| Essa Cement Industries Limited |
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| Annual
Report 1998 |
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| CONTENTS |
|
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| Company
Information |
|
| Notice
of Meeting |
|
| Directors'
Report to the Members |
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| Financial
Highlights |
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| Auditors'
Report to the Members |
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| Balance Sheet |
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| Profit
and Loss Account |
|
| Statement
of Changes in Financial Position |
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| Notes
to the Accounts |
|
| Pattern
of Share Holding |
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|
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| COMPANY
INFORMATION |
|
|
| BOARD
OF DIRECTORS |
|
|
| MR.
ABDUL AZIZ ESSA |
CHAIRMAN & CHIEF
EXECUTIVE |
|
| MRS.
HUMERA ESSA |
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| MRS.
HAMILA YOUNUS DADA |
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| MRS.
ZAITOON HAMZA DADA |
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| MR.
JAWED AZIZ ESSA |
|
| MR.
IRFAN AZIZ ESSA |
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| MR.
ZAFARUDDIN SIDDIQUI |
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| COMPANY
SECRETARY |
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| MR.
JAWED AZIZ ESSA |
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| AUDITORS |
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| F.R.
MERCHANT & CO. |
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| CHARTERED
ACCOUNTANTS |
|
|
| BANKERS |
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| HABIB
BANK LIMITED |
|
| NATIONAL
BANK OF PAKISTAN |
|
| MUSLIM
COMMERCIAL BANK LIMITED |
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| ANZ
GRINDLAYS BANK |
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| ALLIED
BANK OF PAKISTAN LIMITED |
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| BOLAN
BANK LIMITED |
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| BANK
AL HABIB LIMITED |
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| REGISTERED
OFFICE |
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| FL-2/1,
BLOCK-6, |
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| GULSHAN-E-IQBAL, |
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| KARACHI-75300 |
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| FACTORY |
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| DEH
KALO KOHAR |
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| NOORIABAD
INDUSTRIAL AREA, |
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| DISTRICT
DADU, (SINDH) |
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| NOTICE
OF MEETING |
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| NOTICE
IS HEREBY GIVEN that Annual General Meeting of the Company will be held on
Tuesday, |
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| December
29, 1998 at 02:00 P.M. at the Registered Office of the Company at FL-2/1,
Block-6, |
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| Gulshan-e-Iqbal,
Karachi, to transact the following business: |
|
|
| 1)
To confirm the minutes of the Extra Ordinary General Meeting held on June 04,
1998. |
|
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| 2)
To receive and consider the Report of the Directors, the Audited Accounts and |
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| Statement
alongwith the Balance Sheet for the year ended June 30, 1998 with the |
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| Auditors'
Report thereon. |
|
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| 3)
To appoint Auditors for the year 1998-99 and to fix their remuneration. |
|
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| 4)
To transact any other business with the permission of the Chairman. |
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|
By Order of the Board |
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|
