Sheezan International Limited- Annual Reports 2004

SHEEZAN INTERNATIONAL LIMITED

ANNUAL REPORT 2004

Board of Directors:

Mr. Muneer Nawaz

Chairman

Mr. Saifi Chaudhry

Chief Executive

Mrs. Majeeda Begum

Mr. Mahmood Nawaz

Mr. C. M. Khalid

Mr. M. Naeem

Mr. Muhammad Khalid

Mr. Muhammad Nawaz Tishna

(Nominee N.I.T.)

Mr. Muhammad Asif

(Nominee N.I.T.)

Executive Director & Company Secretary:

Mr. Muhammad Khalid

Chief Financial Officer:

Mr. Faisal Ahmad Nisar, ACA

Audit Committee:

Mr. Muneer Nawaz

Chairman

Mr. Muhammad Khalid

Member

Mr. Muhammad Asif

Member

Mr. Sajid Hussain Syed

Secretary

Registered Office / Head Office:

56 - Bund Road,

Lahore-54500.

Factories:

• 56 - Bund Road,

Lahore-54500.

Auditors:

Messrs. Ford Rhodes Sidat Hyder & Company

Chartered Accountants,

Mall View Building,

4 - Bank Square, Lahore.

Legal Advisors:

Messrs. Cornelius, Lane & Mufti,

Nawa-e-Waqt Building,

Shahrah-e-Fatima Jinnah, Lahore.

Messrs. Sukhera Law Associates,

7-B, Turner Road, Lahore.

Bankers:

United Bank Limited.

Muslim Commercial Bank.

National Bank of Pakistan.

The Bank of Khyber.

Citibank N.A.

Bank AI-Habib.

Habib Bank Limited.

Directors' Report to the Members

Volume of export sales was lower than last year's due

We are pleased to present the 41st annual report of

With the improvement in global situation, we expect

Shezan International Limited with audited financial

that our export sales will grow in Afghan market as well

statements for the year ended June 30, 2004.

as we will gain a foothold in the markets of Central

Asian States. We would like to mention that one of our

Business Overview:

units is strategically located at Hattar, NWFP to

National economy posted a reasonable growth during

economically fulfill import demand of processed food

the year inspite of worldwide recession. This encouraging

products of Afghanistan and Central Asian States.

development enhanced productivity in consumer

industry. Especially sales of juice products recorded a

Merger of wholly owned subsidiary, Messrs. Hattar Fruit

significant increase while demand of preserves, sauces

Products Limited with the company was a major event

and canned goods showed upward trend. Relatively

during the year. The transition will contribute to higher

long summer season was helpful as well. It is pertinent

profitability by means of significant reduction in operating

to note that the steady growth across the board was

costs; optimum utilization of resources will result in

achieved amidst tough competition in the market, being

enhanced productivity; and joint marketing efforts will

abundantly supplied with a variety of processed food

promote business of the company. Needless to mention

products sold at very competitive prices. In addition,

that the ultimate beneficiary of overall improvement is

competition became more intensified due to regular

the shareholder, whose investment will further be

influx of imported products.

reinforced.

On the development front, the important work completed

Appropriations:

was the launch of "Shezan Twist" juice product, which

is purely made from premium quality fruits. It is a tasty

The Board of Directors recommends the following

and wholesome product for the whole family and has

appropriation of the profit for the year ended June 30,

received an encouraging consumer response but we

2004

anticipate that the target market segment for such kind

of juice will grow gradually nevertheless we are constantly

(Rupees in

making efforts to build the image of this product. Shezan's

thousands)

other products enjoy popularity amongst the consumers

of all age group due to their quality and prices, and we

Profit after taxation

intend to further strengthen this firm position.

Unappropriated profits brought forward

We also made our humble contribution to National

Transfer from subsidiary due to

Exchequer by paying a sum of Rs. 309 million in the

scheme of merger/amalgamation

shape of Excise Duty, Sales Tax and Income Tax for the

year ended June 30, 2004.

7,779

Financial Results:

Profit available for appropriation

There was an impressive increase in both sales which

73,907

grew by 13% as well as pre-tax profit which rose by

69% for the year under review. In other words, profit

Appropriations:

before tax was up from Rs. 55 million to Rs. 93 million

while sales revenue exceeded the Rs. 1 billion mark.

