| Pioneer Cement Limited |
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|
(Annual Report 1996) |
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| CONTENTS |
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| Corporate
Information |
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2 |
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| Notice
of Meeting |
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3 |
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| Directors'
Report |
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4 |
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| Pattern
of Shares Holding |
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12 |
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| Auditors'
Report |
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13 |
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| Balance
Sheet |
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14 |
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| Profit
and Loss Account |
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16 |
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| Statement
of Sources & Application of Funds |
17 |
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| Analysis
of Increase/(Decrease) in Working Capital |
18 |
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| Notes
to the Accounts |
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19 |
|
| Proxy |
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|
| CORPORATE
INFORMATION |
|
| BOARD OF DIRECTORS |
|
| Malik Manzoor Hayat Noon |
(Chairman) |
|
| Javed
Ali Khan |
(Chief Executive) |
|
| K.
Iqbal Talib |
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| Mohammad
Anwar Mir |
|
| Dr.
Parvez Hassan |
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| Lt.
Col. (R) M. Bashir Ahmed |
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| Soren
Iversen (FLS) |
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| Ghulam
Muhammad Ziaullah (ADB) |
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| Khalid
Tanwari (NDFC) |
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| Rauf
Baksh Kadri (BE) |
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| MANAGEMENT |
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| Javed
Ali Khan |
Chief Executive |
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| Usman
Masud Khan |
Director Coordination |
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| Badruddin
Fakhri |
Director Finance |
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| I.H. Shamsi |
|
Financial Advisor |
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| Talat
Saeed Khan |
General Manager Marketing |
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| Emilio
Gutierrez |
General Manager Works |
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| Javed Ellahi |
|
Deputy General Manager
Works |
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| SECRETARY |
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| Syed
Anwar Ali |
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| AUDITORS |
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| Anjum
Asim Shahid & Company, Chartered Accountants |
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| LEGAL
ADVISERS |
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| Hassan
& Hassan (Advocates) |
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| BANKERS |
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| Bank
AI-Habib |
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| Habib
Bank Limited |
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| Citi Bank |
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| Habib
Bank AG Zurich |
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| National
Bank of Pakistan |
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| National
Development Finance Corporation |
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| Standard
Chartered Bank |
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| United
Bank Limited |
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| Muslim
Commercial Bank Ltd. |
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| Crescent
Investment Bank Ltd. |
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| REGISTERED
OFFICE |
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| 1st
Floor, Alfalah Building, Shahrah-e- Quaid-e-Azam, Lahore. |
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| SHARES
DEPARTMENT |
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| Registrars: |
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| Ford,
Rhodes, Robson, Morrow, |
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| MCS
Department, 4th Floor, Writers Chambers, |
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| I.I.
Chundrigar Road, Karachi. |
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| Ph: 2427497 |
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| KARACHI
OFFICE |
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| 7th
Floor, Lakson Square, Building No. 3, Sarwar Shaheed Road, Karachi. |
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| SALES
OFFICES |
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| Lahore
Office: |
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| 77-Ahmed
Block, New Garden Town. |
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| Telephone
No: 5867270-71 |
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| Faisalabad
Office: |
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| 103-C,
Peoples Colony. |
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| Telephone
No: 710051. |
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| Sargodha
Office: |
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| 66/9
Civil lines, Kutchery Road, |
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| Sargodha.
Telephone No: 724003 |
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| FACTORY |
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| Chenki,
District Khushab. |
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| NOTICE
OF ANNUAL GENERAL MEETING |
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| Notice
is hereby given that the 10th Annual General Meeting of the Members of
Pioneer Cement Limited |
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| will
be held at 66/67 Garden Block, New Garden Town, Lahore on Tuesday the 31st
December, 1996 at |
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| 11.00
a.m to transact the following business. |
|
|
| 1.
To confirm the minutes of the extraordinary general meeting held on 8th
August, 1996. |
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| To
receive, consider and adopt the audited accounts for the year ended 30th
June, 1996 and reports |
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| of
the directors and the auditors thereon. |
|
|
| 3.
To appoint auditors for the ensuing period and fix their remunerations. |
|
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| 4.
