| Dawood Hercules Chemicals Limited |
|
|
|
|
|
|
|
| Annual
Report 1999 |
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|
|
| CONTENTS |
|
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| Company
Information |
|
|
| Notice
of Annual General Meeting |
|
| Directors'
Report |
|
|
| Auditors'
Report to the Members |
|
|
| Profit
and Loss Account |
|
|
| Balance Sheet |
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|
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| Cash
Flow Statement |
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|
| Notes
to the Accounts |
|
|
| Pattern
of Share Holdings |
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| COMPANY
INFORMATION |
|
|
| DIRECTORS |
|
Ahmed Dawood |
|
|
(Chairman) |
|
|
|
M. Hussain Dawood |
|
|
(Chief Executive) |
|
|
|
Shahzada Dawood |
|
|
|
Khawaja Amanullah |
|
|
|
Abdul Ghafoor Gohar |
|
|
|
Abdul Ahad Faruqui |
|
|
|
Syed Muhammad Asghar |
|
|
| SECRETARY |
|
S.M. Asghar |
|
|
|
| AUDITORS |
|
Taseer Hadi Khalid &
Co. |
|
|
Chartered Accountants |
|
|
| LEGAL
ADVISORS |
Hassan & Hassan |
|
|
|
(Advocates) |
|
|
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| TAX
CONSULTANT |
S.M. Masood & Co. |
|
|
|
| REGISTERED
OFFICE |
35-A, Shahrahe Abdul
Hameed Bin |
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|
Baadees, Lahore |
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|
| PLANT |
|
Chichoki Mallian |
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|
Sheikhupura |
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|
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| NOTICE
OF MEETING |
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| Notice
is hereby given that the Thirty-second Annual General Meeting of Dawood
Hercules Chemicals Limited will Insha |
|
| Allah
be held at the Company's Registered Office at 35-A, Shahrahe Abdul Hameed Bin
Baadees, Lahore at 10:00 A.M. |
|
| on
Friday, 30 June 2000, for the purpose of transacting the following ORDINARY
BUSINESS after recitation from the |
|
| Holy Quran: |
|
|
| 1.
To confirm the Minutes of the Thirty-first Annual General Meeting held on 25
June 1999. |
|
|
| 2.
To receive, consider and adopt the audited accounts of the Company for the
year ended |
|
| 31
December 1999. |
|
|
| 3.
To consider and, if thought fit, approve payment of final cash dividend at
the rate of Rs. 6.00 per share in |
|
| addition
to interim declaration of cash dividend of Rs. 4.00 per share for the year
ended 31 December 1999. |
|
|
| 4.
To appoint auditors and to fix their remuneration. |
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|
|
|
By order of the Board |
|
|
S. M. Asghar |
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| Lahore:
29 May, 2000 |
|
Company Secretary |
|
|
| Notes: |
|
|
| 1.
The share transfer books of the Company will remain closed from 24 June to 30
June 2000, both days |
|
| inclusive. |
|
|
| 2.
A member of the Company who is entitled to attend and vote, may appoint
another member as his/her |
|
| agent
duly authorized under a power of attorney or by proxy to attend the meeting
and vote instead of him/ |
|
| her.
The proxy shall have the right to attend, speak and vote in place of the
member appointing him/her at |
|
| the
meeting. A Corporation, being a member, may appoint as representative any
person whether or not a |
|
| member
of the Company. Proxies must be received at the registered office of the
Company not less than |
|
| forty
eight hours before the meeting. The form of proxy is attached herewith. |
|
|
| 3.
