SUNRAYS TEXTILE MILLS LIMITED FINANCIAL ANALYSIS

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Ratio Analysis of SUNRAYS TEXTILE MILLS LIMITED

Industry Overview: Textile is the most important industry in Pakistan. It accounts for approximately 40 percent of manufacturing employment, over 60 percent of total exports, and over 30 percent of value-added production. Pakistan's textile industry, based on locally grown cotton, produces cotton yarn, cotton cloth, and made-up textiles and apparel. Its small woolen industry uses mostly imported fibers to manufacture woolen yarn, acrylic yarn, fabrics, shawls blankets and carpets. The polyester fiber and yarn industry has also grown significantly in recent years, and meets over 80 percent of country requirements, but viscose and acrylic fibers are imported. The artificial silk and synthetic weaving industry remains largely in the unorganized sector. In Pakistan Fiscal Year (PFY) 1998 (Pakistan Fiscal Year starts July 1 and ends June 30), Pakistan had a total of 503 spinning mills with an installed capacity of 8,332,000 spindles and 145,000 rotors. The weaving industry has 53 integrated units (composite units with spinning and weaving in one unit) with an installed capacity of 14,130 looms; 512 shuttle less weaving units with an installed capacity of 13,340 1ooms; and approximately 30,000 units in the power loom (shuttle loom) sector, with an estimated 225,253 looms. In PFY-97 it additionally had 670 finishing units with a production capacity of 3,460 million sq. meters of fabric per annum, 700 knitwear units with 15,000 knitting machines, and 4,000 garment units with 160,000 industrial and 450,000 domestic sewing machines. Pakistan's textile industry is based on domestically grown cotton. Imports meet the shortfall of domestically grown medium staple cotton and the requirements for long staple and extralong staple cotton. Exports of all textiles in PFY-97 totaled a value of USD 5.4 billion. The major buyer of textile clothing and accessories was the United States, which purchased USD 309.2 million of goods. Pakistan's spinning and weaving industry is in a crisis, largely owing to higher prices for domestically produced cotton, financial mismanagement and the subsequent difficulty in obtaining loans for new, technically-advanced machinery. Loans from financial institutions are unavailable to the spinning industry, and several weaving units are working under

contract for lack of working capital. The East Asian crisis and rising electricity charges have further exacerbated the situation. Source: US Department of State and US Foreign Commercial Service
Spinning Industry

Spinning is the process of converting fibers into yarn. This is the first process of value chain that adds value to cotton by converting into a new product i.e. conversion from ginned cotton into cotton yarn. If spinning industry produces sub-standard yarn, its effect goes right across the entire value chain. Of the total 163 million spindles in the world, 113 million spindles are installed in Asia. Major Asian yarn producers along with their number of installed spindles and share in world and Asia are shown in the following table:
World share of Spindles

Country China India Pakistan Indonesia Turkey Japan Thailand Taiwan Korea Iran

Spindles 000 41,710 31,835 8,159 7,050 4,544 4,360 4,100 3,334 2,135 1,975

Share in World 25.50% 19.50% 5.00% 4.30% 2.80% 2.70% 2.50% 2.00% 1.30% 1.20%

Share in Asia 38.60% 29.50% 7.60% 6.50% 4.00% 4.00% 3.80% 3.10% 2.00% 1.80%

Growth Rate (1992-96) 0.01% 3.16% 6.22% 4.59% 2.80% -11.00% 1.94% -2.34% -10.07% 7.25%

Yarn is a $27 billion global market. Two third of the total global spinning capacity is installed in Asia and as a result Asian exporters account for 40% of total world exports. Major Asian yarn producing countries are China, India and Pakistan. Major markets for Cotton Yarn are Hong Kong, China, Japan, Italy, Germany, Korea, UK and the USA. Cotton yarn is the largest product category within yarn and accounts for around 25% of total global exports. However 92% of yarn exports from Pakistan are concentrated just in this one category. Pakistan is the fourth largest producer of cotton yarn in the world. Total number of installed spindles in the country is 8.3 million and yarn production is around 1.5 million tones. 70% of total yarn production in Pakistan is based on coarse and medium count cotton yarn. Therefore there is a strong need for spinning industry in Pakistan to diversify its product mix and increase the share of high value added finer count yarns. Global consumption of fiber is shifting from Cotton to MMF. In Pakistan, however only 18% of spindle utilization is for man

made fiber and the need is to increase this percentage to 40% at least, in line with the global trade patterns.
Pakistans Position in Global Yarn Market

