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

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

Hinopak Motors Limited

(Annual Report 1996)

CONTENTS

Company Information

Notice of Meeting

Chairman's Review

Directors' Report

Ten Years at a Glance

Auditors' Report to the Members

Balance Sheet

Profit and Loss Account

Cash Flow Statement

Notes to the Accounts

Pattern of Share Holding

Form of Proxy

Board of Directors

Keith S. Stack

(Chairman)

C.D.W. Leitch

Shah Jalil Alam

Nazir Ahmed Shaikh

Kunwar Idris

Masamichi Yoshimizu

Kanji Kawamura

Hajime Atsumi

Hasan Irshad

(Managing Director & Chief Executive)

Company Secretary

Mohammad Z. A. Syed

General Managers

F.K. Siddiqi

(Personnel & Administration)

Feroz A. Pirzada

(Production)

Iftikhar Quraeshi

(Marketing)

L. R. Kherati

(Material Operations)

Mohammad Z. A. Syed

(Finance)

Bankers

ABN - AMRO Bank

Allied Bank of Pakistan Limited

American Express Bank Limited

Bank of America NT & SA

Banque Indosuez

The Bank of Tokyo - Mitsubishi, Limited

Habib Bank Limited

Hongkong & Shanghai Banking Corporation Limited

National Bank of Pakistan Limited

Societe Generale - The French & International Bank

Auditors

A. F. Ferguson & Co.

Legal Advisors

Surridge & Beecheno

Registered Office

D-2, S.I.T.E., Manghopir Road,

P.O.Box No. 10714, Karachi- 75700.

NOTICE OF MEETING

NOTICE IS HEREBY GIVEN that the Eleventh Annual General Meeting of the shareholders of

Hinopak Motors Limited will be held at the Ballroom B, Pearl Continental Hotel, Club Road,

Karachi on Wednesday, December 4, 1996 at 11.00 a.m. to transact the following business:

ORDINARY BUSINESS

(1) To receive and consider the Audited Accounts of the Company for the financial year

ended June 30, 1996, together with the Report of Directors and Auditors.

(2) To appoint Auditors for the year 1996-97 and to fix their remuneration. The retiring

Auditors Messrs. A. F. Ferguson & Co., Chartered Accountants being eligible, offer

themselves for re-appointment.

(3) To approve, as recommended by the Board of Directors, the final cash dividend at the rate

of 35% i.e. Rs. 3.50 per share for the year ended June 30, 1996.

SPECIAL BUSINESS

(4) To consider, and if thought fit, to pass the following resolution as an Ordinary Resolution:

"RESOLVED THAT:

(a) Pursuant to the Article 127 of the Articles of Association a sum of Rs. 20,667,600 out

of the free reserves of the Company, be capitalized and applied towards the issue of

2,066,760 fully paid ordinary shares of Rs. 10/- each as bonus shares in proportion

of one bonus share for every five ordinary shares held by the members whose names

appear in the Members' Register at the close of business on November 19, 1996. The

shares so distributed shall be treated for all purposes as increased paid up capital of

the Company.

(b) The shares so distributed shall rank pari-passu in all respects with the existing shares

of the Company. However, these shares shall not be eligible for the cash dividend

declared for the year ended June 30, 1996.

ordinary shares then, such fractional entitlements shall be consolidated into whole

shares and sold on the Karachi Stock Exchange. The proceeds of sale, when realized,

shall be paid to the entitled members.

(d) For the purpose of giving effect to the foregoing, the Chief Executive and the

Company Secretary be and are hereby authorized to give such directions as they

deem fit to settle any question or any issues that may arise in the distribution of the

said bonus shares or in the payment of sale proceeds of the said fractions."

A statement under Section 160 of the Companies Ordinance, 1984 setting forth all material facts

containing the Resolution contained in item (4) of the Notice which will be considered for

adoption at the Meeting is annexed to this Notice of Meeting being sent to Members.

