| Pak Suzuki Motor Co. Limited |
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| Annual
Report 1998 |
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| CONTENTS |
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| Company
Profile |
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| Company
Information |
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| Notice
of Meeting |
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| Highlights
of the Accounts |
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|
| Chairman's
Review |
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|
| Directors'
Report |
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| Auditors'
Report |
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| Balance Sheet |
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| Profit
& Loss Account |
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| Statement
of Changes in Financial Position (Cash Flow Statement) |
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| Notes
to the Accounts |
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| Selected
Financial Data |
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| Pattern
of Shareholdings |
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| COMPANY
PROFILE |
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| Pak
Suzuki Motor Company Limited (PSMC) is a public limited company with its
shares quoted on stock |
|
| Exchanges
in Pakistan. The Company was formed in August 1983 in accordance with the
terms of a joint |
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| venture
agreement concluded between Pakistan Automobile Corporation Limited
(representing Government |
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| of
Pakistan) and Suzuki Motor Corporation (SMC) - Japan. The Company started
commercial production |
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| in
January 1984 with the primary objective of progressive manufacturing,
assembling and marketing of |
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| Cars,
Pickups, Vans and 4 x 4 vehicles in Pakistan. |
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| The
foundation stone laying ceremony of the company's existing plant located at
Bin Qasim was performed |
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| in
early 1989 by the Prime Minister then in office. By early 1990, on completion
of first phase of this plant, |
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| in-house
assembly of all the Suzuki engines started. In 1992, the plant was completed
and production of |
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| the
Margalla Car commenced. Presently the entire range of Suzuki products
currently marketed in Pakistan |
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| are
being produced at this Plant. |
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| Under
the Government's privatization policy, the Company was privatized and placed
directly under the |
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| Japanese
management in September 1992. |
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| At
the time of privatization, SMC increased its equity from 25% to 40%.
Subsequently, SMC progressively |
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| increased
its equity to 72.8% by purchasing remaining shares from PACO. The total
foreign investment |
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| brought
in by SMC - Japan since inception stands at Rs.1026.36 million. |
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|
| The
Suzuki Management immediately after privatization started expansion of the
Bin Qasim Plant to |
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| increase
its installed capacity to 50,000 vehicles per year. The expansion was
completed in July 1994. |
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| Keeping
this in view, the company's long term plans inter-alia include tapping of
export markets. The |
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| company
has acquired additional land measuring about 30 acres from Pakistan Steel
Mills Corporation |
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| in
proximity to its Bin Qasim Plant to set up production facilities for
manufacture of some local components. |
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| The
Company continues to be in the fore-front of automobile industry of Pakistan.
Over a period of time, |
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| the
company has developed an effective and comprehensive network of sales,
service and spare parts |
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| dealers
who cater to the needs of customers and render effective after sale service
country wide. PSMC |
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| is
serviced by over 204 active vendors who are engaged in the local manufacture
and supply of automotive |
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| parts
to the company. |
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| BIN
QASIM PLANT IN BRIEF: |
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| LOCATION: |
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|
Downstream Industrial
Estate of Pakistan Steel |
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| TOTAL
AREA: |
|
259,200 M(2) (64 acres) |
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| COVERED
AREA: |
|
41,000 M(2) |
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| FACILITIES: |
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Press Shop, Welding Shop,
Paint Shop, Engine and Transmission Assembly |
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|
Shop, Final Assembly
& Inspection Shop |
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| COST: |
|
Rs. 2.1 billion |
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| PRODUCTION
CAPACITY: |
50,000 units per annum
(double shift) |
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| COMPANY
INFORMATION |
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|
| BOARD
OF DIRECTORS |
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|
| Hirofumi
Nagao |
|
Chairman & Chief
Executive |
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| Capt.
(Retd) Bashir Ahmed |
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Deputy Managing Director |
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| Osamu Lizuka |
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|
Director |
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| Qaiser Sultan |
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|
Director |
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| Yoshio Saito |
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|
Director |
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| Razi-ur-Rehman
Khan |
|
Director |
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| Koki Imamura |
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|
Director |
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| COMPANY
SECRETARY |
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| Abdul
Hamid Bhombal |
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| AUDITORS |
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| Sidat
Hyder Qamar Maqbool & Co. |
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| Chartered
Accountants |
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| BANKERS |
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| Bank
Alfalah Limited |
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| Deutsche
Bank AG |
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| Habib
Bank Limited |
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| Muslim
Commercial Bank Limited |
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| National
Bank of Pakistan |
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| The
Bank of Tokyo-Mitsubishi Limited |
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| LEGAL
ADVISORS |
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| Syed
Qamaruddin Hassan |
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| Industrial
Relations Advisor |
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| Orr
Dignam & Company |
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| Advocates
& Legal Consultants |
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| REGISTERED
OFFICE |
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| DSU-13,
Pakistan Steel Industrial Estate, |
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| Bin Qasim, |
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| Karachi. |
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| REGISTRAR |
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| Ferguson
Associates (Pvt) Limited |
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| State
Life Building 1-A, |
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| I.I.
