| Ferozsons Laboratories Limited |
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| Annual
Report 1998 |
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| CONTENTS |
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| Board
of Directors |
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| Summary
of Financial Results |
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| Notice
of Annual General Meeting |
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| Director's
Report |
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| Auditor's
Report |
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| Balance
Sheet |
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| Profit
& Loss Account |
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| Statement
of Source & Application of Funds |
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| Notes
to the Accounts |
|
| Pattern
of Shareholding |
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| BOARD
OF DIRECTORS |
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| Chairperson
and Chief Executive |
Mrs. Akhter Khalid Waheed |
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| Directors |
|
Zafar, Mr. A.U.,
President |
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|
Waheed, Begum S. |
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|
Cassim, Mr. Firozuddin A. |
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Ispahani, Mr. M.M. |
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Khanzada, Mr. Taj
Mohammad |
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Sherpao, Khan Dost
Mohammad Khan |
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Shah, K. M.M. |
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Azhar, Ms. Munize |
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Waheed, Mr. Osman Khalid |
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Mazhar, Mr. Farooq |
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|
Iqbal Mr. Walid |
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| Secretary |
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Ahmed, Mr. Maqbool |
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| General
Manager Nowshera |
Waheed, Mr. Omar Khalid |
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| Auditors |
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Messrs Taseer Hadi Khalid
& Co. |
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|
6th Floor, State Life
Building No. 5, |
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|
Blue Area, Islamabad. |
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| Bankers |
|
ANZ Grindlays Bank Ltd. |
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|
Crescent Investment Bank
Ltd. |
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| Registered
Office |
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197-A, The Mall,
Rawalpindi. |
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Phones: (051) 562155-57 |
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Fax: (051) 584195 |
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e-mail:
ferozson@isb.comsats.net.pk |
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internet:
http://www.ferozsons.net |
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| Factories |
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P.O. Ferozsons, Nowshera
(N.W.F.P.) |
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| Summary
of Financial Results |
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|
1997 |
1998 |
Growth |
|
|
|
Rs. |
Rs. |
(%) |
|
|
|
|
|
| Net Sales |
|
210,610,699 |
229,851,858 |
09.14 |
|
| Operating
Expanses |
|
43,534,755 |
50,217,477 |
15.35 |
|
| Operating
Profit |
|
33,867,049 |
24,136,501 |
(28.73) |
|
| Profit
After Tax |
|
22,369,469 |
15,583,466 |
(30.33) |
|
| Earning
per Share |
|
7.12 |
4.41 |
(38.06) |
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|
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| NOTICE
OF ANNUAL GENERAL MEETING |
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| Notice
is hereby given that the 42nd Annual General Meeting of FEROZSONS
LABORATORIES |
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| LIMITED
will be held on Monday, the 30th of November, 1998 at 12.00 noon at its
Registered Office, |
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| 197-A,
The Mall, Rawalpindi to transact the following business: |
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| 1.
To confirm the Minutes of 41st Annual General Meeting held on 29th November,
1997. |
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|
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| 2.
To receive, consider, and adopt the Annual Audited Accounts for the year
ended 30th June, |
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| 1998
and Directors' and Auditors' Reports thereon. |
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|
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| 3.
To approve payment of Dividend at the rate of 15% (Rs. 1.50 per share of Rs.
10/- each) for |
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| the
year ended 30th June, 1998 as recommended by the Directors. |
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| 4.
To appoint Auditors and to fix their remuneration. The present Auditors M/s
Taseer Hadi |
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| Khalid
& Co., Chartered Accountants, being eligible, have offered themselves for
re- |
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| appointment. |
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| 5.
To transact any other business with the permission of the Chair. |
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BY ORDER OF THE BOARD |
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|
(Maqbool Ahmed) |
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|
Secretary |
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| Dated:
31st October, 1998 |
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| Notes: |
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| 1.
The Share Transfer Books of the Company will remain closed from 29th
November, |
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| 1998
to 8th December, 1998 (both days inclusive). Shares for transfers will be
received |
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| at
the Registered Office of the Company at 197-A, The Mall, Rawalpindi. |
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| 2.
A member entitled to attend and vote at this meeting may appoint another
member as |
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| his/her
proxy to attend and vote. The Form of Proxy duly completed, should reach the |
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| Registered
Office of the Company 48 hours before the time of the Meeting. |
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| 3.