To transact any other business as may be placed before the meeting with
permission of the Chairman. |
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|
|
By Order of the Board |
|
|
|
Syed Anwar Ali |
|
| 8th
December, 1996 |
|
Company Secretary |
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|
| Notes: |
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| i)
The share transfer Books of the Company shall remain closed on 30th December,
1996 and 31st |
|
| December,
1996. |
|
|
| ii)
A member entitled to attend, speak and vote at this meeting may appoint
another member as proxy |
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| to attend, speak and vote on his/her
behalf. Proxies in order to be effective must be received at the |
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| Registered Office of the Company not later
than 48 hours before the meeting. |
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|
| iii)
The members are requested to notify change in their address, if any, to the
Company's Registrars |
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| i.e. M/s. Ford, Rhodes, Robson, Morrow,
12-A, First Floor Writers Chamber, Mumtaz Hasan Road, |
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| Karachi. |
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|
| DIRECTORS'
REPORT |
|
| It gives me immense
pleasure to present the |
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| annual
report and audited accounts of the |
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| company
for the financial year ended on 30th June, |
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| 1996
on behalf of the Board of Directors. |
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|
| PRODUCTION |
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| The
performance of the plant has been highly |
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| encouraging.
Production of clinker during 1995- |
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| 96
was 634,823 tons which represented a capacity |
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| utilisation
of 96%, as against 91% achieved during |
|
204 |
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| last
year. I.D. Fan motor which had problems right |
|
1,960 |
|
| from
the inception, got flashed in September, |
|
| 1995.
The plant had to remain closed for 27 days. |
|
91% |
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| Free
replacement of motor was however arranged |
|
| from
the suppliers of motor and the kiln went back |
|
| into
operation after 27 days. Had this abnormal |
|
374,197 |
|
| stoppage
of kiln not taken place, the production |
|
139 |
|
| would
have been of the order of about 688,000 |
|
2,698 |
|
| tons
representing a capacity utilisation of 104%. |
|
| You
will also be pleased to know that average |
|
81% |
|
| output
per day increased to 2,151 tons during |
|
| current
year as against 1,960 tons per day |
|
| achieved
last year registering a rise of over 10% |
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| which
sufficiently speaks of the efficiency of the |
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| plant. |
|
|
| Cement
production was 687,457 tons yielding a |
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| capacity
utilisation of 99% as against capacity |
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| utilisation
of 87% achieved last year. Average |
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| production
per day increased to 2,999 tons from |
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| 2,698
tons representing an increase of 11% over |
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| last year. |
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|
|
1996-97 |
1995-96 |
1994-95 |
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|
(5 months) |
|
(8 months) |
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|
| Clinker |
|
|
| Production(Tons.) |
261,825 |
634,823 |
399,790 |
|
| Running Days |
|
122 |
122 |
295 |
|
| Output
per day(Tons.) |
2,144 |
2,144 |
2,151 |
|
| Capacity |
|
| utilisation |
|
95% |
95% |
96% |
|
|
| Cement |
|
| Production(Tons.) |
293,045 |
687,457 |
374,197 |
|
| Running Days |
|
91 |
229 |
139 |
|
| Output per day(Tons.) |
3,208 |
2,999 |
2,698 |
|
| Capacity |
|
| utilisation |
|
101% |
99% |
81% |
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| MARKETING |
|
| Sales
were of the order of 679,891 tons yielding a |
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| monthly
average of 56,658 tons as against monthly |
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| average
of 46,966 tons achieved during 1994-95 |
|
| registering
an increase of 20.6% over the last year. |
|
|
| During
the period under review the cement market |
|
| was
characterised by frequent fluctuations in prices. |
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| The
coming on stream of Pioneer, A.C. Wah (March, |
|
| 1995),
expansion in Cherat Cement and the |
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| shrinkage
in local demand of cement due to adverse |
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| economic
conditions and slowdown of government's |
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| developmental
projects created a grave oversupply |
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| situation.
This caused a cut-throat price competition |
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| amongst
the manufacturers in the Northern Zone, |
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| bordering
on a price war. Efforts were made from |
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| time
to time to shore up prices through coordinated |
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| efforts,
to at least recover the escalations occurring |
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| because
of tremendous increases in government |
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| taxes,
input costs and devaluation. These efforts |
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| however
could not succeed as every time the weak |
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| market
failed to absorb the higher prices. |
|
|
| The
total quantity of cement sold during the period |
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| July,
1995 to June, 1996 in the Northern Zone was |
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| about
5.4 million tons compared to an installed |
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| capacity
of approx. 6.4 million tons. The situation |
|
| was
further aggravated when Southern brand cement |
|
| was
also diverted to Northern zone from Karachi |
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| and
Hyderabad. However, due to the company's |
|
| aggressive
marketing policies, except for the slack |
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| period
of November 1995 to January, l996 during |
|
| which
the average sale was 44,318 tons per month, |
|
| for
the rest of the period from February, 1996 to |
|
| October,
1996, the average monthly sale was 57,535 |
|
| tons
which is 96% of the rated capacity. |
|
|
| The
downward trend in ex-factory prices which started |
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| in
February, 1995 continued till August, 1995 when |
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| the
lowest point of Rs.2,900 per ton was reached (from |
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| Rs.3,310
in February, 1995). The higher price level of |
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| Rs.3,250
achieved in November/December, 1995 |
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| could
not be sustained and the price levels once again |
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| came
down to around Rs.3,000 per ton in May 1996 |
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| due
to over supply situation. |
|
|
| The
increases made in price first to Rs.3,250 in early |
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| June
1996 and then to Rs.3,950 in mid June, 1996 |
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| were
essentially to incorporate the effect of higher |
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| furnace
oil prices and huge rises in Excise Duty and |
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| Sales
Tax from 25% to 35% and from 15% to 18% |
|
| respectively.