Transfer to General reserve 31,000

Similarly, earnings per share registered a handsome

increase from Rs. 6.67 to Rs. 13.23. Increased focus

Proposed dividend @ Rs. 7/50 per share

on marketing strategies, expansion in supply chain area,

(2003: @ Rs. 5/50 per share) 37,500

control over operating activities and reduction in

manufacturing costs enabled this performance. In

Unappropriated profits carried forward

addition, merger of wholly owned subsidiary, Messrs.

Hattar Fruit Products Limited, played an important role

5,407

in the achievement of excellent results.

Earnings per share in Rupees - Basic

13.23

Directors' Report to the Members

Leave of absence was granted to the members who

did not attend the Board meeting.

S. No. Name of Director

No of Meetings

Attended

Chief Executive, Directors, Company Secretary and

1 . Mr. Muneer Nawaz

4

their spouses and minor children have made no

2. Mr. Saifi Chaudhry

3

transactions in the company's shares during the year

3. Mrs. Majeeda Begum

Nil

under reference.

4. Mr. Mahmood Nawaz

3

5. Mr. C. M. Khalid

2

Related Party Transactions:

6. Mr. M. Naeem

1

7. Mr. Muhammad Khalid

4

The Directors confirm the following regarding Related

8. Mr. Muhammad Nawaz Tish

3

Party Transactions:

9. Mr. Muhammad Asif

4

1. That the transactions undertaken with Related

Name of Related Party

Payable

Receivable

Parties during the financial year have been ratified

(Rs.)

by the Audit Committee and approved by the Board

Shezan Services (Private) Limited

6,386,6327-

NIL

of Directors.

Shahtaj Sugar Mills Limited

NIL

IMawazabad Farms

5,809,0007-

NIL

2. That the amounts or appropriate proportions of

Shahnawaz (Private) Limited

NIL

outstanding, items pertaining to related parties and

Shahtaj Textile Limited

NIL

receivables/payables from the related parties as

on June 30, 2004 were as under:

Future Prospects:

Six years review at a glance:

We regard WTO regime both a challenge and an

Key operating and financial data of last six years is

opportunity. Gearing up for those changes in economy is

annexed to this report.

the need of the day. We have to be absolutely focused on

defending local market as well as at the same time finding

Statement of Compliance with the Best Practices

new export markets. We have to understand our

on Transfer Pricing:

consumer's demand, offering them variety to choose from

The Company has fully complied with the best practices

and quality to depend upon on the most competitive

on transfer pricing as contained in the listing regulations

prices.

of the stock exchanges.

We are confident that we will be able to defend our

Auditors:

local markets and also explore new business

The retiring auditors Messrs. Ford Rhodes Sidat Hyder

opportunities in the years to come.

& Company, Chartered Accountants, were ineligible for

re-appointment due to rotation clause of Code of

Acknowledgment:

Corporate Governance. However, the company applied

We express our heartfelt gratitude to the Honourable

to Securities & Exchange Commission of Pakistan

Finance Minister and the Government of Pakistan for

(SECP) for relaxation in the rotation clause. SECP

exempting fruit juices, squashes and syrups from Central

acceded to the company's request and allowed the

Excise Duty in the Federal Budget 2004. With this bold

existing auditors to continue for the next financial year

step, the agriculture sector will be benefited directly

subject to rotation of the partner of the retiring audit

and will contribute in the uplift of our country's economy.

firm who was incharge of audit for the year ended

We also like to thank Pakistan Fruit Processors

June 30, 2004.

Association for its valuable contribution for getting this

exemption.

The matter was then placed before the Audit Committee

for its consideration. The Audit Committee

We wish to appreciate efforts and ground work done

recommended re-appointment of existing auditors to

for the waiver of Excise Duty by Mr. Waseem A.

the Board for the financial year ending June 30, 2005.

Mahmood, as Secretary to Pakistan Fruit Processors

Since, the Board had approved the matter, the retiring

Association and our General Manager Marketing.

auditors, Messrs. Ford Rhodes Sidat Hyder & Company

However, on the whole it was a collective effort on all

are eligible for re-appointment for the next financial

the fronts and also a team work.

year.

