| D.G. CEMENT |
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| ANNUAL
REPORT 1998 |
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| CONTENTS |
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| Company
Profile |
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| Notice
of Meeting |
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| Directors'
Report |
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| Five
Years At a Glance |
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| Auditors'
Report |
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| Balance
Sheet |
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| Profit
and Loss Account |
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| Cash
Flow Statement |
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| Notes
to the Accounts |
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| Pattern
of Share Holding |
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| COMPANY
PROFILE |
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| Board
of Directors |
Mrs. Naz Mansha |
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Chief Executive |
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|
Mst. Akhtar Jehan Begum |
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Mr. Khalid Qadeer Qureshi |
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Mr. Aftab Ahmad Khan |
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Mr. Muhammad Azam |
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Rana Muhammad Mushtaq |
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Mr. Zaka-ud-Din |
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| Company
Secretary |
Mr. Khalid Mahmood Chohan |
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| Bankers |
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ABN-AMRO Bank N.V. |
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AI-Faysal Investment Bank
Limited |
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Bank of America NT&SA |
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Habib Bank Limited |
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Mashreq Bank PSC |
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Muslim Commercial Bank
Limited |
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Atlas Investment Bank
Limited |
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| Auditors |
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M/s A F Ferguson &
Co. |
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Chartered Accountants |
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| Registered
Office |
Nishat House, 53-A,
Lawrence Road, Lahore-Pakistan |
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Phone: 92-42-6367812-20
Fax: 92-42-6367414 |
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Telex: 47523 Nisht PK.
Lahore |
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E.Mail:
dgkcc@lhr.comsats.net.pk |
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| Factory |
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Khofli Sattai, Distt.
Dera Ghazi Khan-Pakistan |
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Phone: 92-641-60025-7 |
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Fax: 92-641-62392 |
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Telex: 42492 DGK CF PK. |
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| NOTICE
OF ANNUAL GENERAL MEETING |
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| Notice
is hereby given that Annual General Meeting of the Shareholders of D.G. Khan
Cement Company |
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| Limited
("the Company") will be held on Thursday the 31sl December, 1998 at
11:00 a.m., at Nishat |
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| House,
53-A, Lawrence Road, Lahore to transact the following business: |
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| 1.
To confirm minutes of the last meeting. |
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|
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| 2.
To receive and adopt the audited accounts of the Company for the financial
year ended June 30, |
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| 1998
together with the Directors' and Auditors' reports thereon. |
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|
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| 3.
To elect seven Directors of the Company for a period of three years in
accordance with the provisions |
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| of
Section 178 of the Companies Ordinance, 1984 in place of the following
retiring Directors: |
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| 1.
Mrs. Naz Mansha |
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|
2. Mst. Akhtar Jehan
Begum |
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| 3.
Mr. Khalid Qadeer Qureshi |
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4. Mr. Muhammad Azam |
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| 5.
Rana Muhammad Mushtaq |
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6. Mr. Zaka-ud-Din |
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| 7.
Mr. Aftab Ahmad Khan |
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| The
Board of Directors has fixed the number of elected Directors as seven. All
retiring Directors shall be |
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| eligible
1o offer themselves for re-election. |
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| 4.
To appoint Auditors for the year 1998-99 and fix their remuneration. The
present Auditors |
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| M/s.
A. F. Ferguson & Company, Chartered Accountants, Lahore retire and being
eligible, offer |
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| themselves
for re-appointment. |
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| 5.
Any other matter with the permission of the Chair. |
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By order of the Board |
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{KHALID MAHMOOD CHOHAN) |
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|
Company Secretary |
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| Lahore: |
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| December
05, 1998. |
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| NOTES: |
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| 1.
Share transfer books of the Company will remain closed from 31-12-98 to
06-01-99 (both days |
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| inclusive).
Transfers received in order at Nishat House, 53-A, Lawrence Road, Lahore upto
1:00 p.m |
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| on
December 30, 1998 will be considered in time. |
|
|
| 2.
A member eligible to attend and vote at this meeting may appoint another
member his/her proxy to |
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| attend
and vote instead of him/her. Proxies in order to be effective must reach the
Company's |
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| Registered
office not less than 48 hours before the time for holding the meeting. |
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|
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| 3.
Nominations to contest election for the office of Directors must be received
at least 14 clear days before |
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| the
date of the Annual General Meeting at the Registered Office, during working
hours. |
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| 4.
