Atlas Battery Limited - Annual Reports

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Atlas Battery Limited

Annual Report 2001

MISSION STATEMENT

To achieve market leadership through

technological edge, distinguished by quality,

service and customers' satisfaction, emphasis on

employees long term welfare and ensure adequate

return to shareholders. Be a good corporate

citizen. Contributing to development of the

society and the country through harmonised

endeavour.

CONTENTS

COMPANY INFORMATION

BOARD OF DIRECTORS

Chairman

Yusuf H. Shirazi

Chief Executive Officer

Vazeer Ali

Directors

Aitzaz Shahbaz

Aamir H. Shirazi

Iftikhar H. Shirazi

Yoshitami Saito

Shahid Anwar

Company Secretary

Shahabuddin Ahmad Siddiqui

GROUP EXECUTIVE COMMITTEE

Chairman

Aamir H. Shirazi

Members

Jawaid Iqbal Ahmed

Frahim Ali Khan

Iftikhar H. Shirazi

Saquib H. Shirazi

Saleem Ahmed

Secretary

Theresa Dias

GROUP PERSONNEL COMMITTEE

Chairman

Yusuf H. Shirazi

GROUP AUDIT COMMITTEE

Chairman

Sanaullah Qureshi

COMPANY MANAGEMENT

Chief Executive Officer

Vazeer Ali

General Manager Technical

M. Khalid Jilani

General Manager Administration

Zameer Haider

General Manager Finance

Shahabuddin Ahmad Siddiqui

General Manager Marketing

Arshad Gulraiz Butt

Auditors

Hameed Chaudhri & Co.

Chartered Accountants

Bankers

National Bank of Pakistan

Habib Bank Limited

Muslim Commercial Bank Limited

Habib Bank A.G. Zurich

The Bank of Tokyo-Mitsubishi Limited

Registered Office/Factory

D/181, Central Avenue, S.I.T.E, Karachi-75730

Tel: 2567990-4 Fax: 2564703

Zonal Office Karachi:

PPI Building, Near Sindh Secretariat Building,

Shahrah-e-Kamal Ataturk, Karachi-74200

Tel: 2636057 - 2626478

Lahore Office:

Salam Chambers, 21, Link Mcleod Road, Lahore-54000

Tel: 7227075-7354245 Fax: 7352724

Multan Office:

Azmat Wasti Road, Chowk Dera Adda, Multan-60000.

Tel: 548017

Rawalpindi Office:

312-A, Kashmir Road, R.A. Bazar, Rawalpindi-65847

Tel: 567423

Faisalabad Office:

54-Chenab Market, Madina Town, Faisalabad,

Tel: 713127 Fax: 726628

Sahiwal Office:

647-V-7, Al-Hilal Building, Nishter Road, Sahiwal-57000

Tel: 61539

Sukkur Office:

1738/D, Husaini Road, Sukkur,

Tel: 612532

NOTICE OF ANNUAL GENERAL MEETING

Notice is hereby given that the Annual General Meeting of the Shareholders of the Company will be held at 10:00 a.m. on

Friday, 21 December 2001 at Adamjee House, 8th Floor, I.I. Chundrigar Road, Karachi to transact the following business:

Ordinary Business

1. To confirm Minutes of Annual General Meeting held on 19 December 2000.

2. To consider and adopt the audited accounts of the company for the year ended 30 June 2001 together with the

Directors' and Auditors' Report thereon.

3. To consider and approve the recommendation of Directors for payment of dividend at the rate of 15% (Rs. 1.50

per share) for the year ended 30 June 2001.

4. To appoint Auditors for the year 2001-2002 and fix their remuneration.

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

Special Business

6. To approve the remuneration of the Chief Executive.

A statement under section 160 of the Companies Ordinance, 1984 pertaining to the Special Business referred to above

is annexed to this Notice of Meeting.

