| TOYOTA |
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| INDUS
MOTOR COMPANY LTD. |
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| ANNUAL
REPORT 1997 |
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| Contents |
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| Toyota's
Guiding Principles |
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| Company
Information |
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| Directors'
Report |
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| Chairman's
Review |
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| Auditors'
Report |
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| Balance Sheet |
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| Profit
and 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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| Notice
of Meeting |
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| Guiding
Principles |
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| 1.
Honor the language and spirit of the law of |
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| every
nation and undertake open and fair |
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| corporate
activities to be a good corporate |
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| citizen
of the world |
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| 2.
Respect the culture and customs of every |
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| nation
and contribute to economic and social |
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| development
through corporate activities in |
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| the
communities |
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| 3.
Dedicate ourselves to providing clean and |
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| safe
products and to enhancing the quality of |
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| life
everywhere through all our activities |
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| 4.
Create and develop advanced technologies |
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| and
provide outstanding products and |
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| services
that fulfill the needs of customers |
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| worldwide |
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| 5.
Foster a corporate culture that enhances |
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| individual
creativity and teamwork value, |
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| while
honoring mutual trust and respect |
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| between
labor and management |
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| 6.
Pursue growth in harmony with the global |
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| community
through innovative management |
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| 7.
Work with business partners in research and |
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| creation
to achieve stable, long-term growth |
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| and
mutual benefits, while keeping ourselves |
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| open
to new partnerships |
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| Board
of Directors |
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| Chairman |
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Mr. Ali S. Habib |
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| Vice
Chairman |
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Mr. Yutaka Arae |
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| Chief
Executive Officer |
Mr. Farhad Zulficar |
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| Directors |
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Mr. Mohamedali R. Habib |
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Mr, Hideaki Otaka |
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Mr. Azhar Wali Mohammad |
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Mr. Masaru Kato |
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| Company
Secretary |
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Mr. Shahid M. Khan |
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| Bankers |
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| American
Express |
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| ANZ
Grindlays Bank plc |
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| Askari
Commercial Bank |
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| Bank
of America |
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| Bank
of Tokyo-Mitsubishi, Ltd. |
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| Credit
Agricole Indosuez |
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| Deutsche
Bank |
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| Emirates
Bank International Ltd. |
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| Faysal
Bank Ltd. |
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| Habib
Bank AG Zurich |
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| Hong
Kong & Shanghai Banking Corporation |
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| Metropolitan
Bank |
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| Muslim
Commercial Bank Ltd. |
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| National
Bank of Pakistan |
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| Standard
Chartered Bank |
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| Societe
Generale |
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| Auditors |
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| M/s.
Ford, Rhodes, Robson, Morrow |
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| Chartered
Accountants |
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| 1st
Floor, Finlay House, |
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| I.I.
Chundrigar Road, Karachi. |
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| Legal
Advisors |
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| A.
K. Brohi & Co. |
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| Mansoor
Ahmed Khan & Co. |
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| Mahmood
& Co. |
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| Registered
Office |
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| 14,
Bangalore Town Housing Society, |
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| Main
Shahrah-e-Faisal, Karachi. |
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| Registrar |
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| M/s.
Noble Computer Services (Pvt) Ltd. |
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| 1st
Floor, AI-Manzoor Building, |
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| Dr.
Ziauddin Ahmed Road, Karachi. |
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| Regional
Offices |
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| Lahore |
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| 8/1
Abid Majeed Road, Lahore Cantt. |
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| Islamabad |
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| 2A,
Ataturk Avenue West, G-6/4, Islamabad. |
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| Factory
Site |
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| Plot
No. NWZ/1/P-1, |
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| Port
Qasim Industrial Estate, |
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| Bin
Qasim, Karachi. |
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| Five
Years at a Glance |
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1997 |
1996 |
1995 |
1994 |
1993 |
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|
(Rupees in thousands) |
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| Toyota
Vehicles |
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| Sales (Units) |
8,100 |
8,125 |
6,802 |
9,440 |
11,034 |
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| Turnover |
|
4,534,425 |
4,136,100 |
3,869,607 |
4,722,194 |
4,307,280 |
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| Profit
before taxation |
226,286 |
221,024 |
85,513 |
149,702 |
167,059 |
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| Taxation |
|
76,082 |
33,789 |
33,792 |
28,157 |
82,581 |
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| Profit
after taxation |
150,204 |
187,235 |
51,721 |
121,545 |
84,478 |
|
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| No.
