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Gharibwal Cement Limited
Annual Report 1998
CONTENTS
Board of Directors
Notice of Meeting
Directors' Report to the Shareholders
Auditors' Report
Pattern of Shareholding
Balance Sheet
Profit and Loss Account
Cash flow Statement
Notes to the Accounts
Subsidiary Company
COMPANY PROFILE
BOARD OF DIRECTORS: MR. MOHAMMAD TOUSIF PERACHA
Chairman
MR. FAROOQ ZAMAN
Managing Director (Chief Executive)
MRS. TABASSUM TOUSIF PERACHA
Director
MR. M. NIAZ PERACHA
Director
LT. COL (R) BADRUZZAMAN KHAN
Director
MR. RAZI-UR-REHMAN KHAN
Director (Nominated by NIT)
MR. IMTIAZ RASOOL
Director (Nominated by SLIC)
SECRETARY: MR. ABDUL JABBAR BUTT
AUDITORS: HAMEED CHAUDHRI & CO.
Chartered Accountants
BANKERS: NATIONAL BANK OF PAKISTAN
UNITED BANK LIMITED
MUSLIM COMMERCIAL BANK
THE HONGKONG AND SHANGHAI BANKING CORPORATION
FAYSAL BANK
REGISTERED OFFICE: 26-EMPRESS ROAD, LAHORE
WORKS: ISMAILWAL (DISTT. CHAKWAL)
NOTICE OF MEETING
Notice is hereby given that 38th Annual General Meeting of the members of GHARIBWAL CEMENT LIMITED will be
held at its registered office, 26-Empress Road, Lahore, on Monday, December 28, 1998 at 3.30 p.m. for transacting the
following business:
ORDINARY BUSINESS
1. To confirm the minutes of the Annual General Meeting held on 27 December, 1997.
2. To receive, consider and adopt the Accounts of the Company for the year ended June 30, 1998 together with the
Directors' and Auditors' reports thereon.
3. To appoint Auditors for the year 1998-99 and fix their remuneration. M/s Hameed Chaudhri & Co. Chartered
Accountants, the retiring Auditors have offered themselves for re-appointment as Auditors of the Company.
4. To transact any other business with the permission of the Chair.
SPECIAL BUSINESS
To consider and pass the following Special Resolution:-
"Resolved that the consent and approval of the Company be and is hereby accorded to enhance the investment in the
share capital/loan from Rs. 150 million to Rs. 200 million of GCL Electric Company Limited from time to time as
may deem expedient.
It is further resolved that the Chief Executive of the Company be and is hereby authorized to negotiate and to take
any and all actions as may be deemed necessary to enhance of the aforementioned investment from Rs. 150 million
to Rs. 200 million or any part thereof of the Subsidiary Company from time to time as may deem expedient for said
considerations and/or on such terms and conditions as he may think fit on behalf of the Company. He is further
authorized for investment in the Subsidiary Company within the meanings and terms of Section 208 of the Companies
Ordinance, 1984".
By order of the Board
Date: December 3, 1998 ABDUL JABBAR BUTT
Secretary
Notes:
1. Share transfer books of the Company will remain closed from December 19, 1998 to December 28, 1998 (both days
inclusive). The members whose names appear in the Register as at the close of business on December 18, 1998, will
qualify to attend the meeting.
2. A Member entitled to attend and vote at this Meeting may appoint another Member as his / her Proxy to attend and
vote on his/her behalf. Proxies, in order to be effective must be received by the Company not less than 48 Hours
before the Meeting.
3. Kindly quote Folio Number in all correspondence with the Company.
4. Members are requested to notify any change in address immediately.
DIRECTORS' REPORT TO THE SHARE HOLDERS
Your Directors are pleased to present the annual report and audited accounts for the financial year ended on 30 June 1998.
General
During the year under review the cement industry as a whole remained under extreme pressure. Commissioning of new
plants further created the gap of supply versus demand of cement. Due to surplus supply of cement in the market the sales
prices remained under serious stress. The overall economy of the country remained stagnant. No major development
project was carried out by the Government due to financial constraints prevailing in the country as a result of that the
demand of cement industry did not pick up.
Financial Results
The company suffered a net loss for the year Rs. 79.666 million as compared to Rs. 248.722 million of the previous year.
Rs. in million
Net Loss for the year 79.666
Add Loss brought forward 247.660
Loss carried forward 327.326
Operating Performance
The clinker production was increased by 4.38% as compared to last year, Whereas the cement production decreased by
13.62%. The actual sales were also lower by 14.91% from the previous year mainly due to decline in the demand as a result
of increase in supply of the new brands of cement. The summary is given below.
1997-98 1996-97
       (Tonnes)
Clinker Production 437,455 419,080
Cement Production 418,670 484,685
Dispatches 416,305 489,276
The booking price remained under stress till Feb. 98. The prices remained in the range of Rs. 3,130 to Rs. 3,300 per tonne
till Jan. 98. These were increased from Rs. 3,300 to 4,470 per tonne in Feb. 98 to June 98. However, at the end of June prices
once again started to decline.
Marketing
The company was successful in retaining its main market inspite of very tough competition prevailing in the market due to
excessive supply of the cement. The product acceptability remained satisfactory in the eyes of the customer.
Development and Maintenance
Power Plant has started its commercial production since Oct. 98. This captive power plant will supply power to the factory
and workers colony. It will give a major relief in electricity bills and favourable impact on the cash flow of the company.
However, considerable amount of civil work was deferred due to financial constraints. This will be completed in the
forthcoming financial year.
The cement plant performance remained satisfactory and its normal maintenance has been carried out throughout the year.
Pattern of Shareholding
Pattern of Shareholding of the company is annexed.
Dividend
No dividend is recommended due to loss suffered by the company.
Auditors
M/s Hameed Chaudhri & Co. Chartered Accountants, the retiring auditors, being eligible offer themselves for
re-appointment.
Future Outlook
As explained above that over supply of cement in the country and due to heavy taxation in terms of central excise
duty @ 40% of the retail sales price imposed by the Government, the industry will remain under pressure. In order to save
the industry from a total collapse the Government should take extensive measures i.e. reduction of excise duty and
facilitation of export of cement and undertaking of development projects in the country.
Commissioning of our own power plant and stringent cost controls undertaken by the management will help to strengthen
the financial position of the company.
Labour Management Relations
The Board of Directors appreciates the hard work of the labour and the entire team of the company and applauds the
cordial relationship that exists between the labour and management. It is hoped that they will continue to work with same
zeal and spirit.
For and on behalf of the Board
Lahore, December 3rd, 1998. FAROOQ ZAMAN
CHIEF EXECUTIVE
AUDITORS' REPORT TO THE MEMBERS OF GHARIBWAL CEMENT LTD.
We have audited the annexed Balance Sheet of GHARIBWAL CEMENT LIMITED as at 30 June, 1998 and the related
Profit and Loss Account and Cash Flow Statement, together with the notes forming part thereof, for the year then ended and
we state that we have obtained all the information and explanations which to the best of our knowledge and belief were
necessary for the purposes of our audit and, after due verification thereof, we report that:
a) in our opinion, proper books of account have been kept by the Company as required by the Companies
Ordinance, 1984.
b) in our opinion:
(i) the Balance Sheet and Profit and Loss Account together with the notes thereon have been drawn up in
conformity with the Companies Ordinance, 1984 and are in agreement with the books of account and are
further in accordance with accounting policies consistently applied;
(ii) the expenditure incurred during the year was for the purpose of the Company's business; and
(iii) the business conducted, investments made and the expenditure incurred during the year were in accordance
with the objects of the Company;
c) in our opinion and to the best of our information and according to the explanations given to us, the Balance Sheet,
Profit and Loss Account and the Cash Flow Statement, together with the notes forming part thereof, give the
information required by 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 30 June, 1998 and of the loss and the cash flows for the year then
ended; and
d) in our opinion, no Zakat was deductible at source under the Zakat and Ushr Ordinance, 1980.
HAMEED CHAUDHRI & CO.