Shareholders are requested to immediately notify the change of address, if
any, immediately. |
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|
|
| DIRECTORS'
REPORT |
|
|
| The
Directors have pleasure in presenting their Annual Report with the audited
accounts of the Company for the year |
|
| ended
31 December 1999. |
|
|
| The
financial results of the Company for the year under review are as under: |
|
|
Rupees |
|
|
| During
the year the Company made a profit of |
|
622,205,582 |
|
|
| Adding
thereto the un-appropriated profit |
|
| brought
forward from the previous year |
|
1,934,120,373 |
|
|
------------------ |
|
| Making
available for appropriation a sum of |
|
2,556,325,955 |
|
|
| Of
the above, the Directors during 1999 declared |
|
| an
interim cash dividend of Rs. 4.00 per share |
|
160,128,000 |
|
|
| And
recommend final cash dividend at Rs.6.00 per share |
|
240,192,000 |
|
|
------------------ |
|
| Making
a total amount for appropriation of |
|
400,320,000 |
|
|
------------------ |
|
| And
propose to carry forward to the next year the balance of |
|
2,156,005,955 |
|
|
========== |
|
|
| The
earning per share is Rs.15.54 |
|
|
| Production
of 419,394 M. Tons of urea during 1999 was 94.14% of the design capacity of
445,500 M. Tons and marginally |
|
| less
than the previous year's production of 423,521 M. Tons. The reason for below
capacity operations, as stated in the |
|
| Half
Yearly Report, was the long stoppage of gas supply (forty seven days) during
January / February, 1999. If the supply |
|
| of
gas had not been curtailed the production during the year would have exceeded
the design capacity. The gas supply |
|
| situation
has improved in the current year and production for the year 2000 is expected
to be better than the previous year, |
|
| Insha Allah. |
|
|
| There
was a surplus supply situation in the market during the year, caused
primarily by the import of low priced urea. As |
|
| a
result of several representations by the fertilizer industry the Government
took cognizance of the situation and a |
|
| regulatory
import duty of 10% was imposed towards the end of the year. Nevertheless, due
to competition the prices could |
|
| not
be maintained. |
|
|
| Another
factor which severely effected the profitability of the Company was a massive
increase in the price of gas from the |
|
| middle
of the year. Full impact of this price hike will show itself in the results
of the coming years. The Company finds |
|
| itself
in a disadvantageous position visa vis its competitors who are operating new
plants and are protected for ten years |
|
| from
the commencement of production against any increase in the price of gas used
as feedstock. |
|
|
| During
the year 1999, Dawood Hercules Chemicals Limited (DHCL) employed a portion of
its reserves for purchasing |
|
| shares
of Engro Chemical Pakistan Limited (ECPL) from the stock market. The Company
is convinced that this is an |
|
| excellent
long term deployment of funds. The recent fall of more than 25% in the
KSE-100 index between 20 April and |
|
| 29
May, 2000 has brought about significant erosion in the share prices of
virtually all companies. Consequently, the price |
|
| of
ECPL shares has also declined and at the present time is below the average
price paid by DHCL. Short term movements |
|
| in
the share price would obviously not affect the above long term commitment. |
|
|
| In
the last week of February, 2000 ECPL filed a civil suit before the Sind High
Court against, inter alia, DHCL, alleging |
|
| breach
of certain laws in purchasing shares of ECPL. In the opinion of the Legal
Advisors of your Company, Dawood |
|
| Hercules
Chemicals Limited have a good defence to the suit. |
|
|
| The
exercise to implement the Y2K compliance project was successfully completed
in time and consequently no problem |
|
| was
faced at the onset of year 2000. |
|
|
| The
term of office of the Board expired in May 1999. Pursuant to section 178(1)
of the Companies Ordinance 1984, the |
|
| Board
of Directors fixed the number of Directors to be elected for the next term of
three years at seven. At the |
|
| Extraordinary
General Meeting of the shareholders held on 6 May, 1999, seven Directors
Messrs. Ahmed Dawood, |
|
| M.
Hussain Dawood, Shahzada Dawood, Khawaja Amanullah, Abdul Ghafoor Gohar,
Abdul Ahad Faruqui and Syed |
|
| Muhammad
Asghar were elected. The Board of Directors elected Mr. Ahmed Dawood as
Chairman of the newly elected |
|
| Board.
