| INDUS MOTOR COMPANY LTD. |
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| Annual Reports 2002 |
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| CONTENTS |
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| Toyota's
Guiding Principles |
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| Company Information |
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| Financial
Statistical Summary |
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| Directors' Report |
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| Chairman's Review |
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| Auditors'
Report on Corporate Governance |
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| Auditors' Report |
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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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| Pattern
of Shareholding |
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| Notice
of Annual General Meeting |
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| COMPANY
INFORMATION |
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| BOARD
OF DIRECTORS |
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| Mr. All S. Habib |
Chairman |
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| Executive Directors |
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| Mr. Yutaka Arae |
Vice Chairman |
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| Mr. M. llyas Suri |
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| Non
Executive Directors |
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| Mr. Farhad Zulficar |
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| Mr. A.Okabe |
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| Mr. K. Furubayashi |
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| Mr.
Mohamedali R. Habib |
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| CHIEF
EXECUTIVE OFFICER |
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| Mr. Mazhar Valjee |
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| COMPANY
SECRETARY |
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| Mr. Qaiser Pervaiz |
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| AUDIT
COMMITEE MEMBERS |
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| Mr.
Mohamedali R. Habib |
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| Mr.
Farhad Zulficar/ Mr. Kersi Kapadia (Alternate) |
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| Mr.
K. Furubayashi / Mr. M. Takeda (Alternate) |
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| |
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| Bankers |
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| • ABN Amro Bank |
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| • American Express |
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| •
Askari Commercial Bank |
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| •
Bank of Tokyo-Mitsubishi, Ltd. |
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| •
Credit Agricole Indosuez |
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| •
Emirates Bank International Ltd. |
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| • Faysal Bank Ltd. |
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| •
Habib Bank AG Zurich |
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| • Habib Bank Limited |
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| •
Hong Kong & Shanghai Banking Corporation |
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| •
Metropolitan Bank Limited |
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| •
Muslim Commercial Bank Ltd. |
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| •
National Bank of Pakistan |
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| • Societe Generale |
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| •
Standard Chartered Bank |
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| •
Standard Chartered Grindlays Bank Ltd. |
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| •
Union Bank Ltd. |
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| |
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| Registered Office |
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| 14, Bangalore Town Housing
Society, |
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| Main
Shahrah-e-Faisal, Karachi. |
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| Factory |
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| Plot No. NWZ/1/P-1, |
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| Port
Qasim Industrial Estate, |
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| Bin Qasim, Karachi. |
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| |
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| Registrar |
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| M/s. Noble Computer
Services (Pvt) Ltd. |
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| 14, Bangalore Town Housing
Society, |
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| Main
Shahrah-e-Faisal, Karachi. |
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| |
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| Auditors |
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| M/s.
Ford, Rhodes, Robson, Morrow |
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| Chartered
Accountants |
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| 1st
Floor, Finlay House, |
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| I.
I. Chundrigar Road, Karachi |
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| |
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| Legal Advisors |
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| M/s.
A. K. Brohi & Co. |
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| M/s.