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|
JAWED AZIZ ESSA |
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| KARACHI:
November 26, 1998 |
|
Director & Secretary |
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|
|
| NOTES: |
|
|
| 1)
The Share Transfer Books of the Company will remain closed from December 18, |
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| 1998
to December 29, 1998 (both days inclusive). |
|
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| 2)
A member entitled to attend and vote at the Annual General Meeting may |
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| appoint
another member as the proxy to attend and vote on his/her behalf. |
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| Proxies
must be duly filled, signed and deposited at the Registered Office of the |
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| Company
note less than 48 hours before the time of the meeting. |
|
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| 3)
Shareholders are requested to promptly notify the Company of any change in |
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| their
addresses, if any. |
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|
| DIRECTORS'
REPORT TO THE MEMBERS |
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| Your
directors have pleasure in presenting their report alongwith audited accounts
and |
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| auditors'
report thereon for the year ended June 30, 1998. |
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|
| PRODUCTION: |
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| During
the year under report the Company witnessed a further setback in production |
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| compared
to last year. The shortfall in production was due to closure on account of
synchronising |
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| of
existing plant with expansion of new unit and slump in the market. The
comparative figures |
|
| both
for clinker and cement production are given below: |
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|
1997-98 |
1996-97 |
|
|
Tons |
Tons |
|
|
| Clinker |
|
75,855 |
133,982 |
|
| Ordinary
Portland Cement |
|
50,485 |
90,075 |
|
| Slag Cement |
|
22,915 |
48,024 |
|
| Sulphate
Resistance Cement |
|
5,707 |
12,643 |
|
|
| SALES
& MARKETING: |
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| The
cement industry as a whole is passing through the worst period of its
history. One the |
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| one
hand there was excess supply of cement due to new projects and expansions in
some of |
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| the
existing units kept pressure on selling price. The cement sales by the
Company aggregate to |
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| 87,069
tons as compared to 150,455 tons last year. |
|
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| Gross
Sales Revenue amounted to Rs. 292.922 million, out of which Rs. 120.350
million were |
|
| paid
to the government as Excise Duty. Net sales revenue amounted to Rs. 172.571
million. |
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|
| FINANCIAL
RESULTS: |
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| The
Company has maintained its operating efficiency, however, due to depressed |
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| marketing
conditions the financial results have shown loss for the first time in the
history of the |
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| company. |
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| PROFIT/(LOSS)
AFTER TAX |
|
(11,043,488) |
|
| UNAPPROPRIATED
PROFIT B/F |
|
4,693,872 |
|
|
---------- |
|
| UNAPPROPRIATED
PROFIT/(LOSS) C/F |
|
6,349,616 |
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|
========== |
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| Inspite
of lower selling prices, higher input cost and lower production, your company
was |
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| able
