| Pak Suzuki Motor Co. Limited |
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| Annual
Report 1999 |
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| CONTENTS |
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| Company
Profile |
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| Company
Information |
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| Notice
of Meeting |
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| Highlights
of the Accounts |
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| Chairman's
Review |
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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 Financial Position |
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| (Cash
Flow Statement) |
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| Notes
to the Accounts |
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| Selected
Financial Data |
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| Pattern
of Shareholdings |
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| COMPANY
PROFILE |
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| Pak
Suzuki Motor Company Limited (PSMC) is a public limited company with its
shares quoted on Stock |
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| Exchanges
in Pakistan. The Company was formed in August 1983 in accordance with the
terms of a joint |
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| venture
agreement concluded between Pakistan Automobile Corporation Limited
(representing Government |
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| of
Pakistan) and Suzuki Motor Corporation (SMC) - Japan. The Company started
commercial production |
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| in
January 1984 with the primary objective of progressive manufacturing,
assembling and marketing of |
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| Cars,
Pickups, Vans and 4 x 4 vehicles in Pakistan. |
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| The
foundation stone laying ceremony of the company's existing plant located at
Bin Qasim was performed |
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| in
early 1989 by the Prime Minister then in office. By early 1990, on completion
of first phase of this plant, |
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| in-house
assembly of all the Suzuki engines started. In 1992, the plant was completed
and production of |
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| the
Margalla Car commenced. Presently the entire range of Suzuki products
currently marketed in Pakistan |
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| are
being produced at this Plant. |
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| Under
the Government's privatization policy, the Company was privatized and placed
directly under the |
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| Japanese
management in September 1992. |
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| At
the time of privatization, SMC increased its equity from 25% to 40%.
Subsequently, SMC progressively |
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| increased
its equity to 72.8% by purchasing remaining shares from PACO. The total
foreign investment |
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| brought
in by SMC - Japan since inception stands at Rs.1026.36 million. |
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| The
Suzuki Management immediately after privatization started expansion of the
Bin Qasim Plant to |
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| increase
its installed capacity to 50,000 vehicles per year. The expansion was
completed in July 1994. |
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| Keeping
this in view, the company's long term plans inter-alia include tapping of
export markets. The |
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| company
has acquired additional land measuring about 30 acres from Pakistan Steel
Mills Corporation |
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| in
proximity to its Bin Qasim Plant to set up production facilities for
manufacture of some local components. |
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| The
Company continues to be in the fore-front of automobile industry of Pakistan.
Over a period of time, |
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| the
company has developed an effective and comprehensive network of sales,
service and spare parts |
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| dealers
who cater to the needs of customers and render effective after sale service
country wide. PSMC |
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| is
serviced by over 204 active vendors who are engaged in the local manufacture
and supply of automotive |
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| parts
to the company. |
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| BIN
QAS1M PLANT IN BRIEF: |
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| LOCATION |
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Downstream Industrial
Estate of Pakistan Steel |
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| TOTAL AREA |
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259,200 M2 (64 acres) |
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| COVERED
AREA |
41,000 M2 |
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| FACILITIES |
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Press Shop, Welding Shop,
Paint Shop, Engine and Transmission Assembly |
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|
Shop, Final Assembly
& Hi-Tech Inspection Shop. The Company has also |
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established a modern
Waste Water Treatment Plant as its contribution to |
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the environment. |
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| COST |
|
Rs. 2.7 billion |
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| PRODUCTION
CAPACITY |
50,000 units per annum
(double shift) |
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| COMPANY
INFORMATION |
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| BOARD
OF DIRECTORS |
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| Hirofumi Nagao |
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|
Chairman & Chief
Executive |
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| Capt.
(Retd) Bashir Ahmed |
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Deputy Managing Director |
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| Katsuichiro Ota |
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|
Director |
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| Qaiser Sultan |
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Director |
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| Yoshio Saito |
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|
Director |
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| Nasim Beg |
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Director |
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| Koki Imamura |
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|
Director |
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| COMPANY
SECRETARY |
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| Abdul
Hamid Bhombal |
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| AUDITORS |
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| Sidat
Hyder Qamar & Co. |
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| Chartered
Accountants |
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| BANKERS |
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| ABN-AMRO
Bank |
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| Allied
Bank of Pakistan Limited |
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| Bank
Alfalah Limited |
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| Deutsche
Bank AG |
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| Habib
Bank Limited |
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| Muslim
Commercial Bank Limited |
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| National
Bank of Pakistan |
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| The
Bank of Tokyo-Mitsubishi Limited |
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| The
Hongkong and Shanghai Banking Corporation Limited |
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| LEGAL
ADVISORS |
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| Syed
Qamaruddin Hassan |
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| Industrial
Relations Advisor |
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| Orr
Dignam & Company |
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| Advocates
& Legal Consultants |
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| REGISTERED
OFFICE |
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| DSU-1
3, Pakistan Steel Industrial Estate, |
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| Bin Qasim, |
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| Karachi. |
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| REGISTRAR |
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| Ferguson
Associates (Pvt) Limited |
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| State
Life Building l-A, |
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| I.I.
