| National Foods Limited |
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| Annual Report 1999 |
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| CONTENTS |
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| Board of Directors |
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| Chairman's Review |
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| Chief Executive's Report |
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| Notice of Meeting |
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| Auditors'
Report to the Members |
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| Balance Sheet |
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| Profit & Loss Account |
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| Statement
of Changes in Financial Position (Cash Flow Statement) |
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| Notes to the Accounts |
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| Pattern
of Share Holdings |
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| BOARD
OF DIRECTORS |
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| MR.A. MAJEED |
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|
Chairman |
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| MR. WAQAR HASAN |
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|
Managing Director / Chief
Executive |
|
| MR.
KHAWAR M. BUTT |
|
Director |
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| MR. ABRAR HASAN |
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|
Director |
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| MR. ZAHID MAJEED |
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|
Director |
|
| MR.
M. AFZAL-ULLAH SIDDIQUI |
|
Director (N.I.T. Nominee) |
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| MR.
MOHAMMED SHAFI |
|
Director (N.I.T. Nominee) |
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| MR.
HABIB A. ISMAlL KHAIRANI |
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Company Secretary |
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| REGISTERED OFFICE |
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12/CL-6, Claremont Road,
Civil Lines, Karachi-75530. |
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P.O. Box No. 15509 |
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Phones: 5662687, 5670540,
5670585, 5670646, 5670793, |
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& 5672268 Fax No.
5684870 & 5671225 |
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| AUDITORS |
|
RIAZ AHMAD, SAQIB, GOHAR
& COMPANY, |
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Chartered Accountants, |
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|
5-Nasim Co-operative
Housing Society Ltd, |
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Major Nazir Bhatti Road,
Off Shaheed-e-Millat Road, Karachi. |
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Phones: 4945427-4946112
Fax' 4932629 |
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| REGISTRAR |
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NOBLE COMPUTER SERVICES
(PVT.) LIMITED |
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1st Floor, A!-Manzoor
Building, |
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Dr. Ziauddin Ahmad Road,
Karachi. |
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Phones: 2635511-14 |
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| BANKERS |
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BANK AL-HABIB LIMITED |
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Mackinnons Building, I.
I. Chundrigar Road, Karachi. |
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Phones ' 2412986 (10
lines) Fax ' 2419752 |
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S.I.T.E. Branch, |
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Plot # B/76 S.S. Chambers
S.I.T.E., Karachi. |
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Phones: 2571710-11
(92-21) 2571522 |
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City Garden Town Branch |
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Lahore City. |
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CITI BANK NA, |
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State Life Building No.
1, I. I. Chundrigar Road, Karachi. |
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Phones: 2412641-50 Fax:
2426773 |
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MUSLIM COMMERCIAL BANK
LIMITED, |
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Clifton Corporate Branch,
Kulsom Court, Clifton Karachi. |
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Phones ' 5872286- 5831835
Fax '5872058 |
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Wahdat Road Branch,
Lahore. |
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Phones: 7235737 |
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HABIB BANK LIMITED |
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Hub River Road Branch,
Karachi. |
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Phone: 2572197 |
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| CHAIRMAN'S
REVIEW |
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| The
Corporate Management has been working to lead your Company towards the next
millennium. |
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| In
order to face the challenges, the corporate policies, procedures and systems
have been framed, |
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| reduced
in writing and approved. These systems have been worked out by Company's
Professional |
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| Managers
working in the company. |
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| It
has been agreed that the company will optimize the present human and
financial resources and |
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| consolidate
itself for the next two years. |
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| The
targets have been set and all the four pillars |
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| of
management i.e. Procurement/Inventory, Production, |
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| Marketing
& Finance have accepted the goals. |
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| They
will be supported by Human Resource department |
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| and
Quality Control. I see no reason why the |
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| company
will not be able to achieve higher profitability |
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| targets in coming years. |
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| The consolidation
period will allow the higher |
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| management
to plan the expansion either as extension |
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| of
present products or go entirely in new direction |
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| within
the Food Industry. |
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| Also
we are in the process of setting up "INTERNAL |
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| AUDIT"
as the 5th pillar of organization. This will |
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| ensure
an independent feed back at regular interval |
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| on
the implementation of corporate policies. |
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| I
am sure that your Company can enter the next |