to earn operating profit of Rs. 14.290 million. |
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|
| EXPANSION
PROGRAMME: |
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| The
expansion of the plant has completed and the trial production of the expanded
unit |
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| has
started since August 1998. |
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| Your
directors are confident that with the expanded capacity the company will be
able |
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| to
substantially improve its performance and operating results in the year
ahead. |
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|
| STAFF
& LABOUR: |
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| The
relations between the management and workers remained cordial throughout the |
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| year.
The Directors wish to place on record their appreciation for the efforts and
good work done |
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| by
the Staff and the Workers and expect that they will show greater zeal in
further improving the |
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| performance
of the Company. |
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|
| AUDITORS: |
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| The
present Auditors M/s. F.R. Merchant & Co., Chartered Accountants, retire
and being |
|
| eligible
offer themselves for reappointment as Auditors of the Company for the year
1998-99. |
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|
For and on behalf of the Board |
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|
ABDUL AZIZ ESSA |
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| KARACHI:
November 26, 1998 |
|
Chairman/Chief Executive |
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| FINANCIAL
HIGHLIGHTS |
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|
(Figures in Thousand) |
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|
1998 |
1997 |
1996 |
1995 |
1994 |
1993 |
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| NET SALES |
|
172,571 |
270,954 |
300,613 |
310,612 |
338,811 |
265,994 |
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| RESULT |
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| PROFIT
BEFORE TAX |
|
(10,143) |
11,918 |
41,614 |
88,845 |
115,915 |
88,051 |
|
| PROFIT
AFTER TAX |
|
(11,043) |
16,267 |
29.015 |
70,670 |
114,211 |
86,719 |
|
| NET
RETURN OF TURNOVER % |
|
(6,40) |
6.00 |
9.65 |
22.75 |
33.71 |
32.60 |
|
| CURRENT
ASSETS |
|
229,423 |
188,831 |
184.302 |
156,415 |
109,566 |
76,578 |
|
| CURRENT
LIABILITIES |
|
254,363 |
171,174 |
127,282 |
90,633 |
63,969 |
86,357 |
|
| CURRENT
RATIO ASSETS: LIABILITIES |
0.90:1 |
1.10:1 |
1.45:1 |
1.73:1 |
1.71:1 |
0.89:1 |
|
| DISTRIBUTABLE
RESERVES |
|
173,650 |
216,175 |
228,528 |
199,513 |
147,508 |
33,297 |
|
| SHAREHOLDERS
EQUITY |
|
519,948 |
530,991 |
514,724 |
342,611 |
260,629 |
146,418 |
|
| NUMBER
OF SHARES |
|
34,630 |
31,482 |
28,620 |
14,310 |
11,312 |
11,312 |
|
| EARNING
PER SHARE OF RS. 10 EACH |
(0.32) |
0.52 |
1.01 |
4.94 |
10.10 |
7.67 |
|
| BREAK-UP
VALUE PER SHARE |
RS. |
15.01 |
16.87 |
17.98 |
23.94 |
23.04 |
12.94 |
|
|
|
| AUDITORS'
REPORT TO THE MEMBERS |
|
|
| We
have audited the annexed balance sheet of ESSA CEMENT INDUSTRIES LIMITED as
at |
|
| June
30, 1998 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 |
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| 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; |
|
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| b)
in our opinion: |
|
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| I)
the balance sheet and profit and loss account, together with the notes |
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| thereon,
have been drawn up in conformity with the Companies Ordinance, |
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| 1984
and are in agreement with the books of account and are further in |
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| accordance
with accounting policies consistently applied; |
|
|
| ii)
