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

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

T O Y O T A

INDUS MOTORS COMPANY LTD.

(ANNUAL REPORT 1996)

CONTENTS

Toyota's Guiding Principles

Company Information

Directors' Report

Chairman's Review

Auditors' Report

Balance Sheet

Profit and Loss Account

Statement of Changes

in Financial Position

Notes to the Accounts

Pattern of Shareholdings

Notice of Meeting

Guiding Principles

[] Be a company of the world

[] Serve the greater good of people

everywhere by devoting careful attention to

safety and to the environment

[] Assert leadership in technology and in

customer satisfaction

[] Become a contributing member of the

community in every nation

[] Foster a corporate culture that honours

individuality while promoting teamwork

[] Pursue continuing growth through efficient

global management

[] Build lasting relationships with business

partners around the world

Shoichiro Toyoda

Chairman

Hiroshi Okuda

President

Board of Directors

Chairman

Mr. Ali S. Habib

Vice Chairman

Mr. Yoshiyuki Matsumiya

Chief Executive Officer

Mr. Farhad Zulficar

Directors

Mr. Mohamedali R. Habib

Mr. Hideaki Otaka

Mr. Azhar Wall Mohammad

Mr. Masaru Kato

Company Secretary

Mr. Shahid M. Khan

Bankers

American Express

ANZ Grindlays Bank plc

Askari Commercial Bank

Bank of America

Bank of Tokyo Ltd.

Banque Indosuez

Deutsche Bank

Emirates Bank International Ltd.

Faysal Bank Ltd.

Habib Bank AG Zurich

Hong Kong & Shanghai Banking Corporation

Metropolitan Bank

Muslim Commercial Bank Ltd.

National Bank of Pakistan

Standard Chartered Bank

Societe Generale

Auditors

M/s. Ford, Rhodes, Robson, Morrow

Chartered Accountants

1st Floor, Finlay House,

I.I. Chundrigar Road, Karachi.

Legal Advisors

Khalid Anwer & Co.

Mansoor Ahmed Khan & Co.

Mahmood & Co.

Qadir H. Sayeed

Registered Office

14, Bangalore Town Housing Society,

Main Shahrah-e-Faisal, Karachi.

Registrar

M/s. Noble Computer Services (Pvt) Ltd.

1st Floor, AI-Manzoor Building,

Dr. Ziauddin Ahmed Road, Karachi.

Regional Offices

Lahore

8/1 Abid Majeed Road, Lahore Cantt.

Islamabad

2A, Ataturk Avenue West, G-6/4, Islamabad.

Factory Site

Plot No. NWZ/P-1,

Port Qasim Industrial Estate,

Bin Qasim, Karachi.

Five Years at a Glance

(Rupees in thousands)

1996

1995

1994

1993

1992

Toyota Vehicles

Sales (Units)

8,125

6,802

9,440

11,034

8,440

Turnover

4,136,100

3,869,607

4,722,194

4,307,280

1,917,184

Profit before taxation

221,024

85,513

149,702

167,059

133,272

Taxation

33,789

33,792

28,157

82,581

39,000

Profit after taxation

187,235

51,721

121,545

84,478

94,272

No of employees

546

509

553

496

230

Earning per share

(in Rupees)

2.38

0.66

1.55

1.07

1.20

DIRECTORS' REPORT

The Directors of Indus Motor Company Limited take pleasure in presenting this Report, together with

the Accounts of the Company for the year ended June 30, 1996 and recommend the following

appropriations:

1996

1995

(Rupees in thousands)

Operating Results

Profit before tax

221,024

85,513

Taxation

33,789

33,792

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

Profit After Taxation

187,235

51,721

Unappropriated Profit brought forward

347

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

187,303

52,068

Appropriations

Dividend- proposed @ 15%

117,900

Transfer to revenue reserve

69,000

52,000

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

Unappropriated Profit Carried Forward

403

====================

Directors

Since the holding of the last Annual General Meeting on 16th December 1995, the following changes

have taken place in the Board of Directors.

1. Mr. Akira Yokoi resigned and Mr. Hideaki Otaka was appointed in his place.

2. Mr. Masahiko Takahashi resigned and Mr. Masaru Kato was appointed in his place.

The Board of Directors wishes to record its appreciation of the valuable services rendered by the

outgoing Directors and welcome the new Directors.

Auditors

The Auditors, Messrs. Ford, Rhodes, Robson, Morrow, retire at the conclusion of the 7th Annual General

Meeting and, being eligible, offer themselves for re-appointment.

Chairman's Review

The directors of the Company endorse the contents of the Chairman's Review dealing with the Company

activities which is included in the Annual Report and forms an integral part of the Directors' Report.

