| PAKISTAN PAPER PRODUCTS LIMITED |
|
|
|
|
|
|
|
| ANNUAL REPORT 2004 |
|
|
| DIRECTORS' REPORT |
|
| The Directors of
your Company take pleasure in presenting their report together with the |
|
| Audited Accounts
and Auditors' Report thereon for the year ended 30th June, 2004. |
|
| Operating Results |
|
| During the year
under review your Company showed good progress with Net Sales growing by |
|
| 7.32% to Rs. 136.29
million compared to Rs. 126.99 million in the previous year. All sections of |
|
| the Company showed
good growth levels with the Pro Label section growing by 16.87%, and the |
|
| Sensitised and
Plain Paper Copier Section growing by 19.07%. This was achieved by gearing up |
|
| our marketing and
production resources to meet the increased demand. The sales of the Exercise |
|
| Book Section
declined slightly due to the loss of a few major orders, but these have now
been |
|
| captured again so
it is hoped that sales next year will again grow by a satisfactory level. |
|
| Financial Results |
|
| By the grace of
Allah, your Company was able to earn a Net Profit after tax of Rs. 18.71
million |
|
| compared to Rs.
16.42 million in the previous year. This increase was made possible through |
|
| proper resource
management, production efficiency, and cost economy. The total profit
available |
|
| for appropriation
is Rs. 18.71 million. Your Directors recommend a final dividend of 40%, which |
|
| amounts to Rs. 10
million, while Rs. 4 million will be transferred to general reserve, and Rs.
4.71 |
|
| million will be
carried forward as un-appropriated profit. The summary of the accounts for
the |
|
| year ended 30th June 2004 is given
below: |
|
|
|
|
June. 2004 |
June. 2003 |
|
| Profit before
taxation |
|
26,723,630 |
25,268,949 |
|
| Taxation |
|
-8,015,926 |
-8,844,132 |
|
| Profit after
taxation |
|
18,707,704 |
16,424,817 |
|
| Un-appropriated
profit brought forward |
|
8,684 |
267,277 |
|
| Transfer from
surplus on Revaluation of Fixed Assets |
|
- |
316,590 |
|
| Available for
appropriation |
|
18,716,388 |
17,008,684 |
|
| Appropriation |
|
|
|
| Proposed Cash
Dividend |
|
-10,000,000 |
-10,000,000 |
|
| Transfer to General
Reserve |
|
-4,000,000 |
-7,000,000 |
|
| Un-appropriated
Profit Carried forward |
|
4,716,388 |
8,684 |
|
|
| Board of Directors |
|
| The Board
comprises of two executive
and five non-executive Directors
including one |
|
| independent
Director. All the Directors keenly take interest in the proper stewardship of
the |
|
| company's affair.
The non-executive Directors are independent of management. |
|
| Statement of
Business Ethics & Practices |
|
| The Board has
adopted the statement of Business Ethics and Practices. All employees are |
|
| informed of this
statement. |
|
| Audit Committee |
|
| Comprises of three
members from the Board, including two non-executive directors. The Board |
|
| of Directors has
set out terms of reference for the audit committee. The audit committee
reviews |
|
| the annual and
quarterly financial statements, internal audit reports and holds its meeting
prior to |
|
| the Board meeting.
The committee manages adequately the system of internal control through |
|
| Internal audit
department and review effectiveness of operational and financial control. |
|
| Material Changes |
|
| There have been no
material changes and the company has not entered into any commitment |
|
| that will affect
its financial position. |
|
| Earning Per Share |
|
| Earning per share
comes to Rs.7.48 per share (2003:Rs. 6.57 per share) |
|
| Dividend |
|
| Directors propose
cash dividend at the rate of Rs.4.00 per share i.e. 40%. |
|
| Operating and
Financial Data |
|
| Operating and
Financial data and key ratios of the Company for last six years are annexed. |
|
| Code of Business
Principles |
|
| As a leading Paper
Converting Company, reputation for high ethical standards is central to |
|
| business success.