Lahore: 3rd December, 1998 CHARTERED ACCOUNTANTS
PATTERN OF SHAREHOLDING AS AT 30 JUNE, 1998
    Share Holding No. of  No. of Percentage
From To Share Shares Held of Issued 
Holders Capital
1 100 714 29,270 0.17
101 500 498 128,372 0.76
501 1000 244 167,470 1.00
1001 5000 313 676,561 4.01
5001 10000 55 366,642 2.17
10001 15000 11 132,808 0.79
15001 20000 4 67,359 0.40
20001 30000 5 117,623 0.70
30001 9999999 14 15,190,312 90.00
---------- ---------- ---------- ---------- ----------
1858 16,876,417 100
========== ========== ========== ========== ==========
No. of  No. of Percentage
Categories of Share Holders Share Shares Held of Issued 
Holders Capital
Individuals 1816 1,536,737 9.106
Investment Companies 3 1,007,992 5.973
Insurance Companies 6 3,682,937 21.823
Financial Institutions 10 1,872,345 11.094
Private Limited Companies 14 92,912 0.551
Foreign Investors 2 8,564,224 50.747
Corporations 1 61,301 0.363
Corporate Law Authority 1 11 0.000
Others 5 57,958 0.343
---------- ---------- ----------
Grand Total 1858 16,876,417 100.000
========== ========== ==========
DETAIL OF OTHERS
Tehrik-i-Jadid Anjuman Ahmadiya Pakistan 278
Sadar Anjuman Ahmadiya Pakistan 24,448
Dacca Benevolent Association 17,437
The Ahmadiya Anjuman Ishaat-i-Islam 934
Dy. Administration Abandoned Properties 14,861
----------
57,958
==========
BALANCE SHEET AS AT 30 JUNE, 1998
SHARE CAPITAL AND RESERVES 1998 1997
Note  (Rupees in thousand)
Authorised
50,000,000 ordinary
shares of Rs. 10 each 500,000 500,000
========== ==========
Issued, subscribed and paid-up 3 168,764 168,764
General reserve 332,000 332,000
Accumulated loss (327,326) (247,660)
---------- ----------
173,438 253,104
SURPLUS ON REVALUATION OF FIXED
ASSETS 4 993,804 993,804
LIABILITIES AGAINST ASSETS
SUBJECT TO FINANCE LEASE 5 145,228 124,574
DEFERRED LIABILITIES
Deferred taxation 6 14,687 15,581
Vacation benefits 7 6,548 7,495
Deposits from customers 8 8,035 14,900
---------- ----------
29,270 37,976
CURRENT LIABILITIES
Current portion of liabilities against
assets subject to finance lease 5 21,014 25,132
Short term finance 9 48,310 33,135
Creditors, accrued and other liabilities 10 236,041 152,699
Taxes and duties 11 44,843 52,320
Unclaimed dividend 3,038 3,106
---------- ----------
353,246 266,392
CONTINGENCIES AND COMMITMENTS 12 ---------- ----------
1,694,986 1,675,850
========== ==========
TANGIBLE FIXED ASSETS
Operating fixed assets 13 867,731 912,182
Capital work-in-progress 14 297,645 311,421
Stores held for capital expenditure 1,905 3,926
---------- ----------
1,167,281 1,227,529
LONG TERM INVESTMENTS 15 150,042 2,719
LONG TERM DEPOSITS AND
PREPAYMENTS 16 12,279 1,174
LONG TERM LOANS AND ADVANCES 17 22,102 29,467
CURRENT ASSETS
Stores, Spares and loose tools 18 114,989 122,420
Stock-in-trade 19 89,806 26,790
Trade debtors 20 0 0
Loans, advances, deposits, prepayments
and other receivables 21 94,719 221,981
Short term investments 22 504 980
Cash and bank balances 23 43,264 42,790
---------- ----------
343,282 414,961
---------- ----------
1,694,986 1,675,850
========== ==========
The annexed notes form an integral part of these accounts.
M. NIAZ PERACHA FAROOQ ZAMAN
DIRECTOR CHIEF EXECUTIVE
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 30 JUNE, 1998
Note 1998 1997
 (Rupees in thousand)
SALES - net 24 797,528 899,671
COST OF SALES 25 840,692 1,089,982
---------- ----------
GROSS (LOSS) (43,164) (190,311)
OPERATING EXPENSES
General and administrative 26 33,977 38,117
Selling and distribution 27 9,341 13,342
Financial charges 28 49,390 4,731
Other charges 29 998 169
---------- ----------
93,706 56,359
---------- ----------
OPERATING (LOSS) (136,870) (246,670)
OTHER INCOME 30 61,047 20,238
---------- ----------
(LOSS) BEFORE TAXATION (75,823) (226,432)
PROVISION FOR TAXATION
Current and prior years 11.1 4,737 26,447
Income tax refunds 0 (838)
Deferred 6 (894) (3,319)
---------- ----------
3,843 22,290
---------- ----------
(LOSS) AFTER TAXATION (79,666) (248,722)
(ACCUMULATED Loss)/
UNAPPROPRIATED PROFIT
- Brought forward (247,660) 1,062
---------- ----------
(ACCUMULATED LOSS)
- Carried to Balance Sheet (327,326) (247,660)
========== ==========
The annexed notes form an integral part of these accounts.
M. NIAZ PERACHA FAROOQ ZAMAN
DIRECTOR CHIEF EXECUTIVE
CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE, 1998
1998 1997
 (Rupees in thousand)
NET CASH INFLOW/(OUTFLOW) FROM
OPERATING ACTIVITIES (Note 'A') 116,641 (207,345)
CASH FLOW FROM INVESTING ACTIVITIES
Fixed capital expenditure (3,676) (68,504)
Long term investments in Subsidiary Company (147,430) 0
Sale proceeds of operating fixed assets 2,324 1,450
Exchange fluctuation gain 8,836 10,423
Dividend received 1 13
Interest received 2,925 6,730
---------- ----------
NET CASH (OUTFLOW) FROM
INVESTING ACTIVITIES (137,020) (49,888)
CASH FLOW FROM FINANCING ACTIVITIES
Lease finances - net 16,536 135,693
Short term finances - net 15,175 15,643
Mark-up on short term finances paid (4,176) (2,190)
Lease finance charges paid (6,614) (784)
Dividend paid (68) (83)
---------- ----------
NET CASH INFLOW FROM FINANCING ACTIVITIES 20,853 148,279
---------- ----------
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 474 (108,954)
CASH AND CASH EQUIVALENTS
- At the beginning of the year 42,790 151,744
---------- ----------
CASH AND CASH EQUIVALENTS
- At the end of the year 43,264 42,790
========== ==========
The annexed note 'A' forms an integral part of this Statement.
M. NIAZ PERACHA FAROOQ ZAMAN
DIRECTOR CHIEF EXECUTIVE
NOTE 'A"
CASH FLOW FROM OPERATING ACTIVITIES
1998 1997
 (Rupees in thousand)
Loss for the year-Before taxation (75,823) (226,432)
Adjustments for:
Depreciation 61,923 68,762
Gain on sale of fixed assets (323) (659)
Mark-up on short term finances 5,419 2,004
Lease finance charges 7,985 784
Interest on bank deposits (2,808) (3,976)
Exchange fluctuation gain (8,836) (10,423)
Provision for diminution in value of
investments - provided for/(written back) 583 (143)
Dividend income (1) (13)
---------- ----------
(11,881) (170,096)
Long term deposits and prepayments (11,105) 387
Long term loans and advances to staff 8,639 3,178
Vacation benefits - net (947) (219)
Deposits from customers refunded - net (6,865) (21,525)
Taxes and duties 627,927 841,316
---------- ----------
CASH FLOW FROM OPERATING ACTIVITIES
- Before working capital changes 605,768 653,041
(Increase)/Decrease in current assets
Stores, spares and loose tools 7,431 27,853
Stock-in-trade (63,016) 83,335
Advances, deposits, prepayments and other receivables 125,197 (108,047)
Increase in creditors, accrued and other liabilities 80,728 5,586
---------- ----------
150,340 8,727
CASH FLOW FROM OPERATING ACTIVITIES
- Before taxation 756,108 661,768
- Taxes paid (639,467) (869,113)
---------- ----------
NET CASH INFLOW/(OUTFLOW) FROM OPERATING
ACTIVITIES - After taxation 116,641 (207,345)
========== ==========
M. NIAZ PERACHA FAROOQ ZAMAN
DIRECTOR CHIEF EXECUTIVE
NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 30 JUNE, 1998
1. STATUS AND OPERATIONS
The Company was incorporated on 29 December, 1960 as a Public Company and its shares are quoted on Karachi and
Lahore Stock Exchanges It is principally engaged in production and sale of cement.
