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| Emco
Industries Limited |
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|
(Annual Report 1996) |
|
|
|
| Contents |
|
|
| Company
Information |
|
2 |
|
| Business
Items |
|
3 |
|
| Notice
of Meeting |
|
4 |
|
| Directors'
Report to the Members |
5 |
|
| Financial
Highlights |
|
6 |
|
| Ten
Years at a Glance |
|
7 |
|
| Chairman's
Review |
|
10 |
|
| Auditors'
Report |
|
13 |
|
| Balance
Sheet |
|
14 |
|
| Profit
and Loss Account |
|
16 |
|
| Cash
Flow Statement |
|
17 |
|
| Notes
to the Accounts |
|
19 |
|
| Pattern
of Shareholdings |
|
34 |
|
| Proxy Form |
|
|
35 |
|
|
|
| Company
Information |
|
|
|
| Board
of Directors |
|
|
| Mr.
S. A. Mannan, Chairman |
|
| Mr.
Tariq Rehman, Chief Executive |
|
| Mr.
A. Rehman |
|
| Mr.
Shafiq A. Siddiqi |
|
| Mr.
T. M. Sheikh |
|
| Mr.
Haris Noorani |
|
| Mr.
Suhail Mannan |
|
| Mr.
Tahir Rehman |
|
| Mr.
Iqbal Shafiq |
|
| Mr.
Usman Haq |
|
|
| Auditors |
|
| S.
A. Salam & Co. |
|
| Chartered
Accountants, |
|
| Lahore |
|
|
| Bankers |
|
| American
Express Bank Limited |
|
| Bank
of America |
|
| Citibank
N. A. |
|
| Deutsche
Bank |
|
| Emirates
Bank International Ltd. |
|
| Standard
Chartered Bank |
|
|
| Registered
Office |
|
| 2nd
Floor, Emirates Bank Building, |
|
| 14
Kashmir-Egerton Road, |
|
| Lahore-54000 |
|
|
| Factory |
|
| 19-Kilometer,
Lahore-Sheikhupura Road, |
|
| Lahore. |
|
|
| Business
Items |
|
| Porcelain
Insulators |
|
|
| ·
Suspension Insulator |
|
| ·
Pin Insulator |
|
| ·
Line Post Insulator |
|
| ·
Cap and Pin Type Support Insulator |
|
| ·
Station Post Insulator |
|
| ·
Indoor Switch and Bus Insulator |
|
| ·
Apparatus Insulator |
|
| ·
Insulator for Railway Electrification |
|
| ·
Telephone Insulator |
|
| ·
Low Voltage Insulator |
|
| ·
Dropout Cutout Insulator |
|
| · Bushings |
|
|
| Switchgear |
|
| Disconnect
Switches upto 145 kV |
|
| Metal
Oxide Surge Arresters upto 430 kV |
|
| (Under
Licence from Siemens, Germany) |
|
|
| Chemical
Porcelain |
|
| ·
Acid Proof Wares and Bricks |
|
| ·
Raschig Rings and Saddles |
|
| ·
Acid Proof Porcelain Pipes and Fittings |
|
| ·
Acid Proof Cement |
|
|
| Special
Porcelain |
|
| ·
Special Refractories |
|
| ·
High Alumina Porcelain |
|
| ·
Lining & Grinding Media |
|
|
| Ceramic
Glazed Wall Tiles |
|
| ·
Coloured & Decorative Glazed Wall Tiles |
|
| 15
cmx 15 cmx6mm |
|
|
|
|
| Ceramic
Glazed Floor Tiles |
|
| ·
Vitreous & Semi Vitreous Decorative Glazed |
|
| Floor Tiles |
|
| 30cmx30cmx8mm |
|
| ·
Semi Vitreous Glazed Floor Tiles |
|
| 40cmx40cmx8mm |
|
| ·
Floor and Facing Tiles |
|
| 10cmx30cmx8mm |
|
|
|
|
|
Notice of Meeting |
|
|
|
|
| NOTICE
IS HEREBY GIVEN that the 41st Annual General Meeting of the Members of EMCO |
|
| INDUSTRIES
LIMITED, will be held on 12th December, 1996 at 11.00 A.M. at the Registered
Office of |
|
| the
Company, 2nd Floor, Emirates Bank Building, 14-Kashmir/Egerton Road, Lahore
to transact the following |
|
| business:- |
|
|
| 1.
