| D.G CEMENT LIMITED |
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| Annual
Report 1997 |
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| Contents |
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| Company
profile |
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| Notice
of Meeting |
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| Directors'
Report |
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| Five
Years At a Glance |
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| Auditors'
Report |
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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 Share Holding |
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| Board
of Directors |
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| Mian
Raza Mansha |
Chief Executive |
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| Mrs.
Naz Mansha |
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| Mian
Umer Mansha |
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| Mst.
Akhtar Jehan Begum |
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| Mr.
Khalid Qadeer Qureshi |
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| Mr.
Mohammad Ali Artwar |
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| Mr.
Anwar Ahmad Khan |
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| Company
Secretary |
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| Khalid
Mahmood Chohan |
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| Bankers |
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| ABN-AMRO
Bank N.V. |
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| Askari
Commercial Bank Limited |
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| Bank
of America NT&SA |
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| Citibank
NA |
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| Faysal
Bank Limited |
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| Habib
Bank Limited |
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| Mashreq
Bank psc |
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| Muslim
Commercial Bank Limited |
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| Schon
Bank Limited |
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| Union
Bank Limited |
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| United
Bank Limited |
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| Auditors |
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| M/s
A F Ferguson & Co. |
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| Chartered
Accountants |
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| Registered
Office |
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| Nishat
House, 53-A, Lawrence Road, Lahore - Pakistan |
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| Phone:
92- 42- 6367812- 20 Fax: 92- 42- 6367414 |
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| Telex:
47523 Nisht PK. Lahore |
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| E.Mail:
dgkcc@lhr.comsats.netpk |
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| Factory |
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| Khofli
Sattai, Distt. Dera Ghazi Khan - Pakistan |
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| Phone:
92-641-60025-7 |
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| Fax:
92-641-62392 |
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| Telex:
42492 DGK CF PK. |
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| NOTICE
OF ANNUAL GENERAL MEETING |
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| Notice
is hereby given that Annual General Meeting of the Shareholders of D.G. Khan
Cement Company |
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| Limited
("the Company") will be held on Wednesday the 31st December, 1997
at 11:30 a.m. at Nishat House, |
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| 53-A,
Lawrence Road, Lahore to transact the following business: |
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| 1.
To confirm minutes of the last meeting. |
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| 2.
To receive and adopt the audited accounts of the Company for the financial
year ended June 30, 1997 |
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| together
with the Directors' and Auditors' reports thereon. |
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| 3.
To appoint Auditors for the year 1997-98 and fix their remuneration. The
present Auditors |
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| M/s.
A F Ferguson & Company, Chartered Accountants, Lahore retire and being
eligible, offer |
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| themselves
for re-appointment. |
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| 4.
Special business: |
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| To
pass the following special resolution with or without modification, as
approved by the Board of |
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| Directors. |
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| RESOLVED
THAT the following existing clauses of the Articles of Association of the
Company be and are |
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| hereby
deleted with immediate effect as the same are no more required to remain
incorporated in the |
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| Articles
of Association. |
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| "63
(a) Notwithstanding anything to the contrary contained in any article herein,
the decision of the |
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| Board
on all the following matters shall always require the participation of
National Development |
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| Finance
Corporation's Director. |
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| a)
Appointment / Change of M.D. / Chief Executive. |
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| b)
Appointment of key personnel and consultants. |
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| c)
Changes in the financial plan, size and capacity of the Project. |
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| d)
Award of contracts to any Supplier(s) of Plant, Machinery and Equipment and
for construction of civil |
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| works
of the Project. |
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| e)
Capital expenditure exceeding Rs. 25 million per item during any financial
year. |
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| f)
Loans or any business dealings on the basis of deferred payments of any kind
whatsoever |
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| g)
subsidiaries, associated undertakings (if any) of the Company or of its
sponsor(s). |
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| g)
Transfer, sale, assignment or lease of the immovable properties of the
Company or the creation of |
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| any
hypothecation, mortgage, charge or other encumbrance thereon. |
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| h)
Recommendation of dividend. |
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| i)
Creation of and transfer to reserves other than statutory reserves. |
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| j)
Delegation of powers of M.D. / Chief Executive. |
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| k)
Recommendation on the appointment of auditors. |