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| millennium
as professionally competent and organized |
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| entity
thus safeguarding the interests of the Share |
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| Holders
in the next millennium. |
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|
A. MAJEED |
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|
Chairman |
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| CHIEF
EXECUTIVE'S ANNUAL REPORT |
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| TO
THE SHAREHOLDERS FOR THE YEAR |
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| SUMMARY |
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| The
operational results of National Foods Limited are presented before you. |
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| The
company finished with a pretax profit of Rs.14,593,422 against a total Gross
Sale of Rs.820,795,775. |
|
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| The
sales registered a growth of 27.93% vs. profit growth of -0.38%. The reasons
for a somewhat static |
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| profit
growth are presented below. |
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| APPROPRIATION |
|
| The
Board of Directors takes pleasure in |
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| announcing
the appropriation as follows: |
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|
1998 |
1999 |
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|
Rupees |
Rupees |
|
|
| Profit after taxation |
|
11,443,422 |
9,504,052 |
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| Add: Unappropriated |
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| profit brought forward |
|
27,161,624 |
23,201,752 |
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--------------------- |
--------------------- |
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| Profit available for |
|
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| appropriation |
|
38,605,046 |
32,705,804 |
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| Proposed dividend |
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| @ 14% |
|
5,950,753 |
-- |
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| Reserve for issue of |
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| bonus shares Nil |
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| (1998: 15%) |
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|
-- |
5,544,180 |
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|
--------------------- |
--------------------- |
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| Unappropriated profit |
|
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| carried forward |
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|
32,654,293 |
27,161,624 |
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============ |
============ |
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| OPERA
TIONAL REPORT |
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| As
mentioned above the dismal or rather static growth |
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| in
profit was seen in last year's performance. On |
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| analyzing
the operational accounts, it is clear that all |
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| costs
have been reduced, specially fixed costs, which |
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| include
Selling & Administrative Costs. |
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| The
main reason for decline is a reduction in the |
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| GP rate to 20.34%
from 22.48%. If we analyze |
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| this
further, it becomes evident that among the |
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| variable
costs the raw material rates compared to Operating Profit |
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| last
year have increased, even though the packaging |
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| material
rates were contained and a reduction in |
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| terms percentage of
sales can be witnessed. |
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| There were primarily 2
items whose escalation |
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| has
led to the fall in GP rate. These 2 items are |
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| Red Chillies and price
of Raw Mangoes used in |
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| Pickles.
The prices for both these items moved |
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| too far too fast and
hence despite increasing |
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| prices
of our products in the market 4 times the |
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| rising
costs could not be contained. |
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| The
rapid excesses of the economy of which the |
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| prime
culprit has been the GST and utilities also |
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| further
enhanced this escalation. The difference |
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| in
prices because of GST now has created a gap |
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| of
80% in the market. This has caused a lot of |
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| our consumers to switch
from branded market |
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| towards the open
/loose market. Various revisions |
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| in
the year of the GST rate have also led to |
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| increased
pricing for our products. |
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| Also
unplanned increases on the utility rates specially |
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| fuel
and electricity by the government has led to |
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| various
budget revisions on our part. |
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| All these
increasing costs could not be contained |
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| by
price increases alone. In order to combat this |
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| burden
the company is undergoing a consolidation |
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| phase
in which various cost cutting exercises |
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| are
being undertaken to increase profitability. |
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| This
needs to be done effectively as further |
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| price increase is not
sustainable. Emphasis is |
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| on
Operational policies, wastage control and |
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| effective benchmarking. |
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| OUTLOOK |
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| The
company has launched various new products |
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| in the market last year.
These new products |
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| include
the Chinese range, Jams and Jellies and |
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| earlier Tomato Ketchup.
