| Emco Industries Limited |
|
|
|
|
|
|
|
|
|
|
| Annual Report 1999 |
|
|
| Contents |
|
| Company Information |
|
|
| Business Items |
|
| Notice of Meeting |
|
|
| Director's
Report to the Members |
|
| Financial Highlights |
|
|
| Ten Years at a Glance |
|
|
| Chairman's Review |
|
|
| Auditors' Report |
|
|
| Balance Sheet |
|
|
| Profit and Loss Account |
|
|
| Statement
of Changes in Financial Position |
|
| Notes to the Accounts |
|
|
| Pattern of Shareholdings |
|
|
|
|
|
|
| Company Information |
|
|
|
|
|
| Board of Directors |
|
| Mr.
S. A. Mannan, Chairman |
|
| Mr.
Tariq Rehman, Chief Executive |
|
| Mr. A. Rehman |
|
| Mr. Shafiq A. Siddiqi |
|
| Mr. T.M. Sheikh |
|
| Mr. Haris Noorani |
|
| Mr. Suhail Mannan |
|
| Mr. Tahir Rehman |
|
| Mr. Iqbal Shafiq |
|
| Mr.
Muhammad Shafiq GilI-ICP Nominee |
|
|
| Auditors |
|
| S.A. Salam & Co. |
|
| Chartered Accountants, |
|
| Lahore |
|
|
| Bankers |
|
| Habib Bank Ltd. |
|
| United Bank Ltd. |
|
| Standard Chartered Bank |
|
| Emirates Bank International |
|
| Deutsche Bank A.G. |
|
| American
Express Bank Ltd. |
|
|
| Registered Office |
|
| 2nd
Floor, Emirates Bank Building, |
|
| 14-Kashmir-Egerton Road, |
|
| Lahore-54000 |
|
|
| Factory |
|
| 19-Kilometre,
Lahore-Sheikhupura Road, |
|
| Lahore. |
|
|
|
| Business Items |
|
|
| Porcelain Insulators |
|
| · Suspension Insulator |
|
| · Pin Insulator |
|
| · Line Post Insulator |
|
| ·
Cap and Pin Type Support Insulator |
|
| · Station Post Insulator |
|
| ·
Indoor Switch and Bus Insulator |
|
| · Apparatus Insulator |
|
| ·
Insulator for Railway Electrification |
|
| · Telephone Insulator |
|
| · Low Voltage Insulator |
|
| · Dropout Cutout Insulator |
|
| · Bushings |
|
|
| Switchgear |
|
| ·
Disconnect Switches upto 145 kV |
|
| ·
Metal Oxide Surge Arresters upto 430 kV |
|
| (Under Licence from Siemens, Germany) |
|
|
| Chemical Porcelain |
|
| ·
Acid Proof Wares and Bricks |
|
| ·
Raschig Rings and Saddles |
|
| ·
Acid Proof Porcelain Pipes and Fittings |
|
| · Acid Proof Cement |
|
|
| Special Porcelain |
|
| · Special Refractories |
|
| · High Alumina Porcelain |
|
| Lining & Grinding Media |
|
|
| Ceramic Glazed Wall Tiles |
|
| Coloured
& Decorative Glazed Wall Tiles |
|
| 15cmx 15cmx6mm |
|
| 20 cm x 25 cm x 6mm |
|
|
| Ceramic
Glazed Floor Tiles |
|
| · Vitreous & Semi Vitreous Decorative
Glazed |
|
| Floor Tiles |
|
| 30 cm x 30 cm x 8 mm |
|
| · Semi Vitreous Glazed Floor Tiles |
|
| 40 cm x 40 cm x 8 mm |
|
| · Floor and Facing Tiles |
|
| 10 cm x 30 cm x 8 mm |
|
|
|
| Notice of Meeting |
|
|
| NOTICE
IS HEREBY GIVEN that the 44th Annual General Meeting of the Members of |
|
| EMCO
INDUSTRIES LIMITED, will be held on 29th December, 1999 at 11.00 A.M. at the
Registered |
|
| Office
of the Company, 2nd Floor, Emirates Bank Building, 14-Kashmir/Egerton Road,
Lahore, to transact |
|
| the following business> |
|
|
| 1.
To confirm the minutes of the last Extraordinary General Meeting held on 30th
June, 1999. |
|
|
| 2.
To consider and adopt the Audited Accounts of the Company for the year ended
30th June, 1999 and |
|
| reports
of the Auditors and Directors thereon. |
|
|
| 3.
