Fecto Sugar Mills Limited - Annual Reports 2003

FECTO SUGAR MILLS LTD.

Annual Reports 2003

CONTENTS

COMPANY INFORMATION

BOARD OF DIRECTORS

MR. GHULAM MUHAMMAD A. FECTO - CHAIRMAN

MR. MUNAWAR ALI FECTO - CHIEF EXECUTIVE

DIRECTORS

MR. KAISER MAHMOOD FECTO - DEPUTY CHIEF EXECUTIVE

MRS. ABEDA BANO

MR. YAHYA AHMED BAWANY

MR. MOIN A. HAROON

MR. JAMES R. RICHARDS

MR. FAZLUR REHMAN '

MR. IMRAN AZIM

AUDIT COMMITTEE

MR. MOIN A. HAROON

OF THE BOARD

MR. GHULAM MUHAMMAD A. FECTO

MR. JAMES R. RICHARDS

COMPANY SECRETARY

MR. ABDUL SAMAD

AUDITORS

M/S. HYDER BHIMJI & CO

(Chartered Accountants)

BANKERS

MUSLIM COMMERCIAL BANK LTD.

HABIB BANK LTD.

REGISTERED OFFICE

1 ST FLOOR, PANORAMA CENTRE,

RAJA GHAZANFAR ALI KHAN ROAD,

KARACHI-75530

ISLAMABAD OFFICE

1ST FLOOR, OFFICE NO. 14, BEVERLY CENTRE,

JINNAH AVENUE, BLUE AREA, ISLAMABAD.

ZONAL OFFICE

1ST FLOOR, NAWA-E-WAQT HOUSE,

4-SHAHRAH-E-FATIMA JINNAH

LAHORE.

MILLS

DARYAKHAN (DISTT: BHAKKAR)

NOTICE OF THE MEETING

NOTICE IS HEREBY GIVEN that the Thirty Ninth Annual General Meeting of the members of the Company

will be held on Wednesday the December 31, 2003 at 5:30 p.m. at Dr. Abdul Qadeer Khan auditorium,

Haji Abdullah Haroon Muslim Gymkhana, Gate # 1, Aiwan-e-Saddar Road, Karachi to transact the fol-

lowing business.

ORDINARY BUSINESS

(1) To receive and adopt the Annual Audited Accounts of the Company for the year ended September 30, 2003

together with the Directors' & Auditors' Reports thereon.

(2) To appoint Auditors for the year ending September 30, 2004 and fix their remuneration. The present

auditors Messrs Hyder Bhimji & Co., Chartered Accountants retire and being eligible, have offered

themselves for reappointment.

(3) To transact any other business with the permission of the Chair;

By order of the Board

(MUNAWAR ALI FECTO)

Karachi : the 8th December, 2003. Chief Executive

NOTES:

(1) The Share Transfer Books of the Company will remain closed from December 24, 2003 to December 31,

2003 (both days inclusive).

(2) All the members should bring their original National Identity Card at the time of the meeting.

(3) A member entitled to attend and vote at this Meeting, may appoint another member as his/her Proxy to

attend, speak and vote'on his/her behalf. The instrument appointing a proxy and the power of attorney or

other authority under which it is signed or a notarially attested copy of the power of attorney must be

deposited at the registered office of the Company at least 48 hours before the time of the meeting.

(4) Shareholders are requested to notify any change in their address immediately.

(5) In compliance with the requirement of Form-A (Annual Return), all shareholders of the Company are request-

ed to intimate their NIC number for local shareholders and passport number for foreign shareholders alongwith

folio number to the Company.

CDC Account Holder:

A. For Attending the Meeting:

i) In case of individuals, 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.

B. For Appointing Proxies

i) In case of individuals, 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 submit the proxy

form as per the above requirements.

ii) The proxy form shall be witnessed by two persons whose names, addresses and NIC numbers shall

be mentioned on the form.

iii) Attested copies of NIC or the passport of the beneficial owners and the 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 specimen signature shall

be submitted (unless it has been provided earlier) alongwith proxy form to the Company.

