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| ENGRO |
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| ANNUAL REPORT FOR 1995 |
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| C O N T E N T S |
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| Board of Directors |
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1 |
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| Notice of the Meeting |
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2 |
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| Statement
under Section 160 |
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| of the Companies |
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| Ordinance |
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4 |
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| Directors' Report |
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5 |
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| Pattern
of Holding of Shares |
7 |
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| Financial Highlights |
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9 |
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| Chairman's Statement |
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10 |
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| Directors & Senior |
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| Management |
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17 |
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| Auditors' Report |
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18 |
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| Balance Sheet |
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19 |
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| Profit & Loss Account |
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21 |
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| Cash Flow Statement |
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22 |
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| Notes to the Accounts |
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23 |
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| Corporate Committees |
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44 |
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| Ten Years at a Glance |
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45 |
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| BOARD OF DIRECTORS |
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| Shaukat R Mirza, Chairman |
|
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| Javed Akbar |
|
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| Mahmud Dossa |
|
|
| Michael G. Essex |
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| Behram Hasan |
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| Nasim A. Jafarey |
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| Zaffar A. Khan |
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| Nisar A. Memon |
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| Stephen Potter |
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| Imtiaz Samee |
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| Abdul Shakur |
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| Secretary |
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| Andalib Alavi |
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| Registered Office |
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| PNSC Building |
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| Moulvi
Tamizuddin Khan Road |
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| Karachi |
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| Auditors |
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| A. F. Ferguson 8~ Co. |
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| Chartered Accountants |
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| NOTICE OF MEETING |
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| NOTICE
IS HEREBY GIVEN that the Thirtieth Annual General Meeting of |
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| Engro
Chemical Pakistan Limited will be held at Karachi Marriott Hotel, |
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| Abdullah
Haroon Road, Karachi on Wednesday, April 17, 1996 at 10.00 |
|
| a.m.
to transact the following business: |
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| A. ORDINARY BUSINESS |
|
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| (1) To receive and consider the Audited
Accounts for the year ended December 31, 1995 and the Directors' and
Auditors' Reports thereon. |
|
| (2) To declare a final dividend at the
rate of Rs.2.00 per share for the year ended December 31, 1995. |
|
| (3) To appoint Auditors and fix their
remuneration. |
|
|
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| B. SPECIAE BUSINESS |
|
| (4) To consider, and if thought fit, to
pass the following Resolution as an Ordinary Resolution: |
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|
| "Resolved that: |
|
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| (a) A sum of Rs. 116,812,800 (Rupees One
Hundred and Sixteen Million Eight Hundred Twelve Thousand and Eight Hundred
only) out of the free reserves of the Company be capitalized and applied
towards the issue |
|
| of
11,681,280 ordinary shares of Rs. 10/- each as bonus shares in the ratio of
1:5 i.e. one bonus share for every five ordinary shares held by the members
whose names appear on the Members Register on April 3,1996. These |
|
| bonus
shares shall rank pari passu in all respects with the existing shares but
shall not be eligible for the dividend declared for the year ended December