Code of Business
Principles has been
developed and is
now being |
|
| communicated and
acknowledged by each Director and employee of the Company. |
|
| Communication |
|
| Communication with
the shareholders is given a high priority. Annual and Quarterly Reports are |
|
| distributed to them
within the time specified in the Code. There is also an opportunity for |
|
| individual
shareholders to attend and ask questions at the Annual General Meeting. |
|
|
| SUMMARIZED STATEMENT OF KEY OPERATING AND FINANCIAL DATA OF SIX
YEARS Years at a Glance |
|
|
Rupees in Thousand |
|
|
2004 |
2003 |
2002 |
2001 |
2000 |
1999 |
|
| Sales-Net |
|
136,295 |
126,994 |
111,918 |
83,980 |
72,104 |
69,469 |
|
| Other Income/
(Loss) |
287 |
-7 |
382 |
201 |
88 |
43 |
|
| Profit before
Taxation |
26,724 |
25,269 |
17,293 |
11,650 |
6,540 |
4,691 |
|
| Taxation |
|
-8.016 |
-8.844 |
-4.065 |
-5.102 |
-2.165 |
-1.559 |
|
| Profit after
Taxation |
18,708 |
16,425 |
13,228 |
6,547 |
4,375 |
3,132 |
|
| Cash Dividend (%) |
40% |
40% |
25% |
25% |
25% |
20% |
|
| Bonus Shares (%) |
- |
- |
• 25% |
33.33% |
- |
50% |
|
| Earning per
Share(Rs.) |
7.48 |
6.57 |
5.29 |
4.36 |
2.93 |
3.14 |
|
| Paid up Capital |
|
25,000 |
25,000 |
20,000 |
15,000 |
15,000 |
10,000 |
|
| Shareholder Equity |
66,116 |
57,409 |
50,667 |
42,439 |
39,642 |
34,017 |
|
| Total Assets |
|
98,043 |
95,586 |
78,067 |
66,846 |
55,542 |
54,885 |
|
| Working Capital |
|
39,009 |
32,647 |
29,723 |
24,867 |
27,172 |
22,759 |
|
| Number of Employees |
82 |
84 |
88 |
96 |
99 |
94 |
|
| Production |
|
|
|
| Exercise Books
(Gross) |
40,432 |
41,006 |
47,761 |
36,641 |
38,199 |
34,096 |
|
| Ammonia Paper
(Rolls 10 yds) |
99,177 |
90,204 |
89,127 |
103,982 |
119,926 |
109,981 |
|
| Pro-Labels (Sq.
Meters) |
966,409 |
772,382 |
516,134 |
242,000 |
125,200 |
158,538 |
|
|
| STATEMENT OF
COMPLIANCE WITH THE CODE OF CORPORATE |
|
| GOVERNANCE FOR THE
YEAR ENDED JUNE 30, 2004 |
|
| 1) The Company encourages representation of
independent non-executive directors. At present |
|
| the board
includes five independent non-executive directors
including one director |
|
| nominated by the
N.I.T. |
|
|
| 2) The directors have confirmed that none of
them is serving as a director in more than ten |
|
| listed companies
including this company. |
|
|
| 3) 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 any NBFI or, being a |
|
| member of stock
exchange, has been declared as a defaulter by the stock exchange. |
|
|
| 4) No casual vacancy had occurred in the
Board during the period under review. |
|
|
| 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 Statements, overall corporate strategy and |
|
| significant
policies of the company. A complete record of particulars of significant
policies |
|
| along with the date
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
Chief Executive Officer (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, along with agenda and working |
|
| papers were
circulated at least seven days before the meetings. The minutes of the
meetings |
|
| were appropriately
recorded and circulated. |
|
|
| 9) The Board arranged an orientation course
for its directors during the year to apprise them of |
|
| their duties and
responsibilities. |
|
|
| 10) No new
appointments of CFO, Company Secretary or Head of Internal Audit have been |
|
| made after the
application of the Code of Corporate Governance and up to June 30, 2004. |
|
| However in case of
new appointment in future their remuneration and terms and conditions |
|
| of employment, will
be approved by the Board. |
|
|
| 11) The directors'
report for the period ended June 30, 2004 has been prepared in compliance |
|
| with the
requirements of the Code and 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 of
the Board |
|
|
| Statements of
Directors' Responsibilities |
|
| The Board regularly
reviews the Company's strategic direction. Annual plans and performance |
|
| targets for