2. SIGNIFICANT ACCOUNTING POLICIES
2.1 Accounting convention
These accounts have been prepared under the historical cost convention except that certain fixed assets have been
included at revaluation and certain exchange elements referred to in note 2.9 have been incorporated in the cost of
relevant assets.
2.2 Staff retirement benefits
a) The Company operates a funded Gratuity Scheme for its employees. Contribution to the Fund is made annually
to cover obligation under the Scheme. However, gratuity is payable subject to completion of a prescribed
qualifying period of service.
b) The Company also operates a funded contributory Provident Fund Scheme for its employees and contributions
based on salaries of the employees are made to the Fund monthly.
2.3 Taxation
The charge for current taxation is based on taxable income at the current rates of taxation.
The Company accounts for deferred taxation using the Liability Method on all major timing differences.
2.4 Tangible fixed assets and depreciation
Operating fixed assets, except freehold land, are stated at cost or revalued amounts less accumulated depreciation.
Freehold land is stated at revalued amount. Capital work-in-progress is stated at cost.
Borrowing cost during erection period are capitalised as part of cost of the related asset.
Depreciation charge is based on reducing balance method whereby the cost/revalued amount and capitalised
exchange fluctuations of an asset is written-off over its estimated useful life. Rates of depreciation are stated in
note 13. No depreciation is provided on assets in the year of disposal whereas full year's depreciation is charged
in the year of purchase/commercial operations/revaluation.
Gain/loss on disposal of fixed assets is taken to Profit and Loss Account.
Normal repairs and maintenance are charged to income as and when incurred. Major improvements and
modifications are capitalised and assets replace if any, other than those kept as stand-by, are retired.
2.5 Assets subject to finance lease
These are stated at the lower of present value of minimum lease payments under the lease agreements and the fair
value of the assets. The related obligation of lease are accounted for as liabilities. Financial charges are
allocated to accounting periods in a manner so as to provide a constant periodic rate of financial cost on the
remaining balance of principal liability for each period.
Depreciation is charged at the rates stated in note 13 applying reducing balance method to write-off the cost of the
asset over its estimated remaining useful life in view of certainty of ownership of assets at the end of the lease
period.
Financial charges and depreciation on leased assets are charged to income currently.
2.6 Stock-in-trade
Basis of valuation are as follows:
Particulars Mode of valuation
Raw materials - At lower of annual average cost and market
value.
Work-in-process - At cost.
Finished goods - At lower of cost and net realisable value.
Packing materials - At moving average cost.
Cost in relation to work-in-process and finished goods represents the annual average manufacturing cost which
consists of prime cost and appropriate manufacturing overheads.
- Net realisable value signifies the selling price in the ordinary course of business less cost necessary to be
incurred to effect such sale.
2.7 Stores and spares
These are valued at moving average cost except items-in-transit which are valued at cost accumulated to the
balance sheet date. Obsolete stores are written-off.
2.8 Investments
a) Investments are carried at the lower of cost or market value determined on an aggregate portfolio basis.
b) Gain/loss on sale of investments is taken to Profit and Loss Account.
c) Bonus shares are accounted for by increase in number of shares without any change in value.
2.9 Foreign currency translation
Assets and liabilities in foreign currencies are translated into Pak Rupees at rates of exchange prevalent on the
balance sheet date except those covered under forward exchange contracts which are translated at the
contracted rates.
Exchange differences arising from translation and repayment of foreign currency loans are capitalised as part
of cost of plant and machinery acquired out of the proceeds of such loans. All other exchange differences are
taken to Profit and Loss Account.
2.10 Receivables
Known bad debts are written-off and provision is made against debts considered doubtful.
2.11 Revenue recognition
Sales are recorded on dispatch of goods to customers.
Interest on advance tax is accounted for on 'Receipt Basis'.
Interest income is accounted for on 'Accrual Basis'.
Dividend income is accounted for on 'Receipt Basis'.
3. ISSUED, SUBSCRIBED AND PAID-UP CAPITAL
Note 1998 1997
 (Rupees in thousand)
3,445,000 ordinary shares of Rs. 10 each
fully paid in cash 34,450 34,450
13,431,417 ordinary shares of Rs. 10 each
issued as fully paid bonus shares 134,314 134,314
---------- ----------
168,764 168,764
========== ==========
4. SURPLUS ON REVALUATION OF FIXED ASSETS
Revaluation of freehold land, buildings, plant & machinery and railway sidings produced surplus of
Rs. 993.804 million. This amount was credited to 'Surplus on Revaluation on Fixed Assets Account' to comply with
the requirements of Section 235 of the Companies Ordinance, 1984. The revaluation exercise was carried-out in March,
1993. The Company, however, incorporated the revaluation adjustments with effect from July, 1992.
5. LIABILITIES AGAINST ASSETS SUBJECT TO FINANCE LEASE
Askari Ghandhara First National
Leasing Leasing Leasing Development
Limited Company Corporation Leasing
Limited Limited Corporation
Limited 1998 1997
(Rupees in thousand)
Balance amount of future lease
payments and the periods in
which these will become due:
FINANCIAL YEAR
1997 - 98 0 0 0 0 0 55,664
1998 - 99 36,888 8,129 5,019 7,433 57,469 55,530
1999 - 2000 66,434 6,968 4,302 6,372 84,076 58,052
2000- 2001 68,046 6,968 4,302 1,972 81,288 43,538
2001 - 2002 32,135 5,581 2,009 0 39,725 35,366
----------------------------------------------------------------------
203,503 27,646 15,632 15,777 262,558 248,150
Less: Security deposits
adjustable on expiry of
lease terms 12,600 2,500 1,500 910 17,510 17,510
----------------------------------------------------------------------
190,903 25,146 14,132 14,867 245,048 230,640
Less: Financial charges
- Allocated to future
periods 63,994 7,080 3,628 2,733 77,435 80,934
- Accrued during the
year 0 620 355 396 1,371 0
----------------------------------------------------------------------
63,994 7,700 3,983 3,129 78,806 80,934
----------------------------------------------------------------------
Principal liability 126,909 17,446 10,149 11,738 166,242 149,706
Less: Current portion grouped
under current liabilities
- Installments due
within following
twelve months 8,789 3,682 2,464 4,510 19,445 24,858
- Installments overdue 0 541 362 666 1,569 274
----------------------------------------------------------------------
8,789 4,223 2,826 5,176 21,014 25,132
----------------------------------------------------------------------
118,120 13,223 7,323 6,562 145,228 124,574
======================================================================
Askari Ghandhara First National
Leasing Leasing Leasing Development
Limited Company Corporation Leasing
Limited Limited Corporation
Limited
 (Rupees in thousand)
No. of lease facilities 2 1 1 1
No. of monthly installments 60 60 60 49
Last installment due 15 May, 2002 15 July, 2001 15 July, 2001 20 August, 2000
Discount factor applied P.A. 22.07% & 21.50% 21.50% 20.50%
23.50%
Residual value at the end of
lease term Rs. 2.000  Rs. 5.000 Rs. 1.500 Rs. 0.910
million &  million million million
Rs. 10.600
million
Security - First charge - Hypothecation Promissory
on fixed assets over Company's note
of the Company current assets
- First charge - First registered
on present and charge over
future current Company's
assets of the current
Company assets
- Pledge of - Personal
1.58 million guarantees
shares of the of the directors
Company
- Personal
guarantees
of the directors
5.1 Lease finance facility amounting Rs. 106 million available from Askari Leasing Limited (A.L.L.) has been
rescheduled during the current year on the following terms and conditions:
Amount rescheduled: Rs. 106,663 thousand
Salvage value: Rs. 10,600 thousand
(To be adjusted against lease
key money already deposited)
- Period: 45 months
- Grace period: 1 month
- Rent: - Rs. 400 thousand per month
for first 6 months from
January, 1998
- Rs. 700 thousand per month
for next 6 months
- Rs. 4,760 thousand per month
for next 32 months
5.2 Lease finance facility amounting Rs. 20 million available from A.L.L. has also been rescheduled during the
current year on the following terms and conditions:
- Amount rescheduled: Rs. 20,420 thousand
- Salvage value: Rs. 2,000 thousand
(To be adjusted against lease
key money already deposited)
- Period: 54 months
- Grace period: 1 month
- Rent Rs. 100 thousand per month for
first 12 months from January, 1998
- Rs. 588 thousand for next 11 months
- Rs. 910 thousand for next 30 months
6. DEFERRED TAXATION
Note 1998 1997
 (Rupees in thousand)
Deferred liability arising due to accelerated
tax depreciation allowance 18,048 19,073
Deferred debits arising in respect of
provision for excise duty, doubtful
debts and vacation benefits (3,361) (3,492)
---------- ----------
14,687 15,581
========== ==========
6.1 Tax effects aggregating Rs. 14.983 million (Credit) including Rs. 3.529 million for the current year on timing
differences aggregating Rs. 45.404 million including Rs. 10.694 million for the current year have not been
provided for in these accounts as management considers that the said timing differences are not likely to reverse
in the foreseeable future.
