| Fecto Cement Limited |
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| (Annual
Report 1997) |
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| CONTENTS |
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| Corporate
Information |
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| Notice
of Meeting |
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| Directors'
Report |
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| Auditors'
Report |
|
| Balance
Sheet |
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| Profit
& Loss Account |
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| Statement
of Changes in Financial Position |
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| Notes
to the Accounts |
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| Pattern
of Shareholding |
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| Form
of Proxy |
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|
| CORPORATE
INFORMATION |
|
| BOARD
OF DIRECTORS |
|
| CHIEF
EXECUTIVE |
|
| Mr.
Mohammed Yasin Fecto |
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| DIRECTORS |
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| Mr.
Ghulam Mohammed A. Fecto |
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| Mr.
Mohammed Asad Fecto |
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| Mr.
Mohammed Ilyas Khan |
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| Mr.
Muhammad Nasim Khan |
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| Mr.
Safdar Abbas Morawala |
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| Mr.
Muhammad Umer Memon |
|
| Mr.
Muhammad Sharif Shafique |
|
| Mr.
Afzalul Haque |
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| Mr.
Abdul Jaleel Shaikh |
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| SECRETARY |
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| AUDITORS |
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| Mr.
Abdul Aleem, FCA |
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| Taseer
Hadi Khalid & Co. |
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| Chartered
Accountants |
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| Mr.
Rahim Iqbal Rafiq & Co. |
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| Chartered
Accountants |
|
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| LEGAL
ADVISOR |
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| Nisar
Law Associates |
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| 51,
Mozang Road |
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| Lahore |
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| BANKERS |
|
| Allied
Bank of Pakistan |
|
| ABN
AMRO Bank |
|
| American
Express Bank Limited |
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| Bank
of America |
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| Citibank NA |
|
| Habib
Bank Limited |
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| Muslim
Commercial Bank Limited |
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| National
Development Finance Corporation |
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| Union
Bank Limited |
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| REGISTERED
OFFICE |
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| 35-Darulaman
Housing Society |
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| Block
7/8, Shahra-e-Faisal |
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| Karachi |
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| FACTORY |
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| MARKETING
OFFICE |
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| Sangjani,
Islamabad |
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| 2nd
Floor, Majeed Plaza |
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| Bank
Road, Saddar |
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| Rawalpindi |
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| SHARE
REGISTRAR OFFICE |
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| Uni
Corporate & Financial Services |
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| 4th
Floor, Bank Square No. 2 |
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| M.
A. Jinnah Road |
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| Karachi |
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| NOTICE
OF ANNUAL GENERAL MEETING |
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| Notice
is hereby given that the 16th Annual General Meeting of the Members of the
Company will |
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| be
held at Registered Office, 35-Darulaman Housing Society, Block 7/8,
Shahra-e-Faisal, Karachi on |
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| Wednesday,
December 31, 1997 at 8.00 a.m. to transact the following business: |
|
|
| ORDINARY
BUSINESSES |
|
| 1.
To confirm the Minutes of the 15th Annual General Meeting held on December
31, 1996. |
|
|
| 2.
To receive and adopt the Annual Audited Accounts for the year ended June 30,
1997 together |
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| with the Directors' and Auditors' Reports
thereon. |
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| 3.
To appoint Auditors and fix their remuneration. The present Auditors Messrs.
Taseer Hadi Khalid |
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| & Co., Chartered Accountants and
Messrs. Rahim Iqbal Rafiq & Co., Chartered Accountants retire |
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| and being eligible, offer themselves for
re-appointment. |
|
|
| To
elect seven directors in accordance with the provisions of Section 178 of the
Companies |
|
| Ordinance,
1984 for a period of three years commencing January 01, 1998. |
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| The
number of elected directors fixed by the Board of Directors under Section 178
of the |
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| Companies
Ordinance, 1984 is seven |
|
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| The
retiring Directors are: |
|
| Mr.