The launch has been |
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| quite
successful and we hope these ranges would |
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| start
contributing in volume sales and profitability |
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| for the future. |
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| The
Chilli crop is good this year and the prices are down by 50%. The Mango
procurement has |
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| also
been done on reduced rates and these materials should contribute effectively
towards the profit |
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| this year. |
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| The
company is also ISO 9001 certified. Since its certification it has also
passed 2 subsequent |
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| follow up audits. |
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| As
mentioned above the coming years would see a period of consolidation.
Expansion shall be limited |
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| and
modernization would be the key focus during this period. This should lead to
efficient processes |
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| and
thus a lower cost per unit in the long run. |
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| AUDITORS |
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| The
present Auditors Messrs. Riaz Ahmad, Saqib, Gohar & Company, Charted
Accountants, retire, |
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| being
eligible for re-appointment, have offered themselves, for re-appointment as
auditors for the |
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| year 1999-2000. |
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| YEAR
2000 COMPLIANCE |
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| Computer
hardware and software used for Financial, Marketing, Production,
Administration and |
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| Procurement
applications have been thoroughly test and we have ensured that Y2K problem
will |
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| not
affect any of these application. The steps taken include upgradation,
replacement and modification |
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| of
certain hardware and software. |
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| PATTERN
OF SHARE HOLDING |
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| The
Pattern of Share Holding as referred by Section 236 of Companies Ordinance
1984 is enclosed. |
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| MANAGEMENT |
|
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| Like
always the board emphasizes its gratitude towards the management. Without
their hard |
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| work,
achievements towards ISO certification would not have been possible. |
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| The
entire management is charged and motivated to handle the cost escalation and
consolidation |
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| exercise effectively. |
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| We
hope to overcome this depressive era and enter the new millennium with a
renewed vigor and |
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| self-determination-
a better company at all levels ready to face the new challenges of the |
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| millennium. |
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|
WAQAR HASAN |
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|
Chief Executive |
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| NOTICE
OF MEETING |
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| Notice
is hereby given that the 28th Annual General Meeting of National Foods
Limited will be held at the |
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| Registered
Office situated at 12/CL-6, Claremont Road, Civil Lines Karachi, on Tuesday
the 21 st December |
|
| 1999,
at 11.00 a.m. to transact the following business: |
|
|
| 1.
To read and confirm the minutes of the Last Annual General Meeting held on
30th December |
|
| 1998. |
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|
|
| 2.
To receive, consider and approve the Audited Accounts for the year ended 30th
June 1999. |
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|
| 3.
To approve payment of Cash Dividend @ 14% (Rs.1.40 per share of Rs.10 each)
as recommended |
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| by the Directors. |
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|
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| 4.
To appoint Auditors for the year 1999-2000 and to fix their remuneration. The
present auditors |
|
| Messrs. Riaz Abroad, Saqib, Gohar &
Company, Chartered Accountants retire, being eligible, have |
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| offered themselves for re-appointment as
Auditors. |
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| 5.
To transact any other business with the permission of the Chairman. |
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|
By order of the Chairman |
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| Karachi:
15th November, 1999 |
|
(HABIB A. ISMAlL
KHAIRANI) |
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|
Company Secretary |
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| NOTES · |
|
|
| 1.
The share transfer books of the Company will remain closed from 20th
November, 1999 to |
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| 27th
November, 1999 (Both days inclusive). |
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|
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| 2.
All members are entitled to attend and vote at the meeting. |
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|
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| 3.
A member entitled to attend and vote at the Meeting may appoint a proxy to
attend, speak |
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| and
vote for him/her. A proxy needs to be a member of the Company. |
|
|
| 4.
In order to be valid, an instrument of proxy and the Power of Attorney or
other authority (if |
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| any) under which it is signed, or a
notarially certified copy of such power of authority, must |
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| be deposited at the Registered' Office of
the Company not less than 48 hours before the |
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| time of the meeting. |
|
|
| 5.