Members are requested to notify immediately the change in their address, if
any. |
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| DIRECTORS'
REPORT FOR THE YEAR ENDED 30TH JUNE, 1998 |
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| We
are pleased to present the audited annual accounts of your Company for the
financial year 1997-98. |
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| Industry
Scenario |
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| The
year under review has been a period of great social and economic turmoil for
the nation. A lack of |
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| clear
direction from the government further precipitated this crisis, leading to a
severe slow-down in the |
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| entire
economy. The pharmaceutical industry has been the hardest hit by this
catastrophe. In the last year, |
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| the
industry as a whole grew negatively, despite the addition of newer medicines
and new manufacturers. |
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| A
number of key facts will illustrate only too clearly the gravity of the
situation faced by the industry: |
|
|
| *
Successive devaluations have caused the prices of raw materials to escalate
uncontrollably. Raw |
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| materials,
which were imported at Rs. 37.16 in October 1996, are now being imported at
Rs. 50.52 in |
|
| October
1998. This represents a 36% increase in the cost of imports. It is important
to note that |
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| virtually
all raw materials used by the industry are imported. |
|
|
| *
The Pakistan Pharmaceuticals Manufacturers Association (PPMA) has estimated
that when the |
|
| impact
of raises in the cost of utilities and labour are added to the effect of
devaluation, the total |
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| increase
in manufacturing cost comes to 46.4% in this period. |
|
|
| *
In this same two-year period, the only price increase given to manufacturers
of essential drugs to |
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| compensate
for this 46.4% rise in cost was a single increase of 6% in November 1996. |
|
|
| *
Market data suggests that the recessionary impact during 1997-98 has been so
strong that there |
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| was
a shrinkage in the consumption of even the vital commodity of medicines
during the year |
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| under
review. |
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| Your
Company's Performance |
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| In
a negatively growing pharmaceutical market, your company managed to achieve a
positive growth of |
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| 9.14%
in its Net Sales, which stood at Rs. 229.852 Million on June 30, 1998
compared to Rs. 210.611 |
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| Million
achieved during the same period last year. |
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| Despite
our best efforts, however, the growth in sales was not sufficient to ensure a
corresponding |
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| growth
in the bottom-line. Profit for the Year under review fell to Rs. 24.596
Million from Rs. 34.035 |
|
| Million
during 1996-97, representing a decline of 27.73%. |
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| The
primary contributor to the erosion of company margins, for the reasons
outlined above, has been the |
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| increase
in cost of Sales, which grew by 16.7% (almost twice the percentage increase
in net sales). |
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| Increases
in Administrative Expenses and Financial Cost, despite inflationary
pressures, were contained |
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| to
6.5% and 4.15% respectively, reflecting your company's efforts to manage its
resources as efficiently |
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| as
possible. |
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| Greater
investment in Field Strength and marketing efforts was necessitated by the
steady increase in |
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| sophistication
of your company's newer range of products. Selling Expenses increased by Rs.
5.604 |
|
| Million
during the year under review, representing a rise of 22.3%. We are confident,
however, that this |
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| investment
will bear fruit in the year to follow. |
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| The
Net Profit after Tax of your company for the year stood at Rs. 15.583 Million
(1997: Rs. 22.369 |
|
| Million).
The corresponding Earning per Share (EPS) of your company on the increased
paid-up capital |
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| after
issue of bonus shares last year comes to Rs. 4.41 (1997: Rs. 7.12). |
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| Challenges
Ahead |
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| The
year ahead presents even greater challenges to the pharmaceutical industry
than the year under |
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| review.
Continued stagnation and the prospects of further devaluation present a bleak
scenario for the |
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| future
of the industry. There is also a failure on the part of the authorities to
recognize the severity of the |
|
| problem.
When post-nuclear sanctions were imposed on the country, the Government
initially placed |
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| pharmaceutical
raw materials and finished medicines on the list of essential importables, to
be imported |
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| on
the official exchange rate. Soon, thereafter, pharmaceutical raw materials
were removed from this list, |
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| while
finished drugs were kept on, thereby subsidizing imports of
finished medicines against locally |
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| manufactured
ones to the tune of 13% (the difference between the official and composite
rates). When |
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| the
industry raised its objection over this counter-logical measure, the
government, instead of putting |
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| pharmaceutical
raw material back on the list, promptly removed finished medicines from the
list of |
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| essential
importables also. Pharmaceutical manufacturers are now also subject to 30%
cash margin on |
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| Letters
of Credit. |
|
|
| While
your Company cannot exempt itself from the reality of its economic
environment, the management |
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| has
taken several measures to move against the tide of the industry. Our desire
in the future is to focus on |
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| qualitative
growth rather than quantitative growth. The field force has been expanded and
divided into |
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| three
separate business units. These business units will focus on six front-line
and two second-line |
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| products
each, thereby achieving greater focus and increased penetration in those
products that hold the |
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| most
future potential for your company and are the key to its continued health. |
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| The
company has also worked hard to improve its product pipeline, and has
successfully |
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| launched
two groundbreaking products in the first quarter of 1998-99. Genesis |
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| (Finasteride
1 mg) tablets were launched in August for the treatment of
Male Pattern |
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| Baldness.
