| Refrigerators Manufacturing Company Pakistan
Limited |
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| Annual
Report 1999 |
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| CONTENTS |
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| Company
Information |
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| Directors'
Report |
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| Auditors'
Report |
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| Balance Sheet |
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| Profit
& Loss Account |
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| Statement
of Changes in Equity |
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| Cash
Flow Statement |
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| Notes
to the Accounts |
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| Pattern
of Shareholding |
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| Notice
of the AGM |
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| COMPANY
INFORMATION |
|
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| BOARD
OF DIRECTORS |
|
| M.
Farooq Farooqi -- Chairman & Chief Executive |
|
| Javed Iqbal |
|
| K.M. Aminullah |
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| L.J. Mees |
|
| Muhammad
Ali Khoja |
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| Nizam A. Shah |
|
| Amjad Waheed |
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| COMPANY
SECRETARY |
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| Syed
Nadeemuddin Ahmed |
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| BANKERS |
|
|
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| ANZ
Grindlays Bank Limited |
|
|
| Bank
of America NT&SA |
|
|
| Habib
Bank Limited |
|
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| Muslim
Commercial Bank Limited |
|
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| Standard
Chartered Bank |
|
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| The
Hongkong & Shanghai Banking Corporation Limited |
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| AUDITORS |
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| A.F.
Ferguson & Co. |
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| REGISTERED
OFFICE |
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| D-98, S.I.T.E. |
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| Karachi-75730 |
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| DIRECTORS'
REPORT |
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| The
Directors would like to present their report with the audited accounts of the
Company |
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| for
the year ended 31 December 1999. |
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| BOARD
OF DIRECTORS |
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| Subsequent
to the election of Board of Directors in the First Annual General Meeting
held on |
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| 10
June 1999, National Investment Trust (NIT) nominated Dr. Amjad Waheed as its
nominee |
|
| Director
on the Board of the Company with effect from 11 June 1999 in place of |
|
| Mr.
Razi-ur-Rehman Khan. |
|
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| The
Board places on record its appreciation of the valuable services rendered by
the outgoing |
|
| Director
in a particularly difficult period and extends a warm welcome to the new
appointee. |
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|
| BUSINESS
REVIEW |
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| The
year has remained in the grip of continuing economic recession and political
uncertainty, |
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| which
had severely impacted on our profitability and growth rate. The business
conditions |
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| have
further deteriorated and resulted in erosion of the purchasing power of the
general |
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| consumer.
Strenuous efforts from all the employees of the Company were put in to arrest
the |
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| adverse
situation, as far as possible. The Company offered heavy incentives in line
with the |
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| market
trends to keep-up with the sales and liquidate the stocks. |
|
|
| Despite
the unfavorable trading conditions and with the help of heavy incentives, the
Company |
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| has
been able to achieve the turnover marginally better than last year. Cost
saving initiatives |
|
| in
procurement, higher local integration and vigorous expense containment
strategies |
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| throughout
the Company contributed to restrict the loss after tax at Rs. 58.2m. |
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| The
Board wishes to place on record its deepest appreciation for the contribution
made by |
|
| staff
at all levels and the co-operation and support of its customers, distributors
and dealers |
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| in
an unprecedented difficult period. |
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| NEW
PRODUCTS |
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| The
Company has successfully launched two new products, Deep Freezers and Air
Conditioners |
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| in
April and May 1999 respectively, in the middle of the season. These have been
well received |
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| in
the market however; full seasonal benefit of the two products will be
available in year 2000. |
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| AUDITORS |
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| A.F.
Ferguson & Co. retires and offers themselves for reappointment. |
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|
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| PATTERN
OF SHAREHOLDING |
|
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| A
statement showing the Pattern of Shareholding in the Company as at 31
December 1999 |
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| appears
on page 26. |
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| The
Company will continue to reduce the pressure on margins by achieving higher
sales |
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| volume
and containing costs through sustained efficiency measures. Sale through hire
purchase |
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| channel
is also being explored keeping in view the deteriorating purchasing power. |
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|
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| The
Company also plans to launch a new model of local refrigerator with improved
internal |
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| and
external aesthetics to remain in line with the global trends. |
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|
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| Moreover,
selection of models in terms of sizes and capacities will be in line with the
market |
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| acceptability
with strict adherence to the parameters set for the debtors and stock levels.