Pakistan held 4% share of the total global yarn exports and ranked 7th in 1997 among the yarn exporters. In the Asian export market, Pakistan had 13% share and ranked 4th. Pakistans exports have decreased in the period 1996-97 from $1.67 billion to $1.45 billion. Pakistan used to hold 2nd position in Asian Yarn export market but its position declined from 2nd to 4th in 1997. The performance looks even more unsatisfactory in view of the fact that the total export market for yarn is growing. This means that Pakistan is losing market share in yarn export market. Pakistans yarn exports and its market shares during the time 1993-97 are shown in the Table:

Years World Market (000 $) % Change Asian Market (000 $) % Change Pakistans Exports (000$) % Change World Market Share (%) % Change Asian Market share (%) % Change

1993 19,432 6,990 1,200 6.20% 17.10%

1994 24,027 23.6 9,039 29.3 1,424 18.7 5.90% -4.8 15.70% -8.2

1995 28,025 16.6 10,525 16.4 1,648 15.7 5.90% 0 15.60% -0.6

1996 27,547 -1.7 10,617 0.9 1,672 1.5 6.10% 3.4 15.70% 0.6

1997 27,596 0.2 11,108 4.6 1,458 -12.8 5.20% -14.8 13.10% -16.6

During the period 1993-97, Pakistans market share dropped from 6.2% to 5.2% in the global yarn exports. As a percentage of total Asian exports, Pakistans market share dropped from 17.1% to 13.1%. Blended Yarns In the category of the blended yarns, Polyester/Cotton (PC) and Polyester/Viscose (PV) are the main types of yarns produced by the Pakistani spinning industry. PC yarn claims 70% share of the total production of the blended yarn, the rest 30% claimed by PV yarn. Blended yarns constitute a smaller portion of the Pakistans total yarn production. Percentage share trend of PC and PV for the period 1982-99 is shown in figure below. From 1996 onwards, there has been a trend of continuous increase in production of PC yarn and its percentage share has increased to 17.9% in 1999. Major

reason for this trend has been the growth of polyester industry in Pakistan leading to easy availability of polyester staple fiber. Growth in PV yarn has been lesser significant compared to that in PC yarn. The share increased from 4.2% in 1982 to 7.5% in 1999. Viscose fiber industry has not developed in Pakistan and almost all of the viscose fiber used is imported. For the year 1997-98, total imports of viscose staple fiber were 20.7 million kg which amounted to Rs 1.3 billion. Looking at the spindles capacity utilization for MMF in major textile exporters, Pakistan is found to be operating at a very low usage of spindles for MMF spinning. Far Eastern countries have the higher reliance on MMF compared to other countries. Taiwan has the highest figure where 66% of the total spindles are being used for spinning MMF. The reason for this is the non-availability of local cotton and large local manufacturing base of MMF. Pakistan is operating at 18% utilization for MMF that is lowest amongst all the competitors. Although local availability of cotton is the competitive edge of Pakistan and its utilization should naturally be higher for cotton but even India and China use 40% and 35% of their spindles for spinning MMF. Their figure is more than double than that of Pakistan. Comparison with India and China is more realistic because they are larger cotton producers than Pakistan and their competitive edge in textiles also stems from local cotton production. But they are trying to follow the world trend in which Pakistan is lagging far behind. Spindle Capacity Utilization for MMF China has the largest number of installed spindles in the world and accounts for 25% of the world and 39% of the Asia. There has been no change in Chinas spinning capacity during the period 1992-96. China is followed by India, which has 32 million spindles and contributes 20% to the world and 30% to Asian installed spindles. India has increased its spinning capacity at a growth rate of 3%. Pakistan is the third largest player in Asia. Pakistans spinning capacity is 5% of the total world and 7.6% of the capacity in Asia. Pakistans growth rate has been 6.2% and is second only to Iran amongst the major players. Source: SMEDA website.
SUNRAYS TEXTILE MILLS LIMITED