From this level prices once again came |
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| down
to Rs.3,550 in October, 1996. This price was |
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| increased
again to Rs.3,800 in mid November, 1996 |
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| because
of further increase in the price of Furnace |
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| Oil,
but currently this price is also finding difficult to |
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| hold on. |
|
|
| Your
management is however fully alive to the |
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| market
conditions and has been successful in |
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| selling
cement equivalent to our capacity, without |
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| accumulating
stocks of clinker or cement. The only |
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| setback
faced by the management is falling prices |
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| which
in turn adversely affects the profitability of |
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| the company. |
|
|
| OPERATING
RESULTS |
|
| Gross
Sales Revenue amounted to Rs.2,109 |
|
| million,
out of which Rs.792 million were paid to |
|
| the
government as Excise Duty and Sales Tax. |
|
| Net
sales revenue amounted to Rs. 1,272 million. |
|
|
| The
company earned a gross profit of Rs.406 |
|
| million
as against a gross profit of Rs.271 million |
|
| earned
during last year. |
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|
|
|
| After adjusting
financial charges, operating |
|
| expenses and
other income (charges), net profit |
|
| before
tax comes to Rs.34.4 million. Although the |
|
| company
is exempted from income tax, Rs.4.24 |
|
| million have to be
paid to the government as |
|
| turnover
tax. This leaves a balance of Rs.30.2 |
|
| million
which is being carried forward. The |
|
| accumulated
retained earnings come to Rs.54.805 |
|
| million
which is hardly enough to declare any |
|
| dividend. |
|
|
|
| The
company has not been able to make adequate |
|
| profits
during the year owing to the following |
|
| factors: |
|
|
| 1.
Net prices of cement kept on declining due to |
|
| glut of cement caused by an
over-supply |
|
| situation
which was further aggravated by the |
|
| extremely
depressed economic conditions of |
|
| the country. |
|
|
| 2.
Prices of packing material, fuel and other |
|
| items
of cost kept on increasing. |
|
|
| 3.
Being new and capital intensive unit, |
|
| depreciation
and financial charges of the |
|
| company
at Rs.447 million are very high when |
|
| compared
with other like plants which not only |
|
| have
lower depreciation cost but also carry |
|
| nominal
financial charges. |
|
|
| With
recent change in the government, it is |
|
| expected
that economic activities will be geared |
|
| up
and development projects will be revived which |
|
| will
result in higher demand of cement which will |
|
| certainly
lead to higher prices of cement and |
|
| improved
profitability for the company. |
|
|
| RESTRUCTURING
OF LOANS |
|
| You
will be pleased to know that ADB and AFIC |
|
| have
approved restructuring of their loans. IDBP |
|
| has
also approved restructuring of its loan. |
|
| Restructuring
of loans is however, still in process |
|
| with
NDFC and BE. Fresh proposals have been |
|
| submitted
with these financial institutions. After the |
|
| restructuring
will be approved by them the current |
|
| liabilities
of the company appearing on the balance |
|
| sheet
as on 30th June, 1996 are expected to be |
|
| reduced
by over Rs.300 million. |
|
|
| CAPITALIZATION
OF EXCHANGE COVER FEE |
|
| The
auditors are of the opinion that in the light of a |
|
| technical
release issued by the Institute of Chartered |
|
| Accountants,
the foreign exchange cover fee |
|
| should
be charged to Profit & Loss Account. |
|
| However,
as per the legal opinion sought by the |
|
| company
with reference to the International |
|
| Accounting
Standard No.23, the company can |
|
| continue
to capitalise foreign exchange cover fee |
|
| payable