Notes:

i) A member entitled to attend and vote at this General Meeting is entitled to appoint a

Proxy to attend, speak and vote in his place at the Meeting. Instrument appointing a proxy

must be deposited at the Registered Office of the Company at least forty eight hours

before the time of the Meeting.

ii) The share transfer books of the Company will be closed from November 20, 1996 up to

December 4, 1996 (both days inclusive).

iii) The shareholders are requested to intimate any changes in their addresses to our Share

Registrar Messrs. Ferguson Associates (Private) Limited, State Life Building No. IA, I.I.

Chundrigar Road, Karachi, Pakistan.

Statement Under Section 160 of the Companies Ordinance, 1984

This Statement is annexed to the Notice of the Eleventh Annual General Meeting of the

Shareholders of Hinopak Motors Limited to be held on December 4, 1996 at which certain special

business is to be transacted.

The special business is the proposed issue of bonus shares. The purpose of this statement is to set

forth the material facts concerning this special business.

Item (4) of the Notice of Meeting

In view of the sound financial position of the Company your Board of Directors recommend the

issued capital of the Company be increased by capitalization of free reserves amounting to

Rs. 20,667,600 and the issue of bonus shares in the ratio 1:5 i.e. one bonus share for every five

ordinary shares. The Directors of the Company, directly or indirectly, are not personally interested

in this business except to the extent of their shareholdings in the Company.

Chairman's Review

It gives me great pleasure to welcome you to the

11th Annual General Meeting of the Company

and to present to you the report on the perfor-

mance of the Company for the year ended 30th

June, 1996.

OPERATING RESULTS

As indicated in the half yearly report your

Company has not only been able to emerge from

the previous year's loss making situation but has

been able to achieve a significant improvement in

all areas of its operations. The Company earned a

net profit of Rs. 176.11M for the year ended 30th

June,1996 which is much higher than the

aggregate losses suffered during the previous two

financial years (1993-94 Rs. 54.63 M and

1994-95 Rs. 71.66M, Total Rs. 126.29M). Sales

Revenue more than doubled to Rs.2.6 Billion

from Rs. 1.29 Billion achieved during last year.

Gross Margin was Rs. 300.9 M compared to

Rs. 48.3 M achieved during the year 1994-95.

These results have been achieved despite the

adverse law and order situation and the depressed

economic conditions prevailing in the country.

Sale of old stocks, improved demand for heavy

vehicles and a better Yen / Rupee parity rate also

played a significant role in achieving these

excellent results. The profit for the year also

includes other income totalling Rs. 37M,

comprising a gain on the sale of Plot S-49 and

interest income earned on short term deposits.

Improved liquidity reflecting higher sales, a

significant reduction in stocks carried during the

year and a substantial increase in credit balances

of customers further strengthened the Company's

financial position and enabled us to achieve a

notable reduction of Rs. 43.6 M (77%) in

financial charges.

REVALUATION OF LAND AND BUILDINGS

During the year, the Company commissioned an

updated, independent professional valuation of its

Land and Buildings, which were last revalued in

1993. The valuation revealed a surplus over book

value of Rs. 261.3 million. No adjustment has

been incorporated in the accounts for this surplus.

However, in view of the significance of the

surplus in relation to Shareholders' Funds, it is

considered that the attention of the shareholders

should be drawn to this item.

It is the intention of the directors to continue, in

the future, to revalue Land and Buildings every

three years.

ISSUE OF BONUS SHARES

The directors are of the view that the issued equity

capital of the Company, which has not changed

since the issue of shares to the public in 1988, has

not kept pace with the Company's asset base.

Accordingly, a bonus issue of one share for every

five shares held is being proposed to redress this

imbalance.

SALE / MARKET SHARE

Although the Bus & Truck sector of the automobile

market has not yet reverted to the pre-Transport

Scheme position, it has shown a considerable

improvement during the year 1995-96 compared

to 1994-95. The total market reached 2600 units

during 1995-96 from 1700 units during the year

1994-95. Hinopak has not only taken full

advantage of the improved market situation

but has been able to achieve a significant

improvement in overall market share which rose

to 66% from 62% achieved during last year.

Hino chassis sales increased to 1713 units from

1055 units sold during last year achieving a

growth of 658 units (62%).