The Board also appointed Mr. M. Hussain Dawood as the Managing Director and
Chief Executive of the Company |
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| for
a period of three years commencing 6 May, 1999. |
|
|
| By
Allah's Grace, the relationship between the management and all employees
continued to remain in total harmony. |
|
|
| The
retiring auditors, M/s. Taseer Hadi Khalid & Co., Chartered Accountants,
being eligible, offer themselves for |
|
| re-appointment. |
|
|
|
On behalf of the Board of Directors |
|
|
|
|
|
M. Hussain Dawood |
|
| Lahore:
29 May, 2000 |
|
Chief Executive |
|
|
|
| AUDITORS'
REPORT TO THE MEMBERS |
|
|
| We
have audited the annexed balance sheet of DAWOOD HERCULES CHEMICALS LIMITED
as at 31 December 1999 |
|
| and
the related profit and loss account and cash flow statement, 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 and, after due
verification thereof, 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 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 and cash flow statement, together with the notes
forming part thereof, 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 31 December
1999 and of the profit and |
|
| cash
flows 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 in the Central Zakat Fund established under section 7 of that
Ordinance. |
|
|
|
|
TASEER HADI KHALID & CO. |
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| Lahore:
29 May, 2000 |
|
Chartered Accountants |
|
|
|
| PROFIT
& LOSS ACCOUNT |
|
| FOR
THE YEAR ENDED 31 DECEMBER 1999 |
|
|
|
Note |
1999 |
1998 |
|
|
|
|
| Sales |
|
|
2,215,268,799 |
2,767,274,262 |
|
| Cost
of goods sold |
|
3 |
1,592,397,978 |
1,525,068,588 |
|
|
|
------------------ |
------------------ |
|
| Gross profit |
|
|
622,870,821 |
1,242,205,674 |
|
| Selling,
administrative and financial expenses |
|
4 |
119,312,185 |
94,735,203 |
|
|
|
------------------ |
------------------ |
|
| Operating profit |
|
|
503,558,636 |
1,147,470,471 |
|
| Other income |
|
5 |
328,385,645 |
289,969,255 |
|
| Diminution
in value of investment - written back/(provided for) |
|
23,989,233 |
(23,989,233) |
|
|
|
------------------ |
------------------ |
|
| Profit
for the year |
|
|
855,933,514 |
1,413,450,493 |
|
| Provision
for contribution to: |
|
|
|
| Workers
profits participation fund |
|
|
25,177,932 |
57,373,524 |
|
| Workers
welfare fund |
|
|
12,000,000 |
27,000,000 |
|
|
|
------------------ |
------------------ |
|
|
|
37,177,932 |
84,373,524 |
|
|
|
------------------ |
------------------ |
|
| Profit
before taxation |
|
|
818,755,582 |
1,329,076,969 |
|
| Provision
for taxation |
|
6 |
196,550,000 |
401,300,000 |
|
|
|
------------------ |
------------------ |
|
| Profit
after taxation |
|
|
622,205,582 |
927,776,969 |
|
| Unappropriated
profit brought forward |
