| DANDOT CEMENT COMPANY LIMITED |
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| ANNUAL
REPORT 2004 |
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| Board
of Directors |
Mr. Abdur Rafique
Khan (Chairman & Chief Executive) |
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|
Mr. M. Tousif Peracha |
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|
Mr. A. Shoeb Piracha |
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|
Mr. Jawaid A. Peracha |
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|
Mr. M. Niaz Paracha |
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|
Mr. Aameen Taqi Butt |
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|
Mr. Abbas Rashid |
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| Audit Committe |
|
Mr. Aameen Taqi Butt
(Chairman) |
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|
Mr. A. Shoeb Piracha |
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|
Mr. Jawaid A. Peracha |
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| Chief
Financial Officer |
Mr. Zulfiqar A.
Choudhry (FCA, ACMA) |
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| Company
Secretary |
Mr. Abbas Rashid |
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| Statutory
Auditors |
Khalid Majid Rahman
Sarfaraz |
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|
Rahim Iqbal Rafiq |
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|
Chartered Accountants |
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| Legal Advisor |
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International Legal
Services |
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| Bankers |
|
Habib Bank Limited |
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|
Saudi Pak Commercial Bank
Limited |
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|
The Bank of Punjab |
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|
Citibank N.A. |
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|
United Bank Limited |
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National Bank of Pakistan |
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|
Bolan Bank Limited |
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Muslim Commercial Bank
Limited |
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PICIC Commercial Bank
Limited |
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| Registered
Office |
3-A/3Gulberg-lll, Lahore. |
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Telephone: 5871057-58,
Fax: 5871056 |
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| Factory |
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DANDOT R.S., Distt.
Jhelum. |
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Telephone: (0458)
211371,211491 Fax: (0458) 211490 |
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| Shares
Department |
3-A/3 Gulberg - III,
Lahore. |
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| Directors'
Report to the Shareholders |
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| Your
Directors are pleased to present the annual report along with the audited
financial statements for the yeai |
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| ended
June 30, 2004. |
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| Operational
Performance - The comparative data for production of
clinker & cement and dispatches of cemen |
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| is
summarized hereunder:- |
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|
2004 (Tonnes) |
2003 (Tonnes) |
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| Clinker
Production |
274,683 |
259,900 |
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| Cement: |
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|
|
| Production |
|
295,414 |
275,300 |
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| Despatches |
|
296,467 |
273,195 |
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| During
the year under review, production of clinker and cement increased by about 6%
and 7% respectively whereas |
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| the
Company's dispatches of cement posted an increase of 8.52% over last year.
Capacity utilization (clinker) was |
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| 57.23%
during the year under review as compared to 54.14% in last year. The current
year's figures show improvement |
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| over
the previous year and the management of your company is continuously
endeavoring to improve results. |
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| The
performance of the cement plant remained satisfactory whereas its normal
maintenance was carried out |
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| throughout
the year. |
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| Financial
Results - Although the Company has suffered a net loss
after-taxation from ordinary activities of Rs. |
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| 112.828
million for the year under review as against a profit of Rs. 47.133 million
for the preceding year, the Company |
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| has,
however, after recognition of waiver aggregating to Rs. 158.967 million on
settlement of debt, earned a net |
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| profit
for the year of Rs. 45.867 million (2004) as compared to a net profit of Rs.
47.133 million (2003). |
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| The
Company has earnings of Rs. 1.09 per share for the year ended June 30, 2004,
as compared to earnings of |
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| Rs.
1.66 per share for the year ended June 30, 2003. |
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|
| Net-sales
revenue (Cement Sales less sales tax, excise duty & rebate/commission
paid to stockists) for the year |
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| under
review is Rs. 812 million which is an increase of about 37.62% over the
net-sales revenue of Rs. 590 million |
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| posted
for the preceding year. This improvement in net-sales value is due to the
following factors:- |
|
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| (a) Price stability marked by normal and
healthy competition amongst the cement manufacturers. |
|
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| (b) Robust demand for cement both for
local consumption as well as for exports. |
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| (c) The plant posted continuous operations
throughout the year under review. However, the production schedule |
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| of
the plant was curtailed for a period of about one month in May 2004 to enable
BMR. |
|
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| (d) Financial charges have been reduced by
half from Rs. 119 million (2003) to Rs. 60 million (2004). |
|
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| (e) 'Selling & distribution expenses'
remained generally stable for the year under review inspite of the increased |
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| operational
performance of the Company, whereas the 'Administrative & general
expenses' increased during |
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| the
same period on account of the administrative restructuring having taken place
at the Company's head |
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| office. |
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| No
dividend has been declared by the company during the year due to accumulated
losses. |
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| Future
Prospects - We are confident that the cement industry has
finally emerged from the slump with an aggressive |
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| turn-around.
