| SHEEZAN INTERNATIONAL LIMITED |
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| ANNUAL REPORT 2003 |
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| Directors' Report
to the Members |
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| We are pleased to
present the 40* Annual Report of |
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| Shezan
International Limited together with the Audited |
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| Accounts for the
year ended June 30, 2003. |
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| The year 2002-2003
was a challenging year for the |
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| company in view of
the country's economic environment. |
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| We are facing all
these challenges and are taking |
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| necessary action to
maintain our position as one of the |
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| leading processors
of fruits and vegetables in the |
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| country. |
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| Our efforts are
based on two fronts i.e. maintain our |
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| market share and at
the same time to get fair margin |
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| on our products. We
are also trying to achieve these |
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| objectives by
diversifying into new products in order to |
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| enhance the sales
and profitability of the company. |
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| There is an open
competition in the market due to new |
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| entrants and
imported products, since our country is |
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| signatory to WTO,
it is expected that the duties of |
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| finished products
would be gradually reduced and |
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| because of this we
have to gear up our marketing team |
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| and make all out
efforts to maintain our sales and |
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| profitability. |
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| 1 am pleased to
inform our shareholders that inspite of |
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| above scenario our
sales figures increased from |
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| Rs. 772.1 86
million to Rs. 833.991 million during this year. |
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| Financial results: |
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| Our profit for the
year ended June 30, 2003 was less |
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| than last year.
There was a slight decrease which was |
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| primarily due to
substantial increase in the selling and |
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| distribution
expenses which were necessary to maintain |
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| market share of our
products. |
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|
| Six Years Review at
a Glance |
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|
Year 1998 |
Year 1999 |
Year 2000 |
Year 2001 |
Year 2002 |
Year 2003 |
|
| Income |
|
|
| Sales |
|
591,166 |
657,119 |
695,179 |