|
|
1,934,120,373 |
1,376,639,404 |
|
|
|
------------------ |
------------------ |
|
| Profit
'available for appropriation |
|
|
2,556,325,955 |
2,304,416,373 |
|
|
| Appropriations: |
|
| Interim
dividend @ Rs.4.00 (1998: Rs. 2.50) per share |
|
160,128,000 |
83,400,000 |
|
| Bonus
shares nil (1998:1 for 5) |
|
-- |
66,720,000 |
|
| Proposed
final dividend @ Rs. 6.00 (1998: Rs. 5.50) per share |
|
240,192,000 |
220,176,000 |
|
|
------------------ |
------------------ |
|
|
|
400,320,000 |
370,296,000 |
|
|
|
------------------ |
------------------ |
|
| Unappropriated
profit carried forward |
|
Rupees |
2,156,005,955 |
1,934,120,373 |
|
|
|
========== |
========== |
|
| Earnings
per share |
|
25 |
Rs. 15.54 |
Rs. 23.18 |
|
|
|
========== |
========== |
|
|
|
|
| These
accounts should be read in conjunction with the annexed notes. |
|
|
|
M. Hussain Dawood |
|
Khawaja Amanullah |
|
|
Chief Executive |
|
Director |
|
|
| Lahore:
29 May, 2000 |
|
|
|
| BALANCE
SHEET AS AT 31 DECEMBER 1999 |
|
|
|
Note |
1999 |
1998 |
|
|
| CAPITAL
AND RESERVES |
|
| Authorised
capital |
|
| 100,000,000
ordinary shares of Rs. 10 each |
|
1,000,000,000 |
1,000,000,000 |
|
|
========== |
========== |
|
|
|
|
| Issued,
subscribed and paid up capital |
|
7 |
400,320,000 |
400,320,000 |
|
| General reserve |
|
|
500,000,000 |
500,000,000 |
|
| Unappropriated
profit |
|
|
2,156,005,955 |
1,934,120,373 |
|
|
|
------------------ |
------------------ |
|
|
|
3,056,325,955 |
2,834,440,373 |
|
|
|
|
| DEFERRED
LIABILITIES |
|
|
|
| Deferred
taxation |
|
8 |
36,800,000 |
35,350,000 |
|
| Retirement
benefits |
|
9 |
26,981,116 |
36,777,557 |
|
|
|
------------------ |
------------------ |
|
|
63,781,116 |
72,127,557 |
|
| CURRENT
LIABILITIES |
|
| Creditors,
accrued and other liabilities |
|
10 |
627,549,656 |
389,200,963 |
|
| Provision
for taxation |
|
24,773,281 |
187,674,646 |
|
| Provision
for contribution to |
|
| workers
profits participation & |
|
| workers
welfare funds |
|
70,443,972 |
137,633,420 |
|
| Proposed
dividend |
|
240,192,000 |
220,176,000 |
|
|
------------------ |
------------------ |
|
|
962,958,909 |
934,685,029 |
|
|
| CONTINGENT
LIABILITIES AND COMMITMENTS |
11 |
-- |
-- |
|
|
------------------ |
------------------ |
|
|
Rupees |
4,083,065,980 |
3,841,252,959 |
|
|
|
========== |
========== |
|
|
| FIXED ASSETS |
|
|
|
| At
cost less accumulated depreciation |
|
12 |
473,063,626 |
549,638,618 |
|
| Capital
work in progress |
|
13 |
8,904,952 |
6,197,657 |
|
|
------------------ |
------------------ |
|
|
481,968,578 |
555,836,275 |
|
|
| LONG
TERM INVESTMENTS |
|
14 |
1,868,700,000 |
-- |
|
|
|
|
|
|
| LONG
TERM LOANS AND ADVANCES |
|
15 |
930,240 |
6,783,517 |
|
|
|
|
|
|
| DEFERRED
COSTS |
|
16 |
15,889,150 |
31,194,740 |
|
|
|
| CURRENT
ASSETS |
|
|
|
