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RUPALI POLYESTERS LIMITED
Annual Reports 2003
Contents
Financial Highlights
Directors' Report to the Shareholders
Notice of Meeting
Statement of Compliance with Best Practices of Corporate Governance
Auditors' Review Report to the Members on Statement of
Compliance with Best Practices of Code of Corporate Governance
Auditors' Report to the Members
Balance Sheet
Profit and Loss Account
Cash Flow Statement
Statement of Changes in Equity
Notes to the Financial Statements
Pattern of Shareholding
Board of Directors
Jafferali M. Feerasta
Chairman
Badruddin J. Feerasta
Chief Executive
Muhammad Rashid Zahir Nooruddin Feerasta (Sr.)
Mrs. Malek Sultan J. Feerasta Amin A. Feerasta
Abdul Hayee
Secretary
S. Ghulam Shabbir Gilani
Audit Committee
Jafferali M. Feerasta Muhammad Rashid Zahir
Chairman Member
Nooruddin Feerasta (Sr.)
Member/Secretary
Bankers
ABN AMRO Bank N.V. American Express Bank
Citibank, N.A. Credit Agricole Indosuez
Habib Bank Ltd. MashreqBank Pakistan Ltd.
Meezan Bank Limited Metropolitan Bank Ltd.
Muslim Commercial Bank Limited Soneri Bank Limited
Standard Chartered Grindlays Union Bank Limited
Auditors
Qavi & Co.
Chartered Accountants
Registered Office Plant
4th Floor, IEP Building 30.2 Kilometer
97-B/D-1,Gulberg-lll Lahore - Sheikhupura Road
Lahore - 54660 Sheikhupura - 39350
PAKISTAN PAKISTAN
Corporate Data
RUPALI POLYESTER LIMITED was incorporated at Karachi
in May 1980 as a Public Limited Company and is listed
on all stock exchanges of Pakistan. It owns and operates
composite facilities to manufacture polyester fiber and
filament yarn. It produces quality products by using
latest technology and best quality of raw materials. The
Company has the privilege of being one of the pioneers
in Pakistan for manufacture of staple fiber of highest
quality. Since its inception, the Company has been
growing steadily through expansion and diversified
operations. The assets of the Company have increased
to over Rs. 2,199 million from the initial capital outlay
of Rs. 150 million.
The Company has a polymerization unit with a capacity of 105 metric tons per day, polyester filament yarn capacity of
30 metric tons per day and a polyester staple fiber capacity of 65 metric tons per day. The various products of Rupali are
in fact import substitution as these were previously imported from Japan, Indonesia, Taiwan and Korea. Now the Company
is importing the basic raw materials only and through value addition is producing the highest quality products locally.
Since inception, the philosophy of the Company's management is to grow on the strength of quality and reliability. To achieve
this objective, it is maintaining a well equipped Research & Development Centre for standard maintenance, innovative
improvements in its products and achieving economies in production techniques without compromising on standard and
quality of products. Products and services offered by the Company are acknowledged by the customers as quality and
reliable products and are the first preference of customers.
The Company gives high priority to customers' satisfaction, tries to maintain uninterrupted supply of its products and
provides after sales services, technical support for trouble shooting.
AL HAMDO LILLAH, the Company enjoys high prestige and reputation in the business community, banks, financial institutions
and customers. It is also amongst major contributors to the national exchequer.
Profile
(Rupees in million)
1998 1999 2000 2001 2002 2003
Sales (Net) 2,075.67 1,812.28 2,175.16 2,666.46 2,448.09 2,584.91
Profit before Tax 128.75 135.307 257.777 678.018 215.001 134.643
Profit after Tax 92.001 67.243 140.409 528.575 134.951 50.659
Income Tax - Current 36.749 45.644 90.616 128.22 77.117 55.192
- Prior years - - 4.38 0.612 -2.422 -1.213
- Deferred - 22.42 22.372 20.611 5.355 30.005
Sales Tax 261.372 252.283 326.354 403.214 447.957 464.177
Excise Duty 18.194 17.539 19.943 20.161 17.546 -
Gross assets employed 2,249.31 2,231.18 2,120.67 2,626.04 2,680.12 2,179.47
(excluding capital work-in-progress)
Shareholders equity 1,404.93 1,369.97 1,374.11 1,732.34 1 ,805.449 1,787.97
Long term loan 0 0 0 0 0 0
Debt/ Equity ratio 00:100 00:100 00:100 00:100 00:100 0:100
Earning per share before tax-Rs. 3.78 3.97 7.57 19.9 6.31 3.95
Dividend (percentage) 25 30 40 50 20 20
Production volume (M. tons) 29,807 30,068 29,049 31,719 31,066 30,362
Number of employees 1185 1266 1281 1356 1348 1442
It gives me immense pleasure to welcome you on behalf
of the Board of Directors to the twenty third annual
general meeting and present the report on the
performance of the Company and audited accounts of
the Company for the year ended 30 June 2003 along
with auditors' report thereon.
Financial Results: Rs. in '000
Net profit before taxation 134,643
Provision for taxation 83,984
Profit after taxation 50,659
Un-appropriated profit brought forward 82,380
Effect of change in accounting policy
and fundamental error 78,632
161,012
Profit available for appropriation 211,671
Appropriations:
Proposed final cash dividend
@ 20% (2002: @ 20%) 68,137
Transferred to general reserve 131,863
200,000
Un-appropriated profit carried forward 11,671
Earnings per share after tax Rs. 1.49
Overview
The financial results for the year under review in
comparison with previous year are not reflecting a very
' optimistic scenario. These results visualize an alarming
situation for a dreaded downfall of Polyester Yarn and
Staple Fiber industry of the country in coming year.
