INTRODUCTION TO TEXTILE SECTOR

Reliance Weaving Mills Ltd.

eXECUTIVE SUMMARYRELIANCE WEAVING MILLS LTD is located in Multan. Reliance weaving Mills Ltd. (RWML) is part of the Fatima Group. Fatima Group established RWML on April 7, 1990 as a public limited company and obtained certificate for commencement of business on May 14, 1990.

I visited RELIANCE WEAVING MILLS LTD times for my report and was always warmly welcomed by their management and employees. All machinery installed in the mill is American. Plans and strategies are made in the head Office. Raw materials purchase decision is also made in the Head Office. Employees work in three shifts, whereas these are both permanent and on daily wages.

The mills units is supported by different facilities as canteen, store room, laboratory, godown, and many others. The production process is divided into two sections:

Export sales cover major portion of total sales due to good quality. They contain very low portion of local market. Centralized decision-making is one of the weaknesses of the RWML, but good management covers this weakness in an appreciable manner. So for as Account department is concerned though there is a little bit workload on the employees, but inside friendly environment helps a lot to cover these tasks without fatiguenes and boredom.

Finally I have given some recommendations to cover these threats. My suggestions were highly appreciated by the management of RWML.

RELIANCE WEAVING MILLS LIMITED MULTAN

GROUP PROFILE

The company has been sponsored by FATIMA GROURP in Multan. The sponsors are already engaged in the field of manufacturing Sugar, Cotton lint yarn, Grey cloths. Their company, RELIANCE COMMODITY PVT. LTD has been awarded Best Performance Trophies for the years 1997-98 to 99-00 in the field of export of Molasses declared the top 5 company of the Pakistan. The sponsors have also taken up the managing control of a band new spinning unit at Rawat Distt. Rawalpindi form UBL through bidding.

Following are the companies included in the group:

Sr. # Company Name

1. FATIMA SUGAR MILLS LTD.

2. RELIANCE WEAVING MILLS LTD.

3. RELIANCE COTTON PVT. LTD.

4. RELIANCE COMMODITIES PVT. LTD.

5. RELIANCE EXPORT LTD.

6. RELIANCE FIBRES LTD.

7. FATIMA FERTILIZER COMPANY LTD.

8. FAZAL CLOTH MILLS LTD.

9. AHMED FINE TEXTILE MILLS LTD

COMPANY PROFILE

Reliance weaving Mills Ltd. (RWML) is part of the Fatima Group. Fatima Group established RWML on April 17, 1990 as a public limited company and obtained certificate for commencement of business on May 14, 1990.

Authorized capital of RWML at the time of incorporation was Rs.250 million and presently RWML has authorized and paid up capital of Rs.700million which has gradually increased and at present subscribed share capital of company stands at Rs. 308109370 , listed at Karachi and Lahore Stock Exchanges and also inducted into Central Depository Company (C.D.C). The company has issued 1st tranche of Term Finance Certificate (TFCs) of Rs. million in February 2002, which has been fully subscribed. These TFCs are listed at Karachi Stock Exchange and has also been declared as eligible security in C.D.C.

The principal business of the Company is manufacture and sale of cotton yarn and grey woven fabric. RWML production capacity consists of two main segments, Weaving and Spinning, both are ISO-9002 Certified for its quality. Today Reliance weaving Mills Limited is the 3rd largest weaving mill in Pakistan with modern and technologically advanced greige weaving plant. The we4aving units are situated at Multan and the Spinning unit at Rawalpindi. The details are as under:

Weaving units:

Weaving unit is situated at Fazalpur; Khanewal Road, Multan commenced its commercial production on May 01, 1993 with 96 Tsudakoma air jet weaving machines imported from Japan along with modern auxiliary machinery to produce high quality cloth for export markets. Further and additional 20 Tsudakoma air jet weaving machines form Japan were installed in 1999 coupled with yarn doubling and twisting machines to produce value added fabrics. The installed production capacity of the unit is approximately 16.085 million meters per annum. Further more, a captive power plant consisting of 2.5 MW Capacities are also installed in the weaving unit-1 by which the company is saving power cost and production losses.