More than 3 times as effective as anyother treatment available for baldness
in |
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| men,
Genesis has a 99% success rate in stopping further hair loss in balding men,
and up |
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| to
86% success in regrowing hair that has already been shed. Finasteride 1 mg is
the first |
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| oral
pill approved by the United States FDA for the treatment of male pattern
baldness, |
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| and
has been launched in Pakistan by your company only six months after its
launch in |
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| the
United States. |
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| Your
company has also become the first company in Pakistan and one of the |
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| first
two companies in the world to launch a complete 7-day therapy for the |
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| permanent
cure of peptic ulcers. Recent research has shown that peptic ulcer |
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| is
not a disease of life style, but is an infection caused by the bacteria |
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| helicobacter
priori. Helicure, a combination
pack containing an anti- |
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| ulcerant
(omeprazole) and two anti-microbials (clarithromycin and |
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| metronidazole)
was launched by your company at the end of the 1st Quarter |
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| of
1998-99. This therapy, if taken for 7 days, has a 95% success rate in eradi- |
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| cating
ulcers in patients. Initial sales of Genesis and doctors' pre-marketing response to Helicure are |
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| both
encouraging indicators for the future of your company. During the coming
year, we plan to launch |
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| more
innovative products in the anti-inflammatory, anti-allergic, and anti-vital
segments. |
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|
| Expansion |
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| The
development of your company's new plant for the manufacture of injectable
antibiotics has been put |
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| on
a "go-slow" because of the current detrimental climate for
investment in the country. However, the |
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| products
to be manufactured at the plant hold vast potential for the Company, and we
intend to accelerate |
|
| the
pace of construction as soon as the availability of foreign exchange and
continuation of raw material |
|
| imports
become more certain. |
|
|
| Expansion
and modernization of the existing facility for oral dosage forms continued
during the year |
|
| under
review. Your company's tablet manufacturing facilities are now state of the
art, and capacity has |
|
| been
increased to include the encapsulation of products in powder and pellet
forms. Upgradation has also |
|
| commenced
in the oral liquid and cream-manufacturing facilities. |
|
|
| Year
2000 bug |
|
| During
the year under review, your company conducted internal reviews of all
existing software in |
|
| preparation
of the millennium bug. Alterations in the software programs that can be
affected by the bug |
|
| have
already commenced, and we expect these to be completed by June 1999. |
|
|
| AFFIRMATION |
|
| Once