738,391 |
772,186 |
833,991 |
|
| Others |
|
14,144 |
5,847 |
3,643 |
32,064 |
17,184 |
24,225 |
|
|
605,310 |
662,966 |
698,822 |
770,455 |
789,370 |
858,216 |
|
| Expenditure |
|
|
|
| Cost of sales |
|
468,348 |
517,477 |
528,989 |
572,604 |
598,075 |
650,198 |
|
| Administrative,
selling and general |
92,362 |
93,552 |
100,569 |
110,894 |
114,246 |
132,870 |
|
| Financial |
|
953 |
898 |
1,995 |
2,857 |
3,270 |
3,019 |
|
| Others |
|
15,003 |
14,290 |
16,333 |
17,775 |
18,592 |
19,362 |
|
|
576,666 |
626,217 |
647,886 |
704,130 |
734,183 |
805,449 |
|
| Profit before
taxation |
28,644 |
36,749 |
50,936 |
66,325 |
55,187 |
52,767 |
|
| Taxation |
|
6,500 |
10,500 |
19,500 |
14,800 |
7,951 |
11,359 |
|
| Profit after
taxation |
22,144 |
26,249 |
31 ,436 |
51,525 |
47,236 |
41 ,408 |
|
| Paid-up capital |
|
50,000 |
50,000 |
50,000 |
50,000 |
50,000 |
50,000 |
|
| Reserves &
unappropriated profits |
106,870 |
108,119 |
109,555 |
131,080 |
148,316 |
162,224 |
|
| Shareholders equity |
156,870 |
158,119 |
159,555 |
181,080 |
198,316 |
212,224 |
|
| Break up value per
share in Rupees |
31.38 |
31.62 |
31.91 |
36.22 |
39.66 |
42.44 |
|
| Earnings per share
in Rupees |
4.43 |
5.25 |
6.29 |
10.31 |
9.45 |
8.28 |
|
| Cash distribution
per share in Rupees |
3.5 |
5 |
6 |
6 |
6 |
5.5 |
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| Details of
Directors, their Spouses and Mine |
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Children etc. |
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| Name of Director |
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|
Relationship |
Percentage |
Shares |
|
| Mr. Muneer Nawaz |
|
Self |
7.12% |
356,117 |
|
| Mrs. Abida Muneer
Nawaz |
|
Wife |
1 .00 % |
50,105 |
|
| Miss. Annum
Shahnawaz |
|
Daughter |
1.31% |
65,500 |
|
| Mr. Saifi Chaudhry |
|
Self |
0.21% |
10,500 |
|
| Mrs. Majeeda Begum |
|
Self |
0.16% |
8,249 |
|
| Mr. Mahmood Nawaz |
|
Self |
9.34% |
467,107 |
|
| Mrs. Bushra Mahmood
Nawaz |
|
Wife |
0.07% |
3,600 |
|
| Mr. C. M. Khalid |
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|
Self |
1.11% |
55,530 |
|
| Mrs. Amtul Hai
Khalid |
|
Wife |
4.29% |
214,506 |
|
| Mr. M. Naeem |
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|
Self |
0.28% |
14,150 |
|
| Mrs. Amtul Bari
Naeem |
|
Wife |
3.31% |
165,811 |
|
| Mr. Muhammad Khalid |
|
Self |
0.02% |
1,000 |
|
| Mrs. Surriya Khalid |
|
Wife |
0.01% |
500 |
|
| Mr. Muhammad Nawaz
Tishna |
|
Self |
- |
N.I.T. Nominee |
|
| Mr. Muhammad Asif |
|
Self |
- |
N.I.T. Nominee |
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| Pattern of
Shareholdings |
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| as at June 30, 2003 |
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|
Number of Shareholders |
From |
Shareholdings To |
Shares Held |
|
|
73 |
1 |
100 |
7,300 |
|
|
152 |
101 |
500 |
63,800 |
|
|
46 |
501 |
1,000 |
41,500 |
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|
50 |
1,001 |
5,000 |
120,500 |
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|
8 |
5,001 |
10,000 |
63,349 |
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|
2 |
10,001 |
15,000 |
25,150 |
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|
3 |
15,001 |
20,000 |
51,000 |
|
|
2 |
20,001 |
25,000 |
45,725 |
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|
2 |
25,001 |
30,000 |
55,100 |
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|
2 |
30,001 |
35,000 |
65,900 |
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|
1 |
40,001 |
45,000 |
43,200 |
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|
2 |
50,001 |
55,000 |
105,030 |