business are set by the Chief Executive and are reviewed in total by the
Board in the |
|
| light of the
Company's overall objectives. The Board is committed to maintain the high
standards |
|
| of good corporate
governance. |
|
| Corporate
Governance |
|
| •We are pleased to
report that your company has taken necessary steps to comply with the |
|
| provisions of
the Code of
Corporate Governance as
incorporated in the
listing |
|
| regulations of the
Karachi Stock Exchange. |
|
| •We give below
statements on corporate and financial reporting framework. |
|
| •The financial
statements, prepared by the management of the company, present fairly its |
|
| state of affairs,
the result of its operations, cash flows and changes in equity. |
|
| •There are no
significant doubts upon the company's ability to continue as a going |
|
| concern. |
|
| •The system of
internal control, which was in place, is being continuously reviewed bv |
|
| internal audit and
other such procedures. The process of review will continue with the |
|
| objective to
further improve. |
|
| •Proper books of
account of the company have been maintained. |
|
| •Appropriate
accounting policies have been consistently applied in preparation of
financial |
|
| statements and
accounting estimates are based on reasonable and prudent judgments. |
|
| •During the year
five (5) meetings of the Board of
Directors were held. Attendance by |
|
| each Director was
as follows: |
|
|
| Name of Directors |
|
Meetings Attended |
|
| Mr. Hashim B.Saveed |
|
5 |
|
| Mr. Abbas Sayeed |
|
2 |
|
| Dr. Asadullah
Sayeed |
|
5 |
|
| Mr. Abid Sayeed |
|
5 |
|
| Mrs. Muleika Sayeed |
|
4 |
|
| Mr. Mohammed Ali
Sayeed |
|
2 |
|
| Mr. Mansoor Mukhtar
Shah |
|
3 |
|
|
| REVIEW REPORT TO
THE MEMBERS ON STATEMENT OF |
|
| COMPLIANCE WITH
BEST PRACTICES OF CODE OF CORPORATE |
|
| GOVERNANCE |
|
| We have reviewed
the Statement of Compliance with the best practices contained in the Code of |
|
| Corporate
Governance prepared by the Board of Directors of Pakistan Paper Products
Limited |
|
| to comply with the
Listing Regulation No.37 of the Karachi Stock Exchange (Guarantee) Limited |
|
| where the Company
is listed. |
|
| 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 provisions of the Code of Corporate Governance and |
|
| report if it does
not. A review is limited primarily to inquiries of the Company personnel and |
|
| review of various
documents prepared by the Company to comply with the Code. |
|
| As part of our
audit of the 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 special review of the internal control system to enable
us |
|
| to express an
opinion as to whether the Board's statement on internal control covers all
controls |
|
| and the
effectiveness of such internal controls. |
|
| Based on our
review, nothing has come to our attention which causes us to believe that the |
|
| Statement of
Compliance does not appropriately
reflect the Company's compliance, in
all |
|
| material respects,
with the best practices contained in the Code of Corporate Governance as |
|
| applicable to the
Company for the year ended Jun 30, 2004 . |
|
| Safety &
Environment |
|
| The Company
strictly complies with the standard and follows the safety rules &
regulations. The |
|
| Company has held
various sessions on safety awareness and no accident occurred. |
|
| Auditors |
|
| The present
Auditors M/s Haider Shamsi & Co.,
retire and being eligible, offer themselves for |
|
| reappointment and
as required by
the code, the
Audit Committee has
recommended |
|
| appointment of M/s.
Haider Shamsi & Co., Chartered Accountants, as auditors of the company |
|
| for the financial
year 2004-2005. |
|
| Pattern of
Shareholding |
|
| A statement of the
pattern of shareholding of certain class of shareholders as at June 30, 2004 |
|
| whose disclosure is
required under the reporting framework is included in the report. |
|
| The Directors, CEO,
