Fazal Cloth Ltd
Products/Services We Offer:
Yarns for Towels, Home Textiles, Knitting& Hosiery
Business Type: Manufacturer
Industry Focus: Yarn ,
Geographic Markets: Worldwide
No. of Employees: Above 1000 People
Annual Sales Range (USD): Above US$100 Million
Certificates: Supima, Du Pont Lycra and Lenzing certify
Year Established: 1936
Legal Representative/CEO: MIAN REHMAN NASEEM
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Contact Information
Company Name:
Fazal Cloth Mills Ltd
Contact Person: Mr Tasswur Hassnain
Address: 102,103 International Plaza, Bohra Street, Multan Cantt, Multan, Pakistan, Pakistan
Telephone: 92 061 4782796
Fax: 92 061 4541832
Mobile Phone: 92 -333 -6119534
Introduction
We introduce ourselves as Fazal Group based in Pakistan. We are manufactuer's of Ring Spun Yarns and Greige Woven Fabrics.
Our Spinning Division comprises 150,000 spindles with 3,100 tons of Ring Spun Yarn production per month. We produce Yarns for Towels(Two For One Twisted Plied, Modal/Cotton, Zero Twist, Supima, Giza Yarns), Yarns for Home Textiles(Fine Counts upto Ne 120/1, Compact), Yarns for Denim(Core Spun with Lycra, Slub), Knitting& Hosiery Yarns. Supima, Du Pont Lycra and Lenzing certify us for using their products and issuing certificates based on which our customers can put respective labels on their products.
Our Weaving Division comprises 224 Air Jet Looms with 3.5 Million meters of fabric production per month. We produce Twills, Drills, Canvases, Stretch Twills, Slubs, Bull Denims& Sheeting fabrics.
Our Company has been in Textile business since 1936 and enjoys excellent reputation.70% of our $125 Million in sales per annum is generated from exports.
We would like to work with your Company to supply our Yarns& Fabrics. Please advise how to proceed to start this relationship.
For business information, annual reports, laws, ordinances, regulations and articles.
Web Paksearch.com
FAZAL CLOTH MILLS LIMITED
Annual Report 2003
CONTENTS
Company Information
Vision and Mission Statement
Statement of Ethics
Notice of Annual General Meeting
Directors 'Report
Statement of compliance with best practices of Code of Corporate Governance
Review report to the members on the statement of compliance with best practices
of Code of Corporate Governance
Auditors 'Report to the Members
Balance Sheet
Profit and Loss Account
Cash Flow Statement
Statement of Changes in Equity
Notes to the Financial Statements
The pattern of Shareholding as per requirements of Code of Corporate Governance
COMPANY INFORMATION
Board of Directors Sh. Naseem Ahmad Chairman & Chief Executive
Sh. Amir Naseem
Mr. Rehman Naseem
Mr. Fazal Ahmad Sheikh
Mr. Faisal Mukhtar
Mrs. Farrukh Mukhtar
Mr Shamsuddin Khan Nominee NIT Ltd.
Audit Commitee Sh. Naseem Ahmad Chairman
Mr. Rehman Naseem Member
Mr. Fisal Mukhtar Member
Company Secretary Mr. M.D. Kanwar
Chief Financial Officer Mr. Faizan-ul-Haq
Auditors M/s Yousuf, Adil, Saleem & Co.,
Chartered Accountants
Bankers Habib Bank Limited
Askan Commercial Bank Limited
Sonen Bank Limited
Bank AI-Falah Limited
National Bank of Pakistan
Faysal Bank Limited
ABN-AMRO Bank. N.V.
Meezan Bank Limited
Pakistan Industrial Credit & Investment Corporation Limited
Pakistan kuwait Investment Company (Pvt) Limited
Offices :
Head/Registered Office 1st Floor, International Plaza, Bohra Street, Multan Cantt Pakistan
Ph.: 061-587632, 588733, 581422, Fax . 0092-61-541832
e-mail : fazalgrp@brain.net.pk
Account Office 2nd Floor, Trust Plaza, Multan - Pakistan
Ph. 061-549713. 512031 Fax 0092-61-511677
Mills: i) Fazal Nagar. Jhang Road, Muzaffargarh - Pakistan
Ph. 0661-422216-18 Fax : 0092-661-422217
e-mail exports@fazalcloth.com
ii) Qadirpur Rawan Bypass, Khanewal Road, Multan - Pakistan
Ph. 061-578022-23, 578097 Fax : 0092-61-578098
Corporate Vision / Mission Statement
Vision
The Company aims at becoming a Complete Textile unit, which can explore local
and international market of very high value products. The Company would keep its
emphasis on product and market diversification, value 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
The Company should provide a secure and rewarding investment to its shareholders
and investors, quality products to its customers, a secure place of work to its
employees and an ethical partner to all its business associates.
STATEMENT OF ETHICS
INTRODUCTION
The Company's policy is to conduct business with honesty and integrity and be ethical in all its
dealing, showing respect for the interest of those with whom it has relationships.
EMPLOYEES
1. This Code of Ethics is established on the basis that unless a limitation is specifically stated the
objectives and fundamental principles are equally valid for ail employees, whether they are at mills
or at head office.
2. An employee is distinguished by certain characteristics including :
2.1 Master of particular intellectual skill, acquired by training and education.
2.2 Acceptance of duty to society as a whole in addition to duties to the organization and
employer.
2.3 Rendering personal services to a high standard of conduct and performance.
3. The specialized knowledge, skills, training and experience required to be a proficient employee.
4 The efforts of the services of superiors to train those working directly and indirectly under them
would be appreciated.
THE PUBLIC INTEREST
5. A distinguishing mark of a profession is acceptance of its responsibility to the organization. The
organization is responsible towards customer, credit grantors, governments, employees, investors,
the business and financial community and others who rely on the objectivity and integrity of the
organization to maintain the orderly functioning of commerce and industry. This reliance imposes
a public interest responsibility on the organization. The public interest is defined as the collective
well being of the community of people and institution served by the organization.
6. An organization's responsibility is not exclusively to satisfy the needs of an individual customer or
director. The standards of service are heavily determined by the public interest for example :
6. / Transparent dealings help to maintain the integrity and efficiency of the Organization presented
to the shareholders, financial institutions, customers, employees, government regulations
and tax authorities. The transparent dealings would help to secure loans and to obtain
capital from share holders.
6.2 Financial planning serves in efficient and effective use of the organization's resources.
6.3 Internal auditors provide assurance about a sound internal control system, which enhances
the reliability of the external financial information of the organization.
6.4 Directors help to establish confidence and efficiency for fair resolution Organization's affairs.
6.5 Management has responsibility toward the organization in advocating sound management
decision making.
7. The organization has an important role towards society, shareholders, creditors, employees and
other sectors of the business community, as well as the government and the public at large for
sound financial accounting, reporting effective financial management and variety of business and
taxation matters. Sound business practices of the organization has an impact on the economic
well being of the country.
8. It is in the best interest of the organization that services are provided at the highest level of
performance and in accordance with ethical standards to ensure continued good performance.
9. In formulating this code of ethics, the Board of Directors has considered the public service and
employees expectations of the ethical standards of the organization.
OBJECTIVES OF THE ORGANIZATION
10. The code recognizes that the objectives of the organization are to work to highest standards of
professionalism, to attain the highest levels of performance and generally to meet the interested
group requirements set out above. These objectives require four basic needs to be met:
10.1 Credibility
In the whole of society there is a need for credibility in information and information systems.
10.2 Professionalism
The customers, employees and other interested parties can rely on the professionalism of
the organization.
10.3 Quality of Services
There is a need for assurance that all services provided are carried out to the highest
standards of performance.
10.4 Confidence
Interested groups should be able to feel confident that there exists a framework of
professional ethics, which governs the provision of services provided by the organization to
the community and the country.
FUNDAMENTAL PRINCIPLES
11. In order to achieve the objectives of the organization, employer and employees have to observe a
number of prerequisites or fundamental principles.
12. The fundamental principles are:
12.1 Integrity
An interested group connected with the organization should be straight forward and honest
in performing professionals services.
12.2 Objectivity
The organization should be fair and should not allow prejudice or bias or influence of other
to override objectivity.
12.3 Professional Competence, Due Care and Timeliness
An organization should perform and provide goods and services with due care, competence
and diligence and has a continuing duty to maintain a level required to ensure that a customer
or employee receives goods and service based on up to date product line. Further all industrial
obligations should be adhered to for timely compliance.
12.4 Confidentiality
The organization should respect the confidentiality of information acquired during the course
of providing goods and services and should not use or disclose any such information without
proper and specific authority or unless there is a legal or professional right or duty to disclose.
12.5 Organizational Behavior
The organization should act in a manner consistent with the good reputation of the industry
and refrain from any conduct, which might bring discredit to the company.
12.6 Technical Standards
The organization should provide goods and services in accordance with the relevant technical
ond professional standards The organization has a duty to carry out with care and skill, the
instructions of the customers insofar as they are compatible with the requirements of
commercial trade practice. In addition they should conform with the technical and professional
standards promulgated by:
— PCSIR (Pakistan Council for Scientific & Industrial Research)
— international Standards
— Relevant Legislation
13. In addition to observing the fundamental principles listed above; the organization should be and
appear to be free of any interest, which might be, regarded, whatever its actual effect, as being
incompatible with integrity, objectivity and independence.
14. The objectives as well as the fundamental principles are of a general nature and are not intended
to be used to solve the organization's ethical problems in a specific case. However, the code
provides some guidance as to the application in practice of the objectives and the fundamental
principles with regard to a number of typical situations occurring in the industrial process and
company procedure.
NOTICE OF MEETING
Notice is hereby given that the 38th Annual General Meeting of the Shareholders of the Company
FAZAL CLOTH MILLS LIMITED will be hied on Friday, the 30th day of January, 2004 at 11:00 a.m.
at Room No. 102/103,1st Floor, International Plaza, Bohra Street. Multan Cantt. to transact the
following business:
ORDINARY BUSINESS :
1. To confirm the minutes of the last Annual General Meeting of the Company dated 31.03.2003.
2. To receive, consider and adopt the Audited Accounts of the Company for the year ended 30th
September, 2003, together with the Auditors' and Directors' Reports thereon.
3. To approve the payment of Cash Dividend at the rate of Re. 1/- (Rupee One Only) per ordinary
share of Rs. 10/-each (10%) as recommended by the Board of Directors.
4. To appoint M/s. M. Yousuf Adil Saleem & Co. Chartered Accountants as External Auditors of the
Company for the financial year 2003-04 and fix their remuneration in place of M/s. Hameed Chaudhri
& Co. Chartered Accountants, Lahore who have retired in pursuance of Corporate Governance.
5. Any other business with the permission of the Chairman.
BY ORDER OF THE BOARD
Sd/-
MULTAN (M.D. KANWAR)
Dated : January 06, 2004 Company Secretary
NOTES :-
I. The Share Transfer Books of the Company will remain closed from 21st January, 2004 to 03rd
February, 2004 (both days inclusive)
li. A member entitled to attend and vote at the meeting may appoint another member as his/her
proxy to attend and vote instead of him/her. A Corporate Body being a member of the Company
may appoint its proxy either under its Seal or under the hand of any officer or attorney duly
authorized. The instrument of appointing proxy must be deposited at the Company's Registered
Office at Room No. 102/103,1st Floor, International Plaza, Bohra Street, Multan Cantt. not
later than 48 hours before the time of meeting.
