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AL-GHAZI TRACTORS LTD
ANNUAL REPORT 1996-97
AGRICULTURE
						(Million hectares)
Description			Pakistan	Punjab	Sindh	NWFP	Balochistan
LAND USE
Total geographical area			79.609	20.625	14.091	10.174	34.719
Cultivable land			30.300	13.980	7.010	2.960	6.350
Cultivated area			21.460	12.140	5.730	1.920	1.670
Cropped area			22.150	15.550	3.740	2.020	0.840
Irrigated land			17.120	12.990	2.440	0.890	0.800
as % of cropped area			77%	84%	65%	44%	95%
Land dependent on rain			5.030	2.560	1.330	1.130	0.040
Forest area			3.440	0.470	0.590	1.290	1.090
			4%	2%	4%	13%	3%
FARM DISTRIBUTION 1990
Average size of farm (Hec.)			3.8	3.7	4.3	2.2	9.5
Number of farms
(Million Nos.) Total			5.071	2.957	0.802	1.069	0.243
Owner			69%	69%	50%	78%	81%
Owner-cum-tenant			12%	16%	8%	8%	5%
Tenant			19%	15%	42%	14%	14%
Area of farms Total			19.150	10.970	3.482	2.359	2.339
Owner			65%	62%	59%	73%	81%
Owner-cum-tenant			19%	24%	12%	15%	8%
Tenant			16%	14%	29%	12%	11%
Small Farms (Million Nos.)			4.726	2.755	0.750	1.034	0.187
			93%	93%	94%	97%	77%
Small Farms (Area)			11.568	6.998	2.232	1.657	0.681
			60%	64%	64%	70%	29%
Land use intensity (%)			87	95	83	87	54
Cropping intensity (%)			137	141	140	132	94
Farm machinery/Agro-industries/inputs (E)
Tractors* 1994-95 (Nos)			304 992	*	*	*	*
Tubewells 1993-94 (Nos)			389 493	341 773	23050	8367	16303
Fertilizer plants 1994-95 (Nos)			12	6	4	2	*
Fertilizer use 1994-95			2.183	1.557	0.452	0.142	0.032
(Million nutrient tonnes)
Fertilizer use/hec. 1995			102	128	79	74	19
(Nutrient Kgs/hectare)
Water availability '95 at
Farm gate (mill.acre-feet)			105.98	53.47	46.81	3.75	1.95
Kharif			68.03	33.68	31.07	2.22	1.06
Rabi			37.95	19.79	15.74	1.53	0.89
Storage capacity** 1992-93 (000 tonnes)
Wheat			5 042	2 886	689	445	164
Rice			831	*	*	*	*
Cotton			480	*	*	*	*
CONTENTS
Company Information
Notice of Annual General Meeting
Chairmans' Review
Directors' Report
Decade at a Glance
Auditors' Report to the Members
Balance Sheet
Profit & Loss Account
Cash Flow Statment
Notes to the Accounts
Pattern of Shareholdings
COMPANY PROFILE
DATE OF INCORPORATION:			June 1983
DATE OF COMMENCEMENT
OF OPERATIONS:			September 1, 1983
DATE OF TAKE OVER
BY AL-FUTTAIM			December 8, 1991
START OF PRODUCTION AT
DERA GHAZI KHAN PLANT:
i) Auxiliary Plant.			February 20, 1984.
ii) Main Plant.			April 1, 1985.
INSTALLED CAPACITY:			15,000 TRACTOR PER ANNUM IN SINGLE SHIFT.
TOTAL LAND AREA:			APPROX. 100 ACRES.
EMPLOYEES:			536
OFFICES:
Head Office.			Karachi.
Plant.			Dera Ghazi Khan - 12 km from D.G. Khan City.
Marketing Centres:			Lahore.
			Multan
			Peshawar.
			Islamabad.
			Sukkur.
FACILITIES AT THE
STAFF COLONY
HOUSING			126 FAMILY HOMES AND BACHELOR QUARTERS FOR
			EXECUTIVES AND WORKERS.
POPULATION OF THE STAFF
COLONY:			APPROXIMATELY 500.