7. VACATION BENEFITS
These represent balance of provision made against un-availed leaves of employees payable on
retirement/resignation/termination. The balance includes Rs. 2,190 thousand (1997: Rs. 3,140 thousand) being
provision for Executives.
8. LONG TERM DEPOSITS FROM CUSTOMERS
These represent interest free securities received from Dealers which are refundable on termination of Dealership.
9. SHORT TERM FINANCES
Secured
The Hongkong and Shanghai Banking
Corporation Ltd. 9.1 34,715 32,373
The Bank of Punjab 9.2 6,478 0
Unsecured
Temporary bank overdraft 9.3 3,609 762
Others 9.4 3,508 0
---------- ----------
48,310 33,135
========== ==========
9.1 Short term running finance facility available from The Hongkong and Shanghai Banking Corporation Ltd.
under mark-up arrangements amounts to Rs. 80.699 million (1997: Rs. 53.0 million). The facility is secured
against Bank's lien over U.S.$ fixed deposit accounts (note 23.2) and hypothecation charge over stocks and
book debts of the Company. The facility carries mark-up @ Rs. 0.4109 per thousand Rupees per day and is
available uptill 30 June, 1998.
9.2 This finance has been created by The Bank of Punjab against payment of import foreign bills. It is secured
against imported goods and carries mark-up @ Rs. 0.60 per thousand Rupees per day. It is due for payment.
9.3 This arose due to issuance of cheques for amounts in excess of balance at the bank account.
9.4 This represents balance of a short term loan amounting Rs. 6.508 million provided by East West Infinity (Pvt.)
Ltd. The loan carries mark-up @ Rs.0.57 per thousand Rupees per day.
10. CREDITORS, ACCRUED AND OTHER LIABILITIES
Note 1998 1997
 (Rupees in thousand)
Creditors 22,499 25,830
Accrued expenses 79,222 43,528
Mark-up on short term finances 1,276 33
Finance charges accrued on liabilities
against assets subject to finance lease 1,371 0
Workers' (Profit) Participation Fund 10.1 4,575 4,963
Due to:
- Employees 1,996 786
- Directors 58 366
Income tax deducted at source 236 167
Due to provident fund trust 7,077 2,888
Due to gratuity fund trust 8,001 8,718
Advances from customers 100,976 56,435
Interest free deposits:
Repayable on demand 2,805 1,044
Others 4,981 5,573
---------- ----------
7,786 6,617
Sales tax payable 0 1,423
Others 968 945
---------- ----------
236,041 152,699
========== ==========
10.1 Worker's (Profit) Participation Fund
Opening balance 4,963 4,454
Add: Interest on funds utilised
by the Company 567 620
---------- ----------
5,530 5,074
Less: Funds transferred to trust 955 111
---------- ----------
4,575 4,963
========== ==========
Note 1998 1997
 (Rupees in thousand)
11. TAXES AND DUTIES
Provision for taxation 11.1 34,387 36,735
Excise duty 12.1 1,760 1,760
Local taxes 7,174 5,773
Excise duty on minerals 232 225
Sales tax payable 0 6,431
Royalty 1,290 1,396
---------- ----------
44,843 52,320
========== ==========
11.1 Provision for taxation - net
Opening balance 43,784 458,907
Provision made during the year
Current year 4,333 4,722
Prior years 404 21,725
---------- ----------
4,737 26,447
---------- ----------
48,521 485,354
Less: Payments/adjustments against
completed assessments 6,054 441,570
---------- ----------
42,467 43,784
Less: Payment of advance tax/tax
deducted at source 8,080 7,049
---------- ----------
34,387 36,735
========== ==========
a) Income tax assessments of the Company have been completed upto the Income Year ended 30 June, 1996
(Assessment Year 1996-97).
b) The Assessing Officer while finalising the Company's assessments for the Income Years ended 30 June,
1993 to 30 June, 1996 (Assessment Years 1993-94 to 1996-97) made certain add-backs to income against
which the Company filed appeals with the Commissioner of Income Tax (Appeals) {CIT}. The CIT, for
the Assessment Year 1993-94, partly deleted the additions made by the Assessing Officer. The Company
filed an appeal before the Income Tax Appellate Tribunal (ITAT) against the said orders of the CIT.
The ITAT, for the Assessment Year 1993-94, vide its orders dated 17 February, 1998 partly accepted the
Company's contention. The Company, thereafter filed an appeal under section 136 of the Income Tax
Ordinance, 1979 before the Lahore High Court.
c) The Company, for the Assessment Year 1993-94, filed an application before the ITAT for the stay of
penalty amounting Rs. 16.335 million imposed under section 111 of the Income Tax Ordinance, 1979. The
ITAT accepted the application and allowed the stay upon part payment of Rs. 2.500 million.
d) Provision for taxation is considered adequate to discharge the expected liability.
12. CONTINGENCIES AND COMMITMENTS
12.1 Excise duty arrears demand of Rs. 16.276 thousand in respect of capacity production period 1966-67 to
1973-74 made by the Central Excise and Land Customs Department had not been accepted by the Company.
The Company had calculated its liability at Rs. 1,760 thousand on the basis of actual production which was
accounted for in prior years. On appeals filed by the Company, the Central Board of Revenue remanded the
case to the Collector of Central Excise and Land Customs, Rawalpindi.
12.2 The Excise and Taxation Department had claimed Rs. 43 thousand on account of short payment of education
cess upto 30 June, 1984. The Company has not accepted this claim and the matter is pending with the Excise
and Taxation Department.
12.3 The Adjudicating Authority of the Employees Old Age Benefits Institution imposed penalty amounting Rs.
102 thousand for various periods in respect of daily wages labour and some of the officers. The Company has
not accepted the said demand and filed an appeal with the competent Authority to waive-off the said demand.
The appeal is pending for decision.
12.4 The Company filed a writ petition in the Lahore High Court (the Court) against imposition of export tax on
raw materials by District Council, Chakwal (the Council) and refund of amounts already paid on this account.
The Court vide its judgment dated 18 February, 1997 directed the Council to refrain from collecting export
tax on raw materials brought by the Company from its quarries to its factory. The Court further directed the
Council to refund to the Company the sum of Rs. 45.948 million recovered from it during the period from
1985-86 to 1996-97.
The Lahore High Court - Rawalpindi Bench vide its order dated 17 March, 1997, on a revision application by
the Council, suspended the operation of the judgment dated 18 February, 1997. The matter is still pending
adjudication with the Lahore High Court - Rawalpindi Bench.
12.5 District Council - Chakwal served notices dated 25 July, 1998 and 05 August, 1998 whereby the Company
has been directed to deposit an amount of Rs. 5,400 thousand being 'exit tax' pertaining to the year 1996-97
and also for the deposit of such tax on the prescribed rate in future. The Company has undertaken to deposit
the said amount with the Additional Registrar of the Lahore High Court - Rawalpindi Bench (the Court). The
Court has further directed that future deposits will be made with the Additional Registrar of the Court and
these amounts will not be paid to any party pending disposal of this case.
12.6 1998 1997
 (Rupees in thousand)
Commitments outstanding for
- Capital expenditure 0 8,628
- Revenue expenditure 0 1,251
---------- ----------
0 9,879
========== ==========
12.7 Counter guarantees given by the Company to Financial Institutions on behalf of its Subsidiary Company
outstanding as at 30 June, 1998 aggregated Rs. 499.328 million (1997: Rs. 487.016 million).