Sunrays Textile Mills Limited was established in 1987 as a public limited company and is listed on Karachi Stock Exchange. The company operates a spinning unit of 192000 spindles in Muzaffargarh (40 KM from Multan), which started commercial production in 1991. Sunrays is part of family group of companies, Indus Group of companies, that is the leading textile group in Pakistan, operating in the sector of yarn manufacturing and cotton ginning. Indus group has been engaged in the textile industry since 1955. The current capacity of

group includes 30,000 tons of cotton yarn and over 100,000 (16,000 tons) cotton bales annually. The group is involved in the supply of yarn to the national and international markets for the weaving and knitting industry. Other companies of Indus group are Indus dyeing and manufacturing company Ltd, Yousuf Textile Mills Ltd, cotton ginning and seed crushing factories. Indus Dyeing and Manufacturing Company Ltd, was established in 1957. The company has spinning factory at Hyderabad of 37,000 spindles (Mill 1, Mill 2, and Mill 3) and another unit in Muzaffargarh of 15360 spindles. It is public limited company and is listed on Karachi stock exchange. Over the years, it has shown a outstanding export performance for which it has earned trophies for highest export in cotton yarn from the FPCCI. In addition to manufacturing and exporting cotton yarn it also exports raw cotton, mainly to Japan. Yousuf Textile Mills Ltd, a public limited company listed in Karachi Stock Exchange was set up in 1966. It consists of 15,696 spindles located in Karachi. Its production facilities have been modernized over the years and latest automatic cone winding machines of Murata; drawing machines of Toyoda and Toyoda ring frames have been installed. The group has been operating Cotton Ginning and Seed Crushing Factories, since 1960. These are located near Multan in Shujabad, Gellawala and Bahadurpur. Annual production of these factories is over 100,000 cotton bales (16,000 tons).
Vision: To become a leading exporter of best quality yarn.

Mission Statement:

We will achieve sustainable competitive advantage by consistently producing quality yarn that will satisfy both our customers and in return, our investors and employees. GOALS To produce best quality yarn. To serve our customers, employees, suppliers, shareholders and the society as a whole. To become profitable and groom, through providing high quality product and services. OBJECTIVES To increase our production capacity. To reduce production cost

 To increase export of yarn. To acquire good quality raw material. To have good human resource. To build good relationships with all stakeholders. Problem statement: Sunrays Textile Mill is facing high production cost. It is reducing its profits. The high production cost includes the high raw material cost, high electricity charges, high interest charges and high ocean freight charges. Existing Strategies: Operational level strategies: Product development: The company always tries to improve the quality of its products. For this purpose, they have acquired latest technologies and they also improved the process of production. Last year the company got ISO 9002 Certification for this purpose. Business level strategies: Cost leadership: The company has planned to reduce its operational costs to stay competitive in the industry. E.g. the new machinery (Reiter) will give high level of production, it will save labor cost of about 35 workers. the automation will help in reducing cost in the long run. Corporate level strategies: Backward integration: Sunrays textile mills Ltd. integrated backward by purchasing ginning factories on lease. The company has control over the quality of raw material. And it has reduced its transaction cost of purchasing ginned cotton from ginning factories. Related diversification: The Indus group follows strategy of related diversification. E.g. they have engaged in the business of dyeing the yarn. It is a value addition to yarn.

Proposed Strategies: Forward integration: Sunrays Textile Mill should go for forward integration and should install weaving and stitching factories. Concentric diversification: They should add new but related products to the existing one. E.g. they should product polyester/cotton (PC) and Polyester/Viscose (PV) in order to reduce the threat of substitute products. Market development: They should continuously search for new markets as it important for success and gain competitive advantage. Company management is exploring new markets. According to Mr. Kashif Riaz, Director of Sunrays Textile Mill, they have their own office and setup in U.S.A to reach the whole U.S.A market, that is the most profitable market. In other countries, the company is selling yarn through commission agents. To increase its exports and face the competition, the company should find some new markets.
Financial Analysis:

Financial position of the company in the previous six years:

Sales Cost of goods sold Gross Profit Administrative & selling expenses Operating profit Other income Financial charges Workers profit participation Net Profit Before Tax Provision for taxation Net Profit After Tax 1996 1997 1998 1999 2000 2001 535,393,969 612,068,314 647,978,220 741,567,558 861,596,730 919,018,288 475,153,752 536,031,063 563,707,401 660,374,753 681,340,306 743,086,387 60,240,217 76,037,251 84,270,819 81,192,805 180,348,965 175,931,901 16,647,234 43,864,776 271,793 45380760 25,659,825 50,687,436 310,010 45,555,669 259,108 16,308,521 67,962,298 509,723 50,887,297 883,693 19,474,267 61,718,538 1,620,621 43,615,193 993,039 51,208,900 129,140,065 1,831,269 39,007,623 4,602,364 71,362,031 104,725,641 670,630 51,552,054 2,720,190