During the last financial year, the company has implemented and expansion project for its weaving unit at a cost of a about Rs.500 million, comprising 108 Tsudakoma air jet weaving machines from Japan along with modern auxiliary machinery to produce high quality cloth for export markets. The project started its commercial production from October 01, 2001. The installed production capacity of the unit is approximately 21.70 million meters per annum.

Another 48 air jet looms expansion plan in existing weaving unit # 2 is at advance stage, which will result in increase in production approximately by 9.00 million meters per annum. Now weaving unit comprise of 295 Tsudakoma with production capacity of 57.6 million meters of grey cloth annually.

Spinning Unit:The spinning unit of the RWML is located at Mukhtarabad, Rawat, and District Rawalpindi in the province of Punjab. The unit commenced its commercial production on October 01, 1999 with 14400 spindles with a very good combination of European and Japanese machinery with allied accessories. It produces high quality yarn for in-house consumption and for export markets. The installed capacity after conversion into 20/s count is approximately 4.849 million kgs.

The spinning unit has 35,520 spindles with an installed capacity of 12.30 million kgs of yarn converted at 20/s count. Cotton yarn produced is used in weaving units for manufacturing of fabric being sold in local and export market.

ORGANIZATIONS (RWML) HIERARCHY

CHIEF EXECTIVE

VISION STATEMENT

The company is interested to install complete textile finishing plant including bleaching, dyeing, mercerizing, calendaring, folding, printing plant in the existing weaving units at Multan to make it a complete composite unit, which can explore local and international market of high value products. The company would keep its emp0hasis on product and market diversification, values addition and cost effectiveness. We want to fully equip the company to play a meaningful role on the sustainable basis in the economic development of the country.

MISSION STATEMENT

The mission of the company is to operate state of the are textile plants capable of producing yarn and fabrics.

The company will conduct its operations prudently assuring customer satisfaction and will provide profits and growth to its shareholders through:

Manufacturing of yarn and fabrics as per the customers requirements and market demand.

Exploring the global market with special emphasis on Europe

and USA.

Enhancing the profitability by improved efficiency and cost controls.

Recruiting, developing, motivating and retaining the personnel having exceptional ability and dedication by providing them good working conditions, performance based compensation, attractive benefit program and opportunity for growth.

Protecting the environment and contributing towards the economic strength of the country and function as a good corporate citizen.

THE PROJECT

The project of setting up 96 looms was successfully completed and the company commenced commercial production on May 01, 1993. The capacity of the project is 15.50 million Mtrs. Grey Cloth per year. In addition to further 20 looms was a installed in 1997 along with doubling machine and self power generation plant of 2.5 MW was installed in 1999.

COST OF PROJECT AND MEANS OF FINANCE

ESTIMATED COST

Pak. Rs. In (Million)

Imported machinery 210.50

Import incidentals 25.20

Local machinery 13.50

Land, Building, Others 44.80

Total Estimated cost 294.00

ACTUAL COST

Imported machinery 199.00

Imported incidentals 22.40

Local machinery 15.60

Land, building, others 47.00

Total actual cost 284.00

The company has successfully completed the project within the projected cost by saving at least 11.00 (m) from the imported machinery due to forward booking of US $ on L/Cs through speculation with the bank.

FINANCING

The project has been financed through;

Pak.Rs. In (M)

Share holders equity 109.55

Redeemable capital 3.00

FC loan I.BR.D Line world bank 146.45

Local Bank Loan 13.60

Directors Loan 4.80

Local suppliers 6.60

Actual project cost 284.00 COMMERCIAL PRODUCTION

The company has commenced commercial production from May 1, 1993.

FINANCIAL YEAR

The financial year of the company is from October 1st to September 30th.

RAW MATERIAL

The basic raw material for the company is cotton yarn, which is easily available in Pakistan.