III. Shareholders are requested to promptly notify the Company of any change in their addresses.
DIRECTOR'S REPORT
Dear Shareholder,
Assalam-o-Alaikum,
I feel pleasure to welcome you to 38th Annual General Meeting of the Company and place before you the
Audited Financial Statement of the Company for the year ended September 30, 2003.
FINANCIAL AND OPERATING RESULTS:
During the year under review, the installed capacity of the Company increased from 74,756 spindles to
91,892 spindles. As a result of this fixed cost per spindle reduced significantly. Sales increased by 19.31%
from Rs.2.363 Billion to Rs. 2.820 Billion. The result of this was an increase in after tax profit from Rs.40.499
Million to Rs.92.439 Million after charging depreciation of Rs.126.601 Million (previous year Depreciation
charged Rs. 105.312 Million) and contribution to Workers Profit Participation Fund of Rs.8.159 Million (previous
year WPPF contribution Rs.2.822).
The Tax provision for the year under review includes provision for Deferred Taxation amounting to Rs.43.726
Million in compliance with IAS - 12 "Income Taxes". Profit for the year would have been Rs. 136.320 Million if
this change in accounting policy was not adhered to. This provision is a non cash expense. The Company
does not expect to pay this amount in the near future.
Earnings Per Share (EPS) increased to Rs 7 48 (last year EPS Rb.3.96). Earnings Per Share Before Interest
& Tax (EBIT/Share) increased to Rs.21.70 (last year Rs.18.33). Earning Per Share Before Interest, Tax and
Depreciation (EBITDA/Share) increased to Rs.31.96 (last year Rs.25.87).
The improved resuits of the Co.npany are due to reduction in cost occuring due to:
a) Economies of Scale
b) Reduction in Short & Long Term Interest Expense
I would like to take this opportunity to thank the State Bank of Pakistan and all the Bankers of our Company
for the correct decision taken by them which has resulted in a significant decrease in interest rates prevalent
in the country. The decrease is in line with reduction in interest rates across the globe. Inshallah, this will
result in increased investment in Pakistan giving a much needed fillip to the Country's Economy.
DIRECTORS:
The Directors, Chief Executive Officer, Chief financial Officer, Company Secretary, their spouses and minor
children have made no transactions in Company's shares.
During the year 2002-2003, four board meetings were held which were attended as follows :
Sh. Naseem Ahmad Chairman/Chief Executive 3
Mr Shamsuddin Khan Nominee of NIT Ltd. 3
Sh. Amir Naseem 4
Mr. Rehman Naseem 3
Mr. Fazal Ahmad Sheikh 2
Mr. Faisal Mukhtar 1
Mis. Farrukh Mukhtar 1
COMPARISON OF LAST SIX YEARS OF OPERATIONS:
Salient features of the financial performance of the company for last six years are reproduced below :
2003 2002 2001 2000 1999 1998
Production in Kgs (000) 21,924 20,047 15,170 13,237 12,311 12,127
Sales net
(Rs in million) 2,820.26 2,363.75 1,903.90 1,553.00 1,353.20 1,419.64
Gross Profit
(Rs. in million) 318.853 263.004 259.345 297.648 144.373 146.094
Net profit before tax
(Rs in million) 154.868 52.612 52.068 154.31 31.335 12.574
Provision for taxation
Including deferred tax
(Rs. in million) 62.428 12.113 12.757 47.149 16.335 12.388
Profit after taxation
(Rs. in million) 92.439 40.499 39.311 107.161 15 0.186
Un-appropriated profit
brought forward
(Rs. in million) 244.984 216.84 194.161 130.243 124.747 124.561
Profit available for
Appropriation
(Rs. in million) 337.424 257.339 233.472 237.404 139.747 124.747
Dividend per share 1 1 1.75 4.55 1.5 Nil
Gross profit ratio 11.31% 11.30% 13.62% 19.17% 10.67% 10.29%
Net profit ratio 5.49% 1.74% 2.06% 6.90% 1.11% 0.01%
Earnings before interest,
tax and depreciation
allowance (BBITDA)
(Rs. in million) 394.749 331.826 329.335 292.316 154.379 129.269
CORPORATE GOVERNANCE:
In compliance with the code of corporate governance the board of directors hereby declare that:
• The financial statements for the year ended September 30, 2003 present fairly the state of affairs, the
result of its operations, cash flows and changes in equity;
• Proper books of account have been maintained;
• Appropriate accounting policies have been consistently applied in preparation of financial statements
except for changes, as mentioned in note 2.5(b) to the financial statement for the year ended September
30, 2003,
• International Accounting Standard (IAS) as applicable in Pakistan, have been followed in preparation of
financial statements;
• The system of internal control is sound in design and has been effectively implemented and monitored;
• There is no doubt aoout the company to continue as going concern;
• There has been no material departure from best practices of corporate governance as detailed in listing
regulations.
PATTERN OF SHAREHOLDING:
The pattern of share holding as on September 30, 2003 is annexed.
DIVIDEND:
Your Directors are pleased to propose a dividend of Re. 1.00 per share (10%) out of the profit of the Company
for the year ended September 30, 2003.
FUTURE OUTLOOK:
The Raw Cotton Crop during the current year, both in Pakistan and in the International Market, has been
effected by pest attack and inclement weather conditions. Due to this prices of the main raw materials of the
Company have increased substantially. Yarn prices have also increased but not proportionately. The Company
expects its sales to register a sharp rise. However, this will be on account of an increase in selling price per
unit rather than an increase in production. Cost of Sales will also register a sharp increase. Based on the
operating results of the Company during the first quarter of this financial year (Oct-Dec 03), I remain cautiously
optimistic about the financial performance of the Company during the current year.
Quotas on import of textile products by Europe and USA are expected to be phased out by end of 2004.
Although, I believe that the Quota free world will be generally beneficial for the Textile Industry in Pakistan, it
will also unleash a fierce competition between players in this industry. Only those Companies will be able to
survive which are able to produce high quality goods at a globally competitive cost. To meet the challenges
posed and to capitalize on the increased market access provided by this change, your Company intends to
continue the process of Balancing, Modernization and Expansion of its plants and equipment. LCs for import
of Machinery for modernization and expansion of Mills No. 1 of the Company have already been opened.
Work has also started on enhancement in capacity of the Captive Gas Fired power project of the Company
located at Muzaffargarh from 5 MW to 7 MW and setting up of a new 3 MW Captive Gas Fired power project for
supply of electricity to Mills No. 3 of the Company located in Multan.
100% electricity requirements of the Company will be met by the Captive Power Projects of the Company
resulting in a reduction in power cost. The Company also intends to install 7,056 spindles with allied back
process and winding machinery in Mills No.3 of the Company to reduce fixed costs per spindle. The Company
also plans to install a new Spinning Unit in multan at a cost of Rs.600 Million. These investments will result
in reduction in fixed costs per spindles, improve quality and diversify the Company's product base making it
more resilient to ups and downs in the textile business.
AUDITORS:
M/s. Hameed Chaudhri & Co., Chartered Accountants, Lahore, auditors of the company retire and in compliance
with the clause xli of the code of Corporate governance M/s. Yousaf, Adil, Saleem & Co., Chartered Accountants
being eligible offers themselves for appointment for the year 2003-2004.
MANAGEMENT/LABOUR RELATIONS:
The management/labour relations remained warm and cordial throughout the year under review. We place
great importance on our employees. We continue to invest in the professional development and improvement
of skills of our human resource, since we believe that by investing in our people we invest in our future.
Company's human resource policy is based on the underlying values of fairness, merit, equal opportunity
and social responsibility. Complying with our human resource policies we do not hire any child labour.
The employees and management of the company continued to make joint efforts to keep up high standards
of productivity. By the grace of Allah the Almighty, relationship of management and employees continued to
remain in total harmony.
The board wishes to place on record its deep appreciation to all of them for their hard work and dedication to
achieve these results.
STATEMENT OF COMPLIANCE WITH BEST
PRACTICES OF CODE OF CORPORATE GOVERNANCE
The statement is being presented to comply with the Code of Corporate Governance contained in
Listing Regulation No.37 of Karachi Stock Exchange (Guarantee) Limited and Chapter XIII of the
Lahore Stock Exchange (Guarantee) Limited for the purpose of establishing a framework of good
governance, whereby a listed company is managed in compliance with the best practices of Corporate
Governance.
The Company has applied the principles contained in the Code in the following manner:
1. The Company encourages representation of independent non-executive directors; at present the
Board includes three independent non-executive directors.
2. The Directors have confirmed that none of them is serving as a director in more than ten listed
companies, including this Company.
3. To the best of our knowledge all the resident directors of the Company are registered as taxpayers
and none of them has defaulted in payment of any loan to a banking company, a DPI or a NBFI or,
being a member of a stock exchange, has been declared as a defaulter by that stock exchange.
4 No casual vacancy occurred in the Board during the current year.
5. The Company has prepared a 'Statement of Ethics and Business Practices', which has been
signed by all the directors and key employees of the Company.
6. The Board has developed a vission/mission statement, overall corporate strategy and significant
policies of the Company. A complete record of praticulars of significant policies along with the
dates on which they were approved or amended has been maintained.
7. All the powers of the Board have been duly exercised and decisions on material transactions,
including appointment and determination of remuneration and terms and conditions of employment
of the CEO and other executive directors, have been taken by the Board.
8. The meetings of the Board were presided over by the Chief Executive and, in his absence, a
-------director elected by the Board for this purpose and the Board met at least once in every quarter.
Written notices of the Board meetings, along with agenda were circulated at least seven days
before the meetings. The minutes of the meeting were appropriately recorded and circulated.
9. Directors are well conversant with the Listing Regulations and legal requirements and as such are
fully aware of their duties and responsibilities.
10. There were no new appointments of CFO, Company Secretary or head of internal audit department
during the year.
11. The directors' report for this year has been prepared in compliance with the requirements of the
Code and it fully describes the salient matters required to be disclosed.
12. The financial statements of the Company were duly endorsed by CEO and CFO before approval by
the Board.
13 The directors, CEO and executives do not hold any interest in the shares of the Company other
than that disclosed in the pattern of shareholding.
14. The Company has complied with all the corporate and financial reporting requirements of the
Code.
15. The Board has formed an audit committee which comrises of three members of whom two are non-
executive directors.
16. The meetings of the audit committee were held at least once every quarter prior to approval of
quarterly, interim and final results of the Company and as required by the Code. The terms of
reference of the committee have been formulated and advised to the committee for compliance.
17. The Board has set-up an effective internal audit function.
18. The statutory auditors of the Company have confirmed that they have been given a satisfactory
rating under the quality control review programme of the Institute of Chartered Accountants of
Pakistan (ICAP) and that they or any of the partners of the firm, their spouses and minor children
do not hold shares of the Company and that the firm and all its partners are in compliance with
International Federation cf Accountants (IFAC) guidelines on code of ethics as adopted by Institute
of Chartered Accountants of Pakistan.