Primary consumer of Polyester Yarn and Staple Fiber
is textile sector. Depressed situation in textile rebounds
towards Polyester industry as a chain reaction pushing
its infrastructure into idle state and upsetting its economy.
At present the country's polyester fiber and filament
yarn industry is also passing through stagnation phase
mainly because of influx of imported yarn and smuggled
fabrics from China and other Far Eastern countries.
Sales although increased by 5.59% to Rs. 2,585 million
from Rs. 2,448 million in the previous year, but this
increase is only the result of higher volume otherwise
the products prices remained under intense pressure.
At one point, during the year our finished goods inventory
reached a very high level. To reduce the stocks and
generate the cash, the Company had to export its chips
to China, Europe and USA. The exports had to be made
at lower prices, which caused the decrease in gross
profit.
Profitability during the year has remained under pressure
due to higher input cost and lower sale price. The
international prices of imported raw materials sharply
Directors' Report to the Shareholders
increased during the year. Due to this, our gross profit declined by 29% from Rs. 349.504 million to Rs. 247.800 million during
the year.
There is no significant change in operating expenses. Net profit for the year registered a decline of 37%, from
Rs. 215.001 million in the year 2002 to Rs. 134.643 million. The tax assessments for our last two income years i.e.
2000-01 & 2001-02 were recently finalized. By virtue of these assessments, certain adjustments have been made in current
year financial results which also caused net profit decline. Resultantly the after tax profit remained Rs. 50.659 million as compared
to last year profit of Rs. 134.951 million.
Future Outlook
Under the prevailing situation, future of the industry in next year does not look very bright. The pressure on prices and profitability
will prolong because of the weakening of local market due to imbalanced demand-supply of Polyester Staple Fiber and Yarn.
Price escalations of PTA, MEG and other petroleum products which constitute major components of the total production cost
will also react negatively on our profitability.
Soon after the Budget of 2002, import duty on polyester yarn was abruptly reduced from 25% to 20% thus creating an anomaly
because the duty structure on raw materials (PTA 15% and MEG 10%) remain unchanged. Due to the reduction in duty, there
is tremendous increase in import of filament yarn i.e. from 7,000 tons to 45,000 tons i.e. more than 6 times.
This is all being done at the expense of local industry. Presently domestic production has come down to 75,000 tons against
available capacity of 110,000 tons reflecting a huge unabated under-utilization. Unless the import duty on polyester yarn is
restored to 25% and usance of smuggled fabric is curbed, the anomaly in industry will continue. Several representations were
made at the highest level but so far failed to achieve any results.
Again for high cost of infrastructure and other reasons stated above, our prices are not compatible with imported products. The
difference in prices, help importer to improve their share in local market by increasing imports at dumping prices.
The above mentioned adverse economic and market factors are expected to influence the future outlook of the Company.
In the above scenario, a further squeeze in margin is expected irrespective of how the wider political, social and economic
developments move forward.
Directors'  Report to the Shareholders
Board of Directors
The term of existing directors is expiring and election of
directors for next term of three years will be held in forthcoming
annual general meeting. The number of the directors fixed
by the Board is seven (7).
Dividend
Your directors are pleased to propose a dividend @ 20%
i.e. Rs. 2.00 per share of Rs.10/- each for the year ended
30 June 2003.
Auditors
The present auditors M/s Qavi & Co. Chartered Accountants
retire and being eligible offer themselves for re-appointment.
The Board has received recommendations from its Audit
Committee for reappointment of M/s Qavi & Co. Chartered
Accountants as Auditors of the Company for the ensuing year.
Pattern of Shareholding
A statement showing the pattern of shareholding in the Company as at 30 June 2003 as required under Section 236 of the
Companies Ordinance, 1984 and the Code of Corporate Governance appears on page 34.
Disclosure Requirements as per Stock Exchanges Regulations of Corporate Governance
Good Corporate Governance has always been the focal point of the Board of Directors of your Company. I am happy to report
that your Company, by the grace of Allah, meets the standard set in the guidelines for Good Corporate Governance. The Company
has maintained its books of accounts as per statutory requirements of the country. Your Company's Financial Statements fully
meet the disclosure standards and fairly represent the state of the affairs of the Company, its results of operations, cash flow
and changes in equity. The management is satisfied that your Company's status as a going concern is sound. The Company's
internal controls are effective and sound.
Further appropriate accounting policies and applicable International Accounting Standards were applied in preparation of these
financial statements. There is no inconsistency in these policies and no material departure from best practices of corporate
governance is allowed.
Investment of Provident Fund
The value of investment in Provident Fund Trust Account inclusive of profit accrued thereon, as per their audited accounts is
Rs. 38.409 million.
Board Meetings & Attendance by each Director
Total No. of Board Meetings held during the year under review: 5
Attendance by each Director
1 .    Mr. Jafferali M. Feerasta 5
2.    Mr. Badruddin J. Feerasta 3
3.    Mr. Muhammad Rashid Zahir 3
4.    Mr. Nooruddin Feerasta (Sr.) 5
5.    Mrs. Malek Sultan J. Feerasta 4
6.    Mr. Amin A. Feerasta 4
7.    Mr. Abdul Hayee 5
Leave of absence was granted to Directors who could not attend
some of the Board Meetings.
Approval of Financial Statements
The financial statements were approved by the Board of Directors on 24 September 2003 and authorized for their issuance.
Transfer Pricing to Related Party Transactions
The directors are fully cognizant of the laws governing the Transfer Pricing to Related Parties and the mandatory requirements
of inclusion of information in this Report. Accordingly, we shall comply with those as from the date stipulated in SECP Circular
No. 4 of 2003 dated 20 February 2003.