According to the Japan Automotive Manufacturers

Association (JAMA) report, 74% of all Japanese

heavy-duty trucks and tractors imported into

Pakistan were Hino vehicles. 192 Hino bus

chassis were imported into Pakistan, which made

up 72% of the total Japanese bus chassis imports

during 1995-96.

NEW PRODUCT LAUNCH

The Pakistan automobile industry entered a new

era when Hinopak launched a new series of

trucks and buses in April 1996. The new series

incorporates the latest automotive technology

adapted to suit driving conditions in Pakistan.

Mr. Tomio Futami, President of Hino Motors

Japan and Mr. Masaru Kato, Managing Director

of Toyota Tsusho Corporation, Japan were

personally present in Pakistan to launch these

new models which incorporate state-of-the-art

technology, developed to satisfy a wide

variety of individual customers and specific

business needs. Extensive time was spent on

designing and developing these vehicles to meet

the changing needs of the customers and to make

the truck more comfortable, elegant, economical

and environment friendly. The launching of

these new models also coincided with the 10th

anniversary celebrations of Hinopak which

allowed Mr. Futami, Mr. Kato and Mr. Majid Al-

Futtaim, President of the A1-Futtaim Group,

Dubai to meet in Karachi and take part in these

celebrations.

PRODUCT SUPPORT & AFTER

SALES SERVICE

Hinopak has always placed heavy emphasis on

achieving its goal of customer satisfaction. We at

Hinopak are always in constant contact with our

customers either directly or through our dealers to

ensure smooth operation of all Hino vehicles

plying in the country.

The company has embarked upon an elaborate

plan to supplement its existing "After-Sales

Service" network by setting up 3S dealership

networks at Karachi, Peshawar, Quetta and

Multan. Mobile- workshops continue to play a

vital role in supporting our products in the

remotest parts of the country.

DESIGN & DEVELOPMENT

The Design and Development department

continues its quest to develop new bodies and

superstructures. This effort is in line with

management's policy to broaden the product

range and to capture a higher share of the body

fabrication market. The drive towards self

sufficiency in design has been reinforced by the

fact that the entire design process is now carded

out using "Computer Aided Design" systems.

Among the significant developments carded out

by the department during the year has been the

designing of a 43 seater bus based on Hino FC,

currently in the testing phase. The body has been

designed with a flexibility to convert this vehicle

into an A.C configuration. To expand the

acceptability of the FB 113KA, the department has

designed two models of A.C. buses Metroliner

with 18-25 and 22-29 seats respectively.

Meanwhile the existing body shape of the

Humrahi has been modified and renamed as

Rapidliner.

PRODUCTION

As the automobile industry emerged from the

acute recession in the previous years, the

production department geared itself to cope

with the new challenges, which were twofold in

nature. First, management had to bring back the

manufacturing efficiency of the labour force

which had been affected by the low production

during 1994-95. Secondly, the Super Flyer truck

and AK-MA bus series were scheduled to be

launched during the year and consequently labour

and plant facilities had to be reorganized and

upgraded to meet this change. The production

department faced up to these challenges and

manufactured a total of 1715 units, exceeding the

previous year's production by 691 units. This

achievement included production of 323 units of

the new models, commercial production of which

commenced in June, 1996.

The production at the Body Operation Plant also

gained momentum during the year. A total of 337

units was produced in 1995-96 against 212 units

produced during 1994-95. This amounts to a 59%

increase in production over the last year. The

units produced during the year included water

bowzers, garbage collectors, troop carriers,

freight vans and dump trucks. Besides the main

assembly operations, the Body Operations Plant

also made significant achievement in the in-

house development of component parts. A total

of 68 different sheet metal parts were fabricated

by the Sheet Metal Shop and the FRP Shop

developed 73 different parts for our various truck

& bus models. The quality of sheet metal paris

developed indigenously compares favourably

with the original parts imported from Japan.

