| Rafhan Best Foods Limited |
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| Annual
Report 1998 |
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| CONTENTS |
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| Company
Information |
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| Notice
of First Annual General Meeting |
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| Directors'
Report |
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| Chief
Executive's Review |
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| Auditors'
Report |
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| Balance
Sheet |
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| Profit
& Loss Account |
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| Notes
to the Accounts |
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| Pattern
of Share Holdings |
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| COMPANY
INFORMATION |
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| Chairman |
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Mr. Diego Bevilacqua |
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| Chief
Executive & |
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Mr. Suleman Daud |
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| Managing
Director |
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| Directors |
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Mr. R. Kenneth Henry |
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Mr. Ahsan Rashid |
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Mr. John Gorman |
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Mr. E. A. Nomani |
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Mian Nisar Ahmad Mannoo |
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Mian Zulfikar Mannoo |
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Mian Mohammad Adil Mannoo |
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Mr. Zahid Ali H. Jamal |
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| Secretary |
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Mr. Saif Ullah Malik |
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| Bankers |
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ANZ Grindlays Bank |
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A B N Amro Bank NV |
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Citibank N.A. |
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Standard Chartered Bank |
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Bank of America NT &
SA |
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Muslim Commercial Bank
Ltd. |
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Union Bank Ltd. |
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Habib Bank Ltd. |
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National Bank of Pakistan |
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| Auditors |
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Ford, Rhodes, Robson,
Morrow, |
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Chartered Accountants, |
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Lahore-Karachi |
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| Legal
Advisor |
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Surridge & Beecheno, |
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Karachi-Lahore |
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| Registered
Office |
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Finlay House, 1st Floor, |
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I.I. Chundrigar Road, |
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Karachi. |
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| Head
Office and |
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1st Floor, Pakland House, |
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| Shares
Department |
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200-Ferozepur Road, |
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Lahore-Pakistan |
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| NOTICE
OF FIRST ANNUAL GENERAL MEETING |
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| Notice
is hereby given that First Annual General Meeting of the Shareholders of
Rafhan Best Foods |
|
| Ltd.,
will be held on Monday, March 1, 1999 at 11 a.m. at the Overseas Investors
Chamber of |
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| Commerce
and Industry's Hall, Talpur Road, Karachi to transact the following business: |
|
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| 1)
To receive, consider and adopt the Audited Accounts of the Company for the
year ended |
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| September
30, 1998 together with the Reports of the Auditors and Directors thereon. |
|
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| 2)
To consider and approve dividend payments. |
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| 3)
To appoint auditors for the year ending September 30, 1999 and fix their
remuneration. The |
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| present
auditors Messrs Ford, Rhodes, Robson, Morrow, Chartered Accountants, retire |
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| and
being eligible, offer themselves for reappointment. |
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| 4)
To elect directors of the Company. |
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|
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| All
directors of the company namely: |
|
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| 1.
Mr. Diego Bevilacqua |
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2. Mr. Suleman Daud |
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| 3.
Mr. R. Kenneth Henry |
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4. Mr. John Gorman |
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| 5.
Mr. Ahsan Rashid |
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6. Mr. E.A. Nomani |
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| 7.
Mian Nisar Ahmad Mannoo |
8. Mian Zulfikar Mannoo |
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| 9.
Mian M. Adil Mannoo |
|
10. Mr. Zahid Ali H.
Jamal |
|
|
| shall
retire on March 1, 1999 i.e. the date of the First Annual General Meeting
and, being |
|
| eligible,
offer themselves for re-election. |
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|
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| The
directors have fixed the number of directors to be elected for three years at
the First |
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| Annual
General Meeting at ten. |
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| SPECIAL
BUSINESS |
|
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| 5)
To consider and if thought fit, to approve remuneration payable to Chief
Executive/ |
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| Managing
Director and an employee Director. |
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| 6)
To consider and if thought fit, to approve change of the registered office
from Karachi to |
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| Lahore. |
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| A
statement under section 160 of the Companies Ordinance, 1984 pertaining to
special |
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| business
is attached: |
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| STATEMENT
UNDER SECTION 160 |
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| OF
THE COMPANIES ORDINANCE, 1984 |
|
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| This
statement sets out material facts concerning the Special Business to be
transacted at the |
|
| meeting. |
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| 5.1
Remuneration of Directors |
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| The
shareholders approval will be sought for the payment of remuneration and
provision of |
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| certain
facilities to the Chief Executive and Managing Director, Mr. Suleman Daud and
full |
|
| time
employee director, Mr. Ahsan Rashid, Director Finance & MIS, in
accordance with their |
|
| terms
of appointment with the Company. |
|
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| For
this purpose it is proposed to move following resolution at the meeting. |
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| "RESOLVED that the Company hereby approves and authorizes payments as
remuneration to |
|
| Mr.
