For business information, annual reports, laws, ordinances, regulations and articles.

	Web Paksearch.com

Atlas Honda Limited

Annual Report 1998

CONTENTS

Corporate Data

Notice of Annual General Meeting

Chairman's Review

Directors' Report

Auditors' Report to the Members

Balance Sheet

Profit & Loss Account

Cash Flow Statement

Notes to the Accounts

Pattern of Shareholding

Atlas Group Companies

CORPORATE DATA

BOARD OF DIRECTORS:

CHAIRMAN

Mr. Yusuf H. Shirazi

DIRECTORS

Mr. Aamir H. Shirazi

Mr. Aitzaz Shahbaz

Mr. Kanji Kashiwagi

Mr. Sherail Mundrawala

Mr. Takemi Ishikewe

Mr. Zahid Ali H. Jamall

Company Secretary

Mr. Saleem Ahmed

GROUP EXECUTIVE COMMITTEE:

CHAIRMAN

Mr. Yusuf H. Shirazi

MEMBERS

Mr. Jawaid Iqbal Ahmed

Mr. Frahim Ali Khan

Mr. Iftikhar H. Shirazi

Mr. Aamir H. Shirazi

Mr. Saquib H. Shirazi

Secretary

Mr. Amjad Hussain

GROUP PERSONNEL COMMITTEE:

CHAIRMAN

Mr. Yusuf H. Shirazi

GROUP AUDIT COMMITTEE:

CHAIRMAN

Mr. Sanaullah Qureshi

COMPANY MANAGEMENT:

CHIEF EXECUTIVE OFFICER

Mr. Aamir H. Shirazi

TECHNICAL DIRECTOR

Mr. Takemi Ishikawa

DIRECTOR FINANCE

Mr. Saleem Ahmed

GENERAL MANAGER MARKETING

Mr. Nurul Hoda

GENERAL MANAGER HUMAN RESOURCES

Mr. Zamir Haider

AUDITORS:

Hameed Chaudhri & Co.

Chartered Accountants

LEGAL ADVISORS:

Mohsin Tayebaly & Co.

TAX ADVISORS:

Mahmood Law Associates

BANKERS & LENDING INSTITUTIONS:

BANKERS

LENDING INSTITUTIONS

Credit Agricole Indosuez

Atlas Investment Bank Limited

Deutsche Bank AG

National Investment Trust Limited

Emirates Bank International P.J.S.C.

National Development Finance Corporation

Muslim Commercial Bank Limited

Saudi Pak Industrial and Agricultural

National Bank of Pakistan

Investment Company (Pvt) Limited

The Bank of Tokyo-Mitsubishi Limited

The Hong Kong and Shanghai

Banking Corporation Limited

United Bank Limited

REGISTERED & HEAD OFFICE:

1-McLeod Road, Lahore-54000

Tel: (92-42) 7225015-17, 7233515-17

Fax: (92-42) 7233518

Email: ahl@lhr.atlasgrouppk.com

FACTORIES:

KARACHI

SHEIKHUPURA

F-36, Estate Avenue, S.I.T.E.,

26-27 KM, Lahore-Sheikhupura Road,

Karachi-75730

Sheikhupura-39321

Tel: (92-21) 2575561-65

Tel: (92-4931) 6655-57, (92-42) 7222222

Fax: (92-21) 2563758

Fax: (92-342) 354111

Email: ahl@atlasgrouppk.com

Email: ahlskp@lhr.atlasgrouppk.com

BRANCH OFFICES:

MULTAN OFFICE

WARRANTY & TRAINING CENTRES

Azmat Wasti Road, Multan

7-Pak Chambers,

Tel: 31990, 571989, 72028

West Wharf Road, Karachi.

Fax: 541690

Tel: 2310142

RAWALPINDI OFFICE

28 Mozang Road

Room 9, 2rid Floor

Lahore

Sunny Plaza, Chandni Chowk,

Tel: 6375360

Murree Road, Rawalpindi

Tel: 455328

Azmat Wasti Road,

Fax: 847928

Multan

Tel: 72028

SHOW ROOM

West View Building,

Service Factory

Preedy Street, Saddar, Karachi.

