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Dewan Sugar Mills Limited

Annual Reports 2003

Mission Statement

The Mission of Dewan Sugar Mills Limited is to be the finest

Organisation, and to conduct business responsibly

and in a straight forward way.

Our basic aim is to benefit the customers, employees

and shareholders and to fulfill our commitments to the society.

Our hallmark is honesty, innovation, teamwork of our people

and our ability to respond effectively to change in all aspects

of life including technology, culture and environment.

We will create a work environment, which motivates, recognizes

and rewards achievements at all levels of the Organisation

because

In Allah we belive and in people we trust

We will always conduct ourselves with integrity

and strive to be the best.

CONTENTS

COMPANY INFORMATION

Board of Directors

Dewan Zia-ur-Rehman Farooqui

Chairman

Dewan Ghulani Mustafa Khalid

Vice Chairman

Dewan Mohammad Yousuf Farooqui

Managing Director / Chief Executive

Dewan Abdul Rehman Farooqui

Deputy Managing Director

Dewan Muhammad Ayub Khalid

Dewan Asim Mushfiq Farooqui

Dewan Abdullah Ahmed

Audit Committee

Dewan Ghulam Mustafa Khalid - Chairman

Dewan M. Ayub Khalid - Member

Dewan Asim Mushfiq Farooqui - Member

Auditors

Messrs Faruq AH & Co.

Chartered Accountants

803, 8th Floor, Land Mark Plaza,

1. I. Chundrigar Road,

Karachi.

Chief Financial Officer

Mr. Muhammad Khubaib

Company Secretary

Syed Moonis Abdullah Alvi

Tax Advisors

Sharif & Company

Advocates

Bankers

Muslim Commercial Bank Limited

Citibank N.A.

Habib Bank Limited

Union Bank Limited

Standard Chartered Bank

Meezan Bank Limited

ABN Amro Bank

The Hong Kong and Shanghai Banking Corporation Limited

United Bank Limited

Registered Office

Dewan Centre

3-A, Lalazar, Beach Hotel Road,

Karachi-74000, Pakistan.

Mills

Jillaniabad, Budho Talpur,

Taluka: Mirpur Bathoro

District: Thatta Sindh, Pakistan.

NOTICE OF 22^ND ANNUAL GENERAL MEETING

Notice is hereby given that 22nd Annual General Meeting of Dewan Sugar Mills Limited will be held

on January 31, 2004 at 06.00 p.m. at Merchant Navy Club, M. T. Khan Road, Near Dewan Centre,

Karachi to transact the following business:

1. Recitation from HOLY QURAN.

2. To read and confirm the minutes of 21st Annual General Meeting held on February 24, 2003.

3. To receive, consider and adopt the Annual Audited Accounts for the year ended September 30,

2003 together with the Directors' and Auditors' reports thereon.

4. To appoint auditors for the year ending September 30, 2004 and to fix their remuneration. The

Board of Directors based on the recommendation of the Audit Committee has proposed

M/s. Feroze Sharif Tariq & Co. Chartered Accountants for appointment as auditors. The retiring

auditors M/s. Faruq Ali & Co. Chartered Accountants, have not offered their services in order

to comply with the Code of Corporate Governance.

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

By Order of the Board

January 10, 2004 Syed Moonis Abdullah Alvi

Karachi. Company Secretary

NOTES:

1. A member of the Company entitled to attend and vote at this meeting may appoint another member

as his/her proxy to attend and vote instead of him/her. Proxies, in order to be effective, must be received

by the Company not less than 48 hours before the meeting. CDC Account holders will further have

the following guidelines as laid down by the Securities and Exchange Commission of Pakistan.

a) For Attending Meeting:

i) In case of individual, the account holder or sub-account holder and/or the person whose securities

are in group account and their registration details are uploaded as per the regulations, shall

authenticate his/her identity by showing his/her original National Identity Card (NIC) or original

passport at the time of attending the meeting.

ii) In case of corporate entity, the Board of Directors ' resolution/power of attorney with the specimen

signature of the nominee shall be produced (unless it has been provided earlier) at the time of

meeting.

b) For Appointing Proxies:

securities are in group account and their registration, details are uploaded as per the

regulations, shall submit the proxy form as per the above requirements.

ii) Two persons whose names, addresses and NIC numbers shall be mentioned on the form shall

witness the proxy.

in) Attested copies of NIC or passport of the beneficial owners and proxy shall be furnished with

the proxy form.

iv) The proxy shall produce his/her original NIC or original passport at the time of the meeting.

v) In case of corporate entity, the Board of Directors' resolution/power of attorney with the

specimen signature of the nominee shall be produced (unless it has been provided earlier)

along with the proxy form to the Company.