19. The statutory auditors or the persons associated with them have not been appointed to provide
other services except in accordance with the listing regulations and the auditors have confirmed
that they have observed IFAC guidelines in this regard.
20 We confirm that all other material principles contained in the Code have been complied with.
REVIEW REPORT TO THE MEMBERS ON STATEMENT
OF COMPLIANCE WITH BEST PRACTICES
OF CODE OF CORPORATE GOVERNANCE
We have reviewed the Statement of Compliance with the best practices contained in the Code of
Corporate Governance prepared by the Board of Directors of FAZAL CLOTH MILLS LIMITED to comply
with the Listing Regulation No. 37 (Chapter XI) of the Karachi Stock Exchange (Guarantee) Limited
and Chapter XIII of the Lahore Stock Exchange (Guarantee) Limited where the Company is listed.
The responsibility for compliance with the Code of Corporate Governance is that of the Board of Directors
of the Company. Our responsibility is to review, to the extent where such compliance can be objectively
verified, whether the Statement of Compliance reflects the status of the Company's compliance with
the provisions of the Code of Corporate Governance and report if it does not. A review is limited
primarily to inquiries of the Company oersonnel and review of various documents prepared by the
Company to comply with the code.
As part of our audit of financial statements we are required to obtain an understanding of the accounting
and internal control systems sufficient to plan the audit and develop an effective audit approach. We
have not carried out any special review of the internal control system to enable us to express an
opinion as to whether the Board's statement on internal control covers all controls and the effectiveness
of such internal controls.
Based on our review, nothing has come to our attention which causes us to believe that the Statement
of Compliance does not appropriately reflect the Company's status of compliance, in all material
respects, with the best practices contained in the Code of Corporate Governanace as applicable to the
company for the year ended 30 September, 2003.
AUDITORS' REPORT TO THE MEMBERS
We have audited the annexed balance sheet of Fazal Cloth Mills Limited as at 30th September,
2003 and the related profit and loss account, cash flow statement and statement of changes in equity
together with the notes forming part thereof, for the year then ended and we state that we have obtained
all the information and explanations which, to the best of our knowledge and belief, were necessary for
the purposes of our audit.
It is the responsibility of the Company's management to establish and maintain a system of internal
control, and prepare and present the above said statements in conformity with the approved accounting
standards and the requirements of the Companies Ordinance, 1984. Our responsibility is to express
an opinion on these statements based on our audit.
We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These
standards require that we plan and perform the audit to obtain reasonable assurance about whether
the above said statements are free of any material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the above said statements. An audit
also includes assessing Ihe accounting policies and significant estimates made by management, as
well as, evaluating the overall presentation of the above said statements. We believe that our audit
provides a reasonable basis for our opinion and, after due verification, we report that:
(a) in our opinion, proper books of account have been kept by the Company as required by the
Companies Ordinance, 1984;
(b) in our opinion :
(i) the balance sheet and profit and loss account together with the notes thereon have been
drawn up in conformity with the Companies Ordinance, 1984, and are in agreement with the
books of account and are further in accordance with accounting policies consistently applied,
except for the changes as stated in note 2.5(b) with which we concur;
(ii) the expenditure incurred during the year was for the purpose of the Company's business; and
(iii) the business conducted, investments made and the expenditure incurred during the year were
in accordance with the objects of the Company;
(c) in our opinion and to the best of our information and according to the explanations given to us, the
balance sheet, profit and loss account, cash flow statement and statement of changes in equity
together with the notes forming part thereof conform with approved accounting standards as
applicable in Pakistan, and, give the information required by the Companies Ordinance, 1984, in
the manner so required and respectively give a true and fair view of the state of the Company's
affairs as at 30 September, 2003 and of the profit, its cash flows and changes in equity for the year
then ended, and
(d) in our opinion zakat duductible at source under the Zakat and Ushr Ordinance, 1980 (XVIII of
1980), was deducted by the Company and deposited in the Central Zakat Fund established under
Section 7 of that Ordinance.
HAMEED CHAUDHRI & CO.,
LAHORE: 07 JANUARY, 2004 CHARTERED ACCOUNTANTS
BALANCE SHEET
2003 2002
Note Rupees Rupees
CAPITAL & RESERVES
Authorised Capital
25,000,000(2002:
25, 000,000) ordinary
shares of Rs. 10/- each 250,000,000 250,000,000
Issued, subscribed and
paid-up capital 3 123,552,000 123,552,000
Capital reserve 4 77,617,419 77,616,000
Unappropriated profit 325,069,160 244,984,433
526,238,579 446,152,433
LONG TERM FINANCES 5 362,920,161 390,349,912
DEMAND FINANCE 6 129,475,452 27,642,400
LIABILITIES AGAINST
ASSETS SUBJECT
TO FINANCE LEASE 7 1,011,129 13,728,367
CUSTOMS DUTIES 8 27,231,214 27,231,214
DUE TO ASSOCIATED
UNDERTAKING 9 7,133,528 7,133,528
DEFERRED INCOME 10 22,061 44,122
DEFERRED LIABILITIES
Deferred taxation 11 65,500,000 21,774,000
Gratuity 2.4 16,706,796 13,780,569
82,206,796 35,554,569
CURRENT LIABILITIES
Current portion of long
term liabilities 12 129,440,787 145,468,136
Short term finances 13 668,225,666 660,415,260
Creditors, accruals and
other liabilities 14 156,163,867 126,855,187
Provision for taxation 15 51,847,374 34,447,374
Dividends 16 13,699,966 13,650,355
1,019,377,660 980,836,312
CONTINGENCIES AND
COMMITMENTS 17
2,155,616,580 1,928,672,857
The annexed notes form an integral part of these financial statements.
2003 2002
Note Rupees Rupees
TANGIBLE FIXED ASSETS
Operating fixed assets 18 1,169,552,247 979,213,287
Capital work-in-progress 19 48,961,415 96,338,815
1,218,513,662 1,075,552,102
LONG TERM
INVESTMENTS 20 2,337 918
LONG TERM LOANS 21 648,721 647,994
LONG TERM DEPOSITS 4,194,125 4,089,125
CURRENT ASSETS
Stores, spares and I
loose tools 22 39,030,821 33,783,119
Stock-in-trade 23 624,268,259 549,136,025
Trade debtors 24 139,338,132 191,749,996
Advances, deposits,
prepayments and
other receivables 25 120,426,435 68,987,615
Cash and bank
balances 26 9,194,088 4,725,963
932,257,735 848,382,718
PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 30 SEPTEMBER, 2003
2003 2002
Note Rupees Rupees
SALES - Net 27 2,820,256,650 2,363,745,162
COST OF SALES 28 2,501,402,651 2,100,741,143
GROSS PROFIT 318,853,999 263,004,019
ADMINISTRATIVE EXPENSES 29 39,919,216 34,865,287
OPERATING PROFIT 278,934,783 228,138,732
OTHER INCOME 30 575,191 3,069,883
279,509,974 231,208,615
OTHER CHARGES
Financial - Net 31 113,280,538 173,903,315
Miscellaneous 32 30,419,531 871,415
Corporate asset tax 0 1,000,000
Workers' welfare fund 160,000 0
Workers' (profit) participation fund 14.1 8,159,000 2,822,000
124,641,491 178,596,730
PROFIT BEFORE TAXATION 154,868,483 52,611,885
PROVISION FOR TAXATION
— Current and prior years -net 15 18,702,556 12,112,517
— Deferred 11 43,726,000 i °
62,428,556 12,112,517
PROFIT AFTER TAXATION 92,439,927 40,499,368
UNAPPROPRIATED PROFIT
— Brought forward 244,984,433 216,840,265
PROFIT AVAILABLE FOR APPROPRIATION 337,424,360 257,339,633
APPROPRIATION:
Proposed dividend - Re. 1.00 per share
(2002: Re. 1 00 per share) 12,355,200 12,355,200
UNAPPROPRIATED PROFIT
— Carried to Balance Sheet 325,069,160 244,984,433
EARNINGS PER SHARE 34 7.48 3.96
The annexed notes form an integral part of these financial statements.
CASH FLOW STATEMENT
FOR THE YEAR ENDED 30 SEPTEMBER, 2003
2003 2002
Rupees Rupees
NET CASH INFLOW FROM OPERATING
ACTIVITIES (Note 'A') 359,960,790 53,906,227
CASH FLOW FROM INVESTING ACTIVITES
Fixed capital expenditure -270,539,875 -205,154,433
Proceeds from disposal of fixed assets 1,530,350 102,300
NET CASH OUTFLOW FROM INVESTING ACTIVITIES -269,009,525 -205,052,133
CASH FLOW FROM FINANCING ACTIVITIES
Right shares issued 0 28,512,000
Share premium received 0 14,256,000
Long term finances obtained 176,869,374 127,155,712
Long term finances paid -237,051,639 -55,317,356
Demand finances obtained 184,964,931 34,553,000
Demand finance paid -53,049,493 -6,560,150
Lease finances repaid -26,074,459 -25,044,894
Short term finances - net 7,810,406 231,574,120
Financial charges paid -127,646,671 -187,163,002
Dividend paid -12,305,589 -16,409,455
NET CASH (OUTFLOW)/INFLOW FROM
FINANCING ACTIVITIES -86,483,140 145,555,975
NET INCREASE/(DECREASE) IN CASH AND
CASH EQUIVALENTS 4,468,125 -5,589,931
CASH AND CASH EQUIVALENTS
— At the beginning of the year 4,725,963 10,315,894
CASH AND CASH EQUIVALENTS
— At the end of the vear 9.194.088 4.725.963
The annexed note ;A' forms an integral part of these financial statements.
NOTE 'A' 2003 2002
Rupees Rupees
CASH FLOW FROM OPERATING ACTIVITIES
Profit for the year - Before taxation 154,868,483 52,611,885
Adjustments for:
Depreciation 126,601,095 105,247,664
Provision for gratuity - net 2,926,227 193,983
Deferred income -22,061 -565,461
Gain on disposal of fixed assets - net -553,130 -22,319
Financial charges 113,280,538 173,903,315
Corporate asset tax 0 1,000,000
Balances (written back)/written off- net 0 -2,382,699
Workers welfare fund 160,000 0
Provision for slow moving items 1,770,316 0
CASH INFLOW FROM OPERATING ACTIVITIES
— Before working capital changes 399,031,468 329,986,368
Decrease/(lncrease) in current assets 1 I I
Stores, spares and loose tools -7,018,018 16,158,974
Stock-in-trade -75,132,234 -157,795,025
Trade debtors 52,411,864 -57,299,549
Advances, deposits, prepayments and other
receivables (excluding taxes paid and current
portion of long term loans to employees) -9,515,094 -26,483,651
lncrease/(Decrease) in creditors, accruals and
other liabilities (excluding taxes paid and accrued
financial charges) 43,514,813 [ (24,937,342)
4,261,331 -250,356,593
CASH INFLOW FROM OPERATING ACTIVITIES
— Before taxation 403,292,799 79,629,775
Income tax paid -42,834,281 -24,801,284
Corporate asset tax paid 0 -1,000,000
CASH INFLOW FROM OPERATING ACTIVITIES
— After taxation 360,458,518 53,828,491
Long term loans to employees - net -392,728 234,436
Long term deposits -105,000 -156,700
NET CASH INFLOW FROM OPERATING ACTIVITIES 359,960,790 53,906,227
The annexed notes form an integral part of the financial statements.
