PakSearch.com - Pakistan's Best Business site with Annual Reports, Laws and Articles

For business information, annual reports, laws, ordinances, regulations and articles.

PHILIPS

ANNUAL REPORT 1995

C O N T E N T S

COMPANY INFORMATION

BOARD OF DIRECTORS

SYED NASEEM AHMAD

RAFIQ M. HABIB

NIZAM A. SHAH

J. A. RUTGERS

M. ASADULLAH SHEIKH

HAKIMULLAH SIDDIQUI

JAVED IQBAL

REGISTERED OFFICE

ISLAMIC CHAMBER OF COMMERCE,

INDUSTRY & COMMODITY

EXCHANGE BUILDING,

ST-2/A, BLOCK-9, K.D.A. SCHEME-5,

CLIFTON. KARACHI-75600.

FACTORIES

F-54, SINDH INDUSTRIAL

TRADING ESTATE,

KARACHI.

D-98, SINDH INDUSTRIAL

TRADING ESTATE,

KARACHI.

BANKERS

ABN AMRO BANK

AMERICAN EXPRESS BANK LTD.

ANZ GRINDLAYS BANK

BANK OF AMERICA

CITIBANK N.A.

EMIRATES BANK

INTERNATIONAL LTD.

HABIB BANK LTD.

HONG KONG AND SHANGHAI

BANKING CORPORATION

MUSLIM COMMERCIAL BANK

NATIONAL BANK OF PAKISTAN

STANDARD CHARTERED BANK

AUDITORS

A.F. FERGUSON & CO.

CHARTERED ACCOUNTANTS

KEY DATA

(Rs. in millions)

1995

1994

Sales

2,666

2,409

Operating Profit

280

230

Profit Before Taxation

196

149

Taxation

Profit after taxation

122

----------------------------------

Dividend- Cash

Bonus Issue

Paid-up Capital

119

108

Shareholders' Equity

393

360

Earning per share

10.30

8.6

Number of Employees

1,048

1,040

Report of the Directors for the year ended

December 31, 1995

Syed Naseem Ahmad

Chairman & Managing Director

The Directors take pleasure in

presenting their Report with the

Audited Accounts of the Company for

the year ended December 31, 1995.

GENERAL OVERVIEW

Our business has shown good trends

in all the major segments, and we

were able to realise our targets of

turnover and profits. The year has

been a period of stability and

satisfaction for the Company which

has restored confidence leading to

expectations of improved perfor

mance in the future.

During the year, the Government

continued its policies of deregulation

and liberalization of economy,

although the pace of tariff reforms

has slowed down against earlier

indications. Pakistan's economy is

still facing the crunch of revenue

shortfall and higher inflation. This,

coupled with devaluation of Pak

Rupee, has had an adverse effect on

the disposable income of the

common man which has negatively

influenced the market of consumer

durables. In addition the imposition of

regulatory duties during the last

quarter, has put the business

activities in a difficult and an

uncertain situation.

With regard to the practice of illegal

trade, while numerous steps have

been taken by the Government to

curb smuggling, it is expected that

further efforts in this respect would be

taken to effectively control trading

through irregular channels. Apart

from the loss of revenue to the

Government, these channels are

causing severe concern for the

business houses who find it

impossible to compete with low

priced products available in the

market. We would like to emphasize

that serious efforts towards

documentation of economy are

warranted and the Government

should continue to take appropriate

measures to impose GST at retail

stage to curb duty evasion and to

provide an even playing field for

legitimate business activities.

Tariff reforms coupled with the

opening up of economy has provided

new avenues for business. However,

it has exerted pressure on the local

manufacturing units, which are

operating under constraints of low

market size and economy of scale, to

compete with cheap imported

products. In this regard, the

Government should ensure

reasonable and just protection to the

local industries by maintaining

differentials in Government levies.

