Dynea Pakistan Limited - Annual Reports 2004

DYNEA PAKISTAN LIMITED

ANNUAL REPORT 2004

2004

2003

Rs. '000

(Loss) before taxation

-11,751

-329

Provision for taxation

10,870

7,082

Unappropriated profit brought forward

(881) 60,851

6,753 54,098

Unappropriated profit carried forward

59,970

60,851

(RS IN Mil 1 ION)

2003-04 1

2002-03

2001-02

2000-01 1

1999-00

1998-99

1997-98

1996-97 1

1995-96

1994

18 Months

TURNOVER

824.795

510.407

423.844

485.758

335.393

306.713

354.498

338.646

479.629

234.543

GROSS PROFIT

49.012

9.307

38.967

37.55

51.887

46.381

36.445

28.491

70.48

33.461

NET(LOSS) / PROFIT

-11.751

-21.174

21.265

32.935

47.496

27.223

11.403

16.03

41 .459

33.556

TAXATION

10.87

-11.83

6.163

2.646

6.546

4.387

1.399

2.921

17.119

12.65

(LOSS) / EARNING RETAINED IN BUSINESS

-0.881

-9.344

5.664

16.134

2.479

2.876

0.93

3.641

6.982

9.545

NET ASSETS EMPLOYED

276.055

220.263

254.244

203.898

185.158

158.375

161.313

165.11

138.44

129.958

SHARE CAPITAL FUND

94.362

72.586

63.118

SHAREHOLDERS FUND

255.332

186.566

195.91

190.245

174.111

149.856

146.979

146.049

132.94

125.958

Gross Profit%

5.94

1.82

9.19

7.73

15.47

15.12

10.28

8.41

14.69

14.27

Net (Loss) / Profit %

-1.42

-4.15

5.02

6.78

14.16

8.88

3.22

4.73

8.64

14.31

Taxation %

1.32

-2.32

1.45

0.54

1.95

1.43

0.39

0.86

3.57

5.39

(Loss) / Earning per Share Rs.

-0.05

-0.5

0.8

1.6

2.17

1.57

0.69

1.27

3.28

2.66

Net (Loss) / Earning Per Rupee Sales

-0.001

-0.02

0.04

0.06

0.12

0.07

0.03

0.05

0.08

0.14

Dividend %

-

10

15

23

27.5

12.5

-

27.5

18

Bonus %

__

_

30

_

15

__

_

9. The Board arranged orientation programmes to apprise them of their duties and responsibilities.

1 0. The Board has approved the appointment of CFO and Company Secretary of the Company.

1 3. The financial statements of the Company were duly endorsed by the CEO and CFO before approval of the Board.

14. The Company has complied with all the corporate and financial reporting requirements of the Code.

Note

2004

2003

Rupees

TURNOVER

2.2

824,794,905

728,930,576

COST OF SALES

2.3

-775,782,516

-664,943,241

GROSS PROFIT

49,012,389

63,987,335

Other income Administrative expenses Selling and distribution expenses

2.7

-22,167,097

-2,056,183

-52,237,552

-50,037,748

OPERATING (LOSS) / PROFIT Financial charges

28

-8,526,111

-14,278,860

(LOSS) BEFORE TAXATION TAXATION

29

10,870,188

7,082,030

(LOSS) / PROFIT AFTER TAXATION Unappropriated profit brought forward

60,851,389

54,098,632

Unappropriated profit carried forward

59,970,303

60,851 ,389

BASIC EARNINGS PER SHARE

31

-0.05

0.36

Note

2004

2003

ASSETS

Rupees

NON-CURRENT ASSETS

Tangible fixed assets Long-term loans Long-term deposits

6.7

12,398,498

1,726,115

CURRENT ASSETS

201,176,611

205,620,390

Stores and spares Stock-in-trade Trade debtors Loans, advances, deposits

2.5

5,581,766

596,894

329,441,255

344,846,410

TOTAL ASSETS

530,617,866

550,466,800

EQUITY AND LIABILITIES

SHARE CAPITAL AND RESERVES

Authorised capital

40,000,000 (2003 : 40,000,000) Ordinary shares of Rs. 5/- each

200,000,000

Issued, subscribed and paid-up capital Reserves

16

160,970,303

161,851,389

255,332,368

256,213,454

NON-CURRENT LIABILITIES

Redeemable capital Deferred liabilities

1.8

10,008,379

9,581 ,802

20,722,660

34,581 ,799

CURRENT LIABILITIES

Current portion of redeemable capital Short-term loans Short-term finance Creditors, accrued and other liabilities