of employees |
598 |
546 |
509 |
553 |
496 |
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| Earning
per share |
1.91 |
2.38 |
0.66 |
1.55 |
1.07 |
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| (in
Rupees) |
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| The
Directors of Indus Motor Company Limited take pleasure in presenting this
Report, together with |
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| the
Accounts of the Company for the year ended June 30, 1997 and recommend the
following |
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| appropriations: |
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1997 |
1996 |
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|
(Rupees in thousands) |
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| Operating
Results |
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| Profit
before tax |
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|
226,286 |
221,024 |
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---------- |
---------- |
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| Taxation |
- Current |
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|
51,082 |
33,789 |
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|
- Deferred |
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|
25,000 |
- |
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---------- |
---------- |
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76,082 |
33,789 |
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---------- |
---------- |
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| Profit
After Taxation |
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|
150,204 |
187,235 |
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| Unappropriated
Profit brought forward |
403 |
68 |
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---------- |
---------- |
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150,607 |
187,303 |
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| Appropriations |
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| Dividend
- proposed @ 15% |
|
117,900 |
117,900 |
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| Transfer
to revenue reserve |
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32,000 |
69,000 |
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---------- |
---------- |
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| Unappropriated
Profit Carried Forward |
707 |
403 |
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========== |
========== |
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| Auditors |
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| The
Auditors, Messrs. Ford, Rhodes, Robson, Morrow, retire at the conclusion of
the 8th Annual General |
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| Meeting
and, being eligible, offer themselves for re-appointment. |
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| Chairman's
Review |
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| The
directors of the Company endorse the contents of the Chairman's Review
dealing with the Company |
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| activities
which is included in the Annual Report and forms an integral part of the
Directors' Report. |
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| Earning
Per Share (EPS) |
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| The
Earning Per Share is Rs. 1.91. |
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| Pattern
of Shareholding |
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| The
Pattern of Shareholding of the Company as at June 30, 1997 is given on Page
31. |
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| As
Salaam O Alaikum, Shareholders, |
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| It
is with great pleasure that I welcome you to the |
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| 8th
Annual General Meeting of the Company and |
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| present
to you the report on the performance of |
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| the
Company for the year ended June 30, 1997. |
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| Political
upheaval and an uncertain economic |
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| environment
were the mainstay of the year under |
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| review
which saw fresh elections and two mini |
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| budgets
that were announced in October '96 and |
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| March
'97 respectively. The continuous |
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| devaluation
of the Pak Rupee exacerbated the |
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| situation,
resulting in an increase in input costs |
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| during
the year. |
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| A
reduction in sales during November '96 - March |
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| '97,
resulted in an increase in stocks and |
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| financial
expenses, while the administrative and |
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| selling
expenses incurred remained the same as |
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| that
of the previous year. |
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| The
Company's operations for the year resulted |
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| in
a Gross Profit of Rs. 436.605 million and a Net |
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| Profit
after taxes of Rs. 150.204 million after |
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| providing
for taxation of Rs. 76.082 million. Sales |
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| revenue
increased to Rs. 4.5 billion from Rs. 4.1 |
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| billion.
Utilization of capacity improved due to |
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| increased
sales of Toyota Hilux Pick-ups and |
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| Toyota
Corolla Diesel 2000cc. Net Sales |
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| Revenue
rose by 9.63% over the previous year, |
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| though
Gross Profit and Profit before tax margins |
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| decreased
from 9.68% to 9.63% and from 5.34% |
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| to
4.99% respectively. |
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| The
Directors are pleased to recommend a Cash |
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| Dividend
of 15% for the year to the shareholders, |
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| apportioning
a part of the profit to reserves for |
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| future
capital commitments. |
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| Operations
for the Year 1996-97 |
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| An
extremely competitive market environment |
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| was
created due to an increase in manufacturers |
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| and
also by the introduction of new models. |
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| However,
the Company was able to maintain |
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| steady
sales growth by concerted efforts that |
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| included
aggressive sales promotion and the |
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| expansion
of the Toyota product range. |
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| The
Government announced a reduction in Sales |
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| Tax
from 18% to 12.5% in March '97 and taking |
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| advantage
of this development, the Company |
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| reduced
selling prices substantially and |
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| increased
sales during the last quarter of the |
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| Financial
Year. |
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| In
September 1996, the Sixth Dealer Conference |
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| was
held in Istanbul, Turkey. In November 1996 |
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| the
Rural Product Displays campaign was |
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| initiated
which aimed to increase sales in the |
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| rural
and semi-rural areas. December 1996 saw |
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| another
landmark with the production of 20,000 |
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| Toyota
vehicles. Also two new variants of Toyota |
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| Corolla,
the Corolla XEG and 2.0DG, were |
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| successfully
launched. With the introduction of |
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| these
in the market, the locally produced Toyota |
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| product
range has increased to six Toyota |
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| Corolla
models and two Toyota Hilux models. |
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| Marketing
Operations |
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| The
marketing operations of the Company have |
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| focused
on its "Customer First" philosophy. |
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| Customer
Relations Sections at our dealerships |
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| have
re-energized our after-sales service |
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| facilities.