To confirm the minutes of the last Extraordinary General Meeting held on 30th
June, 1996. |
|
|
| 2.
To consider and adopt the Audited Accounts of the Company for the period
01-01-1995 to 30-6-1996 |
|
| (18
months) and report of the Auditors and Directors thereon. |
|
|
| 3.
To declare a Dividend. The Board of Directors have recommended a cash
dividend of |
|
| 20%
@ Rs. 2/- per Share. |
|
|
| 4.
To appoint Auditors and fix their remuneration. |
|
|
| NOTES: |
|
|
| i)
The Share Transfer Books of the Company for cash dividend will remain closed
and no transfer of |
|
| Shares
will be accepted for registration from 4th December, 1996 to 12th December,
1996 (both days |
|
| inclusive).
The members whose names appear in the Register at the close of the business
on Decem- |
|
| ber
3, 1996 will qualify for entitlement of cash dividend. However, the Right
Shares will not qualify |
|
| for
the dividend being declared. |
|
|
| ii)
A Member entitled to attend and vote at the General Meeting may appoint
another member as his/ |
|
| her
proxy to attend and vote instead of him/her at the meeting. Proxies must be
deposited at the |
|
| Company's
Registered Office not less than 48 hours before the time of holding the
meeting. |
|
|
| iii)
Members are requested to notify immediately the change of address, if any. |
|
|
|
|
|
Directors' Report |
|
|
| The
Board of Directors is pleased to present the 41st Annual Report of EMCO
Industries Limited for |
|
| the
period January 1, 1995 to June 30, 1996. |
|
|
| Financial
Results and Appropriations |
|
|
Rupees |
|
|
| Net
profit for the period after taxation |
53,801,898 |
|
|
| Unappropriated
profit brought forward |
|
|
|
| from
prior year |
|
16,682,077 |
|
|
---------- |
|
| Total
profit available for appropriation |
70,483,975 |
|
|
---------- |
|
| Appropriations |
|
|
|
| Transferred
to general reserve |
|
30,000,000 |
|
|
|
| Proposed
dividend on 6 million shares |
|
|
|
| of
Rs.10/- each at Rs.2/- per share |
|
12,000,000 |
|
|
|
---------- |
|
|
|
42,000,000 |
|
|
---------- |
|
| Unappropriated
profit carried forward |
|
28,483,975 |
|
|
========== |
|
|
|
| Pattern
of Holding of Shares |
|
| A
statement showing the pattern of holding of shares in the Company as on June
30, 1996 appears on page- |
|
| 34. |
|
|
| Auditors |
|
| The
retiring auditors, Messrs. S. A. Salam & Co., being eligible, offer
themselves for re-appointment. |
|
|
| Chairman's
Review |
|
| The
accompanying Chairman's review deals with the performance of the Company
during the period and |
|
| the
future outlook. The Directors endorse the contents of the review. |
|
|
|
|
Financial Highlights |
|
|
|
|
|
18 Months to |
12 Months to |
|
|
|
June 30, 1996 |
Dec., 1994 |
|
|
| Net Sales |
|
Rs. Million |
791 |
462 |
|
| Profit
before Tax |
|
Rs. Million |
38 |
23 |
|
| Income Tax |
|
Rs. Million |
4 |
2 |
|
| Profit
after Tax |
|
Rs. Million |
54 |
21 |
|
| Earnings
per Share |
|
Rs. / Share |
8.97 |
3.45 |
|
| Dividend
per Share |
|
Rs. / Share |
2 |
1.75 |
|
| No.
