An amusing poetic conversation between Ghalib, Iqbal & Faraz

Standard

Scribo

.

Let me imbibe in the mosque, O priest, let me there drink my wine
Else show me someplace God doesn’t go, where his light does not shine

-Ghalib (1797-1869)

.

A mosque’s no fitting place to drink, its purpose is God’s praise
If ‘tis drink you want, find an infidel’s heart, where God no longer stays

-Iqbal (1877-1938)

.

I have known an infidel’s heart, for I have visited there
God does indeed dwell therein, only the infidel isn’t aware

-Faraz (1931-2008)

.

.

Zahid sharab peene de masjid mein beth kar,
Yaa woh jagha bata jahan Khuda nahin..
(Mirza Ghalib)

Masjid khuda ka ghar hai, peeney ki jagha nahin,
Kaafir ke dil mein ja, Wahan khudaa nahin..
(Allama Iqbal)

Kaafir ke dil se aya hon mein yeh dekh kar,
Khuda maujood hai wahan, Par usey pata nahin..
(Ahmad Faraz)

.

.

Three great Urdu poets of different temperaments…

View original post 86 more words

FCFF Calculation and Valuation

Standard

Part A

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Sales Growth 102.22% 19.50% 6.50% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00%
Operating Margin (EBIT/Sales) 49.39% 50.93% 50.91% 49.92% 48.97% 47.93% 46.81% 37.95% 35.50%
Depreciation 3,424 3,508 3,533 3,558 3,583 3,608 3,633 3,658 3,683
Capital Expenditure 1675 500 500 500 500 500 500 500 500
Investment in NWC (% of additional sales amount) 20% 10% 10% 10% 10% 10% 5% 5% 5%
Year 0 1 2 3 4 5 6 7 8 9
Sales      14,833.34 29,995.99    35,845.20    38,175.14 40,083.90 42,088.09 44,192.50 46,402.12 48,722.23    51,158.34
EBIT 14,815.02    18,255.96    19,434.96 20,009.88 20,610.54 21,181.46 21,720.83 18,490.09    18,161.21
After-tax Operating Income    9,629.76    11,866.38    12,632.73 13,006.42 13,396.85 13,767.95 14,118.54 12,018.56    11,804.79
Add: Depreciation    3,424.00      3,508.00      3,533.00    3,558.00    3,583.00    3,608.00    3,633.00    3,658.00      3,683.00
Less: Investment in Net Working Capital    3,032.53        584.92        232.99      190.88      200.42      210.44      110.48      116.01        121.81
Less: Investment in Fixed Assets    1,675.00        500.00        500.00      500.00      500.00      500.00      500.00      500.00        500.00
FCFF    8,346.23    14,289.45    15,432.73 15,873.55 16,279.43 16,665.51 17,141.06 15,060.55    14,865.98
126,703.58
Discounted Value of FCFF $7,252.24 $10,788.95 $10,124.84 $9,049.01 $8,063.96 $7,173.14 $6,410.77 $4,894.35 $4,197.88
FCFF Valuation
PV of FCFF (year 1-9) $67,955.13
PV of terminal value $35,778.72
Value of firm’s operating assets $103,733.86
Add: cash 3839.00
Less: Debt      37,490.00
Value of Common Equity 70082.86
Fair Price per share            33.37
Calculation of WACC
MV Weight A-T Cost
Equity      48,132.00 0.58278948 20.300%
Debt      34,457.00 0.41721052 7.800%
Total Market Value of Long-term Capital      82,589.00          1.00 15.085%
Number of Shares (millions) 2,100
Beta (historical) 1.15
Market Price (December 31, 2011) 22.92
Interest rate on LT debt 12%
Tax rate 35%
Terminal growth rate 3%
Risk-free rate 11.50%
Market Premium 8%
Adjusted Beta 1.10
Cash 3839.00
Debt 37490
Sales 14,833.34

 