LABOUR AND TEACHNICAL KNOW-HOW

The textile industry, being the oldest and largest industry in the country, there is cheap labor available, both skilled as well as unskilled. The company has hired experienced team, which is engaged in the running of existing manufacturing facilities.

PROCESS OF WEAVING UNIT

RWML UNIT-2 is engaged in the following functions.

WEAVING

Different types of the cloths are produced in the Weaving department. Weaving process includes the following steps.

Yarn receiving and issuing

Doubling/twisting

Loading on sizing

Sizing

Loom shed

Cutting/Folding and Packing

Yarn Receiving and Issuing

Following is the process of yarn receiving and issuing:

Yarn receive

Yearn tested through lab

Yarn record maintained in computer

Yarn requisition/issuingYarn ReceiveFirst of all in weaving unit yarn received by yarn clerk from the spinning unit. Yarn clerk check and count the bags and arrange its stacking in very arrange manner.

Yarn Tested In Lab

After receiving the yarn at least 2 cones are send to the lab to check the weight/quality count and length.

Yarn Record

After receiving the correct result of the yarn from lab, it is recorded in stock register maintained in computer.

Yarn Requisition/Issuing

Yarn is issued to warping department after receiving the requisition from the General Manager/Production Manager.

RWMLS PRICING STRATEGIES

RWML adopts following pricing strategies:

Direct selling

Through agent selling.

Direct selling

If co. sells directly then price components will be as follows;

Fixed cost+variable cost+Desired profit

Through agent selling

Through agent selling pricing components are:

Fixed cost+variable cost+Desired profit + Middlemans commission

Pricing Procedure in Local Market

RWML sells only extra quality left from the foreign order in the local market. They call tenders when they want to sell the production in the local market. They sell to those person whose tender price will be high.

Pricing Procedure for Export

Pricing procedure for export is different from the local procedure they charging the price in foreign factors before charging the mind certain factors before charging the price in foreign market. When any customers want to purchase the products after negotiation they fix the price. Some important factors are inland freight, sea freight clearing charges etc.

1. PLACE ( Distribution Channels)

RWML exports more than 90% of its product. They are using two types of distribution channels in export.

Direct channel.

RWML====(Customer

Indirect Channel.

RWML==(Middleman=====(Customer

Mostly RWML exports its products through ship. They are alos using other modes of transportation as well:

Trucking

Shipping

Air line

Major export countries are as under;

1. Japan

2. Korea

3. Hong Kong

4. USA

ADMINISTARATION DEPARTMENT

This is very important department of the organization as named shows, this dept. has to administer all the operations of the organization. Sections of this department are divided into offices as under;

Labor office

Security guard office

Gate office

Time office

LABOR OFFICEAs required by labor dept of the govt. of Pakistan, this office has been setup to deal with all the matters that are related with labor. The dept. is under the labor officer. He is responsible to resolve all the disputes, conflicts, misunderstandings and any other kind of matter, which may arise from time to time with the labor and the immediate supervisor or with any other person in the organization.

It is the duty of the labor officer to inform the legal requirements concerning the labor and company affairs as well as any changes in rather labor laws.

It is the duty of the labor officer to satisfy itself regarding payment bonus, gratuity, and other benefits to labor and to keep their morale and motivational level high.

SECURITY GUARD OFFICE

The main objective of the security office is to safe handling of the goods from /to the mill premises. For the achievement of such objective a team of security guards has been employed by the company. All the keys relating to the mills office, labor colony, (quarters) are lying into the responsibility of the security officer

No out side visitor can enter in the mills premises without the permission of the Admin Manager.

a) Whenever any visitor wants to enter into the mill, security guard firstly contact with the authority in the mill top grant the permission to enter into the mills premises.

b) They are the guardians of the every thing of the co.

c) They are in uniform of dark army color.

d) They sere and check the outward going pass of certain things when these going to out of the mills premises.

GATE OFFICE

This office has been made to keep the record of each and every thing coming in and going out of the Mills gate.