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 SEPTEMBER, 2003
Unrealised
Share Capital Share Premium Reserve gain on remeasure-ment of Unappropriated Profit Total
investments
Rupees
Balance as at
30 September, 2001 95,040,000 63,360,000 0 216,840,265 375,240,265
Right shares issued 28,512,000 0 0 0 28,512,000
Premium on right shares 0 14,256,000 0 0 14,256,000
Profit for the year ended
30 September, 2002 0 0 0 40,499,368 40,499,368
Proposed dividend 0 0 0 -12,355,200 -12,355,200
Balance as at
30 September, 2002 123,552,000 77,616,000 0 244,984,433 446,152,433
Surplus on remeasure-
ment of investments 0 0 1,419 0 1,419
Profit for the year ended
30 September 2003 0 0 0 92,439,927 92,439,927
Proposed dividend 0 0 0 -12,355,200 -12,355,200
Balance as at
30 September, 2003 123,552,000 77.616,000 1,419 325,069,160 526,238,579
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER. 2003
1. THE COMPANY AND ITS OPERATIONS
The Company was incorporated in Pakistan in 1966 as a Public Company and its shares are
quoted on Karachi and Lahore Stock Exchanges. The Company is engaged in manufacture
and sale of yarn.
2. SIGNIFICANT ACCOUNTING POLICIES
2.1 Statement of Compliance
These financial statements have been prepared in accordance with the approved
accounting standards as applicable in Pakistan and the requirements of the Companies
Ordinance, 1984. Approved accounting standards comprise of such International
Accounting Standards (IAS) as notified under the provisions of the Companies Ordinance,
1984. Wherever the requirements of the Companies Ordinance, 1984 or directives issued
by the Securities and Exchange Commission of Pakistan differ with the requirements of
these standards, the requirements of the Companies Ordinance, 1984 or the requirements
of the said directives take precedence.
2.2 Accounting convention
These financial statements have been prepared under the historical cost convention,
except for:
— modification of foreign currency translation adjustments as stated in note 2.3; and
— recognition of employee retirement benefits at present value.
2.3 Foreign currency translations
Transactions in foreign currencies are accounted for in Pak Rupees at the exchange
rates prevailing on the date of transactions. Assets and liabilities in foreign currencies
are translated into Pak Rupees at the exchange rates prevailing on the balance sheet
date except where forward exchange rates are booked, which are translated at the
contracted rates.
Exchange fluctuations on principal loans were transferred to the cost of respective assets
acquired out of the proceeds of such loans. All other exchange fluctuations are taken to
profit and loss account.
2.4 Staff retirement benefits
The Company operates an un-funded Gratuity Scheme covering all eligible employees
completing the minimum qualifying period of service as specified by the Scheme. Provision
for gratuity is made annually to cover obligation under the Scheme in accordance with
actuarial recommendations.
Actuarial valuation was conducted as on 30 September, 2003 on the basis of projected
unit credit method by an independent Actuary. The projected unit credit method is based
on following assumptions:
2003 2002
Discount rate 8% per annum 10% per annum
Expected rate of increase in salary 7% per annum 9% per annum
Average expected remaining working
life time of employees 10 years 11 years
Amount recognised in the balance sheet is as folllows: 2003 2002
Rupees Rupees
Present value of defined benefit obligation as at
30 September, 19,299,170 14,348,010
Unrecognised actuarial loss -2,592,374 -567,441
Liability recognised as at 30 September, 16,706,796 13,780,569
Movement in liability recognised :
Liability as at 30 September, 13,780,569 13,586,586
Amounts recognised during the year 6,890,565 3,406,397
Benefits paid during the year -3,964,338 -3,212,414
Liability as at 30 September, 16,706,796 13,780,569
Amounts recognised during the year :
Current service cost 5,455,764 2,944,030
Interest cost 1,434,801 1,277,178
Transitional provision 0 -814,811
6,890,565 3,406,397
The Company's policy with regard to actuarial gams / losses is to follow minimum recommended
approach under IAS-19 (Revised 2000) 'Employee Benefits'.
2.5 Taxation
(a) Current
Provision for current taxation is based on taxable income at the current rates of
taxation after taking into account tax credits and tax rebates available, if any, or
minimum tax at the rate of 0.5% of turnover, whichever is higher.
(b) Deferred
During the current year, the Company has changed its accounting policy in respect
of deferred taxation. The change has been made to comply with the requirements
of the revised IAS 12 (Income Taxes) which became applicable for financial periods
beginning on or after 01 January, 2002. Accordingly, deferred tax is now recognised
using the balance sheet liability method in respect of all temporary differences
between the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for taxation purposes. Deferred tax assets are recognised
to the extent that it is probable that taxable profit will be available against which
the deductible temporary differences, unused tax losses and tax credits can be
utilised. Deferred tax liabilities are generally recognised for all taxable temporary
differences. Derferred tax assets and liabilities are based on the expected tax
rates applicable at the time of reversal.
Had the policy not been changed, profit after taxation for the year would have been
higher by Rs. 43,726,000.
The effect of change in accounting policy, as per the allowed alternative treatment
under IAS 8 "Net Profit or Loss for the Period, Fundamental Errors and Changes in
Accounting Policies" has been charged to profit and loss account and additional
pro-forma comparative information has been disclosed in note 11.1.
2.6 Tangible fixed assets and depreciation
Fixed assets except freehold land are stated at cost less accumulated depreciation
and identified impairment losses, if any. Freehold land and capital work-in-progress
are stated at cost. Cost of some plant and machinery consists of historical cost and
exchange rate fluctuations on foreign currency loans utilised for acquisition thereof.
Depreciation is charged to income applying reducing balance method to write-off the
cost and capitalised exchange differences over estimated remaining useful life of assets.
The useful life and depreciation method are reviewed periodically to ensure that the
method and period of depreciation are consistent with the expected pattern of economic
benefits from items of fixed assets Rates of depreciation are stated in note 18.
No depreciation is provided on assets in the year of disposal whereas full year's
depreciation is charged in the year of purchase/operations.
Gain/loss on disposal of fixed assets is taken to Profit and Loss Account.
Major improvements and modifications are capitalised and assets replaced, if not kept
as stand-by, are retired. Minor repairs and replacements are taken to Profit and Loss
Account.
Leased
These are stated at the lower of present value of minimum lease payments under the
lease agreements and the fair value of the assets. The related obligation of leases is
accounted for as liability. Financial charges are allocated to accounting periods in a
manner so as to provide a constant periodic rate of financial cost on the remaining
balance of principal liability for each period.
Depreciation is charged to income at the same rates and basis as applicable to the
Company's owned assets. Outstanding obligation under lease less finance charges
allocated to future periods is shown as liability. The finance charge is calculated at the
rate implicit in the lease and is charged to income.
2.7 Impairment of assets
Assets are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable, whenever the
carrying amount of an asset exceeds its recoverable amount, an impairment loss is
recognised in income for items of assets.
2.8 Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of
qualifying assets, which are assets that necessarily take a substantial period of time
to get ready for their intended use or sale, are added to the cost of those assets, until
such time as the assets are substantially ready for their intended use or sale. All other
borrowing costs are charged to income in the period of incurrence.
2.9 Long term investments
Associated Companies
Investments are initially measured at cost. At subsequent reporting dates, the Company
reviews the carrying amount of the investment to assess whether there is any indication
that such investments have suffered an impairment loss. If any such indication exists
the recoverable amount is estimated in order to determine the extent of the impairment
loss, if any. Impairment losses are recognised as expense.
Where an impairment loss subsequently reverses, the carrying amount of the investment
is increased to the revised recoverable amount but limited to the extent of the initial
cost of the investment. A reversal of the impairment loss is recognised in income.
Available for sale
Ail purchase and sales are recognised on the trade dates. Changes in carrying values
are recognised in equity until investment is sold or determined to be impaired at which
time the cumulative gain or loss previously recognised in equity is included in profit
and loss account for the year.
2.10 Stores, spares and loose tools
These are valued at moving average cost except items-in-transit which are stated at
cost accumulated to the Balance Sheet date.
2.11 Stock-in-Trade
Basis of valuation are as follows :
Particulars
Raw materials Mode of Valuation
- At mills - At lower of annual average cost of both local and
imported purchases and net realisable value.
- In transit - At cost accumulated to the balance sheet.
Work-in-process - At raw materials cost.
Finished goods - At lower of cost and net realisable value.
Waste - At net realisable value.
Cost of finished goods represents annual average manufacturing cost which
consists of prime cost and appropriate production overheads.
Net realisable value signifies the selling price in the ordinary course of business
less cost of completion and cost necessary to be incurred to effect such sale.
2.12 Revenue recognition
- Sales are recorded on despatch of goods to customers.
- Return on investments and deposits is accounted for on time proportion basis.
- Dividend income is accounted for when the right to receive Is established.
- Gain on 'sale and lease-back' transactions is deferred and is credited to Profit and
Loss Account over the lease term i.e. 5 years.
2.13 Provisions
Provisions are recognised when the Company has a present legal or constructive
obligation as a result of past events, it is probable that an outflow of resources will be
required to settle the obligation, and a reliable estimate of the amount can be made.
2.14 Cash and cash equivalents
Cash and cash equivalents consist of cash-in-hand and balances with banks.
2.15 Financial instruments
Financial assets
The Company's principal financial assets are cash & bank balances, trade debtors
and deposits.
Financial liabilities
Financial liabilities are classified according to the substance of the contractual
arrangements entered into. Significant financial liabilities include long term finances,
liabilities against assets subject to finance lease, short term loans, creditors & other
liabilities and dividend payable. These are stated at nominal value.
2.16 Offsetting of financial instruments
Financial assets and liabilities are off-set and the net amount reported in the balance
sheet when there is a legally enforceable right to set-off the recognised amounts and
there is an intention to settle on a net basis, or realise the asset and settle the liability
simultaneously.
2.17 Related party transactions
Sales, purchases and other transactions with related parties are made at arm's length
prices determined in accordance with the comparable uncontrolled price method except
for the allocation of expenses relating to combined offices shared with the Associated
Companies which are on the actual basis.