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|
1 |
55,001 |
60,000 |
55,530 |
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|
2 |
65,001 |
70,000 |
133,180 |
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|
2 |
75,001 |
80,000 |
154,200 |
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|
1 |
95,001 |
100,000 |
99,900 |
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2 |
100,001 |
105,000 |
204,500 |
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|
1 |
105,001 |
110,000 |
109,625 |
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|
1 |
165,001 |
170,000 |
165,811 |
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|
3 |
210,001 |
215,000 |
635,906 |
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|
1 |
355,001 |
360,000 |
356,117 |
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|
1 |
465,001 |
470,000 |
467,107 |
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|
1 |
,930,001 |
1 ,935,000 |
1 ,930,570 |
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|
359 |
|
5,000,000 |
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| Balance Sheet |
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| as at June 30, 2003 |
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|
Notes |
2003 |
2002 |
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|
(Rupees in thousands) |
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| NON-CURRENT ASSETS |
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| Tangible fixed
assets |
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|
|
| Operating fixed
assets |
|
4 |
66,745 |
51,924 |
|
| Capital work in
progress |
|
5 |
23,747 |
17,599 |
|
| Investments |
|
6 |
21 ,650 |
20,625 |
|
| Long term deposits |
|
7 |
4,160 |
2,792 |
|
|
|
|
116,302 |
92,940 |
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| CURRENT ASSETS |
|
|
|
|
| Stores and spares |
|
8 |
796 |
1,020 |
|
| Stock in trade |
|
9 |
214,560 |
199,991 |
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| Trade debts |
|
10 |
51 ,952 |
31,624 |
|
| Advances, deposits,
prepayments and other receivables |
11 |
48,175 |
21,283 |
|
| Cash and bank
balances |
|
12 |
17,971 |
27,550 |
|
|
|
|
333,454 |
281 ,468 |
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| LESS: CURRENT
LIABILITIES |
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|
|
|
| Short term running
finances |
|
13 |
20,867 |
- |
|
| Current maturity of
obligations under finance lease |
17 |
1 1 ,494 |
7,354 |
|
| Creditors, accrued
and other liabilities |
14 |
146,343 |
119,219 |
|
| Proposed dividend |
|
15 |
27,500 |
30,000 |
|
| Taxation |
|
|
10,000 |
9,000 |
|
|
|
|
216,204 |
165,573 |
|
| WORKING CAPITAL |
|
|
117,250 |
115,895 |
|
| TOTAL CAPITAL
EMPLOYED |
|
|
233,552 |
208,835 |
|
| NON-CURRENT
LIABILITIES |
|
|
|
| Deferred taxation |
|
16 |
3,310 |
1,951 |
|
| Obligations under
finance lease |
|
17 |
18,018 |
8,568 |
|
|
|
|
21 ,328 |
10,519 |
|
| NET CAPITAL
EMPLOYED |
|
|
212,224 |
198,316 |
|
| REPRESENTED BY: |
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| SHARE CAPITAL AND
RESERVES |
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| Share capital |
|
18 |
50,000 |
50,000 |
|
| General reserve |
|
|
155,000 |
145,000 |
|
| Unappropriated
profits |
|
|
7,224 |
3,316 |
|
|
|
|
212,224 |
198,316 |
|
| CONTINGENCIES AND
COMMITMENTS |
19 |
- |
- |
|
|
|
|
212,224 |
198,316 |
|
|
| Cash Flow Statement |
|
| for the year ended
June 30, 2003 |
|
|
2003 |
2002 |
|
|
(Rupees in thousands) |
|
| Cash flow from
operating activities |
|
| Funds provided from
operations: |
|
| Adjustments for: |
|