Shareholders are requested to immediately notify the change in address, if
any. |
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| DIRECTORS'
REPORT TO THE SHAREHOLDERS |
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| Your
directors are pleased to place before you the annual report along with
audited accounts for the year |
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| ended
June 30, 1998. |
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| The
financial results remained under tremendous pressure mainly due to depressed
demand |
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| accompanied
with oversupply position resulting into rock bottom cement prices. The
situation was further |
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| aggravated
by constant increase in prices of utilities, petroleum products and
electricity etc. evaporating the |
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| profit
of the Company. The other major factors which really turned down the profit
into loss is the provision |
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| for
diminution in the value of short-term investment on account of bearish market
conditions resulting net loss |
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| of
Rs. 58.284 million during the year under review. Accordingly earning per
share has gone to |
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| negative
i.e. Re. (0.44)from Re. 0.54 in 1997. |
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| APPROPRIATION |
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|
1998 |
1997 |
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|
(Rupees in thousand) |
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| Net
(loss)/profit after taxation |
|
|
(58,284) |
71,454 |
|
| Un-appropriated
profit brought forward |
|
451 |
997 |
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| (Loss)/profit
for appropriation |
|
|
(57,833) |
72,451 |
|
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|
|
| Appropriations: |
|
|
|
| Transferred
to general reserve |
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|
- |
72,000 |
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| (Loss)/profit
un-appropriated |
|
|
(57,833) |
451 |
|
|
| PRODUCTION
AND SALES |
|
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| The
production of Clinker and Cement for the period was 940,007 and 912,976 tons |
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| respectively
(1997:634,821 tons and 667,937 tons). Break up is given hereunder: |
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|
Existing |
Expansion |
Total |
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| - Clinker |
(M. Tons) |
474,476 |
465,531 |
940,007 |
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| - Cement |
(M. Tons) |
576,014 |
336,962 |
912,976 |
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| The
expansion plant started commercial production wef Ist June 1998. The break up
of production |
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| (expansion
plant) during the period under review is given hereunder: |
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|
Clinker |
Cement |
|
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|
(M. Tons) |
(M. Tons) |
|
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| -
Trial run production |
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|
371,795 |
266,416 |
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| -
Commercial production |
|
|
93,736 |
70,546 |
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| (wef
Ist June '98) |
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|
|
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|
465,531 |
336,962 |
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| During
trial run 107,496 tons of clinker was transferred to existing plant, which
was ground and despatched. |
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| During
the period under review total despatches made were 900,010 tans. The
despatches include cement |
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| produced
during trial run of expansion plant. |
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| PLANT
PERFORMANCE |
|
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| Though
the performance of the existing plant was not excellent due to depressed
market, but |
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| ALHAMDO
LILLAH it was satisfactory at 72% of capacity utilization. |
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| The
expansion plant, (during trial run) had some teething problems, which were
removed by M/s F. L. Smidth, |
|
| Denmark
(plant supplier). After successful trial run, the plant is operating
smoothly. However, in certain areas |
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| (viz.
cement mill) some modifications suggested by the plant supplier are being
carried out. |
|
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| Pursuant
to the Technical Assistance Services agreement with M/s F. L. Smidth,
supervisors are monitoring the |
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| plant
operation. During the tenure of the agreement, they will not only ensure
smooth operation of the plant |
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| but
also remove any fault/problem encountered during plant operation. |
|
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| The
initiative to restructure and improve the productivity and to face the
increasing competitive environment, |
|
| the
voluntary retirement scheme under Golden Hand Shake was introduced in April
1998. |
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| OPERATING
RESULTS |
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| The
gross sales during the year were Rs. 2.213 billion as compared to Rs. 2.496
billion in last year. The |
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| net
sale price has registered a decrease of 3.13% over last year inspire of the
increase in sales volume by |
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| 34.05%.