CHILDREN IN THE AGTL
PRIMARY SCHOOL:			98
OTHER FACILITIES:			- MOSQUE
			- HOSPITAL WITH AMBULANCE
			- AGTL PRIMARY SCHOOL FOR CHILDREN OF THE STAFF
			RESIDING IN THE COLONY.
			- RECREATION CENTRES FOR EXECUTIVES, WORKERS
			AND LADIES, WITH INDOOR GAMES, TV, VIDEOS, DISH
			ANTENNAS, AND OTHER FACILITIES,
			- PLAY GROUNDS, PARKS, HORTICULTURE, AND
			JANITORIAL SERVICES.
			- SCHOOL BUS FOR PICK AND DROP SERVICES TO
			SCHOOL AND COLLEGE GOING CHILDREN OF THE STAFF
			FOR D.G. KHAN CITY.
			- PRIVATE ELECTRIC GENERATOR FOR UNINTERRUPTED
			POWER SUPPLY
			- CLEAN WATER SUPPLY WITH UV FILTRES.
			- TRANSPORT FACILITY FOR D.G. KHAN CITY & ADJOINING
			AREAS.
COMPANY INFORMATION
Board of Directors				Auditors
KUNWAR IDRIS-CHAIRMAN				A.F. FERGUSON& CO.
PARVEZ ALl - CHIEF EXECUTIVE
KEITH S. STACK				Legal Advisors
SHAH JALIL ALAM				SURRIDGE & BEECHENO
HASAN IRSHAD
RAZI UR RAHMAN KHAN				Tax Advisors
NAZIR A. SHAIKH				FORD, RHODES, ROBSON,
MARIO CHESSA				MORROW
				Bankers
				HABIB BANK LTD.
				SOCIETE GENERALE
Company Secretary				STANDARD CHARTERED BANK
SALEEM ADIL				UNION BANK LTD.
OFFICES
KARACHI.
Registered Office-11th Floor, NIC Building, Abbasi Shaheed Road, Karachi 74400.
Telephone: (92.021) 5660881-5. Telefax: (92.021) 5869387.
DERA GHAZI KHAN
PLANT P.O. Box 38, Sakhi Sarwar Road, Dera Ghazi Khan.
Telephone: (92.0641) 63159, 63805,63750. Telefax: (92.0641) 62117.
LAHORE
MARKETING Center- 10 km Sheikhupura Road, Lahore.
Telephone: (92.042) 270081 272226,7924676-7. Telefax: (92.042) 272257.
ISLAMABAD
Flat No. 8 2nd Floor, Malik Complex, Shahrahe Quaid-e-Azam,
Blue Area, Sector F-7 & G-7, Islamabad.
Telephone: (92.051) 829895, 272866. Telefax: (92.051) 272377.
PESHAWAR
Suite No. 205 A, city Tower, University Road, Peshawar.
Telephone: (92.0521) 842315, 841823.
MULTAN
20 Industrial Estate, Multan.
Telephone: (92.061) 539557-9 Telefax: (92.061) 539241
SUKKAR
C/631/3, Minara Road, Sukkur
NOTICE OF ANNUAL GENERAL MEETING
Notice is hereby given that the Fourteenth Annual General Meeting of AI-Ghazi Tractors Limited will
be held at Hotel Marriott, Karachi on Monday, December 15, 1997 at 11.00 a.m to transact the
following business:
ORDINARY BUSINESS
1. To receive and consider the audited Accounts, the Director's report and the Auditor's report for
the year ended June 30, 1997.
2. To declare the final cash dividend. (The Directors have recommended a final Dividend of 35%
i.e. Rs. 1.75 per share issued, in addition to 15% i.e. Rs. 0.75% per share already paid as
interim Dividend, making a total cash dividend of 50% i.e. Rs. 2.50 Per Share).
3. To appoint Auditors for the year ending June 30, 1998 and to fix their remuneration. The retiring
Auditors M/s A.F. Ferguson & Co. being eligible offer themselves for reappointment.