31,1995. |
|
|
|
| (b) Members entitled to fractions of
shares as a result of their holding either being less than five ordinary
shares or in excess of an exact multiple of five ordinary shares shall be
given the sale proceeds of their fractional |
|
| entitlements
for which purpose the fractions shall be consolidated into whole shares and
sold on the Karachi Stock Exchange. |
|
|
|
| (c) For the purpose of giving effect to
the foregoing, the directors be and are hereby authorized to give such
directions as they deem fit to settle any question or any |
|
| difficulties
that may arise in the distribution of the said bonus shares or in the payment
of the sale proceeds of the fractions " |
|
|
|
| A
statement under Section 160 of the Companies Ordinance, 1984 setting forth
all material facts concerning the Resolution contained in item (4) of the
Notice which will be considered for adoption at the |
|
| Meeting
is annexed to this Notice of Meeting being sent to Members. |
|
|
|
|
By Order of the Board |
|
|
|
| Karachi |
|
Andalib Alavi |
|
| Dated February 27, 1996 |
|
Company Secretary |
|
|
|
|
|
| N.B. |
|
| (1) The share transfer books of the
Company will be closed and no transfers of shares will be accepted for
registration from Wednesday, April 3, 1996 to Wednesday, April t 7, 1996
(both days inclusive). |
|
| Transfers
received in order at the Registered Office of the Company upto the close of
business (4:30 p.m.) on Tuesday, April 2, 1996 will be in time to be passed
for payment of the final dividend and issue of bonus shares to the
transferees. |
|
|
|
| (2) A member entitled to attend ann vote
at this Meeting shall be entitled to appoint another person, as his/her proxy
to attend, speak and vote instead of him/her, and a proxy so appointed shall
have such rights, as |
|
| respects
attending, speaking and voting at the Meeting
as are available to a member. Proxies, in order to be effective, must
be received by the Company not less |
|
| than
48 hours before the Meeting. A proxy need not be a member of the Company. |
|
|
|
| STATEMENT
UNDER SECTION 160 OF THE COMPANIES ORDINANCE, 1984 |
|
| This statement is annexed to the Notice of
the Thirtieth Annual General Meeting of Engro Chemical Pakistan Ltd. to be
held on April 17, 1996 at which certain special business is to be transacted.
The special business is |
|
| to
issue bonus shares. The purpose of this Statement is to set forth the
material facts concerning such special business. |
|
|
|
| ITEM (4) OF THE AGENDA |
|
| The Board of Directors recommend that
taking into account the financial position of the Company the issued capital
of the Company be increased by capitalization of free reserves amounting to
Rs. 1 16,812,800 and the |
|
| issue
of bonus shares in the ratio of 1:5 i.e. one bonus share for every five
ordinary shares. The Directors of the Company are interested in the business
to the extent of their shareholding in the Company. |
|
|
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|
By Order of the Board |
|
| Karachi |
|
Andalib Alavi |
|
| Dated February 27, 1996 |
|
Company Secretary |
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| DIRECTORS REPORT |
|
|
| The Board of Directors is pleased to
present the thirtieth annual report of Engro Chemical Pakistan Limited for
the year ended December 31, 1995. Engro Chemical Pakistan Limited is a public
limited company |
|
|
|
| Engro Chemical Pakistan Limited is a
public limited company incorporated in Pakistan. Major shareholders are
Employees and the Employees' Trust, International Finance Corporation (IFC), |
|
| Commonwealth
Development Corporation (CDC) and Asian Finance & Investment Corporation
(AFIC). Other shareholders are financial institutions such as National
Development Finance Corporation (NDFC), |
|
| Pak
Kuwait Investment Company (PKIC) and the general public. The pattern of share
holding as at December 31, 1995 is shown in the annexed statement. |
|
|
|
| The Company continued to perform well
during 1995. Fertilizer sales at 825,100 metric tons were an all time record.
Engro urea production increased from 633,000 tons in 1994 to 649,700 tons in
1995. The |
|
| Balancing,
Modernization and Replacement (BMR) expansion of the urea plant capacity to
750,000 metric tons was successfully achieved during the year. The profit
after tax was Rs 782.7 million versus pervious year's profit of Rs 601.1
million. |
|
|
|
| Your Board recommends that the net profit
of Rs 782.7 million earned during the year together with the balance of
unappropriated profit of Rs 8.2 million brou,~ht forward from prior year be
appropriated as follows: |
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|
MILLION RUPEES |
|
| Total
profit available for appropriation |
|
790.9 |
|
|
|
|
| Appropriations |
|
|
|
| Transfer
to greneral reserve |
|
440.0 |
|
|
|
|
| First
interim dividend on 58.406 million |
|
|
|
| shares
of Rs 10 each at Rs 2.00 per share |
-------- |
|
| declared on August 9, 1995 |
|
16.8 |
|
|
|
|
|
| Second
interim dividend on 58.406 million |
|
|
| shares
of Rs 10 each at Rs 2.00 per share |
|
|
| declared
on November 6, 1995 |
|
116.8 |
|
|
|
|
|
| Proposed
final dividend on 58.406 million |
|
|
| shares
of Rs 10 each at Rs 2.00 per share |
116.8 |
|
|
|
-------- |
|
| Total
Dlvidend for the year |
|
350.4 |
|
|
|
|
-------- |
|
| Unappropriated
profit carried forward |
|
0.5 |
|
|
|
|
======== |
|
|
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|
|
|
|
|
|
| The Board recommends that bonus shares in
the ratio of one bonus share for every five shares be issued by
capitalization of Rs. 116.8 million out of the free reserves (share premium
account) of the |
|
| Company.