Robust activity in the housing sector which has been complemented by access
to capital due to liberal |
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| financing
for home building, increased government spending in infrastructure, and the
prospects of continued exports |
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| to
the Afghan market augurs well for the cement sector in the immediate future. |
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|
| Impact
of Reduction in Duties by the Government - The Government
had reduced the CED on cement by 25% |
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| in
June 2003. The impact of this measure was reflected throughout the year under
review on our operational and |
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| market
performance. However, the cement industry felt disappointed as no further
reduction of CED was announced |
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| in
the June 2004 Budget. |
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| Significant
Plans & Decisions |
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| (a) Technological - During the year under review, a major project of plant
modernization & optimization was |
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| successfully
implemented at the Factory in May 2004. As a result of this BMR, the
Company's production |
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| capacity
has substantially increased the fruits of which the Company enjoyed for only
two months in the year |
|
| under review. |
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| The
management has also decided to place an order for a gas fired power generator
of 6.3 MW. Cheaper |
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| energy
costs would hopefully reflect well on the profitability in future. |
|
|
| (b) Financial - During the year under review, Right Shares Issue of the Company
was successfully taken up. |
|
| Resultantly,
the issued, subscribed and paid-up share capital of the Company has increased
from Rs. 278 |
|
| million
to Rs. 678 million by the issuance of 40,000,000 new ordinary shares of Rs.
10 each at the discounted |
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| price
of Rs. 5/- each. |
|
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| The
right issue during the year has improved the equity of the Company thereby
improving the 'debt-equity' ratio. |
|
|
| Change
in the Depreciation Rate as applied in the Company's Financial Statements - During the year, the |
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| management
of the Company formed a Technical Committee to review the useful life of
plant and machinery and |
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| expected
pattern of its economic benefits. The management of the Company on the
findings of the Technical |
|
| Committee
which are primarily based on the recommendations of an independent valuer
revised the economic life |
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| and
pattern of consumption of economic benefits of plant & machinery. As a
result of that revision, the depreciation |
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| rate
has been reduced from 10% to 5% with effect from July 01, 2003. |
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| Auditors'
Observation - The auditors have commented on the going
concern assumption and the delayed payments |
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| to
the provident fund trust. The directors have a reasonable expectation that
the Company would be able to generate |
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| adequate
resources to continue in operational existence for the foreseeable future.
(Note 1.2 to the annexed audited |
|
| accounts).
The directors have resolved to work towards alleviating the observations of
the auditors. |
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| Compliance
with Code of Corporate Governance - The management is fully
aware of the compliance with the |
|
| Code
of Corporate Governance and steps have been taken for its effective
implementation since its inception. |
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| Statements
as required by the Code are given below:- |
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| Presentation
of Financial Statements - The financial statements prepared
by the management present fairly the |
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| Company's
state of affairs, the results of its operations, cash flows and changes in
equity; |
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| Books
of Account - Proper books of account have been maintained; |
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| Accounting
Policies - Appropriate accounting policies have been
consistently applied in preparation of financial |
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| statements
and accounting estimates are based on reasonable and prudent judgment; |
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| Compliance
with International Accounting Standards (IAS) -
International Accounting Standards, applicable |
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| in
Pakistan, have been followed in preparation of financial statements; |
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| Internal
Control System - The system of internal control is sound in
design and has been effectively implemented |
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| and
is being monitored continuously. The review will continue in future for the
improvement in controls; |
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| Going
Concern - Although, the auditors have commented on the
going concern assumption by adding an emphasis |
|
| of
matter paragraph in their report, however, the directors have reasonable
expectation that the Company would |
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| be
able to generate adequate resources to continue in operational existence for
the foreseeable future. (Note 1.2 |
|
| to
the Notes to the Accounts). |
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|
| Best
Practices of Corporate Governance - There has been no
material departure from the Best Practices of |
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| Corporate
Governance, as detailed in the listing regulations wherever applicable to the
Company for the year ended |
|
| June 30, 2004. |
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| Financial
Highlights - Key operating & financial data of last ten
years is annexed. |
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|
| Outstanding
Statutory Dues - The outstanding statutory dues on account
of taxes, duties, levies and charges |
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| are
disclosed in notes to annexed audited accounts. |
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|
| Statements
on Value of Staff Retirement Funds - As of 30th June 2004,
the value of investments & assets of |
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| Gratuity
Fund and Provident Fund is Rs. 80 million and Rs. 190 million respectively
(based on their un-audited |
|
| accounts). |
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|
| Board
Meetings - During the year, seven meetings of the Board of
Directors were held. Attendance by each |
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| Director
at the Board Meeting is as unden- |
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|
| No. of Meetings |
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Attended |
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| Mr.