SPECIAL BUSINESS
1. To approve issue of bonus shares and in this regard to pass the following special resolutions:
"RESOLVED THAT a sum of Rs. 8,110,780 out of the Free Reserves of the company be
capitalised and applied to the issue of 1,622,156 Ordinary shares of Rs. 5/- each and allocated
as fully paid up Bonus shares to the Members whose names appear in the register of the
members at the close of business on November 30, 1997 in the proportion of one Share for
every Ten existing shares held and that such new shares shall rank pari passu with the existing
ordinary shares of the company but shall not be eligible for dividend in respect of the year ended
June 30, 1997."
Further Resolved that in the event of any member holding shares which are not an exact
multiple of Ten, the Directors be and are hereby authorised to sell in the stock market such
fractional entitlement and to pay the proceeds of sale when realized to a charitable Institution."
STATEMENT UNDER SECTION 160 OF THE COMPANIES ORDINANCE 1984
1. The Directors consider it advisable to capitalise a sum of Rs. 8,110,780 which they have set
aside in a special Reserve for issue of Bonus shares.
NOTES:
1. A member entitled to attend and vote at this meeting is entitled to appoint a proxy to attend and
vote on his/her behalf. No person shall act as a proxy (except for a corporation) unless he is
entitled to be present and vote in his own right. Proxies, in order to be effective, must be
received at the registered office of the Company duly stamped and signed not less than 48
hours before the time of the meeting.
2. The Share Transfer Books of the Company will remain closed from December 01, 1997 to
December 15, 1997 (both days inclusive).
3. Members are requested to promptly communicate to the Company any change in their
addresses.
CHAIRMAN'S REVIEW
I take pleasure in welcoming you to the Fourteenth Annual General Meeting of AI-Ghazi Tractors Ltd. and in
presenting the Annual Report and Accounts of your Company for the year ended June 30, 1997.
SALES & PRODUCTION:
The year 1996-97 saw a large contraction in the tractor market from 14,419 units last year to a booking of
merely 8,294. Whereas the ADBP loaning for booking of tractors for the whole industry was restricted to 7,206
units, the lowest in fifteen years, the cash market developed last year was also severely diminished by levy
of Sales Tax coupled with farmers' inability to market the cotton crop profitably. However, with the help of
2,491 bookings, pending for delivery at the beginning of the year, your company was able to deliver 4,701
units during the year against 6 ,617 units sold last year. The market share, in terms of delivery, rose from
40.6% last year to 46.3%.
OPERATING RESULTS:
With austerity and primacy of efficiency, which are settled wisdom at AGTL, your company achieved growth
both in profit and cash generation. Shortly after the privatization of the company, the net equity on June 30,
1992 was just Rs. 4.1 million. Subsequently, with a return to profits, the management, pursuing a sound policy
of creating a strong foundation for growth of the company, has been reinvesting profits into the business. In
five years the net equity of the Company has increased to Rs. 478.4 million at June 30, 1997. This has
resulted in elimination of the financial charges which, in turn, has enhanced profitability. In addition the
company has earned a handsome return on its surplus funds. The prudence of investing in in-house
assembly of hydraulic lifts, steering gear, etc. has yielded substantial savings. Thus, with an impeccable
record of maintaining a price freeze throughout the year in which all national economic indicators showed
alarming trends and inflation ripped through the economy, your company with more efficiency, tight control
and lower inventory recorded a pre-tax profit of Rs. 186.0 million, compared to Rs. 171.9 million last year.
CHANGES IN ACCOUNTING POLICIES:
In line with the international best practice, the company has changed the method of recording depreciation
of operating fixed assets from the reducing balance method to the straight line method. This gives rise to a
one-off increase in the charge for depreciation this year of Rs. 5.3 million.
Previously, no account has been taken of the effect of deferred tax credits. Effective this year, account will be
taken for this item which would give rise to a one-off reduction in the tax charge of Rs. 15.7 million.
These changes in the company's accounts and the balance sheet will more accurately reflect its true state of
affairs.
INVENTORY OF ASSETS:
The company's most important asset continues to be its human capital: the customers, the employees, the
investors. our real success lies in earning the long term loyalty of each of these groups. This human capital
does not depreciate over time. The management works to ensure that all vendors, dealers, shareholders,
employees and the principals share in the Company's growth and prosperity.
