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PAKISTAN PAPERSACK CORPORATION LIMITED
ANNUAL REPORT 2004
BOARD OF DIRECTORS
		Rafiq M. Habib		Chairman
		S. Z. Kazmi		Chief Executive
		All S. Habib
		Kersi D. Kapadia
		Mohamedali R. Habib
		Anis Wahab Zuberi		NIT Nominee
		Mansoob A. Akhtar		NIT Nominee
AUDIT COMMITTEE
		Ali S. Habib		Chairman
		Kersi D. Kapadia		Member
		Mohamedali R. Habib		Member
CHIEF FINANCIAL OFFICER
& COMPANY SECRETARY		Raj Kanwar Batra
AUDITORS		Hyder Bhimji & Co.
		Chartered Accountants
LEGAL ADVISER		Nadeem Ahmed
		Advocate
BANKERS		Habib Bank AG Zurich
		Habib Bank Limited
		Hongkong & Shanghai Banking Corporation
		Metropolitan Bank Limited
		National Bank of Pakistan
FACTORIES		Stepped-end Division,
		Hub Chowki, Balochistan.
		Balochistan Laminates Division,
		Hub Chowki, Balochistan.
REGISTERED OFFICE		5th Floor, Siddiqsons Towers,
		3-Jinnah Cooperative Housing Society,
		Sharea Faisal, Karachi, Pakistan.
		Tel         :   4312030-34
		Fax       :   92-21 -4312198
		E-Mail   :   ppcl@cyber.net.pk
REGIONAL SALES		1st Floor, E-83/A, Super Town,
OFFICE		Walton Road,
		Lahore Cantt.
		Tel   :  6664571
REGISTRAR		Noble Computer Services (Pvt.) Limited
		Sohni Centre, 2nd Floor, BS 5-6,
		Block 4, Main Karimabad,
		Karachi.
		Tel  : 6801880-2
DIRECTORS' REPORT TO THE SHAREHOLDERS
FOR THE YEAR ENDED JUNE 30, 2004.
				2004	2003
				Rs. in '000
Profit before Taxation				80,316	105,384
Provision for Taxation				14,420	26,359
Profit after Taxation				65,896	79,025
Un-appropriated Profit B/F				82	553
				65,978	79,578
Appropriations :
Proposed Cash Dividend @ 45%				31,047	34,496
Transferred to General Reserve				34,500	45,000
Un-appropriated Profit C/F				431	82
				65,978	79,578
PAPERBACK OPERATIONS :
During the year under review sales of papersacks declined to Rs. 355.6 million showing a decrease of 18% as
compared to last year's sales of Rs. 433.9 million, while operating profit showed a decline from Rs. 69.4 million to
Rs. 38.9 million - a decrease of 44%. The decline is due to dumping of papersacks by international competitors in
Pakistan at below normal prices and increased use of PP bags especially for packaging of cement for export and in
the northern region in Pakistan. Further, smaller Papersack units which had earlier closed down have resumed their
operations exerting pressure on the selling prices.
Exports : During the year under review, export sales remained stagnant at Rs. 5.9 million the same figure as last
year. The export market remained lukewarm in the face of dumping of papersacks by international suppliers. Your
Company is making plans to enter into export market aggressively and is exploring new markets.
FUTURE OUTLOOK:
The cement sector is showing strong growth and the production and consumption of cement can be expected to
increase during this year and beyond. This should result in the increased market for cement bags in Pakistan.
However, a substantial chunk of the market in the northern regions and the export market to Afghanistan has been
taken by PP bags which are environment unfriendly. In addition, the increased competition in the market, increase
in paper prices and continuing decline in selling prices, is expected to squeeze margins for the Company. The
expected entry of a major international competitor in Pakistan market by the end of the next financial year is
expected to further increase pressure on the existing Papersack manufacturers in the Country.
The Government of Pakistan had earlier in the budget reduced the rate of custom duty on sack kraft paper-our
industrial raw material for packaging of cement to 10%. This decision was taken after public hearing conducted by
National Tariff Commission to give relief to Papersack industry in the face of growing imports. However, recently the
Government has increased the duty to 15% thus taking away the level playing field available to manufacturers of
papersack and PP bags and increasing the prospect of the import of Papersacks into the country.
Your Company's management is monitoring all these factors and taking necessary steps including taking up our
case with Government authorities, and exploring new markets and is hopeful of meeting the challenges of the future
with your support and encouragement.
LAMINATES OPERATIONS :
During the year under review sales amounted to Rs. 484.3 million as against previous year's sales of Rs. 463.2
million, which is an increase of 4.5%. Operating profit decreased from Rs. 29.2 million to Rs. 8.3 million during the
year. The cost of raw material consumed during the period increased from Rs. 346.4 million to Rs. 382.5 million
during the year under review, an increase of 10.4 %. The increase is mainly due to high prices of Phenol Crystal in
the international market, appreciation of Euro against Pak Rupees and increase in cost of other inputs. Intense
competition has made it difficult to pass on this impact to the customers.