Mansoor Ahmed Khan & Co. |
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| M/s. Mahmud & Co. |
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| Key Indicators |
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|
Ratio Analysis |
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| PARTICULARS |
|
2002 |
2001 |
2000 |
1999 |
1998 |
1997 |
1996 |
1995 |
1994 |
1993 |
| |
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| UNITS |
|
11,823 |
13,942 |
11,944 |
11,249 |
9,295 |
8,100 |
8,125 |
6,802 |
9,440 |
11,034 |
| |
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| SALES |
|
Rs. in '000' |
8,111,289 |
9,054,730 |
8,246,268 |
6,957,876 |
4,973,991 |
4,538,220 |
4,136,100 |
3,869,607 |
4,722,194 |
11,034 |
| GROSS PROFIT |
|
Rs. in '000' |
794,926 |
618,722 |
544,341 |
735,799 |
446,129 |
440,400 |
400,542 |
294,785 |
324,615 |
175,433 |
| NET PROFIT |
|
| BEFORE TAXATION |
|
Rs. in '000' |
528,364 |
338,918 |
280,230 |
501,310 |
271,702 |
226,286 |
221,024 |
85,513 |
149,702 |
167,059 |
| AFTER TAXATION |
|
Rs. in '000' |
360,463 |
203,370 |
172,254 |
251,289 |
147,164 |
150,204 |
187,235 |
51,721 |
121,545 |
84,478 |
| PERCENTAGE
TO SALE |
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| Gross profit |
|
% age |
9.8 |
6.83 |
6.6 |
10.58 |
8.97 |
9.7 |
9.68 |
7.62 |
6.87 |
4.07 |
| Profit before taxation |
|
% age |
6.51 |
3.74 |
3.4 |
7.2 |
5.46 |
4.99 |
5.34 |
2.21 |
3.17 |
3.88 |
| Net
profit after taxation |
% age |
4.44 |
2.25 |
2.09 |
3.61 |
2.96 |
3.31 |
4.53 |
1.34 |
2.57 |
1.96 |
| Admin
& selling expenses |
% age |
3.31 |
2.57 |
3.05 |
3.27 |
3.71 |
3.33 |
3.6 |
3.09 |
2.41 |
2.73 |
| RATIOS |
|
| Current |
|
Ratio |
1.24:1 |
1.58:1 |
1.46:1 |
1.73:1 |
1.4:1 |
1.53:1 |
1.63:1 |
1.63:1 |
1.44:1 |
1.12:1 |
| Acid test |
|
Ratio |
087-1 |
0.54:1 |
0.75:1 |
0.93:1 |
0.87:1 |
0.63:1 |
0.77:1 |
0.59:1 |
0.68:1 |
0.51:1 |
| Long
term debt to equity |
Ratio |
6:94 |
15:85 |
21:79 |
18:82 |
4:96 |
8:92 |
12:88 |
17:83 |
21:79 |
20:80 |
| Debtor turnover |
|
Times |
19 |
19 |
16 |
22 |
44 |
45 |
26 |
31 |
74 |
172 |
| Debt collection period |
|
Days |
19 |
20 |
23 |
17 |
8 |
8 |
14 |
12 |
5 |
2 |
| Inventory turnover |
|
Times |
5.08 |
6.95 |
7.61 |
7.6 |
6.79 |
6.68 |
6.48 |
6.21 |
5.2 |
5.45 |
| Inventory
holding period |
Days |
72 |
52 |
48 |
48 |
53 |
54 |
56 |
58 |
69 |
66 |
| Return on equity |
|
% age |
19.44 |
12.43 |
11.11 |
16.8 |
10.5 |
10.94 |
13.97 |
4.07 |
9.97 |
7.01 |
| Return
on average fixed assets |
% age |
32.01 |
17.09 |
15.57 |
24.61 |
14.52 |
13.98 |
17.1 |
4.53 |
9.88 |
8.3 |
| Ownership
to fixed assets |
Times |
1.65 |
1.45 |
1.24 |
1.4 |
1.44 |
1.3 |
1.22 |
1.16 |
1.02 |
0.95 |
| Earnings per share |
|
Re |
4.59 |
2.59 |
2.19 |
3.2 |
1.87 |
1.91 |
2.38 |
0.66 |
1.55 |
1.07 |
| Dividend per share |
|
Re |
2 |
1.5 |
1.5 |
2 |
1.5 |
1.5 |
1.5 |
0 |
1.3 |
0 |
| Share
capital and reserves |
Rs. '000' |
1,853,914 |
1,635,884 |
1,550,414 |
1,496,060 |
1,401,971 |
1,372,701 |
1,340,403 |
1,271,068 |
1,219,347 |
1,204,611 |
| Number of employees |
|
Nos |
697 |
628 |
643 |
625 |
611 |
598 |
546 |
509 |
553 |
496 |
| Automobile Industry - |
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| Car Sales |
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Units |
42,341 |
39,168 |
32,493 |
37,261 |
33,684 |
33,741 |
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| DIRECTORS'
REPORT |
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| The
Directors of Indus Motor Company Limited take pleasure in presenting this
Report, together with the |
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| Accounts
of the Company for the year ended June 30, 2002 and recommend the
following |
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| appropriations: |
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| |
Note |
2002 |
2001 |
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| |
(Rs. In '000) |
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| OPERATING
RESULTS |
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| Profit before taxation |
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528,364 |
338,918 |
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| Taxation - Current |
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174,606 |
161,805 |
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| - Prior |
|
1,036 |
(310) |
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| - Deferred |
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(7,741) |
(25,947) |
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| |
167,901 |
135,548 |
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| PROFIT
AFTER TAXATION |
|
360,463 |
203,370 |
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| Unappropriated
profit brought forward |
|
884 |
414 |
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361,347 |
203,784 |
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| APPROPRIATIONS |
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| Proposed
dividend @ 20% (2001: @ 15%) |
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157,200 |
117,900 |
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| Transfer
to general reserves |
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204,000 |
85,000 |
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361,200 |
202,900 |
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| Unappropriated
profit carried forward |
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147 |
884 |
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| Further
the Directors also confirm the following Statements: |
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| a The financial statements, prepared by the