3. ISSUED, SUBSCRIBED AND PAID-UP CAPITAL
2002 2003 2003 2002
(Number of shares) Rupees Rupees
1,000,000 1,000,000 ordinary shares of Rs. 1 0/- each 10,000,000 10,000,000
9,187,200 9,187,200 ordinary shares of Rs. 10/- each
issued as right 91,872,000 91,872,000
2,168,000 2,168,000 ordinary shares of Rs. 1 0/- each
issued as bonus shares 21,680,000 21,680,000
12.355,200 12,355,200 123,552,000 123,552,000
3.1 As at the year-end shares held by the associated companies are as follows:
No. of Shares held
Fatima Trading Company (Pvt.) Limited 620,907 620,907
Reliance Commoditeis (Pvt.) Limited 453,514 453,514
Rashid Brothers Associates (Pvt.) Limited 423,716 423,716
Mukhtar Trading Company (Pvt.) Limited 617,976 617,976
Amir Fine Exports (Pvt.) Limited 2,248,442 2,248,442
4. RESERVES 2003 2002
Share premium Rupees Rupees
@ Rs. 20/- per share on issue of 3,168,000
ordinary shares of Rs. 10/- each issued during 2001 63,360,000 63,360,000
@ Rs. 51- per share on issue of 2,851 ,200
ordinary shares of Rs. 1 01- each issued during 2002 14,256,000 14.256,000
77,616,000 77,616,000
Fair value
Unrecognised gain on remeasurement of
investment 1,419 0
77,617,419 77,616,000
5. LONG TERM FINANCES - Secured
2003 2002
Note Rupees Rupees
Habib Bank Limited (HBL)
- LMM finance 5.1 0 855,000
Askari Commercial Bank Limited (ACBL)
- Term finance - 1 5.2(a) 0 14,130,367
- Term finance -II 5.2(a) 0 8,749,140
- Term finance -III 5.2(b) 220,116,056 245,100,000
- Term finance - IV 5.2(c) 95,642,367 0
Soneri Bank Limited (SBL)
- Term finance 5.3 0 56,000,000
Pakistan Industrial Credits Investment
Corporation (PICIC; 5.4
- BMR-I 26,362,259 32,013,197
- BMR-II 71,250,026 77,087,153
- BMR-II! 26,165,908 31,284,024
ABN AMRO Bank
- Customer term loan 5.5 0 34,500,000
439,536,616 499,718,881
Less : Current portion grouped under
current liabilities
Overdue instalment 0 1,177,750
Instalments due within following
twelve months 76,616,455 108,191,219
76,616,455 109,368,969
362,920,161 390,349,912
5.1 This finance was obtained from HBL under the State Bank of Pakistan's Locally
Manufactured Machinery Scheme It carried mark-up @ 14% per annum and was
repayable in 14 equal half-yearly instalments by 30 June, 2006. However, this has been
fully repaid during the year. It was secured against first registered charge on fixed assets
of the Company and personal guarantees of the directors of the Company.
5.2 (a) These finances were obtained for repayment of cost of imported plant and machinery.
Originally, term finance-l and term finance-ll carried mark-up @ 18% and 16% per
annum respectively. Subsequently, ACBL reduced the mark-up rates and during
the year, charged mark-up on both the finances at the rates ranging from 9.5% to
13% per annum. These finances were due for repayment during the current year
and have been fully repaid.
(b) This finance has been obtained for repayment of cost of imported plant and
machinery to establish a new unit. As per original terms and conditions, this finance
carried mark-up @ (SBP discount + 2%) with floor of 15% per annum and it was
repayable in equal quarterly instalments in five years. The Company paid an
instalment of Rs. 12.90 million as per original terms and conditions during the
preceding year and remaining amount of Rs. 245.10 million is to be paid in 24 un-
equal quarterly instalments commencing 18 February, 2003. This finance carries
mark-up Tenure of Treasury Bills with floor of 5% per annum. The bank, during the
year, charged mark-up at the rates ranging from 5% to 13% per annum.
Subsequent to the balance sheet date, ACBL has reduced the mark-up rates to 6
months1 Treasury Bills + 2% with a floor of 4.25% per annum.
(c) This finance has been obtained for repayment of cost of imported plant and
machinery. As per original terms and conditions, this finance carried mark-up @
(SBP discount + 3%) with floor of 12% and cap of 16% per annum. However,
during the year, ACBL reduced the interest rates to Treasury bills + 3% with floor
of 5% per annum The bank, during the year, charged mark up at the rates ranging
from 5% to 12% per annum It is repayable in 20 un-equal instalments and first
instalment will become due on 31 January, 2.004.
Subsequent to the balance sheet date, ACBL has reduced the mark-up rates to 6
months' Treasury Bills + 2% with a floor of 4.25% per annum.
(d) These term finance facilities are secured against first charge ranking pan-passu
on all fixed assets, land, building & machinery of the Company upto Rs. 100.00
million, first exclusive charge on all present and future fixed assets, first charge on
all present and future current assets for Rs. 525 million, second hypothecation
charge on plants machinery and other fixed assets of the Company for Rs 35.00
million and personal guarantees of the sponsoring directors of the Company
5.3 This finance was obtained for repayment of cost of imported plant and machinery. It was
repayable in ten equal half yearly instalments by 10 May, 2006. However, this has been
fully repaid during the year. The bank during the year, charged mark-up at the rates
ranging from 10.58% to 15% per annum. This was secured against registered charge on
all fixed assets of the Company on the basis of pari-passu with the existing first charge
holder fellow banks.
5.4 These loans have been obtained out of sanctioned limit of Rs. 150.00 million for balancing,
moderinization and replacement programme of the spinning facilities. As per original
terms and conditions, these finances carried mark-up @ 15% per annum. These loans
are repayable in twenty un-equal quarterly instalments; repayment of BMR-I, BMR-II
and BMR-III commencing from 19 June, 2002, 11 June, 2003 and 05 September, 2002
respectively. PICIC, during the year, reduced mark-up rate from 15% to 9.5% per annum.
Mark-up rate has been reduced to 7.5% per annum subsequent to the balance sheet
date. These loans are secured by first pari-passu charge on fixed assets and personal
guarantees of the sponsoring directors of the Company.
5.5 This loan was obtained from ABN-AMRO Bank for permanent working capital financing.
This loan was repayable on demand or on expiry of 13 months from date of drawdown,
whichever was earlier. It has been fully repaid during the year. It was secured against
subordinate charge over stocks and receivables of the Company, pledge over government
securities of directors and promissory note.
5.6 The Company, during the year, obtained other long term fund based facilities amounting
Rs. 520 million from various banks. Unfunded facilities have been obtained from Soneri
Bank Limited for opening letters of credit for 1090 days upto a maximum limit of Rs.
49.725 million. These facilities remained un-utilised at the year-end.
6. DEMAND FINANCE - Secured
2003 2002
Note Rupees Rupees
Habib Bank Limited (HBL)
- Demand finance- 1 6.1 0 34,553,000
- Demand finance- II 6.2 166,468,438 0
166,468,438 34,553,000
Less : Current portion grouped under
current liabilites 36,992,986 6,910,600
129,475,452 27,642,400
6.1 This finance was created by HBL for repayment of letters of credit for Rs. 35.00 million.
it was repayable within a period of three years in five equal half yearly instalments
commencing from June, 2003. However, it has been fully repaid during the year. The
bank, during the year, charged mark-up at the rates ranging from 9.5% to 13% per
annum. It was secured against first equitable mortgage charge on fixed assets of the
Company for Rs. 440 million and personal guarantees of all directors of the Company.
6.2 This finance has been obtained for repayment of cost of imported plant and machinery
and lona term finances from other financial instutijtinns It carries mark-up © (SBP
discount + 2%) and is repayable in ten equal half yearly instalments commencing 30
September 2003 The bank, during the year, charged mark-up at the rates ranging from
6.35% to 9.5% per annum. It is secured against first equitable mortgage charge on fixed
assets of the Company for Rs. 440 million and personal guarantees of all directors of the
Company.
Subsequent to the balance sheet date, HBL has reduced the mark-up rate to 6 months'
Treasury Bills + 3% with a floor of 5% per annum.
7. LIABILITIES AGAINST ASSETS SUBJECT TO FINANCE LEASE
Upto From one
one to five 2003 2002
year years
Minimum lease payments 24,777,279 1,746,020 26,523,299 58,568,444
Less: Finance charges:
- Allocated to future periods 779,032 34,891 813,923 7,223,127
- Accrued during the year 516,901 0 516,901 78,383
1,295,933 34,891 1,330,824 7,301,510
23,481,346 1,711,129 25,192,475 51,266,934
Less: Security deposits adjustable
on expiry of lease terms 7,650,000 700,000 8,350,000 8,350,000
Present value of minimum
lease payments 15,831,346 1,011,129 16,842,475 42,916,934
Less: Current portion grouped
undercurrent liablities:
-overdue installments 3,236,210 0
- installments due within following
twelve months 12,595,136 29,188,567
15,831,346 29,188,567
1,011,129 13,728,367
7.1 The Company has executed lease agreements with Orix Leasing Pakistan Ltd., Atlas
Investment Bank Ltd, (Formerly Atlas Lease Ltd.), Crescent Leasing Corporation Ltd.,
Askari Leasing Ltd. and Pacific Leasing Ltd. to acquire plant and machinery. The liabilities
under the lease agreements are payable by January, 2005 and were originally subject to
finance charge at the rates ranging from 11 % to 22% per annum. However, the finance
charge rates at the year end were ranging from 9% to 12% per annum. The Company
intends to exercise its option to purchase the leased plant and machinery upon completion
of the respective lease terms. The lease liabilities are secured against charge on the
assets of the Company and personal guarantees of the Company's Directors.
7.2 The Company, during the year, obtained ijrah (lease finance) facility from Meezan Bank
Limited for Balancing Modernization and Replacement (BMR). The facility is for five
years upto a maximum limit of Rs. 100 million. The facility remained unutilised at the
year end.
8. CUSTOMS DUTIES - Secured
2003 2002
Note Rupees Rupees
Surcharge 8.1 2,185,200 2,185,200
Customs duties 8.2 25,046,014 25,046,014
27,231,214 27,231,214
8.1 It represents surcharge on plant and machinery imported by the Company. The said
plant and machinery was released against furnishing of bank guarantees. The Company
has applied to the Customs Authorities for release of bank guarantees and exemption of
this levy.
8.2 Custom duties represent customs duties and sales tax on plant and machinery imported
under S.R.Os. 554(l)/98, 27(l)/98, 369(l)/2000 and 439(l)/2001 of Government of Pakistan,
which specify that customs duties and sales tax on imported plant and machinery shall
be exempt provided that the export sales of the Company shall not fall below 50% of the
additional capacity due to expansion, in first five and ten years respectively. In case the
conditions of above-mentioned S.R.Os are violated, the amount of customs duties and
sales tax exempted shall be recovered alongwith penalties imposed in this regard under
section 202 of the Customs Act, 1969. Kr-sping in view the un-expected decline in the
export sales in the said future periods, the Company has made the provision of those
plant and machinery which do not fulfill the conditions of above-mentioned S.R.Os.
9. DUE TO AN ASSOCIATED UNDERTAKING - Unsecured
9.1 This balance has arisen due to purchase of land and building from Rehan Amir Fabrics
Limited (an Associated Undertaking). No interest has been charged by the associated
undertaking on the outstanding balance as per agreement.
9.2 Land and building purchased from associated undertaking having cost of Rs. 7.134
million is not in the name of Company as at balance sheet date. Transfer of title of the
said land and building in the name of the Company is under process.
10. DEFERRED INCOME
Opening Balance 44,122 609,583
Less: Credited to Profit and Loss Account
during the year. 22,061 565;461
22,061 44,122
10.1 Deferred income represents gain arisen on 'sale and lease-back'of plant and machinery.
This gain has been deferred and is being credited to Profit and Loss Account over the
lease terms of plant and machinery i.e., 5 years.