Labor Management Relations
Like previous year, cordial relations were maintained between the management and labor during this year and we wish to place
on record our appreciation for the dedication and hard work demonstrated by employees at every level for the progress and
growth of the Company.
A Note of Gratitude
The directors wish to place on record their appreciation for the co-operation extended by the Ministries of Finance, Industries,
Commerce and Communication. We also owe our thanks to the Department of Customs, Central Excise and Government of the
Punjab for their co-operation. We appreciate the patronage and confidence placed in the Company by the development financial
institutions and commercial banks. We are thankful to our valued customers and expect more pleasant business relationship with
them. To our shareholders we are grateful for their faith in the Company. We greatly value their trust.
On behalf of the Board
Lahore                                                                                                                                                                Jafferali M. Feerasta
24 September 2003                                                                                                                                                            Chairman
Notice is hereby given that the Twenty third Annual General Meeting of the Company will be held at Auditorium of the Institute
of Chartered Accountants of Pakistan, 155-156, West Wood Colony, Thokar Niaz Baig, Raiwind Road, Lahore on
Thursday, 30 October 2003 at 10:00 a.m. to transact the following business:
Ordinary Business:
1.     To confirm the minutes of last annual general meeting held on 26 October 2002.
2.     To receive, consider and adopt audited accounts together with the Directors and Auditors Reports thereon for the year
ended 30 June 2003.
3.      To elect seven (7) Directors of the Company in accordance with the provisions of Section 178 of the Companies Ordinance,
1984 for a period of three (3) years commencing from 22 December 2003.
4.     To approve payment of final cash dividend @ 20% i.e. Rs. 2.00 per share for the year ended 30 June 2003 as recommended
by the Board of Directors.
5.     To appoint Auditors of the Company and to fix their remuneration.
6.     To transact such other ordinary business as may be placed before the meeting with the permission of the Chair.
By order of the Board
Lahore                                                                                                 S. Ghulam Shabbir Gilani
24 September 2003                                                                                Company Secretary
Notes:
1.      In accordance with Section 178(1) of the Companies Ordinance, 1984, the number of Directors to be elected has been
fixed at seven (7). The retiring Directors, namely; Mr. Jafferali M. Feerasta, Mr. Badruddin J. Feerasta, Mr. Muhammad Rashid
Zahir, Mrs. Malek Sultan J. Feerasta, Mr. Nooruddin Feerasta (Sr.), Mr. Amin A. Feerasta and Mr. Abdul Hayee are eligible
for re-election as Directors.
2.      In terms of Section 178(3) of the Companies Ordinance, 1984, any person who seeks to contest an election to the office
of Director, whether he/she is a retiring Director or otherwise, shall file with the Company, not later than fourteen (14) days
before the date of this meeting, a notice of his/her intention to offer himself/herself for election as a Director.
3.     Share transfer books of the Company will remain closed from 24 October 2003 to 30 October 2003 (both days inclusive)
for determining the entitlement of dividend. The members whose names appear in the register of members as at the close
of business on 23 October 2003 will qualify for payment of dividend.
4.     A member entitled to attend and vote at this meeting may appoint another member as his or her proxy to attend and vote.
Proxies in order to be effective must be received at the registered office of the Company not less than 48 hours before
the time of holding the meeting.
5.     Accountholders/sub-accountholders holding book entry securities of the Company in Central Depository System (CDS) of
Central Depository Company of Pakistan Limited (CDC) who wish to attend the Annual General Meeting are requested to
please bring their original National Identity Card or original passport with a photocopy duly attested by their bankers
alongwith participant's I.D. number and their account number in CDS for identification purposes.
In case of corporate entity, the Board of Directors' resolution/power of attorney with specimen signature of the nominee
together with the original proxy form duly filled in must be received at the registered office of the Company not less than
48 hours before the time of holding the meeting. The nominees shall produce their original National Identity Card (NIC) or
original passport at the time of attending the meeting for identification purpose.
6.     Shareholders are requested to notify any change in their addresses immediately.
Notice of Annual General Meeting
Statement of Compliance with the
Code of Corporate Governance
This statement is being presented to comply with the Code of Corporate
Governance contained in Listing Regulation No. 37, Chapter XI, No. 43
Chapter XIII & section 36 of Chapter XI of the Karachi Stock Exchange
(Guarantee) Limited, Lahore Stock Exchange (Guarantee) Limited and
Islamabad Stock Exchange (Guarantee) Limited respectively for the
purpose of establishing a framework of good governance, whereby a
listed company is managed in compliance with the best practices of
corporate governance.
The Company has applied the principles contained in the Code in the
following manner:
1.      The Company encourages representation of independent non-
executive directors and directors representing minority interests
on its Board of Directors. At present the Board includes four (4)
independent non-executive directors.
2.      The directors have confirmed that none of them is serving as a
director in more than ten listed companies, including this Company.
3.      All the directors of the Company are registered as taxpayers and
none of them has defaulted in payment of any loan to a banking
company, a DFI or an NBFI. No director in the Board is a member
of any of the stock exchanges in Pakistan and hence the question
of declaring any of our directors as a defaulter by any stock
exchange does not arise.
4.      A casual vacancy occurring in the Board on 02.07.2002 was filled
up by the directors within 30 days thereof.
5.      The Company has prepared a 'Statement of Ethics and Business
Practices', which has been signed by all the directors and its
signing by the employees is in process.
6.      The Board has developed a vision/mission statement, overall
corporate strategy and significant policies of the Company. A
complete record of particulars of significant policies along with
the dates on which they were approved or amended has been
maintained.