LOCALIZATION / DELETION

PROGRAM

Every fiscal year ends with successful

achievement of deletion targets, while each

successive new year carries new, aggressive

targets for localization. The year just closed

was remarkable in the sense that indigenisation/

deletion levels reached 53%, which was due to

the combined effort of all the team members of

the organization, without which such smooth

target achievements would not have been

possible. In the year under review, new models

were launched with the same level of deletion i.e.

53% according to the programs approved by the

Government.

The Company's localization targets have been

kept aggressive to save foreign exchange and

attain maximum technology transfer.

In April, 1996, a Vendor's Convention was held

in Karachi, which was attended by the

Company's vendors from all over Pakistan. The

Convention was presided over by the President of

Hino Motors Ltd. Japan and joined by other

dignitaries from TTC and the Government of

Pakistan.

QUALITY ASSURANCE

Quality at Hinopak is progressively moving

towards meeting the most advanced Quality

Management standards practiced elsewhere in

the world.

For promoting quality culture, QC circle

presentation contests were organised for

motivating the work force on Quality aspects. In

November, 1995 members from two winning

teams of Hinopak QC circle contest were sent to

Hino Motors Ltd. Japan for participation in the

5th Hino Overseas QC Circle Convention.

ISO 9000 REGISTRATION

The Company's efforts to achieve ISO 9000

certification are being intensively pursued.

Preparation of the Quality Manuals as well as

Procedure & Instruction Manuals are in the final

stages, while the internal system audit is

simultaneously in progress to ensure that the

Company obtains the required certification early

next year.

TECHNICAL DEPARTMENT

The Technical Department continued to expand

its role in different areas to assist the Company

in achieving manufacturing and marketing

synergy. The focus was towards streamlining

manufacturing operations by providing support

through comprehensive documentation in the form

of Operation Description Sheets (ODS). A Skill

Development Program was pursued consistently,

parallel to the ODS, to develop a multi-skilled

labour force. The effort was apart from regular

programs conducted in affiliation with the Sindh

Board of Technical Education and Directorate of

Manpower which benefited 21 workers and 12

apprentices respectively. The thrust of support to

marketing activities was towards developing a

system to evaluate strengths and weaknesses of

the Hinopak product range and in turn lead to

improvements in deficient areas. Another activity

carried out during the year was the alignment

of Hinopak's manufacturing processes with

that of other Hino affiliates under Hino

Overseas Manufacturing Conference (HOMAC)

guidelines. This activity was followed in line

with efforts of Hino Motors Ltd. Japan, to

formulate a common process language to serve as

a communication medium among its six overseas

manufacturing affiliates situated in South East

Asia and Japan.

COMPUTERIZATION

Hinopak believes in the philosophy of keeping its

Information Technology environment uptodate

with the latest trends. The Company is operating

a fully integrated Manufacturing and Financial

system which enables management to update

all its manufacturing and financial information

simultaneously.

The MIS department is also connected to the

Internet, which provides on-line immediate

information from the word wide web to any

requesting department in Hinopak. In future

Hinopak also plans to have an individual web site

which will provide Internet services to other

organizations and users around the world.

The Company has also introduced a Local Area

Network (LAN) system, which enables PC users

to be linked together for software and hardware

resource sharing purposes.

LABOUR MANAGEMENT RELATIONS

Labour Management Relations remained smooth

and supportive to help promote productivity

culture in the Organisation. The Company's 10th

Anniversary celebration in April 1996 witnessed

the largest assembly of the Hinopak family,

when over 7000 persons comprising Company

employees alongwith their family members

gathered at a local stadium and shared a day-long

program of colourful festivities.

TRAINING

A multi-skill improvement program, PC

application training program and various

professional and technical training courses were

organised during the year to focus on the

Company's continued efforts to improve the

quality of its human resources. 18 managers and

executives were sent to Japan under the AOTS

and other Overseas Training programs during the

financial year 1995-96.

STAFF WELFARE, SPORTS AND

RECREATIONAL ACTIVITIES

The Company continues its philosophy to

patronize sports. The 6th KCCA Inter-firms

Cricket tournament and the Hinopak 10 years

Celebration Cup Cricket Tournament, both