Suleman Daud, Chief Executive and Managing Director a sum not exceeding
Rs.2,009,000/- |
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| and
to Mr. Ahsan Rashid, Director Finance & MIS a sum not exceeding
Rs.1,150,000/- for the year |
|
| ended
September 30, 1998 and for subsequent years a sum per annum not exceeding the
said |
|
| amount
with an increase of upto 30% per annum. The specific amount to be determined
by a |
|
| director
authorized by the Board. The company also approves and authorizes the
provision to them of |
|
| transport,
leave encashment, bonus, medical and leave fare facilities for themselves,
their wives |
|
| and
dependent children, and retirement and other benefits in accordance with
their terms and |
|
| conditions
of service with the Company." |
|
|
| "RESOLVED
FURTHER that the Board hereby authorizes Mr. Diego
Bevilacqua, director, to |
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| determine
the specific amount of increase per annum in the case of Mr. Suleman Daud,
and also |
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| authorizes
Mr. Suleman Daud to determine increase in case of Mr. Ahsan Rashid." |
|
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| 6.1
Change of Registered Office |
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| The
shareholders will also be requested to approve change of the registered
office from |
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| Karachi
to Lahore. Company's production facilities and Head Office are located in the |
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| province
of Punjab while registered office is in the province of Sindh. Management of
the |
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| Company
believes that affairs of the Company can be run more economically and
efficiently |
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| if
registered office of the Company is changed. It is, therefore, proposed to
pass the |
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| following
resolution as a "Special Resolution". |
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| "RESOLVED that registered office of the Company be shifted from Finlay
House, 1st Floor, |
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| I.I.
Chundrigar Road, Karachi to 52-km Multan Road, Pernawan, Phool Nagar Lahore |
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| subject
to approval of Corporate Law Authority Islamabad and that the Secretary be,
and is |
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| hereby
authorized to take all appropriate and necessary consequential actions". |
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| NOTES: |
|
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| 1-
The share transfer books of the Company will remain closed from February 24,
1999 to |
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| March
1, 1999 (both days inclusive) and no transfer will be accepted for
registration during |
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| this
period. |
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|
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| 2-
A member entitled to attend, speak and vote at the meeting shall be entitled
to appoint |
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| another
person as his/her proxy to attend, speak and vote instead of him/her, and a
proxy so |
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| appointed
shall have such rights with respect to attending, speaking and voting at the |
|
| meeting
as are available to a member. Proxies in order to be effective must be
received by |
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| the
Company not less than 48 hours before the meeting. A proxy need not be a
member of |
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| the
Company. Form of proxy is enclosed. |
|
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| 3-
Shareholders are requested to notify change of address, if any, immediately. |
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| 4-
Any person interested to contest election to the office of Director whether
he is a retiring |
|
| Director
or otherwise is required to file with the Company, not later than 14 days
before the |
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| date
of the meeting, a notice of his intention to offer himself for. election as a
Director of the |
|
| Company
alongwith his Consent in the prescribed form. |
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By order of the Board |
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|
Saif UIlah Malik |
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| Karachi,
February 05, 1999 |
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Company Secretary |
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|
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| DIRECTORS'
REPORT |
|
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| The
Directors feel great pleasure in presenting their First Report and Audited
Accounts for the year |
|
| ended
September 30, 1998 before the First Annual General Meeting to be held on
March 01,1999. |
|
|
| OPERATING
RESULTS |
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| Through
the order of Honourable High Court of Sindh, dated March 21,1998, the
consumer |
|
| business
of CPC Rafhan Ltd. was transferred to your Company. A brief summary of the
results is as |
|
| follows: |
|
|
|
|
1998 |
|
|
|
Rs.'000' |
|
|
| Profit
for the year before taxation |
|
153,724 |
|
| Taxation |
|
|
55,000 |
|
|
|
|
---------- |
|
| Profit
after taxation |
|
98,724 |
|
| Un-appropriated
profit transferred from CPC Rafhan Ltd. |
261,858 |
|
|
|
|
---------- |
|
|
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|
360,582 |
|
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|
|
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|
| Appropriations |
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| Interim
dividend @ 25% |
|
15,394 |
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| Proposed
final dividend @ 25% |
|
15,394 |
|
|
|
|
---------- |
|
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|
30,788 |
|
|
|
|
---------- |
|
| Un-appropriated
profit carried forward |
|
329,794 |
|
|
|
|
========== |
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| Earning
per share |
|
Rs. 16.03 |
|
|
|
|
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| DIVIDEND |
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| The
directors propose a final dividend @ 25% which, together with interim
dividend @ 25% already |
|
| paid,
makes total dividend for the year as 50%. |
|
|
| DIRECTORS |
|
| Messrs.