To appoint Auditors and fix their remuneration. |
|
|
|
By order of the Board |
|
|
(HARIS NOORANI) |
|
| Lahore: November 29, 1999 |
|
DIRECTOR CORPORATE
AFFAIRS |
|
|
| NOTES: |
|
|
| i) The Shares Transfer Books of the Company
will remain closed and no transfer of Shares will be |
|
| accepted
for registration from 20th December, 1999 to 29th December, 1999 (both days
inclusive). |
|
|
| ii)
A member entitled to attend and vote at the General Meeting may appoint
another member as his/her |
|
| proxy
to attend and vote instead of him/her at the meeting. Proxies must be
deposited at the |
|
| Company's
Registered Office not less than forty eight hours before the time of holding
the meeting. |
|
| Form of proxy is enclosed. |
|
|
| iii)
Members are requested to notify immediately the change of address, if any. |
|
|
|
| Directors' Report |
|
|
| The
Board of Directors is pleased to present the 44th Annual Report of EMCO
Industries Limited |
|
| year ended June 30, 1999 |
|
|
| Financial Results |
|
|
Rupees |
|
| Net
loss for the year after taxation |
|
(146,357,682) |
|
|
|
|
| Unappropriated
loss brought forward |
|
|
|
| from prior year |
|
(58,257,837) |
|
|
---------------------- |
|
| Unappropriated
loss carried forward |
|
(204,615,519) |
|
|
============= |
|
|
| Pattern
of Holding of Shares |
|
| A
statement showing the pattern of holding of shares in the Company as on June
30, 1999 appears in the last. |
|
|
| Auditors |
|
| The
retiring auditors, Messrs. S.A. Salam 8: Co, being eligible, offer themselves
for re-appointment. |
|
|
| Chairman's Review |
|
| Tim
accompanying Chairman's review deals with the performance of the Company
during the year and |
|
| future
outlook. The Directors endorse the contents of the review. |
|
|
|
On behalf of the Board of
Directors |
|
|
| Lahore: November 29, 1999 |
|
TARIQ REHMAN |
|
|
(Chief Executive) |
|
|
|
|
|
|
|
| FINANCIAL HIGHLIGHTS |
|
|
|
June 30, |
June 30, |
|
|
1999 |
1998 |
|
|
| Net
Sales |
|
Rs. in Million |
480 |
307 |
|
| Profit / (Loss) before tax |
|
Rs. in Million |
(143.9) |
(62.7) |
|
| Income
Tax |
|
Rs. in Million |
2.4 |
1.5 |
|
| Profit/(Loss) after tax |
|
Rs. in Million |
(146.3) |
(64.2) |
|
| Earning Per Share |
|
Rs. in Million |
(9.57) |
(5.58) |
|
| No. of Shares Outstanding |
(000's) |
15,333 |
11,500 |
|
| Taxes & Duties |
|
Rs. in Million |
84* |
83* |
|
|
|
|
| * For details see Note
31 to the Accounts |
|
|
| APPLICATION OF REVENUE |
|
|
Rupees |
|
|
|
In Million |
% |
|
| Material
Services & Utilities |
317 |
55.90% |
|
| Depreciation |
|
52 |
9.20% |
|
| Taxes & Duties |
|
84 |
14.80% |
|
| Salaries |
|
114 |
20.10% |
|
|
------------------- |
------------------- |
|
|
567 |
100% |
|
|
|
| TEN
YEARS AT A GLANCE |
|
|
|
1999 |
1998 |
1997 |
1996 |
1994 |
1993 |
1992 |
1991 |
1990 |
1989 |
|
|
|
18 Months |
|
|
|
| (Rupees in Million) |
|
|
| Net Total Sales |
480 |
307 |
490 |
791 |
462 |
348 |
417 |
296 |
238 |
192 |
|
| Exports |
78 |
50 |
50 |
44 |
31 |
20 |
8 |
17 |
23 |
16 |
|
| Employees Costs |
114 |
76 |
126 |
183 |
103 |
85 |
81 |
65 |
53 |
46 |
|
| Profit/(Loss) before tax |
(144) |
(63) |
(20) |
38 |
23 |
15 |
25 |
17 |
26 |
16 |
|
| Profit/(Loss) after tax |
(146) |
(64) |
(23) |
54 |
21 |
23 |
15 |
14 |
23 |
9 |
|
| Earning per share |
(9.55) |
(5.58) |
(2.25) |
8.97 |
3.45 |
5.83 |
3.78 |
3.54 |
5.74 |
2.17 |
|
| Capital Expenditure |
2 |
255 |
29 |
102 |
28 |
15 |
61 |
84 |
84 |
15 |
|
| Cash Dividend Rate |
- |
- |
- |
20.00% |
17.50% |
17.50% |
15.00% |
15.00% |
20.00% |
17.50% |
|
| Stock Dividend Rate |
- |
- |
15% |
- |
- |
- |
- |
- |
- |
- |
|
| Shareholders' Equity |
79 |
187 |
251 |
213 |
172 |
159 |
99 |
89 |
81 |
66 |
|
|
|
| CHAIRMAN'S
REVIEW |
|
|
| On
behalf of the Board of Directors it gives me great pleasure to welcome you to
the 44th Annual General |
|
| Meeting
of the Company and to present before you the Annual Report and Financial
Statements for the |
|
| year ended 30th June, 1999. |
|
|
| During
this year your Company has sustained a loss after tax amounting to Rs.