again, it is our privilege to bring on record the dedicated efforts put in by
the company staff at the |
|
| factory,
at the head office, the regional offices and in the field. |
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|
|
For and on Behalf of the Board of Directors |
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|
|
|
|
|
|
(Mrs. Akhter Khalid Waheed) |
|
|
|
Chairperson & Chief Executive |
|
|
| Rawalpindi |
|
| October
31, 1998 |
|
|
|
|
| REPORT
OF THE AUDITORS TO THE MEMBERS OF |
|
| FEROZSONS
LABORATORIES LIMITED |
|
|
| We
have audited the annexed balance sheet of Ferozsons Laboratories Limited as
at 3 0th June, |
|
| 1998
and the related profit and loss account and statement of source and
application of funds, |
|
| 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 statement of source
and application |
|
| of
funds, 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 30th June, 1998 and of
the profit |
|
| and
the source and application of funds 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. |
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|
|
|
|
TASEER HADI KHALID & CO. |
|
|
|
Chartered Accountants |
|
| Islamabad |
|
| 31st
October, 1998 |
|
|
|
| BALANCE
SHEET AS AT 30TH JUNE, 1998 |
|
|
|
NOTE |
1998 |
1997 |
|
|
|
(RUPEES) |
(RUPEES) |
|
|
|
|
| SHARE
CAPITAL AND RESERVES |
|
|
|
|
|
| Share
capital |
|
3 |
35,329,130 |
31,403,670 |
|
| Capital
reserve |
|
4 |
321,843 |
321,843 |
|
| Reserve
for issue of bonus shares |
|
|
- |
3,925,459 |
|
| Unappropriated
profit |
|
|
37,772,926 |
27,488,830 |
|
|
|
|
---------- |
---------- |
|
|
|
|
73,423,899 |
63,139,802 |
|
|
|
|
|
| SURPLUS
ON REVALUATION OF |
|
|
|
| FIXED
ASSETS |
|
5 |
45,725,290 |
45,'725,290 |
|
|
|
|
|
| DEFERRED
LIABILITY FOR TAXATION |
|
|
3,277,155 |
3,098,000 |
|
| OBLIGATIONS
UNDER FINANCE LEASE |
|
6 |
3,850,932 |
332,880 |
|
|
|
|
|
|
|
| CURRENT
LIABILITIES |
|
|
|
|
| Bank
and other borrowings |
|
7 |
22,289,413 |
25,616,651 |
|
| Current
maturity of long term liabilities |
8 |
2,046,217 |
489,393 |
|
| Creditors,
accrued and other liabilities |
9 |
19,806,966 |
21,747,210 |
|
| Revolving
advances |
|
10 |
540,456 |
898,456 |
|
| Provision
for taxation |
|
|
7,624,977 |
9,993,238 |
|
| Unclaimed
dividend |
|
|
1,324,031 |
888,957 |
|
| Proposed
dividend |
|
|
5,299,370 |
9,421,101 |
|
|
|
|
---------- |
---------- |
|
|
|
|
58,931,430 |
69,055,006 |
|
|
|
|
---------- |
---------- |
|
|
|
|
185,208,706 |
181,350,978 |
|
|
|
|
|
========== |
========== |
|
|
|
|
| FIXED
ASSETS |
|
11 |
91,144,193 |
80,376,818 |
|
| CAPITAL
WORK IN PROGRESS |
|
12 |
7,442,907 |
6,504,397 |
|
|
|
|
|
| LONG
TERM INVESTMENTS |
|
13 |
33,085 |
33,085 |
|
|
|
|
|
|
| COMPENSATION
RECEIVABLE |
|
|
|
| FROM
GOVERNMENT |
|
14 |
738,076 |
738,076 |
|
|
|
|
|
| CURRENT
ASSETS |
|
|
|
|
|
|
|
| Stores,
spares and loose tools |
|
15 |
1,652,603 |
1,780,851 |
|
| Stocks
in trade |
|
16 |
52,597,193 |
47,180,422 |
|
| Trade
debts - unsecured |
|
|
|
| (considered
good) |
|
|
16,267,220 |
20,720,725 |
|
| Advances,
deposits, prepayments and |
|
|
| other
receivables |
|
17 |
14,121,685 |
14,202,195 |
|
| Cash
and bank balances |
|
18 |
1,211,744 |
9,814,409 |
|
|
|
|
---------- |
---------- |
|
|
|
|
85,850,445 |
93,698,602 |
|
|
|
|
---------- |
---------- |
|
|
|
|
|
185,208,706 |
181,350,978 |
|
|
|
|
========== |
========== |
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
|
|
Osman Khalid Waheed |
|
A.U. Zafar |
|
Mrs. Akhter Khalid Waheed |
|
|
Director |
|
Director & President |
|
Chairperson & Chief Executive |
|
|
|
|
| Rawalpindi |
|
|
|
| 31st
October, 1998 |
|
|
|
|
|
|
|
|
|
|
| PROFIT
AND LOSS ACCOUNT FOR THE YEAR ENDED 30TH JUNE, 1998 |
|
|
|
|
|
|
NOTE |