Ghulam Mohammed A. Fecto |
Mr. Mohammed Yasin Fecto |
|
| Mr.
Mohammed Asad Fecto |
|
Mr. Mohammed Ilyas Khan |
|
| Mr.
Muhammad Nasim Khan |
|
Mr. Muhammad Umer Memon |
|
| Mr.
Safdar Abbas Morawala |
|
|
| SPECIAL
BUSINESSES |
|
|
| 5.
To consider and approve the remuneration payable to the Chief Executive and
one Working |
|
| Director and in this respect to pass with
or without modification, the following resolution as an |
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| ORDINARY RESOLUTION: |
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|
| "RESOLVED
THAT the remuneration of Chief Executive and one Working Director be fixed at
to |
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| Rs.
100,000.00 each plus all other benefits available to executives in accordance
with the |
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| Company's
Rules, commencing January 01, 1998" |
|
|
| 6.
To transact any other business with the permission of the Chair. |
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|
By Order of the Board |
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| Karachi:
November 27, 1997 |
COMPANY SECRETARY |
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| Notes: |
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| 1.
The Share Transfer Books of the Company will remain closed from Monday,
December 22, 1997 |
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| to Wednesday, December 31, 1997 (both days
inclusive). |
|
|
| 2.
A Member entitled to attend, speak and vote at this meeting may appoint
another Member as |
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| his/her proxy to attend, speak and vote on
his/her behalf. |
|
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| 3.
An instrument appointing a proxy must be received at the Registered Office of
the Company not |
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| later than forty eight hours before the
time appointed for the Meeting. A Member shall not be |
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| entitled to appoint more than one proxy. If
a Member appoints more than one proxy and more |
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| than one instrument of proxy are deposited
by a Member with the Company, all such |
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| instruments shall be rendered invalid. |
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| 4.
Members are requested to notify any change in their address immediately. |
|
|
| 5.
Members should quote their Folio Number in all correspondence and at the time
of attending |
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| the Meeting. |
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| 6.
Any person who seeks to contest election to the office of Directors shall,
whether he is a retiring |
|
| Director or otherwise, file with the
Company, not later than Fourteen (14) days before the date |
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| of the meeting, a notice of his intention
to offer himself for election as Director in terms of |
|
| Section 178 of the Companies Ordinance,
1984. |
|
|
| STATEMENT
UNDER SECTION 160 OF THE COMPANIES ORDINANCE, 1984 |
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| The
Chief Executive and full time Working Director will be interested in the
business of fixing their |
|
| remuneration
to the extent the remuneration will be payable to them. |
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|
|
| DIRECTORS'
REPORT TO THE MEMBERS |
|
| Dear Members |
|
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| Your
Directors are pleased to present their report along with the audited accounts
for the year |
|
| ended
June 30, 1997. |
|
|
| The
Company with the blessings of Almighty Allah has maintained its operating
efficiency, however, |
|
| due
to depressed marketing conditions the financial results have shown loss for
the first time in the |
|
| history
of the company. |
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|
| OPERATING
PERFORMANCE |
|
| The
company continue to achieve the optimum level of efficiency which has been
possible due to |
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| exceptional
care and maintenance of the plant. The production and despatches for the year
under |
|
| review
were as follows: |
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|
1997 |
1996 |
|
| Tonnes |
|
|
| Production |
|
| Clinker |
|
671,882 |
654, 560 |
|
| Cement |
|
716,748 |
694,843 |
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|
----------- |
----------- |
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| Despatches |
|
716,941 |
696,008 |
|
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| OPERATING
RESULT |
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| We
have informed in our last report that the cement industry is passing through
a difficult period. |
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| On
the one hand the excess supply of cement due to commissioning of new units
and expansion in |
|
| some
of the existing units and the economic slum in the country kept pressure on
selling prices. |
|
| While
on the other hand input cost has increased substantially mainly due to
massive enhancement |
|
| in
fuel and power prices by the Government, heavy taxation and high rate of
inflation prevailing in |
|
| the
country. All these factors have eroded the profitability of the cement
sector. |
|
|
| Whatever
increase in prices achieved by the company were wiped out by the high rate of
taxation |
|
| and
as such the net revenue of Rs. 1,298.181 million has shown nominal increase
of 1.36% as |
|
| compare
to corresponding period. The increase in cost of sales mainly due to increase
of |
|
| approximately
36% in the fuel and power cost resulted in decrease in gross profit rate to
4.61% |
|
| compared
to 18.13% in the corresponding period. Although the operating expenses of Rs.