management of the Company, present fairly its state of |
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| affairs,
the result of its operations, cash flows and changes in equity. |
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| b Proper books of accounts of the Company
have been maintained. |
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| c Appropriate accounting policies have been
consistently applied in preparation of financial |
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| statements
except for the changes as discussed in note 2.3 to the accounts and
accounting |
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| estimates
are based on reasonable and prudent judgement. |
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| |
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| d International Accounting Standards, as
applicable in Pakistan, have been followed in preparation |
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| of
financial statements. |
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| e The system of internal control, which was
in place is being continuously reviewed by internal audit |
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| and
other such procedures. The process of review will continue and any weaknesses
in controls |
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| will be removed. |
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| f There are no significant doubts upon the
Company's ability to continue as a going concern. |
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| g There has been no material departure from
the best practices of corporate governance as detailed |
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| in
the listing regulations. |
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| Key
Operating and Financial Data |
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| The
Key Operating and Financial Data is on Page No. 5 |
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| Auditors |
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| As
recommended by the Audit Committee, the Auditors, M/s. Ford, Rhodes, Robson,
Morrow, retire at the |
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| conclusion
of the 13th Annual General Meeting and being eligible, offer themselves for
re-appointment. |
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| Chairman's Review |
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| The
Directors of the Company endorse the contents of the Chairman's Review
dealing with the Company's |
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| activities
which are included in the Annual Report and form an integral part of the
Directors' Report. |
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| CHAIRMAN'S
REVIEW |
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| BISMILLAH
HIP REHMAN NIP RAHIM |
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| |
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| It
gives me great pleasure to welcome you all to the 13th Annual General Meeting
for presentation |
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| of
the report on your Company's performance for the year ended 30th June 2002. |
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| The
year under review was an eventful one for the Nation and for your Company.
The post Sept. 11 |
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| period
posed many challenges that the nation faced bravely and intelligently. The
economy has |
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| braved
the set backs, as agriculture & manufacturing have registered marginal
growth |
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| while
textile exports have resisted a decline. The automobile sector by the Grace
of God has |
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| performed
well. The Company's operations resulted in gross profit of Rs. 794.296
million and net profit after tax of Rs. |
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| 360.463
million, both higher than the previous year, after providing for current and
deferred |
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| taxation
of Rs. 167.901 million. The above results were achieved despite decrease in
the sales |
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| revenues
from Rs. 9.055 billion to Rs. 8.111 billion. The reason for decrease in sales
was due to the |
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| phasing
out of the Corolla model that the Company had produced and successfully
marketed since |
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| 1993.
The Gross Profit percentage for the year under review registered an
improvement from |
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| 6.8%
to 9.8%, over last year. Administrative and selling expenses increased |
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| during
the year due to depreciation of newly acquired ERP
Solution (SAP) and
on |
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| Advertisement
and Sales promotion costs incurred on the launch campaign of the New |
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| Corolla.
The elegant styling, specifications and competitive pricing of the New
Corolla has attracted a very |
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| large
number of advance sales orders. Whilst this is indeed very good news for your
Company we |
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| have
been overwhelmed by impatient customers wishing to own and drive the New
Corolla |
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| immediately.