| Stores,
spares and loose tools |
|
17 |
488,568,425 |
449,138,243 |
|
| Stocks |
|
18 |
271,883,701 |
67,755,147 |
|
| Trade debtors |
|
19 |
9,972,562 |
11,127,081 |
|
| Loans,
advances, short term investments, |
|
|
|
|
| prepayments
and other receivables |
|
20 |
761,430,313 |
961,700,485 |
|
| Cash
and bank balances |
|
21 |
183,723,011 |
1,757,717,471 |
|
|
|
------------------ |
------------------ |
|
|
|
1,715,578,012 |
3,247,438,427 |
|
|
|
------------------ |
------------------ |
|
|
Rupees |
4,083,065,980 |
3,841,252,959 |
|
|
|
========== |
========== |
|
| These
accounts should be read in conjunction with the annexed notes. |
|
|
| Lahore:
29 May, 2000 |
M. Hussain Dawood |
|
Khawaja Amanullah |
|
|
Chief Executive |
|
|
Director |
|
|
|
|
|
| CASH
FLOW STATEMENT |
|
| FOR
THE YEAR ENDED 31 DECEMBER 1999 |
|
|
|
1999 |
1998 |
|
|
|
|
|
|
| CASH
FLOW FROM OPERATING ACTIVITIES |
|
|
| Cash
generated from operations |
|
'A' |
568,728,024 |
1,251,650,990 |
|
| Financial
charges paid |
|
(8,451,428) |
-- |
|
| Taxes paid |
|
(358,001,365) |
(413,732,142) |
|
| Gratuity paid |
|
(25,222,254) |
(17,452,033) |
|
| Deferred costs |
|
-- |
700,296 |
|
| Decrease/(increase)
in long term loans & advances |
|
5,853,277 |
(6,203,612) |
|
|
------------------ |
------------------ |
|
| Net
cash inflow from operating activities |
|
182,906,254 |
814,963,499 |
|
|
| CASH
FLOW FROM INVESTING ACTIVITIES |
|
| Fixed
capital expenditure |
|
|
(13,580,542) |
(12,452,722) |
|
| Sale
proceeds of fixed assets |
|
|
4,262,978 |
469,500 |
|
| Long
term deposit |
|
|
86,691,800 |
-- |
|
| Profits
on time deposits |
|
|
247,421,026 |
117,439,687 |
|
| Purchase
of WAPDA bearer bonds |
|
|
-- |
(39,516,575) |
|
| Purchase
of US$ bonds |
|
|
-- |
(608,618,749) |
|
| Dividend
income from shares |
|
|
-- |
109,986,660 |
|
| Sale
proceeds of shares |
|
|
-- |
206,421,920 |
|
| Sale
proceeds of US$ bonds |
|
|
-- |
444,745,000 |
|
| Purchase
of shares |
|
|
(196,504,093) |
(1,868,700,000) |
|
|
------------------ |
------------------ |
|
| Net
cash inflow/(outflow) from investing activities |
|
(1,650,225,279) |
128,291,169 |
|
|
| CASH
FLOW FROM FINANCING ACTIVITIES |
|
| Dividends paid |
|
(336,520,349) |
(370,854,463) |
|
|
------------------ |
------------------ |
|
| Net
cash outflow from financing activities |
|
(336,520,349) |
(370,854,463) |
|
|
------------------ |
------------------ |
|
| Net
increase/(decrease) in cash and cash equivalents |
|
(1,803,839,374) |
572,400,205 |
|
|
| CASH
AND CASH EQUIVALENTS AT THE BEGINNING |
|
| OF THE YEAR |
|
2,471,883,205 |
1,899,483,000 |
|
|
|
| CASH
AND CASH EQUIVALENTS AT THE END |
|
------------------ |
------------------ |
|
| OF THE YEAR |
|
'B' |
Rupees |
668,043,831 |
2,471,883,205 |
|
|
|
|
========== |
========== |
|
|
| A.