Management development and training continue to be a priority. Computerization and information systems
are constantly re-engineered. With quality being our most enduring competitive edge, the company has
embarked upon a systematic programme to obtain the ISO-9000 registration, with all its virtues. Despite the
fact that the Company was once again awarded the Top Companies Award of the Karachi Stock Exchange
for the year 1995, and the Management Association of Pakistan conferred the Corporate Excellence
Certificate for demonstrating the Best Corporate Performance in the Engineering Sector during the year
1995, we consider acquisition of the ISO-9000 certification crucial for a more successful organization.
The company's 1997 calendar on Pakistan's Golden Jubilee won a Special Award from Pakistan National
Council of Culture and Arts.
COLLABORATION WITH NEW HOLLAND:
The acquisition of the Ford Tractor business by the Fiat Group in 1995 provided new opportunities for the
Company to update and widen its product range. In February, 1996, the Company achieved a major landmark
by entering into an agreement with New Holland, our joint venture partners, for the manufacture of New
Holland tractors of Model 5010, 4010 and 3010. It is intended to launch the new series during 1998.
AWAMI TRACTOR SCHEME:
The Awami Tractor Scheme, launched in 1994 by the previous government, created havoc in the domestic
industry. The consequences of the scheme for the tractor and allied vending industry were disastrous.
The early assurance by the new government that a successor scheme would be based on the domestic
industry were warmly welcomed. It is vital that this pledge is delivered, giving a much needed fillip to the local
industry as well as enabling the product to be competitively priced. With 80% + local content, the impact on
the national economy will be nothing but beneficial.
APPROPRIATIONS:
An interim dividend of 15% has already been paid. The Board is now pleased to recommend a final dividend
of 35% making a total of 50%. Although the rate of dividend is the same as that of last year, the actual pay
out will be more because of the 10% bonus share issue made last year.
In further pursuance of the policy of steadily enlarging the equity base, the Board is also pleased to
recommend a bonus issue of one share for every ten shares held.
INDUSTRIAL RELATIONS:
The company, during the year, concluded an agreement with the CBA for a two year term expiring on June
30, 1997. A new agreement is now due for the next two years. The management continues to enjoy cordial
relations with the workers aimed at enhancing productivity and profitability whilst maintaining exemplary
working conditions.
FUTURE OUTLOOKS:
There is an upside to every downside. Hiatus in ADBP's loaning resulted in an alarming fall in the booking of
tractors during 1996-97. The new government however recognizes that the tractor is the essential prime
mover, the bulwark of agriculture. The 8th Five-Year Plan (1993-98) states that "mechanization has become
necessary for intensifying production and increasing the speed of pre-harvest and post harvest farm
operations". The plan recommends the induction of over 150,000 tractors. While announcing the package of
agricultural reforms the Prime Minister promised a "green revolution" for the country. The government has
recognized that for a quantum leap and to attain self-sufficiency in foodgrains there is an urgent need to
increase farm power through mechanization,' hence an unprecedented allocation of Rs. 30 billion for
agriculture. The resolve of the government to patronize the local tractor industry by purchasing 30,000
tractors from domestic production would give a long overdue rebound both to industry and agriculture. There
is thus renewed hope for the current year provided extra funds are made available to the ADBP for financing
local tractors.
DIRECTORS:
Mr. Razi-ur Rahman Khan was nominated by National Investment Trust to represent them on AGTL's Board
in place of Mr. A. K. M. Sayeed who resigned after serving 8 years. I take this opportunity to wish Mr. A. K.
M. Sayeed well and to welcome Mr. Razi-ur Rahman Khan.
APPRECIATIONS:
I conclude by recording the Board's appreciation to the Government and the ADBP for their renewed support
to the local tractor industry. I also acknowledge the continuing technological support provided by our
principals, New Holland. The efforts of staff, management, dealers and vendors for their untiring efforts, also
deserve commendation. Last, and most importantly, I thank the Fiat customers whose number is ever
growing.