7.      All the powers of the Board have been duly exercised and decisions
on material transactions, including appointment and determination
of remuneration and terms and conditions of employment of the
CEO and other Executive Directors have been taken by the Board.
8.      The meetings of the Board were presided over by the Chairman
and the Board met at least once in every quarter. Written notices
of the Board meetings, along with agenda and working papers,
were circulated at least seven days before the meetings. The
minutes of the meetings were appropriately recorded and circulated.
9.      The Directors are aware about their fiduciary responsibilities and
most of them have attended formal orientation courses.
10.    The appointment of CFO, Company Secretary and Head of Internal
Audit, were made before the implementation of Code of Corporate
Governance. However, their next appointment, if any, including
their remuneration and terms and conditions of employment,
after its determination by the CEO, will be referred to the Board
of Directors for their approval.
11.    The Directors' Report for this year has been prepared in compliance
with the requirements of the Code and fully describes the salient
matters required to be disclosed.
12.    The financial statements of the Company were duly endorsed by
the CEO and CFO before approval of the Board.
13.    The directors, CEO and executives do not hold any interest in the
shares of the Company other than that disclosed in the pattern
of shareholding.
14.    The Company has complied with all the corporate and financial
reporting requirements of the Code.
15.    The Board has formed an audit committee. It comprises 3 members,
of whom two are non-executive directors including the chairman
of the committee.
16.    The meetings of the audit committee were held at least once
every quarter prior to approval of interim and final results of the
Company and as required by the Code. The terms of reference
of the committee have been formed and advised to the committee
for compliance.
17.    The Board has set-up an effective internal audit function.
18.    The statutory auditors of the Company have confirmed that they
have been given a satisfactory rating under the Quality Control
Review programme of the Institute of Chartered Accountants of
Pakistan, that they or any of the partners of the firm, their spouses
and minor children do not hold shares of the Company and that
the firm and all its partners are in compliance with International
Federation of Accountants (IFAC) guidelines on code of ethics as
adopted by Institute of Chartered Accountants of Pakistan.
19.    The statutory auditors or the persons associated with them have
not been appointed to provide other services except in accordance
with the listing regulations and the auditors have confirmed that
they have observed IFAC guidelines in this regard.
20.    We confirm that all other material principles contained in the Code
have been complied with.
Badruddin J. Feerasta
Chief Executive
For And On Behalf Of The Board Of Directors
Lahore: 24 September 2003
Review Report to the Members on Statement of
Compliance with Best Practices of Code
of Corporate Governance
We have reviewed the Statement of Compliance with the best practices contained
in the Code of Corporate Governance prepared by the Board of Directors of RUPALI
POLYESTER LIMITED to comply with the Listing Regulation No. 37 (Chapter XI),
No. 43 (Chapter XIII) & section 36 (Chapter XI) of the Karachi, Lahore &
Islamabad Stock Exchanges respectively, where the Company is listed.
The responsibility for compliance with the Code of Corporate Governance is that
of the Board of Directors of the Company. Our responsibility is to review, to the
extent where such compliance can be objectively verified, whether the Statement
of Compliance reflects the status of the Company's compliance with the provisions
of the Code of Corporate Governance and report if it does not. A review is limited
primarily to inquiries of the Company personnel and review of various documents
prepared by the Company to comply with the Code.
As part of our audit of financial statements we are required to obtain an understanding
of the accounting and internal control systems sufficient to plan the audit and
develop an effective audit approach. We have not carried out any special review
of the internal control system to enable us to express an opinion as to whether
the Board's statement on internal control covers all controls and the effectiveness
of such internal controls.
Based on our review, nothing has come to our attention which causes us to believe
that the Statement of Compliance does not appropriately reflect the Company's
compliance, in all material respects, with the best practices contained in the Code
of Corporate Governance for the year ended 30 June 2003.
Lahore:                                                                                                     Qavi & Co.
24 September 2003                                                            Chartered Accountants
We have audited the annexed balance sheet of RUPALI POLYESTER LIMITED as at 30 June 2003 and the related profit and loss
account, cash flow statement and statement of changes in equity 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.
It is the responsibility of the Company's management to establish and maintain a system of internal control, and prepare and
present the above said statements in conformity with the approved accounting standards and the requirements of the Companies
Ordinance, 1984. Our responsibility is to express an opinion on these statements based on our audit.
We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These standards require that we
plan and perform the audit to obtain reasonable assurance about whether the above said statements are free of any material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the above said
statements. An audit also includes assessing the accounting policies and significant estimates made by management, as well
as, evaluating the overall presentation of the above said statements. We believe that our audit provides a reasonable basis for
our opinion and, after due verification, 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 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 consistently applied except for the change as explained in Note 7 to the
financial statements with which we concur;
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, cash flow statement and statement of changes in equity together with the notes forming part
thereof conform with approved accounting standards as applicable in Pakistan, and, 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 30 June 2003 and of the profit, its cash flows and changes in the equity for the year
then ended; and
d)     in our opinion Zakat deductible at source under the Zakat and Ushr Ordinance, 1980 (XVIII of 1980), was deducted
by the Company and deposited in the Central Zakat Fund established under Section 7 of that Ordinance.
Lahore                                                                                                                                                                              Qavi & Co.