F.J. Kocun, Mr. Rashid Ali, and Sh. Gulzar Hussain, nominee directors of CPC
International, |
|
| USA
resigned as directors of the Company during the year and Mr. R. Kenneth
Henry, Mr John |
|
| Gorman
and Mr. Ahsan Rashid were appointed in their place. Mr. S.Q.A. Zaidi, nominee
director of |
|
| National
Investment Trust resigned during the year and Mr. Zahid Ali H. Jamal was
appointed in his |
|
| place
as a nominee director of NIT. All directors of the Company shall stand
retired on the date of first |
|
| Annual
General Meeting from the office. The number of directors proposed to be
elected was fixed at |
|
| ten
by Board of Directors in their meeting held on December 29, 1998. |
|
|
| PATTERN
OF SHARE HOLDINGS |
|
| Majority
shares of the Company are held by Bestfoods, USA. The pattern of
shareholdings as at |
|
| September
30, 1998 is provided on page 34. |
|
|
| COMPLIANCE
WITH YEAR 2000 |
|
| Company
has a comprehensive plan to address the year 2000 issue. We have already
completed |
|
| conversion
of the PC based applications and are currently working on our AS/400
applications |
|
| which
are expected to be Year 2000 compliant by June 1999. |
|
|
| AUDITORS |
|
| The
present auditors M/S Ford, Rhodes, Robson, Morrow, Chartered Accountants
retire at the First |
|
| Annual
General Meeting and being eligible offer themselves for reappointment. |
|
|
| For
and on Behalf of the Board, |
|
|
| SULEMAN
DAUD |
|
| Chief
Executive & Managing Director |
|
December 29, 1998. |
|
|
|
| CHIEF
EXECUTIVE'S REVIEW |
|
|
| I
am pleased to share excellent results we achieved during the year ended
September 30, 1998 |
|
| which
was our first year of operation as an independent consumer food company. The
consumer |
|
| business
of CPC Rafhan Ltd. was transferred to Rafhan Best Foods Ltd., in line with
the CPC |
|
| International's
decision to spin-off its industrial operation. In Pakistan, the Scheme of
Bifurcation |
|
| was
approved by the Honourable High Court of Sindh on March 21,1998. |
|
|
| OPERATING
RESULTS |
|
| 1998
was a challenging and demanding year. We successfully completed lengthy
demerger |
|
| process,
fulfilled all legal formalities to establish a new company, and built a team
of high caliber |
|
| professionals.
Meanwhile, we achieved an unprecedented business growth inspite of tough |
|
| economic
environment. |
|
|
| Our
sales grew by 27%, primarily as a result of volume growth in all product
categories. Our dessert |
|
| business
was under pressure due to Government's restriction on marriage parties.
However, we |
|
| were
able to counter this set-back with aggressive promotional activities and
introduction of new |
|
| products.
Our Dextrose, Oil and Knorr categories registered a record growth, which
indicates |
|
| growing
consumer acceptance of Rafhan, Energile and Knorr brands. |
|
|
| We
improved Gross Profit margins by 2% of Sales inspite of higher cost of local
and imported raw |
|
| materials
as a result of significant increase in utility rates and devaluation of Pak
rupee. We made |
|
| concerted
efforts to improve margins through better production efficiencies and
reduction in |
|
| packaging
material cost. |
|
|
| A
record volume growth, reduction in cost of sales and effective control on
operating expenses |
|
| resulted
in 57% growth in Operating Profits. |
|
|
| RETAIL
BUSINESS |
|
| An
aggressive sales growth was achieved through expansion of our distribution
coverage, re- |
|
| structuring
of sales force, and implementation of performance based sales incentive plan.