Share-holders are requested to notify immediately, any change in their
Registered address. |
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| RATIO ANALYSIS |
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|
1995 |
1996 |
1997 |
1998 |
1999 |
|
|
| LIQUIDITY RATIOS |
|
|
|
|
|
| Current Ratio |
1.07 |
1.02 |
1.01 |
1.04 |
1.09 |
|
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| Acid Test Ratio |
0.39 |
0.25 |
0.28 |
0.26 |
0.23 |
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| Debt / Equity Ratio |
3.92% |
5.39% |
4.61% |
7.91% |
8.69% |
|
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| Interest Cover |
3.33 |
2.28 |
2.28 |
2.94 |
2.16 |
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| OPERATING RATIO |
|
|
|
| Return On Shareholder's Equity |
18.74% |
13.48% |
12.77% |
12.54% |
13.12% |
|
|
| Gross Profit Margin |
20.21% |
20.15% |
20.20% |
22.48% |
20.34% |
|
|
| Operating Profit |
8.59% |
6.27% |
6.15% |
7.65% |
5.70% |
|
|
| Net Profit Margin |
3.56% |
2.31% |
2.14% |
1.89% |
1.78% |
|
|
| TURNOVER RATIOS |
|
|
|
| Asset Turnover |
1.99 |
2.07 |
2.31 |
2.47 |
2.52 |
|
|
| Equity Turnover |
5.26 |
5.83 |
5.96 |
6.65 |
7.39 |
|
|
| Debtor's Turnover |
11.23 |
17.75 |
23.79 |
27.02 |
34.13 |
|
|
| Receivable Days |
32.49 |
20.56 |
15.34 |
13.51 |
10.69 |
|
|
| Inventory Turnover |
4.69 |
3.95 |
4.16 |
4.65 |
4.38 |
|
|
| Days Inventory |
77.86 |
92.33 |
87.82 |
78.55 |
83.35 |
|
|
| OPERATING
EXPENSES |
|
|
|
| Administrative Expenses |
3.63% |
3.49% |
3.49% |
3.38% |
2.75% |
|
| Selling Expenses |
11.15% |
11.54% |
12.20% |
14.37% |
13.42% |
|
|
| Financial Expenses |
1.85% |
2.37% |
2.07% |
1.60% |
1.95% |
|
|
|
|
| COST OF SALES |
|
|
| Materials |
84.87% |
84.80% |
84.94% |
83.24% |
85.01% |
|
|
| Direct Labor |
4.65% |
4.93% |
4.59% |
4.61% |
4.09% |
|
|
| Overheads |
10.48% |
10.27% |
10.47% |
12.15% |
10.90% |
|
|
| OPERATING
EXPENSES (% OF GP ) |
|
|
| Administrative |
17.95% |
17.33% |
17.25% |
15.05% |
13.52% |
|
|
| Selling |
55.14% |
57.29% |
60.42% |
63.95% |
66.02% |
|
|
| Financial |
9.17% |
11.74% |
10.27% |
7.10% |
9.59% |
|
|
| STOCK
MARKET RATIOS |
|
|
| Earnings Per Share |
3.66 |
2.61 |
2.58 |
2.57 |
2.69 |
|
|
| Dividend Per Share |
2.00 |
2.00 |
1.25 |
1.50 |
1.40 |
|
|
| Dividend Cover |
1.83 |
1.30 |
2.06 |
1.71 |
1.92 |
|
|
|
|
| AUDITORS'
REPORT TO THE MEMBERS |
|
|
|
|
| We
have audited the annexed balance sheet of National Foods Limited as at 30
June, 1999 and the |
|
| related
profit and loss account and the 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, investment 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 the 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 30 June 1999 and of
the profit for the year then ended; and |
|
|
| (d)
In our opinion, no zakat was deductible at source under the Zakat and Ushr
Ordinance, |
|
| 1980. |
|
|
RIAZ AHMAD, SAQIB, GOHAR
& CO. |
|
| Karachi:
27th October, 1999. |