Exports : During the year under review, the Company's efforts to explore new markets bore fruit and exports of
Decorative and Industrial Laminates increased from Rs. 50.9 million to Rs. 59.9 million an increase of 17.68%.
Efforts are being made to enter into USA market.
FUTURE OUTLOOK:
The prices of the Phenol Crystal have increased by almost 100% in the international market. The profitability of the
division is very sensitive to the changes in the price of the raw materials particularly Phenol Crystal. In the budget
the Government has reduced the import duty on paper from 20-25% to 5% which is a welcome development.
However, the chances of reduction in the prices of Phenol Crystal in the near future are very slim. These factors are
expected to put pressure on the profitability of the Company. Your Company is making efforts to pass on some of
the impact to the customers, to improve the situation.
CEASATION OF FOOD TRADING ACTIVITIES :
A decision has been taken to cease food trading activities as these did not fit in with the core business of the
Company and the management is negotiating with prospective buyers for the sale of related goodwill and brand.
CORPORATE GOVERNANCE :
The Directors of your Company confirm compliance with the Corporate and Financial Reporting Framework of the
Securities and Exchange Commission of Pakistan's Code of Corporate Governance for the following :-
a)     The financial statements prepared by the management of the Company present fairly the Company's state
of affairs, the results of its operations, cash flows and changes in equity.
b)     Proper books of accounts of the Company have been maintained.
c)     Appropriate accounting policies have been consistently applied in preparation of financial statements and
accounting estimates are based on reasonable and prudent judgment.
d)     International Accounting Standards, as applicable in Pakistan, have been followed in preparation of
financial statements and any departure there-from has been adequately disclosed.
e)     The system of internal control is sound in design and has been effectively implemented & monitored.
f)      There are no significant doubts upon the Company's ability to continue as a going concern.
g)     There has been no material departure from the best practices of Corporate Governance, as detailed in the
listing regulations.
h)     Information about taxes and levies is given in the notes to the accounts.
i)      Value of investments in provident fund based on un-audited accounts for the year ended June 30, 2004
amounted to Rs. 53.6 million (Audited 2002 : Rs. 23.35 million).
j)      There has been no trading in the shares of Company carried out by its Directors, CE and CFO, Company
Secretary and their spouses and minor children during the year ended June 30, 2004.
k)     Key financial data for the last six years and pattern of shareholding is annexed.
I)      During the year under review, four meetings of the Board of Directors were held:
Directors			Attended
Mr. Rafiq M. Habib			3
Mr. S. Z. Kazmi			4
Mr. Kersi D. Kapadia			3
Mr. Mohamedali R. Habib			4
Mr. All S. Habib			4
Mr. Shamsuddin Khan			3	NIT Nominee
Mr. Mansoob A. Akhtar			4	NIT Nominee
Six Years At A Glance
		2004	2003	2002	2001	2000	1999
				Rs. in '000
Financial Position
Shareholders Equity		451,226	389,480	334,945	310,871	301,171	279,060
Total Assets		610,521	530,938	454,228	497,432	512,790	603,123
Operating Position
Sales (Net)		839,930	897,234	805,598	731,616	698,883	766,001
Profit before Taxation		80,316	105,384	81 ,437	25,298	55,361	70,729
Taxation		14,420	26,359	26.215	5,249	16,002	22,500
Profit after Taxation		65,896	79,025	55,222	20,049	39,359	48,229
Duties & Taxes paid		225,287	256,420	239,359	223,296	234,051	251 ,522
Earning per Share   Rs.		4.78	5.73	4	1.45	2.85	3.5
Cash Dividend        (%)		45	50	45	15	25	35
COMBINED PATTERN OF CDC &
NORMAL SHAREHOLDINGS AS AT 30.6.2004
		NUMBER OF		SHAREHOLDINGS	TOTAL
		SHAREHOLDERS		RS. 5/- EACH	SHARES HELD
		632	1	100	23,181
		585	101	500	158,439
		172	501	1000	136,539
		296	1001	5000	680,114
		35	5001	10000	249,031
		15	10001	15000	196,028
		3	15001	20000	50,163
		15	20001	25000	339,045
		8	25001	30000	224,127
		4	30001	35000	123,521
		1	35001	40000	39,000
		2	40001	45000	89,500
		1	45001	50000	47,451
		1	55001	60000	57,000
		1	65001	70000	69,100
		2	75001	80000	152,743
		1	95001	100000	96,000
		1	115001	120000	118,292
		1	120001	125000	120,500
		1	130001	135000	131,414
		8	145001	150000	1,183,402
		1	185001	190000	189,678
		2	195001	200000	395,177
		4	205001	210000	830,480