2. Members are requested to immediately notify the change in their addresses, if any.

3. The Share Transfer Books of the Company will remain closed from January 22, 2004 to January 3 1 ,

2004 (both days inclusive).

Your Directors present to you the Twenty Second Annual Report of the Company together with the audited

accounts for the financial year ended on September 30, 2003.

The sugar industry particularly that of Sindh fared yet another adverse year with surplus stocks, record

production and insignificant export of surplus sugar by Trading Corporation of Pakistan. The price of white

refined sugar remained depressed throughout the year. Your company's performance was not satisfactory

due to these factors and thus the results from sugar operations for the year under review reflect their impact

and of other adverse economic factors.

Your Company has suffered a net loss of Rs. 115.227 million after taking into effect the reversal of provision

of Rs. 41.6 million on account of diminution in the market value of investment in Dewan Farooque Motors

Limited, Rs. 60.274 million for depreciation and making a provision for tax amounting to Rs. 50.673

million. The highlights of the accounts are as follows:

2003

2002

Rupees in million

Sales - Sugar

1,811.45

932.923

- Fertilizer

742.55

165.77

- Polypropylene

169.53

181.213

2,723.53

1,279.91

Depreciation

60.274

65.28

Gross profit / (loss)

10.248

-15.912

Taxation

50.673

11.655

Net (loss) after tax

-115.227

-214.761

Appropriations

NIL

We humbly and gratefully bow our heads before Almighty Allah, the Most Gracious and Merciful, who

has rewarded and blessed your Company with His innumerable bounties in these difficult times.

IF YE GIVE THANKS, I WILL GIVE YOU MORE (AL-QURAN)

The Board would like to appraise the valued shareholders about the status and future of your Company

and sugar industry through this report.

PERFORMANCE REVIEW

Plant Performance

Sugar Operations

The sugarcane crushing season for 2002-2003 commenced on 20th December 2002 and continued up to

12th April 2003.During the season the plant crushed" 824,622 metric tons or 22,095,534 maunds of sugar

cane. Total refined sugar produced was 80,315 metric tons at an average recovery of 9.14%. Total quantity

of molasses produced was 42,604 metric tons at an average recovery of 5.17 %.

Polypropylene Plant

The polypropylene unit is working at its full capacity and the results are satisfactory. The bags and sheets

produced by the Company are in great demand due to their quality. The Company had to turndown some

sales as it did not have the capacity to meet further orders. In current fiscal year the management has decided

to double the existing capacity which is 1.2 million bags per month. The increased production will be started

during the current year.

Chip Board Plant

The plant was under trial production during the year under review and will commence commercial

DIRECTORS' REPORT

production in the subsequent period. It is producing about 1,000 boards per day. The initial board

production was well accepted in the market and is of comparable quality available in the market.

Financial Results

The total gross sales of sugar amounted to Rs. 1,811.446 million as compared to Rs. 932.923 million of

the last year. The sales of the Company increased by about 94% and the volume of sales is 135% as

compared to last year. In the year under review the Company sold 100,912 tons of sugar as compared to

the last year sales of 42,905 tons. The average selling price of sugar was down to Rs. 17,465 per ton as

compared to the last year average of Rs. 19,705 per ton showing a decrease of about 11.36%.

The polypropylene division earned operating profit of Rs. 1.909 million after charging depreciation of

Rs.6.738 million and financial charges of Rs. 1.146 million. The turnover was Rs. 169.530 million. During

the year the unit produced 13.77 million bags.

During the year your Company imported 44,500 tons of agricultural fertilizers. The entire quantity was

sold for Rs.563.177 million contributing operating profit of Rs. 46.300 million to the Company. The

fertilizer was marketed through dealers under the brand name 'Salsabil'. This trading activity also benefited

the polypropylene division as their bags were used in the packing of fertilizer. The trading in fertilizer

has contributed to profitability of your Company.

The loss per share of Company works out to Rs. 6.31 as compared to the last year's loss per share of Rs.

11.76. Despite the adverse situation, Alhamdolillah, your Company has been able to meet all its financial

obligations on time.

The diversification in the industrial activity of the Company has been undertaken to provide a buffer against

poor performance in sugar operations.

DIVERSITY AND INTEGRATION

Distillery Plant

We are pleased to inform you that the management has finalized the setting up of a manufacturing facility

for industrial alcohol. Industrial alcohol is used for production of paints and chemicals. Its superfine quality

is used for medical and cosmetics production. There is increasing demand for it in Americas, Europe, Japan

and South Korea for a mix in automobile fuel as it control emissions of smoke. It helps to keep the

environment clean.

The total cost of the project will be Rs. 500 million. The plant capacity is 125,000 liters per day. The plant