We also |
|
| subdivided
our distribution network in major cities to further improve product
availability. In addition, |
|
| we
launched several new products to cater local eating habits and new consumer
segments, which |
|
| include
KNORR Tomato Ketchup, FIESTA Dextrose powder, BEST FOODS Sandwich spreads, |
|
| SKIPPY
Ready-to-Eat Jelly, KNORR Pulao cubes, RAFHAN Canola and Sunflower oils. We
have |
|
| continued
our efforts to build consumer franchise for our brands through aggressive and
innovative |
|
| consumer
promotions and marketing programs. |
|
|
| CATERPLAN
BUSINESS |
|
| Our
Caterplan business also achieved healthy growth during the year. The recent
entry of |
|
| International
Chain Accounts in Pakistan offers us tremendous business opportunities. There
is a |
|
| rapid
growth in number of outlets of all major International fast food chains
including KFC, Pizza Hut |
|
| and
McDonalds. We are well positioned to capitalize on this opportunity due to
our strong business |
|
| relationship
with these international chains in other markets, relevant product range and
excellent |
|
| R&D
resources. We believe that there is a tremendous growth potential for this
business segment |
|
| due
to "out-of-home eating" trend and expansion of international
fast-food restaurants. We are |
|
| convinced
that we can successfully localize global concepts to meet the needs of
catering industry. |
|
|
| FUTURE
PROSPECTS |
|
| The
declining consumer purchasing power, major reduction in trade liquidity and
rapid increase in |
|
| cost
of sales are major obstacles for our business growth. Inspire of these
challenges, our company |
|
| plans
to achieve aggressive business growth in future. |
|
|
| We
intend to achieve superior business results by introducing innovative and
high consumption |
|
| new
products, consolidating our manufacturing facilities and further improving
product availability. |
|
| We
will increase consumer demand for our products through effective marketing
programs and |
|
| continue
to make focused efforts to accelerate growth in our Caterplan and Export
businesses. |
|
|
| We
are confident that InshAIlah we will maintain our business growth momentum
and increase |
|
| shareholders'
value by taking advantage of our core strengths. |
|
|
| SULEMAN
DAUD |
|
| Chief
Executive & Managing Director |
|
December 29, 1998. |
|
|
|
| AUDITORS'
REPORT TO THE MEMBERS |
|
|
| We
have audited the annexed Balance Sheet of Rafhan Best Foods Limited, as at
September |
|
| 30,1998
and the related Profit and Loss Account and Statement of Sources and
Application of |
|
| Funds,
together with the notes forming part thereof, for the year then ended and we
state that |
|
| we
have obtained all the information and explanations which to the best of our
knowledge and |
|
| belief
were necessary for the purposes of our audit and, after due verification
thereof, |
|
| we
report that: |
|
|
| (a)
in our opinion, proper books of account have been kept by the Company as
required by |
|
| the
Companies Ordinance, 1984; |
|
|
| (b)
in our opinion - |
|
|
| i)
the balance sheet and the 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
stated in Note No. 3; |
|
|
| 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 sources
and |
|
| application
of funds, together with the notes forming part thereof, give the information |
|
| required
by the Companies Ordinance, 1984, in the manner so required and respectively |
|
| give
a true and fair view of the state of the company's affairs as at September
30, 1998 |
|
| and
of the profit and the changes in sources and application of funds for the
year then |
|
| ended; and |
|
|
|
| (d)
in our opinion Zakat deductible at source under the Zakat and Ushr Ordinance
1980, |
|
| was