the expenditure incurred during the year was for the purpose of the |
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| Company's
business; and |
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| iii)
the business conducted, investments made and the expenditure incurred |
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| during
the year were in accordance with the objects of the Company; |
|
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| c)
in our opinion and to the best of our information and according to the |
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| explanations
given to us, the balance sheet, profit and loss account and the |
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| statement
of changes in financial position, together with the notes forming part |
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| thereof,
give the information required by the Companies Ordinance, 1984 in the |
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| manner
so required and respectively give a true and fair view of the state of the |
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| Company's
affairs as at June 30, 1998 and of the loss and the changes in the |
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| financial
position for the year then ended; and |
|
|
| d)
In our opinion, no zakat was deductible at source under the Zakat & Ushr |
|
| Ordinance,
1980. |
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|
|
F.R. MERCHANT & CO. |
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| KARACHI:
November 26, 1998 |
|
Chartered Accountants |
|
|
|
| BALANCE
SHEET AS AT JUNE 30, 1998 |
|
|
|
NOTE |
1998 |
1997 |
|
|
| SHARE
CAPITAL AND RESERVES |
|
|
| Authorised |
|
| 50,000,000
ordinary shares of Rs. 10/- each |
|
500,000,000 |
500,000,000 |
|
|
| Issued,
subscribed and paid-up capital |
|
3 |
346,297,320 |
314,815,750 |
|
| Reserves |
|
4 |
173,650,384 |
216,442 |
|
|
|
---------- |
---------- |
|
|
|
519,947,704 |
530,991,192 |
|
|
|
|
| REDEEMABLE
CAPITAL |
|
5 |
- |
- |
|
| LONG
TERM LOANS |
|
6 |
634,379,446 |
444,264,846 |
|
| LIABILITIES
AGAINST ASSETS |
|
|
|
|
| SUBJECT
TO FINANCE LEASE |
|
7 |
26,853,332 |
24,166,761 |
|
|
|
|
| CURRENT
LIABILITIES |
|
|
|
|
|
|
| Current
maturity of redeemable capital |
|
5 |
- |
1,967,500 |
|
| Current
maturity of long term loans |
|
6 |
93,848,939 |
45,044,034 |
|
| Current
maturity of liabilities against |
|
|
|
| assets
subject to finance lease |
|
7 |
16,346,121 |
11,215,989 |
|
| Creditors,
accrued and other liabilities |
8 |
143,733,796 |
74,536,354 |
|
| Running
finances under mark-up arrangements |
9 |
109,848,174 |
94,269,119 |
|
| Provision
for taxation |
|
|
617,333 |
2,204,189 |
|
| Unclaimed
dividend |
|
|
163,891 |
163,891 |
|
|
|
---------- |
---------- |
|
|
|
364,558,254 |
229,401,076 |
|
| CONTINGENCIES
AND COMMITMENTS |
|
10 |
---------- |
---------- |
|
|
Rupees |
1,545,738,736 |
1,228,875 |
|
|
========== |
========== |
|
|
| FIXED
ASSETS-Tangible |
|
| Operating
Assets |
|
11 |
301,494,015 |
328,275,152 |
|
| Capital
work-in-progress |
|
12 |
1,010,636,771 |
708,304,598 |
|
|
|
---------- |
---------- |
|
|
|
1,312,130,786 |
1,036,579,750 |
|
|
|
|
| LONG
TERM DEPOSITS |
|
|
4,185,346 |
3,413,146 |
|
|
|
|
| CURRENT
ASSETS |
|
|
|
| Stores
and spares |
|
13 |
99,762,417 |
57,728,816 |
|
| Stock-in-trade |
|
14 |
82,406,066 |
70,010,433 |
|
| Trade debts |
|
15 |
27,034,224 |
35,993,259 |
|
| Advances,
deposits, prepayments |
|
|
|
| and
other receivables |
|
16 |
12,169,396 |
12,371,748 |
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| Cash
and bank balances |
|
17 |
8,050,501 |
12,726,723 |
|
|
---------- |
---------- |
|
|
229,422,604 |
188,830,979 |
|
|
---------- |
---------- |
|
|
Rupees |
1,545,738,736 |
1,228,875 |
|
|
========== |
========== |
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
|
ABDUL AZIZ ESSA |
|
JAWED AZIZ ESSA |
|
|
CHIEF EXECUTIVE |
|
DIRECTOR |
|
|
|
| PROFIT
AND LOSS ACCOUNT |
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| FOR
THE YEAR ENDED JUNE 30, 1998 |
|
|
|
NOTE |
1998 |
1997 |
|
|
| Sales |
|
|
292,921,858 |
495,938,477 |