Earning Per Share (EPS) and Pattern of Shareholding

E3rning Per Share and Pattern of Shareholding of the Company as at June 30, 1996 is given on Page 6

and Page 31 respectively,

Karachi:

October 01, 1996.

FARHAD ZULFICAR

Chief Executive Officer and Director

YOSHIYUKI MATSUMIYA

Vice Chairman and Director

CHAIRMAN'S REVIEW

As Salaam O Alaikum, Shareholders,

During the period under review, additional

taxation with tile imposition of regulatory duty,

further devaluation of the Rupee and competitive

marketing environment continued to pose

challenges to the Company.

The Company's operations for the year resulted

in a gross profit of Rs. 400.542 million and a net

profit of Rs. 187.235 million after providing for tax

which shows substantial improvement over the

first half of the year when the results were gross

profit of Rs. 127.503 million and net profit

after-tax of Rs. 25.684 million.

Enhancement of the production facilities for the

Toyota Hilux pick-ups and the Diesel Corolla

2000cc combined with competitive pricing

strategy increased profitability. While the net

sales increased by 6.89% as compared to the

previous year the gross profit ratio also went up

from 7.62% to 9.68%. Financial costs stood

substantially reduced while selling,

administration and general expenses increased

marginally in comparison with the previous year.

The overall improvement in profitability and cash

flow has resulted in the directors

recommendation for a payment of dividend @

15% which is consistent with the Company's

policy of maintaining a reasonable balance

between dividend payments and income retained

to finance future capital investments.

Operations for 1995-96

While the industry continues to face problems

due to additional taxation and Rupee

devaluation, the unfavourable effects of the taxi

scheme are now receding as the taxi vehicles in

stock with the Dealers have mostly been sold.

The year under review was eventful for the

Company. The 5th Dealers' Conference was held

in Islamabad in July 1995 and in August the

celebration for the line-off of the 10,000th locally

produced vehicle was held. The Company's new

product the Toyota Hilux pick-up was

introduced in Rawalpindi on 7th March '96.

Immediately thereafter the 2000cc Diesel Corolla

was launched at a colourful ceremony in Lahore.

In May a new recreational vehicle the "Toyota

RAV 4" was test marketed to monitor customer

response which was good and the vehicle will be

formally launched soon.

Record production and sales were achieved in

June and the threshold of 15,000 locally

produced vehicles was also crossed.

The market response to the Toyota Hilux which is

very popular in the northern region of the country

has been very encouraging. The 2000cc Diesel

Corolla has also come up to the customers'

expectations due to its high quality, comfort and

diesel economy. With four Corolla models and

two Hilux models the product range has been

expanded and will improve capacity utilization in

the coming years.

Marketing Operation

Toyota's philosophy is "Customer Satisfaction",

which has been the driving force behind the

marketing operations of the Company. Continued

efforts in "After Sales Service" at the Dealerships

and from within the Company, the establishment

of a "Customer Relation Cell" and the ongoing

programme for training to our dealership staff

have resulted in improved service to our

customers. The uninterrupted availability of spare

parts at reasonable prices throughout the country

contributed in Toyota vehicles commanding a

high resale value which in turn attracts repeat

sales and customer loyalty thus achieving our

objective of an increased market share for

Toyota.

In recognition of our achieving a higher standard

of "After Sales Service" in Pakistan, Toyota Motor

Corporation of Japan has presented the

Company its "Gold Performance Award" which

places Pakistan in the highest category.

Production & Quality Assurance

In addition to installing production facilities for the

Hilux Pick-ups and the Diesel Corolla, production

volumes also increased as compared to the

preceding year. The implementation of Toyota

Production System based on Just-in-Time (JIT),

Built-in-Quality and continuous improvement

through Kaizen has been further consolidated

and this has helped in improving efficiencies of all

production activities.

A comprehensive and Independent Quality

Assurance Division of professionally qualified

engineers is exercising strict Quality Control in

three vital areas namely:

· Incoming materials including process

checks at vendor's site.

· Component processing and assembly check

at Plant.

· Final delivery of products from Plant.

The role of the Quality Assurance Department

has been expanded to support and train vendors,

conduct process audits at vendor premises and

also support the Service Department in grasping

customers quality expectations and taking

corrective measures to meet them.

Kaizen Circle activities initiated during previous

years registered substantial growth signaling a

healthy response towards continuous

improvement in systems and process.

Indigenisation Program

Adherence to the deletion policy of the

government to achieve maximum indigenisation

and promotion of the automobile vending

industry has been one of the key objectives of the

Company.

Not only have the deletion targets set by the

Government been met, the number of local

components utilized by us in Corolla stands

highest among other manufacturers in this

category.

In order to meet future deletion targets, Product

Development Department is continuously

enhancing its own inspection and testing facilities

and additional modern equipments are being

added as local components increase to ensure

that high Toyota quality standards are

maintained.

