| CHERAT PAPERSACK LTD |
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| Annual
Report 1997 |
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| CONTENTS |
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| Company
Information |
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| Notice of Meeting |
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| Directors'
Report to the Members |
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| Auditors'
Report to the Members |
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| Balance Sheet |
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| Profit and Loss Account |
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| Cash Flow Statement |
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| Notes to the Accounts |
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| Pattern
of Shareholding |
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| COMPANY
INFORMATION |
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| CHAIRMAN |
|
MR. MOHAMMED FARUQUE |
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| CHIEF
EXECUTIVE |
MR. ZAHID FARUQUE |
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| DIRECTORS |
|
MR. IQBAL FARUQUE |
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|
MR. AHMED FARUQUE |
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|
MR. MAHMOOD FARUQUE |
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|
MR. AKBARALI PESNANI |
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|
MR. SHEHRYAR FARUQUE |
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|
MR. KELLY PATEL |
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| Company
Secretary |
MR. RAUF JAFRANI |
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| Auditors |
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SIDAT HYDER QAMAR MAQBOOL
& CO. |
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| Bankers |
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ABN AMRO BANK. |
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ALLIED BANK LTD. |
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ANZ GRINDLAYS BANK LTD. |
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CREDITAGRICOLE INDOSUEZ. |
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HABIB BANK LTD. |
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MUSLIM COMMERCIAL BANK
LTD. |
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NATIONAL BANK OF PAKISTAN |
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UNITED BANK LTD. |
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| Registered
Office |
MODERN MOTORS HOUSE, |
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BEAUMONT ROAD, |
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KARACHI-75530. |
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| Factory |
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PLOT NO. 26, |
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GADOON AMAZAI INDUSTRIAL
ESTATE, |
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DISTT. SWABI, |
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N.W.F.P. |
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| Sales
Office |
1ST FLOOR, BETANI ARCADE |
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JAMRUD ROAD, |
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PESHAWAR. |
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| Regional
Office |
3, SUNDERDAS ROAD, |
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LAHORE. |
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| Islamabad
Office |
NO. 7, MEZZANINE LEVEL, |
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RAZIA SHARIF PLAZA, 92,
BLUE AREA, |
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ISLAMABAD. |
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| NOTICE
OF MEETING |
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| NOTICE
IS HEREBY GIVEN that the Eighth Annual General Meeting of this Company will
be held on |
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| Thursday,
November 06, 1997, at 04.00 p.m. at the registered Office of the Company at
Modern Motors |
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| House,
Beaumont Road, Karachi, to transact the following business: |
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| 1.
To receive and consider the audited Accounts for the year ended June 30,
1997, with the |
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| Directors'
and Auditors' Reports thereon. |
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| 2.
To Declare final dividend of Rs. 5.00 per share (50%) recommend by Directors
in addition to |
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| the
interim dividend of Rs. 3/= (30%)already paid. |
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| 3.
To appoint auditors for the ensuing year and to fix their remuneration. |
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| Karachi,
September 18, 1997. |
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By Order of the Board |
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|
R. JAFRANI |
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|
Company Secretary |
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| Note: |
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| 1.
A member eligible to attend and vote at the Annual General Meeting is
entitled to appoint |
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| another
member as his proxy to attend and vote in his stead. Proxies to be effective
must |
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| be
in writing and must be received by the Company 48 hours before the Meeting. |
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| 2.
The member's register will be closed from Friday, October 31, 1997, to
Thursday, November |
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| 06,
1997, inclusive. The transfers received in order at the Registered office of
the company |
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| at
the close of business on Thursday, October 30, 1997 will be treated in time
for the purpose |
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| of
the above Final Dividend. |
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| 3.
