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Emco Industries Limited.
Annual Report 2002
Contents
Company Information
Business Items
Notice of Meeting
Director's Report to the Members
Financial Highlights of Last Ten Years
Chairman's Review
Auditor's Report
Balance Sheet
Profit and Loss Account
Cash Flow Statment
Statement of Change in Equity
Notes to the Accounts
Pattern of Shareholdings
COMPANY INFORMATION
Board of Directors
Mr. S. A. Mannan, Chairman
Mr. Tariq Rehman, Chief Executive
Mr. Haris Noorani
Mr. Suhail Mannan
Mr. Iqbal Shafiq
Ms. Ayesha Noorani
Ms. Maha Rehman
Mr. Muhammad Shafiq Gill-ICP Nominee
Auditors
A.F. Ferguson & Co.
Chartered Accountants.
Lahore.
Bankers
Habib Bank Ltd.
United Bank Ltd.
Standard Chartered Grindlays Bank
Emirates Bank International
Deutsche Bank A.G.
American Express Bank Ltd
Citibank N.A.
Registered Office
2nd Floor, Union Bank Building,
14-Kashmir/Egerton Road,
Lahore 54000
Factory
19-Kilometre, Lahore-Sheikhupura Road,
Lahore.
BUSINESS ITEMS
Porcelain Insulators
• Supension 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
• Discounnect Switich upto 145 kV
• Metal Oxide Surge Arresters upto 430 kV
(Under Licence from Siemens, Germany)
Chemical Porcelain
• Acied Proof Wares and Bricks
• Raschig Ring and Saddles
• Acid Proof Porcelain Pipes and Fitting
• Acid Proof Cement
Special Porcelain
• Special Refractories
• High Alumina Procelain
• Lining & Grinding Media
Ceramic Glazed Wall Tiles
• Coloured & Decorative Glazed Wall Tiles
15 cm x 15 cm x 6 mm
20 cm x 20 cm x 6 mm
20 cm x 25 cm x 6 mm
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 47th Annual General Meeting of Members of EMCO Industries Limited will be
held on 21st October, 2002 at I 1.00 a.m. at the Registered Office of the Company, 2nd floor, Union Bank
Building, 14-Kashmir/Egerton Road, Lahore, to transact the following business;-
1.     To confirm the minutes of the last Extra-ordinary General Meeting held on 29th June, 2002.
2.     To receive, approve and adopt the Audited Accounts for the year ended 30.06.2002 and Director's
Report thereon.
3.     To appoint Auditors for the next financial year and fix their remuneration .M/s. A. F Ferguson & Co.,
Chartered Accountants, the present auditors of the Company, retire and being eligible, offer themselves
for re-appointment.
4.     To transact any other business with permission of the Chair.
By Order of the Board
Lahore
September 23-09-2002.
HARIS NOORANI
(DIRECTOR CORPORATE AFFAIRS)
NOTES:-
1.     The Share Transfer Books of the Company will remain closed and no transfer of Shares will be
accepted for registration from 14-10-2002 to 21-10-2002 (both days inclusive).
2.     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.
3.     Members are requested to notify immediately the change of address, if any.
DIRECTOR'S REPORT
The Board of Directors is pleased to present the 47th Annual Report of EMCO Industries Limited for the
year ended June 30, 2002.
Financial Results		Rupees
Net loss for the year after taxation		(107,202,948)
Unappropriated loss brought forward
from prior year		(478,959,460)
Unappropriated loss carried forward		(586,162,408)
Corporate Governance
The Securities & Exchange Commission of Pakistan, in later half of the year introduced Code of Corporate
Governance to enhance transparency visibility and creditability in the corporate sector, specially of listed
companies. The Code is being enforced through listing regulations of Karachi Stock Exchange (Guarantee)
Ltd. Accordingly the company has taken necessary steps to implement and follow these rules in its true
essence. Following the SECR the Board of Directors in its meeting held on 23-09-2002 has constituted
the Audit Committee and the internal audit functions.
The Board of Directors held four meetings during the year for consideration and approval of annual
business plans, quarterly, half-yearly and annual reports alongwith other matters of significant importance.
Overall 71.4% attendance was witnessed in these four Board meetings.