Part B I

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Sales Growth 102.22% 19.50% 6.50% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00%
Operating Margin (EBIT/Sales) 49.39% 50.93% 50.91% 49.92% 48.97% 47.93% 46.81% 37.95% 35.50%
Depreciation 3,424 3,508 3,533 3,558 3,583 3,608 3,633 3,658 3,683
Capital Expenditure 1675 500 500 500 500 500 500 500 500
Investment in NWC (% of additional sales amount) 20% 10% 10% 10% 10% 10% 5% 5% 5%
Year 0 1 2 3 4 5 6 7 8 9
Sales      14,833.34        29,995.99      35,845.20      38,175.14        40,083.90        42,088.09        44,192.50        46,402.12      48,722.23                  51,158.34
EBIT      9,150.62        14,815.02      18,255.96      19,434.96        20,009.88        20,610.54        21,181.46        21,720.83      18,490.09                  18,161.21
After-tax Operating Income      5,947.90          9,629.76      11,866.38      12,632.73        13,006.42        13,396.85        13,767.95        14,118.54      12,018.56                  11,804.79
Add: Depreciation          746.38          3,424.00        3,508.00        3,533.00          3,558.00          3,583.00        3,608.00          3,633.00        3,658.00                    3,683.00
Less: Investment in Net Working Capital          3,032.53          584.92          232.99            190.88            200.42            210.44            110.48          116.01                      121.81
Less: Investment in Fixed Assets          1,675.00          500.00          500.00            500.00            500.00            500.00            500.00          500.00                      500.00
FCFF          8,346.23      14,289.45      15,432.73        15,873.55        16,279.43        16,665.51        17,141.06      15,060.55                  14,865.98
                 98,548.96    106,601.22    115,884.25    126,703.58    139,475.01    154,779.22    173,452.60    196,745.32    226,613.38    266,298.61    321,592.98
Discounted Value of FCFF $7,252.24 $10,788.95 $10,124.84 $9,049.01 $8,063.96 $7,173.14 $6,410.77 $4,894.35 $4,197.88
FCFF Valuation
PV of FCFF (year 1-9) $67,955.13
PV of terminal value $27,828.39 $30,102.19 $32,723.55 $35,778.72 $39,385.14 $43,706.76 $48,979.77 $55,557.20 $63,991.39 $75,197.75 $90,811.85
Value of firm’s operating assets $95,783.52 $98,057.33 $100,678.68 $103,733.86 $107,340.27 $111,661.89 $116,934.91 $123,512.34 $131,946.52 $143,152.89 $158,766.98
Add: cash      3,839.00          3,839.00        3,839.00        3,839.00          3,839.00          3,839.00        3,839.00          3,839.00        3,839.00                    3,839.00      3,839.00
Less: Debt      37,490.00        37,490.00      37,490.00      37,490.00        37,490.00        37,490.00        37,490.00        37,490.00      37,490.00                  37,490.00      37,490.00
Value of Common Equity 62132.52 64406.33 67027.68 70082.86 73689.27 78010.89 83283.91 89861.34 98295.52 109501.89 125115.98
Fair Price per share            29.59              30.67            31.92            33.37              35.09              37.15            39.66              42.79            46.81                        52.14            59.58
Calculation of WACC
MV Weight A-T Cost
Equity      48,132.00 0.582789476 20.300%
Debt      34,457.00 0.417210524 7.800%
Total Market Value of Long-term Capital      82,589.00                1.00 15.085%
Number of Shares (millions) 2,100
Beta (historical) 1.15
Market Price (December 31, 2011) 22.92
Interest rate on LT debt 12%
Tax rate 35%
Terminal growth rate 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%
Risk-free rate 11.50%
Market Premium 8%
Adjusted Beta 1.10
Cash 3839.00
Debt 37490
Sales 14,833.34

 

