Khairpur Sugar Mills Limited - Annual Reports 2003



KHAIRPUR SHUGAR MILLS LIMITED
ANNUAL REPORT 2003

COMPANY PROFILE
NOTICE OF ANNUAL GENERAL MEETING
DIRECTOR'S REPORT
CORPORATE GOVERNANCE
PATTERN OF SHAREHOLDING
AUDITORS' REVIEW REPORT TO THE MEMBERS
ON STATEMENT OF COMPLIANCE WITH BEST
PRACTICES OF CODE OF CORPORATE GOVERNANCE
AUDITORS¹ REPORT
BALANCE SHEET
PROFIT AND LOSS
CASH FLOW STATEMENT
STATEMENT OF CHANGES IN EQUITY
NOTES TO THE ACCOUNTS

COMPANY PROFILE

BOARD OF DIRECTORS	Muhammad Mubeen Jumani (Chief Executive)
	Faisal Mubeen Jumani
	Muhammad Bux
	Ghulam AN
	Ahmed Ali
	Fahad Mubeen Jumani
	Mrs. Yasmeen
	Al-Malik Khoja (NIT Nominee)

COMPANY SECRETARY	Syed Jamil Ahmed Rizvi

BANKERS	United Bank Limited
	Allied Bank of Pakistan
	Habib Bank Limited
	National Bank of Pakistan
	Muslim Commercial Bank
	PICIC Commercial Bank
	PICIC Limited

AUDITORS	Ebrahim & Co.,
	Chartered Accountants,
	Lakson Square Building No. 1,
	Block C, 2^nd Floor, Sarwar Shaheed Road,
	Karachi

AUDIT COMMITTEE	Muhammad Bux - Chairman
	Ahmed Ali - Member
	Ghulam Ali Jumani - Member

LEGAL ADVISOR	Mirza Ghulam Dastagir (Advocate)
	Abdullah Haroon Road, Karachi

REGISTERED OFFICE	Jumani Arcade, ST-10-D/14,
	Main University Road,
	Gulshan-e-lqbal, Karachi

FACTORY	Naroo Dhoro
	Taluka Kot Diji,
	District Khairpur, Sindh.

NOTICE OF ANNUAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that the 14^th Annual General Meeting of KHAIRPUR SUGAR

MILLS LIMITED will be held at the Registered Office of the Company at Karachi on
Wednesday, December 31, 2003 at 4:30 P.M. to transact the following business:

1. To confirm the minutes of the 13^tn Annual General Meeting held on February 28,
2003

2. To receive, consider and adopt the Balance Sheet, Profit and Loss Account together
with Directors' and Auditors' report thereon for the year ended September 30, 2003.

3. To appoint auditors to hold office till the conclusion of the next Annual General
Meeting and to fix their remuneration. The present auditors M/S Ebrahim & Co.,
Chartered Accountants, retire and being eligible have offered themselves for
reappointment.

4. To transact any other business with the permission of the Chair.

December 8, 2003 BY ORDER OF THE BOARD

Karachi.

NOTES:

1. The Share Transfer Books o< the Company will remain closed from December 29, 2003 to January
10, 2004 (both days inclusive).

2. A member entitled to attend and vote at the Annual General Meeting may appoint another member
as his/her proxy to attend the meeting and vote on his/her behalf. Proxy in order to be effective
must be received at the Registered Office of the Company at least 48 hours before the meeting.

3. Shareholders are requested to immediately notify the Company of any change in their address.


DIRECTOR'S REPORT TO MEMBERS

On behalf of the Board of Directors of your company I feel pleasure to present the 14^th Annual Report of
your Company togetherwith audited accounts for the year ended September 30, 2003:

FINANCIAL RESULTS:		2002-2003	2001 - 2002
		Rupees	Rupees
The Profit and Loss Appropiation Account ia as follows:
Operating Profit/(Loss)		39,101,217	-11,530,956
Workers' Profit Participation Fund		-6,643,249	-
Financial Charges		-6,413,628	-52,347,459
Extra Ordinary Item		100,177,390	-
Provision for Taxation		-1,696,357	-
Accumulated Losses brought forward		-523,627,201	-459,748,786
Accumulated Losses carried over to balance sheet		-399,101,828	-523,627,201
PERFORMANCE REVIEW:
Operating results during the Season 2002-2003 are as under:
		2002-2003	2001 - 2002
Season Started		Nov 24, 2002	Nov 15, 2001
Season Ended		Aug 29, 2003	Apr 04, 2002
Number of Days worked		157	141
Sugarcane Cruhsing (MT)		512,870.57	446,652.81
Recovery (%) - Sugar		8.32	8.74
Recovery (%) - Moiasses		5.867	5.153
Production - Sugar (MT)		42,632.50	39,039.50
Production - Molasses (MT)		30,076.64	23,014.56

The year undor review was better than last year as far as sugarcane crushing is concerned, which was
higher by 15% as compared to last year (2002: higher by 5.7%) showing an increase of 9.2% in sugar
production as compared to last year.

Your mills utilized 81.67% (2002: 79.19%) capacity. The production of Molasses also increased by 31% as
compared to last year.

