| ESSA CEMENT INDUSTRIES LTD. |
|
|
|
|
|
| Annual
Report 1997 |
|
|
| CONTENTS |
|
| Company Information |
|
| Notice
of Meeting |
|
| Directors' Report to the
Members |
|
| Financial
Highlights. |
|
| Auditors' Report to the Members |
|
| Balance
Sheet |
|
| Profit and Loss Account |
|
| Statement
of Changes in Financial Position |
|
| Notes to the Accounts |
|
| Pattern of Share Holding |
|
|
|
|
|
| COMPANY
INFORMATION |
|
|
| BOARD
OF DIRECTORS |
|
|
| MR. ABDUL AZIZ ESSA |
CHAIRMAN & CHIEF
EXECUTIVE |
|
| MRS.
HUMERA ESSA |
|
| MRS.
JAMILA YOUNUS DADA |
|
| MRS.
ZAITOON HAMZA DADA |
|
| MR.
JAWED AZIZ ESSA |
|
| MR.
IRFAN AZIZ ESSA |
|
| MIR.
ZAFARUDDIN SIDDIQUI |
|
|
| COMPANY
SECRETARY |
|
| MR.
JAWED AZIZ ESSA |
|
|
| AUDITORS |
|
| F.R.
MERCHANT & CO. |
|
| CHARTERED
ACCOUNTANTS |
|
|
| BANKERS |
|
| HABIB
BANK LIMITED |
|
| NATIONAL
BANK OF PAKISTAN |
|
| MUSLIM
COMMERCIAL BANK LIMITED |
|
| ANZ
GRINDLAYS BANK |
|
| ALLIED
BANK OF PAKISTAN LIMITED |
|
| BOLAN
BANK LIMITED |
|
|
| REGISTERED
OFFICE |
|
| FL-2/1,
BLOCK-6, |
|
| GULSHAN-E-IQBAL, |
|
| KARACHI-75300 |
|
|
| FACTORY |
|
| DEH
KALO KOHAR |
|
| NOORIABAD
INDUSTRIAL AREA |
|
| DISTRICT
DADU, (SINDH) |
|
|
|
|
| NOTICE
OF MEETING |
|
|
| NOTICE
IS HEREBY GIVEN that Annual General Meeting of the Company will be held on
Monday, |
|
| December
29, 1997 at 08:00 A.M. at Avari Towers, Fatima Jinnah Road, Karachi, to
transact |
|
| the
following business: |
|
|
| ORDINARY
BUSINESS |
|
|
| 1)
To confirm the minutes of the last Annual General Meeting. |
|
|
| 2)
To receive and consider the Report of the Directors, the Audited Accounts and |
|
| Statement
alongwith the Balance Sheet for the year ended June 30, 1997 with the |
|
| Auditors'
Report thereon. |
|
|
| 3)
To appoint Auditors for the year 1997-98 and to fix their remuneration. |
|
|
| 4)
To transact any other business with the permission of the Chairman. |
|
|
| SPECIAL
BUSINESS |
|
|
| 1)
To consider and if thought fit to resolve "that a sum of Rs. 31,481,570
be capitalised |
|
| out
of the profit and general reserve of the Company and that such sum be applied |
|
| in
making full at par for 3,148,157 ordinary shares of Rs. 10 each in the
capital of the |
|
| Company.