The said bonus shares will not be eligible for the dividend declared for the
year ended December 31, 1995. |
|
|
|
| Your board has appproved a project for
further expansion of the urea plant capacity from 750,000 to 850,000 metric
tons per annum which will also improve the plant energy efficiency by more
than 10%. |
|
|
|
| The project planned for completion in the
first quarter of 1998 is estimated to cost US$ 59 million. The Board has also
approved an investment in a joint venture company named Engro Palctanlc
Terminal Ltd., that has |
|
| been
established to build and operate a jetty and terminal facility at Port Qasim
to handle bulk liquid chemicals at an estimated cost of US$65 million. Both
these projects will be financed through internal cash generation and long
term debt. |
|
|
|
| Your board would like to take this
opportunity to express its appreciation to the Engro dealers and to the
employees of the Company for their dedication and hard work throughout the
year. We also |
|
| acknowledge
the support and cooperation received from the Government, our suppliers and
contractors. |
|
|
|
| AUDITORS |
|
|
| The auditors, Messrs. A. F. Ferguson 8~
Company, retire and offer themselves for re-appointment. |
|
|
|
| BOARD OF DIRECTORS |
|
|
| The term of office of the present Board
expires in April 1997. |
|
|
|
|
On behalf of the Board of
Directors |
|
|
|
|
|
Shaukat R. Mirza |
|
| February 27, 1996 |
|
Chairman |
|
|
|
|
|
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|
|
| Pattern of holding of the Shares held by
the Shareholders of Engro Chemical Palcistan Ltd. as at December 31, 1 995. |
|
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|
|
No. of |
|
Shareholding |
|
Total Shares held |
|
|
|
Shareholders |
|
|
|
|
|
|
|
667 |
holding from |
1 |
to |
100 |
40,415 |
|
|
|
1,779 |
holding from |
101 |
to |
500 |
496,266 |
|
|
|
1,159 |
holding from |
501 |
to |
1,000 |
825,496 |
|
|
|
1,443 |
holding from |
1,001 |
to |
5,000 |
3,136,497 |
|
|
|
308 |
holding from |
5,001 |
to |
10,000 |
2,135,886 |
|
|
|
115 |
holding from |
10,001 |
to |
15,000 |
1,386,414 |
|
|
|
50 |
holding from |
15,001 |
to |
20,000 |
856,658 |
|
|
|
44 |
holding from |
20,001 |
to |
25,000 |
1,002,349 |
|
|
|
31 |
holding from |
25,001 |
to |
30,000 |
859,665 |
|
|
|
17 |
holding from |
30,001 |
to |
35,000 |
540,843 |
|
|
|
15 |
holding from |
35,001 |
to |
40,000 |
567,456 |
|
|
|
13 |
holding from |
40,001 |
to |
45,000 |
544,860 |
|
|
|
9 |
holding from |
45,001 |
to |
50,000 |
427,200 |
|
|
|
6 |
holding from |
50,001 |
to |
55,000 |
318,284 |
|
|
|
10 |
holding from |
55,001 |
to |
60,000 |
577,680 |
|
|
|
3 |
holding from |
60,001 |
to |
65,000 |
188,578 |
|
|
|
4 |
holding from |
65,001 |
to |
70,000 |
267,678 |
|
|
|
5 |
holding from |
70,001 |
to |
75,000 |
358,454 |
|
|
|
5 |
holding from |
75,001 |
to |
80,000 |
387,448 |
|
|
|
1 |
holding from |
80,001 |
to |
85,000 |
81,186 |
|
|
|
4 |
holding from |
85,001 |
to |
90,000 |
354 |
|
|
|
2 |
holding from |
90,001 |
to |
95,000 |
188,070 |
|
|
|
1 |
holding from |
95,001 |
to |
100,000 |
95,820 |
|
|
|
5 |
holding from |
110,001 |
to |
115,000 |
562,892 |
|
|
|
4 |
holding from |
115,001 |
to |
120,000 |
465,300 |
|
|
|
2 |
holding from |
120,001 |
to |
125,000 |
248,193 |
|
|
|
3 |
holding from |
125,001 |
to |
130,000 |
382,990 |
|
|
|
1 |
holding from |
130,001 |
to |
135,000 |
135,000 |
|
|
|
4 |
holding from |
135,001 |
to |
140,000 |
549,088 |
|
|
|
1 |
holding from |
140,001 |
to |
145,000 |
141,814 |
|
|
|
2 |
holding from |
145,001 |
to |
150,000 |
294,838 |
|
|
|
2 |
holding from |
155,001 |
to |
160,000 |
319,002 |
|
|
|
1 |
holding from |
180,001 |
to |
185,000 |