A. Rafique Khan |
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7 |
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| Mr.
M. Tousif Peracha |
|
3 |
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| Mr.
A. Shoeb Piracha |
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7 |
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| Mr.
Jawaid A. Peracha |
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1 |
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| Mr.
Aameen Taqi Butt |
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4 |
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| Mr. Abbas Rashid |
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7 |
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| Mr.
Muhammad Asif - Nominated by NIT (retired during June 2004) |
6 |
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| Mr.
M. Niaz Paracha (appointed in June 2004 against casual vacanc |
1 |
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|
| Trading
in Company's Shares - During the year, the Directors of the
Company purchased Right Shares of the |
|
| Company
namely, Mr. A. Rafique Khan (16,394,726 shares) and Mr. M. Tousif Peracha
(15,925,818 shares) on |
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| account
of the Underwriting Agreement made by them with the Company. Mr. Jawaid A.
Peracha purchased 718 |
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| shares
(right shares) whereas no trading in the shares of the Company was carried
out by the remaining Directors, |
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| CFO,
Company Secretary and their spouses and minor children. |
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|
| Pattern
of Shareholding - The Pattern of Shareholding and
additional information required in this regard is |
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| enclosed. |
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|
| External
Auditors - The present auditors, M/s. Khalid Majid Rahman
Sarfaraz Rahim Iqbal Rafiq, Chartered |
|
| Accountants,
retire. A member has given a Notice U/S 253 (2) of the Companies Ordinance,
1984, to the Company, |
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| proposing
the name of M/s. Amin, Mudassar & Co., Chartered Accountants, for
appointment as external auditors |
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| of
the Company for the year 2004-2005 in the forthcoming Annual General Meeting
of the Company. The Company's |
|
| Board
Audit Committee considered the issue and appreciated the services rendered by
the retiring auditors and |
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| recommended
to the Board the appointment of M/s. Amin, Mudassar & Co., Chartered
Accountants, as auditors |
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| for
the year 2004-2005, which has been endorsed by the Board. |
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|
| Acknowledgement
- The Board of Directors appreciates the efforts and
devotion of the employees, the executives |
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| and
the entire team of management and anticipates that they will contribute for
the enhancement of the productivity |
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| and
well being of the Company in future with greater zeal and spirit. The Board
further extends its gratitude to the |
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| financial
institutions for their valued support and co-operation for the Company's
prosperity. |
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| Pattern
of Shareholding |
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|
| S.No. |
Number of |
|
Shareholdings |
Total |
|
|
Shareholders |
From |
To |
Shares Held |
|
| 1 |
81 |
1 |
100 |
4,782 |
|
| 2 |
216 |
101 |
500 |
76,291 |
|
| 3 |
235 |
501 |
1,000 |
220,112 |
|
| 4 |
385 |
1,001 |
5,000 |
1,119,652 |
|
| 5 |
109 |
5,001 |
10,000 |
865,555 |
|
| 6 |
48 |
10,001 |
15,000 |
615,379 |