The |
|
| pursuit
of operating excellence shall remain relentless for the year 2000 and beyond. |
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|
M. Farooq Farooqi |
|
| 25
April 2000, Karachi |
|
Chairman & Chief Executive |
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|
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| AUDITORS'
REPORT |
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| AUDITORS'
REPORT TO THE MEMBERS |
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| We
have audited the annexed balance sheet of Refrigerators Manufacturing Company
Pakistan |
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| Limited
as at 31 December, 1999 and the related profit and loss account, statement of
changes |
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| in
equity 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 |
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| to
the best of our knowledge and belief were necessary for the purposes of our
audit and, |
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| after
due verification thereof, we report that; |
|
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| a)
in our opinion, proper books of accounts have been kept by the Company as
required by |
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| the Companies Ordinance, 1984; |
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| b)
in our opinion; |
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| i)
the balance sheet and profit and loss account together with the notes thereon |
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| have
been drawn up in conformity with the Companies Ordinance, 1984 and |
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| are
in agreement with the books of account and are further in accordance |
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| with
the accounting policies consistently applied; |
|
|
| ii)
the expenditure incurred during the year was for the purpose of the Company's |
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| business; and |
|
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| iii)
the business conducted, investments made and the expenditure incurred |
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| during
the year were in accordance with the objects of the Company; |
|
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| 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, statement of changes in
equity 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
loss, changes |
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| in
equity and cash flows for the year then ended; and |
|
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| d)
in our opinion no Zakat was deductible at source under the Zakat and Ushr
Ordinance, 1980. |
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|
|
|
A.F. Ferguson & Co. |
|
| 25 April 2000, Karachi |
|
Chartered Accountants |
|
|
|
|
| BALANCE
SHEET |
|
| As
at 31 December 1999 |
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|
Note |
1999 |
1998 |
|
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|
|
Rupees in
thousands |
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| Share
Capital and Reserves |
|
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|
| Authorized
capital |
|
|
|
|
|
|
|
|
| 10,000,000
ordinary shares of Rs. 10 each |
|
100,000 |
100,000 |
|
|
|
========== |
========== |
|
| Issued,
subscribed and paid-up capital |
|
3 |
50,023 |
50,023 |
|
|
|
|
|
|
| Reserves |
|
76,380 |
76,380 |
|
| Accumulated
loss |
|
(122,565) |
(64,334) |
|
|
|
------------------ |
------------------ |
|
|
|
(46,185) |
12,046 |
|
|
|
------------------ |
------------------ |
|
|
|
3,838 |
62,069 |
|
| Surplus
on Revaluation of Fixed Assets |
|
8.2 |
66,686 |
-- |
|
| Deferred
Liabilities |
|
|
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| Staff
retirement benefits |
|
4 |
3,413 |
2,446 |
|
|
|
|
|
| Current
Liabilities and Provisions |
|
|
|
| Short-term
finances under mark-up arrangements |
|
5 |
514,230 |
327,186 |
|