CFO, Company Secretary and their spouse and minor children have made |
|
| no transactions of
Company's shares during the year. However, Mr. Hashim B.Sayeed and Mrs. |
|
| Muleika Sayeed have
made a gift of 100,000 shares each to Mr. Abid Sayeed. None of the other |
|
| Directors have made
any transactions of the Company's shares. |
|
| Future outlook |
|
| We are fully geared
up with the economic scenario of this country and the expected shape of |
|
| things in future in
spite of impending pressures on business. Initiatives of the Government to |
|
| improve the tax
collection system based on the principles of equity and reasonableness are |
|
| essential to bring
improvement in investors' confidence. |
|
| Acknowledgments |
|
| The Directors would
like to thank the staff and workers for their hard work and cooperation |
|
| during the year. We
assure the shareholders that the management would do its best to maintain |
|
| the progress and
keep them well informed with the developments. |
|
|
| BALANCE SHEET |
|
|
|
|
Notes |
2004 |
2003 |
|
|
|
|
Rupees |
Rupees |
|
| SHARE CAPITAL AND
RESERVES |
|
|
|
| Share Capital |
|
|
|
| Authorised
4,000,000 (2003: 4,000,000) |
|
|
| Ordinary Shares of
Rs.10 each |
|
|
40,000,000 |
40,000,000 |
|
| Issued, Subscribed
and Paid-up capital |
3 |
25,000,000 |
25,000,000 |
|
| Revenue Reserves |
|
4 |
36,400,000 |
32,400,000 |
|
| Un-Appropriated
Profit |
|
4,716,388 |
8,684 |
|
|
66,116,388 |
57,408,684 |
|
| Surplus on
Revaluation of Fixed Assets |
5 |
- |
- |
|
| Obligation under
Finance Lease |
|
6 |
3,444,712 |
6,434,980 |
|
| Deferred gain under
sales & lease back arrangement |
7 |
451,219 |
697,339 |
|
| DEFERRED
LIABILITIES |
|
|
|
| Deferred Taxation |
|
8 |
3,387,274 |
2,976,735 |
|
| Provision for
Gratuity |
|
9 |
969,525 |
800,172 |
|
|
4,356,799 |
3,776,907 |
|
| CURRENT LIABILITIES |
|
|
|
| Current maturity of
Finance Lease |
|
2,990,268 |
6,286,725 |
|
| Creditors, Accrued
and Other Liabilities |
10 |
10,683,878 |
10,981,471 |
|
| Proposed Dividend |
|
34 |
10,000,000 |
10,000,000 |
|
|
23,674,146 |
27,268,196 |
|
| CONTINGENCIES &
COMMITMENTS |
11 |
- |
- |
|
|
|
|
98,043,264 |
95,586,106 |
|
|
| 13) The Directors,
the CEO and the Executive 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. |
|
|
| 15) The Board has
formed an Audit Committee. It comprises three members, of whom two are |
|
| non-executive
directors including the Chairman of the Audit Committee. |
|
|
| 16) The meetings of
the Audit Committee were held at least once every quarter prior to approval |
|
| of interim and
final results of the Company and as required by the Code. The terms of |
|
| references of the
committee have already been formed and advised to the committee for |
|
| compliance. |
|
|
| 17) The Board has
set up an effective internal audit function and our head of internal audit is
well |
|
| conversant with the
policies and procedures of the company and is involved in the internal |
|
| audit function on a
full time basis. |
|
|
| 18) The statutory
auditors of the company have confirmed that they have been given satisfactory |
|
| rating under the
quality control review program of the Institute of Chartered Accounts of |
|
| Pakistan, that they
or any of the partners of the firm, their spouses and minor children do not |
|
| hold shares of the
Company and that the firm and all its partners are in compliance with |
|
| International
Federation of Accountants (IFAC) guidelines on code of ethics as adopted by |
|
| Institute of
Chartered Accountants of Pakistan. |
|
|
| 19) The statutory
auditors or the persons associated with them have not been appointed to |
|
| provide other
services except in accordance with the listing regulations and the auditors
have |
|
| confirmed that they
have observed IFAC guidelines in this regard. |
|
|
| 20) We confirm that
all other material principles contained in the Code have been complied with. |
|
|
| PROFIT AND LOSS