366/A, Gulistan Colony No.2

Tel: 7720833, 7727607

Near Millat Chawk

Shaikhupura Road,

SPARE PARTS DIVISION

Faisalabad - 38700

D-181/A, Shershah Road,

S.I.T.E., Karachi

Tel: 2561615-16, 293929-30

Fax: 2561616

NOTICE OF ANNUAL GENERAL MEETING

The Thirty fourth Annual General Meeting of the Company will be held on Monday

28 December, 1998 at 10.30 A.M. at 1-McLeod Road, Lahore to transact the following business:

1. To confirm the Minutes of the Thirty third Meeting held on 26 November, 1997.

2. To receive and adopt the Audited Accounts of Atlas Honda Limited together with the

Directors' and Auditors' reports for the year ended 30 June, 1998.

3. To approve the cash dividend @ 25% for the year ended 30 June 1998 as recommended

by the Board of Directors.

4. To appoint the Auditors for the year 1998-99 and to fix their remuneration.

5. To transact such other ordinary business as may be placed before the meeting with

the permission of the chair.

BY ORDER OF THE BOARD

Lahore: 02 December 1998

SECRETARY

N.B. Shareholders are requested to take note of the following:

BOOK CLOSURE

1. The share transfer book of the Company will be closed from 19 December, 1998 to

28 December, 1998 (both days inclusive).

PROXY

1. A member entitled to attend and vote at the Annual General Meeting is entitled to

appoint another member as a proxy to attend and vote on his/her behalf. Proxies in

order to be effective must be received at the Registered Office of the Company not

less than 48 hours before the time appointed for the meeting.

2. No person shall act as proxy unless he is member of the Company.

3. Signature of the shareholder on Proxy Application must agree with the specimen

signature registered with the Company. Appropriate revenue stamp should be affixed

on the Proxy Application.

4. For the convenience of the shareholders a Proxy Application format is attached with

this report.

5. Shareholders are requested to immediately notify the Company of any change in their

addresses.

CHAIRMAN'S REVIEW

It is my pleasure to present to you the 34th

Annual report and review of the performance

of your company for the year ended

June 30, 1998.

THE ECONOMY

The year 1997-98 was indeed eventful both on

the international and the national economic

fronts. Asian countries economic and financial

crises were the worst of their kind. Currency

values eroded drastically, stock markets

crashed and industrial production interrupted

leading to social and political unrest. Pakistan

economy also came under pressure due to

halo effect of the unstable conditions in the

regional markets.

Pakistan's economic performance over the last

few years has been marked by a deceleration

in economic activity, deterioration in budgetary

and current account deficits and inflation. In

order to reinvigorate the economic growth

government took some measures. It introduced

economic reforms based on both supply and

demand side economics. To improve revenue

collection general sales tax regime was re-

launched at the retail level, and partially

increased the 'Tax Net'. However the effect of

these policy measures will take some time to

yield the desired results.

Towards the year end, Pakistan opted for

nuclear detonation on 28th May 1998 following

India's nuclear tests on 11th May 1998. It led to

economic sanctions by the developed

countries. The international loan giving

agencies put their shutters down.

Consequently, foreign currency accounts were

frozen, rupee was devalued by 4.4%, making

it 14.1% for the full fiscal year and a two-tier

foreign exchange region was introduced.

Despite the worsening situation, the economic

indicators for the year were generally

satisfactory. GDP grew by 5.4% as against 1.3%

last year, agriculture sector grew by 5.9% and

the manufacturing sector by 7.0%.

The large-scale manufacturing registered a

growth of 6.2%. The transport and

communication sector recorded a growth of

8.8%. Fixed investment increased by 6.5% and

national savings increased to 15% of GNP from

the 11.3% of last year.

ATLAS GROUP PERFORMANCE

The Atlas Group of which your company is a

constituent member, jealously guards its brand

equity which represents good management

practices, ethical standards and quality of

goods and services provided to its customers.

The Group enjoys an excellent image in

government, business and social circles, both

nationally and internationally.

The Atlas Group is diversified and has

operations in engineering, financial services,

trading, office equipment and information

technology. It consists of seven public limited

companies quoted on the stock exchanges in

Pakistan and eight private limited companies.