CASH GENERATED FROM OPERATIONS |
|
| Profit
before taxation for the year |
|
818,755,582 |
1,329,076,969 |
|
| Adjustment
of items not involving movement of cash |
|
| Depreciation
charged to profit & loss account |
|
86,119,323 |
90,752,130 |
|
| Amortization
of deferred costs |
|
15,305,590 |
15,518,204 |
|
| Provision
for gratuity |
|
15,425,813 |
8,089,956 |
|
| Financial
charges |
|
8,451,428 |
-- |
|
| Interest
from deposits/bonds |
|
(107,426,813) |
(253,922,394) |
|
| Profit
on sale of short term investments |
|
(17,557,171) |
-- |
|
| Profit
on sale of fixed assets |
|
(268,404) |
(2,744,972) |
|
| Dividend
Income |
|
(112,024,860) |
-- |
|
| Provision
for diminution in value of short term investment |
|
(23,989,233) |
23,989.23 |
|
|
------------------ |
------------------ |
|
|
(135,964,327) |
(118,317,843) |
|
|
------------------ |
------------------ |
|
| Profit
before working capital changes |
|
682,791,255 |
1,210,759,126 |
|
|
|
|
| EFFECT
ON CASH FLOW DUE TO |
|
| WORKING
CAPITAL CHANGES |
|
|
| (Increase)/decrease
in current assets: |
|
| Stocks,
stores and spares |
|
(243,558,736) |
(89,336,025) |
|
| Trade debtors |
|
1,154,519 |
62,290,524 |
|
| Loans,
advances, short term investments, |
|
|
|
| prepayments
and other receivables |
|
965,392 |
(10,005,318) |
|
| Increase/(decrease)
in current liabilities: |
|
|
|
| Creditors
and accrued expenses |
|
194,565,042 |
108,761,607 |
|
| Workers
profits participation & workers welfare funds |
|
(67,189,448) |
(30,818,924) |
|
|
------------------ |
------------------ |
|
|
(114,063,231) |
40,891.86 |
|
|
------------------ |
------------------ |
|
|
Rupees |
568,728,024 |
1,251,650,990 |
|
|
|
========== |
========== |
|
| B.
CASH AND CASH EQUIVALENTS |
|
|
| Cash
and bank balances |
|
- (Note 21) |
183,723,011 |
1,757,717,471 |
|
| Short
term investments |
|
- (Note 20.2) |
484,320,820 |
622,165,734 |
|
| Deposits |
|
- (Note 20 ) |
-- |
92,000,000 |
|
|
|
------------------ |
------------------ |
|
|
Rupees |
668,043,831 |
2,471,883,205 |
|
|
========== |
========== |
|
|
|
|
|
|
M. Hussain Dawood |
|
Khawaja Amanullah |
|
| Lahore:
29 May, 2000 |
|
Chief Executive |
|
Director |
|
|
|
|
|
|
|
| NOTES
TO THE ACCOUNTS FOR THE YEAR |
|
|
| ENDED
31 DECEMBER 1999 |
|
|
| 1.
LEGAL STATUS AND NATURE OF BUSINESS |
|
| Dawood
Hercules Chemicals Limited is a public limited company. It was incorporated
in Pakistan in 1968 under |
|
| the
Companies Act 1913 (now Companies Ordinance 1984) and is listed on Karachi
and Lahore Stock |
|
| Exchanges.
The principal activity of the Company is production of urea fertilizer. |
|
|
| 2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
|
|
| a)
Accounting convention |
|
| These
accounts have been prepared under the historical cost convention, without any
adjustment for the |
|
| effects
of inflation or current value. |
|
|
| b)
Revenue recognition |
|
| Sales
of products and services are recorded on dispatch of goods / products to
customers or performance |
|
| of services. |
|
|
| c)
Staff retirement benefits |
|
|
| i)
The Company operates an approved funded gratuity scheme for its management
staff and an |
|
| un-funded
gratuity scheme for its non-management staff. Actuarial valuations were
carried out as |
|
| at
31 December 1999 to determine and adjust the liability on the balance sheet
date. Projected |
|
| unit
credit method has been adopted by the actuary for ascertaining the fair value
of assets and |
|
| liabilities. |
|
|
| Assumptions
used for valuation for the scheme are as under: |
|
|
|
Per annum |
|
|
| -
Discount rate |
|
12% |
|
| -
Expected rate of mark up on investment |
|
12% |
|
| -
Expected rate of increase in salary |
|
10% |
|