11. DEFERRED TAXATION
2003 2002
Note Rupees Rupees
The deferred taxation liability comprises of temporary
differences relating to :
Credit balances arising in respect of :
- accelerated tax depreciation allowances 55,855,000 18,400,000
- lease finances 10,020,000 3,374,000
Debit balance arising due to provision for slow-moving
store inventory -375,000 0
65,500,000 21,774,000
11.1 Additional proforma comparative information
Had the Company followed the benchmark treatment as per IAS 8, the adjustment to the
profit and loss account and unappropriated profit would have been as follows :
Unappropriated profit as reported
01 October, 2002/2001 244,984,433 216,840,265
Effect of change in accounting policy due to
adoption of IAS 1 2 (Revised 2000) 1
Total -36,375,000 -28,500,000
Already recognised 21,774,000 21,774,000
-14,601,000 -6,726,000
Balance as at 01 October, 2002/2001 as restated 230,383,433 210,114,265
Profit for the year before taxation 154,868,483 52,611,885
Provision for taxation -
Current 17,400,000 15,063,492
Prior 1,302,556 -2,950,975
Deferred 291,250,001 7,875,000
47,827,556 19,987,517
Profit for the year after taxation 107,040,927 32,624,368
Profit available for appropriation 337,424,360 242,738,633
Appropriation:
Proposed dividend Re.1 .00 per share (2002: Re.1 .00 per share) 12,355,200 12,355,200
Unappropriated profit as at 30 September, 2003/2002 325,069,160 230,383,433
12. CURRENT PORTION OF LONG TERM LIABILITIES
2003 2002
Note Rupees Rupees
Long term finances 5 76,616,455 109,368,969
Demand Finance 6 36,992,986 6,910,600
Liabilities against assets subject to
finance lease 7 15,831,346 29,188,567
129,440,787 145,468,136
1 3. SHORT TERM FINANCES
Secured 13.1 667,883,537 660,415,260
Un-secured 13.2 342,129 0
668,225,666 660,415,260
13.1 Shortterm finance facilities available from commercial banks under mark-up arrangements
aggregate Rs.2,805 million (2002: Rs.2,165.80 million). These include facilities available
in terms of foreign currency aggregate U.S. $36.542 million (2002:11.S. $16.60 million).
The mark-up charged by banks at various rates ranging from Re. 0.0685 to Re. 0.3562
per thousand Rupees calculated on daily product basis; mark-up is payable on quarterly
basis. The aggregate facilities are secured against pledge/hypothecation of stock-in-
trade, hypothecation charge of stores and spares, lien over import / export documents,
charge on fixed assets and current assets and personal guarantees of all the directors
except nominee director.
Facilities available for opening of letters of credit and guarantee aggregate Rs.315.60
million (2002:Rs.350.90 million) of which the amount remained unutilised at the year
end was Rs.128 million (2002:Rs.121.87 million).
These facilities are expiring on various dates by 30 September, 2004.
These include foreign currency balances aggregate U.S.$5,552,253 (2002:
U.S.$5,451,099) and Euro 127,000 (2002: Nil) which have been converted into Pak Rupees
at the exchange rate prevailing on the balance sheet date i.e. U.S.$1 = Rs.58.05 and
Euro 1 = Rs.67.48.
13.2 These have arisen due to issuance of cheques for amounts in excess of balances at
bank accounts
14. CREDITORS, ACCRUALS AND OTHER LIABILITIES
2003 2002
Note Rupees Rupees
Due to Associated Undertakings 678,341 0
Due to Directors 158,000 256,000
Creditors 52,965,777 41,903,474
Bills payable 15,930,000 0
Advance payments 3,612,601 3,284,577
Mark-up accrued on:
- Long term finances 7,122,437 14,225,744
- Demand finance 2,893,748 1,190,067
-Short term finances 6,667,748 16,072,773
Finance charges accrued on lease finances 516,901 78,383
Accrued expenses 54,941,700 45,857,127
Tax deducted at source 1,899,589 743,155
Workers' (profit) participation fund 14.1 8,159,000 2,822,000
Workers' welfare fund 160,000 0
Others 458,025 421,887
156,163,867 126,855,187
14.1 Workers' (Profit) Participation Fund
Opening Balance 2,822,000 2,740,000
Add: Interest on amounts utilised by the Company 189,422 178,403
3,011,422 2,918,403
Less: Payments made during the year 3,010,512 2,918,361
Deposited in the Government Treasury 910 42
3,011,422 2,918,403
0 0
Add: Contribution for the year 8,159,000 2,822,000
8,159,000 2,822,000
15. PROVISION FOR TAXATION
2003 2002
Note Rupees Rupees
Opening Balance 34,447,374 41,156,262
Add: Provision made during the year 1
-Current year 17,400,000 15,063,492
- Prior years 1,302,556 -2,950,975
18,702,556 12,112,517
53,149,930 53,268,779
Less: Adjustments/payments against
completed assessments 1,302,556 18,821,405
51,847,374 34,447,374
15.1 Income tax assessments of the Company have been finalised upto the Income Year
ended 30 September, 2000 (Assessment Year 2001-2002).
16. DIVIDENDS
Unclaimed 1,344,766 1,295,155
Proposed 12,355,200 12,355,200
13,699,966 13,650,355
17. CONTINGENCIES AND COMMITMENTS
17.1 The Collector of Customs, Sales Tax and Central Excise detprmineri and raided sales
tax alongwith additional tax demand aggregating Rs. 899,967 on sale of bailing hoops.
The Company did not accept the said demand and filed an appeal before Lahore High
Court (LHC), Multan Bench. The LHC vide its judgement dated 28 January, 2002 dismissed
the said appeal The Company has filed appeal before Supreme Court of Pakistan against
the said judgement. The matter is pending adjudication. No provision against the said
demand is made in these financial statements as the Company expects a favourable
decision of the case.
17.2 Market Committee, Muzaffargarh, during 1985, raised demands of market committee
fee of eleven years and panalty due to non-payment. The Company did not accept the
said demands and filed appeal with the Lahore High Court (Multan Bench). The appeal is
pending for decision. Quantum of unprovided market committee fee has not been worked-
out whereas penalty till the balance sheet date @ Rs.100 per day worked-out Rs.
1,059,200 (2002:Rs.1,022,700).
17.3 The Company, imported textile machinery availing exemption of customs duty and sales
tax on importation thereof under S.R.Os 554(l)/98, 987(l)/99 and 439(l)/2001. In case,
the conditions of above-mentioned S.R.Os are violated, the amount of customs duty and
sales tax exempted aggregating Rs.24.711 million shall be recovered alongwith penalties.
17.4 Counter guarantees given by the Company to its bankers outstanding as at 30 September,
2003 were for Rs.21.989 million (2002: Rs.19.088 million).
2003 2002
(Rupees in million)
17.5 Commitments for irrevocable letters of credit:
-Capital expenditure 118.08 135.542
-Revenue 47.105 73.598
165.185 209.14
17.6 Refer contents of note 25.3.
18. OPERATING FIXED ASSETS - Tangible
COST DEPRECIATION Net Book
PARTICULARS As at 30 September, 2002 Additions Disposals/ adjustment As at 30 September, 2003 Rate % To 30 September, 2002 For the year On Disposals/ adjustment To 30 September, 2003 Value as at 30 September. 2003
Owned :
Land - Freehold 12,421,292 534,500 0 12,955,792 0 0 0 0 12,955,792
Buildings on
freehold land
- Factory 139,388,735 29,011,640 0 168,400,375 10 48,072,366 12,032,801 0 60,105,167 108,295,208
- Non-factory 64,277,256 1,653,173 0 65,930,429 5 13,172,462 2,637,898 0 15,810,360 50,120,069
203,665,991 30,664,813 0 234,330,804 61,244,828 14,670,699 0 75,915,527 158,415,277
Plant and
Machinery 1,162,493,996 275,881,383 0 1,438,375,379 10 470,198,303 96,817,708 0 567,016,011 871.359 368
Electric Fttings
and installations 48,663,734 5,337,053 0 54,000,787 10 17,836,998 3,616,379 0 21,453,377 32,547,410
Sui-gas
installations 1,357,147 325,649 0 1,682,796 10 402,834 127,996 0 530,830 1,151,966
Tools, laboratory
equipment and
arms 20,170,560 162,227 0 20,332,787 10 6,345,837 1,398,696 0 7 744,533 12,588 254
Office
equipment 5,438.38 813,590 107,350 6,144,617 10 2,207 436 394,921 12,030 2,590,327 3,554.29
Fire extinguishing
equipment and
weighing scales 5,732,858 171,540 0 5,904,398 10 1,879,014 402,538 0 2,281,552 3622846
Furniture and
fixtures 3,230,211 288,247 0 3,518,458 10 1,441,949 207,651 0 1,649,600 1 368.858
Vehicles 13,303,896 3,738,273 1,774,145 15,268,024 20 6,967,894 1,838,475 892,245 7,914.12 7,353,900
Leased:
Plant and
machinery 111,507,135 0 0 111,507,135 10 40,246,817 7,126.03 0 47,372,849 64,134,286
Rupees 1 587985,197 317,917,275 1,881,495 1,904,020,977 608,771,910 126,601,095 904.275 734,468,730 1,169,552,247
2002 Rupees 1,445,782,309 143,003,061 800,173 1,587,985,197 503,593,575 105,312,750 134,415 608,771.91 979,213,287
18.1 Disposal of operating fixed assets
Particulars Cost Accumulated depreciation Book Value Sale proceeds Gain/ (Loss) Sold through negotiation to:/ insurance claim received from
Office Equipment :
Photocopier 53,000 10,070 42,930 39,000 -3,930 Office equipment & service, Multan
Computer 20,000 0 20,000 15,000 -5,000 Adamjee Insurance Company Ltd.
Mobile Phone 19,600 1,960 17,640 16,650 -990 Adamjee Insurance Company Ltd.
IVlGbiiB FnOM6 14,750 0 14,750 10 700 -4,050 Adamjee insurance Company Ltd
107,350 12,030 95,320 81,350 -13,970
Vehicles :
Toyota cresida 195,200 169,001 26,199 185,000 158,801 Muhammad Tanvir, Multan.
Toyota corolla 1,230,000 442,800 787,200 1,100,000 312,800 Adamjee Insurance Company Ltd.
Honda civic 270,943 264,844 6,101 90,000 83,899 Muhammad Asghar, Multan
Motor cycle 78,000 15,600 62,400 74,000 11,600 Adamjee Insurance Company Ltd.
1,774,145 892,245 881,900 1,449,000 567,100
Rupees 1,881,495 904,275 977,220 1,530,350 553,130
18.2 (a) Depreciation for the year has been
apportioned as under:
2003 2002
Note Rupees Rupees
Cost of sales 123,698,811 102,694,246
Less: Depreciation on customs duty
capitalised in prior year - written-back 0 65,086
123,698,811 102,629,160
Administrative expenses 2,870,309 2,582,975
Lease loss of Carpet Yarn Unit 18.2(b) 31,975 35,529
2,902,284 2,618,504
126,601,095 105,247,664
(b) The lease agreement was not renewed during the current and preceding years.
18.3 The Company's land having book value of Rs. 54,695 is not yet registered in the name of
the Company in the Revenue Records because of dispute over the proprietary rights of
sellers' share of land. The Company had deposited the cost of land with the Government
Treasury and the land is already in the Company's possession. The case is pending for
decision before the Supreme Court of Pakistan.