| Creditors,
accrued and other liabilities |
|
6 |
62,322 |
120,920 |
|
| Taxation |
|
|
-- |
20.15 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
576,552 |
450,121 |
|
| Contingencies
and Commitments |
|
7 |
------------------ |
------------------ |
|
|
|
|
650,489 |
514,636 |
|
|
|
|
========== |
========== |
|
|
|
|
|
|
1999 |
1998 |
|
|
|
|
Rupees in
thousands |
|
| Tangible
Fixed Assets |
|
|
|
| Operating
assets |
|
8 |
119,468 |
37,126 |
|
| Capital
work-in-progress |
|
9 |
2,312 |
5,130 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
121,780 |
42,256 |
|
| Long-term
Loans and Advances |
|
10 |
1,451 |
922 |
|
| Long-term
Deposits |
|
|
1,664 |
949 |
|
| Deferred
Taxation |
|
11 |
11,720 |
658 |
|
|
|
|
|
| Current Assets |
|
|
|
| Stores
and spares |
|
12 |
5,315 |
4,983 |
|
| Stock-in-trade |
|
13 |
261,128 |
235,828 |
|
| Trade debts |
|
14 |
200,621 |
151,442 |
|
| Deposits
and short-term prepayments |
|
15 |
4,458 |
61,703 |
|
| Other
receivables |
|
16 |
21,259 |
14,576 |
|
| Taxation |
|
|
15,847 |
-- |
|
| Cash
and bank balances |
|
17 |
5,246 |
1,319 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
513,874 |
469,851 |
|
|
|
|
------------------ |
------------------ |
|
|
|
650,489 |
514,636 |
|
|
|
|
|
========== |
========== |
|
|
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|
| The
annexed notes form an integral part of these accounts. |
|
|
|
M. Farooq Farooqi |
|
Javed Iqbal |
|
|
Chairman & Chief Executive |
|
Director |
|
|
|
|
| PROFIT
& LOSS ACCOUNT |
|
| For
the Year Ended 31 December 1999 |
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|
|
|
|
|
1 January, |
1 July, 1997 to |
|
|
|
|
1999 to 31 |
31 December, |
|
|
|
Note |
December, 1999 |
1998 |
|
|
|
|
Rupees in
thousands |
|
|
|
|
| Net sales |
|
18 |
576,099 |
750,504 |
|
| Cost
of goods sold |
|
19 |
466,066 |
599,879 |
|
|
|
|
------------------ |
------------------ |
|
| Gross profit |
|
|
110,033 |
150,625 |
|
|
|
|
|
|
| Selling
and administration expenses |
|
20 |
104,996 |
157,575 |
|
| Operating
profit/(loss) |
|
|
5,037 |
(6,950) |
|
| Other income |
|
21 |
1,383 |
2,907 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
6,420 |
(4,043) |
|
|
|
|
|
|
| Financial
charges |
|
22 |
62,003 |
47,736 |
|
| Other charges |
|
23 |
1,337 |
2,206 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
63,340 |
49,942 |
|
|
|
|
------------------ |
------------------ |
|
| Loss
before taxation |
|
|
(56,920) |
(53,985) |
|
| Taxation |
|
24 |
1,311 |
12,790 |
|
|
|
|
------------------ |
------------------ |
|
| Loss
after taxation |
|
|
(58,231) |
(66,775) |
|
|
|
|
|
| Unappropriated
(loss)/profit brought forward/transferred |
|
|
| from
Philips Electrical Industries of Pakistan Limited |
|
(64,334) |
2,441 |
|
|
|
|
------------------ |
------------------ |
|
| Accumulated
loss carried forward |
|
|
(122,565) |
(64,334) |
|
|
|
|
========== |
========== |
|
|
|
|
|
|
|
|
|
|
Rupees |
|
|
|
|
| Loss
per share-basic and diluted |
|
25 |
(11.64) |
(13.35) |
|
|
|
|
========== |
========== |
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
M. Farooq Farooqi |
|
Javed Iqbal |
|
|
Chairman & Chief Executive |
|
Director |
|
|
|
| STATEMENT
OF CHANGES IN EQUITY |
|
| For
the Year Ended 31 December 1999 |
|
|
|
Share Capital |
Capital
Reserve |
|
Revenue Reserve |
|
Unappropriated |
Total |
|
|
|
Share |
Issue of |
General |
Self |
Total |
profit |
|
|
|
|
Premium |
Bonus Share |
|
Insurance |
|
|
|
|
Rupees in
thousands |
|
| Transferred
from PEI as on July 1, |
|
|
| 1997
under the scheme of |
|
|
| arrangement
referred to in note 1.2 |
-- |
9,752 |
-- |
76,200 |
750 |
76,950 |
2,441 |
89,143 |
|
|
|
|
|
|
| Ordinary
shares of Rs. 10 each issued |
|
|
| as
fully paid in cash |
500 |
-- |
-- |
-- |
-- |
-- |
-- |
500 |
|
|
|
|
|
|
| Ordinary
shares of Rs. 10 each issued |
|
|
| as
fully paid under the scheme of |
|
|
| arrangement
referred to in note 1.2 |
39,201 |
-- |
-- |
-- |
-- |
-- |
-- |
39,201 |
|
|
|
|
|
|
| Transfer
to reserve for issue of bonus |
|
|
| shares from: |
|
|
|
| Share premium |
|
-- |
(9,752) |