Atlas shareholders' equity has grown to about

Rs.2.5 billion over the years; assets have

increased to over Rs.8 billion, and sales revenue

crossed the Rs.8 billion mark. The Group paid

taxes of Rs.2.2 billion being 27.5% of the total

turnover of the Group. More than 50% of

employees numbering 2700 pay taxes on their

income and wealth.

The total paid up capital of the seven listed

companies stood at Rs.944 million and free

reserves and surplus at Rs.1.11 billion. The

total equity of listed companies stood at

Rs. 2.05 billion as of 30.6.1998. The networth

value of a Rs.10/- share works out at Rs.21.77.

Out of these seven companies, two companies

have been rated 'A+' and three 'A' by the credit

rating and other evaluating agencies.

The seven listed companies, set up at different

times - the earliest in 1963 with a paid up capital

of Rs.2.00 million and the latest in 1993 with a

paid up capital of Rs.400.00 million - have paid

cash dividend of Rs.287 million and bonus of

Rs.208 million (market value Rs.435 million).

Your Company was set up in 1963 with a paid

up capital of Rs.2.0 million which has grown

to Rs.145.98 million. The total equity at

Rs.481.72 million includes reserves and

unappropriated profit of Rs.335.74 million.

During this period the Company issued bonus

shares of Rs.79.857 million (market value

Rs.237.574 million at Rs. 29.75 per share) and

paid cash dividend of Rs.149.076 million.

HUMAN RESOURCES

Reliance on human resource has been the

hallmark of the Atlas Group since its inception.

Investment in human resource development is

considered a prudent investment for all times

to come. Education, training and grooming of

employees for higher positions is a normal

feature with the Group.

To cope with the growing needs of the Group,

a permanent cell has been established at the

Corporate Office for human resource

development. A full time Director assists the

Group Personnel Committee which is headed

by the Group President and Chairman. The

Committee actively works for improving staff

service rules, staff compensation and career

planning to make them more competitive and

attractive for the employees. Compensation

based on job evaluation and performance

appraisal is now all the more a determining

factor for the performance bonus and the

employees' motivation.

MOTORCYCLE INDUSTRY

Until a few years ago, only the Japanese brand

motorcycles were manufactured in the country,

with a combined (approximate) installed

capacity of 170,000 units. Since then three

manufacturers with Chinese technology have

entered the market with an approximate

installed capacity of 70,000 units, raising the

total installed capacity to 240,000.

In the market place, untimely rains preceding

harvest of cotton crop greatly affected the

liquidity of the farmers, especially in the rural

belt of Southern Punjab. Also, delays in release

of payments by ginners and a sharp rise in

cost of living further dampened the demand

throughout the country. As a result the total

market size stood reduced to 90,000 from

113,000 units last year.

The utilized capacity of the industry as

a whole was only 38%. Your company fared

much better than the competition with a

capacity utilization of 70%.

The competition remained keen throughout the

year with the Chinese manufacturers relying

upon lower priced products to attract the

customers. A Japanese competitor also

introduced a lower priced higher-cc model

which did not fare well, but the competitors'

pressure is mounting. Your company continued

its efforts to upgrade the quality, improve the

after sale service and better spare parts supply

across the board to combat this situation. Your

company also maintained its lead in dealer's

network even during these depressed economic

conditions. During the year, sales and

advertising activities were made more efficient

and the company launched new models both

in CD-70 and CG-125categories, which were

well received by the customers. The market

share improved to over 64% from 61% last year.

DELETION POLICY

In line with Government policy we have been

pursuing the policy of deletion on a high priority

basis. Having completed and commissioned

the Gear Project during the year your company

is now actively planning to manufacture crank

shafts, which again will be a capital intensive

project. While your company is making heavy

investment, it is regrettably observed that new

entrants are operating without any Government

approved deletion program. They have neither

invested substantially nor appear keen to

procure components locally. If such irregular

and improper operations are not controlled the

well thought out and planned Government

deletion program will be defeated with inevitable

rollback of the deletion results achieved

through huge capital investments and

expenditures on technical collaborations and

joint ventures.