of Shares Outstanding |
|
(000's) |
6,000 |
6,000 |
|
| Taxes
and Duties |
|
Rs. Million |
226* |
115' |
|
|
| *
For details see Note 31 to the Accounts |
|
|
| APPLICATION
OF REVENUE |
|
|
|
|
Million |
|
|
|
Rupees |
% |
|
|
|
|
| Materials,
Services & |
439 |
45.68 |
|
| Utilities |
|
|
|
| Depreciation |
59 |
6.14 |
|
| Taxes
& Duties |
226 |
23.52 |
|
| Employees |
|
183 |
19.04 |
|
| Dividend |
|
12 |
1.25 |
|
| Retained
in Business |
42 |
4.37 |
|
|
|
---------- |
---------- |
|
|
|
961 |
100.00 |
|
|
|
========== |
========== |
|
|
|
|
|
| Ten
Years at a Glance |
|
|
|
|
|
|
|
18 months to |
|
|
30/6/1996 |
1994 |
1993 |
1992 |
1991 |
1990 |
1989 |
1988 |
1987 |
1986 |
| (Million
Rupees) |
|
|
|
| Net
Total Sales |
791 |
462 |
348 |
417 |
296 |
238 |
192 |
180 |
154 |
125 |
|
|
|
| Exports |
|
44 |
31 |
20 |
8 |
17 |
23 |
16 |
16 |
3 |
3 |
| Employees
Costs |
183 |
103 |
85 |
81 |
65 |
53 |
46 |
37 |
32 |
27 |
| Profit
before Tax |
38 |
23 |
15 |
25 |
17 |
26 |
16 |
14 |
16 |
13 |
| Profit
after Tax |
54 |
21 |
23 |
15 |
14 |
23 |
9 |
6 |
3 |
13 |
| Earning
per Share |
8.97 |
3.45 |
5.83 |
3.78 |
3.54 |
5.74 |
2.17 |
1.46 |
0.76 |
3.91 |
| Capital
Expenditure |
102 |
28 |
15 |
61 |
84 |
84 |
15 |
13 |
13 |
31 |
| Dividend
Rate |
20% |
17.50% |
17.50% |
15% |
15% |
20% |
17.50% |
17.50% |
15% |
|
| Shareholders'
Equity |
213 |
172 |
159 |
99 |
89 |
81 |
66 |
65 |
66 |
57 |
|
|
| Chairman's
Review |
|
| On
behalf of the Board of Directors, it gives me great pleasure to welcome you
on the Company's 41st |
|
| Annual
General Meeting and to present before you the Company's Annual Report and
Financial Statements |
|
| for
a period of 18 months from January 01, 1995 to June 30, 1996. |
|
|
| During
the period under review the business environment in the country was not
conducive towards growth |
|
| and
was affected by continued recession. The frequent devaluation by the
government together with |
|
| increase
in the costs of energy, import duties and taxes have affected the performance
of the Company. |
|
| Despite
the circumstances mentioned above the management together with the workers
have tried very hard |
|
| to
bring about an increased sale which is 16% higher as compared to the
corresponding previous period. |
|
| Other
areas which have shown better performance are in the production and
Shareholders equity. As |
|
| mentioned
in the last review the Floor Tile Division which was still in the initial
period of production has |
|
| now
achieved excellent results and the profitability for the division has also
increased. You would be |
|
| pleased
to note that the Wall Tile and Floor Tile Divisions have achieved production
of 132% and 103% |
|
| respectively
of their rated capacity. However, the Insulator Plant has shown a negative
growth. A brief |
|
| review
of the performance of each division follows: |
|
|
| Insulator
Division: |
|
| There
has been a 3% decrease in the gross turn-over of the division. This has been
primarily owing to the |
|
| restricted
activities of the utilities within Pakistan. Another factor for the lower
sales has been the reduction |
|
| in
the foreign loans available to WAPDA for electrification in the Country.
Simultaneously the gross |
|
| margin
has also declined substantially owing to higher costs of power and gas,
increase in the cost of raw |
|
| materials
owing to Rupee devaluation and additional taxes imposed by the Government
together with a |
|
| pressure
on the selling prices owing to increased competition in the form of imports.