|
|
|
|
---------- |
---------- |
|
| Less:
Excise duty |
|
|
120,350,425 |
156,419,832 |
|
| Sales tax |
|
|
- |
68,565,033 |
|
|
|
---------- |
---------- |
|
|
|
120,350,425 |
224,984,865 |
|
|
|
---------- |
---------- |
|
| Net sales |
|
|
172,571,433 |
270,953,612 |
|
| Cost of sales |
|
18 |
158,281,301 |
229,846,769 |
|
|
|
---------- |
---------- |
|
|
|
14,290,132 |
41,106,843 |
|
| Administration
and selling expenses |
|
19 |
7,988,877 |
8,632,383 |
|
|
|
---------- |
---------- |
|
| Operating
profit |
|
|
6,301,255 |
32,474,460 |
|
| Other income |
|
20 |
31,590 |
423,435 |
|
|
|
---------- |
---------- |
|
|
|
6,332,845 |
32,897,895 |
|
|
|
---------- |
---------- |
|
| Financial
charges |
|
21 |
15,716,333 |
19,464,596 |
|
| Other charges |
|
22 |
760,000 |
1,515,645 |
|
|
|
---------- |
---------- |
|
|
|
16,476,333 |
20,980,241 |
|
|
|
---------- |
---------- |
|
| Profit/(Loss)
before taxation |
|
|
(10,143,488) |
11,917,654 |
|
| Taxation |
|
23 |
900,000 |
(4,349,348) |
|
|
|
---------- |
---------- |
|
| Profit/(Loss
after taxation |
|
|
(11,043,488) |
16,267,002 |
|
| Accumulated
profit brought forward |
|
|
4,693,872 |
4,908,436 |
|
|
|
---------- |
---------- |
|
| Profit/(Loss)
available for appropriation |
|
(6,349,616) |
21,175,438 |
|
| Appropriations: |
|
|
|
| Transfer
from general reserve |
|
|
- |
(15,000,000) |
|
| Proposed
issued of bonus shares |
|
|
|
| in
the ratio of Nil (1997-1:10) |
|
|
- |
31,481,566 |
|
|
|
---------- |
---------- |
|
|
|
- |
16,481,566 |
|
|
|
---------- |
---------- |
|
| Accumulated
profit/(loss) carried forward |
|
(6,349,616) |
4,693,872 |
|
|
========== |
========== |
|
|
| The
annexed notes form an integral part of these accounts |
|
|
|
|
ABDUL AZIZ ESSA |
|
JAWED AZIZ ESSA |
|
|
CHIEF EXECUTIVE |
|
DIRECTOR |
|
|
|
| STATEMENT
OF CHANGES IN FINANCIAL POSITION (CASH FLOW STATEMENT) |
|
| FOR
THE YEAR ENDED JUNE 30, 1998 |
|
|
|
1998 |
1997 |
|
|
| CASH
FLOW FROM OPERATING ACTIVITIES |
|
| Profit/(loss)
before taxation |
|
(10,143,488) |
11,917,654 |
|
| Adjustments: |
|
|
|
| Depreciation |
|
31,262,323 |
34,234,777 |
|
|
---------- |
---------- |
|
| Operating
profit before changes |
|
21,118,835 |
46,152,431 |
|
| (Increase)/ decrease in
current assets |
|
|
|
| Stores
and spares |
|
(42,033,601) |
(15,316,637) |
|
| Stock-in-trade |
|
(12,395,633) |
18,774,676 |
|
| Trade debts |
|
8,959,035 |
(28,901,683) |
|
| Advances,
deposits, prepayments |
|
|
|
| and
other receivables |
|
202,352 |
17,910,070 |
|
|
---------- |
---------- |
|
|
(45,267,847 |
(7,533,574 |
|
|
| Increase/(decrease)
in current liabilities |
|
| Creditors,
accrued and other liabilities |
|
69,197,442 |
20,889,516 |
|
| Running
finances under mark-up arrangements |
|
15,579,055 |
36,471,891 |
|
|
---------- |
---------- |
|
|
84,776,497 |
57,361,407 |
|
|
| Net
cash from operating activities |
|
60,627,485 |
95,980,264 |
|
| Tax paid |
|
(2,486,8560 |
(9,120,030) |
|
|
---------- |
---------- |
|
| Net
cash from operation activities after tax |
|
58,140,629 |
86,860,234 |
|
|
| CASH
FLOW FROM INVESTING ACTIVITIES |
|
| Capital
expenditure |
|
(306,813,359) |
(538,356,261) |
|
|
---------- |
---------- |
|
| Net
cash from after investing activities |
|
(248,672,730) |
(451,496,027) |
|
|
|
|
| CASH
FLOW FROM FINANCING ACTIVITIES |
|
|
|
| Repayment
of redeemable capital |
|
(1,967,500) |
(8,150,571) |
|
| Repayment
of long term loans |
|
238,919,505 |
438,045,524 |
|
| Liabilities
subject to finance lease |
|
7,816,703 |
20,601,912 |
|
| Long-term
deposits |
|
(772,200) |
(2,005,790) |
|
|
---------- |
---------- |
|
| Net
cash flow from financing activities |
|
243,996,508 |
448,491,075 |
|
|
---------- |
---------- |
|
| Net
cash flow after financing activities |
|
(4,676,222) |
(3,004,952) |
|
| Cash
and bank at the beginning of the year |
|
12,726,723 |
15,731,675 |
|
|
---------- |
---------- |
|
| Cash
and bank at the end of the year |
|
8,050,501 |
12,726,723 |
|
|
========== |
========== |
|
|
|
ABDUL AZIZ ESSA |
|
JAWED AZIZ ESSA |
|
|
CHIEF EXECUTIVE |
|
DIRECTOR |
|
|
|
| NOTES
TO THE ACCOUNTS |
|
| FOR
THE YEAR ENDED JUNE 30, 1998 |
|
|
| 1.