Short excerpts of the operating results are as under: |
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|
|
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|
1998 |
1997 |
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|
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|
(Rupees in thousand) |
|
|
|
|
| Net sales |
|
|
|
1,238,983 |
1,347,594 |
|
| Gross profit |
|
|
|
141,112 |
274,692 |
|
| Operating
profit |
|
|
|
61,175 |
79,857 |
|
|
| The
major input prices particularly petroleum products and power has increased
during the year under review. |
|
| The
cement sector had been in trouble since 1996, the repayment to the foreign
lenders was also affected |
|
| and
the management is in the process of negotiating for restructuring of the
long-term foreign loans. |
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|
| MARKET
REVIEW |
|
|
| Overview |
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| During
the year under review the cement industry passed through the worst crisis of
its history. Depressed |
|
| demand
due to economic crunch, heavy taxation and constraints on exports resulted in
an oversupply of |
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| cement,
(capacity utilization achieved during the year was 59% for the whole cement
industry in Pakistan) |
|
| which
brought down the sale prices to an all time low. The situation was further
aggravated by the |
|
| devaluation
of Pak Rupee and constant increase in prices of utilities viz. electricity,
gas and petroleum |
|
| products
etc., making a big dent in the purchasing power of the common man. |
|
|
| Consequent
upon nuclear tests, sanctions were imposed on Pakistan, which put the economy
n turmoil. |
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| Accordingly
the priorities had to be revised resultantly the industrial reform program
and development |
|
| projects
were either postponed or cancelled. |
|
|
| The
country's economy has also been affected by the financial crisis in south
asia and far eastern countries |
|
| like
Japan, Malaysia and Indonesia etc. All of this resulted in an oversupply of
cement visa vis demand. |
|
|
| Export
was also not possible as the far eastern countries, effected by their
currency turmoil, started sale of |
|
| cement
on dumping prices in the international market, making it almost impossible
for us to compete. |
|
|
| Present
situation |
|
|
| Government
has taken steps for revival of the economy and restoration of law and order
situation in the |
|
| country
particularly in south. After tremendous efforts made by the government, some
of the economic |
|
| sanctions
have been finally lifted and now it is expected that Government development
plans will finally see |
|
| the
light of day and demand for cement will rise. |
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|
| FUTURE
PROSPECTS |
|
|
| The
lifting of US sanctions and successful negotiations with IMF/World Bank will
bail out Pakistan from the |
|
| present
economic crisis. All projects that had been shelved will come on stream
increasing the demand of |
|
| cement.
The best case scenario is that Pakistan will become "trading"
market from a "slump" market. |
|
|
| We
hope that with the recent bail out packages, the economy will come out from
recession, and selling will, |
|
| at
least improve the cash flow if not the actual earning of the Company. |
|
|
| We
have also developed new marketing strategies laying great emphasis on
exploring new markets. In this |
|
| connection
we have had some very encouraging news from the government in regard to
export incentives |
|
| and
are expecting to export a sizeable quantity to Bangladesh, Sri Lanka, Burma,
UAE and some African |
|
| countries.
After hectic efforts and in a record time, we have been able to get the
pre-audit certification of |
|
| IS0-9002,
which will be helpful for exports. |
|
|
| Efforts
are also underway to expand our market share by selling bulk cement. In
addition, we have already |
|
| launched
Sulphate Resistance Cement (SRC) on a small scale conforming to ASTM
specifications. |
