| Fecto Cement Limited |
|
|
|
|
|
|
|
|
|
| Annual
Report 1998 |
|
|
|
| CONTENTS |
|
|
| Corporate
Information |
|
| Notice
of Meeting |
|
| Directors'
Report |
|
| Auditors'
Report |
|
| Balance
Sheet |
|
| Profit
& Loss Account |
|
| Statement
of Changes in Financial Position |
|
| Notes
to the Accounts |
|
| Pattern
of Shareholding |
|
|
|
| CORPORATE
INFORMATION |
|
|
| BOARD
OF DIRECTORS |
|
CHAIRMAN |
|
|
|
Mr. Mohammed Asad Fecto |
|
|
|
|
|
CHIEF EXECUTIVE |
|
|
|
Mr. Mohammed Yasin Fecto |
|
|
|
|
|
DIRECTORS |
|
|
|
Mr. Ghulam Mohammed A.
Fecto |
|
|
|
Mr. Mohammed Ilyas Khan |
|
|
|
Mr. Muhammad Nasim Khan |
|
|
|
Mr. Muhammad Umer Memon |
|
|
|
Mr. Safdar Abbas Morawala |
|
|
|
Mr. Shahid Hassan |
|
|
|
Mr. Afaq Jamal Hussain |
|
|
|
Mr. Abdul Jaleel Shaikh |
|
|
| SECRETARY |
|
|
Mr. Abdul Aleem, FCA |
|
|
|
|
| AUDITORS |
|
|
Taseer Hadi Khalid &
Co, |
|
|
|
|
Chartered Accountants |
|
|
|
|
|
|
|
Rahim Iqbal Rafiq &
Co. |
|
|
|
|
Chartered Accountants |
|
|
|
|
| LEGAL
ADVISOR |
|
Nisar Law Associates |
|
|
|
|
51, Mozang Road |
|
|
|
|
Lahore |
|
|
| REGISTERED
OFFICE |
|
35-Darulaman Housing
Society |
|
|
|
|
Block 7/8, Shahra e
Faisal |
|
|
|
|
Karachi |
|
|
|
|
| FACTORY |
|
|
Sangjani, Islamabad |
|
|
|
|
| MARKETING
OFFICE |
|
2nd Floor, Majeed Plaza |
|
|
|
|
Bank Road, Saddar |
|
|
|
|
Rawalpinid |
|
|
|
| SHARE
REGISTRAR OFFICE |
|
Uni Corporate &
Financial Services |
|
|
|
|
4th Floor, Bank Square
No, 2 |
|
|
|
|
M. A. Jinnah Road |
|
|
|
|
Karachi |
|
|
|
| NOTICE
OF ANNUAL GENERAL MEETING |
|
|
| Notice
is hereby given that the 17th Annual General Meeting of the Members of the
Company |
|
| will
be held at Registered Office, 35-Darulaman Housing Society, Block 7/8,
Shahra-e-Faisal, |
|
| Karachi
on Thursday, December 31, 1998 at 4.00 p.m. to transact the following
business: |
|
|
| ORDINARY
BUSINESSES |
|
| 1.
To confirm the Minutes of the 16th Annual General Meeting held on December
31, 1997. |
|
|
|
|
| 2.
To receive and adopt the Annual Audited Accounts for the year ended June 30,
1998 |
|
| together
with the Directors' and Auditors' Reports thereon. |
|
|
|
|
| 3.
To appoint Auditors and fix their remuneration. The present Auditors Messrs.
Taseer Hadi Khalid |
|
| &
Co., Chartered Accountants and Messrs. Rahim Iqbal Rafiq & Co., Chartered
Accountants |
|
| retire
and being eligible, offer themselves for re appointment. |
|
|
| SPECIAL
BUSINESS |
|
| 4.
To consider and if thought fit to pass with or without modification the
following as Special |
|
| Resolution
to revise fee paid to Directors for attending Board Meeting: |
|
|
| "Resolved
that in article 61 (a) of the Articles of Association of the Company, the
figure "500/" |
|
| be
substituted by the figure "5,000/-" |
|
|
| 5.
To transact any other business with the permission of the Chair. |
|
|
|
|
By Order of the Board |
|
|
|
(ABDUL ALEEM) |
|
|
|
Company Secretary |
|
|
| Karachi:
November 28, 1998 |
|
|
|
| Notes: |
|
|
| 1.
The Share Transfer Books of the Company will remain closed from Monday,
December 21, |
|
| 1998
to Thursday, December 31, 1998 (both days inclusive). |
|
|
|
|
| 2.