The Company registered revenue at Rs.652.426 million as compared to the revenue amounting to Rs.654.266
million in the preceding year. This shows 0.28% decrease. Cost of Sales arrived at Rs.593.897 million as
against Rs. 641.690 in the previous year showing a decrease by 7.45%. Net loss in the previous year was
Rs.63.878 million, which by Grace of Allah, has been converted in Net Profit of Rs. 26.044 million before
extra ordinary item which shows continued effort of the directors of your company. Cost of debt servicing
has also decreased during the year under review from Rs.45.934 million in 2002 to Rs.6.413 million, which
reoresents 87.75% improvement.

Directors of your company are hopeful to steer the company in the best possible way to meet the aspiration
of a!! the stakeholders. An amicable and beneficial compromise settlement has been made with BEL in the
Sind High Court.

Incidence of profit during the year under review can be attributed to the following:

• Lower rates of sugarcane procurement.

• Re-scheduling of loans, resulting in unusual income of Rs. 100 Million.

• No mark-up has been charged on the rescheduled loans.

DIVIDEND:

Due to poor financial conditions and severe liquidity crunch compounded by persistent crisis in Sugar
industry resulting in huge accumulated losses the Directors of your Company in compliance with the
compromise decree signed with PICIC and other DFIs have considered it prudent not to pay dividend.

EARNING PER SHARE:

The eamings/(loss) per share for the year was as follows after provision of taxation:

		2002-2003	2001-2002
		Rupees	Rupees
Basic and diluted		7.77	-3.99

FUTURE PROSPECTS:

The management of your Company is continuously making effort to recoup the accumulated losses, which
is evident from the above tabulations. Piospects of Sugarcane availability is increasing as the area of
cultivation thereof in the vicinity of the mills has been considerably increased. We have started crushing
of sugarcane from November 20, 2003 and we expect to produce about 45,000M.T. of Sugar and 25,000
M.T. of Molasses during the season 2003-04.

PATTERN OF SHAREHOLDING:

The pattern of shareholding on prescribed format is included in this report.

AUDITORS:

The auditors of the Company, M/s. Ebrahim & Co., Chartered Accountants, retire and being eligible offer
themselves for reappointment. The Audit Committee recommends the appointment of M/s. Ebrahim & Co.,
Chartered Accountant as auditors for the year ending September 30,2004.

AUDITORS' OBSERVATION:

Provision of gratuity was not carried out on actuarial basis because of reason given in Note No 11.1 to the
annexed audited accounts. The management is now considering obtaining the valuation for the ensuing
year.

The ability of the Company to continue as a going concern is dependent on the profitability of the project
and ability of the management to repay the debts of the Company as per rescheduled terms, as more fully
explained in Notes: 9.1, 10.1, 10.2 & 10.3 of the notes to the accounts. The management's continued efforts
have resulted in net profits of more than Rs.26 million (before unusual item) during the year under review.
The management is of the firm opinion that the Company will be able to earn profit as mentioned above
and shall be able to repay its debts as per rescheduled terms.

In the opinion of the management the available tax losses would be determined and no charge for current
and deferred tax shall arise.

INDUSTRIAL RELATIONS:

Relationship of labour and management has remained quite cordial during the year under review. The Board
of Directors appreciates the spirit of understanding and co-operation shown by workers. I am thankful to
company executives, officers and staff members and place on record my appreciation for the responsibility
and devotion to duty shown by them. I am also thankful to our dealers, suppliers, shareholders and bankers
for their support and confidence.

BOARD MEETINGS:

During the year under review six (6) meetings of the Board of directors were held. Attendance by each
director is as follows:

Name of Director		No. of Meeting Attended
Mr. Muhammad Mubeen JumaniMr.		6
Muhammad Bux		6
Mr. Ahmed Ali		6
Mr. Fahad Mubeen Jumani		6
Mr. Ghulam Ali		4
Mrs. Yasmeen		1
Mrs. Afroze		Nil
Mr. Faisal Mubeen Jumani from Mar-2003		3
Mr. Syed Muzaffar Shah (NIT Nominee)		2
From Oct-2002 to Jan-2003.
Mr. Al Malik Khoia (NIT Nominee) from April 2003		2

ON BEHALF OF BOARD OF DIRECTORS

Karachi, dated: MUHAMMAD MUBEEN JUMANI

December 8, 2003. Chief Executive/Chairman

CORPORATE GOVERNANCE

The Directors of your Company are pleased to report that your Company has taken necessary steps to
comply with the provision of the Code of Corporate Governance as incorporated in the Listing Regulation
of the Karachi Stock Exchange.

The Directors of your Company are pleased to state, in compliance of the best practices under the Code
of Corporate Governance, that:

1. The annexed Financial Statements prepared by the management of your Company, present fairly
its state of affairs, result of its operations, cash flow and changes in its equity.

2. Proper books of account of the Company have been maintained by the Company.

3. Appropriate accounting policies have been applied in preparation of the financial statements and
accounting estimates are based on reasonable and prudent judgment.

4. International Accounting Standards, as aoplicable in Pakistan, have been followed in preparation
of financial statements and departure therefrom ha been adequately disclosed.

5. The system of inte^a! control is sound in design and have effectively implemented and monitored.
It is being continuously reviewed and weakness, if any, will be removed.

6. There are no significant doubts upon the Company's ability to continue as a going concern.

7. There has been no material departure from the best practices of the Corporate Governance, as
detailed in the listing regulations.

8. Sales of manufactured goods has decreased from Rs.654.266 million in 2002 to Rs. 625.425 million