In compliance with the listing regulation 37 (xix) of the Karachi Stock Exchange (Guarantee) Limited (Code
of Corporate Governance), the Board of Directors hereby declares that;
• the financial statements for the year ended June 30, 2002 present fairly its state of affairs, the results
of its operations, cash flow and changes in equity;
• Proper books of accounts have been maintained;
• appropriate accounting policies have been consistently applied in preparation of financial statements for
the year ended June 30, 2002 and accounting estimates are based on reasonable and prudent judgment;
• International Accounting Standards (IAS) as applicable in Pakistan, have been followed in preparation of
financial statements.
• The system of internal control is sound in design and has been effectively implemented and monitored;
• There are no doubts about the company's ability to continue as a going concern;
• There has been no material departure from the best practices of the corporate governance, as detailed
in the listing regulations.
• The value of Provident Fund investments for the year ended June 30, 2002 was Rs. 106.755 million.
• The value of gratuity for the year ended June 30, 2002 was Rs.4.281 million.
The company has not declared dividend or issued bonus share owing to huge losses as dividend can be
paid out of the profit of company only U/S 249 of Companies Ordinance 1984.
			2002	2001
Earning / (Loss) per share
Net loss for the year		Rupees	(107,202,948)	(100,036,161)
Number of ordinary shares outstanding
during the year		Numbers	15,333,333	15,333,333
Loss per share-basic		Rupees	(6.99)	(6.52)
Financial Highlights
Financial highlights of last ten years are appear on page 8.
Statement of Compliance with the Code of Corporate Goverence
Statement of compliance with the code of corporate goverance is appear on page number 9.
Pattern of Shareholding
A statement showing the pattern of holding of shares in the Company as on June 30, 2002 appear on page 38.
Auditors
The retiring Auditors M/s. A. F. Ferguson, Chartered Accountants being eligible, offer themselves for
reappointment.
Number of Employees
The Company's number of employees at the period end is 928 (932 in year end 2001).
Chairman's Review
The accompanying Chairman's review deals with the performance of the Company during the year and the
future outlook. The Directors endorse the contents of the review.
On behalf of the Board of Directors
Tariq Rehman
Chief Executive
Lahore: September 23, 2002
FINANCIAL HIGHLIGHTS OF LAST TEN YEARS
	2002	2001	2000	1999	1998	1997	1996	1994	1993	1992
							18 Months
	( RUPEES IN MILLIONS)
Net Total Sales	532	484	489	480	307	490	791	462	348	417
Exports	117	99	86	78	50	50	44	31	20	8
Employees Costs	139	124	133	114	76	126	183	103	85	81
Profit/(Loss) before tax	(105)	(97)	(143)	(144)	(63)	(20)	38	23	15	25
Profit/(Loss) after tax	(107)	(100)	(148)	(146)	(64)	(23)	54	21	23	15
Earning per Share	(7)	(7)	(11)	(10)	(6)	(2)	9	3	6	4
Capital Expenditure	2	2	11	2	255	29	102	28	15	61
Cash Dividend Rate							0	0	0	0
Stock Dividend Rate						0
Shareholder's Equity		(106)	(96)	79	187	251	213	172	159	99
STATEMENT OF COMPLIANCE WITH THE CODE OF CORPORATE
GOVERNANCE
The company is in process of implementing the requirements of the Code of Corporate Governance issued
by the Securities & Exchange Commission of Pakistan and adopted by Stock Exchanges. The company has
duly complied with the provisions of the Code, relevant for the year ended June 30, 2002.
The Code of Corporate Governance requires a listed company to obtain a statement of compliance with best
practices of code of corporate governance from the statutory auditors. On receipt of the statement of
compliance from the auditors on September 19, 2002, we now enclose the said statement.
REVIEW REPORT TO THE MEMBERS ON STATEMENT OF COMPLIANCE
WITH BEST PRACTICES OF CODE OF CORPORATE GOVERANCE
We have reviewed the Statement of Compliance with the best practices contained in the Code of Corporate
Governance prepared by the Board of Directors of Emco Industries Limited to comply with the Listing
Regulation No. 37, 43 & 36 of the Karachi, Lahore and Islamabad Stock Exchanges respectively, where the
Company is listed.
The responsibility for compliance with the Code of Corporate Governance is that of the Board of Directors
of the Company. Our responsibility is to review, to the extent where such compliance can be objectively
verified, whether the Statement of Compliance reflects the status of Company's compliance with the provisions
of the Code of Corporate Governance and report if it does not. A review is limited primarily to inquiries of
the Company personnel and review of various documents prepared by the company to comply with the
Code.