146.358 million as |
|
| compared
to a loss of Rs. 64.197 million last year. In 1997-98 losses incurred during
Expansion and Trial |
|
| Run
periods were deferred for amortisation over next five years. Continuous
losses since last three years |
|
| have
resulted in serious cash flow problems. Current year's loss can be
attributable to the following |
|
| reasons: |
|
|
| 1.
Owing to the continued financial crisis of WAPDA, the Company even this year
did not have |
|
| sufficient
orders to run its Insulator Plant at Profitable level. However, there have
been about 50 |
|
| million
increase in the net sales from Rs. 121 million to 170 million of this
division and average |
|
| monthly
production achieved during the year was 145 tons as compared to 72 tons last
year which |
|
| has
resulted into reducing losses of this Division substantially. |
|
|
| 2.
About 82% of the total losses pertains to Wall and Floor Tile Divisions out
of which Wall Tile's |
|
| share
is substantially high because of the following reasons: |
|
|
| a.
Spray Dryer Machine which feeds granulate to both the Wall and Floor Tile
Plants was shut |
|
| down
for a period of two months for major repair and maintenance which caused
closure of |
|
| Floor
Tile plant completely for two months whereas the Wall Tile plant was run with
stand- |
|
| by
Spray Dryer which was not sufficient to meet the market requirement. |
|
|
| b.
Owing to closure of plants due to major repair of Spray Dryer the fixed
factory overheads |
|
| resulted
into increasing the cost of product as compared to Net Realisable Value
(NRV). |
|
| Consequently
major portion of finished goods inventory had to be valued at NRV. |
|
|
| c.
Despite fresh working capital facilities of Rs. 100 million from UBL which
was basically a |
|
| part
replacement of lines blocked by foreign banks, the Company faced lot of
problems in |
|
| production
due to inadequate working capital lines specially L/C and guarantee
facilities. Had |
|
| there
been adequate working capital lines available with the Company the production |
|
| performance
would have been much better. |
|
|
| d.
Some technical problems were also faced during the year which can be
attributable to |
|
| frequent
production stoppages due to non-availability of imported raw materials.
Continuity |
|
| of
production is a key factor to get quality product in Ceramic Industry. |
|
|
| 3.
Price increase in local as well as imported raw materials and rising trend of
inflation also contributed |
|
| in
increasing the product cost. Due to the tough market competition the
corresponding increase in the |
|
| 'selling
price was not possible. |
|
|
| 4.
This was the first year in which the full year's financial charges,
depreciation on expanded |
|
| production
facilities and amortisation of deferred cost which works out to Rs. 65.717
million were |
|
| charged
to Profit and Loss Account. |
|
|
| Despite
such huge losses the management is still committed with the Company and
trying its level best to |
|
| bring
it out of crises which is evident from the followings:- |
|
|
| The
Company during the year declared right issue for Rs. 38.333 million in the
ratio of one share for |
|
| three
shares already held. Because of the poor response from General Public which
was obvious due |
|
| to
economic condition of the Country, and Company's financial position in
particular, 99% portion |
|
| remained
un-subscribed which was picked up by the sponsoring directors. |
|
|
| The
Company has adequate orders in hand to achieve break even level for Insulator
Division. There |
|
| has
been substantial increase in Export of Insulators and concerted efforts are
being made to further |
|
| increase
export sales. To achieve break even level in Insulator Division seems
possible in 1999- |
|
| 2000. |
|
|
| In
first quarter of the current year the Floor Tile has shown positive results.
Efforts are being made |
|
| to maximise profit of this
division. |
|
|
| The
financial results of Wall Tile has very adversely affected the over all
performance of the |
|
| Company.