|
| 7 |
28 |
15,001 |
20,000 |
531,489 |
|
| 8 |
17 |
20,001 |
25,000 |
403,750 |
|
| 9 |
14 |
25,001 |
30,000 |
424,627 |
|
| 10 |
6 |
30,001 |
35,000 |
196,358 |
|
| 11 |
6 |
35,001 |
40,000 |
228,000 |
|
| 12 |
2 |
40,001 |
45,000 |
86,425 |
|
| 13 |
7 |
45,001 |
50,000 |
341 ,250 |
|
| 14 |
3 |
50,001 |
55,000 |
158,750 |
|
| 15 |
3 |
55,001 |
60,000 |
177,400 |
|
| 16 |
5 |
60,001 |
65,000 |
311,634 |
|
| 17 |
1 |
65,001 |
70,000 |
67,687 |
|
| 18 |
1 |
70,001 |
75,000 |
70,300 |
|
| 19 |
2 |
75,001 |
80,000 |
157,700 |
|
| 20 |
1 |
80,001 |
85,000 |
81,193 |
|
| 21 |
2 |
85,001 |
90,000 |
176,500 |
|
| 22 |
1 |
95,001 |
100,000 |
100,000 |
|
| 23 |
1 |
105,001 |
110,000 |
107,500 |
|
| 24 |
1 |
115,001 |
120,000 |
120,000 |
|
| 25 |
1 |
120,001 |
125,000 |
122,201 |
|
| 26 |
1 |
150,001 |
155,000 |
155,000 |
|
| 27 |
1 |
155,001 |
160,000 |
160,000 |
|
| 28 |
3 |
180,001 |
185,000 |
553,137 |
|
| 29 |
1 |
195,001 |
200,000 |
200,000 |
|
| 30 |
1 |
205,001 |
210,000 |
209,500 |
|
| 31 |
1 |
250,001 |
255,000 |
251,900 |
|
| 32 |
1 |
305,001 |
310,000 |
306,624 |
|
| 33 |
1 |
310,001 |
315,000 |
314,800 |
|
| 34 |
1 |
460,001 |
465,000 |
465,000 |
|
| 35 |
1 |
475,001 |
480,000 |
475,500 |
|
| 36 |
1 |
700,001 |
705,000 |
702,000 |
|
| 37 |
1 |
895,001 |
900,000 |
900,000 |
|
| 38 |
1 |
1,055,001 |
1,060,000 |
1,058,812 |
|
| 39 |
1 |
2,625,001 |
2,630,000 |
2,625,375 |
|
| 40 |
1 |
3,190,001 |
3,195,000 |
3,194,653 |
|
| 41 |
1 |
5,750,001 |
5,755,000 |
5,751,849 |
|
| 42 |
1 |
11,425,001 |
1 1 ,430,000 |
11,429,751 |
|
| 43 |
1 |
15,925,001 |
15,930,000 |
15,926,318 |
|
| 44 |
1 |
16,395,001 |
16,400,000 |
16,395,226 |
|
|
1,197 |
|
67,839,980 |
|
|
| Categories
of shareholders |
|
Shares held |
Percentage |
|
| Directors,
Chief Executive Officer, and their Spouse and Minor Children |
32,351,262 |
47.69% |
|
| Associated
Companies, Undertakings and Related Parties |
14,375,355 |
21.19% |
|
| NITandlCP |
|
65,912 |
0.10% |
|
| Banks,
Development Financial Institutions |
|
7,294,159 |
10.75% |
|
| Insurance
Companies |
|
182,625 |
0.27% |
|
| Modarabas
and Mutual Funds |
|
24,000 |
0.04% |
|
| Share
holders holding 10% and above or more voting interests |
43,751,295 |
64.49% |
|
| General Public: |
|
|
|
| a. Local |
|
12,849,651 |
18.94% |
|
| b. Foreign |
|
697,016 |
1 .03% |
|
| Others
(to be specified): |
|
|
|
| State
Cement Corporation of Pakistan |
|
2,625,375 |
3.87% |
|
|
| Pattern
of Shareholding |
|
| As
at June 30, 2004 |
|
|
|
| Categories of |
|
Number of |
Number of |
|
| Shareholders |
|
Shareholders |
Shares Held |
|
| ASSOCIATED
COMPANIES, UNDERTAKINGS & RELATED PARTIES |
3 |
14,375,355 |
|
| i. Gharibwal Cement Limited |
|
1 |
11,429,751 |
|
| ii. Employees Welfare Trust DCCL (Note) |
|
1 |
1,058,812 |
|
| iii. Saudi Pak Leasing Company Limited
(Note) |
|
1 |
1,886,792 |
|
| II NIT AND ICP |
|
2 |
65,912 |
|
| i. National Investment Trust |
|
1 |
64,706 |
|
| ii. Investment Corporation of Pakistan |
|
1 |
1,206 |
|
| III DIRECTORS, CHIEF EXECUTIVE OFFICER, |
|
|
|
| THEIR
SPOUSES AND MINOR CHILDREN |
|
8 |
32,351,262 |
|
| Directors |
|
6 |
15,929,536 |
|
| i. Mr. M. Tousif Peracha |
|
1 |
15,926,318 |
|
| ii. Mr. Jawaid Aziz Peracha |
|
1 |
1,218 |
|
| iii. Mr. A Shoeb Piracha |
|
1 |
500 |
|
| iv. Mr. M. Niaz Paracha |
|
1 |
500 |
|
| v. Mr. Aameen Taqi Butt |
|
1 |
500 |
|
| vi. Mr. Abbas Rashid |
|
1 |
500 |
|
| Chief Executive |
|
1 |
16,395,226 |
|
| i. Mr. A. Rafique Khan |
|
|
16,395,226 |
|
| Directors'
spouses |
|
1 |
26,500 |
|
| i. Mrs. Salma Khan W/O A. Rafique Khan |
|
1 |
26,500 |
|
| IV EXECUTIVES |
|
NIL |
NIL |
|
| V PUBLIC SECTOR COMPANIES AND
CORPORATIONS |
1 |
2,625,375 |
|
| i. State Cement Corporation of Pakistan |
|
1 |
2,625,375 |
|
| VI BANKS, DEVELOPMENT FINANCE
INSTITUTIONS, |
|
|
| NON-BANKING
FINANCE INSTITUTIONS, INSURANCE |
|
|
|
| COMPANIES,
MODARBAS AND MUTUAL FUNDS |
|
12 |
7,500,784 |
|
| VII SHAREHOLDERS HOLDING TEN PERCENT |
|
|
|
| OR
MORE VOTING INTERESTS |
|
3 |
43,751,295 |
|
| i. Gharibwal Cement Limited |