2.5

96,830,754

118,952,830

254,562,838

259,671 ,547

CONTINGENCIES AND COMMITMENTS

21

TOTAL EQUITY AND LIABILITIES

530,617,866

550,466,800

Reserves

Issued, subscribed and paid up capital

General reserve

profit / (loss)

Total

(Rupees)

Balance as at June 30, 2002

94,362,065

101,000,000

54,098,632

155,098,632

249,460,697

Profit for the year

-

6,572,757

6,752,757

Balance as at June 30, 2003

94,362,065

101,000,000

60,851 ,389

161,851,389

256,213,454

Loss for the year

-

(881 ,086)

-881,086

Balance as at June 30, 2004

94,362,065

101,000,000

-59,970,303

160,970,303

255,332,368

THE COMPANY AND ITS OPERATIONS

Dynea Pakistan Limited (the company) was incorporated in Pakistan on June 20, 1982 and is listed on the

Karachi and Lahore stock exchanges in Pakistan. It is engaged in the manufacture and sale of urea/melamine

formaldehyde and aminoplast compound. The registered office of the company is situated at 1st Floor,

Siddiqsons Tower, 3-Jinnah Cooperative Housing Society, Block-7/8, Sharea Faisal, Karachi, Pakistan.

AMALGAMATION OF SUBSIDIARY COMPANY

By the order of Honourable Sindh High Court at Karachi dated October 06, 2003, Visionite (Private) Limited (the

subsidiary company), has been merged into the company effective July 01, 2003 through the absorption of

subsidiary company's assets and liabilities by the company and the dissolution of subsidiary company without

winding up. Subsidiary company was engaged in the production and marketing of aminoplast moulding

compound.

Dynea Pakistan Limited Rui

Visionite Private Limited jees

Assets

432,631,892

119,452,766

Liabilities

255,479,042

40,392,162

Turnover

442,030,899

286,899,677

Other Income

4,185,407

317,417

Net (loss)/profit before tax

-105,564,526

105,235,253

Net (loss)/profit after tax

-93,734,802

100,487,559

Financial instruments

All the financial assets and financial liabilities are recognised at the time when the company becomes a party

to the contractual provisions of the instrument. Financial assets are derecognised when the company loses

control of the contractual rights that comprise the financial assets. Financial liabilities are derecognised

when they are extinguished - that is, when the obligation specified in the contract is discharged, cancelled,

or expires. Any gain or loss on derecognition of the financial assets and financial liabilities is taken to the

profit and loss account currently.

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 recognised amounts and intends either to settle on a

net basis or to realise the asset and settle the liability simultaneously.

Transactions with related parties

Transactions with related parties are based on the policy that all transactions between the company and the

related parties are carried out at arm's length. These prices are determined in accordance with the methods

prescribed under the Companies Ordinance, 1984.

Provisions

Provisions is recognised when the company has a present legal or constructive obligation as a result of a

past event and it is probable that an outflow of resources embodying economic benefits will be required to

settle the obligation and a reliable estimate of the obligation can be made.

COST

DEPRECIATION / AMORTISATION

Written

As at July 1, 2003

Additions

Disposals

As at June 30, 2004

Rate %

As at July 1, 2003

Charge for the year

Disposals

As at June 30, 2004

down value as at June 30, 2004

Rupees

Freehold land

659,961

-

659,961

-

659,961

Leasehold land

1 ,752,884

-

1 ,752,884

99 yrs.

315,825

18,391

-

334,216

1,418,668

Building on freehold land

20,307,457

-

20,307,457

5

10,949,894

467,878

-

11,417,772

8,889,685

Building on leasehold land

37,579,548

-

-460,062

37,119,486

5

15,765,752

1,090,690

-155,723

16,700,719

20,418,767

Plant and machinery

294,823,449

853,212

-

295,676,661

10

142,423,549

15,285,796

-

157,709,345

137,967,316

Electrical installations

15,796,125

-

15,796,125

10

9,025,916

677,021

-

9,702,937

6,093,188

Furniture and fixtures

5,030,912

277,030

-1,886,257

3,421,685

10-20

3,360,292

277,910

-1,461,303

2,176,899

1,244,786

Office equipments

3,879,211

1,279,598

-1,723,323

3,435,486

10-20

2,504,828

269,267

-1,320,633

1,453,462

1,982,024

Computers and accessories

5,720,985

77,525

-

5,798,510

33

4,397,282

446,178

- '