For this purpose gate office clerk maintains two type of registers called;

1) Outward going pass register

2) Inward coming pass register

When every thing including raw material, stores supplies, or any other things comes into the mills premises a document named as I.G.P is made in which information like date of supplier, description, quantity of the material and any other remarks are written. In the same way O.G.P is prepared for out going things etc. and they made a summary on daily basis and fax to head office.

TIME OFFICE1. It keeps the attendance records, which is than used to calculate the salary to be paid to the workers on monthly basis.

2. It keeps the records of the over time single as well as double, leaves, number of days worked of all the workers and than calculate their over time on the basis of the gross salary of each workers.

3. It keeps the records of gratuity, bonus, pensions and other benefits including CPL (cash paid leave ) to each employee.

4. It keeps the records of Social Security, DOBI, Education Cess etc. of all employees.

5. This office keeps and maintain the time record of all the workers.

Accounts Department

PREPARATION OF ACCOUNTS

Following accounts are prepared in the Accounts Department of RELIANCE WEAVING MILLS LTD.

1. Store Creditor/Purchases

2. Export Debtor/Realization

3. Store Consumption

4. Fuel and Power

5. Salary and Wages

6. Site Expansions

7. Inter Unit

8. Administration Expenses

9. Selling Expenses

10. M/up on T.F.C.

11. Social security/E.O.B.I

12. Banks

HBL

FBL

FBL (LOAN)

ABL

SPCB

PETTY CASH FUND

Cash is given to the cashier (the site cashier) for meeting the different site expenses and these are;

Yarn freight

Store freight

Building capitalized/repair and maintenance

Labor welfare charges

The balance is maintained up to Rs. 100000 minimum every time.

PURCHASE PROCESS

First of all purchase requisition is issued to the different suppliers. Then the quotations are received from the different supplier and evaluated by the purchase manager then a purchase order is made. Three copies are maintained for the purchase order;

One to the supplier

One to the accounts department

One is remained with the purchase department

Purchase includes;

Raw material (Local)

Starch (Local)

Beveloid (Local)

Softner-52 (Local)

Chemical PVA imported (Duepont USA)

Yarn (Australia)

MAJOR MARKET OF RWML Major market of RWML is differentiated on the basis of sale;

Export sale (85%)

Export sale is made to;

Europe

Hong Kong

MY LEAARNING ARE AS FOLLOWS

1. How we have to respond and quote prices upon difference inquires from the customer.

2. How the working is being done.

3. Issuance of selling contract to customers

4. After looking on contract, how we have to proceed further in order to fulfillment of desired requirement.

5. How correspondence has to against different orders and different customers.

6. The important matter is to understand the perception from customer and his expectation because it differs from customer to customer and to order.

7. Push up the processing team to help in making timely shipment.

8. Preparation of different sorts of reports

9. How to respond to the assignments given by the CEO.

10. Purchase of yarn and its recording in the books of accounts

11. Payment of petty cash expenses and their recording.BALANCE SHEET

ASSETS: 2014 2013 (Rupees ) in %

Non-current assets

Property, Plant and equipment

Intangible assets

Long-term investment

Long-term deposits

Current assets

Stores, spares and loose tools

Stock-in-trade

Trade debts

Loan and Advances

Trade deposits and payments

Short term Investment

Mark-up accrued

Other receivables

Tax refunds due from government

Cash and bank balances1,906,640,987

1,033,593

69,999,586

2,421,340

103,050,338

772,397,644

157,754,493

187,188,985

1,122,041

125,667,584

7,088,261

8,289,791

45,560,675

41,794,4621,963,229,490

-----------

69,999,586

2,421,340

92,855,401

746,643,801

229,707,309

142,601,992

5,804,422

523,546

7,088,261

1,612,193

49,793,062

32,572,103(56,588,503)

1,033,593

-----------

------------

10,194,937

25,753,843

(71,952,816)

44,586,993

(4,682,381)

125,615,238

------------

6,677,598

(4,232,387)

