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Balochistan Particle Board Limited
Annual Report 1998
Contents
Company Information
Notice of Annual General Meeting
Directors' Report
Auditors' Report to the Members
Balance Sheet
Profit and Loss Account
Cash Flow Statement
Notes to the Accounts
Pattern of Shareholdings
Company Information
Board of Asghar D. Habib Chairman
Directors Imran A. Habib
Zahid Ali H. Jamall
Ismail Merchant
Ghulam Abbas Karjatwala
Ali A. Rahim
Muslim R. Habib Chief Executive
Secretary Ismail Merchant
Bankers Habib Bank Limited
Bank AL Habib Limited
Habib Bank AG Zurich
Auditors Hyder Bhimji & Co.
Chartered Accountants
Registered Imperial Court, 3rd Floor,
Office Dr. Ziauddin Ahmed Road,
Karachi.
Factory Hub Chowki
Shares Imperial Court, 3rd Floor,
Department Dr. Ziauddin Ahmed Road,
Karachi.
Notice of Annual General Meeting
Notice is hereby given that the Eighteenth Annual General Meeting of Balochistan Particle Board
Limited will be held on Monday, December 14, 1998 at 11.00 a.m. at Marriott Hotel, Abdullah Haroon
Road, Karachi, to transact the following business:
1. To confirm the minutes of the Seventeenth Annual General Meeting of the Company held on
December 27, 1997.
2. To receive and consider the audited Accounts, the Directors' report and the Auditors' report for
the year ended June 30, 1998.
3. To appoint auditors for the year ending June 30, 1999 and to fix their remuneration.
By Order of the Board
ISMAIL MERCHANT
Karachi; November 10, 1998 Secretary
Notes:
1. The Share Transfer Books of the Company will remain closed from Friday, December 4, 1998
to Monday, December 14, 1998, both days inclusive.
2. A member entitled to attend and vote at this meeting is entitled to appoint another member of
the Company 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 duly stamped and signed not less
than 48 hours before the meeting.
3. Members are requested to promptly communicate to the Company any change in their
addresses.
Directors' Report
Dear Members - Assalam-o-Alekum
On behalf of my colleagues on the Board, I welcome you to the Eighteenth Annual General Meeting
of the Company and present the annual report alongwith the audited accounts of the Company for
the year ended June 30, 1998.
As reported earlier in my Annual Report of 1997, on account of adverse economic and marketing
conditions, the plant operations were closed down except for a short period of approximately one
month with the objective of consuming the balance stock of raw materials mainly bagasse.
The board industry in Pakistan is passing through a serious crisis on account of excess capacity,
rising cost of production and reduced selling prices. The market conditions have continued to be
depressed and at present operations are not considered economically viable. The management after
the closure of the plant has laid-off all employees and the plant remains manned by security staff
only. Company has arranged loan from sponsor/affiliated company to pay off creditors of goods and
services, full settlement of staff dues, bank installments, interest and lease rentals.
By the Grace of Allah, the Board wish to report that negotiations with banks and financial institutions
in restructuring the long-term loans and moratorium of interest/mark-up has been concluded
satisfactorily as described in note Nos. 5.1 and 5.2 of the Notes to the Accounts.
The management is constantly reviewing the position of the industry and will take appropriate measures
as and when required in-the larger interest of the shareholders.
The Millennium Bug
The company is aware of the millennium bug problem and has already taken all steps to cope with it.
Pattern of Shareholdings
The statement of pattern of shareholdings of the Company as at June 30, 1998 is shown on
Page 24.
Auditors
The present auditors Messrs Hyder Bhimji & Company, Chartered Accountants, retire and being
eligible offer themselves for reappointment.