As stated earlier the Company is facing acute shortage of L/C and guarantee
facilities and |
|
| existing
lines are sufficient only to run Insulator and Floor Tile plants. To bridge
the gap of working |
|
| capital
lines your Company has requested AMEX led consortium to provide additional
non-funded |
|
| facilities
so that losses being sustained by the Company due to non-availability of
imported raw |
|
| materials
can be stopped. The negotiations are still going on in his respect and we
hope the |
|
| consortium
will come up to help the company for its genuine needs. |
|
|
| During
the year your Company requested the long term lenders and leasing companies
for |
|
| rescheduling
of loan for a period ranging from 1 to 11/2 years which was accepted by them.
The long |
|
| term
loan of Rs. 175 million provided by the AMEX led consortium was rescheduled
and the loan |
|
| period
was increased from 5 to 61/2 years. A short term facility of Rs. 40 million
was also re- |
|
| structured
with Citibank N.A. according to which the short term facility was converted
into long |
|
| term
for a period of six years with a grace period of one year. The monthly
repayment of this loan |
|
| will
start from June 30, 2000 and mark-up rate has been agreed at 10% per
annum. |
|
|
| Computer
problems relating to Year-2000 called as "Millennium Bug" is a
major issue being faced |
|
| by
all over the world. Your company has already obtained Year-2000 Compliance
Certificate from |
|
| the Software Consultants. |
|
|
| EMPLOYEES
RELATIONS |
|
| The
Management would like to place on record the positive attitude and
co-operation of the employees |
|
| during
the difficult phase the Company is passing through. The Company has during
this period faced acute |
|
| cash
flow problems, and the employees have shown their loyalty to the organisation
by cutting costs |
|
| wherever possible. |
|
|
|
|
| FUTURE LOOK |
|
| Keeping
in view the financial results of the Company it append that next two years
are going to be difficult |
|
| during
which Company is likely to tide over its cash flows to honour its financial
obligations. The insulator |
|
| and
Floor .The Divisions are doing well and it is expected that these divisions
will show substantial |
|
| improvement
in financial results during year 1999-2000. Efforts are being made to
minimise the losses of |
|
| Wall
Tile by improving recoveries and product mix. Additional working capital
facilities required to |
|
| achieve desired
results are being arranged. |
|
|
| ACKNOWLEDGMENT |
|
|
| I
take this opportunity to place on record the dedication of the employees and
staff during the difficult |
|
| period.
I would also like to thank our customers, dealers, and bankers who have
reposed confidence in the |
|
| products
supplied to them and would like to re-affirm the Company's pledge to continue
"To Provide |
|
| Quality
Products and Services to the Satisfaction oŁ Customers." |
|
|
|
S. A. MANNAN |
|
| Lahore
: November 29, 1999. |
|
(Chairman) |
|
|
|
|
|
|
|
|
|
| Auditors'
Report to the Members |
|
|
|
| We
have audited the annexed Balance Sheet of EMCO Industries Limited as at June
30, 1999 and the |
|
| related
Profit and Loss Account and Statement of Changes in financial position,
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 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 the Statement of Changes in financial
position, 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 June 30, 1999 and of the loss and the changes in financial
position for the |
|
| year then ended; and |
|
|
| d) in our opinion no Zakat was deductible at
source under the Zakat and Ushr Ordinance, 1980. |
|
|
|
S. A. SALAM & CO., |
|
| Lahore: November 29, 1999. |
|
Chartered Accountants. |
|
|
|
|
|
|
|
| BALANCE
SHEET AS AT JUNE 30, 1999 |
|
|
|
|
Note |
June 30, |
June 30, |
|
|
|
1999 |
1998 |
|
|
|
Rupees |
Rupees |
|
|
| SHARE
CAPITAL AND RESERVES |
|
| Authorised capital |
|
| 25,000,000
ordinary shares of Rs. 10 each. |
|
250,000,000 |
250,000,000 |