Chundrigar Road, |
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| Karachi. |
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| NOTICE
OF MEETING |
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| Notice
is hereby given that the Sixteenth Annual General Meeting of the shareholders
of Pak Suzuki |
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| Motor
Company Limited will be held at Avari Towers, Fatima Jinnah Road, Karachi on
Monday December |
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| 27,
1999 at 3.00 p.m. to transact the following business: |
|
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| 1.
To confirm minutes of Fifteenth Annual General Meeting held on December 17,
1998. |
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|
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| 2.
To receive, consider and adopt the audited accounts of the Company for the
year ended June 30, |
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| 1999
together with Directors' and Auditors' reports thereon. |
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|
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| 3.
To approve payment of cash dividend to the shareholders @ Rs. 2.25/- (22.5%)
per share of |
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| Rs. 10/- each. |
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| 4.
To appoint auditors and fix their remuneration for the year ending June 30,
2000. |
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| 5.
To consider any other business with the permission of the Chair. |
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BY ORDER OF THE BOARD |
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|
ABDUL HAMID BHOMBAL |
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| Karachi:
November 14, 1999 |
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COMPANY SECRETARY |
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| Notes: |
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| 1.
The share transfer books of the Company shall remain closed from December 9,
1999 to December |
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| 16,
1999 (both days inclusive) for entitlement of Dividend and no transfer will
be accepted for |
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| registration
during this period. Transfers received in order till close of business on
December 8, 1999 |
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| will
be accepted for transfer and will be entitled to dividend for the year ended
June 30 1999. |
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| 2.
A member entitled to attend and vote at this meeting may appoint another
person as his/her proxy |
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| to
attend the meeting and vote for him/her. Proxies in order to be effective
must be received by the |
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| Company
not less than 48 hours before the meeting. |
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| 3.
Shareholders are requested to immediately notify the change in their address,
if any, to our Registrar |
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| Ferguson
Associates (Pvt.) Limited, State Life Building, l-A, I. I. Chundrigar Road,
Karachi. |
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| 4.
Account holders and sub-account holders holding book entry securities of the
Company in Central |
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| Depository
Company of Pakistan Limited, who wish to attend the Annual General Meeting,
are |
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| requested
to bring original National Identity Card for identification purpose. |
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| HIGHLIGHTS
OF THE ACCOUNTS |
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| FOR
THE YEAR ENDED JUNE 30, 1999 |
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|
Increase/(Decrease) |
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|
1999 |
1998 |
Amount |
% |
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|
(Rupees in thousand) |
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| Production
volume (units) |
|
32,805 |
31,302 |
1,503 |
4.8 |
|
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| Sales
volume (units) |
|
31,296 |
32,601 |
(1,305) |
(4.0) |
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| Net sales |
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|
8,914,017 |
8,680,931 |
233,086 |
2.7 |
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| Gross profit |
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|
663,093 |
578,623 |
84,470 |
14.6 |
|
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| as
a % of net sales |
|
7.4 |
6.7 |
-- |
0.7 |
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|
| Expenses
- Selling & admin. |
|
252,841 |
220,631 |
32,210 |
14.6 |
|
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| - Financial & other
charges |
189,061 |
56,718 |
132,343 |
233.3 |
|
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| - Total |
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|
441,902 |
277,349 |
164,553 |
59.3 |
|
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| as
a % of net sales |
|
5.0 |
3.2 |
-- |
1.8 |
|
|
| Other income |
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|
109,211 |
187,985 |
(78,774) |
(41.9) |
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| as
a % of net sales |
|
1.2 |
2.2 |
-- |
(1.0) |
|
| Profit
before taxation |
|
339,158 |
488,753 |
(149,595) |
(30.6) |
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| as
a % of net sales |
|
3.8 |
5.6 |
-- |
(1.8) |
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| Profit
after taxation |
|
263,347 |
357,753 |
(94,406) |
(26.4) |
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| as