12.8 Counter guarantees given by the Company to Sui Northern Gas Pipelines Limited outstanding as at 30 June,
1998 aggregated Rs. 74.0 million (1997: Nil)
13. OPERATING FIXED ASSETS
COST/REVALUATION DEPRECIATION Book
As at Additions Disposals As at Rate To For On To Value as
PARTICULARS 30 June, during during 30 June, % 30 June, the disposal 30 June, at 30
1997 the year the year 1998 1997 year 1998 June 1998
Owned:
Land - Freehold
Cost                 63 0 0 63 0 0 0 0 0 63
Revaluation 356,674 0 0 356,674 0 0 0 0 0 356,674
---------------------------------------------------------------------------------------------------------------------
356,737 0 0 356,737 0 0 0 0 0 356,737
Buildings & Foundations
On freehold land
Cost               87,918 75 0 87,918 5-10 55,073 2,894 0 57,967 30,026
Revaluation 204,133 0 0 204,133 5-10 77,004 11,321 0 88,325 115,808
---------------------------------------------------------------------------------------------------------------------
292,051 75 0 292,126 132,077 14,215 0 146,292 145,834
On leasehold land
Cost             3,264 0 0 3,264 5-10 2,908 35 0 2,943 321
Revaluation 10,546 0 0 10,546 5-10 4,306 621 0 4,927 5,619
---------------------------------------------------------------------------------------------------------------------
13,810 0 0 13,810 7,214 656 0 7,870 5,940
Plant and machinery
Cost 296,444 6,226 0 302,670 10-20 212,191 10,903 0 223,094 79,576
Revaluation 415,035 0 0 415,035 10-20 181,670 24,797 0 206,467 208,568
---------------------------------------------------------------------------------------------------------------------
711,479 6,226 0 717,705 393,861 35,700 0 429,561 288,144
Railway sidings
Cost   889 0 0 889 7 831 4 0 835 54
Revaluation 7,416 0 0 7,416 7 2,256 361 0 2,617 4,799
---------------------------------------------------------------------------------------------------------------------
8,305 0 0 8,305 3,087 365 0 3,452 4,853
Roads 2,742 0 0 2,742 5 1,541 60 0 1,601 1,141
Loose tools 1,403 0 0 1,403 10 1,104 30 0 1,134 269
Furniture fixtures and office
equipment            36,290 107 11 36,386 10 13,984 2,241 5 16,220 20,166
Transport assets 41,143 724 3,373 38,494 20 23,120 3,350 1,378 25,092 13,402
---------------------------------------------------------------------------------------------------------------------
1,463,960 7,132 3,384 1,467,708 575,988 56,617 1,383 631,222 836,486
Assets held under
finance leases:
Plant and machinery 29,192 12,341 0 41,533 10-20 4,982 5,306 0 10.29 31,245
---------------------------------------------------------------------------------------------------------------------
1,493,152 19,473 3,384 1,509,241 580,970 61,923 1,383 641,510 867,731
=====================================================================================================================
1997 1,459,660 35,036 1,544 1,493,152 512,961 68,762 753 580,970 912,182
13.1 The Company, during 1992-93, revalued freehold land, buildings on freehold and leasehold land, plant &
machinery and railway sidings located at its Plant Site at District Chakwal. The revaluation exercise was
carried-out on the basis of depreciated replacement cost except freehold land which was revalued on the basis
of reassessed replacement value. The revaluation produced an appraisal surplus of Rs. 993.804 million which
was credited to 'Surplus on Revaluation of Fixed Assets Account' (note 4).
13.2 Disposal of operating fixed assets
Accumulated Book Sale proceed/ Gain/ Received from
Particulars Cost depreciation value Insurance (Loss)
claim
Furniture, fixtures and
office equipment 11 5 6 11 5 Ex-employees
Transport assets
Mitsubishi Pajero 1,294 259 1,035 800 (235) Malik Yousaf (Ex-employee)
Toyota Hilux 1,035 611 424 688 264 Mr. Muhammad Amir,
3-A, Jail Road, Lahore.
Suzuki Margala 350 258 92 230 138 Mr. Muhammad Shoeb Khan
12 l-M, Gulberg-III, Lahore
Honda Civic 694 250 444 595 151 Adamjee Insurance
Company Limited.
------------------------------------------------------------
3,373 1,378 1,995 2,313 318
------------------------------------------------------------
3,384 1,383 2,001 2,324 323
============================================================
13.3 Depreciation for the year has been apportioned as under
Note 1998 1997
 (Rupees in thousand)
Cost of sales 25 56,626 62,132
General and administrative expenses 26 3,531 4,420
Selling and distribution expenses 27 1,766 2,210
---------- ----------
61,923 68,762
========== ==========
13.4 The Company leased part of its freehold land to its Subsidiary Company during 1996 for a period of twenty
years on payment of rent at the rate of Rs. 5 thousand per year Book value of the said land as at 30 June, 1998
was Rs. 7.200 million (1997: Rs. 7.200 million).
14. CAPITAL WORK-IN-PROGRESS
Balance Additions Transfers/ Balance
as at 30 during Adjustments/ as at 30
Particulars June, 1997 the year Expensed  June, 1998
out during 
the year
  (Rupees in thousand)
OWNED:
Plant & machinery
Electrostatic Precipitator Plant:
Advance payments 5,250 0 5,250 0
Local machinery cost 43,902 10,166 0 54,068
Civil works 23,440 849 0 24,289
Unallocated capital expenditure  7,330 0 7,330 0
(note 14.1)
LEASED:
Plant & machinery
- Furnace oil storage tank 12,211 130 12,341 0
- Electrostatic Precipitator Plant:
Imported machinery cost 177,386 0 0 177,386
Borrowing cost 41,902 0 0 41,902
------------------------------------------------
311,421 11,145 24,921 297,645
================================================
1997 262,966 246,891 198,436 311,421
14.1 Unallocated capital expenditure aggregating Rs. 6.805 million have been expensed out during the year as no
future economic benefits are expected to arise from these expenditure.
15. LONG TERM INVESTMENTS
Note 1998 1997
  (Rupees in thousand)
Quoted
Mustehkam Cement Limited
5,666 fully paid ordinary shares of Rs 10 each 15.1 873 873
Less: Provision for diminution in value 811 704
---------- ----------
Market value 62 169
Unquoted - At cost
Subsidiary Company
GCL Electric Company Ltd.
14,998,000 (1997: 255,000) fully paid ordinary  149,980 2,550
shares of Rs. 10 each 15.2 ---------- ----------
150,042 2,719
========== ==========
15.1 Equity held by the Company in the Investee Company was less than 10% of the total equity of the investee
Company.
15.2 Equity held by the Company in the Subsidiary Company was 99.99% (1997: 99.22%) of the total equity of the
Subsidiary Company.
16. LONG TERM DEPOSITS AND PREPAYMENTS
Note 1998 1997
  (Rupees in thousand)
Security deposits 511 684
Bank guarantees' margin deposits 11,153 0
Advance rent 97 490
Prepaid bank guarantees commission 518 0
---------- ----------
12,279 1,174
========== ==========
17. LONG TERM LOANS AND ADVANCES TO STAFF - Considered good
        TOTAL
Executives Officers Staff 1998 1997
(Rupees in thousand)
Secured
House building loans 1,515 489 20,354 22,358 28,722
Vehicle loans 1,391 75 1,512 2,978 4,716
Unsecured-Interest free
House repair loans 0 0 1,110 1,110 1,578
Emergency loans 27 0 75 102 171
2,933 564 23,051 26,548 35,187
Less: Current portion grouped
under current assets
(note 21) 807 95 3,544 4,446 5,720
------------------------------------------------------------
2,126 469 19,507 22,102 29,467
============================================================
17.1 The above balances may be classified as under:
Outstanding for period
exceeding 3 years 1,284 444 12,998 14,726 14,529
Others 842 25 6,509 7,376 14,938
------------------------------------------------------------
2,126 469 19,507 22,102 29,467
============================================================
17.2 Interest rate and terms of repayment
Executives Officers Staff
Rate of interest:
House building loans 5% 5% 3%
Vehicle loans 5% 5% Interest Free
Installments:
House building loans 120 120 144 & 240
Vehicle loans 96 & 100 96 & 100 96 & 100
House repair loans - 60 & 125
Emergency loans 20 20 15 & 20
17.3 Security
House building and vehicle loans are secured against charge and lien on provident fund balance, lien on
gratuity, personal/third party guarantees, promissory notes and title of ownership of vehicles.