4,843,460

955,050

Vehicles

4,697,442

-

-1,724,625

2,972,817

20

3,030,204

239,802

-1,248,786

2,021,220

951,597

Technical books

1,750

-

1,750

10

1,475

28

-

1,503

247

Storage tanks *

3,518,344

-

3,518,344

10

1,607,304

191,104

-

1,798,408

1,719,936

Total as at June 30, 2004

393,768,068

2,487,365

-5,794,267

390,461,166

193,382,321

18,964,065

-4,186,445

208,159,941

182,301,225

Total as at June 30, 2003

390,045,861

4,536,207

-814,000

393,768,068

173,058,479

20,976,500

-652,658

193,382,321

200,385,747

5.8 Compensated absences

The company accounts for these benefits in the accounting period in which the absences are earned.

5.9 Revenue recognition

- Sales are recorded when goods are dispatched to customers. - Storage and rental charges are recognised on an accrual basis. - Profit on bank deposits is recognised on an accrual basis.

5.10 Foreign currency transactions

Exchange differences arising on conversion of long term liabilities obtained specifically for financing capital expenditure are included in tangible fixed assets. All other exchange differences are taken to the profit and loss account.

5.11 Operating leases

Lease payments under operating leases are recognised as an expense in the profit and loss account on a straight line basis over the respective lease term.

5.12 Borrowing costs

All mark-up, interest and other charges on long-term and short-term borrowings are charged to profit and loss account in the period in which they are incurred.

5.13 Taxation

5.13.1 Current

Provision for current taxation is based on taxable income at current rates of tax after taking into account applicable tax credits, rebates and exemptions available, if any, or on one half percent of the turnover whichever is higher.

5.13.2 Deferred

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the deferred tax asset to be utilised.

Note

2004

2003

LONG-TERM DEPOSITS

Rupees

2,321,642

1,726,115

DEFERRED TAX ASSET

This is comprised of the following :

Deferred tax liability Difference in tax and accounting bases of tangible fixed assets

-26,469,480

-309,679,053

Deferred tax assets

Provision for doubtful debts Provision for doubtful advances Provision

29,571,914

22,480,419

12,398,498

-884,286

STORES AND SPARES

Oil and lubricants Stores and spares Laboratory chemicals

108,549

11,200,930

11,822,787

STOCK-IN-TRADE Raw material

13,241,627

18,668,994

In hand In bonded warehouse In transit

926,491

966,967

Packing material

30,537,401

40,720,690

Finished goods

119,885,605

139,285,839

Note

2004

2003

Rupees

6.2 Depreciation charge for the year has been

allocated as follows :

Cost of sales

23

18,181,789

19,815,136

Administrative expenses

25

682,867

954,492

Selling and distribution expenses

26

99,409

206,872

18,964,065

20,976,500

LONG TERM LOANS

Unsecured - considered good

Due from executives

7.1

3,241,458

3,858,356

Due from non-executives

7.1

4,845,735

4,012,121

Due from employees

794,375

410,672

8,881,568

8,281,149

Less : Current portion shown under current assets

4,732,860

4,772,621

4,148,708

3,508,528

Due from contractors

7.2

378,260

30,000

Less : Current portion shown under current assets

371,722

30,000

6,538

-

Outstanding for three years and more

4,155,246

3,508,528

TAXATION - net Advance tax Provision for taxation

21.4

22,675,935

38,134,202

15,818,397

26,860,476

CASH AND BANK BALANCES Cash at banks

- in current accounts - in saving accounts

925,129

18,345,927 46

5,448,920

18,345,973

Cheques in hand Cash in hand

132,846

243,180

132,846

3,250,921

5,581,766

21 ,596,894

ISSUED, SUBSCRIBED AND PAID-UP CAPITAL Number of ordinary shares of Rs. 5/- each

18,872,413 18,872,413

94,362,065

7,228,319 7,228,319 Shares held by associated companies

36,141,595

REDEEMABLE CAPITAL - secured and non participatory Long-term finance utilised under mark-up arrangements Less : Current portion shown under current liabilities