60.093 |
|
| million,
financial charges of Rs. 86.161 million and workers funds of Rs. 3.113
million have reduced |
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| by
9.86%, 20.42% and 44.45% respectively compared to corresponding period but
still company has |
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| suffered
loss before taxation of Rs. 57.318 million |
|
|
| DEBT
OBLIGATION |
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| Inspite
of liquidity squeeze the company continue to meet its financial commitments
and debt |
|
| obligations
on time without resorting to any short term borrowings. |
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|
| FUTURE
PROSPECTS |
|
| The
current economic scenario, excess supply of cement and high rate of inflation
presents a very |
|
| bleak
future for the industry. The industry is passing through the phase where its
survival becoming |
|
| difficult
day by day and we fear that if the remedial measures are not taken
immediately than the |
|
| industry
shall become sick. Although in the budget 1997-98 the government has exempted
the |
|
| cement
industry from levy of sales tax but the impact of relief is very nominal as
the excise duty has |
|
| been
increased by 5% and adjustment of sales tax paid on inputs particularly on
papersacks and |
|
| spares
have been discontinued. |
|
|
| BOARD
OF DIRECTORS |
|
| Since
our last Report Mr. Muhammad Aslam, nominee director of National Development
Finance |
|
| Corporation
(NDFC) and Mr. Rashid Zahir nominee director of Saudi Pak Industrial &
Agricultural |
|
| Investment
Co. (Pvt.) Ltd (SAPICO), has resigned from the Board and in their place Mr.
Afzalul Haque |
|
| and
Mr. Abdul Jaleel Shaikh has been nominated by NDFC and SAPICO respectively.
The Company |
|
| place
on record their appreciation for the valuable support and contribution by the
outgoing |
|
| Directors
and 'welcome the new Directors and hope that the Company will benefit from
their |
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| valuable
experience. |
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|
| AUDITORS |
|
| Present
auditors M/s. Taseer Hadi Khalid & Co., Chartered Accountants and M/s.
Rahim Iqbal Rafiq & |
|
| Co.,
Chartered Accountants, retire and being eligible, have offered themselves for
re-appointment. |
|
|
| PATTERN
OF SHAREHOLDING |
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| A
statement showing the pattern of shareholding as at 30th June, 1997 is
annexed. |
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| ACKNOWLEDGMENT |
|
| The
Directors would like to place on record their appreciation for the strenuous
efforts and |
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| dedicated
work of the staff and workers for achieving optimum level of production and
for the |
|
| efforts
made by the dealers in giving full support to our marketing policies. It is
hoped that they will |
|
| continue
to work with same spirit in the years to come. |
|
|
| Above
all, we would like to express our sincere thanks to all the financial
institutions who have been |
|
| associated
with us for their continued support and co-operation. |
|
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|
On behalf of the Board |
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|