1998 |
1997 |
|
|
|
|
(RUPEES) |
(RUPEES) |
|
|
|
|
|
| NET SALES |
|
19 |
229,851,858 |
210,610,699 |
|
| LESS:
COST OF SALES |
|
20 |
(155,497,880) |
(133,208,895) |
|
|
|
|
|
---------- |
---------- |
|
| GROSS
PROFIT |
|
|
74,353,978 |
77,401,804 |
|
|
|
|
|
|
|
| LESS:
OPERATING EXPENSES |
|
|
|
| Administrative
expenses |
|
21 |
14,068,536 |
13,206,003 |
|
| Selling
expenses |
|
22 |
30,732,393 |
25,127,885 |
|
| Financial
expenses |
|
23 |
5,416,548 |
5,200,867 |
|
|
|
|
---------- |
---------- |
|
|
|
|
50,217,477 |
43,534,755 |
|
|
|
|
---------- |
---------- |
|
| OPERATING
PROFIT |
|
|
24,136,501 |
33,867,049 |
|
|
|
|
|
|
| OTHER
INCOME |
|
24 |
459,971 |
168,323 |
|
|
|
|
---------- |
---------- |
|
| PROFIT
FOR THE YEAR |
|
|
24,596,472 |
34,035,372 |
|
|
|
|
|
|
| LESS:
WORKERS' (PROFIT) PARTICIPATION FUND |
|
1,206,825 |
1,693,352 |
|
| CENTRAL
RESEARCH FUND |
|
|
|
227,026 |
318,551 |
|
|
|
|
---------- |
---------- |
|
|
|
|
1,433,851 |
2,011,903 |
|
|
|
|
|
---------- |
---------- |
|
| PROFIT
BEFORE TAXATION |
|
|
23,162,621 |
32,023,469 |
|
|
|
|
|
|
| PROVISION
FOR TAXATION |
|
|
|
|
| - Current |
|
|
|
7,400,000 |
9,600,000 |
|
| - Deferred |
|
|
|
179,155 |
54,000 |
|
|
|
|
---------- |
---------- |
|
|
|
|
7,579,155 |
9,654,000 |
|
|
|
|
|
| PROFIT
AFTER TAXATION |
|
|
15,583,466 |
22,369,469 |
|
| ACCUMULATED
PROFIT BROUGHT FORWARD |
|
|
27,488,830 |
18,465,921 |
|
|
|
|
---------- |
---------- |
|
| PROFIT
AVAILABLE FOR APPROPRIATION |
|
|
43,072,296 |
40,835,390 |
|
|
|
|
|
|
| APPROPRIATIONS: |
|
|
|
|
| Proposed
Dividend @ 15% (1997: 30%) |
|
(5,299,370) |
(9,421,101) |
|
| Transfer
to reserve for issue of Bonus Shares |
|
- |
(3,925,459) |
|
|
|
|
---------- |
---------- |
|
|
|
|
(5,299,370) |
(13,346,560) |
|
|
|
|
---------- |
---------- |
|
| UNAPPROPRIATED
PROFIT CARRIED FORWARD |
|
37,772,926 |
27,488,830 |
|
|
|
|
========== |
========== |
|
|
|
|
|
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
|
|
Osman Khalid Waheed |
|
A.U. Zafar |
|
|
Mrs. Akhter Khalid Waheed |
|
|
Director |
|
Director & President |
|
|
Chairperson & Chief Executive |
|
| Rawalpindi |
|
|
|
| 31st
October, 1998 |
|
|
|
|
|
|
|
|
|
| STATEMENT
OF SOURCE AND APPLICATION OF FUNDS |
|
| FOR
THE YEAR ENDED 30TH JUNE, 1998 |
|
|
|
|
|
|
|
|
|
1998 |
1997 |
|
|
|
|
|
(RUPEES) |
(RUPEES) |
|
|
|
|
|
|
|
| Profit
before taxation |
|
|
|
23,162,621 |
32,023,469 |
|
|
|
|
| Cash
flow from operating activities |
|
|
| Adjustment
for: |
|
|
|
| Depreciation |
|
|
7,123,396 |
4,130,139 |
|
| Profit
on sale of fixed assets |
|
|
(438,173) |
(168,323) |
|
|
|
|
---------- |
---------- |
|
|
|
|
|
6,685,223 |
3,961,816 |
|
|
|
---------- |
---------- |
|
| Operating
profit before working capital changes |
29,847,844 |
35,985,285 |
|
| (Increase)/decrease
in: |
|
|
|
|
| Stocks
and stores |
|
|
(5,288,523) |
(289,898) |
|
| Trade
debtors |
|
|
4,453,505 |
(3,004,596) |
|
| Advances,
deposits, prepayments and other receivables |
80,510 |
(5,424,956) |
|
|
|
|
---------- |
---------- |
|
|
|
|
(754,508) |
(8,719,450) |
|
| (Decrease)/increase
in current liabilities |
|
(5,625,482) |
12,991,096 |
|
|
|
---------- |
---------- |
|
|
|
|
23,467,854 |
40,256,931 |
|
| Payment
of tax |
|
|
(9,768,261) |
(8,606,762) |
|
| Payment
of dividend |
|
|
(8,986,027) |
(9,809,048) |
|
|
|
|
|
---------- |
---------- |
|
| Net
cash from operating activities |
|
|
4,713,566 |
21,841,121 |
|
|
|
|
| Cash
flow from investing activities |
|
|
|
| Capital
expenditure |
|
|
(19,338,982) |
(14,015,927) |
|
| Sale
proceeds of fixed assets |
|
|
947,875 |
302,075 |
|
|
|
|
|
---------- |
---------- |
|
| Net
cash used in investing activities |
|
(18,391,107) |
(13,713,852) |
|
|
|
