It’s also giving a good amount of Dividend to its shareholders. The market price of share is also increasing. It’s a favorable position for company to pursue growth. Either they can expand their business or they can diversify .They can get loan through Debt financing and Equity financing both.As company is financially established.Comapny can easily get the debt on soft terms and condition from banks.

They can expand their organization as they are doing it by expansion of their BOPP plan through Debt financing and internally generated cash.

They can also diversify their business like Engro Pakistan (pvt) Ltd,if it didn’t affect their Vision.

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SummaryTri-Pack Films Limited (Tri-Pack) - a joint venture between Mitsubishi Corporation of Japan and Packages Limited of Pakistan - is involved in production of packaging films used by packaging companies.

Incorporated in 1993, the Company commenced commercial production in 1995.

Tri-Pack is listed on all the three bourses of the country, with a paid-up capital of Rs 300 million.

Packages Limited, an integrated packaging company, is a big buyer of the packaging films produced by Tri-Pack.

The former also holds 33.3 percent equity in the latter.

Tri-Pack is a fairly leveraged company and it enjoys long-term rating of "A+" and a short-term rating of "A1" by PACRA.Tri-Pack produces two types of packaging films used in packaging for consumer goods.

First type is the moisture-resistant 'biaxially oriented polypropylene' (BOPP) film.

BOPP films are produced in four different grades - plain, composite, pearlised and metalised - and their thickness ranges from 12 to 50 microns.

The total installed capacity for BOPP films stands at 29,000 tons per annum.The second type of film is the high-gloss and low-haze 'cast polypropylene' (CPP) film.

CPP films are also available in different grades and their thickness ranges from 20 to 150 microns.

This film is particularly well-suited for coating, lamination, form fill seal and side welded bag manufacturing.

Tri-Pack has CPP film manufacturing capacity of 7,000 tons per annum.

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Financial performance

Sales As the penetration and consumption of fast-moving consumer goods are increasing, demand for packaged goods is also on the rise.

Resultantly, sales' volume of packaging companies and in turn, those of their suppliers has also been increasing.

This phenomenon has greatly benefited Tri-Pack's sales that crossed Rs 9 billion for the first time in 2010.Tri-Pack's sales are heavily tilted towards domestic business; as only about 3 percent of total sales is generated through exports this year.

In 2010, the Company's net sales grew by a magnificent 34 percent over 2009.

Renewed focus on domestic sales through aggressive marketing and government actions against smuggling via Afghan transit trade and under-invoicing of BOPP films helped the company compete better in 2010.

Cost of Sales

Growth in the cost of sales outstripped the increase in net sales during 2010.

The 36 percent growth is primarily on account of higher utilisation of raw materials, especially polypropylene granules, to meet the surge in demand.

Fluctuations in the price of crude oil, another major raw material, also exacerbated the Company's COGS.

As percentage of net sales, cost of sales remained steady at 84 percent during the year.

Operating Expenditures

Owing to higher freight costs, the distribution costs grew by 23 percent in 2010 and stayed the same as a percentage of net sales in 2010 and 2009.Administrative expenses also rose by 27 percent in 2010, when money spent on salaries and wages was more than what was spent during the preceding two years.The expenses ate up 2 percent of net sales in 2010, compared to 1 percent in 2009.

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Other Income & Expenses

During 2010, "other income" for the Company declined by 37 percent over the previous year owing to nil returns on placement of certificate of deposits at an associated investment bank.

"Other expenses" increased by 33 percent over the preceding year on account of higher spending in workers' profit participation fund and workers' welfare fund.Tri-Pack's finance costs declined by 7 percent in 2010, as the lower mark-up payments on long-term finances were more than to offset the higher mark-up payments on short-term finances.

Profitability & Margins

While the Company's profitability has improved in absolute terms over the last three years, its profit margins have somewhat declined.

For instance, the gross profit increased by 23 percent in 2010 over 2009, however, gross margin shed 140 bps over the period.

During same period, the company's operating profits increased by 23 percent, yet the operating margins lost 115 bps.Strong domestic sales, coupled with managed expenditures, led to a growth of 29 percent in pre-tax profits.

It was higher taxation charges that reduced the net profits to Rs 494.8 million in 2010, as the bottom-line grew by 7 percent year-on-year.

Net margins have, however, declined during the period under review to 6.49 percent.Tri-Pack's earnings per share came in at Rs 16.49 in 2010, compared to Rs 15.47 in 2008 and Rs 16 in 2008.

The company's stock has performed consistently over the last three calendar years, trading above Rs 100 and consistently offering a price-to-earnings ratio above 6.

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Liquidity

The Company's cash flows improved to Rs 54.3 million at the end of 2010, compared to a negative cash generation of Rs 376.5 million at the end of 2009.

The Company's current ratio has also improved to 1.3, from 1.2, respectively, during the preceding two years.

The Company seems set to achieve operational efficiency during the year, turning over its inventory 5 times in 2010, compared to 3.9 times in 2009 and 4.3 times in 2008.

Leverage

Tri-Pack's leverage position is much better in 2010 than it was during the preceding two years.

There is less debt accumulation in the company's capital structure.

The debt-to-equity ratio dropped to 0.2 in 2010, from 0.4 in 2009.

Company's interest paying ability also seems to have improved as the financial charges dropped and operating profits increased in 2010.

Future Outlook

To cater to increased demand of its BOPP films in the packaging industry, Tri-Pack decided this year to expand its production capabilities by setting-up a new BOPP plant with a capacity of 40,000 tons, at a budgeted cost of Rs 5.2 billion.

The project is being financed with a mix of debt and internal cash generation and is targeted to be operational by 2012.Being part of the supply-chain of packaged goods industry, Tri-Pack stands to benefit from both, the rising demand of packaged goods and the zeal of Pakistani multinationals to increase their year-on-year volumes.

However, the Company encounters challenges on the raw materials' front, as movements in the prices of crude oil and polypropylene granules directly impact the Company's cost of sales and resulting margins.

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