184,220 |
|
|
|
2 |
holding from |
210,001 |
to |
215,000 |
424,800 |
|
|
|
1 |
holding from |
220,001 |
to |
225,000 |
223,042 |
|
|
|
1 |
holding from |
240,001 |
to |
245,000 |
241,470 |
|
|
|
1 |
holding from |
255,001 |
to |
260,000 |
255,360 |
|
|
|
1 |
holding from |
290,001 |
to |
295,000 |
291,800 |
|
|
|
1 |
holding from |
410,001 |
to |
415,000 |
414,412 |
|
|
|
1 |
holding from |
420,001 |
to |
425,000 |
423,796 |
|
|
|
1 |
holding from |
455,001 |
to |
460,000 |
459,000 |
|
|
|
1 |
holding from |
505,001 |
to |
510,000 |
510,000 |
|
|
|
1 |
holding from |
540,001 |
to |
545,000 |
541,500 |
|
|
|
1 |
holding from |
820,001 |
to |
825,000 |
824,024 |
|
|
|
1 |
holding from |
835,001 |
to |
840,000 |
838,500 |
|
|
1 |
holding from |
885,001 |
to |
890,000 |
889,300 |
|
|
1 |
holding from |
940,001 |
to |
945,000 |
940,117 |
|
|
1 |
holding from |
1,145,001 |
to |
1,150,000 |
1,149,770 |
|
|
1 |
holding from |
1,275,001 |
to |
1,280,000 |
1,275,368 |
|
|
1 |
holding from |
1,510,001 |
to |
1,515,000 |
1,514,599 |
|
|
1 |
holding from |
1,660,001 |
to |
1,665,000 |
1,663,953 |
|
|
1 |
holding from |
2,830,001 |
to |
2,835,000 |
2,833,620 |
|
|
1 |
holding from |
3,115,001 |
to |
3,120,000 |
3,120,000 |
|
|
1 |
holding from |
3,865,001 |
to |
3,870,000 |
3,868,419 |
|
|
1 |
holding from |
3,895,001 |
to |
3,900,000 |
3,900,000 |
|
|
1 |
holding from |
5,840,001 |
to |
5,845,000 |
5,840,640 |
|
|
1 |
holding from |
7,040,001 |
to |
7,045,000 |
7,042,760 |
|
|
---------- |
|
|
|
|
---------- |
|
|
5,741 |
|
|
|
|
58,406,400 |
|
|
========== |
|
|
|
|
========== |
|
|
|
|
| Categories of Shareholders |
|
Number |
Shares held |
Percentage |
|
|
|
|
|
|
| Individuals |
|
5,609 |
17,276,119 |
29.57 |
|
|
| Investment Companies |
|
60 |
9,844,627 |
16.86 |
|
|
| Insurance Companies |
|
9 |
2,804,913 |
4.81 |
|
|
| Joint Stock Companies |
|
9 |
84,672 |
0.14 |
|
|
| Financial Institutions |
|
34 |
24,292,069 |
41.59 |
|
|
| Modaraba Companies |
|
9 |
159,498 |
0.27 |
|
|
| Trade Associations |
|
2 |
2,279 |
- |
|
|
| Cooperative Societies |
|
2 |
6,268 |
0.01 |
|
|
| The
Corporate Law Authority of Pakistan |
1 |
1 |
- |
|
|
| Administrator,
Abandoned Properties |
1 |
52,340 |
0.09 |
|
|
| Government of Pakistan |
|
|
|
|
|
| Others |
|
5 |
3,883,614 |
6.66 |
|
|
|
---------- |
---------- |
---------- |
|
|
|
5,741 |
58,406,400 |
100.00 |
|
|
|
|
========== |
========== |
========== |
|
|
|
|
| On
behalf of the Board of Directors |
|
|
|
|
|
|
|
| Shaukat R. Mirza |
|
|
|
|
| Chairman |
|
|
|
|
|
|
|
|
| FINANCIAE HIGHLIGHTS |
|
|
1,995 |
1,994 |
|
|
|
|
|
| Sales Revenue Rs. Million |
|
Rs. Million |
4,520 |
3,568 |
|
|
| Earnings
after Tax Rs. Million |
Rs. Million |
783 |
601 |
|
|
| Dividend
per Share Rs. /share |
Rs. /Share |
6 |
4 |
|
|
| Return
on Capital Employed (%) |
(%) |
27 |
23 |
|
| Current Ratio |
|
1.29 |
1.45 |
|
| Debt: Equity Ratio |
|
38:62 |
47:53 |
|
| No.
of Shares Outstanding (000's) |
(000's) |
58,406 |
48,682 |
|
| Capital
Expenditure Rs. Million |
Rs. Million |
391 |
284 |
|
|
|
|
|
|
|
| CHAIRMAN S STATEMENT |
|
|
|
|
|
| UREA INDUSTRY ENVIRONMENT |
|
|
| The demand for urea in 1995 rebounded and
grew by 12% over 1994 to approximately 3.4 million tons. Favourable weather
conditions, timely availability of irrigation water and higher crop support
prices were some of the |
|
| factors
that benefited farm economics and stimulated greater demand for
fertilizers. |
|
|
|
|
| On the supply side indigenous urea
production remained at the level of 3.1 million tons due to curtailment of
natural gas to the fertilizer industry and operating difficulties experienced
by some plants. This, combined with export of 82,000 |