| Depreciation |
|
10,760 |
9,325 |
|
| Interest/mark-up |
|
2,276 |
2,641 |
|
| Profit on bank
deposits |
|
-218 |
-672 |
|
| Dividend income |
|
-20,125 |
-15,037 |
|
| Provision for
doubtful debts |
|
- |
-115 |
|
| Gain on
remeasurement of investment - Available for Sale |
-1,025 |
- |
|
| Deterioration in
value of shells, pallets and barrels |
|
2,790 |
2,514 |
|
| Gain on disposal of
operating fixed assets |
|
-688 |
-435 |
|
|
6230 |
1779 |
|
| Operating profit
before working capital changes
46,537 53,408 |
46537 |
53408 |
|
| (IncreaseJ/decrease
in current assets: |
|
| Stores and spares |
|
224 |
94 |
|
| Stock in trade |
|
-17,359 |
-21,679 |
|
| Trade debts |
|
-20,328 |
-14,534 |
|
| Advances, deposits,
prepayments and other receivables |
|
(1 1 ,972) |
7,673 |
|
|
49435 |
28446 |
|
| lncrease/(decrease)
in current liabilities: |
|
| Short term running
finances |
|
20,867 |
-5,257 |
|
| Creditors, accrued
and other liabilities |
|
26,990 |
9,154 |
|
| 47,857 3,897 |
|
| Cash generated from
operations:
44,959 28,859 |
|
| Interest/mark-up
paid
(2,157) (2,641) |
|
| Profit on bank
deposits
318 861 |
|
| Income tax
paid
(23,642) (15,469) |
|
| Net cash flow from
operating activities
19,478 11,610 |
|
| Cash flow from
investing activities
, -------------- ,
-------------- |
|
| Purchase of
operating fixed assets |
|
-4,129 |
-8,107 |
|
| Capital work in
progress |
|
-3,767 |
-13,524 |
|
| Sale proceeds from
disposal of operating fixed assets |
|
1,083 |
1,003 |
|
| Dividend received |
|
20,162 |
40,000 |
|
| Long term deposits |
|
(1 ,783) |
-477 |
|
| Net cash generated
from investing activities
1 1 ,566 1 8,895 |
|
| Cash flow from
financing activities |
|
| Repayment of
obligations under finance lease |
|
-10,637 |
-7,834 |
|
| Dividend paid |
|
-29,986 |
-29,996 |
|
| Net cash used in
financing activities
(40,623) (37,830) |
|
| Net decrease in
cash and cash equivalents
(9,579) (7,325) |
|
| Cash and cash
equivalents at the beginning of the year
27,550 34,875 |
|
| Cash and cash
equivalents at the end of the year
1 7,971 27,550 |
|
|
| Profit and Loss
Account |
|
|
| for the year ended
June 30, 2003 |
|
|
|
|
Notes |
2003 |
2002 |
|
|
|
|
(Rupees in thousands) |
|
| Sales |
|
20 |
833,991 |
772,186 |
|
| Cost of sales |
|
21 |
650,198 |
598,075 |
|
| Gross profit |
|
|
183,793 |
174,111 |
|
| Administrative and
general expenses |
|
22 |
32,038 |
29,836 |
|
| Selling and
distribution expenses |
|
23 |
100,832 |
84,410 |
|
|
|
|
132,870 |
114,246 |
|
| Operating profit |
|
|
50,923 |
59,865 |
|
| Other income |
|
24 |
24,225 |
17,184 |
|
|
|
|
75,148 |
77,049 |
|
| Financial charges |
|
25 |
3,019 |
3,270 |
|
| Other expenses and
provisions |
|
26 |
19,362 |
18,592 |
|
|
|
|
22,381 |
21,862 |
|
| Profit before
taxation |
|
|
52,767 |
55,187 |
|
| Taxation |
|
27 |
1 1 ,359 |
7,951 |
|
| Profit after
taxation |
|
|
41 ,408 |
47,236 |
|
| Unappropriated
profits brought forward |
|
3,316 |
6,080 |
|
| Profit available
for appropriation |
|
|
44,724 |
53,316 |
|
| Appropriations: |
|
|
|
|
| Transfer to General
reserve |
|
|
10,000 |
20,000 |
|
| Proposed dividend @
Rs. 5.57- per share (2002: @ Rs. 6/- per share) |
27,500 |
30,000 |
|
|
|
|
37,500 |
50,000 |
|
| Unappropriated
profits carried forward |
|
|
7,224 |
3,316 |
|
| Earnings per share
in Rupees - Basic |
28 |
8.28 |
9.45 |
|
|
| Notes to the
Accounts |
|
| for the year ended
June 30,2003 |
|
| 1. THE COMPANY AND ITS OPERATIONS |
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| The Company is a
Public Limited Company incorporated in Pakistan and is listed on Lahore and
Karachi |
|
| Stock Exchanges.