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| "63
(b) Notwithstanding anything to the contrary contained in any article herein,
the decision of the |
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| Board
on all the following matters shall always require prior approval of Askari
Commercial Bank |
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| Limited
(ACBL): |
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| i)
Changes in the financial plan, size and capacity of the Project. |
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| ii)
Transfer, sale, assignment or lease of the immovable properties of the
Company or the creation of |
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| any
hypothecation, mortgage, charge or other encumbrance thereon. |
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| iii)
Recommendation on the appointment of auditors. |
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| Provided
that the above Article Clauses 63 (a} & 63 (b) shall remain effective
during the subsistence of |
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| National
Development Finance Corporation and Askari Commercial Bank Limited
loans." |
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| 5. Any other matter with the permission of the Chair. |
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| STATEMENT
UNDER SECTION 160 (1) (B) OF THE COMPANIES ORDINANCE, 1984. |
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| This
statement sets out the material facts concerning the special business to be
transacted at the AGM of |
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| the
Company. |
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| The
above Clauses were inserted in the Articles of Association of the Company
pursuant to the Special |
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| Resolution
passed by the Shareholders of the Company in their AGM held on December 31,
1995, for |
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| obtaining
LMM Finance Facility from National Development Finance Corporation and Askari
Commercial |
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| Bank
Limited, for Expansion Project of the Company. |
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| The
Company has not obtained/availed any financial subsistence from the said
institutions for the Expansion |
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| Project
therefore, the above Clauses have become redundant and no longer required to
remain |
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| incorporated
in the Articles of Association of the Company, accordingly proposed to delete
the said Clauses. |
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| The
Directors of the Company have no interest either directly or indirectly in
proposed deletion of the |
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| aforesaid
certain Clauses of the Articles of Association of the Company. |
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| A
copy of memorandum and Articles of Association of the Company has been kept
at the Registered Office |
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| which
can be inspected from 10:00 a.m. to 11:00 a.m. on all working days upto
December 30, 1997. |
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| Lahore: |
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By order of the Board |
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| December
01, 1997 |
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(KHALID MAHMOOD CHOHAN) |
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|
Company Secretary |
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| NOTES: |
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| 1.
Share transfer books of the Company will remain closed from 31-12-97 to
06-01-98 (both days |
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| inclusive).
Transfers received in order at Nishat House, 53-A, Lawrence Road, Lahore upto
the close of |
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| business
on December 30, 1997 will be considered in time. |
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| 2.
A member eligible to attend and vote at this meeting may appoint another
member his/her proxy to |
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| attend
and vote instead of him/her. Proxies in order to be effective must reach the
Company's |
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| Registered
office not less than 48 hours before the time for holding the meeting. |
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| 3.
Shareholders are requested to immediately notify the change in address, if
any. |
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| DIRECTORS'
REPORT TO THE SHAREHOLDERS |
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| Your
directors are pleased to place before you the |
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| annual
report along with audited accounts for the |
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| year
ended June 30, 1997. |
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| During
the year under review, the Company |
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| earned
pretax profit of Rs. 83.571 million |
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| (1996:
Rs. 308. 411 million} After accounting for all |
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| charges
including depreciation and provision for |
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| turnover
tax, net profit works out to Rs. 71.454 |
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| million
(1996: Rs. 248. 411 million). |
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{Rupees in thousand) |
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| APPROPRIATION |
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1997 |
1996 |
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| The
following appropriations of the available profit |
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| are
recommended: |
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| Net
profit after taxation |
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|
71, 454 |
248, 411 |
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| Un-appropriated
profit brought forward |
997 |
586 |
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| Profit
available for appropriation |
|
72,451 |
248, 997 |
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| Appropriation: |
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| Transferred
to: |
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| -
General Reserve |
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72,000 |
248,000 |
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| Un-appropriated
profit |
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451 |
997 |
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| PRODUCTION
AND SALES |
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| The
production of clinker and cement for |
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| the period was 634,821 and
667, 937 tons |
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| respectively
as compared to 730, 450 tons and |
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| 767,
363 tons for the previous year. The kiln |
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| operated
at 96% of the installed capacity for want |