17.4 Maximum aggregate balances due from the Executives during the year were Rs. 5.883 million
(1997: Rs. 7.061 million).
18. STORES, SPARES AND LOOSE TOOLS
1998 1997
  (Rupees in thousand)
Stores 61,556 63,316
Spares 52,747 58,388
Loose tools 686 716
---------- ----------
114,989 122,420
========== ==========
19. STOCK-IN-TRADE
Raw materials 6,493 13,128
Work-in-process 73,587 4,283
Finished goods 8,503 7,701
Packing materials 887 1,322
Others 336 356
---------- ----------
89,806 26,790
========== ==========
20. TRADE DEBTORS - Unsecured
Considered doubtful 442 442
Less: Provision for doubtful debts 442 442
---------- ----------
0 0
========== ==========
21. LOANS, ADVANCES DEPOSITS, PREPAYMENTS
AND OTHER RECEIVABLES
Due from Subsidiary Company 19,143 139,048
Advances to staff- Considered good
Executives 1,205 1,313
Employees 4,753 8,133
---------- ----------
5,958 9,446
Current portion of long term loans and
advances to staff 17 4,446 5,720
Advances to suppliers
- Considered good 21.4 15,252 37,721
Excise duty 1,519 2,193
Prepayments 1,255 579
Accrued interest 238 355
Claims receivable 790 790
Letters of credit 0 4
Margin deposits 0 164
Expansion project engineering fee
refundable 21.5 46,000 18,536
Others 118 7,425
---------- ----------
94,719 221,981
========== ==========
21.1 Maximum aggregate debit balances due from Executives at any month end during the year were Rs. 2.501
million (1997: Rs. 0.889 million)
21.2 Maximum aggregate amounts due from Directors at any month end during the year were Rs. 1.854 million
(1997: Rs. 1.783 million).
21.3 Maximum aggregate debit balances due from Subsidiary Company at any month end during the year were
Rs. 158.578 million (1997: Rs. 139.048 million).
21.4 These include receivables from Pakistan State Oil Company Ltd. aggregating Rs. 4.429 million.
Reconciliation with PSO was in process as at 30 June, 1998.
21.5 This represents balance of advance of engineering fees in respect of the Expansion Project remitted in U.S.
Dollars in prior years. The Expansion Project Contract was revoked during the Financial Year 1996-97 due
to certain technical modifications and unfavourable market conditions prevalent in Pakistan Cement Industry.
The Company received-back Rs. 166.237 million by 30 June, 1998 and the balance amounting Rs. 46.000
million has been agreed to be remitted by the Contractor to the Company. Exchange gain aggregating
Rs. 49.964 million arisen due to revocation of the Contract has been grouped under Other Income (note 30).
21.6 Aggregate transactions with Subsidiary Company during the year were as follows:
Note 1998 1997
  (Rupees in thousand)
Funds transferred to Subsidiary
Company 11,485 19,505
Expenses incurred on behalf of
Subsidiary Company 12,566 28,131
Advance payments on behalf of
Subsidiary Company 56,588 101,562
Lease payments on behalf of
Subsidiary Company 3,687 45,841
Funds received back from
Subsidiary Company 25,976 55,991
Shares of Subsidiary Company
subscribed 147,430 0
22. SHORT TERM INVESTMENTS
The par value of these 1998 1997 1998 1997
shares/certificates are of      No. of shares/   (Rupees in thousand)
Rs. 10 each.       certificates
QUOTED
Ist Habib Modaraba 163 163 1 1
Ist Constellation Modaraba 50 50 1 1
1st Punjab Modaraba 110 110 1 1
Ist Tawakkal Modaraba 60 60 1 1
Al-Zamin Modaraba 50 50 1 1
Inter Asia Leasing Company Ltd. 1,000 1,000 11 11
Mehran Bank Ltd. 3,300 3,300 33 33
Taj Textile Mills Ltd. 143,500 143,500 811 811
Friends Spinning Mills Ltd. 22,990 22,990 184 184
Friends Textile Mills Ltd. 6,800 6,800 47 47
Ghazi Fabrics Int'l Ltd. 2,900 2,900 12 12
Maple Leaf Cement Factory Ltd. 60 60 1 1
Pakistan International Air Lines Corporation 292 292 2 2
Tri-Star Shipping Lines Ltd. 1,100 1,100 9 9
Hub Petro Chemicals Ltd. 500 500 4 4
Wali Oil Mills Ltd. 1,000 1,000 10 10
---------- ----------
1,129 1,129
Less: Provision for diminution in value 625 149
---------- ----------
Market value as at 30 June, 504 980
========== ==========
Note 1998 1997
  (Rupees in thousand)
23. CASH AND BANK BALANCE
In hand 153 151
At banks on:
- Current accounts 23.1 2,067 42,016
- Savings accounts 1,606 623
- Deposit accounts 23.2 39,438 0
---------- ----------
43,111 42,639
---------- ----------
43,264 42,790
========== ==========
23.1 These include foreign currency balance of U.S.$ 500 (1997: U.S.$ 820.003) which has been converted into Pak
Rupees at the exchange rate prevailing on the balance sheet date i.e. 1 U.S.$=Rs. 46.00 (1997: Rs. 40.4195)
23.2 These fixed deposit accounts aggregating U.S.$ 857.352 were under a bank's lien as at 30 June, 1998 as
security against short term finance facilities availed from it.
24. SALES- Net
1998 1997
  (Rupees in thousand)
Cement sales 1,484,754 1,771,259
Less:
Excise duty 618,174 566,878
Sales tax 0 260,097
Rebate to stockist 68,844 44,368
Siding and other charges recovered
(included in Other Income - note 30) 208 245
---------- ----------
687,226 871,588
---------- ----------
797,528 899,671
========== ==========
25. COST OF SALES
Raw materials consumed 25.1 82,842 76,557
Packing materials consumed 99,257 145,805
Stores and spares consumed 38,213 44,187
Electricity, water and gas 157,628 153,477
Salaries, wages and benefits 46,793 46,317
Fuel 373,469 400,898
Rent, rates and taxes 1,434 1,158
Repair and maintenance 27,806 46,591
Depreciation 56,626 62,132
Insurance 2,442 1,742
Other expenses 24,288 26,116
---------- ----------
910,798 1,004,980
Adjustment of work-in-process
4,283 81,513
Opening (73,587) (4,283)
Closing ---------- ----------
(69,304) 77,230
---------- ----------
Cost of goods manufactured 841,494 1,082,210
Adjustment of finished goods
Opening stock 7,701 15,473
Closing stock (8,503) (7,701)
---------- ----------
(802) 7,772
---------- ----------
840,692 1,089,982
========== ==========
25.1 Raw materials consumed:
Opening stock 13,128 3,219
Add:
Salaries, wages and benefits 29,667 29,364
Outside purchases and
transportation cost 5,305 5,056
Explosives 3,174 1,525
Royalty 2,900 3,088
Excise duty 550 601
Repair and maintenance 13,085 21,925
Stores and spares 3,976 4,694
Power 7,782 6,287
Insurance 1,149 820
Local taxes 6,303 10,652
Other overheads 2,316 2,454
---------- ----------
76,207 86,466
---------- ----------
89,335 89,685
Less: Closing stock (6,493) (13,128)
---------- ----------
82,842 76,557
========== ==========
25.2 Raw materials (Limestone, clay, Shale, Gypsum and Iron Ore) consumption is calculated at a standard usage
of 1.65 metric tonnes for one metric tonne of Clinker produced.
26. GENERAL AND ADMINISTRATIVE EXPENSES
Note 1998 1997
  (Rupees in thousand)
Directors' meeting fee 1 1
Salaries, wages and benefits 15,904 18,732
Vehicles' running and maintenance 1,215 930
Travelling and conveyance {including
Directors' travelling Rs. 1,025 thousand
(1997: Rs. 1,038 thousand)} 2,049 2,759
Legal and professional charges 427 605
Consultancy and service charges 4,553 162
Auditors' remuneration 26.1 50 54
Postage, telegram and telephone 1,203 1,468
Printing and stationery 263 614
Computer expenses 0 76
Insurance 898 992
Rent, rates and taxes 1,639 2,968
Electricity, water and gas 717 762
Advertisement 43 212
Repair and maintenance 621 693
Depreciation 3,531 4,420
Miscellaneous 863 2,669
---------- ----------
33,977 38,117
========== ==========
26.1 Auditors' remuneration
Audit fee 40 40
Out-of-pocket expenses 10 14
---------- ----------
50 54
========== ==========
26.2 Unallocated capital expenditure incurred in prior years aggregating Rs. 6.805 million have been expensed out
during the year as stated in note 14.1. These expenditure have been grouped in respective heads of account.
