| Dandot Cement Company Limited |
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| Annual Report 2002 |
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| Contents |
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| Company
Information |
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| Notice
of Annual General Meeting |
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| Vision
and Mission Statement |
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| Statement
of Ethics and Business Practices |
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| Directors'Report
to the Shareholders |
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| Financial
Highlights of Last Ten Years |
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| Pattern
of Shareholding |
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| Statement
and Review Report of Compliance with Best Practices |
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| of
Code of Corporate Governance |
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| Auditors'Report to the Members |
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| Balance
Sheet |
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| Profit and Loss Account |
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| Cash Flow Statement |
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| Statement of Changes in Equity |
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| Notes
to the Accounts |
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| Company
Information |
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| Board of Directors; |
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| Mr. Abdur Rafique Khan |
(Chairman) |
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| Mr.
M. Tousif Peracha |
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| Mr. A. Shoeb Piracha |
(Managing Director) |
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| Mr. Farooq Zaman |
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| Mr.
Jawaid A. Peracha |
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| Mr. Ali Rashid Khan |
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| Mr. Mohammad Asif |
(NomineeofN.l.T.) |
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| Audit Committe; |
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| Abdur Rafique Khan |
(Chairman) |
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| Jawaid A. Peracha |
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| Ali Rashid Khan |
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| Company Secretary & |
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| Chief
Financial Officer |
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| ZulfiqarA.
Choudhry (ACA. ACMA.) |
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| Statutory Auditors: |
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| Khalid Majid Rahman Sarfaraz |
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| Rahim
Iqbal Rafiq |
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| Chartered
Accountants |
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| Legal Advisor |
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| Walker
Martineau Saleem |
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| Bankers: |
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| Habib Bank Limited |
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| Citibank N.A. |
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| ABN Amro Bank |
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| The Bank of Punjab |
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| Saudi
Pak Commercial Bank Limited |
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| United Bank Limited |
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| National
Bank of Pakistan |
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| Bolan Bank Limited |
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| Muslim
Commercial Bank Limited |
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| Registered Office: |
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| 3-A/3 Gulberg - III, Lahore. |
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| Telephone:
5871057-58, Fax: 5871056 |
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| Factory: |
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| DANDOT R.S., Distt. Jhelum. |
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| Telephone:(0458)
211371,211491 Fax: (0458) 211490 |
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| Shares
Department: 3-A/3 Gulberg - III, Lahore. |
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| Notice
of Annual General Meeting |
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| NOTICE is
hereby given that
22nd Annual General
Meeting of the
shareholders of |
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| Dandot
Cement Company Limited for the financial year ended June 30, 2002 will be
held on Wednesday, |
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| October
30, 2002 at its registered office 3-A/3, Gulberg-III, Lahore at 3:30 p.m., to
transact the following business: |
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| ORDINARY
BUSINESS |
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| 1. To confirm the minutes of the last
Annual General Meeting held on December 26, 2001. |
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| 2. To receive, consider and adopt the
audited accounts together with the Directors' report and Auditors'
report |
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| for
the year ended June 30, 2002. |
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| 3. To appoint Auditors for the year
2002-2003 and fix their remuneration. Khalid Majid Rahman Sarfraz Rahim
Iqbal |
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| Rafiq,
Chartered Accountants, the retiring Auditors, being eligible, offer
themselves for reappointment as Auditors |
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| of the Company. |
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| SPECIAL
BUSINESS |
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| 4. To authorize short term advance to M/s.