Such shares to be distributed as fully paid shares among the members as |
|
| at
the closing of the books on December 17, 1997 C? 10% (1 share for every 10
shares |
|
| held
) and that any fraction of shares arising thereof shall be disregarded and
that the |
|
| whole
shares representing such fraction shall be disposed of in such manner as the |
|
| Directors
of the Company think fit and proceeds shall be distributed in due proportion |
|
| among
the members entitled thereto in accordance with their respective rights and |
|
| such
shares shall rank for all purposes pari passu with the ordinary shares
already |
|
| issued
by the Company." |
|
|
| NOTES: |
|
|
| 1)
The Share Transfer Books of the Company will remain closed from December 18,
1997 to |
|
| December
29, 1997 (both days inclusive). Transfers received in order at the Registered |
|
| Office
of the Company upto the close of business on December 17, 1997 will be
considered |
|
| in
time for the purpose of Bonus Shares to the transferees. |
|
|
| 2)
A member entitled to attend and vote at the Annual General Meeting may
appoint another |
|
| member
as the proxy to attend and vote on his/her behalf. Proxies must be duly
filled, |
|
| signed
and deposited at the Registered Office of the Company not less than 48 hours |
|
| before
the time of the meeting. |
|
|
| 3)
Shareholders are requested to promptly notify the Company of any change in
their |
|
| addresses,
if any. |
|
|
| STATEMENT
UNDER SECTION t60(1) (b) OF THE COMPANIES ORDINANCE, 1984 |
|
| The
Reserves of the Company as on June 30, 1997 represent accretion on its
existing share |
|
| capital,
it has been thought expedient to capitalise a part of the said reserves by
way of issue |
|
| of
Bonus Shares to the members. The Company has no direct interest in the event
the capital |
|
| is
increased as proposed. Upon issuance of the Bonus Shares, the paid-up capital
of the |
|
| Company
shall stand increased to Rs. 346,297,320. |
|
|
|
| DIRECTORS'
REPORT TO THE MEMBERS |
|
|
| The
directors take pleasure in presenting their report alongwith audited accounts
and auditors' |
|
| report
thereon for the year ended June 30, 1997. |
|
|
| PRODUCTION |
|
|
| During
the year under review the Company witnessed a further setback in production. |
|
|
| The
cement industry had to face unfavourable trading conditions particularly in
view of uncertain |
|
| political
situations coupled with inflated sales tax rates and other indirect taxes.
However, the overall |
| capacity
utilised remained at the installed capacity at ~ 00%. Comparative figures of
production are |
| given
hereunder: |
|
|
|
1996-97 |
1995-96 |
|
|
Tons |
Tons |
|
|
| Clinker |
|
133,982 |
149,882 |
|
| Ordinary
Portland Cement |
|
90,075 |
127,030 |
|
| Slag Cement |
|
48,024 |
41,550 |
|
| Sulphate
Resistance Cement |
|
12,643 |
6,220 |
|
|
| SALES & MARKETING |
|
|
| During
the year under review there was over supply of cement in the market,
conversely there |
|
| was
lesser local demand for consumption mainly due to political instability in
the country and law and |
| order
situation which resulted in downward trend in ex-factory prices. Inspire of
all these factors, the |
| Company
has been successful in achieving the sale of cement equivalent to our
capacity. The |
|
| cement
sales by the Company aggregated to 150,455 tons as compared to 173,807 tons
last year. |
|
|
| Gross
Sales Revenue amounted to Rs. 495.938 million, out of which Rs. 224.985