27. SELLING AND DISTRIBUTION EXPENSES
1998 1997
  (Rupees in thousand)
Salaries, wages and benefits 2,116 3,721
Forwarding and demurrage 2,529 2,882
Travelling and conveyance 14 61
Vehicles' running and maintenance 608 465
Postage, telegram and telephone 605 743
Electricity 359 381
Advertisement and sales promotion 446 2,143
Depreciation 1,766 2,210
Insurance , 448 496
Miscellaneous 450 240
---------- ----------
9,341 13,342
========== ==========
28. FINANCIAL CHARGES
Interest on workers' (profit) participation fund 567 620
Lease finance charges 42,409 784
Mark-up on short term finances 5,419 2,004
Commission on bank guarantees 647 0
Bank and other charges 348 1,323
---------- ----------
49,390 4,731
========== ==========
29. OTHER CHARGES
Donations (without directors' interest) 362 63
Provision for diminution in value of long
and short term investments 583 0
Zakat 53 13
Bad debts written-off 0 93
---------- ----------
998 169
========== ==========
30. OTHER INCOME
Interest on:
Bank deposits 2,808 3,976
Employees' loans 790 1,032
Advance income tax 0 549
---------- ----------
3,598 5,557
Lease rentals 13.4 5 5
Dividend 1 13
Exchange fluctuation gain (including
Rs. 49.964 million as detailed in note 21.5) 54,836 10,423
Loading charges recovered 1,249 1,471
Siding and other charges 24 208 245
Sale of scrap 467 1,477
Unclaimed balances written-back 254 137
Gain on sale of operating fixed assets 13.2 323 659
Provision for diminution in value of long and
short term investments written-back - net 0 143
Others 106 108
---------- ----------
61,047 20,238
========== ==========
31. REMUNERATION TO CHIEF EXECUTIVE, DIRECTORS AND EXECUTIVES
    Chief Executive       Directors       Executive
Particulars 1998 1997 1998 1997 1998 1997
  (Rupees in thousand)
Managerial
remuneration 684 684 600 1,268 7,462 11,573
Allowances 0 0 0 0 612 857
Perquisites and
benefits:
House rent 308 308 360 571 1,856 3,269
Personal staff
salary    96 96 120 114 345 595
Entertainment 205 205 120 198 653 1,020
Utilities and
others 251 207 170 143 3,028 4,249
------------------------------------------------------------------------
860 816 770 1,026 5,882 9,133
Contributions to:
- Gratuity Fund
Trust 57 57 50 50 793 749
- Provident Fund
Trust 68 68 60 17 615 948
------------------------------------------------------------------------
1,669 1,625 1,480 2,361 15,364 23,260
========================================================================
No. of persons 1 1 1 3 35 52
31.1 In addition to above Meeting Fee of Rs. I thousand (1997: Rs. 1 thousand) was paid to a non-working
director.
31.2 Chief executive, directors and some of the executives are entitled to free use of Company's transport and
residential telephones.
32. CAPACITY AND PRODUCTION
1998 1997
  (Thousand M. Tonnes)
Rated capacity
(Based on 300 working days) 540 540
Actual production 437 419
33. STATEMENTS UNDER SECTION 237 OF THE COMPANIES ORDINANCE, 1984
The audited Balance Sheet of Subsidiary Company as at 30 June, 1998 is attached herewith:
Statement under sub-section (1) (e) GCL Electric
Company Ltd.
a) Extent of Shareholding 1998 99.99%
1997 99.22%
b) The aggregate amount of profits less losses of
Subsidiary Company so far as these concern
members of the Holding Company and which
have not been dealt within the accounts of the
Holding Company for the year ended
30 June, 1998 are: Nil
i) For the last financial year of the Subsidiary
but subsequent to the acquisition of
controlling interest by the Holding Company. Nil
ii) For the previous years but subsequent to the
acquisition of controlling interest by the
Holding Company. Nil
c) The aggregate amount of profits less losses of
Subsidiary Company so far as these have been
dealt with or provision made for losses in the
accounts of the Holding Company for the year
ended 30 June, 1998 are: Nil
i) for the last financial year of the Subsidiary Nil
ii) for the previous years but subsequent to the
acquisition of controlling interest by the
Holding Company. Nil
Statement under sub-section (1) clauses (f) & (g) Not
Applicable.
34. FIGURES
- in the accounts are rounded-off to the nearest thousand rupees;
- of the previous year are re-arranged wherever necessary for the purpose of comparison.
M. NIAZ PERACHA FAROOQ ZAMAN
DIRECTOR CHIEF EXECUTIVE
GCL Electic Company Ltd
DIRECTORS' REPORT TO THE SHAREHOLDERS
The Directors of your Company are pleased to present the third Annual Report alongwith the Audited Financial Statement
for the year ended 30th June 1998.
In the year under review there have been no operational activities, therefore, no Profit & Loss Account has been drawn. The
report, however, includes the salient features and the information's regarding the project and its progress todate.
THE COMPANY
The Company was incorporated under the Companies Ordinance, 1984, as a Private Limited Company in January, 1995 and
was granted the certificate of incorporation of 17th January 1995. On March 25, 1997 it has been converted into "Public
Company" and the Authorised Capital of the Company has also been enhanced. The capital structure is:
      (Rupees)
1998 1997
Authorized 500,000,000 500,000,000
Paid-up 150,000,000 2,570,000
The Holding Company (Gharibwal Cement Limited) has contributed 99.99% (1997: 99.22%) of the Paid up Capital.
The sole object of the company is generation and sale of electricity to it's Holding Company. The Power sale agreement at
prevailing WAPDA Tariff Rates has already been executed with Gharibwal Cement Limited.
The project comprises of 2 Generators with a capacity of 11.33 M.W. The erection of the machinery has been completed
and the plant has started its commercial production since October, 1998. The revised estimate of the total cost of the
project is Rs. 539 million against the original estimate of Rs. 464 million.
AUDITORS
M/s Hameed Chaudhary & Co., Chartered Accountants, the retiring Auditors have offered themselves for re-appointment
as Auditors of the Company for the next year ending 30 June, 1999.
for and on behalf of the Board
Lahore:
December 3, 1998 FAROOQ ZAMAN
CHIEF EXECUTIVE
AUDITORS' REPORT TO THE MEMBERS OF GCL ELECTRIC COMPANY LIMITED
We have audited the annexed Balance Sheet of GCL ELECTRIC COMPANY LIMITED as at 30 June, 1998 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 purpose 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 together with the notes thereon has been drawn up in the conformity with the Companies
Ordinance, 1984, and is in agreement with the books of account, and is 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,
together with the notes forming part thereof, gives the information required by the Companies Ordinance, 1984, in the
manner so required and gives a true and fair view of the state of the Company's affairs as at 30 June, 1998; and
(d) in our opinion, no Zakat was deductible at source under the Zakat and Ushr Ordinance, 1980.
The accounts of GCL Electric Company Limited for the year ended 30 June, 1997 were audited by Amin & Co., Chartered
Accountants who had expressed an unqualified opinion on those accounts.
Lahore: HAMEED CHAUDHRI & CO.,
December 3, 1998 CHARTERED ACCOUNTANTS.
BALANCE SHEET AS AT 30 JUNE, 1998
Note 1998 1997
  (Rupees in thousand)
SHARE CAPITAL
Authorised
50,000,000 ordinary shares of Rs. 10 each 500,000 500,000
========== ==========
Issued, subscribed and paid-up
15,000,000 (1997: 257,000)
ordinary shares of Rs. 10 each fully paid in cash 3 150,000 2,570
LIABILITIES AGAINST ASSETS
SUBJECT TO FINANCE LEASE 4 227,112 224,970
CURRENT LIABILITIES
Current portion of liabilities against
assets subject to finance lease 4 47,021 8,178
Due to Holding Company 19,143 139,048
Short term finances 5 63,307 24,982
Accrued expenses 6 14,610 2,209
---------- ----------
144,081 174,417
CONTINGENCIES AND COMMITMENTS 7 ---------- ----------
521,193 401,957
========== ==========
TANGIBLE FIXED ASSETS
Capital work-in-progress 8 508,673 384,507
CURRENT ASSETS
Tax deducted at source 5,889 5,885
Accrued interest 0 22
Cash and bank balances 9 6,631 11,543
---------- ----------
12,520 17,450
---------- ----------
521,193 401,957
========== ==========
The annexed notes form an integral part of these accounts.