Part B II

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Sales Growth 102.22% 19.50% 6.50% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00%
Operating Margin (EBIT/Sales) 49.39% 50.93% 50.91% 49.92% 48.97% 47.93% 46.81% 37.95% 35.50%
Depreciation 3,424 3,508 3,533 3,558 3,583 3,608 3,633 3,658 3,683
Capital Expenditure 1675 500 500 500 500 500 500 500 500
Investment in NWC (% of additional sales amount) 20% 10% 10% 10% 10% 10% 5% 5% 5%
Year 0 1 2 3 4 5 6 7 8 9
Sales        14,833.34    29,995.99    35,845.20    38,175.14    40,083.90    42,088.09    44,192.50    46,402.12    48,722.23    51,158.34
EBIT    14,815.02    18,255.96    19,434.96    20,009.88    20,610.54    21,181.46    21,720.83    18,490.09    18,161.21
After-tax Operating Income      9,629.76    11,866.38    12,632.73    13,006.42    13,396.85    13,767.95    14,118.54    12,018.56    11,804.79
Add: Depreciation 3,424 3,508 3,533 3,558 3,583 3,608 3,633 3,658 3,683
Less: Investment in Net Working Capital      3,032.53        584.92        232.99        190.88        200.42        210.44        110.48        116.01        121.81
Less: Investment in Fixed Assets 1675 500 500 500 500 500 500 500 500
FCFF      8,346.23    14,289.45    15,432.73    15,873.55    16,279.43    16,665.51    17,141.06    15,060.55    14,865.98
126,703.58 184,554.02 172,441.19 161,820.44 152,432.06 144,073.32 136,583.64 129,834.19 123,720.39 118,156.48 113,071.48 108,406.09
Discounted Value of FCFF $7,252.24 $10,788.95 $10,124.84 $9,049.01 $8,063.96 $7,173.14 $6,410.77 $4,894.35 $4,197.88
FCFF Valuation
PV of FCFF (year 1-9) $67,955.13
PV of terminal value $35,778.72 $70,433.88 $62,789.27 $56,230.27 $50,560.40 $45,626.69 $41,308.37 $37,508.90 $34,150.18 $31,168.48 $28,511.24 $26,134.82
Value of firm’s operating assets $103,733.86 $138,389.01 $130,744.40 $124,185.40 $118,515.53 $113,581.82 $109,263.51 $105,464.03 $102,105.32 $99,123.61 $96,466.38 $94,089.95
Add: cash          3,839.00      3,839.00      3,839.00      3,839.00      3,839.00      3,839.00      3,839.00      3,839.00      3,839.00      3,839.00      3,839.00    3,839.00
Less: Debt        37,490.00    37,490.00    37,490.00    37,490.00    37,490.00    37,490.00    37,490.00    37,490.00    37,490.00    37,490.00    37,490.00    37,490.00
Value of Common Equity 70082.86 104738.01 97093.40 90534.40 84864.53 79930.82 75612.51 71813.03 68454.32 65472.61 62815.38 60438.95
Fair Price per share              33.37          49.88          46.23          43.11          40.41          38.06          36.01          34.20          32.60          31.18          29.91        28.78
Calculation of WACC
MV Weight A-T Cost 5 6 7 8 9 10 11 12 13 14 15
Equity        48,132.00 0.582789476 20.300% 13.800% 14.800% 15.800% 16.800% 17.800% 18.800% 19.800% 20.800% 21.800% 22.800% 23.800%
Debt        34,457.00 0.417210524 7.800%
Total Market Value of Long-term Capital        82,589.00          1.00 15.085% 11.297% 11.880% 12.462% 13.045% 13.628% 14.211% 14.793% 15.376% 15.959% 16.542% 17.125%
Number of Shares (millions) 2,100
Beta (historical) 1.15
Market Price (December 31, 2011) 22.92
Interest rate on LT debt 12%
Tax rate 35%
Terminal growth rate 3%
Risk-free rate 11.50% 5.00% 6.00% 7.00% 8.00% 9.00% 10.00% 11.00% 12.00% 13.00% 14.00% 15.00%
Market Premium 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8%
Adjusted Beta 1.10 1.10 1.10 1.10 1.10 1.10 1.10 1.10 1.10 1.10 1.10 1.10
Cash 3839.00
Debt 37490
Sales 14,833.34

 

Engro Accounting Analysis

Standard

 

Course: Principles of Accounting – I

 

 TERM PROJECT

ENGRO FOODS LIMITED

 

 

AN INTRODUCTION

Engro Foods Limited was officially launched as a fully owned subsidiary of Engro in 2004. Using dairy as a stepping stone to enter into the food business, the Company has established state-of-the-art processing units in Sukkur and Sahiwal, along with an ice cream production facility in Sahiwal.

With an acquisition of Al Safa – a fast growing and established Halal meat brand – Engro Foods is now venturing into North American market starting from Halal Foods category. The new organization, Engro Foods Canada Ltd. with a subsidiary Engro Foods USA, LLC, intends to aggressively grow the business in this market. Hence, currently it is operating in 310 cities and four provinces of Pakistan, as well as across18+ US states and 4 Canadian provinces.

 

Top quality brands like Olper’s, Olwell, Tarang, Omore and Owsum have been successfully launched under the helm of Company’s dairy products. To support these brands and their highest standards of quality, Engro Foods has invested heavily in milk processing and milk collection infrastructure. The vision of Elevating Consumer Delight Worldwide will shift the Company’s significant focus towards the global operations in the years to come.

 

FINANCIAL OVERVIEW

“Engro Foods will continue to make investments aimed at impacting lives and inspiring hope for millions of Pakistanis every day, in a multitude of ways.”- says the company’s vision.

 

As the country’s fastest growing local conglomerate and leading ice-cream manufacturer, the success of Engro Foods today directly translates into growth of Pakistan’s agri-business sector, accounting for more than 11% of Pakistan’s GDP.

 

 

 

 

PAST YEARS PROFIT AND LOSS ANALYSIS

Sales

The revenue has grown at a very rapid pace from the past 5 years. This is primarily the result of product innovation and launch of new segment.

 

Gross Profit

Gross Profit ratio has significantly improved from 55.7% in the past few years (From the financial statement).

The significant increase in gross profit is a direct consequence of efficiencies in production and economies of scale due to exponential growth in business volume.

 

Distribution and marketing expenses

In order to support continuous growth trajectory, significant expenditure has been incurred for brand building which led to manifold increase in marketing costs.

With many brands now in a very established position, the marketing costs now stand at 12% of revenue in 2012 compared to 26% in 2007.

 

Administrative and other expenses

These expenses have increased primarily due to larger support functions required to manage the business growth.

The expenses under these heads are mostly fixed in nature and therefore, have witnessed reduction in relation to revenue.

 

Finance cost

Finance costs increased with the higher amount of long-term borrowings.

Due to lowering of interest rates in 2012, the finance cost for 2012 is lower despite increase in amount of borrowing.