Chartered Accountants |
|
|
|
|
| BALANCE
SHEET AS ON 30TH JUNE, 1999 |
|
|
|
|
|
|
NOTE |
1999 |
1998 |
|
|
|
|
Rupees |
Rupees |
|
|
|
|
| CAPITAL
AND LIABILITIES |
|
|
| Capital and Reserves |
|
|
|
| Authorised
Capital 5,000,000 |
|
|
| (1998: 5,000,000) ordinary |
|
|
| shares of Rs.10/- each |
|
|
50,000,000 |
50,000,000 |
|
|
|
|
============ |
============ |
|
|
|
|
| Issued,
subscribed and paid-up capital |
|
3 |
42,505,380 |
36,961,200 |
|
| Capital
reserve - share premium |
|
|
6,102,100 |
6,102,100 |
|
| Reserve
for Issue of bonus shares |
|
|
-- |
5,544,180 |
|
| Unappropriated profit |
|
|
|
32,654,293 |
27,161,624 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
81,261,773 |
75,769,104 |
|
| LONG
TERM LIABILITIES - SECURED |
|
|
|
|
| Liabilities
against assets subject to finance lease |
4 |
3,582,869 |
1,145,116 |
|
| Deferred Tax |
|
|
4,000,000 |
4,850,000 |
|
|
|
------------------ |
------------------ |
|
|
7,582,869 |
5,995,116 |
|
|
|
|
|
|
| CURRENT
LIABILITIES |
|
|
|
|
| Current
portion of long term liabilities against |
|
|
|
| subject to finance lease |
|
4 |
1,208,383 |
2,079,534 |
|
| Finances
utilized under mark-up |
|
|
|
| arrangements- Secured |
|
5 |
96,342,005 |
73,868,439 |
|
| Creditors,
accrued & other liabilities |
|
6 |
63,632,975 |
46,139,258 |
|
| Proposed dividend |
|
5,950,753 |
-- |
|
|
|
------------------ |
------------------ |
|
|
|
167,134,116 |
122,087,231 |
|
|
|
|
|
| Contingencies
Commitments |
|
7 |
-- |
-- |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
|
255,978,758 |
203,851,451 |
|
|
|
|
|
============ |
============ |
|
|
|
| PROPERTY
AND ASSETS |
|
|
| Fixed Capital Expenditure |
|
|
|
| Fixed assets |
|
8 |
78,012,026 |
75,127,793 |
|
| Capital work-in-progress |
|
9 |
286,983 |
-- |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
78,299,009 |
75,127,793 |
|
|
|
|
| Long Term Deposits |
|
|
|
1,265,981 |
925,458 |
|
| Deferred Expenditure |
|
10 |
-- |
900,000 |
|
| Current Assets |
|
| Stock-in-trade |
|
11 |
139,868,430 |
94,579,968 |
|
| Trade debts- unsecured- |
|
|
| Considered good |
|
|
19,540,444 |
18,218,515 |
|
|
| Advances,
deposits, prepayments, and |
|
| other receivables |
|
12 |
15,930,649 |
13,384,290 |
|
|
| Cash and bank balances |
|
13 |
1,074,245 |
715,427 |
|
|
------------------ |
------------------ |
|
|
|
176,413,768 |
126,898,200 |
|
|
------------------ |
------------------ |
|
|
|
255,978,758 |
203,851,451 |
|
|
|
============ |
============ |
|
| N.B.
The annexed notes form an integral part of these accounts. |
|
| Auditors'
report annexed. |
|
|
|
|
WAQAR HASAN |
ZAHID MAJEED |
|
|
|
CHIEF EXECUTIVE |
DIRECTOR |
|
|
|
|
| PROFIT
AND LOSS ACCOUNT |
|
| FOR
THE YEAR ENDED 30 JUNE, 1999 |
|
|
|
|
NOTE |
1999 |
1998 |
|
|
|
|
Rupees |
Rupees |
|
|
|
|
|
| Sales |
|
14 |
644,351,806 |
503,645,413 |
|
| Less: Cost of sales |
|
15 |
513,322,658 |
390,437,503 |
|
|
|
|
------------------ |
- |