Chundrigar Road, |
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| Karachi. |
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| NOTICE
OF MEETING |
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| Notice
is hereby given that the Fifteenth Annual General Meeting of the shareholders
of Pak Suzuki Motor |
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| Company
Limited will be held at Avari Towers, Fatima Jinnah Road, Karachi on Thursday
December 1 7, |
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| 1998
at 3.00 p.m. to transact the following business: |
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| 1.
To confirm minutes of Fourteenth Annual General Meeting held on December 17,
1997. |
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|
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| 2.
To receive, consider and adopt the audited accounts of the Company for the
year ended June 30, |
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| 1998
together with Directors' and Auditors' reports thereon. |
|
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| 3.
To approve payment of cash dividend to the shareholders @ Rs. 2/- (20%) per
share of Rs. 10/- each. |
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|
| 4.
To appoint auditors and fix their remuneration for the year ending June 30,
1999. |
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| 5.
To consider any other business with the permission of the Chair. |
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| BY
ORDER OF THE BOARD |
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|
| ABDUL
HAMID BHOMBAL |
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| COMPANY
SECRETARY |
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| Karachi:
November 22, 1998 |
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| Notes: |
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| 1.
The share transfer books of the Company shall remain closed from December 10,
1998 to December |
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| 17,
1998 (both days inclusive) for entitlement of Dividend and no transfer will
be accepted for |
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| registration
during this period. |
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| 2.
A member entitled to attend and vote at this meeting may appoint another
person as his/her proxy |
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| to
attend the meeting and vote for him/her. Proxies in order to be effective
must be received by the |
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| Company
not less than 48 hours before the meeting. |
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|
| 3.
Shareholders are requested to notify the change in their address, if any,
immediately to our Registrar |
|
| Ferguson
Associates (Pvt.) Limited, State Life Building, l-A, 1. I. Chundrigar Road,
Karachi. |
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| HIGHLIGHTS
OF THE ACCOUNTS |
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| FOR
THE YEAR ENDED JUNE 30, 1998 |
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|
Increase/(Decrease) |
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|
1997 |
1998 |
Amount |
% |
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|
(Rupees in thousand) |
|
|
| Production
volume (units) |
|
31,302 |
30,513 |
789 |
2.6 |
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|
| Sales
volume (units) |
|
32,601 |
29,067 |
3,354 |
12.2 |
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| Net sales |
|
8,680,931 |
7,710,453 |
970,478 |
12.6 |
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|
| Gross profit |
|
578,623 |
661,118 |
(82,495) |
(12.5) |
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| as
a % of net sales |
|
6.7 |
8.6 |
-- |
(1.9) |
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| Expenses
--Selling & admin. |
|
220,631 |
175,502 |
45,129 |
25.7 |
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| --Financial
& other charges |
|
56,718 |
90,621 |
(33,903) |
(37.4) |
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| --Total |
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|
277,349 |
266,123 |
11,226 |
4.2 |
|
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| as
a % of net sales |
|
3.2 |
3.5 |
-- |
(0.3) |
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| Other income |
|
187,985 |
90,425 |
97,560 |
107.9 |
|
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| as
a % of net sales |
|
2.2 |
1.2 |
-- |
1.0 |
|
|
|
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|
| Provision
for diminution in market |
|
|
| value
of WAPDA Bonds/Investments |
506 |
82,500 |
(81,994) |
(99.4) |
|
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| Profit
before taxation |
|
488,753 |
402,920 |
85,833 |
21.3 |
|
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| as
a % of net sales |
|
5.6 |
5.2 |
-- |
0.4 |
|
|
|
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|
| Profit
after taxation |
|
357,753 |
391,390 |
(33,637) |
(8.6) |
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| as
a % of net sales |
|
4.1 |
5.1 |
-- |
(1.0) |
|
|
|
|
|
| Stocks |
|
|
1,059,791 |
2,001,691 |
(941,900) |
(47.1) |
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| as
a % of net sales |
|
12.2 |
26.0 |
-- |
(13.8) |
|
| number
of days stock held |
|
48 |
104 |
(56) |
-- |
|
| inventory
turn over ratio |
|
7.6 |
3.5 |
-- |
4.1 |
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| Cash
and bank balances |
|
833,614 |
374,327 |
459,287 |
122.7 |
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| Advances
from customers |
|
753,065 |
464,257 |
288,808 |
62.2 |
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| Pending
orders (Nos.) |
|
6,835 |
13,336 |
(6,501) |
(48.7) |
|
| Shareholders'
equity |
|
1,633,930 |
1,374,440 |
259,490 |
18.9 |
|
|
| Debt
Equity ratio |
|
0:100 |
3:97 |
-- |
-- |
|
|
| Current ratio |
|
1.16:1 |
1.06:1 |
-- |
-- |
|
| Profit
per share |
|
7.28 |
7.96 |
-- |
-- |
|
| Break-up
value per share |
|
33.26 |
27.97 |
-- |
-- |
|
| No.