million were |
|
| paid
to the government as Excise Dub and Sales Tax. Net sales revenue amounted to
Rs. 270.954 |
|
| million. |
|
|
| OPERATING
PROFIT & FINANCIAL RESULTS |
|
|
| The
Company has earned Operating Profit of Rs. 32.474 million during the year as
compared |
|
| to
last year's Operating Profit of Rs. 62.760 million. Following are the
financial results: |
|
|
| PROFIT
AFTER TAX |
|
16,267,002 |
|
| UNAPPROPRIATED
PROFIT B/F |
|
4,908,436 |
|
| PROFIT
AVAILABLE FOR APPROPRIATION |
|
21,175,438 |
|
|
| APPROPRIATIONS |
|
| TRANSFER
FROM GENERAL RESERVE |
|
(15,000,000) |
|
| PROPOSED
ISSUE OF BONUS SHARES |
|
| IN
THE RATIO OF 1:10 |
|
31,481,566 |
|
|
---------- |
|
|
16,481,566 |
|
|
---------- |
|
| UNAPPROPRIATED
PROFIT C/F |
|
4,693,872 |
|
|
---------- |
|
|
|
|
| In
the year under report cement industry as a whole is moving towards decline in
earning due |
|
| to
the factors as discussed above. |
|
|
| BONUS
SHARES |
|
|
| The
Directors now are pleased to recommend to issue Bonus Shares @10% (1 Share
for every |
|
| 10
shares held). |
|
|
| EXPANSION
PROGRAMME |
|
|
| During
the year your Company continued to progress smoothly towards the completion
of |
|
| the
expansion programme with additional capacity of 1000 tons per day, |
|
|
| The
civil work is more than 90% completed, Most of the imported equipment is
already received |
|
| at
the plant site and erection work is already completed, Chinese technical team
is also working at |
| the
plant site and Inshallah, we expect to go on trial production by March 1998, |
|
|
| STAFF & LABOUR |
|
|
| We
wish to place on record our appreciation for the work done by the Staff and
the Workers, |
|
|
| AUDITORS |
|
|
| The
present Auditors M/s. F.R. Merchant & Co., Chartered Accountants, retire
and being eligible |
|
| offer
themselves for reappointment as Auditors of the Company for the year 1997-98. |
|
|
|
|
|
|
|
|
| FINANCIAL
HIGHLIGHTS |
|
|
| [Figures
in Thousand) |
|
|
|
1997 |
1996 |
1995 |
1994 |
1993 |
1992 |
| NET SALES |
|
270,954 |
300,613 |
310,612 |
338,811 |
265,994 |
178,760 |
| RESULT |
|
|
|
11,918 |
416,14 |
88,845 |
115,915 |
88,051 |
35,425 |
| PROFIT
AFTER TAX |
|
16,267 |
29,015 |
70,670 |
114,211 |
86,719 |
34,517 |
|
|
| NET
RETURN OF TURNOVER % |
|
6.00 |
9.65 |
22.75 |
33.71 |
32.60 |
19.31 |
| CURRENT
ASSETS |
|
188,831 |
184,302 |
156,415 |
109,566 |
76,578 |
44,824 |
| CURRENT
LIABILITIES |
|
171,174 |
127,282 |
90,633 |
63,969 |
86,357 |
99,866 |
| CURRENT
RATIO |
|
|
| ASSETS:
LIABILITIES |
|
1.10:1 |
1.45:1 |
1.73:1 |
1.71 : 1 |
0.89:1 |
0.45:1 |
|
|
| DISTRIBUTABLE |
|
|
| RESERVES |
|
216,175 |
228,528 |
199,513 |
147,508 |
33,297 |
(25,142) |
|
|
| SHAREHOLDERS |
|
|
| EQUITY |
|
530,991 |
514,724 |
342,611 |
260,629 |
146,418 |
87,979 |
|
|
| NUMBER
OF SHARES |
|
31,482 |
28,620 |
14,310 |
11,312 |
11,312 |
11,312 |
|
|
| EARNING
PER SHARE |
|
|
| OF
RS. 10 EACH |
|
0.52 |
1.01 |
4.94 |
10.10 |
7.67 |
3.05 |
|
|
| BRACK-UP
VALUE |
|
|
| PER SHARE |
|
RS. |
16.87 |
17.98 |
23.94 |
23.04 |
12.94 |
7.78 |
|
|
|
|
| AUDITORS'
REPORT TO THE MEMBERS |
|
|
| We
have audited the annexed balance sheet of ESSA CEMENT INDUSTRIES LIMITED as
at June |
|
| 30,
1997 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 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, 1 984 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 the statement of
changes |
|
| in