9,222,359

-2.88

100

-----

-----

10.98

3.45

-31.32

31.267

-80.67

23993

-------

414.19

-8.50

28.31

Total Current assets1,449,914,2741,309,202,090140,712,18410.75

TOTAL ASSETS

EQUITY AND LIABILITIES:3,430,009,780 3,344,852,506

(Rupees)85,157,2742.546

In %

Share capital and reserves

Authorized Capital 30,000,000 ordinary shares of Rs 10 each

Issued, subs and paid-up capital

Reserves

Unappropriate profit

Non-current liabilities

Long term Finance & other Capital

Subordinated loans

Deferred liabilities

Current liabilities

Trade and other payables

Interest and mark-up accrued

Finance under markup arrangement

Current portion of non-current liabilitiesTotal Liabilities and Equity30,000,000

308,109,370

395,081,250

165,798,067

868,988,687

711,913,668

63,375,000

8,589,216

783,877,884

128,588,478

56,488,753

1,336,646,814

255,419,164

1,777,143,209

3,430,009,78030,000,000

246,487,500

395,081,250

195,501,910837,070,660

988,791,218

36,875,000

16,238,327

1,041,904,545

124,134,603

43,259,876

1,174,824,009

123,658,813

1,465,877,301

3,344,852,506-------------

61,621,870

--------------

70,296,157

31,918,027

(276,877,550)

26,500,000

(7,649,111)

(258,026,661)

4,453,875

13,228,877

161,822,805

131,760,351

311,265,908

85,157,274---

24.99

-------

35.96

3.81

-28

71.86

-47

-24.76

3.59

30.58

13.77

106.55

21.23

2.546

Profit and Loss Account 2014 2013 (Rupees) in %

Sales

Cost of salesGross profit

Other operating income

Administrative expenses

Distribution and selling costs

Other operating expenses

Finance costs

Profit / (loss) before taxationProvision for taxation

Profit for the year

Earnings per share

3,400,998,361

(3,054,593,695)

346,404,666

39,344,127

(50,282,001)

(49,671,260)

(6,048,989)(232,381,335)

47,365,208

(15,447,181)

31,918,027 1.04

3,122,414,478

(2,699,848,853)422,565,625

17,840,572

(48,421,073)

(39,031,369)

(9,584,861)(199,406,645)

143,962,249

(20,433,058)

123,529,191 4.01

278,583,883

354,744,842

(76,160,959)

21,503,555

1,860,928

10,639,891

(3,535,872)

32,974,690

(96,597,041)

(4,985,877)

(91,611,164)8.92

13.21

-18

120

3.84

27.25

36.89

16.54

-67.10

-24.40

-74.16

Ratio Analysis

We have to analyze firm from five point of view.

Liquidity Analysis

Activity Analysis

Debt Analysis

Profitability Analysis

Marketability Analysis

LIQUIDITY ANALYSIS

FORMULAS

i. Current Ratio

=Current Asset

Current Liabilities

ii. Acid test ratio or quick ratio =Current Asset- Inventory Current Liabilities

ACTIVITY ANALYSIS

FORMULAS

i. Inventory turn Over

=Cost of goods sold

Inventory

ii. Average Age of Inventory

=No. of working days

Inventory turn over

iii. Average collection period =Account Receivable

Average Sale per day

iv. Account receivable turn over =No. of working days Average Collection period

v. Account Payable turn over

=

No, of working days

Average Payment Period

vi. Fixed asset turn over

=

Net sale

Net fixed Asset

PROFITABILITY RATIOS

FORMULAS

i) Gross Profit Ratio on Sale

=

G.P

x 100

Net Sale

ii) Gross profit ratio on cost

=

G.P

x 100

C.G.S

iii) Operating Profit ratio

=

operating Profit x100

Sale

iv) Net Profit ratio

= Net Profit after taxes x100

Net sale

v) Return on asset (ROA)

= Net Profit after taxes x100

Total asset

MARKET ABILITY RATIOS

FORMULASi) Earning Per Share (EPS)

=

N.P.A.T. - Divto P. share

Out Standing Stockii) Dividend Pay out ratio

= Dividend P.Sx100

EPS

CALCULATION OF RATIOSLIQUIDITY ANALYSIS

It shows the firm ability to pay its short-term obligation on time.