a % of net sales |
|
3.0 |
4.1 |
-- |
-- |
|
| Stocks |
|
|
2,320,589 |
1,059,791 |
1,260,798 |
119 |
|
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| as
a % of net sales |
|
26.0 |
12.2 |
-- |
13.8 |
|
|
| number
of days stock held |
|
103 |
48 |
55 |
114.6 |
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| inventory
turn over ratio |
|
3.6 |
7.6 |
-- |
(4.0) |
|
| Cash
and bank balances |
|
182,567 |
833,614 |
(651,047) |
(78.1) |
|
| Advances
from customers |
|
167,454 |
753,065 |
(585,611) |
(77.8) |
|
| Shareholders'
equity |
|
1,786,732 |
1,633,930 |
152802.00 |
9.4 |
|
| Debt
Equity ratio |
|
0:100 |
0:100 |
-- |
-- |
|
| Current ratio |
|
1.15:1 |
1.16:1 |
-- |
-- |
|
| Profit per share |
|
|
5.36 |
7.28 |
-- |
-- |
|
| Break-up
value per share |
|
36.37 |
33.26 |
-- |
-- |
|
| No.
of permanent employees |
|
|
|
|
- Officers |
|
293 |
274 |
19 |
6.9 |
|
|
|
- Staff/workers |
|
326 |
327 |
(1) |
(0.3) |
|
|
- Total |
|
619 |
601 |
18 |
3.0 |
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|
| CHAIRMAN'S
REVIEW |
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|
| I am pleased to
present my review on the performance |
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| of the Company for
the year ended June 30, 1999. |
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| PRODUCTION |
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| The production
volume increased by 5%. During the |
|
|
| year 32,805
units were produced against 31,302 units |
|
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| produced in the
preceding year. The plant capacity |
|
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| improved to 66% from
63% recorded last year. |
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| OPERATING
RESULTS |
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| Sales
continued to suffer depressed demand due to a |
|
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| sluggish
market arising out of the economic down turn. |
|
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| However,
the Company succeeded in limiting drop in |
|
|
| sales
volume upto 4% and could sell 31,296 units as |
|
|
| compared to
32,601 units sold in the previous year. This |
|
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| was achieved through
aggressive marketing and |
|
|
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| advertising/sales
promotion. |
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|
|
|
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|
|
| Gross profit
as a percentage of sales improved from 6.7 |
|
|
| to 7.4. In
absolute terms it increased by Rs. 84.470 |
|
|
|
| million. This
improvement arose mainly from discount |
|
|
| allowed
by Suzuki Motor Corporation Japan on purchase |
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| of
CKD kits in view of change in terms of payment |
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| implemented
from credit to cash basis. |
|
|
| The
selling and administration expenses increased from |
|
| Rs.
220.631 million to Rs. 252.841 million and as a |
|
| percentage
of sales from 2.54 to 2.84. The main factors |
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| which
contributed to the increase were increase in |
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| salaries,
advertising and sales promotion expenses. |
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| Other
income declined from Rs. 1 87.985 million to Rs. |
|
| 109.211
million. The decrease was due to fall in income |
|
| from
surplus bank deposits. The other income reflected |
|
| in
the previous year also included compensation received |
|
| on
delayed income tax refunds. |
|
|
| Financial
and other charges increased from Rs. 56.718 |
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| million
to Rs. 189.061million. The increase represents |
|
| mainly
markup on bank borrowings. Company had |
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| borrowed
from banks for working capital on withdrawal |
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| of
credit facilities for imports from Suzuki Motor |
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| Corporation
- Japan. The funds had also depleted due |
|
| to
requirement of L/C margin. |
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|
| MARKETING |
|
|
|
| The exports of
Suzuki Ravi Pickups to Nepal have |
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|
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| progressively
increased and Bangladesh added as another |
|
|
| destination. To
date 93 units have been exported to |
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| Nepal and
Bangladesh. The management is aggressively |
|
|
| pursuing
exports to utilize idle capacity. |
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|
|
|
|
|
|
| The new model
Baleno 1300 cc Car was successfully |
|
|
| launched
in early September 1998. The Company also |
|
|
| introduced
1600 cc model of this Car in May 1999. The |
|
|
| Baleno Car
has been accepted very well and the product |
|
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| continues
to penetrate in the market segment. |
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| The
management is aware of the forthcoming competition |
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| in
automobile industry and has drawn up a well planned |
|
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| strategy to
compete. The Company has planned to bring |
|
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| in
new models in the year 2000. |
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|
|
|
|
|
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| Company
has participated in the National Transport Taxi |
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| Scheme.