Development of vendors, improving technical

know how and installation of improved quality

control system is another task being focused

upon by the Product Development Department.

With the co-operation of its vendors and the

technical assistance of its Toyota advisors, the

Company is set to achieve the future deletion

targets. The Technical Assistance Agreements

with Toyota vendors from Japan for radiators, car

air conditioners and shock absorbers have been

implemented and production and supplies to the

Company have started.

Computerization

During the year under review, the Company has

made significant progress in acquiring new

computer technology. We have made progress in

the development of in-house programs and

implementation of new software and its

applications which provides a centralized

database, supports integration between the

Manufacturing and the Financial Systems and is

assisting the Company in providing meaningful

data in time for management decision making.

Human Resource Development

Our commitment towards development of Human

Resource to achieve long term goals continued

during the year. For the enhancement of

professional and technical skills approximately

40% of the total manpower were trained in

courses ranging from management development,

team work and additional technical training. Also

20 members of the Indus Team were imparted

overseas training by Toyota Motor Corporation.

The Company has extended its training

programs to cover Dealers and Vendors who are

also a part of the IMC team as we believe that

enhancing their Human Resources will give your

Company a competitive edge in the coming

years. Recruits during the year also went through

class room and on-the-job training before joining

their respective departments in the Company.

Government Policies

Government Policies during 1995-96, in respect

of local automobile industry have remained more

or less consistent and encouraging. However,

need for a long term stable policy for the industry

is yet to be recognized by the Government. The

Engineering Development Board set-up under

the Board of Investment has started working,

however, much more is expected from the Board

towards recommending / implementing long term

industry friendly policies to provide a strong

engineering base in the country which is vital for

the continuous healthy growth of the industry and

the ancillary component manufacturing sectors

consisting of vendors.

Some aspects of Government policies, however,

have been continuously affecting the smooth

working of the industry. One hurdle is the

statutory requirement of collection of Capital

Value Tax by the manufacturer from the

Customers which is counter checked by the

Excise and Taxation Department responsible for

ensuring collection of Capital Value Tax. This

system is cumbersome and causes inordinate

delays in deliveries to customers. We have made

representations to the Government-to remove

such anomalies.

In addition to the above, the presumptive tax

regime has resulted in the same goods being

taxed thrice without any adjustment of taxes paid

at the previous stages. We have made

representations to the Government to review this

system also.

Future Outlook

The law and order situation in Karachi though

improved continues to affect production as well

as demand for new vehicles. While the state of

the economy is far from satisfactory, tariff

changes in the recent budget indicate

inconsistency in the Government policies for the

industry.

The continuation of Regulatory Duty @ 10%,

increase in Custom Duty of CKD kits by 8% and

sales tax by 3%, increase in the rate of Capital

Value Tax (CVT) for non tax payers and

imposition of CVT on tax payers present new

challenges to the management in their efforts

towards improving sales volume and profitability.

The CVT imposed as a percentage of value

based on engine capacity is high and needs to be

rationalized as it is discouraging sales. The levy

of 6% CVT for tax payers and 15% CVT for non-

tax payers on the Diesel Corolla is discriminatory

as it is an economical vehicle and not a luxury

one taxing it simply based on its engine size is

unjustifiable. We have taken up this matter with

the Government.

No amount of efforts at maintaining the industry's

progress can be successful without the support

of the Government. We are still hopeful that with

their co-operation and the recommendations of

the Engineering Board a long term and

consistent industry-friendly policy will

be evolved.

With the introduction of the Diesel Corolla and

the Hilux single cabin pick-ups, the Company's

capacity utilization will improve. Studies to add

other types of Toyota vehicles to the production

line continue so that a constant growth in sales

and turnover by increasing models is maintained

in the coming years. Plans to add two double

cabin pick-ups to the product range have already

been finalized.

We have continued to maintain the high quality of

our products and our Management and workers

have worked with absolute dedication. Our

Dealers and Vendors also continue to contribute

by providing high quality after-sales service and

by producing quality components of high

standards.

We are thankful to the Ministry of Industries and

the newly set-up Engineering Development

Board for their continued support. We are

grateful to our shareholders, staff, dealers and

vendors for their dedication and commitment to

our common goal. We are particularly

appreciative of our customers for their loyalty and

support for Toyota Vehicles.

We pray to Allah for his guidance and our

continuous success.

ALl S. HABIB

Chairman

AUDITORS' REPORT TO THE MEMBERS

We have audited the annexed balance sheet of

INDUS MOTOR COMPANY LIMITED as at June

30, 1996 and the related profit and loss account

and statement of changes in financial position,

together with the notes forming part thereof, for

the year then ended, 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 purpose 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 Companies Ordinance, 1984;

(b) in our opinion:

i) the balance sheet and profit and 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