On behalf of the Board of Directors
Asghar D. Habib
Karachi: November 10, 1998 Chairman
Auditors' Report to the Members
We have audited the annexed Balance Sheet of Balochistan Particle Board Limited as at June
30, 1998, and the related Profit and Loss Account and Cash Flow Statement, 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 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 Cash Flow Statement, together with
the notes forming part thereof, give the information required by the Companies Ordinance,
1984 in the manner so required and respectively give a true and fair view of the state of the
Company's affairs as at June 30, 1998 and of the loss and cash flows for the year then ended; and
(d) in our opinion no Zakat was deductible at source under the Zakat and Ushr Ordinance, 1980
Hyder Bhimji & Company
Karachi: November 10, 1998 Chartered Accountants
Balance Sheet as at June 30, 1998
Note 1998 1997
     (Rupees in thousands)
Capital and Reserves
Share Capital
Authorised
10,000,000 ordinary shares
of Rs. 5 each 50,000 50,000
========== ==========
Issued, subscribed and paid-up capital 3 30,000 30,000
General reserve - revenue 4 -- 25,500
Accumulated (loss) (18,566) (535)
--------------- ---------------
11,434 54,965
Long-term loans - secured 5 27,099 37,500
Loan from sponsors/
affiliated company-unsecured 18,341 --
Current Liabilities
Short-term finances - secured 6 -- 24,918
Current maturity of redeemable capital
and long term loans 7 10,840 2,035
Creditors and accrued expenses 8 1,590 20,566
--------------- ---------------
12,430 47,519
Contingencies and commitments 9
--------------- ---------------
69,304 139,984
========== ==========
Tangible Fixed Assets
Operating fixed assets 10 34,037 37,549
Long-term Investments 11 8,031 8,031
Long-term Loans and Deposits 12 1,560 1,866
Current Assets
Stores, spares and loose tools 13 11,576 11,732
Stock-in-trade 14 -- 24,439
Trade debts - unsecured considered good 15 5,261 32,693
Loans, advances, deposits,
prepayments and other receivables 16 7,603 22,156
Cash and bank balances 17 1,236 1,518
--------------- ---------------
25,676 92,538
--------------- ---------------
69,304 139,984
========== ==========
The annexed notes form an integral part of these accounts.
Profit and Loss Account
for the year ended June 30, 1998
Note 1998 1997
     (Rupees in thousands)
Sales - net 18 22,908 140,258
Cost of sales 19 31,774 117,109
--------------- ---------------
23,149 (8,866)
--------------- ---------------
Factory expenses 20 20,065 --
Administration expenses 21 8,980 11,852
Selling expenses 22 3,421 6,113
Financial charges 23 5,091 11,739
--------------- ---------------
(37,557) (29,704)
--------------- ---------------
Operating (Loss) (46,423) (6,555)
Profit on sale of fixed assets 1,546 280
--------------- ---------------
(Loss) before taxation (44,877) (6,275)
Taxation 24 1,346 5,050
--------------- ---------------
(Loss) after taxation (43,531) (1,225)
Accumulated (Ioss)/profit brought forward (535) 690
--------------- ---------------
(44,066) (535)
Transfer from general reserve 25,500 --
--------------- ---------------
Accumulated (loss) carried forward (18,566) (535)
========== ==========
The annexed notes form an integral part of these accounts.
Cash Flow Statement
for the year ended June 30, 1998
1998 1997
    (Rupees in thousands)
Cash flow from operating activities
Cash generated from operations 25 10,882 9,874
Financial charges paid (6,314) (10,917)
Taxes paid (1,232) (2,933)
Long-term loans and deposits 306 (268)
--------------- ---------------
Net cash (outflow)/inflow from operating activities 3,642 (4,244)
Cash flow from investing activities
Fixed capital expenditure (80) (3,312)
Sale proceeds from disposal of fixed assets 4,557 315
--------------- ---------------
Net cash (outflow)/inflow from investing activities 4,477 (2,997)
Cash flow from financing activities
Loan from sponsors/affiliated company 18,341 --
Repayment of redeemable capital (1,596) 8,846
Dividends paid (228) (4,339)
--------------- ---------------
Net cash inflow from financing activities 16,517 4,507
--------------- ---------------
Net increase/(decrease)in cash and cash equivalents 24,636 (2,734)
Cash and cash equivalents at the beginning of the year (23,400) (20,666)
--------------- ---------------
Cash and cash equivalents at the end of the year 26 1,236 (23,400)
========== ==========
The annexed notes form an integral part of these accounts.
Notes to the Accounts
for the year ended June 30, 1998
1. The company and its operations
Balochistan Particle Board Limited is a public limited company and its shares are quoted on
the Karachi and Lahore Stock Exchanges.
The company is engaged in the manufacture of Particle Board, Formaldehyde and formaldehyde
based resin (Glue). However, in view of adverse business conditions the plant remained in
operation for an approximate period of one month with the objective of consuming the balance
stock of raw-material.
2. Summary of significant accounting policies
2.1 Accounting convention
These accounts have been prepared under the historical cost convention.
2.2 Staff retirement benefits
The company operates provident fund scheme for all the employees eligible for the benefits.
2.3 Taxation
Provision for current taxation is based on taxable income at current rates of taxation after
taking into account tax credits, rebates and exemptions, if any.
The company accounts for deferred taxation. on all material timing differences using liability
method, which are not likely to reverse in the foreseeable future.
2.4 Fixed assets
These are stated at cost less accumulated depreciation except freehold land and capital
work-in-progress which are stated at cost.
Depreciation is computed applying the reducing balance method for the full year except for
plant and machinery on which depreciation is charged for actual working days (note 10.3). No
depreciation is charged on disposals made during the year.