The management, |
|
| however,
keeping in view the trends of reduced activities by the utilities within
Pakistan, decided to expand |
|
| the
Insulator Division by adding facility for manufacturing High Voltage Metal
Oxide Surge Arresters for |
|
| voltages
upto 430kV. This facility will manufacture the Surge Arresters under the
"licensing agreement" |
|
| with
Siemens, Germany. The addition of such a facility has a very good sales
potential not only locally |
|
| but
also in the foreign markets. Siemens, Germany will provide all the technical
and marketing support for |
|
| this
product locally and internationally. Both BMR of Insulator Plant and
production facility for Surge |
|
| Arresters
were executed and commissioned during later part of the period under review
so the benefits from |
|
| these
investments shall start accruing to the Company in the coming years. To
increase division's sales and |
|
| profitability
the management has decided to increase the export sales. We expect to achieve
better results |
|
| in
the coming years for this Division. |
|
|
| Wall
Tile Division: |
|
| The
division operated at 132% of the rated capacity during the period and
achieved record production and |
|
| sales.
Compared with corresponding period the gross turn-over of the division has
gone up by 18%. The |
|
| ratio
of gross profit to gross sales has increased from 22% to 28%. The ratio of
profit from operations to |
|
| gross
sales has increased from 10% to 16%. Strict control on costs resulted in the
improvement of profitability |
|
| of
the division. To meet the increasing demand for Emco's Wall Tile the
management has decided to double |
|
| its
capacity. The enhanced capacity shall result in the reduction of overheads
which in turn will increase |
|
| the
profitability of the division. Your company expect to achieve much better
results in Wall Tile Division |
|
| in
the coming years. |
|
|
| Floor
Tile Division: |
|
| Eversince
Floor Tile Division was commissioned in 1992, this is the first time that
plant was operated at |
|
| 103%
of the rated capacity which obviously was due to increased demand for this
product. Sales during |
|
| the
period registered an increase of 54% compared with corresponding period. The
ratio of gross profit to |
|
| gross
sales has gone up from 25% to 33%. The ratio of profit from operations to
gross turn-over has |
|
| increased
from 6% to 17%. The marked turnaround in the operating results was possible
owing to growing |
|
| awareness
in the market of the advantages of using ceramic tiles on floors, the
concerted efforts of the |
|
| production
team to bring the manufacturing cost down by using various raw materials mix
and extraordi- |
|
| nary
efforts put in by the Marketing Department in promoting sale of this product. |
|
|
| Financial
Results: |
|
| Overall
gross turn-over during the period amounts to Rs. 958.262 million and the
profit from operations |
|
| during
the period was Rs. 130.766 million. The increase is attributable to the
improved financial results |
|
| of
the Floor Tile and Wall Tile Divisions. Your Company earned a pretax net
profit of Rs. 37.757 million |
|
| i.e.
3.94% of gross sales compared with 4.13% in corresponding period. There has
been slight decrease in |
|
| net
profit which is mainly due to increase in financial charges and depreciation
owing to BMR and other |
|
| additions
made in Insulator Division. Profit after tax amounts to Rs. 53.802 million. |
|
|
| Keeping
in view the tradition of declaring dividend every year the Board of Directors
has announced a cash |
|
| dividend
@ 20%. For this purpose out of net profit of Rs. 53.802 million, Rs. 12.000
million are proposed |
|
| to
be appropriated for cash dividend and the remaining amount has been carried
forward to strengthen the |
|
| financial
position of the Company and for future expansion. |
|
|
| Shareholders'
Equity: |
|
| The
shareholders' equity has shown upward trend and stand at Rs. 213 million as
on June 30, 1996 |
|
| increasing
24% from December 31, 1994. The paid up capital now stands at Rs. 60 million
and Break-up |
|
| value
of each share is Rs. 39 (1994: Rs. 32). In order to finance the Wall Tile
expansion the Board of |
|
| Directors
has decided to make a Right Issue of Rs. 60 million by offering Right Shares
@ 2 Shares for |
|
| every
3 Shares held, at a premium of Rs. 5 per Share. With this Right Issue the
paid up capital will |
|
| increase
from Rs. 60 million to Rs. 100 million and share premium from Rs. 34.899
million to Rs. 54.899 |
|
| million. |
|
|
| Employees
Relations: |
|
| Over
the years, we have succeeded in maintaining cordial industrial relations.