 

Provision for taxation

This is directly attributable to increase in profitability.

 

PAST YEARS BALANCE SHEET ANALYSIS

EQUITY

With time-to-time capital injections from the parent company and private placement in 2011, the share capital (including premium) has reached to Rs 8.4 billion in 2012 from Rs 2.2 billion in 2006 (From financial report).

The Company incurred losses in its earlier years. However, the recent profit trajectory has significantly increased Company’s overall equity position.

 

NON-CURRENT LIABILITIES

 

Long-term finances

In order to maintain the growth momentum, the Company continues to finance a portion of its capital requirement by raising long-term loans. Therefore, the long-term loans have significantly increased over the years.

The ratio of long-term loans to equity has gone down to 38:62 in 2012 compared to 55:45 in 2007. The company has been able to reduce this ratio due to its higher cash generation capacity.

 

Deferred taxation

Due to taxable losses in earlier years of operation, the Company’s deferred tax liability has increased significantly.

 

CURRENT LIABILITIES

 

Current portion of Long-term finances

The increase is consequential to higher borrowings.

 

Trade payables

Trade payables have quadrupled over the years in line with the rising business volume.

 

Accrued interest / markup on finances

Increase in borrowings over the years has led to higher year end accruals for financing obligations.

 

NON-CURRENT ASSETS

 

Property, plant and equipment

Property, plant and equipment has witnessed a very large increase over the years. This is due to continuous investment in production facilities and infrastructure to support growing scale of business.

Property, plant and equipment represent almost half of the company’s balance sheet size.

 

Long-term investments

In 2009 and 2010, Engro Foods invested in a rice processing company (then Engro Foods Supply (Private) Limited).

The subsidiary was later sold to another group company as part of group strategy.

 

Biological assets

This represents value of animals purchased at the time of establishment of Company’s Dairy Farm in Nara.

 

 

CURRENT ASSETS

 

Stock-in-trade / Stores & Spares

The increase is in line with the continuous increase in the overall business volume.

On average, the company maintains at least a month’s inventory to meet sales demand and production requirements.

 

Other Receivables

The increase in Other Receivables is primarily due to two factors:

– Increase in sales tax refunds from the government arising mainly on input tax paid at the time of imports.

– Increase in receivable from Tetra under cost-sharing arrangements. This is a direct consequence of increase in business volume.

 

Short-term investments / Cash

Cash and short-term investments were retained in 2011 & 2012 to finance upcoming capex commitments.

 

 

 

REVIEW OF FINANCIAL ACCOUNTING SYSTEM

 

Engro Foods make use of integrated accounting system that is directly linked to its Enterprise Resource Planning. The system is beneficial for the firm in several ways; managers get timely report regarding what company’s performance had been to date, no hassle of baffling with manual records and the system acts as an independent check on fraud and accuracy. Also the system has enabled the managers to have less dependency on sources in order to verify financials in various departments.

Though having an integrated and computerized accounting system, the firm does maintain some records manually. They are usually concerned with day-to-day operating expense, which is a small proportion of total expenses. Some of the books that are recorded manually include:

  • Petty Cash book
  • Mess/pantry record book
  • Stationary record book
  • Gratuity collection book

 

Extract of General ledger chart of accounts

 

Chart of accounts include all the ledgers of the sub accounts that are summarized under a heading mentioned in account’s summary. The extracts of several headings and their sub accounts is given below:

 

REVENUES AND EXPENSES

Revenue is measured at the fair value of the consideration received or receivable and is shown net of sales returns and discounts. Revenue is recognized to the extent it is probable that the economic benefits will flow to the Company and the revenue can be measured reliably, on the following basis:

– Sales are recorded on dispatch of goods to the customers; and

– Return on deposits / bank balances is recognized on accrual basis.

Following are the extracts that show the revenues generated by company for the year 2012:

 

 

 

 

 

 

 

 

 

 

 

The figures reveal that the major revenue by the firm is from the sales of its milk products and Raw-milk. Also company has earned income from its bank deposits and from the disposal of its operating assets during the year.

Research and development costs are charged to income as and when incurred, except for certain development costs which are recognized as intangible assets when it is probable that the development project will be a success and certain criteria, including commercial and technological feasibility have been met.

Borrowing costs are recognized as an expense in the period in which these are incurred except where such costs are directly attributable to the acquisition, construction or production of a qualifying asset, in which case, such costs are capitalized as part of the cost of that asset. Borrowing costs include exchange differences arising from foreign currency borrowings to the extent these are regarded as an adjustment to borrowing costs.

Following are the extracts that show the major expenses incurred by the firm in the same year:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

STOCK VALUATION

 

Stores, spares and loose tools

These are valued at weighted average cost except for items in transit, which are stated at invoice value plus other charges paid thereon till the balance sheet date. A provision is made for any excess book value over estimated realizable value of items identified as surplus to the Company’s requirements. Adequate provision is also made for slow moving items.