to State Bank of Pakistan against foreign |
|
| currency
loans. |
|
|
| ADDITIONAL
MARK UP |
|
| The
auditors are of the opinion that since financial |
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| restructuring
with NDFC and BE is still in process |
|
| and
the original schedules of loans have not been |
|
| revised,
additional mark up (penal interest) provided |
|
| in
the loan agreements with the DFIs in the event of |
|
| late
payment of instalments should be charged to |
|
| the
accounts. The contention of the management is |
|
| that
since it was in principle agreed with all the DFIs |
|
| that
no penal interest/additional mark-up will be |
|
| charged
on restructuring of loans, the same has |
|
| not
been charged in the accounts. |
|
|
| The
contention of the management is further |
|
| strengthened
by the fact that no penal interest has |
|
| been
taken into account by ADB and AFIC and no |
|
| additional
mark up has been taken into account |
|
| by
IDBP, while restructuring their respective loans. |
|
|
| FUTURE
OUTLOOK |
|
| The
cement sector is undergoing a severe crisis |
|
| because
of unprecedented rise in the prices of |
|
| furnace
oil, electricity and over supply situation |
|
| persisting
in the sector due to shrinking demand |
|
| of
cement. Besides, a number of new cement |
|
| projects
are expected to come on stream in the |
|
| near
future. The company however, Insha-Allah, |
|
| being
highly cost efficient in respect of |
|
| consumption
of furnace oil and electricity and |
|
| having
impressive track record of capacity |
|
| utilisation
can withstand the adversaries of the |
|
| changing
scenario. |
|
|
| However,
through the forum of All Pakistan Cement |
|
| Manufacturing
Association the government is |
|
| being
perused to announce a relief package for |
|
| the
cement industry which may include the |
|
| following: |
|
|
| 1.
Reduction in Excise duty and Sales tax which |
|
| is
currently about three times higher than |
|
| neighbouring
countries to bring the net price |
|
| of
cement available to Pakistani cement |
|
| manufacturers
at par with neighbouring |
|
| countries. |
|
|
| 2.
Rationalization in import duty on import of |
|
| paper bags. |
|
|
| 3.
Duty draw back on furnace oil and electricity. |
|
|
| 4.
Reclassification of power tariff for cement |
|
| industry. |
|
|
| 5.
Export subsidy on export of cement. |
|
|
| 6.
Removal of restriction on export of cement |
|
| by road. |
|
|
| BOARD
OF DIRECTORS |
|
| We
deeply regret to inform the members that the |
|
| Chairman
of the company, Malik Nur Hayat Noon |
|
| breathed
his last on 6th September, 1996 in New |
|
| York
hospital where he was under treatment for last |
|
| several
months. |
|
|
| The
company owes a lot to him. He was always |
|
| available
for guidance and stood as a symbol of |
|
| strength
for the management. The Directors have |
|
| elected
Malik Manzoor Hayat Noon, his younger |
|
| brother
as Chairman of the company. Malik Manzoor |
|
| Hayat
Noon has close affiliation with the industrial |
|
| environment
for about 35 years. He has a good |
|
| acumen
for trade and industry. It is hoped that under |
|
| his
dynamic leadership the company will excel in its |
|
| performance
remaining within the constraints of |
|
| cement
sector. |
|
|
| Mr.
Richard Marshall (Nominee director of ADB) |
|
| resigned
due to his transfer from Pakistan. We |
|
| hereby
acknowledge his contribution made almost |
|
| in
all the Board meetings by giving his expert advices |
|
| for
running the affairs of the company. In his place |
|
| Mr.
G.M.Z. Khan has been appointed as director of |
|
| the
company. He is welcomed on the Board and it |
|
| is
hoped that the company will benefit from his |
|
| valuable
experience. |
|
|
| Mr.
I.H. Shamsi also resigned from the Board after |
|
| having
retired from BE. We also acknowledge his |
|
| contribution
in formulating policies in the Board |
|
| meetings.
In his place Mr. Rauf Baksh Kadri has |
|
| been
nominated as member of the Board. He is |
|
| welcomed
to the Board. Being a prominent figure |
|
| in
the field of finance and accounts, it is hoped that |
|
| the
company will immensely benefit from his |
|
| expertise. |
|
|
| Lt.