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| of
annual repair/shut down which took longer |
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| period
than normal. |
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| OPERATING
RESULTS |
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| The
gross sales during the year were Rs. 2.496 |
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| billion
(1996: Rs. 2.442 billion} registering a |
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| nominal
increase of 221%, whereas, net sales |
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| was
decreased by 12.89% over last year |
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| {1997:
Rs. 1.347 billion 1996: Rs. 1.547 billion}. |
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| The
profit during the year decreased substantially |
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| from
Rs. 308.411 million to Rs. 83.571 million. |
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| main
reason for this shortfall was decrease in |
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| sale
price due to oversupply of cement, low |
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| economic
and development activities in the |
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| country
and increase in input prices, which |
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| adversely
affected profit margins. The major |
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| increase
in input cost was in Furnace 0il |
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| and
Electricity which was 63.59% and 12.37% |
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| respectively
{average} over the last year |
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| MARKET
REVIEW |
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| The
political Socio-economic condition and law |
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| and
order situation in the country have led the |
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| industry
into crisis. Constant increase in input |
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| prices and decrease
in sale prices coupled with |
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| stagnation of
demand has resulted in pilling up of |
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| stock
of Clinker/Cement and oversupply. The |
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| impact
of increase in input price could not be |
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| passed
on to the end user, which again squeezed |
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| the
profit margins. |
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| Under
the circumstances, there seems to be no |
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| significant/improvement
in economic activity in the |
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| near
future, which will further weaken the cement |
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| industry
in order to save the industry from |
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| disaster,
the government must take immediate |
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| actions
and review the tax structure of cement |
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| industry
as the industry at present is not in a |
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| position
to carry the burden of ever increasing |
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| input
prices and constant decrease in sale price. |
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| FUTURE PROSPECTS |
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| After
great deal of negotiation and persuasion by |
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| the
cement industry, the government has |
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| announced
(in November, 1997) policy of export of |
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| cement
According to which a rebate of 12.5% ad |
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| volerum
subject to maximum of Rs. 300 per ton is |
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| being
considered. The rebate is considered to be |
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| insufficient
to compete the international market. |
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| There is potential to
export cement in the |
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| surrounding
countries like Sri Lanka, Bangladesh |
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| etc.
This will only be possible if government offers |
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| a
higher rebate than announced. This will help to |
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| minimize
the oversupply and disposal of piled
up |
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| stock
of clinker/cement. |
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|
| The government
industrial reform program is |
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| expected
to boost up the industrial activity in the |
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| country.
At present all the development plans |
|
| (including
industrial zones besides Lahore |
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| Islamabad
Motor way, construction of Islamabad |
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| Peshawar
Motor way, Karachi Mass transit, port |
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| Bin
Qasim Oil Refineries and other big
projects) |
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| have
been held up which are likely to be started |
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| after
resolution of the present political crisis. |
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|
| EXPANSION
PROJECT |
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| By the grace of
Almighty Allah, and gigantic efforts |
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| of
our team, the erection/ installation of the plant |
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| and
machinery has been completed. During trial |
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| run,
after overcoming teething problems, the new |
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| kiln
has produced over 140,000 tons or Clinker. |
|
|
|
| In
order to update the knowledge on latest cement |
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| manufacturing
technology, 30 engineers were |
|
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| sent
to Denmark and Spain for specialized training |
|
|
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| apart
from this M/s FLS experts also imparting |
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|
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| training
on the job to our people at the site. |
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| The
Company has signed Technical Assistance |
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|
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| Services
agreement with M/s F.L.S. Pakistan |
|
|
|
| {Private)
Limited Under this agreement M/s FLS will |
|
|
| provide
the services of competent engineers and |
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|
|
| specialists.