(MOHAMMED YASIN FECTO) |
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| Karachi:
November 26, 1997. |
Chief Executive |
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|
|
|
| AUDITORS'
REPORT TO THE MEMBERS |
|
| We
have audited the annexed balance sheet of FECTO CEMENT 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, 1984 and are in agreement with
the |
|
| books
of account and are further in accordance with the 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 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 the company's affairs as at June
30, 1997 and of the loss and the changes in financial |
|
| position for the year then ended; and |
|
|
| (d)
in our opinion, Zakat deductible at source under the Zakat and Ushr
Ordinance, 1980 was |
|
| deducted by the Company and deposited in
the Central Zakat Fund established under Section 7 |
|
| of that Ordinance. |
|
|
| Karachi:
November 26, 1997. |
TASEER HADI KHALID &
CO. |
|
RAHIM IQBAL RAFIQ &
CO. |
|
|
Chartered Accountants |
|
Chartered Accountants |
|
|
| BALANCE
SHEET AS AT JUNE 30, 1997 |
|
|
|
(Rupees in Thousands) |
|
|
Note |
1997 |
1996 |
|
|
| SHARE
CAPITAL |
|
|
| Authorised: |
|
| 50,000,000
Ordinary Shares of Rs. 10/- each |
|
500,000 |
500,000 |
|
|
========== |
========== |
|
| Issued,
subscribed and paid-up |
|
| 45,600,000
Ordinary Shares of Rs. 10/- each |
|
| Issued
for Cash |
|
456,000 |
456,000 |
|
|
| RESERVES |
|
3 |
189,698 |
258,519 |
|
|
|
645,698 |
714,519 |
|
| REDEEMABLE
CAPITAL |
|
4 |
15,756 |
58,233 |
|
| LONG
TERM LOANS |
|
5 |
200,108 |
307,268 |
|
| DEFERRED
LIABILITIES |
|
7 |
327,325 |
376,499 |
|
| LONG
TERM DEPOSITS |
|
8 |
23,224 |
24,787 |
|
| CURRENT
LIABILITIES: |
|
|
|
| Current
Maturity of Long Term Liabilities |
|
9 |
89,779 |
114,107 |
|
| Creditors,
Accrued & Other Liabilities |
|
10 |
290,301 |
265,002 |
|
| Provision
for Taxation |
|
15,033 |
59,555 |
|
|
---------- |
---------- |
|
|
395,113 |
438,664 |
|
|
---------- |
---------- |
|
|
1,607,224 |
1,919,970 |
|
|
========== |
========== |
|
|
|
|
| These
accounts should be read in conjunction with the attached notes |
|
|
| OPERATING
FIXED ASSETS |
|
11 |
1,107,958 |
1,233,933 |
|
|
|
|
| LONG
TERM DEPOSITS |
|
|
11,772 |
5,606 |
|
|
|
|
| DEFERRED
EXPENSES |
|
12 |
1,153 |
3,459 |
|
|
| CURRENT
ASSETS: |
|
|
| Stores
and Spares |
|
13 |
289,145 |
238,810 |
|
| Stock-in-Trade |
|
14 |
15,382 |
20,407 |
|
| Trade
Debtors-Unsecured Considered Good |
|
26,576 |
26,736 |
|
| Advances,
Deposits and Pre-payments |
|
15 |
85,265 |
199,749 |
|
| Cash
and Bank Balances |
|
16 |
69,973 |
191,270 |
|
|
---------- |
---------- |
|
|
486,341 |
676,972 |
|
|
---------- |
---------- |
|
|
1,607,224 |
1,919,970 |
|
|
========== |
========== |
|
|
|
|
| PROFIT
AND LOSS ACCOUNT |
|
| FOR
THE YEAR ENDED JUNE 30, 1997 |
|
|
|
(Rupees in Thousands) |
|
|
Note |
1997 |
1996 |
|
|
|
| SALES-NET |
|
17 |
1,298,181 |
1,280,743 |
|
| COST
OF SALES |
|
18 |
1,238,397 |
1,048,548 |
|
|
|
---------- |
---------- |
|
| GROSS PROFIT |
|
|
59,784 |
232,195 |
|
|
|
|
|
| OPERATING
EXPENSES |
|
|
|
|
| General
& Administrative |
|
19 |
35,713 |
42,281 |
|
| Selling
& Distribution |
|
20 |
24,380 |
24,387 |
|
|
|
60,093 |
66,668 |
|
|
|
(309) |
165,527 |
|
|
|
---------- |
---------- |
|
| FINANCIAL
CHARGES |
|
21 |
86,161 |
108,275 |
|
| OTHER INCOME |