of permanent employees |
|
|
|
| --Officers |
|
|
274 |
230 |
44 |
19.1 |
|
| --Staff/workers |
|
|
327 |
319 |
8 |
2.5 |
|
| --Total |
|
|
601 |
549 |
52 |
9.5 |
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|
| CHAIRMAN'S
REVIEW |
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|
| I am pleased to
present my review on the performance |
|
|
| of the Company for
the year ended June 30, 1 998. |
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|
| PRODUCTION |
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| During the year
31,302 units were produced against |
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| 30,513 units
produced in the preceding year. The plant |
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| was shutdown
during the entire month of June 1998 to |
|
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| revamp the paint
system from Anodic to Cathodic. |
|
|
| Despite
the planned suspension of plant activities for a |
|
|
| month,
production increased by 2.6% during the year. |
|
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| Capacity
utilization improved to 63% from 61% recorded |
|
|
| last
year. |
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|
|
|
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|
| OPERATING
RESULTS |
|
|
| Sales
encountered depressed demand due to a sluggish |
|
|
| market during
the first half of the year. Aggressive |
|
|
| marketing and
advertising/sales promotion as well as |
|
|
| the package
announced by the Government in January |
|
|
| 1998 for the
passenger cars however yielded positive |
|
|
| results with
increase in sales volume by 12.2%. During |
|
|
| the
year 32,601 units were sold as compared with 29,067 |
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| units
sold in the previous year which resulted in increase |
|
| of
sales revenue by 12.6%. |
|
|
| Gross
profit as a percentage of sales dropped from 8.6% |
|
| to
6.7%. In absolute terms it decreased by Rs. 82.495 |
|
| million.
The decline in gross profit was due to the fact |
|
| that
Company reduced its markup in January 1998 as |
|
| a
gesture to Government's package for the car industry. |
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| The
Government reduced custom duties on Cars by 5% |
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| and
exempted capital value tax thereon. The package |
|
| announced
by the Government had a positive affect |
|
| and
rejuvenated demand in the second half of the year. |
|
| The
selling and administration expenses increased from |
|
| Rs.
1 75.502 million of the preceding year to Rs. 220.631 |
|
| million
and as a percentage of sales from 2.28% to |
|
| 2.54%.
The main factors which contributed to the |
|
| increase
were increase in salaries, depreciation, legal |
|
| charges,
advertising and sales promotion. |
|
|
| Other
income increased from Rs. 90.425 million to Rs. |
|
| 187.985
million. The improvement in income accrued |
|
| with
the compensation received from Income Tax Deptt. |
|
| for
delayed income tax refund and increase in markup |
|
| on
surplus deposits with banks. |
|
|
| Financial and
other charges declined from Rs. 90.621 |
|
|
| million
to Rs. 56.71 8 million. The saving resulted from |
|
|
| decrease
in long term loan amount and improved liquidity |
|
|
| position. |
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|
|
|
|
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| During
the year, the unabsorbed brought forward tax |
|
|
| losses
were fully adjusted. As required higher provision |
|
|
| for
taxation has been made this year. Last year provision |
|
|
| for
turnover tax had only been made. |
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|
|
|
|
| MARKETING |
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|
|
| Your
company achieved a major breakthrough with |
|
|
| commencement
of Exports. A modest beginning has been |
|
|
| made
with Export of thirty Suzuki Ravi Pickups to Nepal. |
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| The
management is aggressively exploring export markets |
|
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| to
utilize idle capacity. |
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| During
the year, the Margalla 1 300 cc car was phased |
|
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| out and replaced by
the technologically advanced |
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| Baleno