Gharibwal Cement Limited and for this purpose, to consider and if |
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| thought
fit to pass the following resolution as special resolution. |
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| "RESOLVED
that the company is hereby authorized to advance a short term credit facility
to Gharibwal Cement |
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| Limited
upto a maximum sum aggregating at any one time to Rs. 100 million." |
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| "FURTHER
RESOLVED that the Chief Executive of the company is hereby authorized to give
effect to the above |
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| resolution,
take all the necessary steps, including seeking permission (where necessary)
from the Securities & |
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| Exchange
Commission of Pakistan as required by the Companies Ordinance, 1984 and to
sign and execute any |
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| paper,
document, application, etc. for and on behalf of the company with respect
thereto." |
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| 5. To adopt, consider and if thought fit
to adopt a new Article No. 78A and substitute Article Nos. 66, 67, 68 &
80 |
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| of
existing Articles of Association of the Company (Resolution relating to
amendments in existing Articles of |
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| Association
of the Company proposed to be moved at the Annual General Meeting is being
sent to the |
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| members
alongwith notice of the meeting). |
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| |
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| 6. To transact any other business with the
permission of the Chair. |
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| By
Order of the Board |
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| ZULFIQAR
A. CHOUDHRY |
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| Company Secretary |
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| Lahore: September 25, 2002 |
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| STATEMENT
U/S 160(l)(b) OF THE COMPANIES ORDINANCE, 1984 |
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| A
statement U/S 160(l)(b) of the Companies Ordinance, 1984 setting forth all
material facts concerning the above |
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| special
resolutions annexed to this notice of meeting is being sent to the members. |
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| NOTES: |
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| 1. The Register of Members and the Share
Transfer Books of the Company will remain closed from 24-10-2002 to |
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| 30-10-2002
(both days inclusive) for the purposes of the Annual General Meeting. |
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| 2. A member entitled to attend and vote at
the Meeting may appoint another member as his/her proxy to attend |
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| and
vote on his/her behalf. Proxies, in order to be effective, must be received
at the Registered Office of the |
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| Company
48 hours before the time of the holding of the Meeting. |
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| 3. Members are requested to notify
immediately changes, if any, in their registered addresses. |
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| 4. CDC Account Holders are requested to
bring their National Identity Card, Account and Participant's Numbers |
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| and
will further have to follow the guidelines as laid down in Securities &
Exchange Commission of Pakistan |
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| Circular
No.l dated 26th January 2000 while attending the Meeting for identification. |
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| Changes
in Articles of Association of the Company |
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| SPECIAL
BUSINESS (relating to Articles of Association of the Company) |
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| ITEM
NO. 5 - To consider and if thought fit to pass the following resolution as
special resolution approving the addition |
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| of
Article No. 78A and substitution of Article Nos. 66, 67, 68 and 80. |
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| "RESOLVED
that the following clauses of the Articles of Association of the Company are
hereby added/substituted as |
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| follows: |
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| 66. The remuneration of directors for
attending a meeting of the Board of Directors shall be Rs.5,000 or such
other |
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| sum
as may be approved by the Directors, subject to the prevailing laws, rules
and regulations. |
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| 67. The Director/Chairman who serves on any
committee or who devotes special attention to the business of the |
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| company
or who performs extra services, may be paid such remuneration as the
Directors may determine from |
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| time to time. |
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| 68. The Director of the company may, in
addition to any remuneration receivable by him, be entitled to be
reimbursed |
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| all
travelling and other expenses incurred in attending the meetings of the
Directors or otherwise incurred whilst |
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| employed
for the business of the company. |
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| 78A. The Directors may from time to time
delegate any of their powers to committees consisting of such members |
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| of
their body as they think fit, and may from time to time revoke such
delegation. Any committee so formed |
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| shall,
in the exercise of the powers so delegated, conform to any regulations that
may from time to time be |
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| imposed
upon it by the Directors. |
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| 80. A resolution, passed without any meeting
of the Directors or of a committee of Directors and evidenced in |
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| writing
under their hands (or in their absence their Alternate Directors), being not
less than the quorum |
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| required
for meetings of the Directors or their committee, as the case may be, shall
be valid and effectual as if |
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| it
had been passed at the meeting of the Directors, or as the case may be of
such committee, duly called or |
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| constituted". |
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| Statement
U/S 160 of the Companies Ordinance, 1984 |
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| ITEM
NO. 4 - TO AUTHORIZE SHORT TERM ADVANCE TO GHARIBWAL CEMENT LIMITED |
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| Gharibwal
Cement Limited (GCL) is an associated company of Dandot Cement Company
Limited (DCCL). In order to |
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| provide
access to funds for immediate cash requirements, the Board of Directors of
DCCL has recommended that it is |
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| necessary
to provide a short term advance facility to GCL upto a maximum sum
aggregating at any one time of |
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| Rs.