|
|
| PATTERN
OF SHAREHOLDING |
|
|
| The
pattern of shareholding of the Company as on June 30, 1998 is annexed with
the Annual Report. |
|
|
| AUDITORS |
|
|
| M/s
A. F. Ferguson & Company, Chartered Accountants, Lahore, the retiring
Auditors, being eligible, offer |
|
| themselves
for re-appointment. |
|
|
| In
compliance with the provisions of SR0-846 (1)/98 dated 24th July, 1998 read
in conjunction with |
|
| Rule
3(2) of the Companies (Audit of Cost Accounts) Rules, 1998, the Company has
appointed |
|
| M/s
Amin Mudassar & Company, Chartered Accountants, Lahore as Cost Auditors
for the year ended |
|
| June
30, 1998. Corporate Law Authority has accorded approval for the said
appointment. |
|
|
| YEAR
2000 COMPLIANCE |
|
|
| The
issue of Year 2000 bug has already been taken care of. The platform used for
our software |
|
| development
has built in capability of storing four digits for the millennium. In
addition, we are also in the |
|
| process
of upgrading our hardware (wherever required) to comply with the Y2K problem
which will be |
|
| completed
before the end of year 1999. |
|
|
| ACKNOWLEDGEMENT |
|
|
| We
express our appreciation to our Cement Stockists who have extended their
fullest cooperation for |
|
| achieving
highest ever despatches made during the year. |
|
|
| The
Directors would also like to place on record their appreciation for the
efforts and hard work done for |
|
| achieving
the production targets and maintaining peaceful atmosphere by the workers,
staff and officers |
|
| during
the year. |
|
|
|
|
On behalf of the board |
|
|
|
|
|
|
|
MRS. NAZ MANSHA |
|
|
|
Chief Executive |
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| Lahore: |
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| December
05, 1998 |
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|
|
|
| FIVE
YEARS AT A GLANCE |
|
|
|
|
1998 |
1997 |
1996 |
1995 |
1994 |
|
| PRODUCTION
& SALES |
|
|
(M.Tons) |
|
| Clinker |
|
940,007 |
634,821 |
730,450 |
669,086 |
631,874 |
|
| Cement |
|
912,976 |
667,937 |
767,363 |
685,348 |
649,852 |
|
| Sales |
|
900,010 |
671,417 |
753,608 |
698,063 |
651,937 |
|
|
|
|
| FOR THE YEAR |
|
|
|
|
|
|
|
(Rupees in thousand) |
|
|
|
|
|
|
| Net Sales |
|
1,238,983 |
1,347,594 |
1,547,090 |
1,498,945 |
1,219,777 |
|
| Gross
Profit/(Loss) |
|
141,112 |
274,692 |
591,430 |
757,254 |
586,653 |
|
| Pre-tax
profit/(Loss) |
|
(46,566) |
83,571 |
308,411 |
569,557 |
550,180 |
|
| After
tax profit/(Loss) |
|
(58,284) |
71,454 |
248,411 |
386,788 |
362,884 |
|
|
|
|
| FINANCIAL
POSITION |
|
|
| Current
Assets |
|
1,029,452 |
989,212 |
1,297,610 |
1,240,604 |
1,095,981 |
|
| Current
Liabilities |
|
2,223,023 |
957,506 |
717,423 |
550,837 |
769,340 |
|
| Operating
Fixed Assets |
|
7,055,845 |
804,047 |
786,929 |
692,991 |
719,066 |
|
| Total Assets |
|
9,069,278 |
8,102,729 |
7,390,244 |
4,010,890 |
2,324,669 |
|
| Long
Term Liabilities |
|
3,049,132 |
3,288,816 |
2,887,875 |
349,724 |
337,397 |
|
| Shareholders'
Equity |
|
3,797,123 |
3,856,407 |
3,784,946 |
3,110,329 |
1,217,932 |
|
|
|
|
| RATIOS |
|
|
|
| Current
Ratio |
|
0.46:1 |
1.03:1 |
1.81:1 |
2.25:1 |
1.42:1 |
|
| Debt
to Equity |
|
45:55 |
46:54 |
43:57 |
10:90 |
22:78 |
|
| Gross
Profit to Sales (%) |
11.39 |
20.38 |
38.23 |
50.52 |
48.10 |
|
| Net
Profit to Sales (%) |
|
(4.70) |
5.30 |
16.06 |
25.80 |
29.75 |
|
| Break-up
value per share (Rs) |
28.69 |
29.13 |
34.82 |
31.47 |
19.68 |
|
|
|
|
|
| AUDITORS'
REPORT TO THE MEMBERS |
|
|
| We
have audited the annexed balance sheet of D.G. Khan Cement Company Limited as
at June 30, 1998, |
|
| the
profit and loss account and the cash flow statement, together with the notes
forming part thereof 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 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 Company's affairs as
at June 30, 1998, and |
|
| of
the loss and the cash flow for the year then ended; and |
|
|
| d)
in our opinion no Zakat was deductible at source under the Zakat and Ushr
Ordinance, 1980. |
|
|
| Without
qualifying our report we draw attention to note 1.2 to the accounts which
states that these accounts |