BY ORDER OF THE BOARD

Karachi: 14 November, 2001

SECRETARY

BOOK CLOSURE:

i. The Share Transfer Books of the Company will remain closed from 12 December 2001 to 21 December 2001 (both

days inclusive). Transfers received in order at the registered office of the company by 11 December 2001 will be in

time for the purpose of entitlement for payment of the dividend to the transferee.

ii. A member entitled to attend and vote at the General Meeting is entitled to appoint another member as a proxy to

attend and vote on his/her behalf. Proxies in order to be effective must be received at the Registered Office of the

Company not less than 48 hours before the time appointed for meeting.

iii. The members are requested to please communicate to the company any change in their mailing address immediately.

iv. Any individual Beneficial Owner of the Central Depository Company, entitle to vote at this meeting must

bring his/her National Identity Card with him/her to prove his/her identity and in case of proxy, must enclose

an attested copy of his/her National Identity Card. Representative of corporate members should bring the

usual documents required for such purpose.

Statement under section 160 of the Companies Ordinance 1984 regarding special business as given in the

notice of meeting:

This statement is annexed to the notice of the 35th Annual General Meeting of the Shareholders of Atlas Battery Limited to

be held on 21 December 2001 and sets out the material facts concerning the following Special Business to be transacted at

the meeting for approval of shareholders.

Remuneration of Chief Executive.

A total amount of Rs. 3.8 million will be proposed as the aggregate remuneration of the Chief Executive of the Company,

in the form of following resolution.

"RESOLVED that the Company hereby authorises the holding of offices of profit and payment as remuneration to Mr. Vazeer

All, Chief Executive, not exceeding in the aggregate Rs. 3.8 million per annum for the year ending 30 June 2002 together

with other benefits as per Company policy."

The Chief Executive is interested in the remuneration payable to him.

TEN YEARS GROWTH AT A GLANCE

(Rupees in million)

Years

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

Sales

562.96

480.81

499.32

443.41

366.10

339.58

121.97

260.41

206.35

175.14

Gross Profit

109.20

91.14

107.67

93.32

73.89

76.79

29.31

66.84

64.75

50.63

Profit Before Tax

11.55

15.82

36.21

31.46

18.18

27.22

8.57

23.89

23.11

18.43

Profit After Tax

9.45

14.13

24.39

21.09

10.64

18.33

5.22

15.84

7.65

16.67

Share Capital

27.20

24.73

23.00

20.00

Share Holders' Equity

105.00

99.63

91.68

77.17

63.50

55.73

43.15

41.38

30.14

25.50

Fixed Assets - Net

97.16

103.79

83.57

65.33

56.12

49.93

45.44

43.19

40.18

39.23

Total Assets

356.69

278.65

260.26

213.92

199.52

198.29

162.79

134.07

119.13

96.77

Dividend

Cash

15%

25%

40%

30%

12.50%

25%

15%

20%

15%

Stock

10%

7.50%

15%

Ratios:

Gross Profit

19.40%

18.96%

21.56%

21.04%

20.18%

22.61%

24.03%

25.67%

31.38%

28.91%

Profit Before Tax

2.05%

3.29%

7.25%

7.17%

4.97%

8.01%

7.03%

9.17%

11.20%

10.52%

Profit After Tax

1.68%

2.94%

4.89%

4.81%

2.91%

5.40%

4.28%

6.08%

3.71%

9.52%

Return To Shareholders

R.O.E.-Before Tax

11.00%

15.88%

39.50%

40.76%

28.63%

48.84%

19.88%

57.73%

76.68%

72.27%

R.O.E.-After Tax

9.00%

14.18%

26.61%

27.33%

16.76%

32.89%

12.10%

38.28%

25.37%

65.39%

E.P.S.-Before Tax(Rs.)

4.25

5.82

14.64

12.72

7.90

11.83

3.73

10.38

11.55

9.21

E.P.S.-After Tax (Rs.)

3.48

5.20

9.87

8.53

4.63

7.97

2.27

6.89

3.82

8.34

Activity

Sales To Total Assets

1.58

1.73

1.92

2.05

1.83

1.71

0.75

1.94

1.73

1.81

Sales To Fixed Assets

5.79

4.63

5.98

6.71

6.52

6.80

2.68

6.03

5.14

4.46

Liquidity/Leverage

Current Ratio

1.19:1

1.35:1

1.28:1

1.21:1

1.17:1

1.24:1

1.27:1

1.16:1

1.08:1

Break up value

per share

38.61

36.63

37.08

31.21

27.61

24.23

18.76

17.99

15.07

12.75

Long Term Debts To

Equity (Times)

0.40

0.53

0.38

0.24

0.29

0.35

0.51

0.52

0.71

0.70

Total Liabilities

To Equity (Times)

2.40

1.80

1.84

1.77

2.14

2.56

2.77

2.24

2.95

2.80

CHAIRMAN'S REVIEW

It is my pleasure to present to you the 35th Annual

Report and review of performance of your company

for the year ended 30 June 2001.

THE ECONOMY

Pakistan's growth performance during the fiscal year

2000-01 suffered from an unprecedented drought. The

situation engulfed the entire country causing serious

damage to agriculture and consequently the overall

economic growth.

GDP was targeted to grow by 4.5% with agriculture

and manufacturing contributing 2.6% and 5.9%

respectively. Real growth was, however, around 3%.

Major contribution to GDP growth was by the

manufacturing sector particularly the automobile and

textile sectors. The greatest set back came from the

agriculture sector, which declined to a negative 0.7%.

Consequently, the value added in agriculture also

registered a decline of 2.5% as against growth of 6.1%

last year. Major crops like cotton, wheat, sugarcane,

and rice also witnessed decline in production by 10.5%.

Since agriculture, electricity and gas distribution account

for almost 30% of the GDP, any significant decline in

these sectors heavily affects the overall GDP growth.

A positive achievement of the outgoing year, however,

has been the lower inflation rate of 4.7% against the

targeted rate of 6%. Another significant achievement

of the year was the sharp reduction in the overall fiscal

deficit of 5.3% or Ks. 185.7 bn. This is the lowest fiscal

deficit over the last decade.

The persistence of the large fiscal deficit associated

with the build up of public debt has been the major

source of macroeconomic imbalance in Pakistan. This

legacy is attributed to a host of factors, chiefly leakage

in revenue collection and widespread financial

indiscipline with ineffective accountability. Frequent

changes in the monetary and fiscal policies have created

imbalances. Growing debt servicing over the years

has also made the fiscal adjustment more difficult.

Pakistan's public debt burden of Rs.3,198 bn is much

higher than that of many developed and developing

countries. However, with the government's multi-

dimensional approach, one can hopefully look forward

to better results!

IMF's acceptance of economic measures taken by the

Government is no less an achievement, which facilitated

another round of external debt rescheduling. The

approval of the third tranche of US$ 133 mn by IMF

under the standby facility agreement also adds support

to the lenders' confidence and growing satisfaction

with the country's economic measures and their viability.

Also the government's emphasis on the export target

of US$10.66 bn, an increase of 3.4% over last year's

US$10.31 bn will certainly help reduce the trade deficit

of US$1.52 bn.

In order to promote investment and achieve sustainable

growth, the need of the hour is a stable macroeconomic

environment where the key elements include low

inflation, sustainable budget deficit, realistic exchange

rates, appropriate real interest rates and consistency in

economic, fiscal and other related policies.

THE INDUSTRY

The organised sector of the industry, for the second

consecutive year showed a negative growth of 1.6%

inspite of GDP growth of 2.6% and large scale

manufacturing growth of 7.8%. This indicates the plight

of the industry which will join the list of non-viable

industries, unless Government takes corrective actions.

The industry is over burdened with incidence of taxes.

(Excise Duty 10%, Sales Tax 15% and 3% further tax,

Custom Duty on raw material and other Federal and

Provincial taxes). The multiple taxes puts the industry

at a disadvantage vis-a-vis the un-organised sector of

replaters and the under invoiced imports. Therefore,

the demand of batteries and the growth in this sector

is being catered for by the unorganised sector which

is indicated by their growth of 17% in the year 2000

and an estimated similar growth in the year 2001.

The sharp growth of the unorganised sector in the

replacement market deprives the Government of

significant revenue. The battery manufacturers had

approached CBR, after the recommendation of the

National Tariff Commission for withdrawal of Excise

Duty in the Budget 2001-2002. No remedial measure

was considered by the government.

On the other hand, the country has the capacity of

producing about 2 mn batteries per annum in the

organised sector, which is presently utilising about 50%

of the installed capacity. There is fierce competition

in the organised sector to utilise capacity resulting in

the inability to increase prices for 3 years inspite of

cost push in imported and local materials, electricity,

gas and other local inputs.

OPERATIONAL RESULTS

The sales revenue for the year increased to Rs. 563.0

mn compared to Rs 480.8 mn in the preceding year,

up by 17.1%.