9,752 |
-- |
-- |
-- |
-- |
-- |
|
| General reserve |
|
-- |
-- |
570 |
(570) |
-- |
(570) |
-- |
-- |
|
|
|
|
| Bonus
shares issued during the year |
10,322 |
-- |
(10,322) |
-- |
-- |
-- |
-- |
-- |
|
|
------------------ |
------------------ |
------------------ |
------------------ |
------------------ |
------------------ |
------------------ |
------------------ |
|
|
10,322 |
(9,752) |
-- |
(570) |
-- |
(570) |
-- |
-- |
|
|
|
|
| Loss
for the period |
-- |
-- |
-- |
-- |
-- |
-- |
(66,775) |
(66,775) |
|
|
------------------ |
------------------ |
------------------ |
------------------ |
------------------ |
------------------ |
------------------ |
------------------ |
|
| Balance
as at December 31, 1998 / |
50,023 |
-- |
-- |
75,630 |
750 |
76,380 |
(64,334) |
62,069 |
|
|
|
| January 1, 1999 |
|
|
|
|
|
|
| Loss
for the year |
-- |
-- |
-- |
-- |
-- |
-- |
(58,231) |
(58,231) |
|
|
------------------ |
------------------ |
------------------ |
------------------ |
------------------ |
------------------ |
------------------ |
------------------ |
|
| Balance
as at December 31, 1999 |
50,023 |
-- |
-- |
75,630 |
750 |
76,380 |
(122,565) |
3,838 |
|
|
========== |
========== |
========== |
========== |
========== |
========== |
========== |
========== |
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
M. Farooq Farooqi |
|
Javed Iqbal |
|
|
Chairman & Chief Executive |
|
Director |
|
|
|
|
|
| CASH
FLOW STATEMENT |
|
| For
the Year Ended 31 December 1999 |
|
|
|
|
|
1 January, |
1 July, 1997 to |
|
|
|
|
1999 to 31 |
31 December, |
|
|
|
Note |
December, 1999 |
1998 |
|
|
|
|
Rupees in
thousands |
|
|
| Cash
flow from operating activities |
|
| Cash
generated from operations |
|
26 |
176,292) |
15,631 |
|
| Staff
gratuity paid |
|
|
|
(1,385) |
|
| Financial
charges paid |
|
|
(52,465) |
(46,482) |
|
| Taxes paid |
|
|
(30,235) |
(11,021) |
|
|
|
|
------------------ |
------------------ |
|
| Net
cash outflow from operating activities |
|
|
(158,992) |
(43,257) |
|
|
|
|
|
|
|
|
| Cash
flow from investing activities |
|
|
| Fixed
capital expenditure-net |
|
|
(22,881) |
(9,200) |
|
| Sale
proceeds of fixed assets |
|
|
-- |
261 |
|
| Long-term
deposit-net |
|
|
(715) |
(154) |
|
| Long-term
loans and advances-net |
|
|
(529) |
1,377 |
|
|
|
|
------------------ |
------------------ |
|
| Net
cash outflow from investing activities |
|
|
(24,125) |
(7,716) |
|
|
|
|
|
|
| Cash
flow from financing activities |
|
|
| Repayment
of redeemable capital |
|
-- |
(65,365) |
|
| Repayment
of obligation under finance lease |
|
-- |
(2,518) |
|
| Short-term
borrowings less repayments |
|
-- |
(75,716) |
|
| Proceeds
from issue of shares |
|
-- |
500 |
|
|
|
------------------ |
------------------ |
|
| Net
cash outflow from financing activities |
|
-- |
(143,099) |
|
|
|
|
------------------ |
------------------ |
|
| Net
decrease in cash and cash equivalents |
|
(183,117) |
(194,072) |
|
| Cash
and cash equivalents at the beginning of the year / |
|
|
|
| transferred
from PEI |
|
(325,867) |
(131,795) |
|
|
|
------------------ |
------------------ |
|
| Cash
and cash equivalents at the end of period |
|
27 |
(508,984) |
(325,867) |
|
|
|
|
|
|
========== |
========== |
|
|
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
|
|
M. Farooq Farooqi |
|
Javed Iqbal |
|
|
Chairman & Chief Executive |
|
Director |
|
|
|
|
| NOTES
TO THE ACCOUNTS |
|
| For
the Year Ended 31 December 1999 |
|
|
| 1.
LEGAL STATUS AND OPERATIONS |
|
|
| 1.1
The Company is a public limited company incorporated in Pakistan under the
Companies |
|
| Ordinance,
1984. Its shares are listed on the Karachi Stock Exchange and is engaged in
the |
|
| manufacturing
and marketing of major domestic appliances. |
|
|
| 1.2
The Company under a Scheme of Arrangement and as sanctioned by the High Court
of |
|
| Sindh
was vested, with effect from July 1, 1997, the Major Domestic Appliances
(MDA) |
|
| undertaking
of Philips Electrical Industries of Pakistan Limited (PEI) inclusive of MDA |
|
| business
and all assets, rights, liabilities & obligations pertaining thereto.