CURRENT RATIO201420132012

1: 0.74times1: 0.84times1: 0.98times

The ratios show that the companys current liabilities and current assets are almost equal. So the co. is in a position to meet its current liabilities on time.

QUICK OR ACID TEST RATIO

201420132012

1: 0.75times1: 0.59times1: 0.48times

The companys quick ratio has increased. So the company is liquid position is very strong.

ACTIVITY ANALYSIS

Activity analysis shows the speed through which various current accounts are converted into cash and measures the efficiency of management that how productively it is utilizing assets to generate desire results.

INVENTORY TURNOVER RATIO

201420132012

3.2times4.8times6.0times

The co. is converting the inventory 6.0 times into cash against the conversion of 4.8times of and 3.2times in. It means that the sale of the co. has been increased.

DEBTOR COLLECTION PERIOD

201420132012

92 days87days44days

Companys credit collection performance is depended upon L/C by the buyer. So the companys debtor collection period mostly depends upon the opening of letter of credit.CREDITORS TURNOVER RATIO

201420132012

10.3 times11.50times12.20times

This ratio shows that the co. is making payment to the creditors within reasonable time period.

FIXED ASSETS TURNOVER RATIO201420132012

0.93times1.24 times2.02 times

PROFITABILITY ANALYSIS

The efficiency of the firm can be analyzed through its profits.

GROSS PROFIT RATIO

201420132012

16.32%15.59%15.30%

Cost of goods sold has remain more or less constant while conversion rate of $ is being higher therefore G.P. is very ideal.

NET PROFIT RATIO

201420132012

1.40%1.57%2.7%

The company profit is increasing with the passage of time. It is because of its 90% exports.

OPERATING PROFIT RATIO

201420132012

10.57%10.70%10.85%

There is little increase in profit of the co. It is because of hiring of new employees which increases the salaries of the co.

RETURN ON ASSETS

201420132012

2.69%3.48%7.49%

Return on assets ratio has increased because of increase in profits.

MARKETABILITY ANALYSIS

EARNING PER SHARE

201420132012

Rs.2.48Rs.2.67Rs.2.82

DIVIDEND DECLARATION

201420132012

6.7%7.50%7.50%

LEVERAGE ANALYSIS

Leverage analysis is used to measure the degree of indebt ness (up to what extent the firm is in debtness).

DEBT RATIO

201420132012

57%68.78%76%

DEBT-EQUITY RATIO

201420132012

186%322%220%

RWML is heavily depending on the outsiders financing.

COVERAGE RATIO ANALYSIS

Coverage ratio is used to see the ability of a firm to pay its fixed financial cost.i-e.

Interest payment

Lease payment t

Dividend to preferred stockholders

TIME INTEREST EARNED RATIO

201420132012

1.27times1.36times1.56times

RWML is paying interest 1.56times in a year, which is greater than previous years.

COMMENTS AND SUGGESSIONS

After a short careful analysis, I come to know that the financial position of the co. is much better than the other weaving units in textile industry.

There is tough competition in textile exports. Buyers are demanding quality and economy in their purchase contracts. They are becoming quality conscious. RWML has vast markets of Japan, USA, Taiwan, H.K therefore co. is going to the installation of 200 looms with complete back up process as well. RWML is saving a huge cost in the field of marketing because its Chief Executive is extra vigilant. In this respect co. is saving more of less. RWML has no marketing department to promote and introduce its products in international market. There is a crucial need for having disciplined and coordinated program of marketing to boost up the exports. There is a need of searching the new customers in international market. So that they can enhance their sale volume because of going to its expansion as double capacity.

CHAIRMAN

C.F.O.

INTERNAL

AUDITOR

FINANCE MANAGER

MKTING

MANAGER

PURCHASE

MANAGER

ACCOUNTS

MANAGER

CHIEF ACCOUNTANT

ASSISTANT ACCOUNTANT

DCA

PAGE 29Internship Report