|
| tons
of urea necessitated the import of approximately 162,000 tons of urea to make
up the shortfall. The urea inventory make up the shortfall. The urea
inventory in the country at the end of 1995 declined to a low level of 64,000
tons. |
|
|
|
|
| The urea industry faced substantial cost
pressures during the year emanating from increases in the price of feed and
fuel gas, |
|
| product
packaging and freight and the burden of absorbing the high cost of imported
urea. |
|
|
|
|
|
| MARKETING |
|
|
|
| The total fertilizer sales revenue of the
company increased by Rs 1 billion to a new record sales revenue of Rs 4.5
billion. |
|
|
|
| Engro urea sales volume increased by 21%
to a record 694,100 tons. In addition, the company sold 24,000 tons of
imported urea. The company's share of the urea market increased from 20% to
21%. Sales of purchased phosphatic and potassic |
|
| fertilizers
were 107,000 tons, unchanged from the levels sold in 1994. Included in this
volume was 85,200 tons of DAP and TSP which the company imported directly and
marketed under the Engro brand name. The branded phosphatic fertilizers |
|
| continue
to be well received by the farming community. |
|
|
|
|
|
| The Engro trademark and the three leaf
logo being used by the Company under license from Exxon has been purchased
during 1995. All rights in the trademark on a worldwide basis (except Canada)
now reside with the Company. |
|
|
|
|
|
|
|
| MANUFACTURING |
|
|
|
|
|
|
| Production of Engro urea increased from
633,000 tons in 1994 to 650,000 tons in 1995 |
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| Gas curtailment and plant shutdown for
maintenance and tie-in of equipment for the Balancing, Modernization and
Replacement (BMR) expansion project limited production during the year. The
BMR project to increase the urea plant |
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| capacity
to 750,000 tons per year became operational from August when additional gas
for this expansion was made available. The expanded plant operated smoothly
and fully demonstrated the enhanced capacity. |
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| During the year, steps were taken to
improve energy efficiency of the plant by die installation of heat recovery
equipment on steam generating units. Improvements were also made in product
quality by shutting |
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| down
the old prill tower and de-bottlenecking the new prill tower to produce
larger sized prills preferred by the farmers. |
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| SAFETY,
HYGIENE AND ENVIRONMENT |
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| The safety performance of our own
employees continued to be satisfactory. By the end of 1995, manufacturing
completed 825 days equivalent to 2.48 million man hours and non-manufacturing |
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| completed
8.5 years equivalent to 2.36 million man hours without any on-the job lost work injury. However, two
employees of our contractors, in separate incidents, were injured on the job,
which later regrettably resulted in |
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| fatalities.
This ended a period of approximately 8 years since the last lost work injury
to a contractor employee. |
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| The company increased its focus on
industrial hygiene and protection of the environment at the plant site.
Special efforts are underway to position the company to comply with the
National |
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| Environment
Quality Standards which are expected to become effective from July 1, 1996 |