 

Stock-in-trade

Stock in trade is valued at the lower of cost and net realizable value. Cost is determined using weighted average method except for raw materials in transit which are stated at invoice value plus other charges paid thereon till the balance sheet date. Cost of finished goods comprises purchase cost and other manufacturing expenses. The cost of work in process includes material and proportionate conversion costs.

Net realizable value signifies the estimated selling price in the ordinary course of business less estimated cost of completion and estimated costs necessary to make the sale. Provision is made for slow moving stocks, where considered necessary.

 

 

Sample vouchers used in firm

 

 

 

 

 

 

 

 

 

 

 

 

 

Horizontal Analyses of Profit and Loss Account (2012 vs. 2011 and 2011 vs. 2010)

Analysis:

  • We see that Engro foods have increased their cost of sales, mainly due to increase in production, but in turn they have considerably increased their sales of the goods.
  • A contributing factor to this is their increase in the Distribution and Marketing Expenses which as you can see that they have increased by about 993 Million rupees.
  • They have also considerably reduced their Finance costs which are the interest and other costs that they have incurred due to loans and the like.
  • The provision of taxation is increased directly due to the increase in profits.
  • Finally when we analyze their Net profit (after-tax); we see that by a whooping increase of 400% in 2011 and another awe inspiring increase of almost about 200% in 2012, the brand induced Food Company is proving itself as a highly profiting and rapidly growing venture.
  • For the sake of a better understanding, above we include data of profit and loss statement till up to the year 2006.
  • From the trend we can see that Engro foods have continuously increased their sales over the periods.
  • They have been continuously investing in the Marketing and distribution of their products for a better reach to consumers and for a better brand image.
  • The provision of taxation is increased directly due to the increase in profits.
  • We can also see that after 2006 they have continually till 2009 experienced the period of continuous losses (After-tax net loss).
  • However since the last 3 years or so, they have emerged as a brand induced highly profiting company with their profits growing by more than 100% each subsequent year.

 

Vertical Analyses of Profit and Loss Account (2012 vs. 2011 and 2011 vs. 2010)

Analysis:

  • The vertical analysis gives us a better picture of the income statement and how much invested in each of its components.
  • If we compare 2012 vs. 2011, we see that they have reduced their cost of sales.
  • Gross profit has increased.
  • The expenses have been almost or approximately stabilized at their previous levels.
  • Operating profit has increased.
  • Finance costs have decreased.
  • The provision of taxation is increased directly due to the increase in profits.
  • Finally, the after-tax net profit has more than doubled, through which we can confidently conclude that Engro Foods is a star company with an ability of doubling its profits.
  • For the sake of a better understanding, above we include data of profit and loss statement till up to the year 2007.
  • If we see the trend, Engro foods has successfully and admirably reduced their cost of sales over the years.
  • Over the periods the percentage of operating profits has increased and revived from a chasm of losses.
  • In the recent periods they have been successful in reducing their finance costs.
  • The provision of taxation is increased directly due to the increase in profits.

 

They have admirably taken their after-tax net profit from a negative figure to a positive figure doubling each year.

 

Horizontal Analysis of Balance Sheet:

Analysis:

  • As we can see that the share capital (including premium) has reached to Rs 8.4 billion in 2012 from Rs 2.2 billion in 2006.
  • The Company incurred losses in its earlier years. However, the recent profit trajectory has significantly increased Company’s overall equity position.
  • The ratio of long-term loans to equity has gone down to 38:62 in 2012 compared to 55:45 in 2007. The company has been able to reduce this ratio due to its higher cash generation capacity as shown by the income statements.
  • Trade payables have quadrupled over the years in line with the rising business volume.
  • As you can see from the data that the Property, plant and equipment has witnessed a very large increase over the years. This can be due to continuous investment in production facilities and infrastructure to support growing scale of business.
  • We also see that, Property, plant and equipment represents almost half of the company’s balance sheet size.
  • Biological assets represent value of animals purchased at the time of establishment of Company’s Dairy Farm in Nara.
  • Advance against purchase of shares of Engro Foods Netherlands B.V.: This represents advance paid to Engro Corp for purchase of shares of Engro Foods Netherlands (Al Safa business). The Company is already managing the Al Safa business in North American and Canadian markets.
  • As we see that Stock-in-trade / Stores & Spares has also increased in line with the continuous increase in the overall business volume.
  • On average, the company maintains at least a month’s inventory to meet sales demand and production requirements.
  • The increase in Other Receivables is primarily due to two factors:

o   Increase in sales tax refunds from the government arising mainly on input tax paid at the time of imports.

o   Increase in receivable from Tetra under cost-sharing arrangements. This is a direct consequence of increase in business volume.

  • Cash and short-term investments were retained in 2011 & 2012 to finance upcoming commitments.