100 million. Mark up on the outstanding amounts would be charged @ 15% per
annum. This facility would remain till |
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| it
is rescinded by the Board of DCCL. |
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| On
availing the above facility, the investment in GCL would exceed 30% of the
paid up capital and free reserves of the |
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| company.
Hence, necessary approval under the proviso of Section 208(1) of the
Companies Ordinance, 1984 is also |
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| sought. |
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| It
is essential to provide GCL access to short term funds to enable it to tide
over its immediate cash requirements |
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| whenever
the need so arises. The directors of DCCL are interested in the business to
the extent of their shareholding |
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| and
that some of the directors of DCCL are also directors of GCL. |
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| ITEM
NO. 5 - CHANGES IN THE EXISTING ARTICLES OF ASSOCIATION OF THE COMPANY |
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| The
proposed alterations to the Articles of Association of the Company are
necessary in order to implement the Code of |
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| Corporate
Governance effectively. Shareholders' approval to the proposed alterations is
sought accordingly. None of the |
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| directors
have any special interest in the said business other than to the extent of
their remuneration and as ordinary |
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| shareholders
of the company. |
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| Vision |
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| DANDOT,
as one of the leading dry-process cement plant of Pakistan, strives to |
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| continue
its path of market consolidation and improvement, spanning the areas |
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| of
north and central Punjab and Azad Kashmir. Our vision is to establish a
strong |
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| market
presence, focused on customer brand loyalty and satisfaction, a long- |
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| term basis. |
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| DANDOT
envisions to maintain quality, keep abreast with technology as well as |
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| up-date
our capabilities in a competitive business environment, and accomplish |
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| furhter
improvement in the market share. |
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| Mission |
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| DANDOT'S
mission is to perform to the highest levels of professional excellence |
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| within
the industry and the national economy, while catering to the needs of
our |
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| ever
dedicated workforce, ensuring reasonable return to the stakeholders
while |
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| delivering
our product to the end consumer at competitive prices to accelerate |
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| the
sustained development of Pakistan. |
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| Statement
of Ethics and Business Practices |
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| Introduction:
Dandot Cement Company Limited is one of the premier dry-process cement plant
of the country. We aim |
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| fo
r a high standard of professionalism and ethics in the entire spectrum of
business transactions of our Company. In |
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| addition,
Dandot Cement Company Limited affirms to observe the applicable laws and
regulations of Pakistan. |
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| |
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| Code
of Conduct: Dandot Cement Company Limited commits itself to adhere to all
professional, legal, and ethical codes |
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| of
conduct which are pertinent in our business dealings with the agencies of the
Government, financial institutions, |
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| cement
industry, stockists and retailers, suppliers and shareholders, etc. |
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| |
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| Employees:
Under the present management, Dandot Cement Company Limited's
employee-management relations |
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| remain
cordial, marked by mutual respect and co-operation in the larger interests of
the Company. The Company |
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| appreciates
the services of all employees and strives to provide a safe, secure and
congenial working environment, |
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| regardless
of rank, caste, or creed. |
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| |
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| The
Factory's social, educational, and transport facilities are accessible to the
staff based in the Factory's residential area. |
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| The
employees are provided with a reasonable number of annual leaves to ensure
their motivation and fitness. In |
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| general,
the employees discharge their functions with integrity and diligence. |
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| |
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| Community:
Dandot Cement Company Limited wishes to pursue good relations with the local
communities. |
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| Quality
Assurance: Dandot Cement Company Limited produces durable "ordinary
portland cement" which conforms |
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| with
the high international standards in quality. We strive to combine techology
with quality to deliver exceptional |
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| results.