|
|
============ |
============ |
|
| Issued,
subscribed and paid up capital |
3 |
153,333,330 |
115,000,000 |
|
| Reserves
and unappropriated profit/(loss) |
4 |
(74,716,993) |
71,640,689 |
|
|
|
----------------------- |
----------------------- |
|
|
|
78,616,337 |
186,640,689 |
|
|
|
|
| SURPLUS
ON REVALUATION OF LAND |
5 |
18,830,530 |
18,830,530 |
|
| SUBORDINATED LOAN |
|
6 |
63,400,000 |
67,000,000 |
|
| LONG
TERM AND DEFERRED LIABILITIES |
|
|
| Long term loans |
|
7 |
194,437,500 |
137,543,948 |
|
| Liabilities
against assets subject to finance lease |
8 |
62,523,056 |
48,885,973 |
|
| Deferred liabilities |
|
9 |
13,730,524 |
25,128,657 |
|
|
|
----------------------- |
----------------------- |
|
|
|
270,691,080 |
211,558,578 |
|
|
|
|
| CURRENT LIABILITIES |
|
|
|
|
|
|
| Short
term finances - Secured |
10 |
342,476,290 |
334,502,606 |
|
| Loan
from associated company - Unsecured |
|
3,200,000 |
-- |
|
| Current
maturity of long term loans |
7 |
35,319,347 |
52,962,899 |
|
| Current
maturity of liabilities against |
|
|
| assets
subject to finance lease |
8 |
21,420,407 |
26,057,086 |
|
| Current
maturity of deferred import levies |
9 |
2,392,469 |
2,392,469 |
|
| Creditors,
accrued and other liabilities |
11 |
125,092,025 |
114,469,612 |
|
|
|
----------------------- |
----------------------- |
|
|
529,900,538 |
530,384,672 |
|
| CONTINGENCIES
& COMMITMENTS |
12 |
- |
- |
|
|
----------------------- |
----------------------- |
|
|
961,438,485 |
1,014,414,469 |
|
|
============ |
============ |
|
|
| TANGIBLE
FIXED ASSETS |
|
| Operating assets |
|
13 |
397,648,869 |
440,129,756 |
|
| Assets
subject to finance lease |
14 |
74,720,073 |
82,694,207 |
|
|
|
----------------------- |
----------------------- |
|
|
472,368,942 |
522,823,963 |
|
|
| DEFERRED EXPENSES |
|
15 |
87,610,671 |
110,947,274 |
|
| LONG
TERM LOANS AND DEPOSITS |
16 |
933,653 |
977,274 |
|
|
| CURRENT ASSETS |
|
| Stores,
spares and loose tools |
17 |
47,188,816 |
52,921,864 |
|
| Stock-in-trade |
|
18 |
182,546,935 |
178,340,967 |
|
| Trade debts |
|
19 |
106,368,829 |
101,827,919 |
|
| Advances,
deposits, prepayments |
|
| and other receivables |
|
20 |
63,561,853 |
44,831,969 |
|
| Cash and bank balances |
|
21 |
858,786 |
1,743,239 |
|
|
|
----------------------- |
----------------------- |
|
|
|
400,525,219 |
379,665,958 |
|
|
----------------------- |
----------------------- |
|
|
961,438,485 |
1,014,414,469 |
|
|
============ |
============ |
|
| Auditors'
report to the members of even date annexed hereto. |
|
|
| Lahore: November 29, 1999. |
|
S. A. Mannan |
Tariq Rehman |
|
|
(Chairman) |
(Chief Executive) |
|
|
|
| PROFIT
AND LOSS ACCOUNT |
|
| FOR THE YEAR ENDED JUNE 30,
1999 |
|
|
|
Note |
June 30, |
June 30, |
|
|
|
1999 |
1998 |
|
|
|
|
Rupees |
Rupees |
|
|
|
|
|
|
| Gross Sales |
|
22 |
539,835,312 |
368,165,018 |
|
| Less:
excise duty & sales tax |
|
60,206,616 |
60,911,668 |
|
|
|
----------------------- |
----------------------- |
|
| Net Sales |
|
|
479,628,696 |
307,253,350 |
|
| Cost of sales |
|
23 |
426,564,457 |
258,313,323 |
|
|
|
----------------------- |
----------------------- |
|
| GROSS PROFIT |
|
53,064,239 |
48,940,027 |
|
|
|
| OPERATING EXPENSES |
|
|
|
| Administration and general |
|
24 |
28,243,441 |
22,820,547 |
|
| Selling and distribution |
|
25 |
42,268,865 |
27,665,633 |
|
|
|
----------------------- |
----------------------- |
|
|
70,512,306 |
50,486,180 |
|
|
----------------------- |
----------------------- |
|
| LOSS
FROM OPERATIONS |
|
(17,448,067) |
( 1,546,153) |
|
|
| Other income |
|
26 |
482,846 |
2,932,589 |
|
|
----------------------- |
----------------------- |
|
|
|
(16,965,221) |
1,386,436 |
|
|
| Financial charges |
|
27 |
126,994,318 |
64,046,767 |
|
|
----------------------- |
----------------------- |
|
| LOSS
BEFORE TAXATION |
|
(143,959,539) |
(62,660,331 ) |
|
| Taxation |
|
28 |
2,398,143 |
1,536,267 |
|
|
----------------------- |
----------------------- |
|
| LOSS AFTER TAXATION |
|
(146,357,682) |
(64,196,598) |
|