 

Vertical Analysis of Balance Sheet:

Future Outlook:

As per the above trend analysis of the profitability ratios shows, considering the multinational company status, the dividends to stockholders, and brand image of Engro, we can confidently conclude that Engro is a highly profit making, finance milking and a brand star corporation.

Secondary Analysis of Pakistan’s Furniture Sector

Standard
Industry AnalysisFurniture Sector of Pakistan
Course: Analysis of Pakistani Industries
Assignment: Secondary Research

 furniture

 

Furniture Sector Pakistan

HISTORY

  • History dates back to as long as 20th century, the furniture design is a combination of eastern and western style, due to the shared history with British.
  • There are ancient traditional values attached to the furniture in a house in our society. Items like, the old ‘charpais’ (string beds), inlaid ‘door jambs’, handcrafted ‘almaris’ (cupboards), ornate ‘jhulas’ (swings) and grandfather’s wooden ‘kursi’ (chair), wooden ‘takht’ (divans), and so on, have values attached. Moreover, due to the tradition of gifting furniture when marrying off daughters, the furniture craftsmen were always deemed as a significant part of the society.
  • Considered as a non-organized Small Scale Cottage industry.
  • The export of furniture which was worth US $3.46 million in 1995-96 decreased to US $3.33 million in 1997-98.
  • A growing trend towards contemporary furniture and posh furniture brands started in 1983 with the establishment of first brand ‘Vogue’ by Neelam Mawaz.
  • According to the PTDA, there are about 700 manufacturing units in the country.
  • These units are operating on the basis of single shift/300 days per annum.
  • 8,000 people (approx.) are directly and indirectly attached with this occupation
  • Strong historical background of craftsmen
  • The leading furniture making areas of Pakistan are Gujrat, Peshawar, Lahore and Karachi and Chiniot.
  • Wooden furniture forms 95% of the total furniture market in Pakistan.
  • The British retail chain Harrods sells some Pakistani furniture at its outlets.
  • Chiniot in Pakistan is well known throughout the word for its beautiful wood carvings and brass inlays. Its furniture is better in quality than that of other areas of the country.
  • This industry, combined with the handicraft industry, is employing about 50,000 people.
  • The demand for Pakistani furniture has been rising constantly. It has bright prospects to export more than $1 billion worth of furniture annually in the international furniture market.

SIGNIFICANCE

 

WORLD MARKET

  • The share of wooden furniture around the world is 77% followed by metal furniture 17% and plastic furniture at 6%.
  • Italy is the world’s biggest exporter of furniture followed by Germany and Canada. United States is the biggest importer of wooden furniture followed by Germany and France.
  • Pakistan’s world share is insignificant despite craftsmanship.

 

FACTOR CONDITIONS

BASIC FACTORS

Raw materials:

  • Chipboard: imported chipboard is used in manufacturing bedroom sets, which sell the most.
  • Timber
  • Foam
  • Polish chemicals materials
  • Color paints
  • Hard ware
  • Nails
  • Screws
  • Glue/solution,
  • Spirit,
  • Thinner
  • Lacquer
  • Sealer
  • Hardener

Wood:

  • Forests in Pakistan cover about 2% of the total area.
  • The best wood used in Sheesham/ Rosewood. 80 % of Pakistani furniture market is dependent on it.
  • Shisham (Dalbergia sissoo) is also commonly known as “Tali” in different areas of Pakistan and internationally it is known as “Indian rose wood” and Bombay black wood.
  • It grows almost everywhere in plains of Pakistan.
  • It varies considerably in size according to locality. Under good conditions it reaches a height of 25m with a bole early straight, clean, cylindrical having an average length of about 6m and diameter upto 1.5m.
  • The average time that Sheesham takes to grow is 50 years.
  • Reserves of Sheesham have decreased by 50 % in the last 5 years.
  • Alternative use of Sheesham; low value added or firewood by timber mafia.
  • Due to decreased supply, the prices have gone up.
  • Swati and Peshawari furniture is made from oak, deodar and partial wood, the wood-carvers of Azad Kashmir and some parts of the Frontier province use walnut wood.
  • Furniture markets are getting wood from timber markets, forest department and private farms.
  • Other types of wood used in manufacturing furniture are: . Teak wood . Walnut wood . Keekar wood.

Labor:

  • Pakistan has been gifted with valuable craftsmanship e.g. Carved Sheesham tables are the specialty of the craftsman of Chiniot (Punjab)
  • The workers are usually unaware of the procedural standards and quality control requirements of the international market.
  • Wood seasoning facility center is available in Pakistan
  • The labor required for manufacturing process is easily available on daily wages, per unit basis and permanently employed.

Tools:

  • The tools usually used are outdated and obsolete. They are locally made. Most of the work is performed through manual labor.

 

Advanced Factors

  • Training: Lack of educated, certified and professionally trained work force.
  • R&D: People do come up with innovative ideas and designs but no proper R&D facilities are available.
  • There is a constraint of technology i.e. improvised machinery in the region due to their high import price.
  • Few creative personnel are employed in the furniture industry due to lack of local demand and payoffs.