17.1

14,285,716

10,714,281

24,999,997

Note

2004

2003

TRADE DEBTORS - unsecured

Rupees

Considered good

Associated undertakings Others

12.1

150,640,143

114,691,410

Considered doubtful

6,650,782

3,169,543

Less : Provision for doubtful debts

12.2

6,650,782

3,169,543

155,591,542

121,578,489

Balance at the beginning of the year Change for the year Reversal during the year

3,887,197

3,371,182

Balance at the end of the year

6,650,782

3,169,543

LOANS, ADVANCES, PREPAYMENTS AND OTHER RECEIVABLES

Current portion of long term loans - Employees - Contractors

7 7

371,722

30,000

Advances - considered good

5,104,582

4,802,621

Sales tax - Suppliers and contractors - Provident fund Others

13.1

726,729

27,100

4,678,664

6,766,714

Advances - considered doubtful Less : Provision for doubtful advances

290,000

-

Deposits Prepayments

194,565

579,825

Sales tax receivable - Associated undertakings - Receivable against storage rentals

21.3

1,494,186

2,230,432

11,085,204

11,392,765

21,363,015

23,701 ,925

Note

2004

2003

Rupees

CREDITORS, ACCRUED AND OTHER LIABILITIES

Creditors

24,673,655

32,000,560

Accrued liabilities

38,909,810

31 ,562,462

Bills payable

17,666,777

37,460,365

Sales tax payable

2,020,588

3,181,203

Mark-up accrued on - redeemable capital

385,737

883,268

- short term finances

768,647

656,426

1,154,384

1,539,694

Workers' welfare fund

100,238

Workers' profit participation fund

20.1

-

1 ,955,945

Provident fund

639,921

134,702

Retention money

-

104,713

Income tax deducted at source

924,152

129,985

Unclaimed dividend

685,539

702,363

Adverse book balance with bank

-

6,701

Other liabilities

20.2

10,055,690

10,073,899

96,830,754

118,952,830

20.1 Workers' profit participation fund

Balance at the beginning of the year

1,955,945

2,388,716

Interest on funds utilized in company's business

113,154

68,359

2,069,099

2,457,075

Allocation for the year

—

1,955,945

2,069,099

4,413,020

Less : Payments during the year

2,069,099

2,457,075

Balance at the end of the year

-

1 ,955,945

CONTINGENCIES AND COMMITMENTS Contingencies

Note

2004

2003

Rupees

DEFERRED LIABILITIES

Deferred taxation Deferred gratuity

9 18.1

10,008,379

8,697,516

10,008,379

9,581 ,802

18.1 Deferred gratuity

18.1.1 The amount recognised in the balance sheet is as follows :

Present value of defined benefit obligation

10,966,794

9,269,693

Transitional obligation to be recognised in later periods

-194,391

-291,586

Actuarial losses to be recognised in later periods

-764,024

-280,591

10,008,379

8,697,516

18.1.2 Movement in the net liability recognised in the balance sheet is as follows :

Opening balance Charge for the year Benefits paid during the year

30.1

1,624,183

1,768,199

Closing balance

10,008,379

8,697,516

SHORT-TERM FINANCES - secured

Running finance under mark-up arrangements Foreign currency import financing (FCIF)

19.1

132,961,262

76,112,270

143,446,368

77,433,001

Special

Resin

Aminoplast

aminoplast

TURNOVER

division

2004

2003

Rupees

Sales

397,266,045

471,330,140

131,697,412

1,000,293,597

886,382,424

Less : Sales-lax

60,245,095

79,227,397

21,759,050

161,231,542

142,055,818

Sales return

-

5,784,936

3,645,244

9,430,180

7,968,987

Rebate and discounts

4,836,970

-

4,836,970

7,427,043

65,082,065

85,012,333

25,404,294

175,498,692

157,451,848

332,183,980

386,317,807

106,293,118

824,794,905

728,930,576

COST OF SALES

Opening stock - raw and packing materials

12,837,790

34,510,891

_

47,348,681

36,978,738

Purchases

378,070,122

207,915,236

-

585,985,358

500,804,979

Inter division transfers-in

165,283

126,947,041

80,106,574

207,218,898

130,395,625

391,073,195

369,373,168

80,106,574

840,552,937

668,179,342

Closing stock - raw and packing materials

-13,887,236

-38,133,877

-

-52,021,113

-47,348,681