financial position, together with the notes forming pad 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 the Company's affairs as at June |
|
| 30,
1997 and of the profit and the changes in the financial position for the year
then |
|
| ended; and |
|
|
| d)
in our opinion, no zakat was deductible at source under the Zakat & Ushr
Ordinance, |
|
| 1,980 |
|
|
F.R. MERCHANT & CO. |
|
| KARACHI
' November 25, 1997 |
|
Chartered Accountants |
|
|
|
|
|
| BALANCE
SHEET AS AT JUNE 30, 1997 |
|
|
| SHARE
CAPITAL AND RESERVES |
|
NOTE |
1997 |
1996 |
|
|
| Authorised |
|
| 50,000,000
ordinary shares of Rs. 10/- each |
|
500,000,000 |
500,000,000 |
|
|
=========== |
=========== |
|
| Issued,
subscribed and paid-up capital |
|
3 |
314,815,750 |
286,196,140 |
|
| Reserves |
|
4 |
216,175,442 |
228,528,050 |
|
|
---------- |
---------- |
|
|
530,991,192 |
514,724,190 |
|
| REDEEMABLE
CAPITAL |
|
5 |
-- |
1,967,500 |
|
| LONG
TERM LOANS |
|
6 |
444,264,846 |
6,368,656 |
|
| LIABILITIES
AGAINST ASSETS SUBJECT TO FINANCE LEASE |
7 |
24,166,761 |
11,310,394 |
|
|
| CURRENT
LIABILITIES |
|
|
| Current
maturity of redeemable capital |
|
5 |
1,967,500 |
815,057.10 |
|
| Current
maturity of long term loans |
|
6 |
45,044,034 |
44,894,700 |
|
| Current
maturity of liabilities against |
|
|
|
|
| assets
subject to finance lease |
|
7 |
11,215,989 |
3,470,444 |
|
| Creditors,
accrued and other liabilities |
|
8 |
74,536,354 |
53,646,838 |
|
| Running
finances under mark-up arrangements |
|
9 |
94,269,119 |
57,797,228 |
|
| Provision
for taxation |
|
2,204,189 |
15,673,567 |
|
| Unclaimed
dividend |
|
163,891 |
163,891 |
|
|
---------- |
---------- |
|
|
229,401,076 |
183,797,239 |
|
|
| CONTINGENCIES
AND COMMITMENTS |
|
10 |
|
|
|
---------- |
---------- |
|
|
Rupees |
1,228,823,875 |
718,167,979 |
|
|
=========== |
=========== |
|
| Fixed
Assets - Tangible |
|
|
|
| Operating
assets |
|
11 |
328,275,152 |
340,832,032 |
|
| Capital
work-in-progress |
|
12 |
708,304,598 |
191,626,234 |
|
|
---------- |
---------- |
|
|
1,036,579,750 |
532,458,266 |
|
|
| LONG
TERM ADVANCES, PREPAYMENTS |
|
| AND
DEFERRED COSTS |
|
13 |
3,413,146 |
1,407,356 |
|
|
| CURRENT
ASSETS |
|
|
| Stores
and spares |
|
14 |
57,728,816 |
42,412,179 |
|
| Stock-in-trade |
|
15 |
70,010,433 |
88,785,109 |
|
| Trade debts |
|
16 |
35,993,259 |
7,091,576 |
|
| Advances,
deposits, prepayments |
|
| and
other receivables |
|
17 |
2,371,748 |
30,281,818 |
|
| Cash
and bank balances |
|
18 |
12,726,723 |
15,731,675 |
|
|
---------- |
---------- |
|
|
188,830,979 |
184,302,357 |
|
|
---------- |
---------- |
|
|
Rupees |
1,228,823,875 |
718,167,979 |
|
|
=========== |
=========== |
|
| The
annexed notes form an integral part of these accounts, |
|
|
|
|
| PROFIT
AND LOSS ACCOUNT |
|
| FOR
THE YEAR ENDED JUNE 30, 1997 |
|
|
NOTE |
1997 |
1996 |
|
| Sales |
|
495,938,477 |
483,573,938 |
|
| Less:
Excise duty |
|
156,419,832 |
115,264,305 |
|
| Sales tax |
|
68,565,033 |
67,696,391 |
|
|
---------- |
---------- |
|
|
224,984,865 |
182,960,696 |
|
|
---------- |
---------- |
|
| Net sales |
|
270,953,612 |
300,613,242 |
|
| Cost
of sales |
|
19 |
229,846,769 |
229,685,129 |
|
|
|
---------- |
---------- |
|
|
|
41,106,843 |
70,928,113 |
|
| Administration
and selling expenses |
|
20 |
8,632,383 |
8,167,965 |
|
|
|
---------- |
---------- |
|
| Operating
profit |
|
|
32,474,460 |
62,760,148 |
|
| Other
income |
|
21 |
423,435 |
1,477,510 |
|
|
|