However only 71 Mehran taxies could be |
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| delivered
against full payment through the banks. |
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|
|
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| DELETION |
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| The
Company is strictly adhering to the Industry Specific |
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| Deletion
Programmes and the Ministry of Industries |
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| programmes
and would continue to meet the deletion |
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| targets.
The Company's resolve and commitment to |
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| localization
is evidenced with the achievement of higher |
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| deletion
levels in the Mehran Car, Ravi Pickup, Bolan |
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| Van
and the Khyber Car. Higher deletion in the recently |
|
| introduced
Baleno Car is being actively pursued. |
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|
|
| PERSONNEL |
|
| Management
and employees relations continued to |
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| remain
cordial and industrial peace prevailed during |
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| the
year. A new charter of demand was negotiated in a |
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| congenial
atmosphere and agreement was entered into |
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| with
the CBA for two years for the period July 1998 to |
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| June 2000. |
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|
| ECONOMIC
CONTRIBUTION |
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| Despite
adverse factors, the Company maintained its |
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| distinctive
position in the automobile industry as a |
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| leading
contributor to the public exchequer. The duties |
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| and
taxes paid and the foreign exchange saved by |
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| Company
in its last five years of operations are as follows: |
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| Year |
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|
|
Duties |
Foreign |
|
|
|
|
and |
exchange |
|
|
|
|
taxes |
savings |
|
|
|
|
(Rupees in
million) |
|
|
|
|
| 1994-95 |
|
|
1,804 |
1,581 |
|
| 1995-96 |
|
|
2,600 |
2,555 |
|
| 1996-97 |
|
|
|
2,728 |
2,539 |
|
| 1997-98 |
|
|
|
2,571 |
2,924 |
|
| 1998-99 |
|
|
|
3,203 |
3,751 |
|
|
|
|
|
|
| FUTURE
PROSPECTS & CONCLUSION |
|
|
| The
Company would strive to earn reasonable return on |
|
|
| equity.
However Rupee/Yen parity, economic conditions |
|
|
| and
Government policies would play a vital role in this |
|
|
| achievement. |
|
|
|
|
|
|
|
|
| Company's
key objectives continue to remain: |
|
|
|
|
|
|
|
|
| - To provide
automobiles of international quality at |
|
|
| reasonable
prices; |
|
|
|
|
|
|
|
|
|
| -
To improve skills of employees by imparting training |
|
|
| and
by inculcating in them a sense of participation; and |
|
|
|
|
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| - To abide by
the deletion policy of the Government, |
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| achieve
maximum indigenisation and promote |
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| the
automobile vending industry. |
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|
|
|
| In
conclusion, I on behalf of the Board and shareholders |
|
| would
like to express my appreciation to the |
|
| management,
executives, workers, dealers, vendors and |
|
| Suzuki
experts for their efforts and contribution to the |
|
| affairs
of the Company. My sincere gratitude also goes |
|
| to
all the Government agencies for their continued |
|
| support
and encouragement. |
|
|
|
|
|
|
Hirofumi Nagao |
|
|
|
Chairman & Chief Executive |
|
|
|
| DIRECTORS'
REPORT |
|
|
|
|
| 1.
The Directors of the Company take pleasure in submitting their report with
audited accounts of the |
|
| Company,
together with Auditors' Report thereon, for the year ended June 30, 1999. |
|
|
| 2. ACCOUNTS |
|
|
|
(Rs. in 000) |
|
|
| Profit
after taxation |
|
|
263,347 |
|
| Accumulated
profit brought forward |
|
3,616 |
|
|
|
|
------------------ |
|
| Profit
available for appropriation |
|
|
266,963 |
|
|
|
|
| Less:
Appropriations |
|
|
| Proposed
cash dividend @ 22.5 % |
|
1,105,451 |
|
| Transfer
to General Reserve |
|
|
155,000 |
|
|
|
|
------------------ |
|
|
|
|
265,545 |
|
|
|
------------------ |
|
| Unappropriated
profit carried forward |
|
1,418 |
|
|
========== |
|
|
|
| 3.