M. NIAZ PERACHA FAROOQ ZAMAN
DIRECTOR CHIEF EXECUTIVE
NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 30 JUNE, 1998
1. STATUS AND OPERATIONS
The Company was incorporated on 17 January, 1995 as a Private Company and was converted into a Public Company
on 25 March, 1997. The sole object of the Company is to set-up and operate power generation project. The Company
is a Subsidiary of Gharibwal Cement Limited. The Company is in the process of setting-up a power generation project.
2. SIGNIFICANT ACCOUNTING POLICIES
2.1 Accounting convention
These accounts have been prepared under the historical cost convention.
2.2 Tangible fixed assets and depreciation
Capital work-in-progress is stated at cost. Cost in relation to certain fixed assets signifies historical cost and cost
of borrowing during construction period. Depreciation has not been provided for as the Company has not yet
commenced its operations.
2.3 Assets subject to finance lease
These are stated at the lower of present value of minimum lease payments under the lease agreements and the fair
value of the assets acquired on lease. The related obligations of lease are accounted for as liabilities.
2.4 Unallocated capital expenditure
These will be capitalised on completion of the project.
2.5 Mark-up, interest and other charges
Mark-up, interest and other charges on liabilities are capitalised upto the date of commissioning of respective plant
and machinery, acquired out of the proceeds of such liabilities.
3. ISSUED, SUBSCRIBED AND PAID UP CAPITAL
Gharibwal Cement Limited (the Holding Company) held 14,998,000 (1997: 255,000) shares i.e. 99.99% (1997:
99.22%) of the Company's Issued, Subscribed and Paid-up Capital as at 30 June, 1998.
4. LIABILITIES AGAINST ASSETS SUBJECT OT FINANCE LEASE
National Grays Pakistan
Development Leasing Industrial
Leasing Limited Leasing
Corporation Corporation
Limited Limited 1998 1997
(Rupees in thousand)
Balance amount of future lease
payments and the periods in
which these will become due:
FINANCIAL YEAR
1997 - 98 0 0 0 0 22,137
1998 - 99 58,370 2,349 53,942 114,661 96,201
1999 - 2000 40,247 2,334 53,942 96,523 96,523
2000 - 2001 40,247 0 53,942 94,189 94,189
2001 - 2002 40,247 0 53,942 94,189 94,189
2002- 2003 47,085 0 56,942 104,027 104,027
-------------------------------------------------------------
226,196 4,683 272,710 503,589 507,266
Less: Security deposits adjustable
on expiry of lease terms 26,962 488 28,726 56,176 56,175
-------------------------------------------------------------
199,234 4,195 243,984 447,413 451,091
Less: Financial charges
Allocated to future periods 68,101 802 93,187 162,090 217,943
Accrued during the year 11,059 131 0 11,190 0
-------------------------------------------------------------
79,160 933 93,187 173,280 217,943
-------------------------------------------------------------
Principal liability 120,074 3,262 150,797 274,133 233,148
Less: Current portion grouped
under current liabilities
- Installments due within following
twelve months 16,623 1,418 21,710 39,751 8,178
- Installments overdue 7,065 205 0 7,270 0
-------------------------------------------------------------
23,688 1,623 21,710 47,021 8,178
-------------------------------------------------------------
96,386 1,639 129,087 227,112 224,970
National Pakistan
Development Grays Industrial
Leasing Leasing Leasing
Corporation Limited Corporation
Limited Limited
No. of lease facilities 2 1 1
No. of installments 20 quarterly 36 monthly 18 quarterly
installments installments installments
Last installment due December, 2002 May, 2000 December, 2002
Discount factor applied P.A. 22% & 22.5% 22.44% 22.73%
Residual value at the end of
lease term Rs. 26.962 Rs. 0.488 Rs. 28.726
million million million
Security - Corporate - Cross - Cross
guarantee by corporate corporate
Holding guarantee guarantee
Company by Holding by Holding
Company Company
- First pari - Personal - Pledge of
passu charge guarantees Company's
over the entire of directors shares worth
current and Rs. 75 million
fixed assets of
the Company
- First registered
charge on
- Company's
fixed assets
ranking pari
passu with NDLC
- Demand
promissory note
Fine 2% per month on Re. 1.00 per
overdue amounts Rs. 1,000 per day
on overdue amounts
5. SHORT TERM FINANCES - Secured
Note 1998 1997
  (Rupees in thousand)
Islamic Investment Bank Ltd. (I.I.B.L.) 5.1 32,482 24,982
Gharibwal Cement Employees' Gratuity
Fund Trust 5.2 30,825 0
---------- ----------
63,307 24,982
========== ==========
5.1 Short term finance facilities available from I.I.B.L. under mark-up arrangements aggregated Rs. 36.0 million as at
30 June, 1998. These facilities are available on roll-over basis and are secured against I.I.B.L.'s lien on cash
margin deposit accounts (note 9.1), counter guarantee by the Company, corporate guarantee by the Holding
Company, registered charge on Holding Company's current assets to the tune of Rs. 26.0 million and personal
guarantees of some of the Company's directors. Mark-up rates on these facilities ranged from 20.5% to 23% per
annum.
5.2 Short term finance facility available from Gharibwal Cement Employees' Gratuity Fund Trust (the Trust) under
mark-up arrangements amounts to Rs. 40.0 million. The facility carries mark-up at the rate of 20% per annum. The
principal amount of this facility alongwith mark-up is repayable to the Trust uptill 30 June, 1999 in equal
monthly installments commencing September, 1998. The facility is secured against Company's fixed assets to the
tune of Rs. 40.0 million, demand promissory note and personal guarantees of some of the Company's directors. In
case of any default, the facility will attract liquidated damages at the rate of 20% per annum.
6. ACCRUED EXPENSES
1998 1997
  (Rupees in thousand)
Finance charges accrued on lease finances 11,190 0
Other charges accrued on lease finances 954 0
Mark-up accrued on short term finances 2,451 2,209
Others 15 0
---------- ----------
14,610 2,209
========== ==========
7. CONTINGENCIES AND COMMITMENTS
7.1 Counter guarantees given by the Holding Company to Financial Institutions on behalf of the Company
outstanding as at 30 June, 1998 were for Rs. 499.328 million (1997 Rs. 487.016 million).
7.2 Commitments for capital expenditure outstanding as at 30 June, 1998 were for Rs. 10.0 million.
8. CAPITAL WORK - IN - PROGRESS
Note 1998 1997
  (Rupees in thousand)
Buildings
- Cost and expenses 70,790 45,891
Plant and machinery
- Owned 66,613 31,170
- Leased 275,320 277,239
---------- ----------
341,933 308,409
Unallocated capital expenditure 8.1 95,950 30,207
---------- ----------
508,673 384,507
========== ==========
8.1 UNALLOCATED CAPITAL EXPENDITURE
Preliminary expenses 793 793
Lease syndication fee 100 100
Advertisement 28 28
Insurance 2,189 1,649
Printing and stationary 3 2
Financial charges 11,569 3,714
Trust brokerage 500 500
Legal and professional charges 62 0
Finance charges on lease finances 80,352 23,451
Miscellaneous charges 407 0
---------- ----------
96,003 30,237
Less: Interest income 53 30
---------- ----------
95,950 30,207
========== ==========
9. CASH AND BANK BALANCE
In hand 1 1
At banks on:
Current accounts 130 4,535
Saving accounts 0 507
Margin deposit accounts 9.1 6,500 6,500
---------- ----------
6,630 11,542
---------- ----------
6,631 11,543
========== ==========
9.1 These are under I.I.B.L.'s lien as stated in note 5.1
10. GENERAL
Figures in the accounts are rounded-off to the nearest thousand rupees;
Figures of the previous year are re-arranged wherever necessary for the purpose of comparison.
Profit and Loss Account has not been prepared as the Company has not yet commenced its operations.
M. NIAZ PERACHA FAROOQ ZAMAN
DIRECTOR CHIEF EXECUTIVE
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