 

PRODUCT MANUFACTURING PROCESS

Wood is cut into different sizes of blocks and slabs. If the wood purchased is not seasoned then these blocks/slices are seasoned through different processes, namely:

  1. . Condensation
  2. . Boiler System
  • Vaccum system
  • Seasoning through putting the wood slices under normal environmental temperature for considerable duration.

Before start of manufacturing of any furniture product a desired design is selected. Selection of elegant design is important to ensure attractive finished product.

The seasoned wood blocks are cut into desired shape and slices according to the requirement of design. The slices of wood are molded into the desired shape according to the design. Once the different pieces are carved & molded than these parts/pieces are assembled or fixed together to give the shape to the final product.

Assembled product is grind to make the surface smooth. Once the surface is smooth, finishing material is applied to make the surface ready for paint or polish. After the base is prepared final finishing is applied depending on requirement in term of paint/polish. Upholstery of fabric is carried out according requirement of design.

 

DEMAND CONDITIONS

Local Demand

  • Most of the local demand comes from hotels, restaurants, and public facilities.
  • Other demands include office furniture market which consists almost entirely of metal furniture,
  • Furniture items produced in Sindh comprise of ordinary chairs, tables, and other items like doors and windows and sold internally because of the simplicity of design and heavy weight.
  • The market is divided into home use and contract markets. The contract market constitutes those units that deal with supplies to hotels, restaurants, offices and public facilities.
  • More than 80 percent of the furniture demand in the country is met by the Chinioti furniture.
  • With the rapid increase in the development of new housing schemes, the increased demand of wooden furniture is anticipated
  • All Pakistan Furniture Exporters Association is established.
  • The major buyers of the Pakistani furniture are the UK, USA, Sri Lanka, the Gulf countries like Dubai, Saudi Arabia, Oman, Kuwait, etc.
  • The United States buys mostly bedroom furniture. UK and the Gulf countries import kitchen furniture and office furniture.
  • The demand of wooden furniture in the International market is increasing
  • Gradually at an annual average rate of 4 percent (Statistical Division of Pakistan).
  • Most players in the furniture market seem to be unaware of social compliance and environmental issues worldwide.
  • Karachi leads in terms of exports, followed closely by Lahore and Peshawar.
  • Pakistan’s exports kept increasing by 10 percent annually until 2007-08. However, the past decade can be considered as an opportunity lost for the nascent industry.
  • A few years back, an exhibition on furniture was conducted by then commerce minister Razzaq Dawood in Europe which attracted the attention of many Asian art craft lovers, and furniture manufacturers back home got hefty orders which could not be met owing to scale limitations.
  • Lack of these attributed to sudden decline in exports during testing times. In FY08, Pakistan exported furniture worth $12 million, while the amount fell to $9 million in 2009 and further declined to around $8 million in 2010. There are many other reasons for this decline too.
  • On a global level, the image of Pakistan in the furniture market is bad. Foreign firms do not trust Pakistani companies because the latter often fail to meet quality standards. Resultantly, these firms end up getting fewer orders. The government itself pays little attention to the problems faced by this industry. The fact of the matter is that there is a dire need to formulate a holistic plan of action to first make this industry sustainable, and later to help it foster and gain recognition on an international level. Otherwise, it’s curtains for this industry.

Export

 

Supporting and related industries

  • Policy makers. Easy access of credit, tax holidays on expansion, frequent road shows and visits to international exhibitions, along with assistance from government officials for marketing furniture in Europe are some of the initiatives that can benefit the industry.
  • There are several other reasons for this industry’s current drawback. To start with, the cost of transport associated with the industry has increased manifold due to a significant rise in the fuel prices. The cost of labor too has increased without an increase in its quality. Even in this era of technological progress, at least 98 percent of manufacturers are using traditional methods in the furniture industry. The latest technology, hence, is not being used at all.
  • Pakistan’s wooden furniture industry has a great export potential, and in quality is inferior to none. The domestic market is very vast and varied. However, Japan’s import market has great potential, too. No tariffs are levied on the furniture or its components. The largest obstacle to imports of furniture into Japan is size. Western furniture is often rejected because it is too large for the Japanese consumers.
  • Traditionally, Japan’s furniture market has been heavily dependent on the so-called box furniture. This type of market, however, is gradually fading away. Instead, the focus of home-use furniture demand is shifting to furniture sets for reception rooms. The increasing adoption of western housing and interior designs will further accelerate this trend. Many single-family dwellings and condominiums come with built- in furniture – such as walk-in closets. The Japanese consumers have a traditional attachment to wood. They dislike the presence of knots in the furniture surface, and expect manufacturers to perform careful finishing to all parts. Hence, products that emphasize the beauty of the wood grain will be an important key to success.