1300 cc car. The new model which is the result |
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|
| of
latest engineering design was launched in early |
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| September
1 998. This new product has been accepted |
|
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| very
well in the market and the sales are proceeding at |
|
|
| a brisk pace. |
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| DELETION |
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| The
Company is strictly adhering to the Industry Specific |
|
|
| deletion
programmes and the Ministry of Industries |
|
|
| programmes
and would continue to meet the deletion |
|
| targets
for future years with increased indigenisation. |
|
| The
company's resolve and commitment to localization |
|
| is
evidenced with the achievement of higher deletion |
|
| levels
in the Mehran Car, Ravi Pickup, Bolan Van and |
|
| the
Khyber Car. Higher deletion in the recently introduced |
|
| Baleno
Car is being actively pursued. |
|
|
|
|
| PERSONNEL |
|
|
| Management
and employees relations continued to |
|
| remain
cordial and industrial peace prevailed during |
|
| the
year. The CBA has served a new charter of demand |
|
| for
the period July 1998 to June 2000. The management |
|
| has
commenced negotiation with the CBA. |
|
|
|
|
| ECONOMIC
CONTRIBUTION |
|
| Despite
adverse factors, the Company maintained its |
|
| distinctive
position as a leading contributor in the |
|
| automobile
industry to the public exchequer. The duties |
|
| and
taxes paid and the foreign exchange saved by |
|
| Company
in its last five years of operations are as follows: |
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|
|
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| Year |
|
|
|
Duties and |
Foreign |
|
|
|
|
|
|
taxes |
exchange |
|
|
|
|
|
|
savings |
|
|
|
|
|
(Rupees in million) |
|
|
|
|
|
|
|
| 1993-94 |
|
|
|
1,157 |
1,033 |
|
|
| 1994-95 |
|
|
|
1,804 |
1,581 |
|
|
| 1995-96 |
|
|
|
2,600 |
2,555 |
|
|
| 1996-97 |
|
|
|
2,728 |
2,539 |
|
|
| 1997-98 |
|
|
|
2,571 |
2,924 |
|
|
|
| FUTURE
PROSPECTS & CONCLUSION |
|
|
|
| The
devaluation of Pak Rupee, composite exchange |
|
|
| rate,
requirement of 30% cash L/C margin and |
|
|
|
| appreciation
of the Yen are pushing up the costs. The |
|
|
| market
is gradually responding to higher prices arising |
|
|
| out
of the changed economic scenario. Presently the |
|
|
| Company
is partly sharing impact of increase in cost in |
|
|
| order
to maintain volumes. However management would |
|
|
| strive
to earn a reasonable return on equity. |
|
|
|
|
|
|
|
|
| Company
s key objectives continue to remain: |
|
|
|
|
|
|
|
|
| -
To provide automobiles of international quality at |
|
|
| reasonable
prices; |
|
|
|
|
|
|
|
| -
To improve skills of employees by imparting training |
|
| and
by inculcating in them a sense of participation; |
|
| and |
|
|
|
|
|
| -
To abide by the deletion policy of the Government, |
|
| achieve
maximum indigenisation and promote the |
|
| automobile
vending industry. |
|
|
|
|
|
| In
conclusion, I on behalf of the Board and shareholders |
|
| would
like to express my appreciation to the |
|
| management,
executives, workers, dealers, vendors and |
|
| Suzuki
experts for their efforts and contribution to the |
|
| affairs
of the Company. My sincere gratitude also goes |
|
| to
all the government agencies for their continued |
|
| support
and encouragement. |
|
|
|
|
|
|
|
Hirofumi Nagao |
|
|
|
Chairman & Chief Executive |
|
|
|
| DIRECTORS
REPORT |
|
|
| 1.
The Directors of the Company take pleasure in submitting their report with
audited accounts of the |
|
| Company,
together with Auditors' Report thereon, for the year ended June 30, 1998. |
|
|
| 2.
ACCOUNTS |
|
|
|
(Rs. in 000) |
|
|
| Profit
after taxation |
|
|
357,753 |
|
| Unappropriated
profit brought forward |
|
4,126 |
|
|
|
|
--------------- |
|
| Profit
available for appropriation |
|
361,879 |
|
|
|
|
| Less:
Appropriations |
|
| Transfer
to General Reserve |
|
|
12,600,001 |
|
| Proposed
cash dividend @ 20 % |
|
|
98,263 |
|
|
|
|
--------------- |
|
|
|
|
358,263 |
|
| Unappropriated
profit carried forward |
|
|
--------------- |
|
|
|
|
3,616 |
|
|
|
|
========== |
|
|
|
|
| 3.
CHAIRMAN'S REVIEW |
|
| The
Chairman's review on page 9 to 11 deals with the year's activities and the
directors of the |
|
| Company
endorse contents of the same. |
|
|
| 4.