Col.(R) M. Bashir Ahmad has also been |
|
| nominated
as member of the Board in place of Late |
|
| Malik
Nur Hayat Noon. He is also welcomed to the |
|
| Board
hoping that the company will be benefitted |
|
| by
his long experience in the industry. |
|
|
| ACKNOWLEDGMENT |
|
| The
Directors would like to express heartiest |
|
| thanks
to the Directors of Asian Development |
|
| Bank,
Asian Finance & Investment Corporation |
|
| Limited
and Industrial Development Bank of |
|
| Pakistan
who have restructured their loans. The |
|
| Directors
would also like to express sincere thanks |
|
| to
National Development Finance Corporation and |
|
| Bankers
Equity Limited who have been considering |
|
| the
financial restructuring facility and hope to approve |
|
| the
same in the near future. |
|
|
| Thanks
are also due to Nissho Iwai Corporation |
|
| who
have extended full cooperation to the |
|
| company.
Thanks are also due to Saudi Pak |
|
| Agricultural
and Investment Co. (Pvt) Limited and |
|
| Crescent
Investment Bank Limited for their |
|
| cooperation
and continued financial support to the |
|
| company. |
|
|
| The
Directors also appreciate the strenuous efforts |
|
| made
by the distributors and employees of the |
|
| company
for producing best possible results |
|
| remaining
within the crisis situation prevailing in |
|
| the
cement sector. It is hoped that they will |
|
| continued
to work with the same zeal and spirit |
|
| witnessed
so far. |
|
|
|
For & on behalf of
the Board. |
|
|
|
JAVED ALl KHAN |
|
|
Chief Executive |
|
|
|
|
| PATTERN
OF SHAREHOLDING AS AT JUNE 30, 1996 |
|
|
| No. of Share |
|
Share Holding |
|
Total Shares |
|
| Holders |
From |
|
To |
held |
|
|
| 643 |
|
1 |
100 |
41,214 |
|
| 3119 |
|
101 |
500 |
1,216,582 |
|
| 3600 |
|
501 |
1000 |
2,742,185 |
|
| 2921 |
|
1001 |
5000 |
6,546,547 |
|
| 397 |
|
5001 |
10000 |
2,816,849 |
|
| 104 |
|
10001 |
15000 |
1,264,014 |
|
| 45 |
|
15001 |
20000 |
789,305 |
|
| 32 |
|
20001 |
25000 |
724,683 |
|
| 19 |
|
25001 |
30000 |
516,807 |
|
| 10 |
|
30001 |
35000 |
322,057 |
|
| 8 |
|
35001 |
40000 |
298,754 |
|
| 4 |
|
40001 |
45000 |
169,609 |
|
| 9 |
|
45001 |
50000 |
442,454 |
|
| 5 |
|
50001 |
55000 |
265,475 |
|
| 2 |
|
55001 |
60000 |
114,625 |
|
| 7 |
|
60001 |
65000 |
427,407 |
|
| 1 |
|
65001 |
70000 |
65,307 |
|
| 1 |
|
70001 |
75000 |
72,500 |
|
| 2 |
|
80001 |
85000 |
168,219 |
|
| 2 |
|
85001 |
90000 |
170,686 |
|
| 3 |
|
90001 |
95000 |
275,180 |
|
| 1 |
|
100001 |
105000 |
100,800 |
|
| 1 |
|
105001 |
110000 |
108,744 |
|
| 1 |
|
110001 |
115000 |
112,154 |
|
| 1 |
|
115001 |
120000 |
117,818 |
|
| 4 |
|
120001 |
125000 |
489,602 |
|
| 1 |
|
195001 |
200000 |
200,000 |
|
| 1 |
|
215001 |
220000 |
218,288 |
|
| 1 |
|
265001 |
270000 |
269,000 |
|
| 1 |
|
305001 |
310000 |
306,535 |
|
| 1 |
|
330001 |
335000 |
333,900 |
|
| 1 |
|
345001 |
350000 |
348,897 |
|
| 1 |
|
395001 |
400000 |
398,900 |
|
| 1 |
|
570001 |
575000 |
574,545 |
|
| 4 |
|
600001 |
605000 |
2,416,540 |
|
| 1 |
|
630001 |
635000 |
631,531 |
|
| 1 |
|
910001 |
915000 |
910,641 |
|
| 1 |
|
1205001 |
1210000 |
1,208,875 |
|
| 1 |
|
1550001 |
1555000 |
1,552,310 |
|
| 1 |
|
2420001 |
2425000 |
2,420,591 |
|
| 1 |
|
3185001 |
3190000 |
3,187,605 |
|
| 1 |
|
3325001 |
3330000 |
3,328,515 |
|
| 1 |
|
3865001 |
3870000 |
3,868,836 |
|
| 1 |
|
6125001 |
6130000 |
6,129,098 |
|
| 1 |
|
7695001 |
7700000 |
7,700,000 |
</ |