Maintenance and normal repairs are charged to income as and when incurred. Major renewals
and improvements are capitalised. Gain or loss, if any, on disposal of assets is included in
income currently.
2.5 Long-term investments
These are stated at cost.
2.6 Stores, spares and loose tools
These are valued at average cost except for items in transit which are valued at actual cost.
2.7 Stock-in-trade
These are valued as follows:
Raw materials At average cost
Raw materials in transit At actual cost
Finished goods At the lower of average cost and net realisable value
2.8 Trade debts
Debts considered irrecoverable are written off and provision is made for debts considered doubtful.
2.9 Foreign currencies
Assets and liabilities in foreign currencies are translated into rupees at the rates of exchange
ruling on the balance sheet date. Exchange gains and losses are included in income currently.
2.10 Revenue recognition
Sales are recorded on despatch of goods to customers. Income from investments is recorded
when received.
2.11 Accounting for leases
Lease rentals for assets acquired under operating lease agreements are charged to profit and
loss account.
2.12 Going concern
These accounts have been prepared under the going concern basis.
1998 1997
    (Rupees in thousands)
3. Issued, subscribed and paid-up Capital
Ordinary shares of Rs. 5 each
1998 1997
4,000,000 4,000,000 Shares fully paid in cash 20,000 20,000
2,000,000 2,000,000 Shares issued as fully paid 10,000 10,000
bonus shares
--------------- --------------- --------------- ---------------
6,000,000 6,000,000 30,000 30,000
========== ========== ========== ==========
4. General reserve - revenue
As at July 1, 25,500 25,500
Transfer to Profit & Loss Account (25,500) --
--------------- ---------------
-- 25,500
========== ==========
5. Long-term loans-secured
5.1 Habib Bank AG Zurich 27,001 25,000
5.2 First International Investment Bank Limited 10,938 12,500
--------------- ---------------
37,939 37,500
Less: Current maturity 10,840 --
--------------- ---------------
27,099 37,500
========== ==========
5.1 Term finance loan and acceptances under import letters of credit aggregating to Rs. 30.859
million as on Feb 4, 1998 from Habib Bank A.G. Zurich were restructured into a long term
loan repayable in 8 equal half-yearly installments commencing on April 30, 1998 which was
paid on due date.
The bank has agreed not to charge mark-up subject to the condition that no default is made
in repayment of loan installments. The loan facility is secured against hypothecation of
company's present and future movable assets and by a equitable mortgage on factory land
and building and plant and machinery.
5.2 Under a Memorandum of Understanding dated April 21, 1998 the borrowing of Rs. 12.5
million under bankers' acceptances from First International Investment Bank Limited (Interbank)
has been restructured into a long-term finance loan at a mark-up of 16 percent per annum
repayable in 8 equal half-yearly installments commencing from June 30, 1998. In consideration
of the above Interbank has agreed to allow moratorium of mark-up subject to the condition
that there is no default in repayment and commercial production is not commenced and fixed
assets are not disposed of during the subsistence of the loan. In case the company commences
commercial production and or disposes of the fixed assets, the parties shall mutually discuss
and agree the modalities of the payment of mark-up.
The facility is secured against hypothecation of trade debts, stores, spares and loose tools
and equitable mortgage of immovable properties and charge on present and future plant,
machinery and equipments of the company.
1998 1997
    (Rupees in thousands)
6. Short-term finances - secured
Cash credits/running finances -- 24,918
Cash Credit/running finances have been repaid during the year. ========== ==========
7. Current maturity of redeemable capital
& long term loans
Redeemable capital -
National Investment Trust Ltd (NIT) - Note 7.1 -- 2,035
Long term loans
Habib Bank A.G. Zurich 7,715 --
First International Investment Bank Limited 3,125 --
--------------- ---------------
10,840 2,035
========== ==========
7.1 The long term finance from N.I.T of Rs. 2.035 million was repaid during the year.
1998 1997
    (Rupees in thousands)
8. Creditors and accrued expenses
Creditors 414 10,635
Bills payable -- 5,315
Accrued expenses 773 2,540
Accrued mark-up on short-term finances -- 1,278
Sales tax -- 43
Advances from customers 55 179
Unclaimed dividends 348 576
--------------- ---------------
1,590 20,566
========== ==========
9. Contingencies and commitments
9.1 Excise duty on transportation of methanol from Karachi to Hub for Rs. 14.119 million demanded
by the Sindh Provincial Government has been challenged by the company before the Hon'ble,
Supreme Court of Pakistan and the company is hopeful, Inshallah, of a favourable outcome.
Counter guarantees given to bank in this respect as on June 30, 1998 amounted to Rs. 6.342