The shareholders are requested to notify the Company if there is any change
in their |
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| address. |
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| DIRECTORS'
REPORT TO THE MEMBERS |
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| FOR
THE YEAR ENDED 30 JUNE, 1997 |
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|
| DEAR
SHAREHOLDERS, |
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| The
Directors are pleased to welcome you to the Eighth Annual General Meeting of
your |
|
| Company
and place before you company's Annual Report together with audited accounts
and Auditors' |
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| Report
thereon for the year ended June 30, 1997. |
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| PRODUCTION
AND SALES |
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| As
you are aware there has been a general slow down in the economic activities
in the |
|
| country
during the last year. The Cement Industry, on which we are dependent has also
been |
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| severely
hit due to economic recession. Even though new cement plants have become
operational |
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| during
the last one year, it was still a difficult task for us to keep up with our
supplies to the cement plants |
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| as
all of these without exception are facing liquidity problem. We had to
perforce relax our credit terms |
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| in
order to be competitive and maintain our share of market. |
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| During
the year under review we were able to produce and dispatch 45.5 million bags |
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| compared
to 44.56 million bags last year. This level of output necessitated working at
times on |
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| double
or triple shifts. Our sales to Cherat Cement amounted to only 16.14 million
bags (i.e. 36%) |
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| and
the balance was sold to other plants, both in North and South. |
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|
| OPERATIONAL
RESULTS |
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| Inspite
of intense competition and slowing down of economic activities and more so in
the |
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| cement
sector, our operational results for the year under review are still
encouraging. This has been |
|
| possible
due to strict check on production costs, acquisition of papers from the right
sources and at |
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| the
most competitive prices, quality of our product and financial discipline. Our
total sales for the period |
|
| amounted
to Rs. 532.173 million (1995-96: Rs. 512.376 million) with cost of sales at
Rs. 436.223 million. |
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| This
has given us a gross profit of Rs. 95.950 million (1995-96 Rs. 112.403
million). Deduction on |
|
| account
of administrative and selling expenses amount to Rs. 15.154 million,
financial charges Rs. |
|
| 16.795
million other charges Rs. 0.913 million and WPPF Rs. 3.222 million. After
adjustment for the |
|
| other
income of Rs. 1.366 million, current year profit before tax comes to Rs.
61.232 million (1995-96 |
|
| Rs.
86.023 million). Provision had to be made for minimum tax (Turnover Tax)
under section 80D of the |
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| Income
Tax Ordinance, 1979 amounting to Rs. 2.661 million. |
|
|
| The
drop in gross profit during the current year is primarily due to the fact
that last year we had |
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| the
benefit of consuming paper acquired by us at much more competitive prices
than we could manage |
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| this
year. Due to world wide shortage of paper during 1996-97 we had to import
paper at much higher |
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| prices
where as the sales prices could not be adjusted proportionately. |
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| The
profit after tax for current year together with unappropriated profit brought
forward from the |
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| last
year gives us a total of Rs. 83.602 million available for appropriation. |
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| Your
Directors propose following appropriation of profit:- |
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Rupees |
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|
(million) |
|
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| Net
profit for the year |
|
58.57 |
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| Add:
Unappropriated profit brought forward |
|
25.03 |
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|
--------- |
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| Total
available for appropriation |
|
83.60 |
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|
========== |
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| Appropriation: |
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| Interim
dividend @ 30 % |
|
12.24 |
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| Proposed