THE COMPANY AND ITS OPERATION |
|
| Essa
Cement Industries Limited is a Public Limited Company and listed on the |
|
| Karachi
and Lahore Stock Exchange. The company's principal activity is |
|
| Manufacturing
& Marketing of Cement and its Products. |
|
|
| 2.
SIGNIFICANT ACCOUNTING POLICIES |
|
|
| 2.1
Accounting convention |
|
| These
accounts have been prepared under the historical cost convention as |
|
| modified
by adjustments of Exchange Fluctuation on Foreign Currency Loans. |
|
|
| 2.2 Taxation |
|
| Provision
for current year taxation is based on current rates of taxation. The |
|
| company
has decided to provide for deferred taxation arising from timing |
|
| differences.
It will be provided in future year out of profit after taxation. |
|
|
| 2.3
Fixed assets and depreciation |
|
| 2.3(I)
Operating assets |
|
| Operating
fixed assets except free hold land are stated at cost less |
|
| accumulated
depreciation. Free hold land and capital work-in-progress |
|
| are
stated at cost. Depreciation is charged to income applying the |
|
| reducing
balance method. |
|
|
| Full
year's depreciation is charged on additions while no depreciation is |
|
| charged
on assets deleted. Profit/Loss on disposal of fixed assets is |
|
| accounting
for in the profit and loss account. |
|
|
| Maintenance
and normal repairs are charged to income as and when |
|
| incurred.
Major renewals and improvements are capitalized and the assets |
|
| so
replaced, if any, are retired. |
|
|
| 2.3
(ii) Assets subject to Finance Lease |
|
| These
are stated at lower of present value of minimum lease payments |
|
| under
the lease agreements and the fair value of the assets. The related |
|
| obligations
of the lease are accounted for as liabilities. Assets acquired |
|
| under
finance lease are depreciated over the useful life of the assets in |
|
| the
same manner as the owned assets. |
|
|
| 2.4
Stores and spares |
|
| These
are valued at moving average cost. |
|
|
| 2.5
Stock-in-trade |
|
| These
are stated at lower of cost or net realizable value. The method used for the |
|
| calculation
of costs are as follows: |
|
|
| Raw
and packing materials |
|
-
at average cost |
|
| Work-in-process
and finished goods |
|
- at average cost of goods
produced |
|
|
during the year |
|
|
| 2.6
Foreign currency translation |
|
| Assets
and liabilities in foreign currencies are translated into rupees at the rates
of |
|
| exchange
prevailing at the date of the balance sheet. |
|
|
| Exchange
differences in respect of foreign currency loans obtained for acquisition |
|
| of
fixed assets are incorporated in the cost of the relevant assets. Exchange |
|
| differences
capitalized include loss or gain on the repayments and year-end |
|
| translation
of foreign currency loans. |
|
|
| 2.7
Revenue recognition |
|
| Sales
are recorded on despatched of goods to customers. |
|
|
|
1998 |
1997 |
|
| 3.
ISSUED, SUBSCRIBED & PAID-UP CAPITAL |
|
|
| 25,913,117
ordinary shares of Rs. 10 each |
|
| issued
for cash |
|
259,131,170 |
259,131,170 |
|
|
| 840,000
ordinary shares of Rs. 10 each |
|
| issued
for consideration other than cash |
|
8,400,000 |
8,400,000 |
|
|
| 7,876,615
(1997: 4,728,458) ordinary shares of |
|
| Rs.
|