While we regret that many of our customers have had to wait we are confident
that |
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| with
our enhanced levels of efficiency and output our valuable customers will
receive their Corollas |
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| earlier
than committed by your Company. |
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| |
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| Earnings
Per Share (EPS) |
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| |
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| The
Earnings Per Share is Rs. 4.59 |
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| Government Levies |
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| Government
levies outstanding as at June 30,2002 has been disclosed in Note No. 19 to
the accounts. |
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| Investments
in Provident Fund |
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| Value
of investments based on last audited accounts of Provident Fund is Rs. 30.6
million. |
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| Board
of Directors Meeting |
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| During
the year 3 meetings of the Board of Directors were held, Attendance by each
Director is as |
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| follows: |
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| Name of Directors |
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Number of meetings
attended |
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| Mr. Ali S. Habib |
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3 |
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| Mr. Y. Arae |
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3 |
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| Mr.
Farhad Zulficar / Mr. Kersi Kapadia (Alternate) |
3 |
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| Mr.
Mohamedali R. Habib |
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2 |
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| Mr. M. llyas Suri |
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3 |
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| Mr.
A. Okabe / Mr. Y. Saito / Mr. H.luchi (Alternate) |
3 |
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| Mr.
H. Tsutsui / Mr. M. Takeda (Alternate) |
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3 |
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| Mr.
Mazhar Valjee (Chief Executive Officer) |
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2 |
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| Statement
of Compliance with Best Practices of Corporate Governance |
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| The
Company is concentrating on implementation of the Best Practices of Corporate
Governance and is |
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| on
target upto now. This is a continuous process and all effects are directed to
bring Company's affairs in |
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| conformity
with the Code of Corporate Governance. |
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| Audit Committee |
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| The
Board of Directors have constituted an Audit Committee comprising of the
following Non-Executive |
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| Directors
as Members of Audit Committee: |
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| |
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| 1)
Mr. Mohamedali R. Habib - Chairman |
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| |
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| 2)
Mr. Farhad Zulficar - Member/ Mr. Kersi Kapadia (Alternate) |
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| 3)
Mr. K. Furubayashi - Member/ Mr. M. Takeda (Alternate) |
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| |
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| The
terms of reference of the Audit Committee is based on the scope as defined by
the Securities & |
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| Exchange
Commission of Pakistan (SECP) and the guidelines given by the Board of
Directors from time |
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| to
time to improve internal control system and procedures. |
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| |
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| Within
the framework of terms of reference determined by the Board of Directors, the
Audit Committee, |
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| among
other things, will recommend appointment of external auditors, ensure
coordination between the |
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| internal
and external auditors and review periodical financial Statements. |
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| |
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| Pattern
of Shareholding |
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| |
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| The
Pattern of Shareholding of the Company as at June 30, 2002 is given on Page
47. |
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| Karachi. |
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| September 16,2002 |
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| |
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| CHAIRMAN'S
REVIEW |
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| |
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| Since
its launch on 2nd March '02, the New Corolla, has received a tremendous
response and |
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| is
all set to achieve No. 1 market share in its class. Your management being
conscious of the strong |
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| desire
of the customers to own and drive the New Corolla has responded by enhancing
production of |
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| the
New Corolla by 35%. |
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| |
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| Hilux,
the workhorse of Toyota, proved its inherent strengths of quality,
reliability and durability with its |
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| market
share increasing to 39% compared to 32% last year. The company has secured
substantial |
|
| "
orders for Hilux from the Police and Army to be supplied during the current
year. The extra |
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| demand
will be met through productivity enhancement attained by separation of the
Hilux |
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| production
line implemented during August '02. In the small car segment, strong
marketing efforts |
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| focussing
on Brand image building for Cuore yielded positive results. Monthly sales
average in |
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| the
January to June period almost doubled to over 350 units a month compared to
177 units in the |
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| July
to December period. We are confident that Daihatsu Cuore will create a class
of its own with |
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| its