---------- |
---------- |
|
|
|
32,897,895 |
64,237,658 |
|
| Financial
charges |
|
22 |
19,464,596 |
17,650,215 |
|
| Other
charges |
|
23 |
1,515,645 |
4,973,336 |
|
|
|
---------- |
---------- |
|
|
|
20,980,241 |
22,623,551 |
|
|
|
---------- |
---------- |
|
| Profit
before taxation |
|
|
11,917,654 |
41,614,107 |
|
| Taxation |
|
24 |
(4,349,348) |
12,598,960 |
|
|
|
---------- |
---------- |
|
| Profit
after taxation |
|
16,267,002 |
29,015,147 |
|
| Accumulated
profit brought forward |
|
4,908,436 |
4,512,903 |
|
|
---------- |
---------- |
|
| Profit
available for appropriation |
|
21,175,438 |
33,528,050 |
|
| Appropriations: |
|
|
| Transfer
from general reserve |
|
(15,000,000) |
-- |
|
| Proposed
issue of bonus shares in |
|
| the
ratio of 1 : 10 (1996 - 1:10) |
|
31,481,566 |
28,619,614 |
|
|
---------- |
---------- |
|
|
16,481,566 |
28,619,614 |
|
|
---------- |
---------- |
|
| Accumulated
profit carried forward |
|
4,693,872 |
4,908,436 |
|
|
========== |
========== |
|
| The
annexed notes form an integral part of these accounts |
|
|
|
|
| STATEMENT
OF CHANGES IN FINANCIAL POSITION (CASH FLOW STATEMENT) |
|
| FOR
THE YEAR ENDED JUNE 30, 1997 |
|
|
| CASH
FLOW FROM OPERATING ACTIVITIES |
|
1996 |
|
| Profit
before taxation |
|
11,917,654 |
41,614,107 |
|
| Adjustments: |
|
| Depreciation |
|
34,234,777 |
35,508,097 |
|
| Amortization
of deferred cost |
|
-- |
1,014,153 |
|
|
34,234,777 |
36,522,250 |
|
|
---------- |
---------- |
|
| Operating
profit before changes |
|
46,152,431 |
78,136,357 |
|
| (Increase)/decrease
in current assets |
|
|
| Stores
and spares |
|
(15,316,637 |
(34,654) |
|
| Stock-in-trade |
|
18,774,676 |
(3,905,468) |
|
| Trade debts |
|
(28,901,683) |
(1,350,654) |
|
| Advances,
deposits, prepayments |
|
|
|
| and
other receivables |
|
17,910,070 |
(13,252,543) |
|
|
---------- |
---------- |
|
|
(7,533,574) |
(18,543,319] |
|
| Increase/(decrease)
in current liabilities |
|
|
|
| Creditors,
accrued and other liabilities |
|
20,889,516 |
7,566,450 |
|
| Running
finances under mark-up arrangements |
|
36,471,891 |
31,392,090 |
|
|
---------- |
---------- |
|
|
57,361,407 |
38,958,540 |
|
|
---------- |
---------- |
|
| Net
cash from operating activities |
|
95,980,264 |
98,551,578 |
|
| Tax paid |
|
(9,120,030) |
(14,908,865 |
|
|
---------- |
---------- |
|
| Net
cash from operating activities after tax |
|
86,860,234 |
83,642,713 |
|
|
| CASH
FLOW FROM INVESTING ACTIVITIES |
|
| Capital
expenditure |
|
(538,356,261) |
(190,005,597) |
|
---------- |
---------- |
|
| Net
cash from after investing activities |
|
(451,496,027) |
(106,362,884) |
|
| CASH
FLOW FROM FINANCING ACTIVITIES |
|
| Right
shares issued |
|
-- |
143,098,070 |
|
| Redeemable
capital |
|
(8,150,571) |
(12,366,100) |
|
| Long
term loans |
|
438,045,524 |
(11,775,328) |
|
| Liabilities
subject to finance lease |
|
20,601,912 |
[1,842,722) |
|
| Long-term
deposits |
|
(2,005,790) |
(1,407,356) |
|
|
---------- |
---------- |
|
| Net
cash flow from financing activities |
|
448,491,075 |
115,706,564 |
|
|
---------- |
---------- |
|
| Net
cash flow after financing activities |
|
(3,004,952) |
9,343,680 |
|
| Cash
and bank at the beginning of the year |
|
15,731,675 |
6,387,995 |
|
|
---------- |
---------- |
|
| Cash
and bank at the end of the year |
|
12,726,723 |
15,731,675 |
|
|
=========== |
=========== |
|
|
| NOTES
TO THE ACCOUNTS FOR THE YEAR ENDED |
|
| JUNE
30, ]997 |
|
|
| 1.