		6	240001	245000	1 ,469,667
		1	255001	260000	259,500
		1	265001	270000	267,696
		2	285001	290000	573,908
		1	290001	295000	290,708
		1	350001	355000	351 ,674
		2	365001	370000	736,300
		1	445001	450000	448,300
		1	625001	630000	628,180
		1	3070001	3075000	3,072,654
		1,809			13,798,512
CATEGORIES OF			NUMBER OF	SHARES	PERCENTAGE
SHAREHOLDERS			SHAREHOLDERS	HELD	%
Individuals			1,768	8,541,097	61 .899
Investment Companies			2	226	0.002
Insurance Companies			6	732,234	5.307
Joint Stock Companies			22	332,109	2.407
Financial Institutions			1	3,072,654	22.268
Modaraba Companies			-	-	-
Foreign Investors			6	1,093,967	7.927
Co-operative Societies			2	1,827	0.013
Charitable Trusts			1	21,898	0.159
Others			1	2,500	0.018
			TOTAL	1,809	13,798,512
BALANCE SHEET AS AT JUNE 30, 2004
			Note	2004	2003
				Rs. in '000
ASSETS
Tangible Fixed Assets
Operating Assets			4	53,288	47,091
Long Term Investments			5	77,988	50,891
Long Term Deposits				2,944	2,733
Current Assets
				476,301	430,223
				610,521	530,938
EQUITY AND LIABILITIES
Share Capital and Reserves Authorised Capital : 20,000,000 Ordinary Share				100,000	100,000
				451,226	389,480
Deferred Tax			16	5,200	5,800
Current Liabilities
				154,095	135,658
Contingencies & Commitments			19
				610,521	530,938
AUDITORS' REPORT TO THE MEMBERS
We have audited the annexed Balance Sheet of Pakistan Papersack Corporation Limited as at June
30, 2004 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 the 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, 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 June 30, 2004 and of the profit, its cash flows and changes in equity for the year then
ended; and
d)       in our opinion, Zakat deductible at source under the Zakat and Ushr Ordinance, 1980, was
deducted by the Company and deposited into the Central Zakat Fund established under Section 7
of that Ordinance.
CASH FLOW STATEMENT
FOR THE YEAR ENDED JUNE 30, 2004
				2004	2003
				Rs. in '000
CASH FLOW FROM OPERATING ACTIVITIES
Profit before Taxation				80,316	105,384
Adjustments for :
Depreciation				11,821	10,421
Investment Income				-37,283	-18,585
Financial Expenses				2,678	2,998
Profit/(Loss) on sale of Fixed Assets				-892	477
				-23,676	-4,689
Operating Profit before Working Capital changes				56,640	100,695
Change in Working Capital
(lncrease)/decrease in current assets
Stores and Spares				-1,263	-3,859
Stock-in-trade				44,023	-100,726
Trade Debts				-16,187	2,661
Loans and Advances				-5,593	1,970
Deposits and Prepayments				-455	-445
Other Receivables net of Tax				-10,358	-613
lncrease/(decrease) in current liabilities				10,167	-101,012
Creditors, Accrued and other Liabilities excluding
Dividend, Mark-up & Interest				-10,264	18,577
Short term and Running Finance				40,569	-8,411
				30,305	10,166
				40,472	-90,846
Cash generated from operations				97,112	9,849
Mark-up / Interest paid				-2,531	-3,000
Income Tax refund received				-	18,522
Income Tax paid				-41,129	-16,205
				-43,660	-683
Net cash generated from operations				53,452	9,166
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of Fixed Assets				-18,876	-16379
Investment Income				32,042	18,910
Sale proceeds of Fixed Assets				1,750	978
Investment made				-4,862	-
Investment sold				9,817	-
Net cash used in investing activities				19,871	3,509
				73,323	12,675
CASH FLOW FROM FINANCING ACTIVITIES
Dividend paid				-34,187	-30,860
Long Term Loans and Deposits				-211	(1 ,029)
Net cash used in Financing Activities				-34,398	(31 ,889)
Net increase in cash and cash equivalents				38,925	-19,214
Cash and cash equivalents at the beginning				67,320	86,534
Cash and cash equivalents at the end of the year				106,245	67,320
PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED JUNE 30, 2004
			Note	2004	2003
				Rs. in '000
Sales			21	839,930	897,234
Cost of Sales			22	711,420	715,363
Gross Profit				128,510	181,871
Administrative Expenses			23	46,674	44,855
Selling & Distribution Expenses			24	34,666	38,499
				81,340	83,354
Operating Profit				47,170	98,517
Trading Profit			25	1,481	329
Other Income			26	39,242	18,354
				87,893	117,200
Financial Expenses			27	2,678	2,998
Other Charges			28	4,899	8,818
				7,577	11,816
Profit before Taxation				80,316	105,384
Provision for Taxation			29	14,420	26,359
Profit after Taxation				65,896	79,025
Un-appropriated Profit brought forward				82	553
Available for appropriation				65,978	79,578
APPROPRIATIONS
Proposed Final Dividend at the rate of 45% i.e. Rs. 2.25
per share (2003 : 50% i.e. Rs. 2.50 per share)