PATTERN OF SHAREHOLDINGS |
|
| The
pattern of shareholdings is given on page 41. |
|
|
| 5.
BOARD CHANGES |
|
| 5.1
Mr. S.G. Abbas was a nominee director of National Development Finance
Corporation (NDFC) |
|
| by
virtue of loan agreement executed between Pak Suzuki Motor Company Limited
and NDFC. |
|
| He
ceased to be director on repayment of loan during the year. |
|
|
| 5.2
Mr. Koki Imamura was appointed as director in place of Mr. Katsumi Saruta who
resigned from |
|
| the
Board on his transfer to Suzuki Motor Corporation in Japan. |
|
|
| 6.
AUDITORS |
|
| Messrs.
Sidat Hyder Qamar Maqbool & Co., Chartered Accountants retire and being
eligible offer |
|
| themselves
for appointment as the auditors of the Company for the year ending June 30,
1999. |
|
|
| BY
ORDER OF THE BOARD |
|
|
| HIROFUMI
NAGAO |
|
| Chairman
& Chief Executive |
|
|
| Karachi |
|
| November
18, 1998 |
|
|
|
| AUDITORS'
REPORT TO THE MEMBERS |
|
|
| We
have audited the annexed balance sheet of PAK SUZUKI MOTOR
COMPANY LIMITED as at |
|
| 30
June 1998 and the related profit and loss account and statement of changes in
financial position, |
|
| together
with the notes forming part thereof, for the year then ended and we state
that we have obtained |
|
| all
the information and explanations which to the best of our knowledge and
belief were necessary |
|
| for
the purposes of our audit and, after due verification thereof, we report
that: |
|
|
| (a)
in our opinion, proper books of account have been kept by the Company as
required by the |
|
| Companies
Ordinance, 1984; |
|
|
| (b)
in our opinion: |
|
|
| i)
the balance sheet and profit and loss account together with the notes thereon
have been |
|
| drawn
up in conformity with the Companies Ordinance, 1984 and are in agreement with |
|
| the
books of account and are further in accordance with accounting policies
consistently |
|
| applied; |
|
|
|
| ii)
the expenditure incurred during the year was for the purpose of the Company's
business; and |
|
|
| iii)
the business conducted, investments made and the expenditure incurred during
the year were |
|
| in
accordance with the objects of the Company; |
|
|
| c)
in our opinion and to the best of our information and according to the
explanations given to us, |
|
| the
balance sheet, profit and loss account and the statement of changes in
financial position, |
|
| together
with the notes forming part thereof, give the information required by the
Companies |
|
| Ordinance,
1984 in the manner so required and respectively give a true and fair view of
the state |
|
| of
the Company's affairs as at 30 June 1998 and of the profit and the changes in
financial position |
|
| for
the year then ended; and |
|
|
| d)
in our opinion zakat deductible at source under the Zakat and Ushr Ordinance,
1980 was deducted |
|
| by
the Company and deposited in the Central Zakat Fund established under Section
7 of that |
|
| Ordinance. |
|
|
|
| Sidat
Hyder Qamar Maqool & Co. |
|
| Chartered
Accountants |
|
|
| Karachi:
November 19, 1998 |
|
|
|
|
| BALANCE
SHEET |
|
| AS
AT JUNE 30, 1998 |
|
|
|
NOTE |
1998 |
1997 |
|
|
|
|
(Rupees in thousand) |
|
|
| SHARE
CAPITAL AND RESERVES |
|
|
|
|
|
|
| Authorised
share capital |
|
|
|
| 150,000,000
(1997:150,000,000) ordinary |
|
|
|
| shares
of Rs.10/- each |
|
|
1,500,000 |
1,500,000 |
|
|
|
|
|
|
========== |
========== |
|
|
| Issued,
subscribed and paid-up share capital |
3 |
491,312 |
491,312 |
|
|
| Reserves |
|
|
4 |
1,139,002 |
879,002 |
|
|
| Unappropriated
profit |
|
|
3,616 |
4,126 |
|
|
|
|
--------------- |
--------------- |
|
|
| Shareholders'
equity |
|
1,633,930 |
1,374,440 |
|
|
| LIABILITIES |
|
|
|
|
|
| Deferred
taxation |
|
18.2 |
105,000 |
97,500 |
|
|
|
|
|
--------------- |
--------------- |
|
|
| Long-term loan |
|
5 |
-- |
41,694 |
|
|
| Current
liabilities |
|
6 |
2,144,223 |
2,743,689 |
|
|
|
|
--------------- |
--------------- |
|
|
|
|
2,144,223 |
2,785,383 |
|
|