As part of our audit of financial statements we are required to obtain an understanding of the accounting and
internal control systems sufficient to plan the audit and develop an effective audit approach. We have not
carried out any special review of the internal control system to enable us to express an opinion as to whether
the Board's statement on internal control covers all controls and the effectiveness of such internal controls.
Based on our review nothing has come to our attention which causes us to believe that the Statement of
Compliance does not appropriately reflect the Company's compliance, in all material respects, with the best
practices contained in the Code of Corporate Governance as applicable to the Company for the year ended
June 30, 2002.
CHAIRMAN'S REVIEW
On behalf of the board of Directors I welcome you to the 47th Annual General Meeting of the Company and
present you the Annual Report and Financial Statements for the year ended 30th June, 2002.
This year your Company has sustained a loss after tax amounting to Rs. 107.203 million. Last year after tax
loss was Rs. 100.036 million, which has now been increased by Rs.7.167 million. The operating results of the
Insulator plant are very encouraging. There has been an increase in the net sales of Rs.48.822 million as
compared to the last year. The profit from operation increased from Rs.23.953 million to Rs.44.708 million.
Average monthly production also increased during the year to 219 ton, from 190 ton. In subsequent period
due to increase in WAPDA orders and upward trend in export this division will perform very good operating
results.
The sale of Wall Tile division has decreased by Rs.31.431 million, the operating loss of this division increased
from Rs.63.014 million to Rs.85.535 million. The decrease in sale of Wall Tile is owing to huge production
loss resulting a less production of M2 as compared to previous year. The sale'of Floor Tile division has
increased by Rs.30.235 million. The operating profit of this division has increased from Rs.12.704 million to
Rs.26.888 million.
After re-organizing the marketing management and strategic policy of production in the tiles division, we
expect marked improvement in the operating results of this division.
During the year your Company has contributed a sum of Rs.84.214 million to government towards the taxes
in the shape of import duty, sales tax, income tax and other government levies, which is 15.84% of total
sates.
Despite a huge losses the Management is still committed with the Company and will continue to support the
company. The Directors and sponsors have injected Rs.50.704 million cash during the year to stabilize the
financial position.
Employment Relations
The Management would like to place on record the positive attitude and cooperation 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 organization by cutting costs wherever
possible.
Acknowledgement
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 and dealers, who have reposed confidence in the products
supplied to them and would like to re-affirm the Company's pledge to continue "Provide Quality Products
and Services to the Satisfactions of Customers." I would also like to thank bankers and leasing companies for
their co-operation and standing behind us in this difficult time and hope they will continue their support in
future periods.
S. A. Mannan
(Chairman)
Lahore: September 23,2002
AUDITOR'S REPORT TO THE MEMBERS
We have audited the annexed balance sheet of Emco Industries Limited as at June 30, 2002 and the related
profit and loss account, cash flow statement and statement of changes in equity 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.
It is the responsibility of the company's management to establish and maintain a system of internal control,
and prepare and present the above said statements in conformity with the approved accounting standards
and the requirements of the Companies Ordinance, 1984. Our responsibility is to express an opinion on
these statements based on our audit.
We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These standards
require that we plan and perform the audit to obtain reasonable assurance about whether the above said
statements are free of any material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the above said statements. An audit also includes assessing the
accounting policies and significant estimates made by management, as well as, evaluating the overall presenta
tion of the above said statements. We believe that our audit provides a reasonable basis for. our opinion and,
after due verification, 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) : / la ouropinion
(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;       .•;;::;.:-    - : -^;-^ 'a: ' ^.:
(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, cash flow statement and statement of changes in equity
together with the notes forming part thereof conform with approved accounting standards as
applicable in Pakistan, and, 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, 2002 and of the loss, its cash flows and changes in equity for the year then ended; and
(d) in our opinion no zakat was deductible at source under the Zakat and Ushr Ordinance, 1980.
Without qualifying our opinion, we draw attention to note 2.2 to the accounts which states that the company
has incurred a net loss of Rs 107.203 million for the year ended June 30, 2002 and has accumulated losses of
Rs 586.162 million as of that date. The company's current liabilities exceeded its current assets by Rs 279.644
million. Against the credit facility of Rs 368.395 million available from commercial banks, the company has
availed Rs 315.137 million. These factors raise substantial doubt that the company will be able to continue as
a going concern. Management's plan in regard to this matter includes a restructuring plan, which involves
injection of cash equity by sponsors and associated companies and measures to increase contribution through
improved productivity. The detailed plan is discussed in note 2.2 to the accounts.
A. F. FERGUSON & CO.
Chartered Accountants