| Otsuka Pakistan Limited |
|
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|
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|
|
| Annual
Report 1998 |
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| CONTENTS |
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| COMPANY
INFORMATION |
|
| NOTICE
OF MEETING |
|
| DIRECTORS'
REPORT |
|
| AUDITORS'
REPORT |
|
| PROFIT
AND LOSS ACCOUNT |
|
| BALANCE
SHEET |
|
| CASH
FLOW STATEMENT |
|
| NOTES
TO THE ACCOUNTS |
|
| PATTERN
OF SHAREHOLDING |
|
|
|
| COMPANY
INFORMATION |
|
|
| BOARD
OF DIRECTORS: |
|
Mr. Kiyoshi Fukai
[Chairman] |
|
|
|
Mr. Abid Hussain [Chief
Executive] |
|
|
|
Mr. Hatsuhiro Okada |
|
|
|
Mr. Mehtabuddin Feroz |
|
|
|
Mr. Yoshio Tanabe |
|
|
|
Mr, Mohammad Abdullah
Feroz |
|
|
|
Mr. Junichiro Otsubo |
|
|
| COMPANY
SECRETARY |
|
Mr. Mohammad Abdullah
Feroz |
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|
| AUDITORS |
|
|
A.F. Ferguson & Co, |
|
|
|
Chartered Accountants |
|
|
|
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| LEGAL
ADVISORS |
|
Hassan & Humayun
Associates |
|
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| BANKERS |
|
|
ANZ Grindlays Bank Ltd. |
|
|
|
The Bank of Tokyo
Mitsubishi Limited. |
|
|
|
Habib Bank Limited |
|
|
|
Allied Bank of Pakistan
Limited |
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|
| REGISTERED
OFFICE |
|
30-B, Sindhi Muslim
Cooperative |
|
|
|
Housing Society,
Karachi-75400 |
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Tel: 4528652-4 |
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Cable: OTSUKA |
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Fax: 4549857 |
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|
E-mail:
otsuka@khi.compol.com.pk |
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| FACTORY |
|
|
No. F/4-9, Hub Industrial |
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|
Trading Estate Distt.
Lasbela |
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|
Balochistan |
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Telephone No. |
[0202] 32363 |
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[0202] 33218 |
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Fax No. |
[0202) 33219 |
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|
E-mail:
otsuka@paknet3.ptc.pk |
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| SHARE
REGISTRAR |
|
Noble Computer Services
[Pvt.) Ltd. |
|
|
|
Shares Department, 2rid
Floor, |
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|
|
AI-Manzoor Building, Dr.
Ziauddin |
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|
|
Ahmed Road, Karachi-
74200. |
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Tel: 2635511 (4 Lines) |
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| NOTICE
OF MEETING: |
|
|
| Notice
is hereby given that the Tenth Annual General Meeting of Otsuka Pakistan
Limited will |
|
| be
held on Tuesday, November 10, 1998 at 10:00 a.m. at the Auditorium of the
Institute of |
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| Chartered
Accountants of Pakistan. G-31/8, Kehkashan, Clifton, Karachi to transact the |
|
| following
business :- |
|
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| 1.
To receive and adopt the Audited Accounts for the year ended June 30, 1998, |
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| together
with the Directors' and Auditors' report thereon. |
|
|
| 2.
To appoint auditors and fix their remuneration. |
|
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| 3.
To transact any other business with the permission of the Chair. |
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| Notes:- |
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| a.
The Share Transfer Books of the Company will remain closed from November 2,
1998 |
|
| to
November 10th, 1998, (both days inclusive). |
|
|
| b.
A member entitled to attend and vote at the Annual General Meeting may
appoint a |
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| proxy
to attend and vote on his/her behalf. A proxy need not be a member of the |
|
| company. |
|
|
| c.