The experts will also provide the |
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|
|
| manufacturing
techniques relating to the efficient |
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|
|
| and
economical operation of the plant and make |
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|
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| available
their technological know how and |
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|
|
| experience
of cement manufacture to the staff of |
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|
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| the
plant. The experts shall in particular assist in |
|
|
| putting
into use the most suitable methods of |
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|
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| extracting
the raw material reaching optimal |
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|
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| process
and quality control as well as effective |
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|
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| plant
maintenance. This agreement will be for a |
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|
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| period
of one year. |
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| PATTERN
OF SHAREHOLDINGS |
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| The pattern of
shareholding of the company as on |
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|
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| June
30, 1997 is annexed with the Annual Report. |
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| AUDITORS |
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|
| M/s
A F Ferguson & Company, Chartered |
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|
|
| Accountants,
Lahore, the retiring Auditors, being |
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|
|
| eligible,
offer themselves for re-appointment |
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| ACKNOWLEDGMENT |
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| The relation between the
management and |
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|
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| workers
remained cordial and peaceful. The |
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|
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| Director
placed on record appreciation for hard |
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|
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| work
done by the workers, staff and officers during |
|
|
| the
year which has resulted in completion of |
|
|
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| expansion
project with the hope that they will work |
|
|
| with
same zeal and spirit in the year to come. |
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| FIVE
YEAR AT A GLANCE |
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|
1997 |
1996 |
1995 |
1994 |
1993 |
|
| PRODUCTION
& SALES |
|
|
|
|
|
|
|
(M.Tons) |
|
| Clinker |
|
634,821 |
730,450 |
669,086 |
631,874 |
663,431 |
|
| Cement |
|
667,937 |
767,363 |
685,348 |
649,852 |
685,401 |
|
| Sales |
|
671,417 |
753,608 |
698,063 |
651,937 |
683,142 |
|
|
|
|
| FOR
THE YEAR |
|
|
|
|
|
|
|
(Rupees in thousand) |
|
| Net .Sales |
|
1,347,594 |
1,547,090 |
1,498,945 |
1,219,777 |
1,131,357 |
|
| Gross
Profit |
274,692 |
591,430 |
757,254 |
586,653 |
536,867 |
|
| Pre-tax
profit |
83,571 |
308,411 |
569,557 |
550,180 |
488,134 |
|
| After
tax profit |
71,454 |
248,411 |
386,788 |
362,884 |
296,134 |
|
|
|
|
| FINANCIAL
POSITION |
|
|
|
|
|
| Current
Assets |
989,212 |
1,297,610 |
1,240,604 |
1,095,981 |
575,237 |
|
| Current
Liabilities |
957,506 |
717,423 |
550,837 |
769,340 |
580,050 |
|
| Operating
Fixed Assets |
804,047 |
786,929 |
692,991 |
719,066 |
691,887 |
|
| Total
Assets |
8,102,729 |
7,390,244 |
4,010,890 |
2,324,669 |
1,877,749 |
|
| Long
Term Liabilities |
3,288,816 |
2,887,875 |
349,724 |
337,397 |
349,801 |
|
| Shareholders'
Equity |
3,856,407 |
3,784,946 |
3,110,329 |
1,217,932 |
947,898 |
|
|
|
|
| RATIOS |
|
|
|
|
|
|
| Current
Ratio |
1.03:1 |
1.81:1 |
2.25:1 |
1.42:1 |
0.99:1 |
|
| Debt
to Equity |
46:54 |
43:57 |
10:90 |
22:78 |
27:73 |
|
| Gross
Profit to Sales (%) |
20.38 |
38.23 |
50.52 |
48.10 |
47.45 |
|
| Net