In addition we have continuous |
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| feedback
from the Voice of Customer (voc) |
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| service
and have introduced the concept of a |
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| Customer
Assistance Centre (CAC) which is a |
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| 24-hour
hotline available at UAN #111-Toyota. |
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| These
new facilities are innovations designed |
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| specially
to cater to the "Customer First" |
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| philosophy,
analysing complaints and responding |
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| with
speed and efficiency. A free check-up |
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| campaign
was also conducted on a nation-wide |
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| basis
through the dealership network. The total |
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| number
of vehicles serviced through Toyota |
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| Dealerships
throughout the country during this |
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| period
exceeded 100,000 units. Also at the |
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| dealerships
the ready availability of genuine |
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| Toyota
spare parts sold at competitive rates, |
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| have
won the confidence of customers. In |
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| recognition
of these efforts at enhancing after- |
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| sales
service, Toyota Motor Corporation |
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| presented
the Company its Gold Performance |
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| Award
for Service and Parts Activities. |
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| The
sales operations of parts from the Central |
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| Parts
Depot have continued to expand, and the |
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| reduction
of duty on spare parts announced in |
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| March
1997 will encourage sales of parts thereby |
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| improving
profitability of the Company. |
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| There
has been an increase in the market share |
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| of the Corolla and
Hilux largely because of the |
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| high resale value of
locally produced Toyota |
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| vehicles. This development has
been |
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| encouraged
by the Company's strategy of |
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| limiting
major model changes which will take |
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| place after some
years. This policy will also |
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| ensure
high resale value and low maintenance |
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| costs.
The current Corolla model is |
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| technologically
superior and highly popular. |
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| Improvements
and expansion of the product |
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| range
are in the pipeline and will be implemented |
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| in
the future in order to maintain market share. |
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| Production
& Quality Assurance |
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| The
introduction of the two new variants has |
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| brought
in substantial growth in the production |
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| volume
and has improved capacity utilization. |
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| Kaizen and its philosophy of
continuous |
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| improvement
has helped to minimize waste and |
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| production
cost and improved working efficiency |
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| in
all spheres of production. In January '97 the |
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| Bumper
Painting Line operations commenced, |
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| and
in June '97 the Engine Assembly Plant |
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| started
production. |
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| In
order to maintain Toyota quality standards, the |
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| Quality
Assurance Department exercised strict |
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| quality
checks both within the plant and at |
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| production
facilities of the vendors. During the |
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| period
under review, six vendors were selected |
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| for
special quality audits. In addition, seminars |
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| were
conducted to apprise the vendors of quality |
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| standards,
and to enable them to expand in- |
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| house
Kaizen activity at their facilities so as to |
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| ensure
further improvements in quality. In April |
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| 1997,
the 4th IMC Kaizen Convention was held |
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| during
which management and team members |
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| participated
fully in production and quality control |
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| measures
that are being implemented at the |
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| Plant. |
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| Adherence
to stringent Toyota quality standards |
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| has
enabled the Company to export Corolla GL |
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| models
to Sri Lanka on a trial basis. This was a |
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| seeding activity
directed to accruing goodwill and |
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| confidence
for future exports. Enhanced capacity |
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| utilization
and increased localization of parts are |
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| vital
to achieving exports in the future which is |
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| one
of the definite goals of the Company. |
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|
| Indigenization
Program |
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| The
Engineering Development Board has revised |
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| the
deletion program from a 'company specific' to |
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| an
'industry and components specific' system. |
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| This
more efficient system has accelerated the |
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| program
of localization. The Company's Product |
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| Development
Department has met deletion |
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| targets
for the period under review. However, |
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| because
of low volumes and an addition of higher |
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| technology
components, efforts will need to be |
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| intensified
to achieve future targets. |
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| To
maintain consistent quality checks and to |
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| assist
vendors in product development, a state- |
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| of-the-art
Quadrant Measuring Machine has |
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| been
installed which will ensure Toyota |
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| standards
are maintained for locally |
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| manufactured
parts. |
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| The
Pakistan Automotive Manufacturing |
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| Association
has set up an Automotive Testing |
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| and
Training Centre in which the Company is |
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| actively
participating to further support Vendor |
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| Development
Programs. |
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| Human
Resources & Training |
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| The
Human Resources Department is committed |
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| to
development and training. During the period |
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| under
review, the number of employees |
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| undergoing
training doubled as compared to the |
|
| previous
year. The training programs for dealers |
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| and
vendors, who are an integral part of the |
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| Toyota
family, were intensified, and during the |
|
| year
19 courses were conducted. Members of |
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| the
Technical Division were also trained |
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| overseas
at Toyota plants. |
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|
| Government
Policies |
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| In
1996-97, Government policies in respect of the |
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| auto
industry have remained largely consistent. |
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| During
the period two mini budgets were |
|
| announced.