Labour Management Relations:

Code of Corporate Governance:

During the year under review the labour and

In compliance with the listing regulations of stock

management relations remained cordial.

exchanges, the Board of Directors hereby declares that:

Your Directors place on record their appreciation for

a. The financial statements prepared by the

the loyalty and devotion to duty of the officers and

management of the Company, present fairly its

workers of all categories.

state of affairs, the results of its operations, cash

Directors' Report to the Members

flow and changes in equity;

Dividend:

Keeping in view the satisfactory financial results, the

b. Proper books of account of the company have

Directors have immense pleasure in proposing a cash

been maintained;

dividend of 75%, i.e., Rs. 7.50 per share. We hope our

shareholders would appreciate our paying generous

c. Appropriate accounting policies have been

returns on their investment.

consistently applied in preparation of financial

statements and accounting estimates are based

1. Mr. Muneer Nawaz Chairman

on reasonable and prudent judgment;

(Non Executive Director)

d. International Accounting Standards, as applicable

in Pakistan, have been followed in preparation of

2. Mr. Muhammad Asif Member

financial statements;

(Non Executive Director)

e. The system of internal control is sound in design

and has been effectively implemented and

3. Mr. Muhammad Khalid Member

monitored;

(Executive Director)

f. There are no significant doubts upon the company's

ability to continue as a going concern;

The Audit Committee reviewed the quarterly, half yearly

and annual financial statements before submission to

g. There has been no material departure from the

the Board for their approval and there after for

best practices of corporate governance, as detailed

publication. It also reviewed internal audit findings and

in the listing regulations; and

held separate meetings with internal and external

auditors as required under the code of corporate

h. The value of investments in Provident Fund for the

governance.

year ended June 30, 2004 was Rs. 46 million.

Board of Directors:

Audit Committee:

The Board of Directors comprises of three executive

The Audit Committee was formed by the Board of

and six non-executive directors. During the year ended

Directors in compliance with the Code of Corporate

June 30,2004, four meetings of Board of Directors were

Governance and comprises of following three members:

held and attended as follows:

Pattern of Shareholdings

as at June 30,2004

Number of

Shareholdings

Shares

Shareholders

From

To

Held

70

1

100

7,000

135

101

500

56,000

53

501

1,000

47,300

49

1,001

5,000

110,400

8

5,001

10,000

59,649

2

10,001

15,000

25,150

4

15,001

20,000

67,100

2

20,001

25,000

45,725

2

25,001

30,000

55,100

2

30,001

35,000

65,900

1

40,001

45,000

43,200

2

50,001

55,000

105,030

1

55,001

60,000

55,530

2

65,001

70,000

133,180

2

75,001

80,000

154,200

1

95,001

100,000

99,900

2

100,001

105,000

204,500

1

105,001

110,000

109,625

1

165,001

170,000

165,811

3

210,001

215,000

635,906

1

355,001

360,000

356,117

1

465,001

470,000

467,107

1

1,930,001

1 ,935,000

1 ,930,570

346

5,000,000

Number of

Shares

Categories of Shareholders

Shareholders

Held

Percentage

Financial Institutions

2

1,931,170

38.62%

Individuals

332

2,988,505

59.78%

Insurance Companies

3

45,200

0.90%

Investment Company

1

11,000

0.22%

Joint Stock Companies

8

24,125

0.48%

Total

346

5,000,000

100.00%

Six Years Review at a Glance

Year

1999

2000

2001

2002

2003

2004

(RUPEES IN THOUSAND)

Income

Sales

657,119

695,179

738,391

772,186

833,991

1,096,586

Others

5,847

3,643

32,064

17,184

24,401

8,740

662,966

698,822

770,455

789,370

858,392

1,105,326

Expenditure

Cost of sales

517,477

528,989

572,604

598,075

650,198

772,217

Administrative, selling and general

93,552

100,569

110,894

114,246

132,870

205,375

Financial

898

1,995

2,857

3,270

3,019

5,340

Others

14,290

16,333

17,775

18,592

19,538

29,478

626,217

647,886

704,130

734,183

805,625

1,012,410

Profit before taxation

36,749

50,936

66,325

55,187

52,767

92,916

Taxation

10,500

19,500

14,800

7,951

1 1 ,359

26,788

Profit after taxation

26,249

31,436

51,525

47,236

41 ,408

66,128

Paid-up capital

50,000

Reserves & unappropriated profits

108,119

109,555

131,080

148,316

162,224

325,407

Shareholders equity

158,119

159,555

181,080

198,316

212,224

375,407

Break up value per share in Rupees

31.62

31.91

36.22

39.66

42.44

75.08

Earnings per share in Rupees

5.25

6.29

10.31

9.45

8.28

13.23

Cash distribution per share in Rupees

5

6

5.5

7.5

Pattern of Shareholdings

as at June 30,2004

Detail of Financial Institutions/Companies

Sr. # Name of Shareholder