Instrument of appointing proxy and the power of attorney or other authority
under which |
|
| it
is signed or a notarially certified copy of the power of authority must be
deposited at |
|
| the
Registered Office of the Company at least 48 hours before the time of the
Meeting.. |
|
| Form
of proxy is enclosed. |
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|
|
| DIRECTORS'
REPORT |
|
|
| The
Directors are pleased to present the Annual Report of the Company for the
year ended June |
|
| 30, 1998. |
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|
| BUSINESS
REVIEW |
|
| Overall
economic conditions of the country, rising costs and denial of reasonable
price increase |
|
| by
the Ministry of Health had a big adverse impact on the profitability of your
Company, |
|
|
| Company
sales have grown by 24.1% however, because of factors explained above, Profit
before |
|
| taxation
dropped by 30.4% Profit after taxation improved by 4.9% because of taxation
provision |
|
| required. |
|
|
| FINANCIAL
RESULTS |
|
|
|
Rupees |
|
|
| Net
profit before. taxation |
|
10,176,126 |
|
| Taxation |
|
|
3,961,854 |
|
| Profit
after taxation |
|
6,214,272 |
|
| Unappropriated
profit brought forward |
|
1,818,772 |
|
| Unappropriated
profit carried forward |
|
8,033,044 |
|
|
| EARNING
PER SHARE |
|
| The
earning per share for the year ended June 30, 1998 works to Rs. 0.62 per
share. |
|
|
| DIRECTORS |
|
| On
November 1, 1997, Mr. Mehtabuddin Feroz resigned as Chief Executive Officer
and was |
|
| appointed
as Advisor Director. Mr. Abid Hussain was appointed as Chief Executive
Officer of |
|
| the
Company with effect from the same date. |
|
|
| The
Board places on record its appreciation and gratitude to Mr. Mehtabuddin
Feroz for his |
|
| role
in setting up the Company and bringing it to its present stage. |
|
|
|
| FUTURE
OUTLOOK |
|
| The
Directors foresee a difficult and challenging time in view of the present
economic |
|
| conditions
of the country. Devaluation of Pak Rupee, imposition of sales tax on raw and |
|
| packaging
materials, increases in utility charged and local inflation has increased the
cost of |
|
| production
significantly. We hope that the Ministry of Health realises the gravity of
the |
|
| situation
and adopts a realistic pricing policy to enable the pharmaceutical industry
to survive |
|
| and
make reasonable profits. |
|
|
| The
Board remains optimistic about improvement in the Company's performance as a
result |
|
| of
changes made in the management during the last one year. Adequate price
increase |
|
| coupled
with increase in market share, containment of costs and launch of new
products could |
|
| bring
in the desired results. |
|
|
| PATTERN
OF SHARE-HOLDING |
|
| The
Pattern of share holding of the Company as at June 30, 1998, is annexed with
this annual |
|
| report. |
|
|
| HOLDING
COMPANY |
|
| The
Company is an indirect subsidiary of Messrs. Otsuka Pharmaceutical Company
Limited, |
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| which
is incorporated in Japan. |
|
|
| AUDITORS |
|
| The
present Auditors Messrs A F Fergusons & Co., retire at the conclusion of
the 10th Annual |
|
| General
Meeting and, being eligible, offer themselves for re-appointment. |
|
|
| ACKNOWLEDGMENT |
|
| The
Board wishes to place on record its appreciation for the hard work and
dedication of all |
|
| the
employees of the Company. |
|
|
|
| AUDITORS'
REPORT TO THE MEMBERS |
|
|
| We
have audited the annexed Balance Sheet of Otsuka Pakistan Limited as at June
30, |
|
| 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, 1 984 and are in |
|
| agreement
with the books of account and are further in accordance with accounting |
|
| policies
consistently applied; |
|
|
| (ii)
The expenditure incurred during the year was for the purpose of the Company's |
|
| business; and |
|
|
| (iii)
the business conducted, investments made and the expenditure incurred during
the |
|
| year
were in accordance with the objects of the Company; |
|
|
| (c)
in our opinion and to the best of our information and according to the
explanations given |
|
| to
us, the Balance Sheet, Profit and Loss Account and Cash Flow Statement,
together |
|
| with
the notes forming part thereof, give the information required by the
Companies |
|
| Ordinance,
1984 in the manner so required and respectively give a true and fair view of |