superior quality and performance. |
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| |
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| |
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| DEALERSHIP
NETWORK |
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| |
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| Our
dealership network which has been operating
on "3S"(sales, service & spares) basis since |
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| inception
has 25 Dealers spread throughout the Country. The dealerships were renovated
and improved for |
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| the
New Corolla launch and for provision of post-launch Services. During the year
under review, our dealership |
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| network
serviced an all time high number of 185,000 vehicles. Extensive Training
activities, |
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| acquisition
of additional Equipment / Special Service Tools, Computerization and
operational |
|
| enhancement
activities were also undertaken, so that better services could be provided
to |
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| Customers. |
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| |
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| IMC
worked together with dealers to enhance their level of operations in the
After-Sales for bringing |
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| them
upto global standards under the Toyota Customer Service Marketing Program
(TSM). |
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| These
measures will further enhance the dealer productivity and Customer
satisfaction. |
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| |
|
| IMC
Marketing Department has worked closely with dealers to support their
activities and prepare |
|
| them
for the launch of the New Corolla. During the post-launch period
the order processing |
|
| procedures
of some of the dealerships have fallen below the expected levels of service
of our |
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| |
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| The
growth in profit reflects improvement and stability of the Rupee against the
Japanese Yen |
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| during
the third and partly fourth quarter of the financial year. |
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| |
|
| I
am pleased to announce that the Board of Directors have proposed a cash
dividend of 20% |
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| and
apportionment of Rs. 204 million to Reserves which will now exceed the paid
up share capital of |
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| the Company. |
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| |
|
| OPERATIONS
AND MARKETING |
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| |
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| During
the year market share of Corolla decreased by 12% as sales of previous models
of Corolla |
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| were
lower than last year's average, with customers preferring to delay purchase
in |
|
| anticipation
of the new model. Availability of Corolla remained limited during January
and |
|
| February
due to phase out of the old model and the launch of the New Corolla. |
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| |
|
| Ceremony
held on 14th February'02 at IMC Plant. An impressive display of localized
parts was also |
|
| arranged
which showed the joint efforts of Indus Team and Vendors. This was highly
appreciated |
|
| by
all participants that included representatives from EDB, Ministry of
Industries and Production, |
|
| Vendors,
Bankers, Dealers and representatives from TMC/TTC Japan and IMC family
members. |
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| |
|
| With
the launch of the Daihatsu Cuore, your Company was faced with the dual
challenge of |
|
| increasing
production capacity and reducing operation costs. It was in conjunction with
Toyota |
|
| Motor
Corporation that your Company took steps to increase plant capacity on a
singte shift basis. At |
|
| the
same time, Toyota, Daihatsu and Indus engineers worked with a commitment to
produce |
|
| high
quality parts to meet deletion targets set by the Engineering Development
Board both for |
|
| Toyota
and Daihatsu vehicles. Post launch vendor workshops were held by IMC |
|
| management
in Karachi & Lahore on 4th June 2002 and 13th June 2002 respectively,
where |
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| |
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| issues
related to Quality & Suppliability of local parts were discussed.
IMC management |
|
| appreciated
the efforts of local vendors in gearing output to meet the enhanced
production demands |
|
| in
response to the overwhelming demand of the customers for the New Corolla.
Vendors |
|
| participated
whole-heartedly and IMC and Vendor team collectively chalked out future plans
for |
|
| maintaining
quality and suppliability. |
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| |
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| |
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| HUMAN
RESOURCE DEVELOPMENT |
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| |
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| |
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| |
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| A
cornerstone of human resource development, our annual Kaizen convention is a
morale boosting |
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| exercise
that acknowledges and honors staff members and vendors who make
significant |
|
| contributions
by boosting efficiency, improving productivity and quality resulting in cost
savings. |
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| |
|
| This
event is based on the Japanese system of continuous improvement. The
convention was |
|
| held
in September this year, where Lt. Gen. (R) Javed Ashraf,
Honorable Minister for |
|
| Communications
& Railway, Government of |
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| |
|
| valuable
customers. Our marketing department is increasing its field-based activities
to bring about |
|
| necessary
improvements. During the period under review the dealerships at Larkana and
Sialkot |
|
| were discontinued. |
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| |
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| |
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| SPARE PARTS |
|
| |
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| |
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| |
|
| Although,
the market was affected by the events of September 11 and events in
neighboring |
|
| countries,
the sales of spare parts by your company showed an increase of 8% over
the |
|
| previous
year. This was largely attributable to reduction in duties on spare parts,
and to |
|
| measures
taken to control imports through gray channels. With an aggressive sales
campaign |
|
| coupled
with competitive pricing of parts the efforts of your management were aimed
at increasing |
|
| market
share in the parts segment and building up a base for its continuous growth.
The Company's |
|
| modern
parts warehouse at the Bin Qasim plant has been ex |