The ISO 9001: 2000 Certification was accomplished during the year under
review. In the context of marketing, |
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| we
expect a fair price for our brand of cement and pursue a competitive and
equitable relationship with our stockists and |
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| retailers. |
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| |
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| Public
Relations; Dandot Cement Company Limited is an independent corporate
enterprise. We are not affiliated with |
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| any
political, regional, or other vested interests. We may interact with other
corporate concerns at the relevant business |
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| and industry forums. |
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| |
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| Financial
Reporting: Our policies with reference to accounting, finance and corporate
matters are governed by |
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| prevalent
corporate regulations, Companies' Ordinance, 1984, and the Code of Corporate
Governance. We are resolved |
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| to
comply with International Accounting Standards for the preparation of
financial statements with any departure |
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| therefrom
being adequately disclosed. An internal audit department is in-process of
being set-up. |
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| Conclusion:
Dandot Cement Company Limited seeks to implement the Statement of Ethics
& Business Practices by all |
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| concerned
in practical terms. |
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| Directors'
Report to the Shareholders |
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| |
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| Your
directors are pleased to present the annual report alongwith the audited
financial statements for the year ended |
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| June 30, 2002. |
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| Operational
Performance - During the year under review, production and despatch of cement
increased by 18.6% |
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| and
16.6% respectively, whereas the production of clinker registered a slight
shortfall due to the curtailment of gas |
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| supply
during the winter from December 07, 2001, uptil March 14, 2002. During this
period, the Company procured |
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| 42,241
tonnes of clinker to meet its requirements. |
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| |
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| The
operation of the cement plant remained satisfactory and its normal
maintenance has been carried out throughout |
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| the
year. The comparative data for production of clinker & cement and
despatches of cement is summarised hereunder:- |
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| |
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| |
2001-2002 |
2000-2001 |
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| |
Tonnes |
Tonnes |
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| Clinker Production |
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225,629 |
260,589 |
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| Cement Production |
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306,667 |
258,549 |
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| Cement Despatches |
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306,900 |
263,174 |
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| In
view of the prevailing recession in the cement industry in which your Company
alongwith other cement units continue |
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| to
suffer a large surplus operating capacity of about 36% on average throughout
the year, the above growth rate |
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| attained
by the Company is a positive development, indicating a return to favourable
conditions in the days ahead. |
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| |
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| Sales
and marketing performance - During the year under review, the Company posted
gross sales of Rs. 1,247 |
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| million
(2001: Rs.1,016 million) and net sales of Rs.747 million (2001: Rs.610
million) reflecting an increase of 23% as |
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| compared
to the preceding year. |
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| |
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| The
increase in sales was brought about by continued market consolidation as well
as increased acceptability of the |
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| Company's
brand of cement in the market. |
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| |
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| Financial
Results — The financial results for the vear ended June 30. 2002. are as
follows: |
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| |
(Rs. In thousand) |
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| Loss before taxation |
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|
(246,549) |
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| Provision
for taxation : |
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| Current year |
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3,877 |
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| Deferred - Current |
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(12,029) |
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| Prior years |
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- |
(8,152) |
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| Loss after taxation |
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|
(238,397) |
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| Loss
per share - Basic |
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|
(8.56) |
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| |
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| The
Company has suffered net loss before tax of Rs.247 million for the year under
review compared to net loss before |
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| tax
of Rs.213 million for the preceding year. This loss is attributed mainly to
the following factors:- |
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| |
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| (i) The impact of production loss due to
the above-referred suspension of gas supply. |
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| |
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| (ii) Increase in gas tariff by 22% during the
year, from Rs.616.40 per HM3 of gas on June 30, 2001, to |
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| Rs.751.31
per HM3 of gas on June 30, 2002, therefore, increasing the fuel costs of the
Company. |
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| |
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| (ill) An excess depredation charge of Rs.46
million on account of "revaluation of the fixed assets". |
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| |
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| Dividends
- No dividend and no bonus share has been declared by the Company during the
year due to accumulated |
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| losses. |
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| |
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| Future
Prospects - The cement industry has managed to survive another year in a
state of depression due to the |
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| factors
of heavy excess capacity, over-taxation, stagnant construction activities and
the rising fuel costs of furnace oil |
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| and
Sui Gas. In the prevailing economic scenario, the cement demand is expected
to inch slowly towards recovery. |
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| |
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| Significant
plans & decisions |
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| |
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| Technological
improvement - Coal Firing Project - The Directors are pleased to announce the
conversion of |
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| the
Company's cement plant to the Coal Firing System in order to effectively
overcome the problems associated |
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| with
frequent disconnection of the Company's gas supply and the increasing tariffs
of Sui Gas. The Coal Firing |
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| System
is in full process of installation and we are confident that production
losses shall be definitely averted once |
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| the
Coal Firing System becomes operational. The Company has made arrangements for
the procurement of high |
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| quality
coal from local and foreign sources to ensure optimum value at competitive
prices. |
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| |
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| By
switch-over to the Coal Firing System, considerable savings shall accrue to
the Company due to reduction in |
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| fuel
and direct cost of production alongwith related benefits. The Coal Firing
System is expected to be in full |
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| operation
during the month of October 2002. |
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| |
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| Financial
restructuring — In order to revamp the Company's borrowing structure and
reduce the burden of |
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| heavy
mark-up based running finance facilities & overdrafts, the sponsors have
advanced foreign currency loans to |
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| the
Company amounting to US Dollars 2 million and Pound Sterling 3 million at
highly favourable terms which will |
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| substantially
reduce the burden of mark-up and add to the profitability of the Company.