THE COMPANY AND ITS OPERATION |
|
| Essa
Cement Industries Limited is a Public Limited Company and listed on the
Karachi and |
|
| Lahore
Stock Exchanges, The company's principal activity is Manufacturing &
Marketing of |
|
| Cement
and its Products. |
|
|
| 2.
SIGNIFICANT ACCOUNTING POLICIES |
|
|
| 2.1
Accounting convention |
|
| These
accounts have been prepared under the historical cost convention as modified |
|
| by
adjustments of Exchange Fluctuation on Foreign Currency Loans, |
|
|
| 2.2
Taxation |
|
| Provision
for current year taxation is based on current rates of taxation, The company |
|
| has
decided to provide for deferred taxation arising from timing differences. It
will be |
|
| provided
in future year out of profit after taxation. |
|
|
| 2.3
Fixed assets and depreciation |
|
| 2.3
(i} Operating assets |
|
| Operating
fixed assets except free hold land are stated at cost less |
|
| accumulated
depreciation. Free hold 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. Profit / Loss on disposal of fixed assets is accounted for in |
|
| the
profit and loss account. |
|
| Maintenance
and normal repairs are charged to income as and when incurred. |
|
| Major
renewals and improvements are capitalized and the assets so replaced, |
|
| if
any, are retired. |
|
|
| 2.3.
(ii) Assets subject to Finance Lease |
|
| These
are stated at lower of present value of minimum lease payments under |
|
| the
lease agreements and the fair value of the assets. The related obligations |
|
| of
the lease are accounted for as liabilities. Assets acquired under finance |
|
| lease
are depreciated over the useful life of the assets in the same manner as |
|
| the
owned assets. |
|
|
| 2.4
Deferred costs |
|
| These
are amortized over a period of four years, |
|
|
| 2.5
Stores and spares |
|
| These
are valued at moving average cost. |
|
|
| 2.6
Stock-in-trade |
|
| These
are stated at lower of cost or net realizable value. The method used for the |
|
| calculation
of costs are as follows: |
|
| Raw
and packing materials |
|
-- at average cost |
|
| Work-in-process
and finished goods |
|
-- at average cost of goods |
|
|
produced during the year. |
|
|
| 2.7 Foreign currency translation |
|
| Assets
and liabilities in foreign currencies are translated into rupees at the rates
of |
|
| exchange
prevailing at the date of the balance sheet except where exchange risk |
|
| cover
has been obtained for repayment of liabilities in which case the rate
contracted |
|
| for
is used. |
|
| Exchange
differences in respect of foreign currency loans obtained for acquisition of |
|
| fixed
assets are incorporated in the cost of the relevant assets. Exchange
differences |
|
| capitalized
include loss or gain on the repayments and year-end translation of foreign |
|
| currency
loans. |
|
|
| 2.8
Revenue recognition |
|
| Sales
are recorded on despatch of goods to customers. |
|
|
|
| 3.
ISSUED, SUBSCRIBED & PAID-UP CAPITAL |
|
1997 |
1996 |
|
|
| 25,913,117
ordinary shares |
|
| of
Rs. 10 each issued for cash |
|
259,131,170 |
259,131,170 |
|
|
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