We believe that the deletion program should

be strictly monitored by the Government to

achieve strict compliance to avert waste of

national resources and investments in an

enlarged capacity of 240,000 units out of which

a substantial part is already sitting idle. The

consequences can be devastating to

investment, employment, and production and

on top of all to technological development and

expansion of engineering base of the country.

TAX PAYMENTS

Your company's contribution to the national

exchequer has been outstanding as the

company paid taxes amounting to Rs 1.03

billion including income tax, sales tax and

customs duties during the year. For the last

three years your company has paid more than

Rs. 3.3 billion to the Exchequer as follows:

1995-96

Rs. 1.01 billion

1996-97

Rs. 1.24 billion

1997-98

Rs. 1.03billion

----------

Total

Rs. 3.28billion

==========

Your Company plans and expects to continue

to contribute to the national exchequer in a

growing trend through stronger company

performance. It is also your Company's

endeavor to continue to be a societal

contributor and continue to be a good

corporate citizen

COMPANY OPERATIONS

The sales revenue for the year ended 30 June

1998 was Rs.3.423 billion against Rs.3.498

billion in 1996-97. The profit before tax was

Rs. 190.920 million compared with a profit of

Rs.188.596 million for the preceeding year. The

gross profit ratio for the year stood at 12.40%

against 11.34% of the preceding year. The

increase in gross profit was achieved by

improving management efficiency, effective

hedging of exchange risk through forward

covers and a comparatively favorable US $

verses Yen exchange rate, throughout the year.

Marketing expenses increased from Rs.92.596

million to Rs.94.345 million in line with

management efforts to meet growing

competition. Inventories were quite effectively

managed and financial expenses for the year

under review were at Rs.57.584 million, net of

investment income of Rs.22.039 million earned

during the year. Your Company achieved an

ROE of 26.12% and EPS of Rs.8.61 after tax.

The equity of your company at Rs.481.715

million including reserves amounting to

Rs. 335.738 million, reflects its sound financial

position. Debt equity ratio was 23.3:76.7 despite

borrowing for the capital intensive gear project.

Your Company negotiated successfully with

the banks to reduce the average mark-up from

17.5% down to 16.0%. The cash management

was very effective to achieve a sound financial

position and had cash balances aggregating

Rs. 441 million, indeed a great achievement.

Liquidity ratio of your Company improved to

1:1.37; the excess liquidity was invested in

foreign currency deposits amounting to

US$ 4.470 million.

HONDA'S 50 YEARS CELEBRATIONS

On behalf of the Atlas Group and my colleagues

I would like to congratulate Honda Motor

Company on this momentous & auspicious

occasion of their 50 years celebrations and

wish them progressive and prosperous future

for more than another 50 years.

We in Pakistan too celebrated its golden jubilee

recently to mark the 50th year of our

independence. At the time of independence in

1947 Pakistan had practically no industry at all

and now we can boast of many economic

landmarks including the Joint Ventures with

Honda Motor Japan.

Let me recall those fine moments between the

visionary Mr. Soichiro Honda and me when we

created this unique partnership between HM

and Atlas Group resulting in a monumental

landmark in 1963. Atlas Group & Honda Motor

Co. Japan today enjoy an exceptional

relationship, with three Joint Venture

Agreements in all the three areas of

manufacturing and marketing of motorcycles,

automobiles, and power products; spanning

over more than 36 years of association, firmly

edificed on utmost mutual trust and

confidence-indeed a role model.

Honda has achieved a most resounding

success by becoming the Number One

producer of motorcycles in the world having

produced over 100 million motorcycles last

year. Similarly Honda Motor achieved Number

5 position in the world amongst the profitable

automobile makers. The major competitive

edge of Honda Motor continues to be product

innovation, zero pollution & hi-tech vehicles.

Honda Motor is making strides into new areas

of technological development. Through this

Honda Motor remains a leader on many

frontiers in the world, which is also

demonstrated by their leading share of the

market in Pakistan of 64% in motorcycles.

It's most relevant to quote here the 50 years

celebration message of Mr. Heroyuki Yoshino,

President & CEO Honda Motors as follows