final dividend @ 50% |
|
20.40 |
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| Transfer
to General Reserve |
|
18.00 |
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| Balance
to be carried forward |
|
32.96 |
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|
--------- |
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|
83.60 |
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|
========== |
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| FINANCIAL
COMMITMENTS / DEBT OBLIGATIONS |
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| There
are no long term loans against the company and the commitments under the
lease |
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| financing
are being met as per schedule. |
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| FUTURE
OUTLOOK |
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| The
general slow down in the economic activities and with the deferment /
cancellation of |
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| government
projects the cement industry is facing serious problems which in turn has
directly affected |
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| us
in the shape of delayed payments, increased receivables and declining
margins. However, if the |
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| economic
activities pick up, which we all hope, then with the enhancement in the
capacity of cement |
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| plants
translated into production and despatch of cement, we should be able to
benefit. |
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| AUDITORS |
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| The
present auditors M/s. Sidat Hyder Qamar Maqbool & Company, Chartered |
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| Accountants,
retire and being eligible offer themselves for reappointment. |
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| ACKNOWLEDGMENT |
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| The
Management wishes to thank the institutions which have been associated with
the |
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| Project,
the cement manufacturers for their continued patronage and support and the
staff for their |
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| hard
work and dedication in achieving excellent results for the Company. |
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| Karachi:
September 18, 1997 |
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|
|
| AUDITORS'
REPORT TO THE MEMBERS |
|
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| We
have audited the annexed balance sheet of CHERAT PAPERSACK LIMITED as at 30 |
|
| June
1997 and the related profit and loss account and cash flow statement,
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 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 Companies Ordinance, 1984; |
|
|
| b)
in our opinion: |
|
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| 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 |
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| are
in agreement with the books of account and are further in accordance with |
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| accounting
policies consistently applied; |
|
|
| ii)
the expenditure incurred during the year was for the purpose of the Company's |
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| business;
and |
|
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| iii)
the business conducted, investments made and the expenditure incurred |
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| during
the year 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 and loss account and the cash flow
statement, |
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| together
with the notes forming part thereof, give the information required by the |
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| Companies
Ordinance, 1984 in the manner so required and respectively give a true |
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| and
fair view of the state of the Company's affairs as at 30 June 1997 and of the
profit |
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| and
the changes in cash flow for the year then ended; and |
|
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| d)
in our opinion, zakat deductible at source under the Zakat and Ushr
Ordinance, 1980 |
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| was
deducted by the Company and deposited in the Central Zakat Fund established |
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| under
Section 7 of that Ordinance. |
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| KARACHI:
September 18, 1997 |
|
SIDAT HYDER QAMAR MAQBOOL
& CO. |
|
|
CHARTERED ACCOUNTANTS |
|
|
| BALANCE
SHEET AS AT JUNE 30, 1997 |
|
|
|
1997 |
1996 |
|
|
NOTE |
(Rupees) |
(Rupees) |
|
| SHARE
CAPITAL AND RESERVES |
|
| Authorised |
|
| 5,000,000
ordinary |
|
| shares
of Rs. 10/- each |
|
50,000,000 |
50,000,000 |
|
|
========== |
========== |
|
| Issued,
subscribed and paid-up |
|
3 |
40,800,000 |
34,000,000 |
|
| Reserves |
|
4 |
99,761,894 |
67,031,157 |
|
|
|
---------- |
---------- |
|
|
140,561,894 |
101,031,157 |
|
| LIABILITIES
AGAINST ASSETS SUBJECT TO |
|
| FINANCE
LEASE |
|
5 |
22,292,549 |
26,805,120 |
|
|
| CURRENT
LIABILITIES |
|
|
| Short-term
finance under mark-up |
|
| arrangements-
secured |