|
| the
state of the Company's affairs as at June 30, 1998 and of the profit and cash
flows |
|
| 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. |
|
|
|
A.F. Ferguson & Co. |
|
| Karachi:
Dated October 12th 1998 |
Chartered Accountants |
|
|
|
| PROFIT
AND LOSS ACCOUNT |
|
| FOR
THE YEAR ENDED JUNE 30, 1998 |
|
|
|
Note |
1998 |
1997 |
|
|
|
|
Rupees |
Rupees |
|
|
|
|
|
| Net sales |
|
20 |
245,647,036 |
197,281,959 |
|
|
| Cost
of goods sold |
|
21 |
180,554,821 |
136,816,765 |
|
|
|
|
|
--------------- |
--------------- |
|
|
| Gross profit |
|
|
65,092,215 |
60,465,194 |
|
|
| Administration
and selling expenses |
22 |
49,172,019 |
40,693,655 |
|
|
|
|
|
--------------- |
--------------- |
|
|
| Operating
profit |
|
|
15,920,196 |
19,771,539 |
|
|
| Other income |
|
23 |
1,318,108 |
1,975,640 |
|
|
|
|
|
--------------- |
--------------- |
|
|
|
|
|
17,238,304 |
21,747,179 |
|
|
|
|
|
--------------- |
--------------- |
|
|
| Financial
charges |
|
24 |
5,575,691 |
4,673,220 |
|
|
| Other charges |
|
25 |
1,486,487 |
2,443,413 |
|
|
|
|
--------------- |
--------------- |
|
|
|
|
|
7,062,178 |
7,116,633 |
|
|
|
|
|
|
|
| Profit
before taxation |
|
|
10,176,126 |
14,630,546 |
|
|
| Taxation |
|
26 |
3,961,854 |
8,708,444 |
|
|
|
|
|
--------------- |
--------------- |
|
|
| Profit
after taxation |
|
|
6,214,272 |
5,922,102 |
|
|
| Unappropriated
profit brought forward |
|
1,818,772 |
5,896,670 |
|
|
|
|
|
--------------- |
--------------- |
|
|
| Profit
available for appropriation |
|
8,033,044 |
11,818,772 |
|
|
|
|
|
|
|
| Appropriation: |
|
|
|
|
| Proposed
final dividend Rs. Nil [1997:10%] |
|
-- |
10,000,000 |
|
|
|
|
|
--------------- |
--------------- |
|
|
| Unappropriated
profit carried forward |
|
8,033,044 |
1,818,772 |
|
|
|
|
========== |
========== |
|
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
| BALANCE
SHEET AS AT JUNE 30, 1998 |
|
|
|
|
|
|
Note |
1998 |
1997 |
|
|
|
|
|
Rupees |
Rupees |
|
|
| SHARE
CAPITAL & RESERVES |
|
|
|
| Authorised
capital |
|
|
|
| 10,000,000
ordinary shares of |
|
|
|
| Rs. 10/- each |
|
|
100,000,000 |
100,000,000 |
|
|
|
|
|
========== |
========== |
|
|
| Issued,
subscribed and paid-up capital |
3 |
100,000,000 |
100,000,000 |
|
|
| Unappropriated
profit |
|
|
8,033,044 |
1,818,772 |
|
|
|
|
--------------- |
--------------- |
|
|
|
|
|
108,033,044 |
101,818,772 |
|
|
|
|
|
|
|
| DEFERRED
LIABILITIES |
|
5 |
2,711,436 |
6,319,388 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| CURRENT
LIABILITIES AND PROVISIONS |
|
|
|
|
| Current
maturity of long-term loans |
4 |
-- |
2,032,355 |
|
|
| Short-term
running finances utilised |
|
|
|
|
| under
mark-up arrangements |
|
6 |
27,404,834 |
36,553,160 |
|
|
| Creditors,
accrued and other liabilities |
7 |
42,218,038 |
35,325,205 |
|
|
| Taxation |
|
|
|
92,250 |
4,499,278 |
|
|
|
|
|
|
|
| Proposed
dividend |
|
|
-- |
10,000,000 |
|
|
|
|
|
--------------- |
--------------- |
|
|
|
|
|
69,715,122 |
88,409,998 |
|
|
| COMMITMENTS |
|
8 |
--------------- |
--------------- |
|
|
|
|
180,459,602 |
196,548,158 |
|
|
|
========== |
========== |
|
|
|
| TANGIBLE
FIXED ASSETS |
|
|
|
|
|
| Operating
fixed assets |
|
9 |
60,271,531 |
74,247,642 |
|
|
| Capital
work-in-progress |
|
10 |
505,000 |
470,900 |
|
|
|
|
|
--------------- |
--------------- |
|
|
|
|
|
60,776,531 |
74,718,542 |
|
|
| LONG-TERM
LOANS |
|
11 |
11,175,686 |
1,012,286 |
|
|
|
|
|
|
|
|
| LONG-TERM
DEPOSITS AND PREPAYMENTS |
12 |
746,250 |
309,750 |
|
|
| CURRENT
ASSETS |
|
|
|
|
|
| Stores
and spares |
|
13 |
5,284,563 |
5,225,800 |
|
|
| Stock-in-trade |
|
14 |
28,612,155 |
60,102,650 |
|
|
|
|
|
|
|
|
| Trade debts |
|
15 |
77,546,017 |
50,589,997 |
|
|
|
|
|
|
|
| Loans
and advances |
|
16 |
1,960,431 |
1,573,155 |
|
|
|
|
|
|
|
|
| Trade
deposits and short-term prepayments |
17 |
3,421,411 |
1,775,140 |
|
|
| Other
receivables |
|
18 |
682,441 |
710,995 |
|
|
|
|
|
|
|
|
| Cash
and bank balances |
|
19 |
254,117 |
529,843 |
|
|
|
|
|
--------------- |
--------------- |
|
|
|
|
|
117,761,135 |
120,507,580 |
|
|
|
--------------- |
--------------- |
|
|
|
|
180,459,602 |
196,548,158 |
|
|
|
|
========== |
========== |
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
| CASH
FLOW STATEMENT |
|
| FOR
THE YEAR ENDED JUNE 30, 1998 |
|
|
|
|
Note |
1998 |
1997 |
|
|
|
|
|
Rupees |