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| FINANCIAL RESULTS |
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| The company earned a profit after tax of
Rs 783 million as compared to Rs 601 million earned in the previous year. The
increase in profit is attributable to higher sales volume of Engro Urea. The
increase in |
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| revenue
due to higher product prices was more than offset by the sharp escalation in
costs resulting from price increases of gas, packaging material, road freight
and the losses absorbed on sale of imported urea. |
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| Out of the total profits available, Rs 350
million were appropriated for dividends and Rs 440 million transferred to
general reserves to finance future growth and diversification plans of the
company. |
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| It will be recalled that in 1994 the
government had conveyed its approval of an 8 year tax holiday for the
expansion project completed in October 1993. During 1995, the Income Tax
authorities established |
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| the
basis for computing the tax exempt profits of the expansion unit which have
been incorporated in the financial results. |
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| In 1995 the company issued bonus shares in
the proportion of one share for existing five shares. As a result, the number
of paid up shares at year end increased to 58.4 million. |
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| The shareholders equity as at December 31,
1995 was Rs 2,593 million compared to Rs 2,16 I million a year ago. The
company's debt: equity ratio improved to 38:62 while the current ratio was at
1.29. |
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| EMPLOYEE
RELATIONS AND ORGANIZATIONAL DEVELOPMENT |
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| Employee relations remained cordial in
1995. |
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| A new Collective Labour Agreement with the
Karachi Staff Union was amicably concluded in record time. The duration of
this agreement is 36 months and became effective July 1, 1995. |
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| The first stage of the office
modernization project that will provide personal computer based electronic
networking capability throughout the organization was implemented at the head
office. A similar modernization |
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| project
is planned for offices at the plant site in 1996. These networks will enhance
the efficiency of customer servicing and other business processes. |
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| COMMUNITY
AND SOCIAL WELFARE |
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| To discharge its responsibilities as a
good corporate citizen of Pakistan, the company participated actively in
community and social welfare programs in the rural and urban areas. |
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| Some highlights were: |
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| A Mother and Child Care Centre was
constructed in Daharki town. This project was undertaken to comply with the
proposal made by the Prime Minister, Mohtarma Benazir Bhutto. The facility
was inaugurated by the Federal Minister for |
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| Education,
Syed Khurshid Ahmad Shah. |
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| Two eye camps were held in the rural areas
where 5900 patients received free treatment and 640 cataract |