ACCOUNT FOR THE YEAR ENDED 30™ JUNE, 2004 |
|
|
|
|
2004 |
2003 |
|
|
|
|
NOTE |
Rupees |
Rupees |
|
| TURNOVER |
|
|
158,422,881 |
147,717,676 |
|
| Sales Tax,
Discounts, commission & sales return |
|
-22,127,960 |
-20,723,407 |
|
| SALES |
|
20 |
136,294,921 |
126,994,269 |
|
| Cost of Goods Sold |
|
21 |
-97,412,698 |
-90,120,135 |
|
| GROSS PROFIT |
|
|
38,882,223 |
36,874,134 |
|
| OPERATING EXPENSES |
|
|
|
| Administrative |
|
22 |
7,159,135 |
6,968,727 |
|
| Selling and
Distribution |
|
23 |
2,143,478 |
1,709,739 |
|
| Financial |
|
24 |
1,240,210 |
1,057,932 |
|
| Workers' Profit
Participation Fund |
|
1,416,970 |
1,356,887 |
|
| Workers' Welfare
Fund |
|
485,396 |
505,379 |
|
|
|
-12,445,189 |
-11,598,664 |
|
| OPERATING PROFIT |
|
26,437,034 |
25,275,470 |
|
| Other Income/
(Loss) |
|
25 |
286,596 |
-6,521 |
|
| NET PROFIT BEFORE
TAXATION |
|
26,723,630 |
25,268,949 |
|
| Taxation |
|
26 |
-8,015,926 |
-8,844,132 |
|
| NET PROFIT AFTER
TAXATION |
|
18,707,704 |
16,424,817 |
|
| Unappropriated
Profit Brought Forward |
|
8,684 |
267,277 |
|
| PROFIT AVAILABLE
FOR APPROPRIATION |
|
18,716,388 |
16,692,094 |
|
| APPROPRIATIONS |
|
|
|
| Transferred to
Revenue Reserve |
|
-4,000,000 |
-7,000,000 |
|
| Proposed Dividend @
40 % ( 2003: 40% ) |
|
-10,000,000 |
-10,000.00 |
|
| Transferred from
revaluation surplus |
|
- |
316.59 |
|
|
|
-14,000,000 |
-16,683,410 |
|
| Unappropriated
profit carried forward |
|
4,716,388 |
8,684 |
|
| EARNING PER SHARE |
|
|
|
| - Basic |
|
31 |
7.48 |
6.57 |
|
| - Diluted |
|
31 |
7.48 |
6.57 |
|
|
| AUDITORS' REPORT TO
THE MEMBERS |
|
| We have audited the
annexed balance sheet of PAKISTAN PAPER PRODUCTS LIMITED as at JUNE 30, 2004 |
|
| and the related
profit and loss account, cash flow statement and statement of changes in
equity togedier 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 statement 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 die 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 accounts
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, 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 |une 30, 2004
and of the |
|
| profit, its cash
flows and changes in equity for the vear then ended; and |
|
| d) In our opinion, zakat deductible at
source under the Zakat and Ushr Ordinance, 1980 (XYIII of 1980), was |
|
| deducted by the
company and deposited in the Central Zakat Fund established under section 7
of the |
|
| Ordinance. |
|
|
| STATEMENT OF
CHANGES IN EQUITY FOR THE YEAR ENDED 30™ JUNE, 2004 |
|
|
Share |
Reserve for |
Revenue |
Unappropr- |
Total |
|
|
Capital |
Issue of |
Reserve |
iated profit |
|
|
|
|
Bonus shares |
|
|
|
( Rupees ) |
|
|
| Balance as at June
30, 2002 |
20,000,000 |
5,000,000 |
25,400,000 |
267,277 |
50,667,277 |
|
| Transfer to share
capital |
5,000,000 |
-5,000,000 |
. |
. |
. |
|
| Transferred from
surplus on |
|
|
| Revaluation of
fixed assets |
- |
- |
- |
316,590 |
316,590 |
|
| Net profit for the
year |
|
|
| Ended June 30, 2003 |
- |
- |
- |
16,424,817 |
16,424,817 |
|
|
|
25,000,000 |
- |
25,400,000 |
17,008,684 |
67,408,684 |
|
| Appropriation: |
|
|
|
| Transfer to revenue
reserve |
- |
- |
7,000,000 |
-7,000,000 |
- |
|
| Proposed final
dividend @ 40% |
- |
- |
- |
-10,000,000 |
-10,000,000 |
|
|
|
- |
- |
7,000,000 |
-17,000,000 |
-10,000,000 |
|
| Balance as at June
30, 2003 |
25,000,000 |
- |
32,400,000 |
8,684 |
57,408,684 |
|
| Net profit for the
year ended |
|
|
| June 30, 2003 |
|
- |
- |
- |
18,707,704 |
18,707,704 |
|
|
|
25,000,000 |
|
32,400,000 |
18,716,388 |
76,116,388 |
|
| Appropriation: |
|
|
|
| Transfer to revenue
reserve |
- |
|
4,000,000 |
-4,000,000 |
- |
|
| Proposed final
dividend @ 40% |
- |
- |
- |
-10,000,000 |
-10,000,000 |
|
|
|
- |
- |
4,000,000 |
-14,000,000 |
-10,000,000 |
|
| Balance as at June'
30, 2004 |
25,000,000 |
- |
36,400,000 |
4,716,388 |
66,116,388 |
|
|
|
|
Notes |
2004 |
2003 |
|
| PROPERTY AND ASSETS |
|
|
Rupees |
Rupees |
|
| TANGIBLE FIXED
ASSETS |