These foreign currency |
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| loans
and the accrual of interest thereon stand subordinated to the Company's
borrowings from financial institutions. |
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| In
addition to the above, an interest-free loan amounting to Rs.27.3 million has
been provided to the Company by |
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| the
sponsors and their associates, thus, resulting in further saving in financial
charges. This interest-free advance |
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| has
expedited the process of development of the Coal Firing System. |
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| |
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| As
of June 30, 2002, a total amount of Rs.429 million (both rupee and foreign
currency) has been injected by the |
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| sponsors
which indicates their commitment to the Company to employ aggressive
financial and physical re- |
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| engineering. |
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| |
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| It
is therefore noteworthy that the present management is taking all preventive
measures to reduce the controllable |
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| cost
(fuel and financial) of the Company which comprise around 55% of the
Company's operating costs. |
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| In
summary, due to the factors of : - |
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| |
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| • Growth in the Company's production and
despatches of cement by 18.6% and 16.6% respectively and |
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| persistent
market consolidation. |
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| |
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| • Commissioning of the Coal Firing System
which will lead to continuous production (no production losses) |
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| |
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| and
reduction in fuel & direct cost of production. |
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| |
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| • Financial restructuring involving
injection of subordinated loans by the sponsors at highly favourable
terms |
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| that
would substantially reduce the burden of mark-up. |
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| |
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| A
return to profitability is indicated in the near term ahead. |
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| |
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| Revaluation
of fixed assets - The Directors are pleased to report that the
"revaluation of the fixed assets" of |
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| the
Company was carried out and completed during the year under review by M/s.
Rahim Iqbal Rafiq & CO., |
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| Chartered
Accountants. As a result, the Company has posted "revaluation
surplus" of Rs.1,843.8 million as of June |
|
| 30,
2002, alongwith a corresponding excess depreciation charge of Rs.46 million
for the year due to revaluation. |
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| |
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| The
Company's assets of land, buildings, plant & machinery and vehicles were
included in the revaluation process. |
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| |
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| I.S.O
Certification - We announce with satisfaction that the I.S.O 9001:2000
Certification of your Company |
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| was
achieved during the year in May 2002, as per our broad vision to maintain
quality and keep abreast with |
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| technology
in a rapidly changing business world. |
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| |
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| Contribution
to the National Exchequer - During the year under review, your Company
contributed Rs.510 million |
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| to
the Nation's exchequer in the form of excise duty, sales tax, royalty, and
income tax, which is calculated at around |
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| 41%
of our gross sales. |
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| |
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| Auditors'
Observation - The auditors have emphasised the matter of going concern,
payments to Provident Fund |
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| |
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| Trust
and Actuarial Valuation as required under IAS-19. |
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| |
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| The
directors have resolved to work towards alleviating the observations of the
Auditors. |
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| |
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| Compliance
with the Code of Corporate Governance - The management is fully aware of the
compliance with the |
|
| Code
of Corporate Governance and steps are being taken for its effective
implementation within allowed time-frame. |
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| The
various statements, as required by the Code, are given below: - |
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| |
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| Presentation
of Financial Statements - The financial statements prepared by the management
present fairly |
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| the
Company's state of affairs, the result of its operations, cash flows and
changes in equity; |
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| |
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| Books
of Account - Proper books of account of the Company have been maintained; |