24 September 2003                                                                                                                                     Chartered Accountants
Amount in Rs. '000
Note 2003 2002
ASSETS
NON CURRENT ASSETS
Tangible Fixed Assets
Operating Fixed Assets 13 498,665 548,907
Capital Work-in-Progress 14 20,187 21,548
Stores held for Capital Expenditure 186 240
519,038 570,695
LONG TERM DEPOSITS AND
PREPAYMENTS 15 5,461 6,164
CURRENT ASSETS
Stores, Spares and Loose Tools 16 175,123 194,370
Stock-in-Trade 17 482,776 581,460
Trade Debts - Unsecured 18 340,613 66,124
Loans, Advances, Deposits, Prepayments
and Other Receivables 19 31,168 477,402
Taxation - net 133,129 88,921
Cash and Bank Balances 20 512,345 716,535
1,675,154 2,124,812
Amount in Rs. '000
Note 2003 2002
Sales 21 2,584,908 2,448,091
Cost of Sales 22 2,337,108 2,098,587
Gross Profit 247,800 349,504
Administration, Selling and General Expenses 23 117,226 91,777
Financial Charges 24 15,550 39,735
132,776 131,512
Operating Profit 115,024 217,992
Other Income 25 29,788 13,010
Profit Before Statutory Provisions 144,812 231,002
Provision for:
Workers' Profit Participation Fund 7,241 11,550
Workers' Welfare Fund 2,928 4,451
10,169 16,001
Profit for the Year Before Taxation 134,643 215,001
Provision for Taxation 26 83,984 80,050
Profit after Taxation 50,659 134,951
Un-appropriated Profit Brought Forward 82,380 4,062
Effect of Change in Accounting Policy & Fundamental Error 27 78,632 90,136
161,012 94,198
Profit Available for Appropriation 211,671 229,149
APPROPRIATIONS:
Proposed Final Dividend @ 20% (2002: @ 20%) 68,137 68,137
Transferred to General Reserve 131,863 -
200,000 68,137
Un-appropriated Profit Carried Forward 11,671 161,012
Basic Earnings per Share (Rupees) 28 1.49 3.96
The annexed notes form an integral part of these financial statements.
Amount in Rs. '000
Note 2003 2002
CASH FLOW FROM OPERATING ACTIVITIES
Profit Before Taxation 134,643 215,001
Add/(Less):
Adjustment for Non Cash Charges and Other Items
Depreciation 13.5 54,415 60,380
Amortization of Deferred Income -120 -120
Adjustment/Amortization of Long Term Deposits
and Prepayments 3,613 -2,098
Provision for Doubtful Receivables 38,052 550
Staff Retirement Benefits - Gratuity 6,796 7,052
Financial Charges 24 13,215 38,870
Bank Charges 24 1,493 72
Financial Charges on Leased Asset 24 842 793
Mark-up/Interest Income 25 -13,069 -14,569
Remission of Liabilities 25 -54 -587
Loss/(Profit) on Sale of Fixed Assets 25 869 -2,237
Exchange Loss 25 2,779 20,499
108,831 108,605
Effect on Cash Flow Due to Working Capital Changes:
(Increasej/Decrease In Current Assets:
Stores, Spares and Loose Tools 19,247 -49,433
Stock-in-Trade 98,684 -84,992
Trade Debts -274,557 -55,282
Loans, Advances, Deposits, Prepayments
and Other Receivables 407,548 383,796
250,922 194,089
Increase / (Decrease) in Current Liabilities:
Advances, Deposits, Retentions and Other Payables &
Creditors and Accrued Expenses 135,830 -24,660
386,752 169,429
Cash generated from Operations 630,226 493,035
Mark-up on Short Term Finances and Bank Charges Paid -22,941 -38,794
Income Tax Paid -98,187 -283,234
Mark-up/Interest Received 13,333 14,341
Staff Retirement Benefits - Gratuity Paid -1,687 -2,157
Net Cash Inflow from Operating Activities 520,744 183,191
Amount in Rs. '000
Note 2003 2002
CASH FLOW FROM INVESTING ACTIVITIES
Fixed Capital Expenditure -4,478 -8,263
Long Term Deposits and Prepayments -2,540 -5,788
Sale Proceeds of Fixed Assets 852 17,457
Net Cash Inflow / (Outflow) from Investing Activities -6,166 3,406
CASH FLOW FROM FINANCING ACTIVITIES
Payment of Lease Obligations -2,935 -1,468
Dividend Paid -68,150 -170,324
Net Cash Outflow from Financing Activities -71,085 -171,792
Net Increase in Cash and Cash Equivalents 443,493 14,805
Cash and Cash Equivalents at the Beginning of the Year 71,563 77,068
Effect of Exchange Rate Fluctuations -2,711 -20,310
Cash and Cash Equivalents at the End of the Year 29 512,345 71,563
The annexed notes form an integral part of these financial statements.
Amount in Rs. '000
Ordinary Un-
Share Capital Revenue appropriated
Capital Reserve Reserve Profit Total
Balance as on 30 June 2001
As previously reported 340,685 71,490 1,195,000 4,062 1,611,237
Effect of Reinstatement of Assets - - - 134,555 134,555
Effect of Depreciation on Reinstated Assets - - - -13,455 -13,455
Transferred to Revenue Reserve - - 37,262 -37,262 -
Balance as on 30 June 2001 as Restated 340,685 71,490 1,232,262 87,900 1,732,337
Net Profit for the year ended 30 June 2002 - - - 146,455 146,455
Final Dividend @ 20% - - - -68,137 -68,137
Effect of Gratuity -IAS- 19 - - - 6,298 6,298
Effect of Depreciation on Reinstated Assets - - - -12,110 -12,110
Effect of adjustment of depreciation on
Reinstated Assets over WPPF - - - 606 606
Balance as on 30 June 2002 as Restated 340,685 71,490 1,232,262 161,012 1 ,805,449
Net Profit for the year ended 30 June 2003 - - - 50,659 50,659
Proposed Final Dividend @ 20% - - - -68,137 -68,137
Transferred of Revenue Reserve - - 131,863 -131,863 -
Balance as on 30 June 2003 340,685 71,490 1,364,125 11,671 1,787,971
1.      The Company and its Operations
1.1    The RUPALI POLYESTER LIMITED was registered in Pakistan on 24 May 1980 as a Public Limited Company and is listed on
the Karachi, Lahore and Islamabad Stock Exchanges. The Registered Office of the Company is situated at 4th Floor, IEP
Building, 97-B/D-1, Gulberg-lll, Lahore.