A Member entitled to attend, speak and vote at this meeting may appoint
another Member |
|
| as
his/her proxy to attend, speak and vote on his/her behalf, |
|
|
|
|
| 3.
Account Holders and Sub-Account Holders of Central Depository Company of
Pakistan |
|
| Limited
are requested to bring their original National Identity Card along with a
photocopy |
|
| of
the same for identification |
|
|
|
|
| 4.
An instrument appointing a proxy must be received at the Registered Office of
the Company |
|
| not
later than forty-eight hours before the time appointed for the Meeting. A
Member shall |
|
| not
be entitled to appoint more than one proxy. If a Member appoints more than
one proxy |
|
| and
more than one instrument of proxy are deposited by a Member with the Company, |
|
| such
instruments shall be rendered invalid. |
|
|
| 5.
Members are requested to notify any change in their address immediately. |
|
|
| 6.
Members should quote their Folio Number in all correspondence and at the time
of attending |
|
| the
Meeting. |
|
|
| STATEMENT
UNDER SECTION 160 OF THE COMPANIES ORDINANCE, 1984 |
|
|
| Fee
payable to a Director for attending Board Meeting was fixed at Rs. 500/- in
1981 which needs |
|
| a
revision in view of the present value of money and lapse of almost 17 years
from its fixation. |
|
| Further
the Institutional Directors have also desired revision of fee to some
reasonable and |
|
| respectable
level. Therefore, members' approval is sought for revising the fee payable to
non |
|
| working
directors for attending Board Meetings from Rs, 500/- to Rs. 5,000/- and
amending the |
|
| concerned
article of the Articles of Association, The Directors will be interested in
the business to |
|
| the
extent of revision. |
|
|
|
| DIRECTORS'
REPORT TO THE MEMBERS |
|
|
| Dear
Members |
|
|
| Your
Directors are pleased to present their report along with the audited accounts
for the year |
|
| ended
June 30, 1998, |
|
|
| The
depressed market condition and excessive supply of cement have adversely
affected the |
|
| operating
efficiency and financial results of the company. |
|
|
| OPERATING
PERFORMANCE |
|
|
| The
production and despatches for the year under review are as follows: |
|
|
|
|
|
|
1998 |
1997 |
|
|
|
|
Tonnes |
|
|
|
|
| Production |
|
|
|
| Clinker |
|
547,302 |
671,882 |
|
| Cement |
|
574,507 |
716,748 |
|
|
|
|
| Despatches |
|
|
|
573,727 |
716,941 |
|
|
|
|
|
|
| OPERATING
RESULT |
|
| Cement
industry continues to suffer due to glut of cement. The current economic
conditions of |
|
| the
country and the excess availability of cement adversely affected the
operating results of the |
|
| company. |
|
|
| The
gross profit rate has reduced from 4,60% to 0,80% due to increase in
production cost per |
|
| tonne
as a result of low production. Although the operating expenses and financial
charges have |
|
| reduced
by 3.64% and 39.23% respectively as compared to corresponding period but
still |
|
| company
has suffered loss before taxation of Rs. 79.273 million. |
|
|
| DEBT
OBLIGATION |
|
| Inspire
of liquidity squeeze the company continues to meet its financial commitments
and debt |
|
| obligations
on time. |
|
|
| FUTURE
PROSPECTS |
|
| The
current economic turmoil, excess supply of cement and high rates of inflation
present a very |
|
| bleak
future for the industry. The industry has almost become sick due to
irrational attitude of the |
|
| Government
towards the industry. |
|
|
| BOARD
OF DIRECTORS |
|
| During
the year under review National Development Finance Corporation changed its
nominee |
|
| directors
and as a result Mr. Muhammad Sharif Shafique and Mr. Afzalul Haque were
replaced by |
|
| Mr.
Shahid Hassan and Afaq Jamal Hussain. Further Mr. Abdul Waheed Mian resigned
from the |
|
| Board
and in his place Mr. Safdar Abbas Morawala was co-opted by the Board. The
Board places |
|
| on
record its appreciation for the valuable support and contribution by the
outgoing Directors |
|
| and
welcomes the new Directors. |
|
|
| AUDITORS |
|
| Present
auditors M/s. Taseer Hadi Khalid & Co., Chartered Accountants and M/s.
Rahim Iqbal |
|
| Rafiq
& Co., Chartered Accountants, retire and being eligible, have offered
themselves for re- |
|
| appointment. |
|
|
| YEAR
2000 COMPLIANCE |
|
| Computer
hardware and software used for financial applications and other purposes have
been |
|
| thoroughly
examined and it has been ensured that the Millennium Bug will effect none of
these. |
|
| The
steps taken include upgradation, modification and replacement of certain
hardware and |
|
| software. |
|
|
| Preliminary
investigation and consultation have also been completed in respect of
computers |
|
| used
in production process and corrective measures have been adopted. However, for
the sake |
|
| of
abundant caution, Company is also undertaking detailed study in consultation
with the |
|
| machinery
suppliers which is underway and is strongly expected to end with the same |
|
| conclusion. |
|
|
| Associated
companies are using computers only for financial applications and other
purposes. |
|
| They
have also taken the same corrective measures and their computers would also
not be |
|
| effected. |
|
|
| The
Company is not dependent on any single major supplier, buyer, debtor etc. for
procurement |
|
| of
material or sale of its product except for purchase of Furnace Oil and
Electricity for which the |
|
| Company
is dependent on Pakistan State Oil Company Ltd. and Water & Power
Development |
|
| Authority
who may encounter the problem of Millennium Bug. |
|
|
| PATTERN
OF SHAREHOLDING |
|
| A
statement showing the pattern of shareholding as at June 30, 1998 is annexed, |
|
|
| ACKNOWLEDGMENT |
|
| The
Directors would like to place on record their appreciation for the strenuous
efforts and |
|
| dedicated
work of the staff and workers and for the efforts made by the dealers in
giving full |
|
| support
to our marketing policies. It is hoped that they will continue to work with
same spirit in the |
|
| years
to come to surmount the problems being faced by the company. We would also
like to |
|
| express
our sincere thanks to all the financial institutions for their continued
support and co- |
|
| operation. |
|
|
|
|
On behalf of the Board |
|
|
|
|
|
|
|
(Mohammed Asad Fecto) |
|
|
|
Chairman |
|
| Karachi:
November 28, 1998 |
|
|
|
| AUDITORS'
REPORT TO THE MEMBERS |
|
|
| We
have audited the annexed balance sheet of FECTO CEMENT 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 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 the |
|
| 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 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, 1998 and of the loss 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. |
|
|
| TASEER
HADI KHALID & CO. |
|
RAHIM IQBAL RAFIQ & CO. |
|
| Chartered
Accountants |
|
Chartered Accountants |
|
|
|
| Karachi:
November 28, 1998. |
|
|
|
| BALANCE
SHEET AS AT JUNE 30, 1998 |
|
|
|
|
|
|
(Rupees in Thousands) |
|
|
Note |
1998 |
1997 |
|
| SHARE
CAPITAL |
|
|
|
|
|
|
| Authorised: |
|
|
|
| 50,000,000
Ordinary Shares of Rs. 10/- each |
|
500,000 |
500,000 |
|
|
|
|
|
========== |
========== |
|
| Issued,
subscribed and paid-up |
|
|
| 45,600,000
Ordinary Shares of Rs. 10/- each |
|
| Issued
for Cash |
|
|
456,000 |
456,000 |
|
|
|
|
| RESERVES |
|
3 |
149,653 |
189,698 |
|
|
|
|
---------- |
---------- |
|
|
|
|
605,653 |
645,698 |
|
| REDEEMABLE
CAPITAL |
|
4 |
- |
15,756 |
|
| LONG
TERM LOANS |
|
5 |
103,643 |
200,108 |
|
| DEFERRED
LIABILITIES |
|
7 |
262,431 |
327,325 |
|
| LONG
TERM DEPOSITS |
|
8 |
21,810 |
23,224 |
|
|
|
|
|
| CURRENT
LIABILITIES: |
|
|
|
|
| Current
Maturity of Long Term Liabilities |
9 |
112,222 |
89,779 |
|
| Creditors,
Accrued & Other Liabilities |
10 |
376,756 |
332,327 |
|
| Provision
for Taxation |
|
|
5,607 |
15,033 |
|
|
|
|
---------- |
---------- |
|
|
|
|
494,585 |
437,139 |
|
|
|
|
---------- |
---------- |
|
|
|
|
1,488,122 |
1,649,250 |
|
|
|
|
========== |
========== |
|
|
| OPERATING
FIXED ASSETS |
|
11 |
996,158 |
1,107,958 |
|
| LONG
TERM DEPOSITS |
|
|
4,253 |
11,772 |
|
| DEFERRED
EXPENSES |
|
12 |
- |
1,153 |
|
| CURRENT
ASSETS: |
|
|
|
|
| Stores
and Spares |
|
13 |
298,473 |
289,059 |
|
| Stock-in-Trade |
|
14 |
23,665 |
15,382 |
|
| Trade
Debtors-Unsecured Considered Good |
|
19,292 |
26,576 |
|
| Advances,
Deposits and Pre-payments |
|
15 |
88,639 |
127,377 |
|
| Cash
and Bank Balances |
|
16 |
57,642 |
69,973 |
|
|
|
|
---------- |
---------- |
|
|
|
|
487,711 |
528,367 |
|
|
|
|
---------- |
---------- |
|
|
|
|
|
1,488,122 |
1,649,250 |
|
|
|
|
========== |
========== |
|
| These
accounts should be read in conjunction with the attached notes |
|
|
| (MOHAMMED
YASIN FECTO) |
|
(MOHAMMED ASAD FECTO) |
|
| Chief
Executive |
|
Chairman |
|
|
|
| PROFIT
AND LOSS ACCOUNT |
|
| FOR
THE YEAR ENDED JUNE 30, 1998 |
|
|
|
|
|
|
|
(Rupees in Thousands) |
|
|
|
|
Note |
1998 |
1997 |
|
|
|
|
| SALES-NET |
|
17 |
1,098,932 |
1,298,181 |
|
| COST
OF SALES |
|
18 |
1,090,193 |
1,238,397 |
|
|
|
|
---------- |
---------- |
|
| GROSS
PROFIT |
|
|
8,739 |
59,784 |
|
|
|
|
|
|
| OPERATING
EXPENSES |
|
|
|
|
| General
& Administrative |
|
19 |
34,807 |
35,713 |
|
| Selling
& Distribution |
|
20 |
23,101 |
24,380 |
|
|
|
|
---------- |
---------- |
|
|
|
|
57,908 |
60,093 |
|
|
|
|
---------- |
---------- |
|
|
|
|
(49,169) |
(309) |
|
|
|
|
---------- |
---------- |
|
| FINANCIAL
CHARGES |
|
21 |
52,343 |
86,161 |
|
| OTHER
INCOME |
|
22 |
(22,388) |
(32,265) |
|
| WORKERS'
WELFARE FUNDS |
|
|
149 |
3,113 |
|
|
|
|
|
---------- |
---------- |
|
|
|
|
30,104 |
57,009 |
|
|
|
|
---------- |
---------- |
|
| (LOSS)
BEFORE TAXATION |
|
|
(79,273) |
(57,318) |
|
| PROVISION
FOR TAXATION |
|
|
|
|
| Current
Year |
|
23 |
5,607 |
12,723 |
|
| Prior Year |
|
|
(21,116) |
(1,220) |
|
| Deferred |
|
|
(23,719) |
- |
|
|
|
|
---------- |
---------- |
|
|
|
|
(39,228) |
11,503 |
|
|
|
|
---------- |
---------- |
|
| (LOSS)
AFTER TAXATION |
|
|
(40,045) |
(68,821) |
|
| ACCUMULATED
(LOSS)/PROFIT BROUGHT FORWARD |
|
(60,302) |
8,519 |
|
|
|
|
---------- |
---------- |
|
| ACCUMULATED
(LOSS) CARRIED FORWARD |
|
|
(100,347) |
(60,302) |
|
|
|
|
========== |
========== |
|
|
| These
accounts should be read in conjunction with the attached notes. |
|
|
| (MOHAMMED
YASIN FECTO) |
|
(MOHAMMED ASAD FECTO) |
|
|
| Chief
Executive |
|
Chairman |
|
|
|
|
| STATEMENT
OF CHANGES IN FINANCIAL POSITION |
|
| FOR
THE YEAR ENDED JUNE 30, 1998 |
|
|
|
|
|
|
|
(Rupees in Thousands) |
|
|
|
|
1998 |
1997 |
|
|
|
|
| Cash
Flows from Operating Activities |
|
|
| Net
(Loss) before Taxation |
|
|
(79,273) |
(57,318) |
|
| Adjustments
for: |
|
|
|
|
|
| Depreciation |
|
|
|
112,463 |
126,690 |
|
| Amortisation
of Deferred Cost |
|
|
1,153 |
2,306 |
|
| (Gain)/Loss
on Disposal of Fixed Assets |
|
(763) |
83 |
|
| Foreign
Exchange (Gain)/Loss |
|
|
(990) |
2,152 |
|
| Financial
Charges |
|
|
|
53,333 |
84,009 |
|
|
|
|
|
---------- |
---------- |
|
| Operating
Profit before Working Capital Changes |
|
85,923 |
157,922 |
|
|
|
|
|
|
|
| (Increase)
in Stores and Spares |
|
|
(9,414) |
(50,249) |
|
| (Increase)/Decrease
in Stock-in-Trade |
|
(8,283) |
5,025 |
|
| Decrease
in Trade Debtors |
|
|
7,284 |
160 |
|
| Decrease
in Advances and Pre-payments |
|
1,308 |
42,583 |
|
| Increase
in Creditors, Accrued and |
|
|
|
| Other
Liabilities |
|
|
|
18,735 |
60,878 |
|
|
|
|
|
---------- |
---------- |
|
| Cash
Generated from Operations |