DIRECTORS' REPORT

The Members,

FECTO SUGAR MILLS LIMITED

KARACHI.

Assalam-o-Alaikum

Your directors are pleased to present the Thirty Ninth Annual Report and Audited Accounts for the year

ended September 30, 2003.

Overview

During the last three years the industry has suffered on account of glut created in the year 2000-2001,

when during the shortfall at the end of year 2000, traders were allowed to import over 1.0 million tons of

subsidized sugar resulting in a surplus of 621,000 tons on September 30, 2001. At the end of the year

under review the ending stock was about 860,000 tons and industry is faced with its disposal.

The situation warranted serious consideration as the prices were alarmingly on the slide. The industry

approached the Government for supportive measures one of them was to export the surplus stock either

on self financing basis or through Trading Corporation of Pakistan (TCP). TCP however, purchased only

100,000 MT from sugar mills, as against the assurance of the Government that the surplus sugar will be

purchased and exported by TCP.

Recently the .Government has shown its interest by approving purchase of another 100,000 tons of sugar

from the mills for buffer stock.

The Government regulates the sugar industry. The price of sugarcane and start of crushing season all are

determined by the Government. Therefore it should ensure a minimum price for sale of sugar also so that

both the stakeholders are protected.

Further in order to keep the industry viable the Government has to :

• Link sugarcane price to recovery, so the incentive should be given to the farmers to cultivate good

quality varietal cane having high recovery percentages.

• Rationalize the rate of Sales tax. At the national level sugar and ghee are the only food items on

which sales tax is charged at 15%. Sugar, however, is charged a futher tax of 3% on the pretext

that the sale is to unergistered parties. Ghee is free of any such retrictions. The additional burden

to the company in the current year is approximately Rs. 21 million, in this accounts.

If the industry is not revived than we have to spend precious foreign exchange on imports when our pro-

duction is low and have no market when production is surplus.

OPERATING PERFORMANCE

2003

2002

Date of Commencement

of Season

18-11-2002

30-11-2001

Date of Cessation

15-04-2003

23-04-2002

Crushing Duration

Days

149

145

Cane crushed

M.Tons

709,891

763,519

Sugar Production

M.Tons

50,014

59,129

Average Recovery

7.04

7.73

FINANCIAL PERFORMANCE

The company has incurred gross loss of Rs. 76.489 million as compared to Gross profit of Rs. 141.293

million. The loss is attributable to various factors that include substandard sugarcane crop and depressed

market conditions which has been discussed as below.

Sugar

As envisaged in our previous reports, production of sugar during the year under review was lesser as

compared to last year even though the sugarcane was available in our natural zone but due to severe dis-

ease attack of pyrilla on such a large scale and intensity as never in the history of the Mills the recovery

was just 3-4%. The company had to procure diseased cane at the price fixed by the Government due to

the pressure of the local administration who only supported growers. However your company managed

to procure good quality sugarcane, having better recovery perecentage, up to some extent from out of

natural zone to improve the recovery.

The sale price of sugar remained depressed for the last three years due to over supply. The situation

warranted serious consideration as the prices are alarmingly on the slide. The price of sugar fell from Rs.

26 in January 2001 to Rs. 20 in September 2003 in the retail market.

The factors discussed above that are faced by the industry coupled with a bad crop in our area affected

with diseases resulted in loss this year.

The management has taken measures to induce growers towards high recovery varietal cane. For this

purpose the company has extended seed and pesticide loans to a number of growers.

Particle Board

The performance of the Particle Board division was much better as compared to last year. The sales

increased to Rs. 28.034 million as compared to Rs. 8.4 million of last year thus showing an increase of

233%. The product of the company has started making its place in the market. The better performance of

this division helped the company to overcome the liquidity problem upto some extent.

STATEMENT OF COMPLIANCE WITH THE CODE OF CORPORATE GOVERNANCE

The Company has complied with all the requirements of code of.Corporate Governance as required by

the listing regulations. In compliance with the code of corporate governance, the directors are pleased to

confirm that: