| Engro Asahi Polymer And Chemicals Limited |
|
|
|
|
|
| Annual
Report 2001 |
|
|
|
| Contents |
|
|
| Company
Information |
|
| Notice
of Meeting |
|
| Directors'
Report |
|
| Auditors'
Report |
|
| Balance
Sheet |
|
| Profit
and Loss Account |
|
| Statement
of Changes in Equity |
|
| Cash
Flow Statement |
|
| Notes
to the Accounts |
|
| Statement
Under Section 237 (1) (e) |
|
| of
the Companies Ordinance, 1984 |
|
| Pattern
of Shareholding |
|
|
| Engro
Asahi Trading (Private) Limited |
|
| Subsidiary
Company |
|
| Directors'
Report |
|
| Auditors'
Report to the Members |
|
| Balance
Sheet |
|
| Profit
and Loss Account |
|
| Statement
of Changes in Equity |
|
| Cash
Flow Statement |
|
| Notes
to the Accounts |
|
| Pattern
of Shareholding |
|
|
| Consolidated Accounts |
|
| Auditors'
Report |
|
| Balance
Sheet |
|
| Profit
and Loss Account |
|
| Statement
of Changes in Equity |
|
| Cash
Flow Statement |
|
| Notes
to the Accounts |
|
|
|
| Company
Information |
|
|
| Board
of Directors |
|
| Zaffar
Ahmed Khan, Chairman |
|
| Asif
Qadir, President & Chief Executive |
|
| Shuichi
Fujishima |
|
| Salim Azhar |
|
| S.M.
Pervez Ghias |
|
| Yukio
Hasegawa |
|
| Hiroyoshi
Kitagawa |
|
| Kazuo
Matsushita |
|
| Hidekazu
Sakurai |
|
| Asad Umar |
|
|
| Company
Secretary |
|
| Andalib
Alavi |
|
|
| Bankers |
|
| Askari
Commercial Bank Limited |
|
| Bank
AI-Falah Limited |
|
| Citibank
N.A. |
|
| Faysal
Bank Limited |
|
| Habib
Bank Limited |
|
| Hong
Kong and Shanghai Banking Corporation Limited |
|
| Muslim
Commercial Bank Limited |
|
| Societe
Generale, the French & international Bank |
|
| Standard
Chartered Grindlays Bank Limited |
|
| Union
Bank Limited |
|
| United
Bank Limited |
|
|
| Auditors |
|
| A.F.
Ferguson & Co. |
|
| Chartered
Accountants |
|
|
| Registered
Office |
|
| 1st
Floor, Bahria Complex 1 |
|
| 24,
Maulvi Tamizuddin Khan Road |
|
| Karachi |
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|
|
| Notice
of Meeting |
|
|
| NOTICE
IS HEREBY GIVEN that the fourth Annual General Meeting of Engro Asahi Polymer
& |
|
| Chemicals
Limited will be held at 1st Floor, Bahria Complex I, M. T. Khan Road, Karachi
on |
|
| Tuesday,
April 23, 2002 at 10 a.m. to transact the following business: |
|
|
| (1)
To receive and consider the Audited Accounts for the year ended December 1,
2001 |
|
| and
the Directors' and Auditors' Report thereon. |
|
|
| (2)
To appoint Auditors and fix their remuneration. |
|
|
| (3)
To elect ten directors in accordance with the provisions of the Companies
Ordinance, |
|
| 1984
for a new term of three years commencing from April 16, 2002. The names of |
|
| the
retiring directors are Mr. Zaffar A. Khan, Mr. Asif Qadir, Mr. Yoshio Shiga,
Mr. Salim |
|
| Azhar,
Mr. S. M. Parvez Ghias, Mr. Yukio Hasegawa, Mr. Kazuo Matsushita, Mr. |
|
| Masayuki
Miyazaki, Mr. Hidekazu Sakurai and Mr. Asad Umar. |
|
|
|
By Order of the Board |
|
|
|
|
| Karachi, |
|
Andalib Alavi |
|
| Dated:
February 12, 2002 |
|
Company Secretary |
|
|
| N, B, |
|
|
| (1)
The share transfer books of the Company will be closed and no transfers of
shares |
|
| will
be accepted for registration from Tuesday, April 16, 2002 to Tuesday, April
23, |
|
| 2002
(both days inclusive). Transfers received in order at the Registered Office
of the |
|
| Company
upto close of business (4.30 p.m.) on Monday, April 15, 2002 will be in time. |
|
|
| (2)
A member entitled to attend and vote at this meeting shall be entitled to
appoint |
|
| another
person, as his/her proxy to attend, speak and vote instead of him/her, and a |
|
| proxy
so appointed shall have such rights, as respects attending, speaking and
voting |
|
| at
the meeting as are available to a member. Proxies, in order to be effective,
must |
|
| be
received by the Company not less than 48 hours before the Meeting. A proxy
need |
|
| not
be a member of the Company. |
|
|
|
| Directors'
Report |
|
|
| The
Board of Directors of Engro Asahi Polymer & Chemicals Ltd. is pleased to
present the Annual |
|
| Report
and the Audited Accounts of the Company from 1st January to 31st December,
2001. |
|
|
| SAFETY
& ENVIRONMENT |
|
| There
was no Lost Work Injury (LWl) to any EAPCL employee in the year 2001. The
Manufacturing |
|
| Division
achieved 0.68 million man-hours of work without suffering any LWl to any of
EAPCL or |
|
| contract
employee throughout the year. |
|
|
| The
company is in compliance with National Environment Quality Standards (NEQS). |
|
|
| THE
PVC INDUSTRY ENVIRONMENT |
|
| The
PVC industry changed significantly during the course of the year, with
declining international |
|
| prices,
and a shrinking PVC-VCM margin. The PVC prices and the PVC-VCM price
differential |
|
| was
the lowest seen since 1985, attributed to the overall global recession. |
|
|
| The
Company launched its extensive market development program in the year 2000,
contributing |
|
| to
the growth of the domestic PVC market. This, combined with low prices,
resulted in domestic |
|
| market
growth of 35% - from 44,500 MT in 2000 to 60,000 MT in 2001. |
|
|
| MARKETING |
|
| The
Company sold 58,192 MT of PVC resin domestically, as compared to 36,577 MT
last year - |
|
| an
increase of about 60%. Customer confidence in SABZ PVC resin, built up over
the past year |
|
| through
extensive customer service, coupled with competitive pricing, resulted in
EAPCL |
|
| capturing
a market share of 97%. In addition, the Company sold 12,409 MT in the export
market |
|
| through
Engro Asahi Trading (Private) Limited - its wholly owned subsidiary-compared
to 25,513 |
|
| MT
in 2000. Exports were curtailed due to the low international margins. With
the September 11, |
|
| 2001
incident, the last quarter of the year witnessed a significant decline in
local demand for PVC |
|
| resin:
sales for the 4th quarter declined to about 12,500 MT, against the previous
quarter sales of |
|
| 16,400 MT. |
|
|
| The
Company's intensive Market Development program considerably boosted the PVC
demand |
|
| in
the pipe sector. In addition, through collaboration with a local
manufacturer, quality |
|
| geomembrane
was developed. Geomembrane demonstration was also successfully completed by |
|
| the
Company during the year, which showed excellent water seepage prevention.
Efforts are |
|
| underway
to introduce this cost-efficient method of lining for canals & water
courses. |
|
|
| MANUFACTURING |
|
| The
production of PVC resin in 2001 was 68,600 MT, achieving 69% of installed
capacity, |
|
| compared
to 65% utilisation in 2000. Production was curtailed in the second half of
the year as |
|
| exports
were not viable due to the low price margins in the international market. |
|
|
| FINANCIAL
RESULTS |
|
| The
Company earned a total revenue of Rs. 2,712 million, as compared to Rs. 2,590
million in the |
|
| previous
year. While the sales volume was higher by 8,600 MT over the previous year,
the |
|
| corresponding
PVC prices were much lower than 2000. The Company experienced a consolidate |
|
| loss
after tax of Rs. 184 M for the year, versus a loss of Rs. 342 million in the
previous year. The |
|
| loss
in 2001 was primarily due to an exceptionally low PVC-VCM price margin, in
particular in the |
|
| last
quarter of the year, where declining global demand for PVC resulted in
continual sliding of |
|
| international
PVC prices. |
|
|
| During
the year, the Company restructured its balance sheets by paying off some of
its loans |
|
| through
the issuance of Term Finance Certificates (TFCs) of PKR 500 million, which
were fully |
|
| subscribed.
JCR-VIS, the credit rating agency, gave an "A" rating to the TFCs. |
|
|
| An
agreement was reached with Qatar Vinyl Company (QVC) for the supply of Vinyl
Chloride |
|
| Monomer
(VCM), which is the primary raw material in the production of PVC. This gives
the |
|
| Company
competitive prices, low lead time, and improved inventory management through
smaller |
|
| parcel size. |
|
|
| The
Company successfully implemented Oracle Financials. This has initiated
business process |
|
| efficiencies,
and will result in better planning, customer servicing and decision making. |
|
|
| We
are pleased to report that the company was awarded ISO-14001 certification.
Also, ISO 9001 |
|
| certification,
received in 2000, was successfully upgraded to the latest version of ISO
9000: 2000. |
|
|
| BUSINESS
OUTLOOK |
|
| Since
late December 2001, domestic sales have been picking up, and continue to be
strong. This |
|
| is
primarily due to the low PVC prices, which have helped in the conversion of
scrap users to virgin |
|
| resin;
market development efforts initiated earlier, and improving economic activity
post |
|
| Afghanistan. |
|
|
| PVC
prices are now on a rising trend, and margins are also improving. New avenues
of PVC |
|
| consumption
have been identified and are being promoted to increase domestic sales. |
|
|
| The
Company is also continuing efforts to bring about further operational
efficiencies to make |
|
| 2002
a profitable year. |
|
|
| COMMUNITY
INVOLVEMENT |
|
| The
Company's commitment to community welfare continues in the form of
contributions to |
|
| various
sectors, like health, environment, education, social work etc. A Community
Involvement |
|
| Committee
(CIC) has been set up with planned activities in the areas of education,
health and |
|
| infrastructure
for the community near the Port Qasim area. For 2001, the Committee selected
the |
|
| "Haji
Ghangi Khan School" located at Ghaghar Phathak, Port Qasim area as a
project for |
|
| infrastructure
improvement. |
|
|
| AUDITORS |
|
| The
present auditors, M/s. A.F. Ferguson & Company, retire and offer
themselves for re- |
|
| appointment. |
|
|
| The
Board would like to put on record its appreciation for the employees of the
Company for their |
|
| dedication
and hard work throughout the year. We also acknowledge the support and
cooperation |
|
| received
from our customers, investors, lenders, Government, suppliers, and
contractors. |
|
|
|
On behalf of the Board of Directors |
|
|
| Karachi, |
|
Asif Qadir |
|
Yoshio Shiga |
|
| Dated:
February 12, 2002 |
|
President & Chief Executive |
|
Director |
|
|
|
| Auditors'
Report to the Members |
|
|
| We
have audited the annexed balance sheet of Engro Asahi Polymer and Chemicals
Limited as |
|
| at
December 31,2001 and the related profit and loss account, statement of
changes in equity and |
|
| cash
flow statement, 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; |
|
|
| (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, statement of changes in equity
and cash flow |
|
| statement
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 December 31, 2001 and of the loss, changes in
equity |
|
| and
its cash flows for the year then ended; and |
|
|
| (d)
in our opinion no Zakat was deductible at source under the Zakat and Ushr
Ordinance, 1980. |
|
|
| Karachi, |
|
A.F. Ferguson & Co. |
|
| Dated:
February 12, 2002 |
|
Chartered Accountants |
|
|
|
| Balance
Sheet |
|
| AS
AT DECEMBER 31 , 2001 |
|
|
|
Note |
2001 |
2000 |
|
|
|
Rupees |
Rupees |
|
| SHARE
CAPITAL AND ACCUMULATED LOSS |
|
| Authorised
capital |
|
| 200,000,000
(2000: 200,000,000) ordinary |
|
| shares
of Rs 10 each |
|
2,000,000 |
2,000,000 |
|
|
========== |
========== |
|
| Issued,
subscribed and paid up capital |
|
3 |
1,780,000 |
1,780,000 |
|
|
| Accumulated
loss |
|
(530,859) |
(359,407) |
|
|
----------- |
----------- |
|
|
1,249,141 |
1,420,593 |
|
|
| REDEEMABLE
CAPITAL |
|
4 |
1,218,033 |
1,100,000 |
|
| LONG
TERM LOAN |
|
5 |
376,828 |
432,343 |
|
| OBLIGATIONS
UNDER FINANCE LEASE |
|
6 |
3,794 |
3,931 |
|
| DEFERRED
LIABILITIES |
|
|
|
| Deferred
custom dues |
|
7 |
59,634 |
96,660 |
|
| Retirement
and other service benefits |
|
|
7,856 |
5,741 |
|
|
| CURRENT
LIABILITIES |
|
| Current
maturity of - redeemable capital |
|
4 |
81,867 |
50,000 |
|
| -
long term loan |
|
5 |
71,760 |
33,257 |
|
| -
obligations under finance lease |
|
6.2 |
4,139 |
1,906 |
|
| -
deferred custom dues |
|
7 |
37,026 |
2,461 |
|
| Short
term finances |
|
8 |
246,269 |
693,834 |
|
| Creditors,
accrued and other liabilities |
|
9 |
530,397 |
423,308 |
|
|
|
---------- |
---------- |
|
|
|
|
971,458 |
1,204,766 |
|
|
|
|
| CONTINGENCIES
AND COMMITMENTS |
|
10 |
|
|
---------- |
---------- |
|
|
3,886,744 |
4,264,034 |
|
| TANGIBLE
FIXED ASSETS |
|
========== |
========== |
|
| Operating
assets |
|
11 |
2,822,078 |
2,956,897 |
|
|
| Capital
work-in-progress |
|
12 |
2,716 |
1,070 |
|
|
|
---------- |
---------- |
|
|
2,957,967 |
2,824,794 |
|
|
| LONG
TERM INVESTMENT |
|
13 |
50,000 |
50,000 |
|
| LONG
TERM LOANS AND ADVANCES |
|
14 |
3,971 |
3,138 |
|
| DEFERRED
COST |
|
15 |
1,953 |
2,971 |
|
| CURRENT
ASSETS |
|
|
|
| Stores
and spares |
|
16 |
65,849 |
39,122 |
|
| Stock-in-trade |
|
17 |
398,963 |
583,776 |
|
| Trade debts |
|
18 |
15,145 |
7,624 |
|
| Loans,
advances, deposits, prepayments |
|
|
|
| and
other receivables |
|
19 |
23,821 |
46,715 |
|
| Short
term investments |
|
20 |
443,312 |
489,939 |
|
| Taxation
recoverable |
|
|
25,500 |
24,323 |
|
| Cash
and bank balances |
|
21 |
33,436 |
58,459 |
|
|
|
---------- |
---------- |
|
|
1,006,026 |
1,249,958 |
|
|
---------- |
---------- |
|
|
3,886,744 |
4,264,034 |
|
|
========== |
========== |
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
Asif Qadir |
|
Yoshio Shiga |
|
|
President & Chief Executive |
|
Director |
|
|
|
| Profit
and Loss Account |
|
| FOR
THE YEAR ENDED DECEMBER 31, 2001 |
|
|
|
|
Note |
2001 |
2000 |
|
|
|
Rupees |
|
| Net sales |
|
22 |
2,711,492 |
2,585,679 |
|
| Less:
Cost of goods sold |
|
23 |
2,483,514 |
2,592,851 |
|
|
|
---------- |
---------- |
|
| Gross
profit/(loss) |
|
|
227,978 |
(7,172) |
|
|
|
|
|
| Less:
Selling, general and administration expenses |
24 |
135,150 |
102,293 |
|
|
|
---------- |
---------- |
|
| Profit/(loss)
from operations |
|
|
92,828 |
(109,465) |
|
|
|
|
|
| Other
income |
|
25 |
40,353 |
104,698 |
|
|
|
---------- |
---------- |
|
|
|
133,181 |
(4,767) |
|
|
|
|
|
| Less:
Financial charges |
|
26 |
289,033 |
331,894 |
|
|
| Other
charges |
|
27 |
2,043 |
1,642 |
|
|
|
---------- |
---------- |
|
|
291,076 |
333,536 |
|
|
---------- |
---------- |
|
| Loss
before taxation |
|
(157,895) |
(338,303) |
|
|
|
|
| Provision
for taxation |
|
28 |
13,557 |
14,807 |
|
|
---------- |
---------- |
|
| Loss
after taxation |
|
(171,452) |
(353,110) |
|
|
========== |
========== |
|
| Earnings
per share |
|
29 |
Rs. (0.96) |
Rs. (1.98) |
|
|
========== |
========== |
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
Asif Qadir |
|
Yoshio Shiga |
|
|
President & Chief Executive |
|
Director |
|
|
|
| Statement
of Changes in Equity |
|
| FOR
THE YEAR ENDED DECEMBER 31 , 2001 |
|
|
|
Share |
Accumulated |
Total |
|
|
Capital |
Loss |
|
|
|
------------------------Rupees--------------------- |
|
| Balance
as at December 31, 1999 |
|
1,780,000 |
(6,297) |
1,773,703 |
|
| Net