18.4 Refer contents of note 9.2.
19. CAPITAL WORK-IN-PROGRESS
Factory buildings
Materials and expenses 2,809,831 12,773,859
Advance payments 7,457,966 8,568,811
10,267,797 21,342,670
Non-factory buildings
Materials and expenses 967,436 0
Plant and machinery
Cost and expenses 25,621,487 71,747,657
Letters of credit 523,895 820,488
Advance payments 1,315,100 i 2,428,000
27,460,482 74,996,145
Vehicle
Advance payments 1,265,700 0
Gas pipeline 9,000,000 0
48,961,415 96,338,815
20. LONG TERM INVESTMENTS
2003 2002
Note Rupees Rupees
Associated Company - Un-quoted
Fazal Industries (Pvt) Ltd.
1 04,500 ordinary shares of Rs. 1 07- each
Net worth per share was nil, based on audited
financial statements for the year ended 30 June, 2001 475,000 475,000
Less: Provision for diminution in value 475,000 475,000
0 0
Available for sale - quoted
Quetta Textile Mills Ltd.
57 ordinary shares (2002: 57) of Rs. 1 0/- each 918 918
Market value Rs.2,337 (2002:Rs.2,280)
Add: Surplus on remeasurement of investments 1,419 0
2,337 918
2,337 918
20.1 Equity percentages held by the Company as at 30 September, 2003 in the Investee
Companies were les than 10%.
21 . LONG TERM LOANS - Considered good
Executives 520,474 565,574
Other employees 1,368,197 930,369
1,888,671 1,495,943
Less: Current portion grouped under current assets 1,239,950 847.949
648,721 647,994
21.1 These interest free unsecured loans have been advanced for various purposes and are
recoverable in instalments which vary from case to case. No balance is outstanding for
more than three years.
21.2 The fair value adjustment required by IAS-39 arising in respect of staff loans is not
considered material and hence not recognised.
22. STORES; SPARES AND LOOSE TOOLS
2003 2002
Note Rupees Rupees
Stores [including in-transit Rs. 1.649 million
(2002: Rs. 0.058 million)] . 22.1 11,279,418 6,463,456
Spares 29,482,272 27,274,486
Loose tools 39,447 45,177
40,801,137 33,783,119
Less:
Provision for slow moving items 1,770,316 0
39,030,821 33,783,119
22.1 The Company does not hold any stores and spares for specific capitalisation (2002:
Stores held for capitalisation amounting Rs. Nil).
23. STOCK-IN-TRADE
Raw materials (including in-transit
Rs 60.389 million (2002: Rs. 36.049)} 533,898,259 433,461,025
Work-in-process 14,496,000 12,087,000
Finished goods
Yarn 69,154,000 98,803,000
Waste 6,720,000 4,785,000
75,874,000 103,588,000
624,268,259 549,136,025
23.1 Finished goods inventory includes stock valuing Rs. 2.812 million (2002: Nil) and Rs.
1.004 million lying with an associated company and third party respectively for
doubling process.
24. TRADE DEBTORS
Secured - Export bills 71,869,415 140,875,695
Unsecured - Considered good 67,468,717 50,874,301
139,338,132 191,749,996
25. ADVANCES, DEPOSITS, REPAYMENTS
AND OTHER RECEIVABLES
2003 2002
Note Rupees Rupees
Due from Associated Undertakings 25.1 3,459,022 8,777,084
Advance payments - Considered good :
- Suppliers and contractors 6,578,542 12,982,082
- Executives 25.2 182,494 148,007
- Other employees 1,186,529 823,784
Letters of credit 279,597 534,807
Deposits 4,249,417 2,399,221
Prepayments 8,569,289 601,814
Workers' welfare demands deposited under protest 38,820 38,820
Advance income tax/tax deducted at source 66,302,334 24,770,609
Income tax refundable 5,324,684 5,324,684
Sales tax refundable 22,554,831 12,273,948
Weight shortage claims receivable 7,619 7,619
Sales tax deposited under protest 25.3 443,386 0
Others 1,249,871 305,136
120,426,435 68,987,615
25.1 Due from Associated Undertakings :
Reliance Weaving Mills Limited 0 5,771,992
Ahmad Fine Textile Mills Limited 3,458,257 3,005,092
Amir Fine Exports (Pvt) Limited 765 0
3,459,022 8,777,084
25.2 Maximum aggregate amount due from executives at any month-end during the year was
Rs. 0.705 million (2002: Rs. 0.725 million).
25.3 The Collector of Customs, Sales Tax and Central Excise has raised a demand of sales
tax amounting Rs. 1.335 million relating to input tax claim of sales tax paid by the
Company on courier bills, telephone bills, and bills of natural gas and electricity. In
addition to the above the Collector has also raised demand of sales tax on insurance
claim received by the Company against burnt cotton amounting Rs. 0 439 million. The
Company has filed an appeal with Sales Tax Appellate Tribunal against the above
mentioned impugned orders which is still pending adjudication with the Tribunal. The
Company has deposited 25% of the disputed amount of Sales tax under the directons of
the Tribunal.
26. CASH AND BANK BALANCES
2003 2002
Note Rupees Rupees
Cash-in-hand 724,633 201,297
Cash at banks on:
Current accounts 7,849,028 3,937,262
Escrow account 926 787
Dividend accounts 496,435 502,458
Saving account 123,066 84,159
8,469,455 4,524,666
9,194,088 4,725,963
27. SALES -Net
Local :
Yarn 1,946,733,815 1,368,071,394
Comber noil 9,042,271 0
Waste 37,393,071 30,391,210
Raw materials sold 13,337,963 36,534,471
2,006,507,120 1,434,997,075
Less :
Sales return 26,390,277 9,900,127
Commission/brokerage 5,622,345 3,905,477
Sales rax 250,620,816 180,620,105
Freight and handling charges 3,772,214 5,706,631
Insurance 178,164 202,487
286,583,816 200,334,827
Net local sales 1,719,923,304 1,234,662,248
Export :
Yarn {including exchange gain of Rs. 0.658 million
(2002: Rs. 3. 105 million)} 1,100,496,673 1,153,014,588
Fabric 3,379,801 0
Comber noil 60,694,140 52,064,764
Hard waste 5,858,263 0
1,170,428,877 1,205,079,352
Less :
Commission 17,356,638 14,215,460
Export development surcharge 2,469,037 2,778,848
Freight, shipment and handling charges 50,263,367 58,880,538
Insurance 6,489 121,592
70,095,531 75,996,438
Net export sales 1,100,333,346 1,129,082,914
2,820,256,650 2,363,745,162
28. COST OF SALES
2003 2002
Note Rupees Rupees
Raw materials consumed 28.1 1,763,028,723 1,488,862,153
Packing materials consumed 40,177,421 40,473,879
Salaries, wages and benefits 28.2 139,949,353 120,312,144
Travelling and conveyance 739,148 0
Power and fuel 246,165,765 203,440,704
Stores consumed 44,983,178 47,882,522
Processing charges 6,565,731 8,284,380
Repair and maintenance 6,612,491 5,184,957
Insurance 5,331,238 4,128,965
Depreciation 123,698,811 102,629,160
Rates and taxes 1,387,756 1,467,559
Others 69,889 21,404
2,378,709,504 2,022,687,827
Adjustment of work-in-process
Opening 12,087,000 14,782,000
Closing -14,496,000 -12,087,000
-2,409,000 2,695,000
Cost of goods manufactured 2,376,300,504 2,025,382,827
Adjustment of finished goods
Opening stock 103,588,000 79,262,000
Purchases 83,881,267 60,407,364
Closing stock -75,874,000 -103,588,000
111,595,267 36,081,364
Cost of goods sold - own manufactured 2,487,895,771 2,061,464,191
Cost of raw materials sold 13,506,880 39,276,952
2,501,402,651 2,100,741,143
28.1 Raw materials consumed
Opening stock 433,461,025 297,297,000
Add : Purchases and expenses 1,868,640,161 1,629,976,885
2,302,101,186 1,927,273,885
Less :
Insurance claim 5,174,204 4,950,707
Closing stock 533,898,259 433,461,025
539,072,463 438,411,732
1,763,028,723 1,488,862,153
(a) Sale of salvage aggregating Rs. 1,188,343 (2002: Rs.880,576) has been netted-off
against the cost of raw materials purchases.
28.2 These include Rs. 5,249,728 (2002: Rs. 2,202,973) in respect of staff retirement benefits.
29. ADMINISTRATIVE EXPENSES
2003 2002
Note Rupees Rupees
Directors' meeting fee 5,000 500
Salaries and benefits 29.1 17,979,501 15,801,605
Travelling and conveyance
Including directors' travelling Rs. 988, 305
(2002: Rs. 555,087) 2,219,407 1,282,131
Vehicles' running and maintenance 3,157,181 2,783,321
Rent, rates, taxes and fees 1,200,706 1,133,995
Electricity, gas and water 979,973 477,743
Entertainment/guest house expenses 715,850 755,442
Communication 6,331,087 5,721,410
Printing and stationery 1,557,683 1,087,616
Insurance 665,592 515,255
Repair and maintenance 737,522 539,010
Subscription/advertisement 293,052 557,350
Auditors' remuneration :
Hameed Chaudhri & Co.
Audit fee 150,000 150,000
Certification charges 10,000 21,000
Interim review fee 70,000 0
Code of corporate governance review fee 25,000 0
Out-of-pocket expenses 0 10,000
255,000 181,000
Ahmad Mushir& Co.
Workers '(profit) participation fund's audit fee 20,000 0
275,000 181,000
Legal and professional charges
(other than Auditors) 566,445 993,175
Depreciation 2,902,284 2,618,504
Others 332,933 417,230
39,919,216 34,865,287
29.1 These include Rs. 1,640,837 (2002:Rs. 1,203,424) in respect of staff retirement benefits.
30. OTHER INCOME
2003 2002
Note Rupees Rupees
Deferred income 10 22,061 565,461
Unclaimed balances written-back 0 2,482,103
Gain on disposal of fixed assets - net 553,130 22,319
575,191 3,069,883
31. FINANCIAL CHARGES
Interest on :
Lease finances 4,797,644 11,313,942
Workers' (profit) participation fund 14.1 189,422 178,403
Mark-up en :
Long term finances 54,789,739 63,526,445
Demand finances 8,160,643 2,260,806
Short term finances - net 31,797,164 85,904,220
Bank charges 13,545,926 10,719,499
113,280,538 173,903,315
31.1 Exchange gain on foreign currency finances amounting Rs.13.383 million
(2002: Rs.4.229 million) has been netted against the mark-up on short term finances.
32. MISCELLANEOUS CHARGES
Donations 32.1 1,271,637 772,011
Bad debts written-off 0 99,404
Provision for obsolete store items 1,770,316 0
3,041,953 871,415
32.1 Donations include Rs. 300,000 paid to Fazal-ur-Rehman Foundation, 487-A, Mumtazabad,
Vehari Road, Multan. Sheikh Naseem Ahmad (Chairman/Chief Executive) is amongst the
trustees of the Foundation.