Profit to Sales (%) |
5.30 |
16.06 |
25.80 |
29.75 |
26.18 |
|
| Break-up
value per share (Rs) |
29.13 |
34.82 |
31.47 |
19.68 |
15.31 |
|
|
|
|
| AUDITORS'
REPORT TO THE MEMBERS |
|
|
| We
have audited the annexed balance sheet of D.G. Khan Cement Company Limited as
at June 30, 1997, |
|
| the
profit and loss account and the cash flow statement, together with the notes
forming part thereof, 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 |
|
|
| (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 account |
|
| and
are further in accordance with accounting policies consistently applied; |
|
|
| (ii)
the expenditure incurred during the year was for the purpose of the Company's
business; and |
|
|
| iii)
the business conducted, investments made and the expenditure incurred 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 cash flow statement together with the
notes forming part |
|
| thereof,
give the information required by the Companies Ordinance, 1984, in the manner
so required |
|
| and
respectively give a true and fair view of the state of Company's affairs as
at June 30, 1997, and of |
|
| the
profit and the cash flow for the year then ended; and |
|
|
| d)
in our opinion no Zakat was deductible at source under the Zakat and Ushr
Ordinance, 1980. |
|
|
| Lahore:
December 01, 1997 |
|
A. Ferguson & Co. |
|
|
Chartered Accountants |
|
|
| BALANCE
SHEET JUNE 30, 1997 |
|
|
(Rupees in thousand) |
|
|
Note |
1997 |
1996 |
|
|
| CAPITAL
AND RESERVES |
|
| Authorised
share capital |
|
| 300,000,000
ordinary shares of Rs. 10/- each |
|
3,000,000 |
3,000,000 |
|
|
========== |
========== |
|
| Issued,
subscribed and paid up share capital |
|
| 132,391,380
(1996: 108,712,925) ordinary |
|
| shares
of Rs. 10/- each |
|
3 |
1,323,914 |
1,087,129 |
|
| Advance
against issue of shares |
|
4 |
-- |
426,206 |
|
| Reserves |
|
5 |
2,532,042 |
2,270,614 |
|
| Unappropriated
profit |
|
451 |
997 |
|
|
---------- |
---------- |
|
|
3,856,407 |
3,784,946 |
|
| LONG
TERM LIABILITIES |
|
|
| LONG
TERM LOANS - SECURED |
|
6 |
3,128,364 |
2,774,385 |
|
| LIABILITIES
AGAINST ASSETS |
|
|
|
| SUBJECT
TO FINANCE LEASE |
|
7 |
106,636 |
56,381 |
|
| DEFERRED
LIABILITIES |
|
8 |
22,258 |
18,025 |
|
|
|
|
| LONG
TERM DEPOSITS |
|
9 |
31,558 |
39,084 |
|
|
| CURRENT
LIABILITIES |
|
| Current
portion of long term liabilities |
|
| Long
term loans - secured |
|
50,436 |
50,436 |
|
| Liabilities
against assets subject to finance lease |
47,005 |
40,996 |
|
| Short
term running finance |
|
10 |
260,254 |
-- |
|
| Creditors,
accrued and other liabilities |
11 |
555,820 |
558,349 |
|
| Provision
for taxation |
|
43,599 |
67,243 |
|
| Dividend
payable |
|
392 |
399 |
|
|
957,506 |
717,423 |
|
|
--------- |
--------- |
|
| CONTINGENCIES
AND COMMITMENTS |
|
12 |
-- |
-- |
|
|
========= |
========= |
|
|
8,102,729 |
7,390,244 |
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
| FIXED
CAPITAL EXPENDITURE |
|
| Operating
fixed assets |
|
13 |
804,047 |
786,929 |
|
| Assets
subject to finance lease |
|
14 |
10,935 |
65,694 |
|
| Capital
work in progress |
|
15 |
5,626,630 |
4,189,893 |
|
|
6,441,612 |
5,042,516 |
|
|
--------- |
--------- |
|
| LONG
TERM INVESTMENTS |
|
16 |
642,614 |
1,022,827 |
|
|
|
| LONG
TERM LOANS TO EMPLOYEES |
|
17 |
7,233 |
8,256 |
|
|
|
|
| LONG
TERM DEPOSITS AND DEFERRED COSTS |
18 |
22,058 |
19,035 |
|
|
| CURRENT
ASSETS |
|
| Stores,
spares and loose tools |
|
19 |
395,638 |
262,664 |
|
| Stock
- in - trade |
|
20 |
41,327 |
40,870 |
|
| Short
term investments |
|
21 |
370,232 |
-- |
|
| Advances,
deposits, prepayments and |
|
|
|
| other
receivables |
|
22 |
139,003 |
272,132 |
|
| Cash
and bank balances |
|
23 |
43,012 |
721,944 |
|
|
989,212 |
1,297,610 |
|
|
---------- |
---------- |
|
|
8,102,729 |
7,390,244 |
|
|
========== |
========== |
|
|
|
|
|
|
|
| PROFIT AND LOSS ACCOUNT FOR THE |
|
|
|
| YEAR
ENDED JUNE 30,1997 |
|
|
(Rupees in thousand} |
|
|
Note |
1997 |
1996 |
|
|
| SALES |
|
24 |
1,347,594 |
1,547,090 |
|
| COST
OF GOODS SOLD |
|
25 |
1,072,902 |
955,660 |
|
|
|
|
---------- |
---------- |
|
| GROSS
PROFIT |
|
274,692 |
591,430 |
|
|
|
| OPERATING
EXPENSES |
|
|
| Administration
and general expenses |
|
26 |
33,826 |
40,794 |
|
| Selling
and distribution expenses |
|
27 |
161,009 |
202,063 |
|
|
|
194,835 |
242,857 |
|
|
|
|
---------- |
---------- |
|
| OPERATING
PROFIT |
|
|
79,857 |
348,573 |
|
| OTHER
INCOME |
|
28 |
47,370 |
105,490 |
|
|
|
|
---------- |
---------- |
|
|