The first, in October '96, increased |
|
| input
costs due to the imposition of service |
|
| charges
and the devaluation of the rupee. The |
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| second
mini budget in March '97 announced by |
|
| the
Government, reduced sales tax from 18% to |
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| 12.5%
and abolished the 2% pre-shipment |
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| inspection
charges. However, duty on CKD |
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| remains
high affecting production costs, and CVT |
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| continues
to hamper the smooth working of the |
|
| industry. |
|
|
| The
CVT rate, though partially rationalized, was |
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| still
not sufficiently favourable to stimulate |
|
| increased
sales, Current estimates indicate that |
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| 27%
of the price of cars relates to Government |
|
| Revenues.
The Government has also imposed a |
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| Wealth
Tax on passenger cars of 1600cc and |
|
| above
and made it mandatory for car owners to |
|
| file
Tax Returns. Non-tax payers reluctant to |
|
| become
a part of the tax net hesitate therefore to |
|
| purchase
new vehicles. |
|
|
| Future
Outlook |
|
| The
Government has taken major steps for the |
|
| revival
of economic activities and success of |
|
| these
policies is expected to increase the |
|
| demand
for vehicles in the country. The |
|
| completion
of the Lahore/Islamabad Motorway, |
|
| expansion
of the road network and reduction in |
|
| the
rail links will all contribute significantly to an |
|
| expansion
in the automobile market in the future. |
|
| Political
stability in Afghanistan will increase |
|
| demand
for commercial vehicles in the northern |
|
| areas.
Concerning the Central Asian Republics, |
|
| with
Karachi being their nearest port, the opening |
|
| of
trade routes in these countries will lead to an |
|
| inevitable
growth in the transport sector. |
|
| The
expansion of capacity and the distribution of |
|
| volumes
of different models and makes within the |
|
| industry
is adversely affecting the implementation |
|
| of
the indigenization program which is influenced |
|
| by
economies of scale. It is vital therefore, that |
|
| the
Government announce a long-term policy |
|
| and
discourage the creation of additional |
|
| capacity
especially in those vehicle segments |
|
| where
competition already exists within the |
|
| country. |
|
| The
import tax on CKD as well as CVT on diesel |
|
| vehicles
remains high and needs further |
|
| rationalization.
The Company will continue its |
|
| efforts
to resolve these issues with the |
|
| Engineering
Development Board and the |
|
| Government. |
|
|
| The
present product range of seven Toyota |
|
| Corollas
(including Toyota Corolla 2.0D-Limited |
|
| which
was launched on 5 October 1997) will be |
|
| -expanded
in the future. New variants suitable for |
|
| commercial
use will also be introduced in Hilux |
|
| vehicles.
The strengthening of after-sales service |
|
| and
improvement in dealer facilities and an |
|
| expanded
product range is expected to increase |
|
| production
and sales. |
|
| We
have maintained the high quality of our |
|
| products
and our management and workers have |
|
| worked
with resolute dedication. Our dealers and |
|
| vendors
have also continued to contribute |
|
| positively
by providing efficient after-sales |
|
| service
and producing high quality components. |
|
|
| During
the year our Vice Chairman, Mr. Y. |
|
| Matsumiya,
who had been with us from 1990 to |
|
| 1996,
returned to Japan. We take this opportunity |
|
| to
gratefully acknowledge his valuable |
|
| contribution
to the Company. We welcome our |
|
| new
Vice Chairman, Mr. Y. Arae, who was |
|
| associated
with the Company during its formation |
|
| and
production startup and is fully cognizant with |
|
| the
unique market conditions and environment |
|
| here
in Pakistan. |
|
|
| We
are thankful to the Ministries of Commerce |
|
| and
Industries and the Engineering Development |
|
| Board
for their sustained support. We are grateful |
|
| to
our shareholders, staff, dealers and vendors |
|
| for
their dedication and commitment to our |
|
| common
goal. We particularly appreciate our |
|
| customers
and thank them for their loyalty and |
|
| support
of Toyota vehicles. |
|
| We
pray to Allah for his guidance and success. |
|
|
|
| AUDITORS'
REPORT TO THE MEMBERS |
|
| We
have audited the annexed balance sheet of |
|
|
|
| INDUS
MOTOR COMPANY 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 purpose 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 |
|
| and
the profit and loss account and |
|
| 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 profit 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. |
|
|