33. RECONCILIATION BETWEEN TAX EXPENSES AND ACCOUNTING PROFIT
2003 2002
Rupees Rupees
Accounting Profit before tax 154,868,483 —
Tax at the applicable rate @ 35% 54,203,969 —
Tax adjustment of prior years -1,302,556 —
Deferred tax of prior years 14,601,000 —
Tax liability under presumptive tax regime 14,630,361 —
Tax effect of profit attributable to presumptive
tax regime -19,704,218 —
62,428,556 —
Major components of tax expense :
Current tax expense 17,400,000 15,063,492
Current tax expense - prior years 1,302,556 -2,950,975
Deferred tax expense 29,125,000 0
Deferred tax expense - prior years 14,601,000 0
62,428,556 12,112,517
34. EARNINGS PER SHARE - Basic
Profit after taxation attributable to ordinary shareholders 92,439,927 40,499,368
Number of Shares
Weighted average number of ordinary shares 12,355,200 10,229,169
Rupees
Earnings per share - Basic 7.48 3.96
35. FINANCIAL INSTRUMENTS
35.1 Financial assets Interest / mark-up bearing Non Interest/ mark-up bearing
and liabilities Interest/
mark-up Maturity Maturity Maturity Maturity Total
rates upto one after one Sub-Total upto one after one Sub-Total
range year year year year
% per
annum Rupees
Financial assets :
Long term investments 0 0 0 0 2,337 2,337 2,337
Long term deposits 0 0 0 0 4,194,125 4,194,125 4,194,125
Trade debtors 0 0 0 139,338,132 0 139,338,132 139,338,132
Advances, deposits
and other receivables 0 0 0 5,506,907 0 5,506,907 5,506,907
Cash and bank 2 35% to
balances 6.50% 123,992 0 123,992 9,070,096 0 9,070,096 9,194,088
2003 123,992 0 123,992 153,915,135 4,196,462 158,111,597 158,235,589
2002 84,946 0 84,946 199,102,989 4,090,043 203,193,032 203,277,978
Financial liabilities :
Long term 5.00% to
finances 15.00% 76,616,455 362,920,161 439,536,616 0 0 0 439,536,616
Demand 6.35% to
finance 1300% 36,992,986 129,475,452 166,468,438 0 0 0 166,468,438
Liabilities against
assets subject 9.00% to
to finance lease 22.00% 15,831,346 1,011,129 16,842,475 0 0 0 16,842,475
Due to an Associated
UndertaKing 0 0 0 0 7,133,528 7,133,528 7,133.53
Short term 2.50% to
finances 13.00% 668,225,666 0 668,225,666 0 0 0 668,225,666
Creditors, accruals
and other liabilities 0 0 0 141,654,336 0 141,654,336 141,654,336
Unclaimed dividends 0 0 0 1,344,766 0 1,344,766 1,344,766
Proposed dividend 0 0 0 12,355,200 0 12,355,200 12,355,200
2003 797,666,453 493,406,742 1,291,073,195 155,354,302 7,133,528 162,487,830 1,453,561,025
2002 805^883,396 431,720,679 1,237.604,075 133,655,810 7,133,528 140,789,338 1,378,393,413
Off balance sheet items :
Commitments 0 0 0 165,184,607 0 165,184,607 165,184,607
Guarantee 0 0 0 8,788,605 13,200,000 21,988,605 21.988,605
2003 0 0 0 173,973,212 13,200,000 187,173,212 187,173,212
2002 0 0 0 209,140,526 19,083,605 228,229,131 228.229,131
35.2 Foreign exchange risk management
Foreign exchange risk arises when receivables and payables exist due to transactions with
foreign undertakings. The management takes out forward exchange contracts, where appropriate,
to mitigate the risk. No forward foreign exchange contracts were outstanding at the year-end.
35.3 Concentration of credit risk
Credit risk represents the accounting loss that would be recognised at the reporting
date if counter parties fail completely to perform as contracted. All of the Ccmpany's
financial assets, except for cash-in-hand amounting Rs. 0.725 million (2002: Rs. 0.201
million), are subject to credit risk.
35.4 Interest rate risk management
Interest rate risk represents the value of a financial instrument which will fluctuate due to
changes in market interest rate. Since the company borrows most of the funds at fixed
interest rate, exposure to interest rate risk is minimal.
35.5 Fair value of financial assets and liabilities
The carrying values of all financial assets and liabilities reflected in the financial statements
approximate to their fair values.
36. REMUNERATION OF CHIEF EXECUTIVE, DIRECTORS AND EXECUTIVES
Chief Executive Working Directors Executives
Particulars
2003 2002 2003 2002 2003 2002
R u p e es
Managerial remuneration 780,000 480,000 1,440,000 1,440,000 3,802,934 2,577,931
Medical 0 0 0 0 239,756 173,781
Rent and utilities 675,727 1,026,990 648,000 648,000 748,755 330,527
Conveyance 0 0 0 0 45,484 25,200
Insurance 18,419 17,600 2,579 944 22,644 12,700
1,474,146 1,524,590 2,090,579 2,088,944 4,859,573 3,120,139
Number of persons 1 1 3 3 20 12
36.1 In addition to above, meeting fee of Rs. 5,000 (2002: Rs. 500) was paid to one (2002:one)
non-working director.
36.2 Chief Executive, Working Directors and some of the Executives are also provided with
free use of the Company maintained cars and telephones at their residences. One of the
Executives is also provided with residence at the Mills' colony.
36.3 The above payments do not include amounts paid or provided for, if any, by the Associated
Companies.
37. NUMBER OF EMPLOYEES 2003 2002
(Number)
Total number of employees at year-end 1,937 1,759
38. TRANSACTIONS WITH RELATED PARTIES
38.1 Related parties comprise of Associated Undertakings, directors and executives. The
Company in the normal course of business carries-out transactions with various related
parties. Amounts due from and to related parties are shown under receivables and
payables. Remunerations of director and executive are disclosed in note 36. Significant
transactions with related parties are as follows :
2003 2002
Rupees Rupees
— Sale of goods 298,255,071 252,688,172
— Purchase of goods 74,337,874 93,174,669
— Services received 5,114,460 6,947,265
— Purchase of fixed assets 4,313,616 13,901,212
38.2 Maximum aggregate debit balance of the related parties, accrued due to trading activities,
at any month-end during the year was Rs.25.135 million (2002:Rs.47.210 million)
38.3 Sales, purchase and other transactions with the related parties are carried out on
commercial terms and conditions.
39. CAPACITY AND PRODUCTION
2003 2002
Number of spindles installed 91,892 74,756
Number of shifts worked
— Unit I & II 1,093 1,093
— Unitlll 1,094 1,094
Number of spindles - Shifts worked 97,384,436 81,462,356
Capacity at 20's count kgs. 20,289,058 16,769,241
Actual production of yarn all counts Kgs. 21,924,679 20,046,947
Actual production converted into 20's count Kgs. 27,365,196 21,899,456
It is difficult to describe precisely the production capacity in spinning mills since it fluctuates widely
depending on various factors such as count of yarn spun, spindles speed, twist and raw materials
used, etc. It also varies according to the pattern of production adopted in a particular year.
40. DATE OF AUTHORISATION FOR ISSUE
These financial statements have been authorised for issue by the Board of Directors of the
Company in its meeting held on January, 06, 2004.
41. FIGURES
— in the financial statements have been rounded-off to the nearest rupee;
— of the corresponding year have been rearranged for the purpose of comparison,
however no material re-arrangement has been made in these financial statements.
FORM - 34
PATTERN OF SHAREHOLDING OF SHAREHOLDERS
AS AT SEPTEMBER 30,2003
NUMBER OF SHAREHOLDING TOTAL
SHAREHOLDERS FROM TO SHARES HELD
742 1 100 Shares 18,734
371 101 500 - 91,260
72 501 1,000 - 52,478
84 1,001 5,000 - 177,071
10 5,001 10,000 - 80,349
1 10,001 15,000 - 10,449
3 20,001 25,000 - 70,968
2 25,001 30,000 - 57,142
1 35,001 40,000 - 38,953
1 120,001 125,000 - 122,031
1 185,001 190,000 - 185,328
1 230,001 235,000 - 234,686
1 420,001 425,000 - 423,716
1 430,001 435,000 - 432,245
2 450,001 455,000 - 905,428
1 530,001 535,000 - 533,935
1 610,001 615,000 - 613,568
2 615,001 620,000 - 1,237,505
1 620,001 625,000 - 620,907
1 700,001 705,000 - 701,655
1 1,015,001 1,020,000 - 1,017,608
1 1,030,001 1,035,000 - 1,030,541
1 1,450,001 1,455,000 - 1,450,201
1 2,245,001 2,250,000 - 2,248,442
1,303 12,355,200
PATTERN OF SHARE HOLDING AS PER REQUIREMENTS OF
CODE OF CORPORATE GOVERNANCE
CATEGORIES OF NUMBER OF TOTAL
SHARE HOLDERS SHAREHOLDERS SHARES HELD PERCENTAGE
ASSOCIATED COMPANIES
Fatima Trading Co. (Pvt.) Ltd. 1 620,907 5.03
Mukhtar Trading Co. (Pvt.) Ltd. 1 617,976 5
Reliance Commodities (Pvt.) Ltd. 1 453,514 3.67
Amir Fine Export (Pvt.) Ltd. 1 2,248,442 18.2
Rashid Bro. Asso. (Pvt.) Ltd. 1 423,716 3.43
CEO & DIRECTORS
Sh. Naseem Ahmad (CEO & Director) 1 3.634 0.03
Mrs. Nighat Naseem (Spouse CEO) 1 122,031 0.99
Sh. Amir Naseem 1 1,017,608 8.24
Mr Rehman Naseem 1 1,030,541 8.34
Mr Fazal Ahmad Sheikh 1 619,529 5.01
Mr. Faisal Mukhtar 1 613,568 4.97
Mrs. Farrukh Mukhtar 1 234,686 1.9
EXECUTIVES
Nil
HOLDERS OF TEN OR MORE PERCENT
Amir Fine Exports (Pvt.) Ltd. Included in associated Companies.
National Bank of Pakistan. Included in Banks, DFI/NBFIs & Ins.
BANKS, DPI, NBFI & INSURANCE CO.
Adamjee Insurance Company Ltd. 1 451,914 366
United Insurance Company Ltd. 1 485 0
State Life Insurance Corp. Ltd. 1 185,328 1.5
United Bank Ltd. 1 325 0
NIT&ICP
NBP 2 1,478,581 111,997
ICP 1 8,807 0.07
PUBLIC SECTOR COMPANIES
Nil
JOINT STOCK COMPANIES
Sarfraz Mahmood (Pvt ) Ltd. 1 31 0
Fazal Vegetable Ghee Mills Ltd. 1 3,168 0.03
Fateh Textile Mills Ltd. 1 316 0
Shakoo Ltd. 1 8,236 0 07
Molasses Trading & Export Co. Ltd. 1 52 0
Farrukh Trading Co. (Pvt.) Ltd. 1 533,935 4.32
Taurus Securities Ltd. 1 52 0
HM Investment (Pvt) Ltd. 1 169 0
Naeems' Securities Ltd 1 316 0
INDIVIDUALS (Otherthan above) 1274 1,655,206 13.4
OTHERS
Govt. of Pakistan Abandoned Properties 1 22,121 0.18
(Holding of Ex-East Pakistanis)
TOTAL 1,303 12,355,200 100
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