|
6 |
-- |
30,000,000 |
|
|
| Current
maturity of liabilities against |
|
| assets
subject to finance lease |
|
5 |
4,512,571 |
3,694,880 |
|
|
|
|
| Creditors,
accrued and other liabilities |
|
7 |
58,430,662 |
61,459,002 |
|
|
| Proposed
dividend |
|
20,400,000 |
24,480,000 |
|
|
---------- |
---------- |
|
|
83,343,233 |
119,633,882 |
|
| CONTINGENCIES
AND COMMITMENTS |
|
8 |
|
|
---------- |
---------- |
|
|
246,197,676 |
247,470,159 |
|
|
========== |
========== |
|
| AUDITORS'
REPORT ANNEXED |
|
|
|
| FIXED
ASSETS-Tangible |
|
|
| Operating
assets |
|
9 |
35,691,413 |
38,891,293 |
|
| Assets
subject to finance lease |
|
10 |
24,705,000 |
27,450,000 |
|
| Capital
work-in-progress |
|
-- |
23,800 |
|
|
---------- |
---------- |
|
|
60,396,413 |
66,365,093 |
|
|
| INVESTMENTS |
|
11 |
5,779,838 |
7,321,659 |
|
|
| LONG-TERM
ADVANCES, DEPOSITS |
|
| AND
DEFERRED COSTS |
|
12 |
1,285,695 |
2,321,737 |
|
|
| CURRENT
ASSETS |
|
| Stores,
spares and loose tools |
|
3,885,369 |
4,336,255 |
|
| Stock-in-trade |
|
13 |
46,235,856 |
16,428,480 |
|
| Trade
debts |
|
14 |
65,080,340 |
22,928,674 |
|
| Short-term
investments |
|
-- |
2,500,000 |
|
| Advances,
deposits, prepayments |
|
| and
other receivables |
|
I5 |
11,209,836 |
20,722,562 |
|
|
|
|
| Cash
and bank balances |
|
16 |
52,324,329 |
4,545,699 |
|
|
|
----------- |
----------- |
|
|
178,735,730 |
171,461,670 |
|
|
----------- |
----------- |
|
|
246,197,676 |
247,470,159 |
|
|
========== |
========== |
|
| These
accounts should be read with the annexed notes. |
|
|
|
| PROFIT
AND LOSS ACCOUNT |
|
| FOR
THE YEAR ENDED 30 JUNE 1997 |
|
|
|
NOTE |
1997 |
1996 |
|
|
(Rupees) |
|
|
| SALES |
|
17 |
532,173,274 |
512,376,605 |
|
| Cost
of sales |
|
18 |
436,222,785 |
399,973,278 |
|
|
|
---------- |
---------- |
|
| Gross
profit |
|
|
95,950,489 |
112,403,327 |
|
| Administration
and selling expenses |
|
19 |
15,154,549 |
11,168,778 |
|
|
---------- |
---------- |
|
|
80,795,940 |
101,234,549 |
|
|
| Financial
charges |
|
20 |
16,794,992 |
10,742,471 |
|
| Other
charges |
|
21 |
913,055 |
1,366,331 |
|
| Other
income |
|
22 |
(1,366,426) |
(1,424,931) |
|
| Workers'
Profit Participation Fund |
|
3,222,716 |
4,527,534 |
|
|
---------- |
---------- |
|
|
19,564,337 |
15,211,405 |
|
|
---------- |
---------- |
|
| Net
profit for the year |
|
61,231,603 |
86,023,144 |
|
| Taxation |
|
23 |
2,660,866 |
2,561,883 |
|
|
---------- |
---------- |
|
| Profit
after taxation |
|
58,570,737 |
83,461,261 |
|
| Accumulated
profit brought forward |
|
25,031,157 |
4,649,896 |
|
|
---------- |
---------- |
|
| Profit
available for appropriation |
|
83,601,894 |
88,111,157 |
|
| Appropriations: |
|
| Proposed
dividend @50% (1996: @ 60%) |
|
20,400,000 |
24,480,000 |
|
| Interim
dividend @ 30% (1996:40%) |
|
12,240,000 |
13,600,000 |
|
| Transfer
to general reserve |
|
18,000,000 |
25,000,000 |
|
|
---------- |
---------- |
|
|
50,640,000 |
63,080,000 |
|
|
---------- |
---------- |
|
| Accumulated
profit carried forward |
|
32,961,894 |
25,031,157 |
|
|
========== |
========== |
|
| These
accounts should be read with the annexed notes. |
|
|
|
| CASH
FLOW STATEMENT |
|
| FOR
THE YEAR ENDED 30 JUNE 1997 |
|
|
1997 |
1996 |
|
|
(Rupees) |
(Rupees) |
|
| CASH
FLOW FROM OPERATING ACTIVITIES |
|
| Net
profit before taxation |
|
61,231,603 |
86,023,144 |
|
| Adjustment
for: |
|
|
|
| Depreciation |
|
6,367,009 |
7,025,811 |
|
| Amortization |
|
900,442 |
2,837,869 |
|
| Provision
for diminution in value of investment |
|
1,541,821 |
-- |
|
|
---------- |
---------- |
|
| Operating
profit before working capital changes |
|
70,040,875 |
95,886,824 |
|
| (Increase)/decrease
in: |
|
|
| Stores,
spares and loose tools |
|
450,886 |
(2,018,910) |
|
| Stock-in-trade |
|
701,926,241 |
(84,433,795) |
|
| Trade
debts |
|
(42,151,666) |
(13,808,322) |
|
| Advances,
deposits, prepayments and |
|
|
|
| other
receivables |
|
9,520,079 |
(11,665,003) |
|
|
---------- |
---------- |
|
|
38,011,923 |
(111,926,030) |
|
| Increase/(decrease)
in: |
|
| Short-term
finance under mark-up |
|
(30,000,000) |
(1,505,383) |
|
| arrangement-
secured |
|
| Creditors,
accrued and other liabilities |
|
(3,028,340) |
53,501,849 |
|
|
---------- |
---------- |
|
|
(33,028,340) |
51,996,466 |
|
|
---------- |
---------- |
|
|
4,983,583 |
(59,929,564) |
|
|
---------- |
---------- |
|
| Cash
generated through operations |
|
75,024,458 |
35,957,260 |
|
| Taxes paid |
|
(2,668,219) |
(3,620,139) |
|
| Dividend
paid |
|
(36,720,000) |
(23,800,000) |
|
| Security
deposit against lease arrangement |
|
-- |
(1,547,250) |
|
| Advance
rent |
|
135,600 |
(391,600) |
|
|
---------- |
---------- |
|
|
(39,252,619) |
(29,358,989) |
|
|
---------- |
---------- |
|
| Net
cash after operating activities |
|
35,771,839 |
6,598,271 |
|
|
| CASH
FLOW FROM INVESTING ACTIVITIES |
|
| Additions
to assets |
|
(398,329) |
(288,799) |
|
| Capital
work-in-progress |
|
-- |
(23,800) |
|
| Investments |
|
2,500,000 |
(577,700) |
|
|
---------- |
---------- |
|
|
2,101,671 |
(890,299) |
|
| CASH
FLOW FROM FINANCING ACTIVITIES |
|
| Issuance
of right shares |
|
13,600,000 |
-- |
|
| Payment
of lease rentals |
|
(3,694,880) |
(6,854,272) |
|
|
| Add:
Cash and bank at beginning of the year |
|
4,545,699 |
5,691,999 |
|
|
---------- |
---------- |
|
| Cash
and bank at end of the year |
|
52,324,329 |
4,545,699 |
|
|
========== |
========== |
|
|
|
|
|
| NOTES
TO THE ACCOUNTS |
|
| FOR
THE YEAR ENDED 30 JUNE 1997 |
|
|
| 1.