|
| have
been prepared on a going concern basis for the reasons explained in the note.
These accounts |
|
| consequently,
do not include any adjustments relating to the realisation of its assets and
liquidation of its |
|
| liabilities
that might be necessary should the company be unable to continue as a going
concern. |
|
|
|
|
A. F. Ferguson & Co. |
|
|
|
Chartered Accountants |
|
| Lahore: |
|
| December
05, 1998 |
|
|
|
| BALANCE
SHEET AS AT JUNE 30, 1998 |
|
|
|
Note |
1998 |
1997 |
|
|
|
|
|
(Rupees in thousand) |
|
|
|
|
| CAPITAL
AND RESERVES |
|
|
|
| Authorised
share capital |
|
|
|
| 300,000,000
ordinary shares of Rs. 10/-each |
|
3,000,000 |
3,000,000 |
|
|
|
|
========== |
========== |
|
| Issued,
subscribed and paid up share capital |
|
| 132,391,380
(1997: 132,391,380) ordinary |
|
| shares
of Rs. 10/-each |
|
3 |
1,323,914 |
1,323,914 |
|
| Reserves |
|
5 |
2,532,042 |
2,532,042 |
|
| Unappropriated
(loss)/profit |
|
|
(57,833) |
451 |
|
|
|
|
---------- |
---------- |
|
|
|
|
3,798,123 |
3,856,407 |
|
| LONG
TERM LIABILITIES |
|
|
|
|
|
|
| Long
term loans - secured |
|
6 |
2,889,671 |
3,128,364 |
|
| Liabilities
against assets subject to finance lease |
7 |
118,966 |
106,636 |
|
| Deferred
liabilities |
|
8 |
16,362 |
22,258 |
|
|
|
|
| LONG
TERM DEPOSITS |
|
9 |
24,133 |
31,558 |
|
|
|
|
| CURRENT
LIABILITIES |
|
|
|
| Current
portion of long term liabilities |
|
| Long
term loans - secured |
|
|
730,059 |
50,436 |
|
| Liabilities
against assets subject to finance lease |
64,042 |
47,005 |
|
| Short
term running finance |
|
10 |
634,073 |
260,254 |
|
| Creditors,
accrued and other liabilities |
11 |
738,146 |
555,820 |
|
| Provision
for taxation |
|
|
55,317 |
43,599 |
|
| Dividend
payable |
|
|
386 |
392 |
|
|
|
|
---------- |
---------- |
|
|
|
|
2,222,023 |
957,506 |
|
|
|
|
| CONTINGENCIES
AND COMMITMENTS |
|
12 |
- |
- |
|
|
|
|
|
|
---------- |
---------- |
|
|
|
|
9,069,278 |
8,102,729 |
|
|
|
|
========== |
========== |
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
| Chief
Executive |
|
|
|
|
|
Note |
1998 |
1997 |
|
|
|
|
|
(Rupees in thousand) |
|
|
|
|
| FIXED
CAPITAL EXPENDITURE |
|
|
| Operating
fixed assets |
|
13 |
7,055,845 |
804,047 |
|
| Assets
subject to finance lease |
|
14 |
274,358 |
10,935 |
|
| Capital
work in progress |
|
15 |
10,729 |
5,626,630 |
|
|
|
|
|
---------- |
---------- |
|
|
|
|
7,340,932 |
6,441,612 |
|
| LONG
TERM INVESTMENTS |
|
16 |
675,114 |
642,614 |
|
| LONG
TERM LOANS TO EMPLOYEES |
|
17 |
4,576 |
7,233 |
|
| LONG
TERM DEPOSITS AND DEFERRED COSTS |
18 |
19,204 |
22,058 |
|
| CURRENT
ASSETS |
|
|
|
| Stores,
spares and loose tools |
|
19 |
390,633 |
395,638 |
|
| Stock-in
-trade |
|
20 |
148,932 |
41,327 |
|
| Trade debts |
|
21 |
45,253 |
|
| Short
term investments |
|
22 |
262,942 |
370,232 |
|
| Advances,
deposits, prepayments and |
|
|
| other
receivables |
|
23 |
161,965 |
139,003 |
|
| Cash
and bank balances |
|
24 |
19,727 |
43,012 |
|
|
|
|
---------- |
---------- |
|
|
|
|
1,029,452 |
989,212 |
|
|
|
|
---------- |
---------- |
|
|
|
|
|
9,069,278 |
8,102,729 |
|
|
|
|
========== |
========== |
|
|
|
|
Director |
|
|
|
| PROFIT
AND LOSS ACCOUNT FOR THE YEAR ENDED JUNE 30, 1998 |
|
|
|
Note |
1998 |
1997 |
|
|
|
|
|
(Rupees in thousand) |
|
|
|
|
| SALES |
|
25 |
1,238,983 |
1,347,594 |
|
| COST
OF GOODS SOLD |
|
26 |
1,097,871 |
1,072,902 |
|
|
|
|
---------- |
---------- |
|
| GROSS PROFIT |
|
|
141,112 |
274,692 |
|
|
|
|
|
| OPERATING
EXPENSES |
|
|
|
| Administration
and general expenses |
|
27 |
35,432 |
33,826 |
|
| Selling
and distribution expenses |
|
28 |
44,505 |
161,009 |
|
|
|
|
---------- |
---------- |
|
|
|
|
79,937 |
194,835 |
|
|
|
|
---------- |
---------- |
|
| OPERATING
PROFIT |
|
|
61,175 |
79,857 |
|
| OTHER INCOME |
|
29 |
37,213 |
47,370 |
|
|
|
|
---------- |
---------- |
|
|
|
|
98,388 |
127,227 |
|
|
|
|
---------- |
---------- |
|
| FINANCIAL
CHARGES |
|
30 |
69,890 |
27,027 |
|
| OTHER
CHARGES |
|
31 |
75,064 |
16,629 |
|
|
|
|
|
---------- |
---------- |
|
|
|
|
|
144,954 |
43,656 |
|
|
|
|
|
---------- |
---------- |
|