1.2    The Company is engaged in the manufacture and sale of Polyester Products.
2.      Statement of Compliance
These financial statements have been prepared in accordance with 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 the Companies Ordinance, 1984 or the requirements of the said directives take precedence.
3.      Summary of Significant Accounting Policies
3.1    Accounting Convention
These financial statements have been prepared under the historical cost convention.
3.2    Staff Retirement Benefits
Defined Benefit Plan - Gratuity
The Company operates an Unfunded Defined Gratuity Scheme for all its permanent employees who attain the minimum
qualification period for entitlement to gratuity. The provision is made on the basis of actuarial valuation to cover the obligation
under the scheme for all employees eligible to gratuity benefits. The charge for the year 2003 is based on the latest actuarial
valuation, at 30 June 2003 using the Projected Unit Credit Method.
Defined Contribution Plan - Provident Fund
The Company contributes to an Approved Provident Fund Scheme which covers all permanent employees. Equal contributions
are made by the Company and the Employees.
3.3    Fixed Assets
Tangible - Owned
Operating fixed assets except freehold land are stated at cost less accumulated depreciation. Freehold land and capital work-
in-progress are stated at cost.
Depreciation on operating fixed assets is calculated on reducing balance method.
Depredation on additions during the year is charged for the full year irrespective of the date of addition. No depreciation is
charged on disposals during the year.
Maintenance and normal repairs are charged to income as and when incurred. Major renewals and improvements are
capitalized.
Gains and Losses, if any, on disposal of assets are taken to profit and loss account.
3.4   Tangible-Assets Subject to Finance Lease
These are stated at lower of present value of minimum lease payments under the lease agreements and the fair value of
assets. Aggregate amount of obligation relating to leased assets subject to finance lease is accounted for at net present
value of liabilities. The related obligation under the lease less financial charges allocated to future period are shown as a
liability. The financial charges are allocated to accounting periods in a manner so as to provide a constant periodic rate of
charge on the outstanding liability. In the case of sale and lease back transactions, any excess of sale proceeds over the
carrying amount is deferred over the lease period. Assets so acquired are depreciated over the useful life of the assets on
the reducing balance method at the rates given in Note 13.
3.5    Stores, Spares and Loose Tools
Stores, Spares and Loose Tools are valued at moving average cost.
Items-in-transit are valued at cost comprising invoice value plus other charges paid thereon.
3.6    Stock-in-Trade
Raw and Packing Materials are stated at cost. Costs incurred in bringing Raw and Packing Materials to their present location
and condition are accounted for at purchase cost using the moving average basis. Items-in-transit are valued at cost comprising
invoice value plus other charges paid thereon. Work-in-process is valued at average cost. Finished goods are valued at lower
of average cost and net realizable value. Cost includes prime cost and appropriate portion of production overheads.
3.7   Trade Debts and Other Receivables
Debts considered irrecoverable, if any, are written off and provision is made for debts considered doubtful.
3.8    Foreign Currency Translation
Transactions denominated in foreign currencies are translated to Pak. Rupees at the foreign exchange rate ruling at the date
of transaction. Monetary assets and monetary liabilities denominated in foreign currencies are established using the rate
of exchange ruling at the balance sheet date except for liabilities covered under forward exchange contracts which are
translated at the contractual rate. Gain or loss in translation at the year end has been taken to income.
3.9   Taxation
Current
Provision for current taxation is based on current rates of tax after taking into account tax credit available under the Income
Tax Ordinance, 2001.
Deferred
Deferred tax is accounted for by using the liability method on all major timing differences excluding tax effect on those timing
differences which are not likely to reverse in the foreseeable future.
3.10 Revenue Recognition
Revenue from sales is recognized on despatch of goods to customers.
Profit on bank deposits is recognized on an accrual basis.
3.11  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 instrument. Any gain or loss on derecognition of the financial assets and financial liabilities is taken to profit
and loss account currently,
3.12 Offsetting of Financial Assets and Financial Liabilities
A financial asset and a financial liability is offset and the net amount is reported in the balance sheet if the Company has a
legally enforceable right to set-off the recognized amounts and intends either to settle on a net basis or to realize the asset
and settle the liability simultaneously.
3.13 Cash and Cash Equivalents
Cash and cash equivalents are carried in the balance sheet at cost. For the purposes of the cash flow statement, cash and
cash equivalents comprises cash in hand, with banks on current and savings accounts and running finances under mark-up
arrangements.
Amount in Rs. '000
Note 2003 2002
4.    Issued, Subscribed and Paid-up Capital
No. o f Shares
2003 2002
9,690,900 9,690,900 Ordinary Shares of Rs. 1 0 each fully paid in cash 96,909 96,909
19,933,895 19,933,895 Ordinary Shares of Rs. 1 0 each issued against
non-repatriable investment 199,339 199,339
4,443,719 4,443,719 Ordinary Shares of Rs. 10 each issued as Bonus Shares 44,437 44,437
34,068,514 34,068,514 340,685 340,685
5.    Reserves
Capital Reserves:
Premium on Ordinary Share Capital 71,490 71,490
Revenue Reserve:
General Reserve 1,364,125 1,232,262
1,435,615 1,303,752
6.    Liability Against Asset Subject to Finance Lease
Finance lease liabilities are payable as follows:
Amount in Rs. '000
2003 2002
Minimum Financial Principal Minimum Financial Principal
Lease charges for outstanding Lease charges for outstanding
Payments future period Payments future period
Less than one year 2,790 403 2,387 2,719 698 2,021
Between one and five years 1,817 116 1,701 4,753 665 4,088
4,607 519 4,088 7,472 1,363 6,109
6.1 The minimum lease payments under the lease agreement are payable in 12 equal quarterly installments commencing
from 15 January 2002. The present value of minimum lease payments have been discounted at an implicit interest
rate of 17% to arrive at their present value. Taxes, Repairs and Insurance costs are to be borne by the Company.