Rupees |
|
|
| Cash
flow from operating activities |
|
|
|
|
|
|
| Cash
generated from operations |
30 |
42,536,207 |
6,368,457 |
|
|
| Mark-up/interest
paid |
|
|
(7,302,576) |
(6,284,420) |
|
|
| Taxes paid |
|
|
(11,097,028) |
(6,760,278) |
|
|
| Gratuity paid |
|
|
(879,806) |
-- |
|
|
| Long-term
loans |
|
|
(I 63,400) |
193,551 |
|
|
| Long-term
deposits and prepayments |
|
(436,500) |
362.50 |
|
|
|
|
|
--------------- |
--------------- |
|
|
| Net
Cash (outflow)/inflow from operating activities |
|
22,656,897 |
(6,120,190) |
|
|
|
|
|
| Cash
Flow from investing activities |
|
|
|
|
|
|
| Fixed
capital expenditure |
|
|
(3,403,841) |
(4,360,027) |
|
|
| Sale
proceeds of fixed assets |
|
|
445,100 |
153,200 |
|
|
| Mark-up
received |
|
|
1,164,708 |
2,950,467 |
|
|
|
|
|
--------------- |
--------------- |
|
|
| Net
cash outflow from investing activities |
|
(1,794,033) |
(1,256,360) |
|
|
|
|
|
| Cash
Flow from Financing activities |
|
|
|
|
|
|
| Repayment
of redeemable capital |
|
-- |
(2,727,273) |
|
|
| Repayment
of long-term loan |
|
|
(2,032,355) |
(1,866,077) |
|
|
| Dividends paid |
|
|
(9,957,909) |
(675) |
|
|
|
|
|
--------------- |
--------------- |
|
|
| Net
cash outflow from investing activities |
|
(11,990,264) |
(4,594,025) |
|
|
|
|
|
--------------- |
--------------- |
|
|
| Net
decrease in cash and cash equivalents |
|
8,872,600 |
(11,970,575) |
|
|
| Cash
and cash equivalents at beginning of the year |
|
(36,023,317) |
(24,052,742) |
|
|
|
|
|
--------------- |
--------------- |
|
|
| Cash
and cash equivalents at end of the year |
31 |
(27,150,717) |
(36,023,317) |
|
|
|
|
|
========== |
========== |
|
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
| NOTES
TO THE ACCOUNTS |
|
| FOR
THE YEAR ENDED JUNE 30, 1998 |
|
|
| 1.
STATUS AND NATURE OF BUSINESS |
|
| The
Company is incorporated in Pakistan as a public limited company and is listed
on |
|
| Karachi
and Lahore Stock Exchanges. It is engaged in the manufacturing, marketing
& |
|
| distribution
of intravenous infusions and trading in pharmaceutical products. |
|
|
| 2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
|
|
| 2.1
Accounting convention |
|
| These
accounts have been prepared under the historical cost convention except for
certain |
|
| exchange
elements referred to in note 2.7 which have been incorporated in the cost of
the |
|
| relevant assets. |
|
|
| 2.2
Staff retirement benefits |
|
| The
Company operates: |
|
|
| -
an approved contributory provident fund for all its permanent employees. |
|
|
| -
an approved gratuity scheme for all its permanent employees. Annual
contributions are |
|
| made
to these schemes on the basis of actuarial recommendations. Actuarial
valuation |
|
| is
carried out once in every three years and the latest valuation was carried
out as at |
|
| October
31, 1 995. The following significant assumptions are used for valuation of
this |
|
| scheme. |
|
|
| -
Expected rate of increase in salary level 10 percent per annum |
|
| -
Expected rate of interest 12 percent per annum |
|
|
| Retirement
benefits are payable to staff on completion of prescribed qualifying period
of |
|
| service
under the scheme. |
|
|
| 2.3 Taxation |
|
| Provision
for current taxation is based on taxable income at the current rates of |
|
| taxation
after taking into account tax credits available, if any, or half percent of
turnover |
|
| whichever
is higher. |
|
|
| Provision
for deferred taxation is made on all material timing differences using the |
|
| liability
method. However, deferred tax is not provided if it can be established with
reasonable |
|
| probability
that these timing differences will not reverse in the foreseeable future. |
|
|
| 2.4
Tangible fixed assets and depreciation |
|
| Operating
fixed assets are stated at cost less accumulated depreciation except
leasehold |
|
| land
and capital work-in-progress which are stated at cost. Cost in relation to
certain |
|
| fixed
assets signifies the historical cost, including the cost of borrowing during
construction |
|
| period
in respect of these fixed assets and the exchange differences referred to in
note 2.7. |
|
|
| Depreciation
is charged to income applying the straight line method whereby the cost of |
|
| an
asset is written off over its estimated useful life without taking into
account any residual |
|
| value.