Gross Profit improved from Rs.91.1 mn to Rs.109.2 mn

up by 19.8% and as a ratio to sales it was 19.4% in

current year, compared to 18.9% in the previous year.

The operating expenses were Rs.81.7 mn in current

year, (includes Rs.14.0 mn export handling and other

charges) compared to Rs.59.1 mn in the previous year

and as a percentage to revenue 14.5% and 12.3%

respectively. Negative growth in the industry created

a fierce competition in the market, due to which the

inflationary costs had to be absorbed by the company

resulting in pressure on operating profit which was

4.9% in the year under reporting as against 6.7% in the

previous year.

Prudent working capital management enabled the

company to contain the financial and other charges to

Rs.19.2 mn as against Rs. 19.6 mn in the previous year:

as a ratio to sales it was down to 3.4% from 4.1% of

previous year.

The net profit before tax for the year was Rs 11.6 mn

as compared to Rs.15.8 mn in the preceding year, and

the profit after tax was Rs.9.5 mn as compared to

Rs.14.1 mn in the preceding year. The profit after tax

margin was 1.7% during the year as against 2.9% in

the last year. The earning per share before tax for the

current year was Rs.4.25 as compared to Rs.5.82 in the

previous year. The book value per share stood at

Rs.38.61 against Rs.36.63 in the previous year. The

after tax return on equity was 9.0% compared to 14.2%

in the last year.

The company contributed a sum of Rs.212.78 mn

towards government exchequer on account of Custom

Duty, Sales Tax, Excise Duty, Income Tax and other

Government levies during the year.

The company had a major breakthrough in exports.

Export sales revenue was Rs.55.5mn. The company

is the largest exporter of lead acid batteries, thus, it

is contributing to Government's efforts to enhance

exports and earn valuable foreign exchange. In the

export market, the product meets the international

quality standard and is competitive in price. This

enabled the company to utilise the capacity further.

The short term finances for export of Rs. 48.5 mn and

Rs.12.0 nm reported in the accounts for the year ending

30 June 2001 have been paid subsequently on realisation

of export proceeds of Rs.49.2 mn which had been

shown as export debtors.

HUMAN RESOURCES

The emphasis on human resource development is the

hallmark of the Atlas Group of which your company

is a constituent member. The Group Personnel

Committee headed by the Chairman has continuously

streamlined, improved and upgraded human resource

policies so that the employees are motivated and

rewarded according to their contribution in meeting

the company's objectives.

As a result the total wage bill increased to Rs.70.69

mn during the year from Rs.42.01 mn during 1996 and

sales per person also increased from Rs.l.121 mn in

1996 to Rs.2.070 mn in the year under review as shown

in the following table:

In view of Group Policy of job rotation and to enhance

opportunities and exposure for the employees, Mr.

Syed Zamir Haider was transferred from Atlas Honda

Ltd., a sister company to Atlas Battery Ltd., as General

Manager Human Resources. Mr. Hussain Tabassum,

General Manager Administration was transferred from

the company to Allwin Engineering Industries Ltd.,

another Group company. To strengthen the Technical

Division, Col (R) Shehzad Ahmed Khan was appointed

as Manager Production.

The charter of demands has been settled for two years

ending 31 December 2002. Consequently, working

hours have been increased from 45 hours last year to

45.5 hours this year, resulting in increased capacity

and productivity. As special recognition, Long Service

Awards were given to 86 permanent employees.

FUTURE OUTLOOK

The battery industry remains under pressure due to

several constraints, mainly the ever increasing fierce

market competition, cost push resulting from inflationary

input cost and progressive devaluation of the rupee

aggregating to 23% during the reporting year alone,

and the inability to raise prices to reflect these increased costs.

Current world economic scenario is expected to go

into recession increasing the economic woes of the

country. The replating and the import of under-

invoiced goods will further damage the battery trade.

In order to meet the situation, management has taken

steps to improve quality, service, cost controls and

productivity for the efficient operation of the company.

However, having journeyed successfully through difficult

years, your company looks forward to the future with

greater determination in order to meet the challenges

ahead.

(There is a world, beyond this world!)

ACKNOWLEDGEMENT

I thank the Board of Directors, Group Executive

Committee members, management team and all

members of the staff and workers of the company for

their dedicated efforts and valuable contribution. I</