|
22 |
(32,265) |
(54,841) |
|
| WORKERS'
FUNDS |
|
23 |
3,113 |
5,604 |
|
|
|
---------- |
---------- |
|
|
|
57,009 |
59,038 |
|
|
|
---------- |
---------- |
|
| (LOSS)/PROFIT
BEFORE TAXATION |
|
|
(57,318) |
106,489 |
|
| PROVISION
FOR TAXATION |
|
|
|
| Current Year |
|
24 |
12,723 |
57,246 |
|
| Prior Year |
|
|
(1,220) |
(52) |
|
|
---------- |
---------- |
|
|
11,503 |
57,194 |
|
|
---------- |
---------- |
|
| (LOSS)/PROFIT
AFTER TAXATION |
|
(68,821) |
49,295 |
|
| UN-APPROPRIATED
PROFIT BROUGHT FORWARD |
|
8,519 |
9,224 |
|
|
---------- |
---------- |
|
|
(60,302) |
58, 519 |
|
|
| APPROPRIATION: |
|
| Transfer
to General Reserve |
|
- |
50,000 |
|
|
---------- |
---------- |
|
| UN-APPROPRIATED
(LOSS)/PROFIT CARRIED FORWARD |
|
(60,302) |
8,519 |
|
|
========== |
========== |
|
| These
accounts should be read in conjunction with the attached notes. |
|
|
|
| STATEMENT
OF CHANGES IN FINANCIAL POSITION |
|
| FOR
THE YEAR ENDED JUNE 30, 1997 |
|
|
|
(Rupees in Thousands) |
|
|
1997 |
1996 |
|
|
|
| Cash
Flows from Operating Activities |
|
| Net
Profit before Taxation |
|
(57,318) |
106,489 |
|
| Adjustments
for: |
|
|
|
| Depreciation |
|
126,690 |
143,071 |
|
| Amortisation
of Deferred Cost |
|
2,306 |
2,306 |
|
| Loss/(Gain)
on Disposal of Fixed Assets |
|
83 |
2 |
|
| Foreign
Exchange (Gain)/Loss |
|
2,152 |
(2,392) |
|
| Financial
Charges |
|
84,009 |
110,667 |
|
|
---------- |
---------- |
|
| Operating
Profit before Working Capital Changes |
|
157,922 |
360,143 |
|
| (Increase)/Decrease
in Sotres and Spares |
|
(50,335) |
(39,778) |
|
| Decrease/(Increase)
in Stock-in-Trade |
|
5,025 |
(7,477) |
|
| (Increase)/Decrease
in Trade Debtors |
|
160 |
16,893 |
|
| Decrease
in Advances and Pre-payments |
|
84,695 |
61,673 |
|
| Increase/(Decrease)
in Creditors, Accrued and |
|
|
|
| Other
Liabilities |
|
18,852 |
(78,832) |
|
|
---------- |
---------- |
|
| Cash
Generated from Operations |
|
216,319 |
312,622 |
|
| Financial
Charges Paid |
|
(112,323) |
(122,364) |
|
| Income
Tax Paid/Deducted at Source |
|
(60,639) |
(12,208) |
|
| Long
Term Deposits Received |
|
(1,563) |
(1,590) |
|
| Long
Term Deposits Given |
|
(6,166) |
1,882 |
|
|
---------- |
---------- |
|
| Net
Cash from/(used in) Operating Activities |
|
35,628 |
178,342 |
|
| Cash
Flows from Investing Activities |
|
|
|
| Fixed
Capital Expenditure |
|
(2,381) |
(14,563) |
|
| Sale
Proceeds of Fixed Assets |
|
1,584 |
1,549 |
|
| Advances
to Associated Companies |
|
34,403 |
2,159 |
|
|
---------- |
---------- |
|
| Net
Cash Used in Investing Activities |
|
33,606 |
(10,855) |
|
| Cash
Flows from Financing Activities |
|
|
|
| Repayment
of Long Term Loans |
|
(107,160) |
(107,162) |
|
| Repayment
of Redeemable Capital |
|
(64,568) |
(78,707) |
|
| Repayment
of Lease Finance |
|
(2,237) |
(4,470) |
|
| Dividend
Paid |
|
(16,566) |
(121,091) |
|
|
---------- |
---------- |
|
| Net
Cash used in Financing Activities |
|
(190,531) |
(311,430) |
|
|
---------- |
---------- |
|
| Net
(Decrease) in Cash & Bank Balances |
|
(121,297) |
(143,943) |
|
| Cash
and Bank Balances as at July1 |
|
191,270 |
335,213 |
|
|
---------- |
---------- |
|
| Cash
and Bank Balances as at June 30 |
|
69,973 |
191,270 |
|
|
========== |
========== |
|
|
|
|
| NOTES
TO THE ACCOUNTS |
|
| FOR
THE YEAR ENDED JUNE 30, 1997 |
|
|
|
| 1.