|
|
95,553 |
216,319 |
|
| Financial
Charges Paid |
|
|
|
(62,457) |
(112,323) |
|
| Income
Tax Paid/Deducted at Source |
|
|
(30,832) |
(60,639) |
|
| Long
Term Deposits Received |
|
|
(1,414) |
(1,563) |
|
| Long
Term Deposits Given |
|
|
7,519 |
(6,166) |
|
|
|
|
|
---------- |
---------- |
|
| Net
Cash from in Operating Activities |
|
8,369 |
35,628 |
|
|
|
|
|
|
|
| Cash
Flows from Investing Activities |
|
|
| Fixed
Capital Expenditure |
|
|
(3,221) |
(2,381) |
|
| Sale
Proceeds of Fixed Assets |
|
|
3,321 |
1,584 |
|
| Advances
to Associated Companies |
|
|
74,345 |
34,403 |
|
|
|
|
|
---------- |
---------- |
|
| Net
Cash from Investing Activities |
|
|
74,445 |
33,606 |
|
|
|
|
|
|
|
| Cash
Flows from Financing Activities |
|
|
|
| Repayment
of Long Term Loans |
|
|
(68,539) |
(107,160) |
|
| Repayment
of Redeemable Capital |
|
|
(21,239) |
(64,568) |
|
| Repayment
of Lease Finance |
|
|
- |
(2,237) |
|
| Dividend
Paid |
|
|
|
(5,367) |
(16,566) |
|
|
|
|
|
---------- |
---------- |
|
| Net
Cash used in Financing Activities |
|
(95,145) |
(190,531) |
|
|
|
|
|
---------- |
---------- |
|
| Net
(Decrease) in Cash & Bank Balances |
|
(12,331) |
(121,297) |
|
| Cash
and Bank Balances as at July 1 |
|
|
69,973 |
191,270 |
|
|
|
|
|
---------- |
---------- |
|
| Cash
and Bank Balances as at June 30 |
|
57,642 |
69,973 |
|
|
|
|
|
========== |
========== |
|
|
|
| NOTES
TO THE ACCOUNTS |
|
| FOR
THE YEAR ENDED JUNE 30, 1998 |
|
|
| 1.
STATUS AND NATURE OF BUSINESS |
|
| The
Company was incorporated in Pakistan on February 28, 1981 as a public limited |
|
| company
and its shares are quoted on Karachi, Lahore and Islamabad Stock Exchanges.
It |
|
| is
principally engaged in production and sale of cement. |
|
|
| 2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
|
|
|
|
| 2.1
Accounting Convention |
|
| The
accounts are prepared under the historical cost convention as modified by |
|
| capitalization
of certain exchange differences. |
|
|
| 2.2
Tangible Fixed Assets |
|
| Operating
fixed assets are stated at cost (including where relevant related |
|
| borrowing
cost and exchange difference) less accumulated depreciation, |
|
| except
free hold land which is stated at cost. |
|
|
| ii)
Capital work in progress is stated at cost including where relevant, related |
|
| financing
costs. These costs are transferred to fixed assets as and when assets are |
|
| available
for use. |
|
|
| iii)
Depreciation is charged to income applying the reducing balance method at |
|
| the
rates specified in Note 11. Full year's depreciation is charged on additions, |
|
| while
no depreciation is charged on assets disposed off. |
|
|
| iv)
Maintenance and repairs are charged to income as and when incurred. Major |
|
| renewals
and improvements are capitalized, Gains and losses on disposal of |
|
| assets,
if any, are included in income currently. |
|
|
| 2.3
Assets Subject to Finance Lease |
|
| i)
These are stated at lower of present value of minimum lease payments under
the |
|
| lease
agreements and fair value of assets acquired on lease, The related |
|
| obligations
of the lease are accounted for as liabilities, Assets acquired under the |
|
| finance
lease are depreciated over the useful life of the assets in the same |
|
| manner
as the owned assets. |
|
|
|
|
|
| ii)
Finance charge under the lease agreements is allocated to the periods during |
|
| lease
term so as to produce a constant periodic rate of financial cost on the |
|
| remaining
balance of principal liability of each period. |
|
|
| 2.4
Staff Retirement Benefits |
|
| The
Company operates a Contributory Provident Fund Scheme for all its eligible |
|