The registered office of the company is situated at Bund Road, Lahore,
Pakistan. It is |
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| engaged in the
manufacturing, trading and sale of juices, pickles, preserves and flavorings
based upon or |
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| derived from fresh
fruits and vegetables. |
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| 2. STATEMENT OF COMPLIANCE |
|
| These financial
statements have been prepared in accordance with the approved accounting
standards as |
|
| applicable in
Pakistan and the requirements of the Companies Ordinance, 1984. Approved
accounting |
|
| standards comprise
of such International Accounting Standards as notified under the provisions
of the |
|
| Companies
Ordinance, 1984. Wherever, the requirements of the Companies Ordinance, 1984
or directives |
|
| issued by the
Securities and Exchange Commission of Pakistan (SECP) differ with the
requirements of these |
|
| standards, the
requirements of Companies Ordinance, 1 984 or the requirements of the said
directives take |
|
| precedence. |
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| 3. SIGNIFICANT ACCOUNTING POLICIES |
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| 3.1 Basis of Measurement: |
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| These accounts have
been prepared under historical cost convention, except for investment
classified |
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| as "available
for sale" which is stated at fair value. |
|
| 3.2 Fixed Assets: |
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| Owned Assets: |
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| Fixed assets are
stated at cost less accumulated depreciation except for freehold land and
capital |
|
| work in progress,
which are stated at cost. |
|
| Depreciation is
calculated using the reducing balance method at rates disclosed in note 4,
which are |
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| considered
appropriate to write off the cost of the assets over their useful lives. |
|
| Full year's
depreciation is charged in the year of addition whereas no depreciation is
charged in the |
|
| year of disposal. |
|
| Leased Assets: |
|
| Leased assets held
under finance lease are stated at cost less accumulated depreciation at the
rates |
|
| and basis
applicable to company owned assets. The outstanding obligations under the
lease less |
|
| finance charges
allocated to future period are shown as liability. The financial charges are
calculated |
|
| at the interest
rates implicit in the lease and are charged to the profit and loss account. |
|
| Repairs and
maintenance are charged to revenue. Material renewals and improvements are
capitalized. |
|
| Gains and losses on
disposal of operating fixed assets are recognized in the profit and loss
account. |
|
| 3.3 Investments: |
|
| Available For Sale: |
|
| All investments are
initially recognized at cost, being the fair value of the consideration given
and |
|
| including
acquisition charges associated with the investment. After initial
recognition, investments, |
|
| which are
classified as "available for sale" are measured at fair value, with
unrealized gains and losses |
|
| on these securities
are recognized in profit and loss account for the year. |
|
| For the investments
actively traded in financial markets, fair value is generally determined with
reference |
|
| to Stock Exchange
quoted market bid prices at the close of business on the balance sheet date. |
|
| For investments
where there is no quoted market price, a reasonable estimate of the fair
value is |
|
| determined with
reference to the current market value of another instrument which is
substantially the |
|
| same or is
calculated based on the expected cash flows of the underlying net asset base
of the |
|
| investment. |
|
| All purchases and
sales of investments are recognized on the trade date, which is the date that
the |
|
| company commits to
purchase or sell the investments. |
|
| Investment in
Subsidiary: |
|
| Investment in
subsidiary company is carried at cost as per requirements of IAS-27
"Consolidated |
|
| Financial
Statements and Accounting for Investments in Subsidiaries". |
|
| 3.4 Stores, Spares and Stock in Trade: |
|
| Stocks, stores and
spares are valued at lower of cost or net realizable value except those in
transit, |
|
| which are valued at
invoice value including other charges, if any, incurred thereon. Basis of
determining |
|
| cost is as follows:
- |
|
| Raw materials - Monthly average |
|
| Finished goods - Yearly average |
|
| Mango pulp - Manufacturing cost according to
annual average method |
|
| Bottles - Yearly average |
|
| Shells, pallets and
barrels - Yearly average |
|