Accordingly, the |
|
| issued
and paid up share capital of PEI was proportionately reduced and transferred
to the |
|
| Company.
The corresponding period figures as such pertain to period commencing from |
|
| July
1, 1997 to December 31, 1998, for which specific permission from the Joint
Registrar |
|
| of
Securities and Exchange Commission of Pakistan was obtained. |
|
|
| 2.
SIGNIFICANT ACCOUNTING POLICIES |
|
|
| 2.1
Accounting convention |
|
| These
accounts have been prepared under the historical cost convention as modified
by |
|
| the
revaluation of certain fixed assets. |
|
|
| 2.2
Staff retirement benefits |
|
| The
Company participates in a defined benefit funded pension fund for management |
|
| employees
and gratuity fund for employees, operated by PEL The pension scheme provides |
|
| lifetime
pension to retired employees or to their spouse, Contributions are made
annually |
|
| to
these funds based on actuarial recommendations. |
|
|
| The
Company also operates an unfunded scheme for supplemental gratuity for non- |
|
| management
employees. Provisions are made to cover obligations on the basis of actuarial |
|
| recommendations. |
|
|
| Consequent
to the adoption of IAS 19-Revised, the actuarial valuation of the above
pension |
|
| and
gratuity schemes as at 31 December, 1998, determined a transitional
obligation of Rs. |
|
| 13.688
million, which under an arrangement will be met by PEI. Further, the cost
recognized |
|
| in
the current year in respect of pension, gratuity and unfunded supplementary
gratuity |
|
| schemes
exclusive of transitional obligation amounted to Rs. 1.837, Rs. 1.125 and Rs.
0.967 |
|
| million
respectively. |
|
|
| The
projected unit credit method, using the following significant assumptions, is
used for the |
|
| valuation
of the above mentioned funded as well as unfunded schemes: |
|
|
| *
Discount rate at 12% per annum. |
|
| *
Expected rate of increase in salaries 12% per annum. |
|
| *
Expected rate of interest on investment 12% per annum. |
|
|
| The
Company also participates in a defined contribution provident fund operated
by PEI. |
|
| Equal
monthly contributions are made to the fund at the rate of 10% of basic salary
by the |
|
| employees
and the Company. |
|
|
|
|
|
|
| The
Company is in the process of establishing its independent funds for gratuity,
pension and |
|
| provident
schemes for which the requisite permission has been obtained from the
Commissioner |
|
| of
Income Tax subsequent to year end. Once the funds are established, the assets
and liabilities |
|
| pertaining
to the Company will be transferred to the new funds on the basis of actuarial |
|
| recommendations. |
|
|
|
|
| 2.3 Taxation |
|
| The
charge for current taxation is based on taxable income at the current rate of
taxation after |
|
| taking
into account tax credits and tax rebates available, if any, or on the basis
of presumptive |
|
| tax regime. |
|
|
| The
Company accounts for deferred taxation on all major timing differences using
the liability |
|
| method. |
|
|
| 2.4
Tangible fixed assets and depreciation |
|
| Operating
fixed assets are stated at cost less accumulated depreciation except for
leasehold |
|
| land
and buildings and plant and machinery which are stated at revalued amounts
less |
|
| accumulated
depreciation and subsequent additions thereto at cost less accumulated
depreciation. |
|
| Capital
work-in-progress is stated at cost. |
|
|
| Depreciation
is charged to income applying the straight-line method whereby the asset is |
|
| written
off over its estimated useful life without taking into account any residual
value. |
|
| Depreciation
on additions is charged from the month in which the asset is put to use and |
|
| on
deletions upto the month of deletion. |
|
|
| Gains
and losses on disposals are taken to income currently. |
|
|
| Maintenance
and repairs are charged to income as and when incurred, major renewals and |
|
| improvements
are capitalized. |
|
|
| 2.5
Stores and spares |
|
| These
are valued at weighted average cost. The value of slow moving items is
appropriately |
|
| reduced. |
|
|
| 2.6
Stock-in-trade |
|