NATURE OF BUSINESS |
|
| The
Company was incorporated in Pakistan as a public limited Company quoted on
Karachi |
|
| and
Lahore Stock Exchanges. Its main business activity is manufacturing and
marketing of Paper |
|
| bags,
packages and sacks. |
|
|
| 2.
SIGNIFICANT ACCOUNTING POLICIES |
|
|
| 2.1
Overall valuation policy |
|
| These
accounts have been prepared on the basis of historical cost 'convention'. |
|
|
| 2.2
Staff retirement benefits |
|
| The
Company operates an approved Provident Fund scheme and unapproved |
|
| Gratuity
scheme covering all eligible employees. |
|
|
| 2.3 Fixed assets and depreciation |
|
| 2.3.1
Operating assets |
|
| Operating
fixed assets except leasehold land and capital work-in-progress |
|
| are
stated at cost less accumulated depreciation. Leasehold land and capital |
|
| work-in-progress
are stated at cost. Depreciation is charged to income |
|
| applying
the reducing balance method. Full year's depreciation is charged on |
|
| additions
while no depreciation is charged on assets deleted. |
|
|
| Maintenance
and normal repairs are charged to income as and when incurred. |
|
| Major
renewals and improvements are capitalised. |
|
|
| Gain
or loss on disposal of assets, if any, are included in income currently. |
|
|
| 2.3.2
Assets subject to finance lease |
|
| Assets
subject to finance lease are stated at lower of the present value of |
|
| minimum
lease payments under the lease agreement and the fair value of the |
|
| assets.
The related obligations of the lease are accounted for as liabilities. |
|
| Assets
acquired under the finance lease are depreciated over the useful life |
|
| of
the assets. |
|
|
| 2.4
Deferred costs |
|
| Deferred
costs are amortized over a period of sixty months from the date the Company |
|
| commenced
its commercial production. |
|
|
| 2.5
Investments |
|
| Investments
are stated at cost. However, provisions are made for permanent diminu- |
|
| tion
in value of investments, if any. |
|
|
| 2.6
Stores, spares and loose tools |
|
| These,
except items-in-transit, are valued at first-in -first-out basis.
Items-in-transit are |
|
| stated
at invoice value plus other charges paid thereon to the balance sheet date. |
|
|
| 2.7
Stock-in-trade |
|
| Stock-in-trade
is valued at the lower of cost and estimated net realisable value. |
|
|
| Cost
signifies in relation to raw material on first-in-first-out basis whereas
finished |
|
| goods
at weighted average cost comprising direct material, labour and appropriate |
|
| manufacturing
overheads. |
|
|
| Net
realisable value signifies the estimated selling price in the ordinary course
of |
|
| business
less cost of completion and cost necessary to be incurred in order to make |
|
| the sale. |
|
|
| 2.8
Foreign currency translation |
|
| Assets
and liabilities in foreign currency are translated into Pakistani rupee at
the rate |
|
| of
exchange approximating to those prevalent at the balance sheet date except |
|
| liabilities
covered under forward contracts which are translated at the contractual
rates. |
|
|
| 2.9
Revenue recognition |
|
| 2.9.1
Sales |
|
| Revenue
from sales is recognised upon passage of title to the customers |
|
| which
generally coincides with physical delivery. |
|
|
| 2.9.2
Investments |
|
| Return
on investments is recognised at the rates specified in the respective |
|
| investment
schemes and accrued for the period. The income is recognised on |
|
| the
assumption that such investments will be held till the next terminal date. |
|
|
| Income
in respect of dividend is recognised on receipt basis. |
|
|
|
1997 |
1996 |
|
|
(Rupees) |
(Rupees) |
|
|
| 3.
ISSUED, SUBSCRIBED AND PAID-UP CAPITAL |
|
| 4,080,000
(1996: 3,400,000) ordinary |
|
| shares
of Rs.10/- each fully paid |
|
| in cash |
|
40,800,000 |
34,000,000 |
|
|
========== |
========== |
|
| 4.
RESERVES |
|
| Capital
reserve |
|
| Premium
on issue of right shares |
|
6,800,000 |
-- |
|
|
| General
Reserve |
|
---------- |