| Stores and
spares - Monthly average |
|
| Goods in
transit - Purchase cost |
|
|
| Notes to the
Accounts |
|
| for the year ended
June 30,2003 |
|
| Shells, pallets and
barrels are subject to a deterioration of 20% per annum using the reducing
balance |
|
| method. |
|
| Net realizable
value is determined on the basis of estimated selling price of the product in
the ordinary |
|
| course of business
less costs of completion and costs necessary to be incurred for its sale. |
|
| 3.5 Trade Debts: |
|
| Trade debtors are
carried at invoice amount on transaction date less any estimate for doubtful
receivable. |
|
| Known bad debts are
written off as and when identified. |
|
| 3.6 Cash and Cash Equivalents: |
|
| For the purpose of
cash flow statement, cash and cash equivalents comprise of cheques in hand,
cash |
|
| and bank balances. |
|
| 3.7 Financial Instruments: |
|
| All the financial
assets and financial liabilities are recognized at the time when the company
becomes |
|
| a party to the
contractual provisions of the instruments. The company derecognises a
financial asset |
|
| or a portion of
financial asset when, and only when, the enterprise loses control of the
contractual |
|
| rights that
comprise the financial asset or portion of financial asset. While a financial
liability or part |
|
| of financial
liability is derecognised from the balance sheet when, and only when, it is
extinguished, |
|
| i.e.; when the
obligation specified in the contract is discharged, cancelled or expired. |
|
| Financial assets
are investments, deposits, trade debts, advances, other receivables, cash and
bank |
|
| balances. These are
stated at their nominal values as reduced by the appropriate allowances for |
|
| estimating
irrecoverable amount. |
|
| Financial
liabilities are classified according to the substance of the contractual
arrangements entered |
|
| into. Significant
financial liabilities are short term running finance utilized under mark-up
arrangements, |
|
| creditors, accrued
and other liabilities. Mark-up bearing finances are recorded at the gross
proceeds |
|
| received. Other
liabilities are stated at their nominal value. |
|
| 3.8 Offsetting of Financial Assets and
Financial Liabilities: |
|
| A financial asset
and financial liability is offset and the net amount is reported in the
balance sheet if |
|
| the company has a
legal enforceable right to set off the recognized amounts and intends either
to |
|
| settle on net basis
or to realize the assets and settle the liabilities simultaneously. |
|
| 3.9 Taxation: |
|
| Current: |
|
| Provision for
current taxation is based on taxable income at the current rate of tax after
taking into |
|
| account applicable
tax credits, rebates and exemptions available, if any. |
|
| Deferred: |
|
| Deferred tax is
provided in full using the balance sheet liability method on all temporary
differences |
|
| arising at the
balance sheet date, between the tax bases of the assets and liabilities and
their carrying |
|
| values. Deferred
tax assets are recognized for all deductible temporary differences to the
extent that |
|
| it is probable that
future taxable profits will be available against which the temporary
differences can |
|
| be utilized. |
|
| The carrying
amounts of all deferred tax assets are reviewed at each balance sheet date
and reduced |
|
| to the extent, if
it is no longer probable that sufficient taxable profits will be available to
allow all or |
|
| part of the
deferred tax assets to be utilized. |
|
| The tax rates
enacted at the balance sheet date are used to determine deferred tax. |
|
| 3.10 Revenue
Recognition: |
|
| Sales are recorded
upon dispatch of goods to the customers. However, export goods are considered |
|
| sold when shipped
on board. |
|
| Income from bank
deposits is recognized on accrual basis. |
|
| Dividend income is
recognized when right to receive is established. |
|
| 3.1 1 Retirement Benefits: |
|
| The Company
operates a recognised provident fund scheme for all permanent employees.
Equal |
|
| monthly
contributions @ 8.33% of basic salary are made both by the company and the
employees to |
|
| the fund. |
|
| 3.12 Financial
Charges: |
|
| All mark up,
interest and other charges are charged to profit and loss account on an
accrual basis. |
|
|
| Notes to the
Accounts |
|
|
| for the year ended
June 30,2003 |
|
|
|
|
2003 |
2002 |
|
|
|
(Rupees in thousands) |
|
| 8. STORES AND SPARES |
|
|
|
| Spares |
|
796 |
1,020 |
|
| 9. STOCK IN TRADE |
|
|
|
| Raw materials |
|
10,609 |
17,601 |
|
| Packing materials |
|
42,695 |
29,179 |
|
| Bottles |
|
49,610 |
50,389 |
|
| Finished goods
(Note: 9.1) |
|
99,767 |
91,907 |
|
| Shells, pallets and
barrels |
|
13,951 |
12,570 |
|
| Less: Deterioration
in value |
|
2,790 |
2,514 |
|