|
1 |
11,429,751 |
|
| ii. Mr. A. Rafique Khan |
|
1 |
16,395,226 |
|
| iii. Mr. M. Tousif Peracha |
|
1 |
15,926,318 |
|
|
| 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 Regulations |
|
| No
37 of the Karachi Stock Exchange and Chapter XIII of the Listing Regulations
of the Lahore Stock Exchange |
|
| 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 on its Board of Directors. |
|
| At
present, the Board includes four 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. To the best of our knowledge all the
resident directors of the Company are registered as taxpayers and none |
|
| of
them has defaulted in payment of any loan to a banking company, a DPI or an
NBFI or, being a member |
|
| of
a stock exchange, has been declared as a defaulter by that stock exchange. |
|
|
| 4. A casual vacancy occurring in the
Board on June 08, 2004 was filled up by the Directors within ten days |
|
| thereof. |
|
|
| 5. The Company has prepared a
"Statement of Ethics and Business Practices", which has been signed
by all |
|
| the
directors and employees of the Company. |
|
|
| 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 alongwith
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, alongwith agenda, were circulated at
least seven days before |
|
| the
meetings. The minutes of the meetings were appropriately recorded and
circulated. |
|
|
| 9. The Board arranged orientation
courses for its certain directors during the year to apprise them of their
duties |
|
| and
responsibilities. |
|
|
| 10. The Board has approved the appointment
of Company Secretary, including his remuneration and terms and |
|
| conditions
of employment, as determined by the CEO. There was no new appointment of CFO
or Head of |
|
| Internal
Audit during the year. |
|
|
| 11. The Directors' Report for this year has
been prepared in compliance with the requirements of the Code and |
|
| it
fully describes the salient matters required to be disclosed. |
|
|
| 12. The financial statements of the Company
were duly endorsed by the CEO and the CFO before approval by |
|
| 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. |
|
|
| Review
Report tn the Members on Statement |
|
| of
Compliance with Best Practices of Code of |
|
|
| Corporate
Governance |
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| We
have reviewed the statement of compliance with the best practices contained
in the Code of Corporate Governance |
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| prepared
by the Board of Directors of Dandot Cement Company Limited to comply with
listing regulation No. 37 of |
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| Karachi
and Chapter XIII of Lahore Stock Exchanges where the company is listed. |
|
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| 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 provision of the Code of |
|
| Corporate
Governance and report if it does not. A review is limited primarily to the
inquiries of the Company personnel |
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| and
review of various documents prepared by the Company to comply with the Code. |
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| 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 |
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| special
review of the internal control system to enable us to express an opinion as
to whether the Board's statement |
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| on
internal control covers all controls and the effectiveness of such internal
controls. |
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| Based
on our review nothing has come to our attention which causes us to believe
that the Statement of Compliance |
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| does
not appropriately reflect the Company's compliance, in all material respects,
with the best practices contained |
|
| in
the Code of Corporate Governance. |
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|
| Auditors'
Report |