 

STRATEGY, STRUCTURE AND RIVALRY

  • The furniture industry has recently gone into aggressive marketing strategy in order to increase exports.
  • 95% of the furniture industry is dominated by wooden furniture manufacturing.
  • The two main types of wood furniture industry are cottage and small scale industry. They use obsolete machinery and emphasis on manual labor.
  • Wooden furniture is manufactured in Pakistan by a large number of cottage industries, spread over rural areas, small towns and cities.
  • Today, a large quantity of wooden furniture is manufactured in Pakistan at the cottage level. The environment and conditions being favorable, the wooden furniture industry holds out a bright scope for further expansion.
  • A number of families in Hala, Kashmore, Khanewal and Dera Ghazi Khan have stuck to the traditional workmanship, despite sharp, fluctuations in the taste of customers.
  • The wood carvers’ skills are predominantly visible in furniture making, apart from carving wooden ceilings, wooden panels, doors and windows.
  • The oldest single style evolved, has been evolved in the NWFP, where craftsmen design massive pieces, beds, desks, chairs, stands, lamps etc.
  • Swati furniture has basically broad sets, heavy legs (chairs) and geometric floral designs, carved in various styles of woodwork. It has been developed in the Peshawar valley.
  • Jacquard work is a popular traditional craft of Sindh. The articles, such as table lamps, chairs, and sofa sets, produced by the lacquer industries of Hala in Hyderabad district and Kashmore in the Jacobabad district, are very popular. There was a time, when villagers used lacquer work furniture only- bed legs, low chairs, in the modern homes of the rich in cities.
  • Furniture items produced in Sindh and parts of Punjab are more cottage industry based and for domestic use only.

 

ISSUES:

  • Exporters are suffering manifold problems while local manufacturers are facing challenges due to heavy imports of furniture. Chinese furniture has also hit the local industry by 70 percent and the sales of locally manufactured household furniture have gone down by 30 percent.
  • Timber production on the other hand has gone down drastically because of unchecked deforestation.
  • About sixty percent raw material used in furniture making is imported from China. Imported item mostly used in furniture making are chipboard, hardware items and glass.
  • Exports of furniture have gone down since 2007 due to political and economic turmoil coupled with load shedding. It is observed that no importer has entered the Pakistani market and no one is ready to book orders by browsing through designs at company web-sites.

 

SUGGESTIONS:

  • For a good start, the government should immediately introduce and implement a reforestation plan that is focused on replanting and sustenance of the ever depleting rosewood. A minimum of ten trees should be planted for every tree cut, and a heavy penalty should be placed on cutting these trees prior to their maturity period, which is approximately fifty to sixty years.
  • To cut down the local wastage of this precious wood, a ban on its use for minor, less profitable purposes is necessary. This may include banning the use of rosewood to make school furniture. To meet such type of demand, research should be carried out on finding alternatives for rosewood. Acacia, for instance, is one such alternative. It can be used as a perfect substitute if it is properly seasoned.
  • Also, to make furniture goods more competitive at the international level, the government should revise its taxes and duties on this industry. Allocating idle industrial zones and premises to the furniture industry will also help in boosting its exports. Furniture testing facilities should be set up to guarantee quality exports that would boost the confidence of international buyers. But most importantly, the government needs to give this sector a most favored industry status. Resultantly, the cost to consumers will fall, thereby stoking demand. This will lead to more demand which will enhance this industrial base, and potentially enhance furniture exports further. The potential for growth of the industry exists. With the right policies and will, this sector has every chance of excelling, despite the general economic conditions of the country.

SOURCES FOR SECONDARY RESEARCH:

A Short History of Indian Furniture

Standard

This will help if you are analyzing the Furniture Industry.

Kuno - furniture & finds from far away

Furniture has never been part of India’s tradition, this perhaps is as a direct result of the extreme climate of Rajasthan. Most people sat, slept and ate on the floor. Early European visitors to India were struck by the lack of furniture in mansions and palaces. What they found were low chairs, if any placed on woven floor carpets, Dhurries and Bolsters were provided for sitting on or against.

The Portuguese thus commissioned copies of their own furniture. The Indian carpenters used considerable freedom and created a striking combination of eastern and western styles. Later the French and British followed the same example and the roots of a foreign culture took hold and the craftsmen continued to produce furniture as was commissioned.

Rosewood or Shisham, from the Himalayan foothills, has for many years been a sought after timber by craftsmen, due to its strength, as well as its potential as…

View original post 211 more words

How-to: Media Text Analysis

Standard

I took Media, Culture and Society as my Social Science elective course in Spring 2014 with Ms. Nadia Zaffar. One of the assignments she gave asked us to analyze a media text. The following is my media text analyzed semiotically.

Good Luck Chuck AnalysisYou can get some more really useful information and help on this slideshow about how to analyze your media text semiotically.

http://www.slideshare.net/LiamCopeland/media-textual-analysis