QUALIFICATION IN THE AUDITORS' REPORT |
|
| The
para (c) of auditors report to the members on the Company's accounts for the
year ended June |
|
| 30,
1999 contain qualification which is explained hereunder: |
|
|
| Net
sales for the year included Rs. 622.710 million in respect of vehicles which
were delivered to |
|
| customers
subsequent to year end. The said sales were booked on the basis of confirmed
purchase |
|
| orders
for specified vehicles against which partial payments were received during
the year. The |
|
| vehicles
were delivered to customers upon realization of balance payment. |
|
|
| In
the opinion of auditors, since the physical possession was not parted with
and full payment was |
|
| not
received by the Company, significant risks and rewards associated with the
ownership of the |
|
| said
vehicles remained with the Company and as such sales cut off was not properly
observed. On |
|
| receipt
of this observation from the auditors, management mooted to rectify the
situation by reversing |
|
| the
sales. However it was deemed inadvisable to reverse the entire process
because of potential |
|
| exposure
in direct and indirect taxation. Had the above sales been reversed, the
profit for the year |
|
| after
taxation would have been lower by Rs. 22.807 million. |
|
|
| 4.
INFORMATION TECHNOLOGY |
|
| The
Directors are pleased to inform that Company's Computer applications, system
and hardware |
|
| are
Y2K compliant. |
|
|
| 5.
EARNING PER SHARE |
|
| The
earning per share for the year is Rs. 5.36. |
|
|
|
|
| 6.
HOLDING COMPANY |
|
| The
Company is a subsidiary of Suzuki Motor Corporation which is incorporated in
Japan. |
|
|
| 7.
ASSOCIATED COMPANIES |
|
| -
Arabian Sea Country Club Limited is associated Company of Pak Suzuki Motor
Co. Ltd. because |
|
| of
common directorship. Mr. Nagao - Chairman and Chief Executive of Pak Suzuki
Motor Co. Ltd. |
|
| is
also director of Arabian Sea Country Club Limited. Pak Suzuki holds 7.22%
shares of the total |
|
| share
capital of Arabian Sea Country Club Limited. |
|
|
| -
Suzuki Motorcycles Pakistan Limited is an associated company of Pak Suzuki
Motor Co. Ltd. in |
|
| terms
of a common holding Company i.e. Suzuki Motor Corporation - Japan. |
|
|
| 8.
CHAIRMAN'S REVIEW |
|
| The
Chairman's review on page 7 to 9 deals with the year's activities and the
directors of the Company |
|
| endorse
contents of the same. |
|
|
| 9.
PATTERN OF SHAREHOLDINGS |
|
| The
pattern of shareholdings is given on page 41. |
|
|
| 10.
BOARD CHANGES |
|
| Mr.
Nasim Beg and Mr. Katsuichiro Ota were appointed as directors in place of |
|
| Mr.
Razi-ur-Rehman Khan and Mr. Osamu lizuka who resigned. |
|
|
| 11. AUDITORS |
|
| Messrs.
Sidat Hyder Qamar & Co., Chartered Accountants retire and being eligible
offer themselves |
|
| for
appointment as the auditors of the Company for the year ending June 30, 2000. |
|
|
|
|
BY ORDER OF THE BOARD |
|
|
|
|
|
| Karachi |
|
HIROFUMI NAGAO |
|
| November
6, 1999 |
|
Chairman & Chief Executive |
|
|
|
|
| AUDITORS'
REPORT TO THE MEMBERS |
|
|
| We
have audited the annexed balance sheet of PAK SUZUKI MOTOR
COMPANY LIMITED as at |
|
| 30
June 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 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 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 except for the effects of any adjustment
which |
|
| would
have been necessary to achieve a proper sales cut off and consequential
effect thereof on |
|
| sales
and profit in respect of vehicles delivered subsequent to the balance sheet
date as referred |
|
| in
note 13.2 to the accounts, respectively give a true and fair view of the
state of the Company's |
|
| affairs
as at 30 June 1999 and of the profit and the changes in financial position
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. |
|
|
|
|
|
|
|
Sidat Hyder Qamar & Co. |
|
| Karachi:
November 6, 1999 |
|
Chartered Accountants |
|
|
|
|
| BALANCE
SHEET |
|
| AS
AT JUNE 30, 1999 |
|
|
|
NOTE |
1999 |
1998 |