The Company intends to exercise its option to purchase the leased asset at the end of lease period.
7.    Staff Retirement Benefits - Gratuity
Defined Benefit Plan
7.1    General Description
The scheme provides for terminal benefits for all its permanent employees who attain the minimum qualifying period
for entitlement to gratuity.
Annual charge is based on actuarial valuation carried out as at 30 June 2003, using the Projected Unit Credit Method.
7.2   Principal Actuarial Assumption
Following are a few important actuarial assumptions used in the valuation:
Discount rate                                                                                     8.00%
Expected rate of salary increase in future years                                  7.00%
Average expected remaining working life time of employees                13 years
Amount in Rs. '000
Note 2003
7.3  Reconciliation of Payable to Defined Benefit Plan
Present value of defined benefit obligation 36,389
Unrecognized actuarial loss -162
7.4 36,227
7.4  Movement in Liability Recognized in the Balance Sheet
Present Value of Defined Benefit Obligation as on 30 June 2002 31,118
Charge for the year 7.5 6,796
Payments made during the year -1,687
Present Value of Defined Benefit Obligation as on 30 June 2003 36,227
7.5  Charge For The Year
Current Service Cost 4,306
Interest Cost 2,490
6,796
7.6 Charge For The Year Has Been Allocated as Follows:
Cost of Sales 22.1 4,759
Administration, Selling & General Expenses 23.1 2,037
6,796
7.7   Previously the Company had been accounting for provision for the gratuity on liability method, based upon their
accounting policy and the management had the belief that it was adequate to cover the obligation.
However, consequential to the adoption of IAS-19 (Revised 2000), the decrease in liability of Rs. 6.298 million has
been reflected by adjusting the opening balance of Retained Earnings in compliance with the Benchmark Treatment
under IAS-8. The effect of change in accounting policy is summarized as under, which has been accounted for according
to Note. 27.
Amount in Rs. '000
Transition Liability / (Asset) under current IAS-19 as per actuarial valuation 31,118
Liability / (Asset) reflected as per Previous Accounting Policy 37,416
Decrease in Liability under current IAS-1 9 -6,298
Amount in Rs. '000
Note 2003 2002
8.    Deferred Income
Balance at the beginning of the year 239 .
Transferred during the year - 359
Amortized during the year -120 -120
Balance at the end of the year 119 239
9.    Short Term Finances - Secured
Running Finance Utilized Under Mark-up Arrangements - 39,972
Term Finance Utilized Under Mark-up Arrangements - 605,000
- 44,972
9.1    The facilities for Running Finance and Term Finance available from various commercial banks under mark-up arrangements
amount to Rs. 1,220 million (2002: Rs. 1,050 million) with mark-up rate ranging between 7% to 11% (2002: 9.95%
to 13.75%) for Running Finance and for Term Finance, the mark-up was ranging between 5.20% to 10%
(2002: 6.50% to 12.50%). These are secured by way of hypothecation charge over current assets to the extent of
Rs. 1,577.758 million and promissory notes valuing Rs. 1,514.487 million and as at 30 June 2003 the entire outstanding
amount has been adjusted.
9.2   The aggregate facility available for opening letters of credit from various commercial banks amount to
Rs. 1,675.50 million (2002: Rs. 1,730 million) of which Rs. 334.968 million were utilized at 30 June 2003
(2002: Rs. 196.293 million).
Amount in Rs. '000
Note 2003 2002
1 0.  Advances, Deposits, Retentions and Other Payables
Advances from Customers 460 820
Deposits 377 351
Retentions 98 104
Other Payables 359 185
1,294 1,460
1 1 .  Creditors and Accrued Expenses
Creditors 11.1 143,884 14,755
Accrued Expenses 28,293 25,606
Mark-up Accrued on Secured Short Term Finances 3,289 11,522
Income Tax Deducted at Source 184 169
Sales Tax Payable 10,350 -
Workers' Profit Participation Fund 11.2 7,181 12,063
Workers' Welfare Fund 7,384 8,812
Unclaimed Dividend 488 501
201,053 73,428
11.1 Amount due to Associated undertakings at the end of the year
aggregated to Rs. 10.144 million (2002: Rs. NIL).
1 1 .2 Workers Profit Participation Fund
Balance at the Beginning of the year 12,063 30,422
Allocation for the year 7,241 12,156
19,304 42,578
Less:Amount paid to the trustees of the fund 5,777 2,811
Deposited with the Government 6,346 27,098
Effect of Depreciation - 606
12,123 30,515
Balance at the end of the year 7,181 12,063
12.   Contingencies and Commitments
12.1  Guarantees issued to different organizations in the normal course of business amounted to Rs. 3.578 million
(2002: Rs, 4.191 million).