This has been possible due |
|
| to
the positive attitude of Management and Labour Union. Our Management and
Labour Union believe in |
|
| resolving
all issues mutually. Insha-Allah this trend will continue with the active
co-operation of the Labour |
|
| Union. |
|
|
| Future
Outlook: |
|
| All
three divisions are expected to perform better in 1996-97. Keeping in view
the rising demand for Wall |
|
| Tile
the management has decided to double the production capacity of Wall Tile
Plant. For this purpose |
|
| the
Company has recently entered into an agreement with American Express Bank
Limited led Consortium |
|
| for
a medium term loan of Rs. 175 million. The Consortium consists of the
following banks: |
|
|
|
|
(Rupees} |
|
|
| 1.
American Express Bank Limited |
|
40 Million |
|
| 2.
Deutsche Bank |
|
30 Million |
|
| 3.
First International Investment Bank Limited |
|
20 Million |
|
| 4.
Standard Chartered Bank |
|
35 Million |
|
| 5.
Saudi-Pak Industrial & Agricultural Investment Co. (Pvt) Limited. |
50 Million |
|
|
| The
total cost of the project is Rs. 255.027 million. The remaining funds shall
be generated through internal |
|
| resources
and by making Right Issue. I am pleased to inform you that letters of credit
in favour of all |
|
| foreign
suppliers have already been established. The imported machinery shall start
reaching site in March |
|
| 1997.
The plant is expected to be commissioned during August, 1997. |
|
|
| In
order to improve the export of Insulators and Tile the Company decided
earlier this year to get certi- |
|
| fication
for ISO 9001. There is already substantial work done and it is expected that
the certification should |
|
| be
available by the middle of 1997. |
|
|
| Acknowledgment: |
|
| I
take this opportunity to place on record the appreciation to the employees
and staff for their co-operation |
|
| and
contribution towards the progress of the Company. I would also like to thank
our customers, dealers, |
|
| bankers
and particularly WAPDA who have reposed confidence in the products supplied
to them and would |
|
| like
to re-affirm the Company's pledge to continue to deliver a quality product on
time and at all cost which |
|
| represents
the best value for their money. |
|
|
|
|
|
|
Auditors' Report to the
Members |
|
|
|
| We
have audited the annexed Balance Sheet of EMCO Industries Limited as at June
30, 1996 and the |
|
| related
Profit and Loss Account and Cash Flow Statement, together with the notes
forming pan thereof, |
|
| for
the period January 01, 1995 to June 30, 1996 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
and, after due verification thereof, we report that: |
|
|
| a)
in our opinion, proper books of account have been kept by the Company as
required by the Com- |
|
| panies
Ordinance, 1984; |
|
|
|
| b)
in our opinion: |
|
|
| i)
the Balance Sheet and Profit & 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; |
|
|
| ii)
the expenditure incurred during the period was for the purpose of the
Company's business; and |
|
|
|
| iii)
the business conducted, investments made and the expenditure incurred during
the period 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 & Loss Account and the Cash Flow Statement, together with
the notes forming |
|
| part
thereof, 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 June |
|
| 30,
1996 and of the profit and cash flow for the period then ended; and |