-1,515,948 4,872,659 317,000

16,701,033 18,730,927 87,361,347 51,124,027 2,028,645 16,734,429 12,264,702

-1,515,984 5,189,659

16,701,033 16,702,282 70,626,918 38,859,325

Financial resources:

Total 535,665,70 612,378,32 648,48794 761,144,59 100 100 100 100 revenues 8 4 3 0 Raw 382,677,63 429,073,22 70.0 443,004,72 68.3 984,503,77 63.6 Material 71.44 7 4 6 3 1 4 3 cost Operatin g 16,647,234 3.11 25,695,825 4.19 16308521 2.51 37,733,678 4.96 expenses Financial 45,380,760 8.47 45,555,669 7.47 50887297 7.85 43,615,193 5.73 expenses Net profit (0.28 (1,515,984) 4,872,659 0.80 16,701,033 2.58 18,730,927 2.46 before ) tax Financial Ratios 1996 1997 1998 1999 2000 Cost of goods sold % of sales 88.8 87.6 85.1 86.9 79.1 Gross profit % of sales 11.3 12.4 14.8 13.1 20.9 Operating profit % of sales 8.19 8.23 9.89 8.12 14.8 Net profit before tax % of sales -0.28 0.8 2.52 2.46 10.1 Net profit after tax % of sales -0.28 0.85 2.52 2.2 8.2 Stock % of sales 4.2 3.15 8.97 13 6.64 Current ratio 0.51 0.64 0.26 0.82 1.05 Quick ratio 0.51 0.62 0.72 0.43 0.68 Debt equity ratio 0.82 0.76 1.05 1.22 0.72 Total debt asset ratio 0.42 0.43 0.51 0.55 0.42 Earning per share 2.78 2.78 11.8
Common Size Income Statement for five years

863,520,54 100 0 435,035,66 50.3 3 8 51,208,900 5.93 39,007,623 4.52 10.1 2

87,361,347 2001 82 19.1 11.4 5.5 4.2 9.17 1.06 0.57 0.78 0.46

Net Sales Less CGS Gross Profit Less Operating Expenses Net Operating profit Less Interest Expenses Plus Non-operating Income Profit before tax Income tax Net Profit after tax

%age % % % % % % % % % %

1996 100 88.75 11.25 3.06 8.19 8.46 (0.27) (0.27)

1997 100 87.58 12.42 4.19 8.23 07.44 0.79 0.79 0.052 0.74

1998 100 85.13 14.87 4.98 9.98 9.89 7.31 2.67 0.09 2.67

1999 100 86.91 13.09 4.97 8.12 5.74 0.21 2.59 0.27 2.32

2000 100 79.08 20.92 5.93 14.99 4.53 0.21 10.67 1.94 8.73

Different costs that incurred in Sunrays reveal that cost of material is 75% of total cost of goods manufactured which is less than 1999 (78%). Main reason of this low cost of raw material is decrease in prices of cotton nationally and internationally. Management has no direct control over the price of raw material. It is affected by the demand and supply conditions. The salaries, wages, benefit cost increased from 5% to 8% in 2000. Total cost incurred on stores and spares, repair and maintenance is 1.81%, which was 2.32% in 1999. Management must control the cost. They must control the wastage and over utilization of spare parts. They should also minimize the need for repairs by providing the employees with necessary training. Financial and other charges are fourth major items of cost. Because any spinning unit has to hold raw material inventory and for this purpose it has to take loan from banks. Fuel and power cost is 31% of total operating cost the administrative and selling expenses increased from 4.96% to 5.94% of sales. These are under the control of management so they should control these expenses. From the ratio analysis of Sunrays Textile Mills Ltd, we come to know that from 1996 to 1999, the firm is not much liquid because its current assets are less than current liabilities but in 2000 its current assets have exceeded its current liabilities. So in 2000 it is considered to be a liquid firm. By analyzing the profitability of the firm, we see that gross profit margin, net profit margin, operating profit margin, return on assets, return on equity has increased in the next years. Net profit before taxes has decreased from 10.1% to 5.5% in 2001, due to huge increase in ocean freight. In the year 2001, Government of Pakistan increased it by 47% and Sunrays Textile Mill paid Rs. 137 million for that. By analyzing the debt ratios of the firm, we see that the firms, debt is increasing every year and thus it has to pay interest expense every year which is increasing. The firm is in better financial position in terms of activity. But the firm is using approx. 50 % external debt, which is very high ratio and has a negative impact on the profitability. From 1997 and onwards, management worked hard to increase the exports. As a result of which export sales of the company increased by 223% during 1998 sales increased by 8.81%. Gross profit improved. Company improved its financial position during 1999 sales increased by 14.44%. Company improved financial position and declared 12.5% cash dividend. During 2000 profit of Company substantially increased and Company declared 20% cash dividend. VALUE CHAIN ANALYSIS Sunrays Textile Mill performs the activities efficiently and effectively to provide quality product and services, offer competitive price and on time delivery of its products.

INBOUND LOGISTICS

Cotton is the major raw material that is used in its production. The company purchases cotton from its own ginning factories. In this way company has more control over the quality of cotton. Sunrays Textile Mill also imports cotton if the good quality cotton is not available in the country. Cotton is stored in their own warehouses as it is a seasonal product, to meet the annual requirement. The company tries its best to keep the quality of cotton better.
OPERATIONS

Sunrays Textile Mill is very concerned of its yarn quality. Although it is very difficult, because there are many variables that deteriorate the yarn quality like moisture, fiber length, fiber fineness, fiber strength, count variations, strength, unevenness etc. GM heads the quality control department. He, Technical manager and laboratory Incharge are responsible for the quality of yarn. Company has fully equipped quality control laboratory where quality is measured using different statistical technique.
OUTBOUND LOGESTICS

Sunrays Textile Mill does not have to store finished inventory because the yarn is produced on order. It is manufactured, packed and shipped, as the export requires.
MARKETING AND SALES

Industrial products need little advertisement. They market their products through commission agents or Export Management Groups (EMG). They have developed their web site on internet to introduce their companies and market their products. The URL address of the web site is www.indus-group.com. It is a very useful website, containing all information about their companies and products. It is also a convenient way to enquire from them.
SERVICES

Sunrays Textile Mill acts promptly and replaces the order, if it is not as per the specifications of the customer. It has a very good relations with its customers, that is why, they are also loyal to them. They work for relationship marketing.
Supporting Activities:

Technology Development:

To ensure best quality product and services, they have upgraded the technology that is useful for efficiency and effectiveness. For example, they have developed online intranet system in their office. It connects all of their employees with each other. In this way, they can access information instantly.
Human Resource:

Sunrays Textile Mill recruits, trains, develops, motivates and rewards employees. To achieve maximum worker efficiency, they have issued every employee a card containing bar code on it. It is used by them for check-in and check-out purpose. The bar card has a unique number on it. The software is supplied by Cranum Software Pvt. Ltd. Lahore. PEST Analysis:

POLITICAL ENVIRONMENT
There is political instability in the country; the investors are reluctant to invest. There is inconsistency in the Government policies. E.g. the income tax and sales tax laws are very complex. Any mistake can cause a serious penalty. Government withdrew 15% duty on cotton import; it is an incentive for the industry. Government allowed addition in spinning capacity and improvement in the machinery through BMR. So the requirement of cotton has gone up to 9.8 million bales. Government allowed the export of the surplus cotton after meeting the local demand. A major problem faced by the industry is refunds on exports. The difficulty is because of the prolonged verification and authentication of refund documents.
ECONOMIC ENVIRONMENT

The economy of Pakistan is at recession. The growth of every sector is very slow. So, all the economic activities are also slow. But the interesting factor is that Sunrays Textile Mills is doing well due to all its production having exported. So, they are not concerned of the low demand or low profit etc. but, they are concerned about the cost of operation and the cost of electricity that is high and causing high cost of production.
SOCIOCULTURAL ENVIRONMENT

The environmental pollution is a growing concern and problem all over the world. In the developed countries, scientists recommended alternative measures to decrease or abolish the dangers to their environment but situation in Pakistan is somewhat different as there is no regulatory body to check pollution. The companies themselves have to take care of this issue. In this regard, Sunrays Textile Mill has contributed over Rs.2,720,190 towards workers profit participation fund and paid Rs.12,264,702 as taxes. Company has workers and employees not only from inside the

surrounding areas but also from the far places. To solve the residential problems of the nonlocal employees and their families, Company has its own residential colony. Sunrays Textile Mills Ltd employs approximately 700 employees and provides indirect employment to a great number of people.
TECHNOLOGICAL ENVIRONMENT

Technology is one of the most important factor to achieve sustainable competitive advantage. But unfortunately, On the average the plant and equipment in our textile industry is over 15 years old. BMR is required not only to replace old equipment but also to upgrade technology with the latest version. Unless BMR is done on a regular basis production quality as well as operational efficiency cannot be achieved as per international requirements. Govt. is providing funds to textile sector for BMR. The company invested Rs. 20 million last year and replaced the old 1990 model machinery with the state-of-art latest technology (Swiss Reiter 2000 model). Structural Analysis Threat of New Entrant: The textile industry is attractive business because there is a lot export potential. Govt. also supports this sector in shape of loans, tax rebates etc. Bargaining Power of Buyer: The power of buyer is high because on one hand, the competition between yarn producers on the other hand, the buyer can switch to any other product. Bargaining power of supplier: The supplier power is not much because there are many suppliers trying to sell the raw material to them. So, due to the competition among the suppliers, the ginning factories gain advantage, that Sunrays Textile Mill own. Threat of substitute product: There is a threat of substitute products like polyester/cotton (PC) and Polyester/Viscose (PV). Competitive Rivalry:

Competitive rivalry is high in this industry, because there are many producers in the market. Only in Pakistan, there are approximately 500 yarn producers. And globally there are so many other rivals like china, Indonesia, India and Taiwan etc. SWOT ANALYSIS
STRENGTHS

Goodwill:

DERBY and LUCUS are Sunrays Textile Mills Brands that are known as quality yarn in national and international markets. Company has good image and reputation in market. The company is exporting its yarn to the developed countries like USA and Japan, which are very quality conscious. With this fact, we can well imagine its repute. Qualified Human Resource: Sunrays Textile Mill has professional management, skilled technical staff and trained labor force. Management of Indus group includes Mian Mohammad Ahmed, who started his textile business 40 years ago. He is responsible for strategic corporate planning. Shazad Ahmad MBA (Marketing) from USA. Mr. Naveed Ahmed Graduate from USA in Accounting. Irfan Ahmad, B.Sc Textile from USA. Riaz Ahmad , Kashif Riaz has completed his MBA fromBahauddin Zakariyya University. The other management staff includes 24 personnel including managers, assistant managers and engineers in different sections of organization. A recent figure of total employees in this organization is approximately 700 including management staff and labor force. Backward integration: One of the great strength of Sunrays Textile Mill is that it has its own suppliers of ginned cotton. It owns several ginning factory. Few advantages are reduce in transaction cost, on time delivery of raw material etc. Technology: The company invested Rs. 20 million this year and replaced the old 1990 model technology with the state of art latest technology (2000 Reiter Swiss Model). This will improve the productivity and quality of yarn and company will become able to charge better prices of yarn and compete in international market. WEAKNESSES High manufacturing cost:

The main weakness is that the cost of production is very high. E.g. in the recent year 2001, cost of goods sold was 82 % of the revenue. The main reason for this is the high price of cotton and electricity charges. It their weakness because, in other similar mills, gas is used instead of electricity. And it is considerably cheap as compared to electricity. OPPORTUNITIES Demand: Yarn and textile has a great demand all over the world, so whatever is produced, is sold. It is a major opportunity for the company to expand its operations and increase the market share. Government policies: The governments policies are favorable to textile and related industries. E. g. there is no sales tax on exports and there are rebates on the import of raw material like cotton. The machineries imported under Balancing, Modernizing and Replacement (BMR) are exempted from duty. Cheap labor: Pakistan has one of the cheapest labor country in the world. The local textile industry is labor intensive. A textile unit of average size employs around 700 employees. THREATS High financial charger: The financial cost in our country is very high as compare to other competing countries like china, India. Interest paid on loans, by the local textile industry comprises 41% of its total operating cost. Interest rates in Pakistan are considerably higher than those of competing countries thus making our industry uncompetitive. Competitors: This a major threat for yarn producers. There are approximately 503 yarn producers in Pakistan. So, according to Mr. Kashif Riaz, every one of them who produces quality yarn of grade A, is their competitor.