12.2 Commitments against foreign irrevocable letters of credit are Rs. 334.968 million (2002: Rs. 196.293 million).
13.  Tangible Fixed Assets Amount in Rs. '000
BOOK VALUE
COST DEPRECIATION
For the Accumu-
As at Addition/ As at Rate Year (on lated As at
01.07.02 (Deletion)/ 30.06.03 % deletion) upto 30.06.03
13.1 Owned (Transfers) 30.06.03
Freehold Land 21,172 - 21,172 - - - 21,172
Building
Factory on 113,443 - 113,443 10 3,565 81,359 32,084
Freehold Land
Office on 8,403 . 8,403 5 223 4,177 4,226
Freehold Land
Roads 4,312 - 4,312 5 108 2,262 2,050
Plant & Machinery 1,611,660 - 1,611,660 10 44,364 1,212,387 399,273
(Note 13.3)
Vehicles 34,719 1,907 30,126 20 1,988 22,172 7,954
-6,500 -4,796
Furniture, Fixture 56,029 3,570 59,564 10 2,943 33,076 26,488
& Equipment -35 -19
Other Assets 1,854 416 2,270 10 104 1,332 938
1,851,592 5,893 1,850,950 53,295 1,356,765 494,185
-6,535 -4,815
1 3.2 Asset subject to Finance Lease
Vehicles 7,000 - 7,000 20 1,120 2,520 4,480
2003 1,858,592 5,893 1,857,950 54,415 1,359,285 498,665
-6,535 -4,815
2002 1,855,971 21,743 1,858,592 60,380 1,309,685 548,907
-19,122 -4,261
13.3 The opening balances of Cost and Accumulated Depreciation includes the effect of reinstatement pertaining to
encashment of performance bond and exchange loss thereagainst, as restated in corresponding figures of the year
ended on 30 June 2002. The Company had accounted for this amount in the year ended on 30 June 2001, when the
dispute between the Company and the supplier of the plant and machinery was resolved, by crediting this amount to
plant and machinery.
However, since the supplier had made payment to the Company due to sterilization of plant & machinery supplied by
it, the management of the Company decided to reinstate the amount of plant and machinery by this amount and adjust
the retained earnings accordingly.
13.4 Had there been no adjustment, the cost, accumulated depreciation and book value of the plant and machinery would
have been as follows:
Amount in Rs. '000
Accumulated Book Value
Cost as at Depreciation as at as at
30 June 2003 30 June 2003 30 June 2003
Plant and Machinery 1,477,105 1,175,923 301,182
1 3.5 The depreciation charge for the year has been allocated as follows:
Amount in Rs. '000
Note 2003 2002
Cost of Sales 22 48,141 53,437
Administration, Selling & General Expenses 23 6,274 6,943
54,415 60,380
13.6 Comparative information of the cost and accumulated depreciation of plant and machinery has been restated for
comparison purposes.
13.7 Disposal of Fixed Assets: Amount in Rs. '000
Accumu- Gain/
lated (Loss)
Depreci- Book Sale on Mode of
Particulars of Assets Cost ation Value Proceeds Sale Disposal Particulars of Buyers
Vehicles
Trailers (2 No.) 6,500 4,796 1,704 852 -852 Negotiation M/s AI-Amin Enterprises,
D-9/3, Salmina Bungalows,
Park Lane, Clifton, Karachi.
Furniture, Fixture
and Equipment
Sewing Machines(2 No.) 18 12 6 - -6 Salvaged
Mobile Telephone Set 8 1 7 - -7 Lost
Written Down Value not
exceeding Rs. 5,000 each 10 6 4 - -4 Salvaged
2003 6,536 4,815 1,721 852 -869
2002 19,122 4,261 4,861 174,572 596
13.7.1 The (Loss) / Gain on disposal of fixed assets has been disclosed as under:
Amount in Rs. '000
Note 2003 2002
Other Income 25 -869 2,357
Deferred Income 8 - 239
-869 2,596
Amount in Rs. '000
Note 2003 2002
1 4.     Capital Work-in-Progress
Land and Land Development - at cost 17,624 17,412
Building and Civil Work 2,503 2,542
Plant and Machinery 45 1,373
Furniture, Fixture and Equipment 15 221
20,187 21,548
1 5.     Long Term Deposits and Prepayments
Deposits 3,788 1,249
Prepaid Rent 4,916 8,528
Less: Current Portion 19 3,243 3,613
1,673 4,915
5,461 6,164
1 6.     Stores, Spares and Loose Tools
Stores
- In Hand 34,120 40,640
- In Transit 442 3,554
34,562 44,194
Spares
- In Hand 135,777 121,649
- In Transit 1,886 25,983
137,663 147,632
Loose Tools
- In Hand 2,898 2,544
175,123 194,370
1 7.     Stock-in-Trade
Raw and Packing Materials - at cost
- In Hand 158,769 70,970
- In Transit 67,352 165,510
226,121 236,480
Work-in-Process 16,328 14,983
Finished Goods 240,327 329,997
482,776 581,460
18.     Trade Debts
Trade debts are un-secured but considered good 340,613 66,124
Amount in Rs. '000
Note 2003 2002
1 9.   Loans, Advances, Deposits, Prepayments and Other Receivables
Loans-considered good
Loans to Staff
Executives 19.1 3 84
Other Employees 1,169 965
Advances-considered good
Advances to:
Staff Against Expenses 485 251
Suppliers and Contractors 10,074 14,250
Advances to Collector of Customs - 1 5,000
Margin on Letters of Credit 212 1,316
Deposits-considered good
Margin on Bank Guarantees 250 250
Prepayments-considered good
Prepaid Insurance 146 78
Current portion of Prepaid Rent 15 3,243 3,613
Prepaid Excise Duty 521 521
Letters of Credit 1,487 653
Other Prepayments 415 981
Receivables-considered doubtful