DIRECTORS' REPORT
The Directors of AI-Ghazi Tractors Limited are pleased to present their Annual Report together with the
company's audited accounts for the year ended June 30, 1997.
					(Rs. '000)
Profit for the year before taxation					186,034
Less: Provision for taxation (Net)					52,073
					----------
Profit after taxation					133,961
Unappropriated profit brought forward					3,844
					----------
Profit available for appropriation					137,805
Less: Appropriations
Dividend
- Interim @ 15% already paid				12,166
- Final @ 35% now proposed				28,388
Transfer to Reserve for issue
of bonus shares				8,111
Transfer to General Reserve				85,000	133,665
				----------	----------
Unappropriated profit carried forward					4,140
					==========
1. With regard to auditors' observation relating to the change in accounting policies of the company
pertaining to recording of deferred tax, depreciation of fixed assets and valuation of consumable stores,
with which they concur kindly refer to notes 2.3, 2.5, 2.7 and 3 to the accounts which fully explain the
position.
2. The pattern of share holdings is included in this Annual Report.
3. The retiring Auditors Messrs. A.F. Ferguson & Co., being eligible, offer themselves for re-appointment.
4. The Directors fully endorse the views expressed by Chairman in his review included in this report.
DECADE AT A GLANCE
Al-Ghazi Tractors Limited
			1996-97	1995-96	1994-95	1993-94	1992-93	1991-92	1990-91	1989-90	1988-89	1987-88
							VOLUME IN UNITS
Production
Model 480s			3,841	4,415	4,400	3,686	4,101	2,595	4,226	4,722	6,383	4,615
Model 640			1,098	2,202	2,015	1,861	2,081	732	1,438	1,885	1,787	1,917
			----------	----------	----------	----------	----------	----------	----------	----------	----------	----------
Total Production			4,939	6,617	6,415	5,547	6,182	3,327	5,664	6,607	8,170	6,532
			==========	==========	==========	==========	==========	==========	==========	==========	==========	==========
Sales:
- Industry			10,161	16,286	17,334	16,089	15,797	10,684	13,909	20,103	24,325	23,935
-AGTL			4,701	6,617	6,420	5,798	5,955	3,402	5,737	6,621	8,189	6,471
-AGTLs share %			46.27	40.63	37.04	36.04	37.70	31.84	41.25	32.94	33.66	27.04
Bookings:
-Industry			8,294	14,419	21,739	17,552	13,464	14527	12,387	19,526	21,870	26,008
-AGTL			3,322	5,843	8,693	6,839	3,944	5,509	4,958	6,715	6,134	9,438
-AGTLs share %			40.10	40.50	40.00	39.00	29.30	37.90	40.00	34.40	28.00	36.30
Deletion Achieved
Model 480s			82%	82%	82%	82%	81%	81%	81%	79%	77%	71%
Model 640			74%	74%	74%	74%	74%	74%	71%	58%	56%	40%
							VALUE IN RS. 000
Sale Revenue			1,717,094	2,264,748	2,029,937	1,749,255	1,700,645	869,590	1,376,778	1,369,485	1,417,737	1,042,293
Gross Margin			254,487	225,422	298,948	275,135	196,194	25,678	82,541	111,404	97,144	88,063
Profit/(Ioss) before tax			186,034	171,893	259,859	166,191	102,521	(77,009)	9,065	6,278	18,594	17,420
Income tax paid			52,073	64,292	87,069	70,000	82,500	5,282	6,949	-	-	-
Profit/(Ioss) after tax			133,961	107,601	172,790	96,191	90,021	(82,291)	2,116	6,278	17,949	17,420
Capital Expenditure			13,477	25,528	9,050	17,919	5,551	5,122	1,195	4,345	4,733	4,540
Dividend
-Cash			40,554	36,867	28,359	13,613	6,188	-	-	6,187	10,313	8,250
-Percentage			50.00%	50.00%	50.00%	30.00%	15.00%			15.00%	25.00%	20.00%
-Stock			8,111	7,373	17,016	11,343	4,125	-	-	6,187	10,313	8,250
-Percentage			10.00%	10.00%	30.00%	25.00%	10.00%			15.00%	25.00%	20.00%