KEY DATA

Rs. in millions

1995

1994

Sales

2666

2409

Operating Profit

280

230

Profit before tax

196

149

Profit after tax

122

SALES & PROFITS

During the year sales increased by

11% over last year, which represents

mainly volume increase attributable

to the policy of diversification by

providing new quality products to the

consumers. This growth in sales has

been achieved despite the law and

order situation and erosion of

purchasing power of the consumers.

To achieve this, effective marketing

policies were employed and good

quality of products was maintained

supported by improved service level.

Operating profit shows significant

improvement of 22% compared to

last year mainly due to lower cost of

sales as a result of volume increase

and rationalization of duties. Profit

after tax has substantially improved

due to lowering of tax rate and

through savings on financial charges.

THE COMPANY AND THE SHAREHOLDERS

Javed Iqbal

Finance Director

We take pleasure in informing our investors that

for the third consecutive year, we were awarded

the coveted stock exchange award of Top

Twenty-Five Companies. This is a significant

achievement depicting management's desire for

attaining higher targets of operational and

financial performance.

The operating profit for 1995 is Rs. 280 million

which represents a 22% increase over last year.

The Company earned a profit after tax of Rs. 122

million against Rs. 93 million of last year.

The earning per share (EPS) amounted to

Rs. 10.3 (1994: Rs. 8.6)

The Board of Directors propose for your

approval, payment of final dividend of 50% in

addition to already paid interim dividend of 25%

thus making a total dividend of 75% for the year

1995. The Board also recommends transfer of

Rs. 32 million to General Reserve.

The profit and proposal for appropriations for

the year are as follows:

(Rs. in thousands)

Profit before providing

for taxation

195,868

Provision for taxation

Current

84,005

Deferred

(9633)

74,327

----------------

Profit after tax

121,496

Adding thereto

Unappropriated

profit brought forward

567

----------------

Profit available for

appropriation

122,063

Appropriations recommended:

General Reserve

32,000

Interim dividend

declared @ 25%

29,698

Proposed final

dividend @ 50%

59.396

121,094

----------------

Unappropriated profit

carried forward

969

========

LIGHTING

M. Kamil Shahbazkar

General Manager-

Light & Professional Systems

In this sector, the Company maintained its

position of being the market leader, and

continued the policy of upgrading the

markets and providing excellent products to

consumers at competitive prices. The

Company maintained its emphasis on

improved service level and offered itself as a

total lighting solution Company. Special

attention was placed on project business and

we managed to acquire substantial orders for

office lighting and also the prestigious project

of flood lighting of Gaddafi Stadium for The

Wills World Cup.

The Company being conscious of energy

constraints, responded by offering energy

saving lamps to the consumers, and takes

pleasure in informing you that the local

assembly operation for these lamps

commenced in the first quarter of 1995.

During the year, this sector recorded sizable

sales growth of 15% against last year mainly

through diversification, effective marketing

strategies including efficient sales promotion

activities. The operating profit improved by

14% which can be attributed to growth in

sales volume.

CONSUMER ELECTRONICS

M. Farooq Farooqui

General Manager-

Consumer Electronics & Domestic Appliances

The market of Television remained stagnant

due to erosion of purchasing power which

has affected the overall market of consumer

durables. The Company followed its policy of

diversification to reduce dependence on

colour television and was able to offer a

greater range of products. In this sector, the

Company shifted its emphasis towards total

entertainment market and started various

new activities of audio systems, VCRs,

Video/Audio Cassettes, etc. The Company

also secured an order for car audio system.

The overall sales improved by 2% against

preceding year. Limited growth in sales is

due to lowering of prices of televisions, to

pass on the benefit of duty relief to

consumers and combat low priced sets in the

market. The improvement in operating profit

is the result of lower costs and control on

overhead costs.

MAJOR DOMESTIC APPLIANCES

The Company continued optimal utilisation of

its local manufacturing facility and

supplemented the product range through

imported refrigerators. The profitability came

under pressure due to changes in deletion

programme and imposition of regulatory

duty. In order to avoid adverse effects on the

manufacturing activity, the Government

should ensure adequate tariff protection to

the industry against CBU imports.