Loss for the year |
|
-- |
(353,110) |
(353,110) |
|
|
---------- |
---------- |
---------- |
|
| Balance
as at December 31, 2000/January 1, 2001 |
1,780,000 |
(359,407) |
1,420,593 |
|
| Net
Loss for the year |
|
-- |
(171,452) |
(171,452) |
|
|
---------- |
---------- |
---------- |
|
| Balance
as at December 31, 2001 |
|
1,780,000 |
(530,859) |
1,249,141 |
|
|
========== |
========== |
========== |
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
Asif Qadir |
|
Yoshio Shiga |
|
|
President & Chief Executive |
|
Director |
|
|
|
| Cash
Flow Statement |
|
| FOR
THE YEAR ENDED DECEMBER 31 , 2001 |
|
|
|
Note |
2001 |
2000 |
|
|
|
Rupees |
|
| CASH
FLOW FROM OPERATING ACTIVITIES |
|
| Cash
generated from operations |
|
31 |
548,821 |
138,204 |
|
| Financial
charges paid |
|
(309,055) |
(324,772) |
|
| Long
term loans and advances |
|
(833) |
(1,137) |
|
| Taxes paid |
|
(14,734) |
(22,139) |
|
| Deferred
custom dues paid |
|
(2,461) |
-- |
|
|
---------- |
---------- |
|
| Net
cash inflow / (outflow) from operating activities |
|
221,738 |
(209,844) |
|
|
| CASH
FLOW FROM INVESTING ACTIVITIES |
|
| Long
term investment in a subsidiary |
|
|
(48,000) |
|
| Capital
expenditure |
|
(22,994) |
(8,458) |
|
| Sale
proceeds on disposal of fixed assets |
|
30 |
2,730 |
|
| Income
received |
|
42,157 |
39,826 |
|
| Net
cash inflow / (outflow) from investing activities |
|
19,193 |
(13,902) |
|
|
| CASH
FLOW FROM FINANCING ACTIVITIES |
|
| Proceeds
from long term loan |
|
-- |
50,400 |
|
| Repayment
of long term loan |
|
(17,012) |
-- |
|
| Repayment
of redeemable capital |
|
(350,100) |
-- |
|
| Proceeds
from redeemable capital |
|
500,000 |
230,000 |
|
| Obligations
under finance lease (net) |
|
2,096 |
(663) |
|
|
---------- |
---------- |
|
| Net
cash inflow from financing activities |
|
134,984 |
279,737 |
|
|
---------- |
---------- |
|
| Net
increase / (decrease) in cash and cash equivalents |
|
375,915 |
55,991 |
|
| Cash
and cash equivalents at the beginning of the year |
|
(145,436) |
(201,427) |
|
|
---------- |
---------- |
|
| Cash
and cash equivalents at the end of the year |
32 |
230,479 |
(145,436) |
|
|
========== |
========== |
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
Asif Qadir |
|
Yoshio Shiga |
|
|
President & Chief Executive |
|
Director |
|
|
|
| Notes
to the Accounts |
|
|
| 1. STATUS AND NATURE OF BUSINESS |
|
| The
Company is a public limited company incorporated in Pakistan under the
Companies |
|
| Ordinance,
1984. The Company's principal activity is to manufacture, market and sell
Poly |
|
| Vinyl
Chloride (PVC), Vinyl Chloride Monomer (VCM), PVC compounds and other related |
|
| chemicals. |
|
|
| The
Company's Term Finance Certificates (TFCs), issued during the year, are
listed on the |
|
| Karachi
Stock Exchange. |
|
|
| 2.
SIGNIFICANT ACCOUNTING POLICIES |
|
| 2.1
Basis of Presentation |
|
| These
accounts have been prepared under the historical cost convention, in
accordance |
|
| with
the requirements of the Companies Ordinance, 1984, and International
Accounting |
|
| Standards
as applicable in Pakistan. |
|
|
| 2.2
Retirement and other service benefits |
|
| The
Company operates defined benefit funded pension and gratuity schemes for its |
|
| management
employees. The pension scheme provides lifetime pension to retired |
|
| employees
or their spouses. Under the gratuity scheme, gratuity is payable on
retirement |
|
| or
death to retired employees or their spouses. Contributions have been made to
these |
|
| funds
on the basis of the actuarial recommendations. |
|
|
| The
Company also operates unfunded schemes for death in service gratuity for its |
|
| management
employees. |
|
|