deducted by the company and deposited in the Central Zakat Fund established |
|
| under
Section 7 of that Ordinance. |
|
|
| Lahore |
|
|
Ford, Rhodes, Robson, Morrow |
|
| December
29, 1998 |
|
Chartered Accountants |
|
|
|
| BALANCE
SHEET AS AT SEPTEMBER 30, 1998 |
|
|
|
|
|
NOTES |
1998 |
|
|
|
|
|
Rs.'000' |
|
| TANGIBLE
FIXED ASSETS |
|
| Operating
fixed assets |
|
4 |
192,125 |
|
| Capital
work-in- progress |
|
5 |
5,891 |
|
|
|
|
---------- |
|
|
|
|
198,016 |
|
|
|
|
|
| LONG
TERM LOANS |
|
6 |
97 |
|
|
|
|
| CURRENT
ASSETS |
|
|
|
|
|
|
| Stores
and spares |
|
|
7 |
11,766 |
|
| Stock
in trade |
|
|
8 |
173,060 |
|
| Trade debts |
|
|
9 |
107,912 |
|
| Advances,
deposits, prepayments |
|
|
|
| and
other receivables |
|
|
10 |
90,302 |
|
| Cash
and bank balances |
|
|
11 |
47,198 |
|
|
|
|
|
---------- |
|
|
|
|
|
430,238 |
|
|
|
|
|
|
|
| LESS:
CURRENT LIABILITIES |
|
|
|
| Current
liability of obligation |
|
|
|
| under
finance lease |
|
14 |
155 |
|
| Deposits,
creditors and |
|
| accrued
liabilities |
|
12 |
124,467 |
|
| Provision
for taxation |
|
|
52,662 |
|
| Dividends |
|
|
|
13 |
22,104 |
|
|
|
|
---------- |
|
|
|
199,388 |
|
|
|
---------- |
|
| WORKING
CAPITAL |
|
|
|
230,850 |
|
|
|
---------- |
|
| TOTAL
CAPITAL EMPLOYED |
|
|
|
428,963 |
|
|
|
|
| LESS:
LONG TERM AND DEFERRED LIABILITIES |
|
|
| Deferred
taxation |
|
|
|
11,919 |
|
| Obligation
under finance lease |
|
14 |
278 |
|
|
|
|
---------- |
|
|
|
|
12,197 |
|
|
|
|
---------- |
|
| NET
CAPITAL EMPLOYED |
|
|
416,766 |
|
|
========== |
|
|
| REPRESENTED
BY: |
|
|
|
| SHARE
CAPITAL AND RESERVES |
|
| Share
Capital |
|
15 |
61,576 |
|
| Reserves |
|
|
16 |
355,190 |
|
|
|
|
|
|
|
| CONTINGENCIES
& COMMITMENTS |
|
17 |
- |
|
|
---------- |
|
|
|
416,766 |
|
|
|
========== |
|
|
| The
annexed notes form an integral part of their accounts. |
|
|
|
|
Suleman Daud |
|
|
|
Chief Executive & Managing Director |
|
|
|
Ahsan Rashid |
|
|
Mian Nisar Ahmad Mannoo |
|
|
Director |
|
|
Director |
|
|
|
|
| PROFIT
AND LOSS ACCOUNT |
|
| FOR
THE YEAR ENDED SEPTEMBER 30, 1998 |
|
|
|
|
NOTES |
1998 |
|
|
|
|
Rs.'000' |
|
|
| Sales |
|
|
18 |
953,016 |
|
| Less
Cost of sales |
|
|
19 |
633,416 |
|
|
|
|
|
---------- |
|
| Gross
profit |
|
|
|
319,600 |
|
|
|
|
| Less: |
Selling and marketing
expenses |
20 |
111,774 |
|
|
General and
administrative expenses |
21 |
41,936 |
|
|
Financial expenses |
|
22 |
1,993 |
|
|
Other charges |
|
23 |
11,945 |
|
|
|
|
---------- |
|
|
|
|
167,648 |
|
|
|
|
---------- |
|
|
|
|
151,952 |
|
|
|
|
| Add:
Other income |
|
|
24 |
1,772 |
|
|
|
|
|
---------- |
|
| Profit
before taxation |
|
|
|
153,724 |
|
|
|
|
|
|
| Taxation |
|
|
25 |
55,000 |
|
|
|
|
|
---------- |
|
| Profit
after taxation |
|
|
|
98,724 |
|
|
|
|
|
|
| Unappropriated
profit brought forward |
|
261,858 |
|
|
|
|
|
---------- |
|
|
|
|
|
360,582 |
|
| Appropriations: |
|
|
|
| Interim
dividend @ 25% |
|
|
|
15,394 |
|
| Proposed
final dividend @ 25% |
|
|
15,394 |
|
|
|
|
|
---------- |
|
|
|
|
|
30,788 |
|
|
|
|
|
---------- |
|
| Unappropriated
profit carried forward |
|
329,794 |
|
|
|
|
|
========== |
|
|
|
|
|
|
Suleman Daud |
|
|
|
|
Chief Executive & Managing Director |
|
|
|
|
|
|
|
|
|
Ahsan Rashid |
|
|
Mian Nisar Ahmad Mannoo |
|
|
Director |
|
Director |
|
|
|
|
|
|
|
|
| STATEMENT
OF SOURCES AND APPLICATION |
|
|
| OF
FUNDS (CASH FLOW) |
|
|
|
| FOR
THE YEAR ENDED SEPTEMBER 30, 1998 |
|
|
|
|
|
|
|
|
1998 |
|
|
|
|
Rs.'000' |
|
|
|
|
| CASH
FLOW FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
| Funds
provided from operations: |
|
|
|
|
|
|
| Profit
before taxation |
|
|
153,724 |
|
| Adjustment
for: |
|
|
|
|
| Depreciation |
|
|
32,792 |
|
| Provision
for doubtful debts |
|
|
720 |
|
| Mark
up on finance lease |
|
|
822 |
|
| (Profit)
on sale of fixed assets |
|
|
(141) |
|
|
|