STATUS AND NATURE OF BUSINESS |
|
| The
Company was incorporated in Pakistan on February 28, 1981 as a public limited
company |
|
| and
its shares are quoted on Karachi, Lahore and Islamabad Stock Exchanges. It is
principally |
|
| engaged
in production and sale of cement. |
|
|
| 2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
|
| 2.1
Accounting Convention |
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| The
accounts are prepared under the historical cost convention as modified by
capitalization |
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| of
certain exchange differences. |
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| 2.2
Tangible Fixed Assets |
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| Operating
fixed assets are stated at cost (including where relevant related borrowing
cost |
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| and
exchange difference) less accumulated depreciation, except free hold land
which is |
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| stated
at cost. |
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| Capital
work in progress is stated at cost including where relevant, related
financing costs. |
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| These
costs are transferred to fixed assets as and when assets are available for
use. |
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| Depreciation
is charged to income applying the reducing balance method at the rates |
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| specified
in Note 11. Full year's depreciation is charged on additions, while no
depreciation |
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| is
charged on assets disposed off. |
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| Maintenance
and repairs are charged to income as and when incurred. Major renewals and |
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| improvements
are capitalized. Gains and losses on disposal of assets, if any, are included
in |
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| income
currently. |
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| 2.3
Assets Subject to Finance Lease |
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| These
are stated at lower of present value of minimum lease payments under the
lease |
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| agreements
and fair value of assets acquired on lease. The related obligations of the
lease |
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| are
accounted for as liabilities. Assets acquired under the finance lease are
depreciated over |
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| the
useful life of the assets in the same manner as the owned assets. |
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| Finance
charge under the lease agreements is allocated to the periods during lease
term so |
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| as
to produce a constant periodic rate of financial cost on the remaining
balance of principal |
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| liability
of each period. |
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| 2.4
Staff Retirement Benefits |
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| The
Company operates a Contributory Provident Fund Scheme for all its eligible
employees. |
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| Contributions
in respect thereof are made in accordance with the terms of Scheme. |
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| 2.5
Deferred Costs |
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| Deferred
costs are amortized over a period of five years from the year of expenditure. |
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| However,
deferred costs prior to the commencement of commercial operations were |
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| accumulated
and are being amortized over a period of five years from the commencement |
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| of
commercial operations. |
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| 2.6
Stores, Spares and Loose Tools |
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| These
are valued at moving average cost other than stores and spares in transit
which are |
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| valued
at cost comprising invoice value plus other charges paid thereon. |
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| 2.7
Stock-in-trade |
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| Stock-in-trade
is valued at lower of cost and net realizable value. Cost signifies in
relation |
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| to: |
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| Raw
Material produced by the |
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At average cost
comprising of excavation cost, |
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| Company |
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labour and appropriate
overheads |
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