|
|
| (d)
in our opinion Zakat deductible at source under the Zakat and Ushr Ordinance,
1980 was deducted |
|
| by
the Company and deposited in the Central Zakat Fund established under Section
7 of that Ordi- |
|
| nance. |
|
|
|
|
BALANCE SHEET AS AT |
|
|
|
|
Note |
June 30, |
December 31, |
|
|
|
1996 |
1994 |
|
|
|
Rupees |
Rupees |
|
| SHARE
CAPITAL AND RESERVES |
|
|
|
|
|
|
|
|
| Authorised
capital |
|
|
|
|
| 10,000,000
ordinary shares of Rs. 10 each |
|
100,000,000 |
100,000,000 |
|
|
|
=========== |
=========== |
|
|
|
|
|
| Issued,
subscribed & paid up capital |
|
3 |
60,000,000 |
60,000,000 |
|
| Reserves
& unappropriated profit |
|
4 |
153,382,501 |
111,580,603 |
|
|
|
---------- |
---------- |
|
|
|
213,382,501 |
171,580,603 |
|
|
|
|
|
|
| SURPLUS
ON REVALUATION OF LAND |
|
5 |
18,830,530 |
18,830,530 |
|
|
|
|
|
| LONG
TERM AND DEFERRED LIABILITIES |
|
|
|
| Long
term loans |
|
6 |
28,951,196 |
44,830,787 |
|
| Liabilities
against assets subject to finance lease |
7 |
47,345,985 |
8,520,500 |
|
| Deferred
liabilities |
|
8 |
15,419,538 |
41,694,346 |
|
|
|
|
|
---------- |
---------- |
|
| CURRENT
LIABILITIES |
|
|
91,716,719 |
95,045,633 |
|
|
|
|
|
|
|
| Short
term finances-Secured |
|
9 |
252,584,672 |
208,350,286 |
|
| Short
term finances from associated |
|
|
|
|
| companies-un
secured |
|
|
27,965,218 |
|
|
| Current
maturity of long term loans |
|
6 |
10,007,507 |
15,515,070 |
|
| Current
maturity of liabilities against assets subject |
|
|
| to
finance lease |
|
7 |
13,791,109 |
11,976,908 |
|
| Current
maturity of deferred import levies |
8 |
2,392,469 |
2,392,469 |
|
| Creditors,
accrued and other liabilities |
10 |
93,856,710 |
60,728,105 |
|
| Proposed
dividend |
|
|
12,000,000 |
10,500,000 |
|
|
|
---------- |
---------- |
|
|
|
|
412,597,685 |
309,462,838 |
|
| CONTINGENCIES
& COMMITMENTS |
|
11 |
- |
- |
|
|
|
---------- |
---------- |
|
|
|
736,527,435 |
594,919,604 |
|
|
|
=========== |
=========== |
|
|
| Auditors'
report to the members of even date annexed hereto. |
|
|
| JUNE
30, 1996 |
|
|
| TANGIBLE
FIXED ASSETS |
|
|
| Operating
assets |
|
12 |
242,756,108 |
239,053,402 |
|
| Assets
subject to finance lease |
|
13 |
71,021,131 |
34,011,295 |
|
| Capital
work-in-progress |
|
14 |
751,976 |
6,103,470 |
|
|
---------- |
---------- |
|
|
314,529,215 |
279,168,167 |
|
|
| LONG
TERM LOANS AND DEPOSITS |
|
15 |
1,759,170 |
3,645,466 |
|
|
| CURRENT
ASSETS |
|
|
|
|
|
|
| Stores,
spares and loose tools |
|
16 |
45,939,123 |
25,807,138 |
|
| Stock-in-trade |
|
17 |
146,719,481 |
135,437,133 |
|
| Trade debts |
|
18 |
142,928,225 |
99,468,446 |
|
| Advances,
deposits, prepayments and other |
|
| receivables |
|
19 |
71,782,807 |
33,537,613 |
|
| Cash
and bank balances |
|
20 |
12,869,414 |
17,855,641 |
|
|
|
---------- |
---------- |
|
|
|
420,239,050 |
312,105,971 |
|
|
|
|
|
---------- |
---------- |
|
|
|
736,527,435 |
594,919,604 |
|
|
|
=========== |
=========== |
|
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
|
|
|
|
PROFIT AND LOSS ACCOUNT |
|
|
FOR EIGHTEEN MONTHS ENDED
JUNE 30, 1996 |
|
|
|
|
|
18months to |
12months to |
|
|
Note |
June 30, |
December 31, |
|
|
|
|
1996 |
1994 |
|
|
|
|
Rupees |
Rupees |
|
|
|
|
| Gross sales |
|
21 |
958,261,748 |
552,930,240 |
|
| Less:
excise duty & sales tax |
|
167,150,369 |
91,049,706 |
|
|
---------- |
---------- |
|
| Net sales |