The net exchange difference relating to an asset at the end of each year is
amortised |
|
| in
equal installments over its remaining useful life. Depreciation on additions
is charged |
|
| from
the month in which the asset is put to use and on disposals upto the month of
disposal. |
|
|
| Maintenance
and normal repairs are charged to income as and when incurred. Major |
|
| renewals
and improvements are capitalised and the assets so replaced, if any, are
retired. |
|
|
| Gains
and losses on disposal of assets, if any, are included in income currently. |
|
|
| 2.5
Stores and spares |
|
| These
are valued at average cost. Items in transit are valued at cost comprising
invoice |
|
| values
and other charges incurred thereon. |
|
|
| 2.6
Stock-in-trade |
|
| Raw
and packing materials except for those in transit are valued at average cost.
Items in |
|
| transit
are stated at cost comprising invoice values and other charges incurred
thereon. |
|
|
| Work-in-process
is valued at material cost only. Conversion costs are not included as |
|
| these
are not significant. |
|
|
| Finished
goods are valued at lower of average cost and net realisable value. Cost of
finished |
|
| goods
comprises cost of direct materials, labour and an appropriate portion of
production |
|
| overheads. |
|
|
| Net
realisable value signifies the estimated selling price in the ordinary course
of |
|
| business
less costs of completion and costs necessary to make the sale. |
|
|
| 2.7
Foreign currency translation |
|
| Assets
and liabilities in foreign currencies are translated into rupees at the rates
of |
|
| exchange
approximating those prevailing at the balance sheet date except for
liabilities |
|
| covered
under forward exchange contracts which are translated at the contracted
rates. |
|
|
| Exchange
differences, which are capitalised during the year as part of cost of fixed |
|
| assets
acquired out of proceeds of foreign currency loans, consist of exchange gain
or |
|
| loss
on the repayments and year end translation of such foreign currency loans. |
|
|
| All
other exchange differences are included in income currently. |
|
|
| 2.8
Revenue recognition |
|
| Sales
are recorded on despatch of goods to customers. |
|
|
| 3.
ISSUED, SUBSCRIBED AND PAID-UP CAPITAL |
|
|
|
|
1998 |
1997 |
|
|
|
|
Rupees |
Rupees |
|
|
| 10,000,000 |
ordinary shares of Rs 10 |
|
|
|
|
each fully paid in cash |
|
100,000,000 |
100,000,000 |
|
|
| --------------- |
|
|
--------------- |
--------------- |
|
|
| 10,000,000 |
|
|
100,000,000 |
100,000,000 |
|
|
| ========== |
|
|
========== |
========== |
|
|
|
| At
June 30, 1998 Otsuka Pharmaceutical Co., Ltd., Japan and P. T. Otsuka
Indonesia, held |
|
| 4,500,000
and 1,000,000 (1997' 4,500,000 and 1,000,000) ordinary shares of Rs |
|
| 10
each respectively. |
|
|
| 4.
LONG-TERM LOANS - Secured |
|
|
|
|
Foreign currency balance |
|
|
|
|
1998 |
1997 |
1998 |
1997 |
|
|
|
Japanese yen |
Rupees |
Rupees |
|
|
| Supplier's credit |
-- |
5,716,200 |
-- |
2,032,355 |
|
|
| Less: |
|
|
|
|
| Current portion |
|
|
|
|
| shown
under current |
|
|
|
| liabilities |
-- |
5,716,200 |
-- |
2,032,355 |
|
|
|
--------------- |
--------------- |
--------------- |
--------------- |
|
|
|
-- |
-- |
-- |
-- |
|
|
|
========== |
========== |
========== |
========== |
|
|
|
| 5.
DEFERRED LIABILITIES |
|
|
|
1998 |
1997 |
|
|
|
|
|
Rupees |
Rupees |
|
|
|
|
|
|