The sales increased by 19% over

comparable period of last year which is

mainly attributable to volume increase.

In spite of increase in costs, low price level

prevailed in the market mainly due to

pressure on the purchasing power of

consumers. Consequently, the enhanced

costs could not be fully passed on to the

market which affected the overall profitability

level.

OTHER ACTIVITIES

This sector includes activities of Domestic

Appliances and Personal Care, Professional

Systems, Medical Systems and 'After Sales

Service'. These activities have a strong

potential for future growth and the Company

is presently investing in the market to

maintain its presence.

The activity of Domestic Appliances and

Personal Care has shown improvements

during the year. The market of these

products is predominantly catered to by the

supplies through irregular channels and

continuity of which is posing a real threat to

the activities of both local manufacturing and

import based trading. As mentioned earlier,

during the last quarter of the year, the

Government imposed regulatory duty which

has placed legitimate importers in a difficult

situation and the Company had to restrict its

business in this field.

The activities of Professional Systems and

Medical Systems cater for the market of

high-tech products/equipments. These

activities are primarily project-based which

require advanced professional know-how

and are dependent on availability of

Development budgets/funds. The Company,

as a policy, concentrates on major projects

and maintains its presence to capitalise on

the opportunities offered by this sector.

As a part of our policy to ensure excellent

service level to the customers and to provide

confidence to the consumers in Philips

products, an efficient set up is maintained for

'After Sales Service'.

In the above activities overall sales remained

low in the professional and medical sector

due to constraints of limited development

budgets/funds. The improvement in profits is

mainly in the activity of Domestic Appliances

and Personal Care, which is a result of

higher sales due to effective marketing

efforts.

HUMAN RESOURCES

Jalees A. Siddiqi

General Manager -Human Resources

On behalf of the Board of Directors and the

Management, we would like to appreciate the

commendable contribution made by the

employees for achievement of the targets set

for 1995. The Board is thankful for the efforts

of the employees, to recover production

losses caused by the law and order situation

that prevailed last year. The industrial

relations between the employees and the

management remained peaceful and most

cordial.

The Company continued it efforts towards

development and training of the employees

at all levels to prepare the organization to

meet the challenges of the highly competitive

business environment. Special emphasis is

placed on the motivation level of the

employees through job satisfaction, change

management and most conducive

atmosphere for them to perform their best in

realising the Company objectives. In this

respect we are conscious of the importance

of human resources and are committed to

follow 'The Philips Way - Value people as our

greatest resource'.

SOCIAL RESPONSIBILITY

The Company continued its support to the

cause of social welfare, and during the year

contributions were made to Layton

Rahmatulla Benevolent Trust, and other

organisations operating in the country which

provide social services. We also contributed

towards conservation of the environment by

providing support to the World Wide Fund

for Nature.

PHILIPS QUALITY PROGRAMME

Your Company has a strong conviction with

regard to the importance of Total Quality

Management for the improvement of

business. To build a Winning Company, we

need shared values, clear vision and

objectives, distinctive skills and competitive

processes. In this respect, we consider the

involvement of all the employees in the

Philips Quality drive a must.

During the year, various quality activities

continued towards Philips Way and adopting

Philips Values in all facets of Company

operations. Lighting factories have already

been certified for ISO 9002 and currently

other sectors are preparing for the

certification in 1996. During the course of the

year, we also commenced efforts for

obtaining PQA-90 (the Philips Quality Award)

by employing the techniques of process

re-engineering for all the operations in the

Company.

The ultimate objective of the Philips Quality

drive is to deliver products and services

which delight the customer and satisfy all

other stake-holders in the Company.

BOARD OF DIRECTORS

The term of office of the present seven

directors is due to expire on May 9, 1996. An

election of Directors will be held at the

forthcoming Annual General Meeting.