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ENGRO
ANNUAL REPORT 1996
COMPANY INFORMATION
BOARD OF DIRECTORS
Shaukat R. Mirza, Chairman
Javed Akbar
Mahmud Dossa
Michael G. Essex
Behram Hasan
Nasim A. Jafarey
Zaffar A. Khan
Nisar A. Memon
Stephen Potter
imtiaz Samee
Abdul Shakur
Secretary
Andalib Alavi
Registered Office
PNSC Building
Moulvi Tamizuddin Khan Road
Karachi.
Auditors
A. F. Ferguson & Co.
Chartered Accountants
NOTICE OF MEETING
Notice is hereby given that the thirty-first Annual General Meeting of Engro Chemical
Pakistan Limited will be held at Karachi Marriott Hotel, Abdullah Haroon Road, Karachi
on Tuesday, April 15, 1997 at 10.00 a.m. to transact the following business:
A. ORDINARY BUSINESS
1) To receive and consider the Audited Accounts for the year ended
December 31, 1996 and the Directors' and Auditors' Reports thereon.
2) To declare a final dividend at the rate of Rs. 3.00 per share for the year
ended December 31, 1996.
3) To appoint Auditors and fix their remuneration.
4) To elect ten directors in accordance with the Companies Ordinance,
1984 for a period of three years commencing from April 22, 1997. The
retiring Directors are Messrs. Javed Akber, Mahmud Dossa,
Michael G. Essex, Behram Hasan, Nasim A. Jafarey, Zaffar A. Khan,
Nisar A. Memon, Shaukat R. Mirza, Imtiaz Samee and Abdul Shakur.
B. SPECIAL BUSINESS
5) To consider, and if thought fit, to pass the following Resolution as a
Special Resolution:
"RESOLVED that the Authorised Capital of the Company be increased
from Rs. 1,000,000,000 to Rs. 2,000,000,000 and that:
(a) Clause 5 of the Memorandum of Association of the Company be and
is hereby amended to read as follows:
"5. The Share Capital of the Company is Rs. 2,000,000,000 (Rupees Two
Thousand Million) divided into 200,000,000 Ordinary Shares of
Rs. 10/- (Rupees Ten) each."
(b) Article 5 of the Articles of Association of the Company be and is
  hereby amended to read as follows:
"5. The Share Capital of the Company is Rs. 2,000,000,000 (Rupees Two
Thousand Million) divided into 200,000,000 Ordinary Shares of
Rs. 10/- (Rupees Ten) each."
(6) To consider, and if thought fit, to pass the following Resolution as an
  Ordinary Resolution."
"RESOLVED that:
a) A sum of Rs. 175,219,200 (Rupees One hundred and seventy five
  million two hundred and nineteen thousand and two hundred) out of
  the free reserves of the Company be capitalized and applied towards
  the issue of 17,521,920 ordinary shares of Rs. 10/- each as bonus shares
  in the ratio of 1:4 i.e. one bonus share for every four ordinary shares
  held by the members whose names appear on the Members Register
  on April 1, 1997. 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, 1996.
b) Members entitled to fractions of shares as a result of their holding
either being less than four ordinary shares or in excess of an exact
multiple of four 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.
(7) To approve the remuneration of Directors as executives of the
Company.
(8) To consider, and if thought fit, to pass the following Resolution as a
  Special Resolution:
"RESOLVED that the consent of the Company in General Meeting be
and is hereby accorded for extending a subordinated loan of upto the
Rupee equivalent of USS 7.5 million plus Rs. 58.5 million to Engro
Paktank Terminal Ltd., an Associated Company, subject to the
permission of the Federal Government under the provisions of Section
208 of the Companies Ordinance 1984."
A statement under Section 160 of the Companies Ordinance, 1984 setting forth all
material facts concerning the Resolutions contained in items (5), (6), (7) and (8) 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
N.B.
(1) The Directors of the Company have fixed, under sub-section (1) of
Section 178 of the Companies Ordinance 1984, the number of elected
directors of the Company at ten. Mr. Stephen Potter has been
nominated on the Board of Directors of the Company by the
Commonwealth Development Corporation, a creditor of the
Company, by virtue of contractual arrangements, and is not subject to
retirement.
(2) The share transfer books of the Company will be closed and no
transfers of shares will be accepted for registration from Tuesday,
April 1, 1997 to Tuesday, April 15, 1997 (both days inclusive).
Transfers received in order at the Registered Office of the Company
upto the close of business (4:30 p.m.) on Monday, March 31, 1997 will
be in time to be passed for payment of the final dividend and issue
of bonus shares to the transferees.
(3) A member entitled to attend and 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 Thirty-first Annual General Meeting of Engro
Chemical Pakistan Ltd. to be held on April 15, 1997 at which certain special business is to be
transacted. The purpose of this Statement is to set forth the material facts concerning such
special business.
ITEM (5) OF THE AGENDA
In order to provide for increase in capital for future growth and diversification the Board of
Directors proposes that the Authorised Capital be increased from Rs.l,000,000,000 to
Rs.2,000,000,000.
ITEM (6) 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. 175,219,200, and the issue of bonus shares in the ratio of 1:4 i.e. one bonus
share for every four ordinary shares. The Directors of the Company are interested in the
business to the extent of their Shareholding in the Company.
ITEM (7) OF THE AGENDA
At the twenty-sixth Annual General Meeting of the Company held on April 14, 1992 an
aggregate annual sum not exceeding Rupees fifteen million was sanctioned to be paid as
remuneration to Directors as executives of the Company. This amount is expected to be
exceeded in 1997. Members approval will be sought at the forthcoming Annual General
Meeting to the holding of offices of profit by Directors of the Company and the payment of an
aggregate annual sum not exceeding Rupees twenty five million as remuneration to Directors
holding offices of profit. Shareholders are informed that Directors who hold offices of profit
are interested in their respective appointments and in the remuneration payable to them
respectively. For this purpose the following Ordinary Resolution will be moved at the Meeting:
"RESOLVED that any Director who gives his full time to the affairs of the Company may hold office
of President, Senior vice-president, vice-president, General Manager or any other office of profit
under the Company and this resolution shall constitute the Company's consent to such
appointment and that an aggregate annual sum not exceeding Rupees twenty five million be and
is hereby sanctioned to be paid as remuneration to the Directors holding such offices of profit,
such sum to be apportioned by the Board of Directors between the aforesaid Directors."
ITEM (8) OF THE AGENDA
Engro Paktank Terminal Limited (EPTL) a joint venture between the Company and the Paktank
group of Holland is constructing an integrated liquid chemical terminal and storage farm at
Port Qasim Karachi, pursuant to an Implementation Agreement signed with Port Qasim
Authority which agreement, inter ail gives EPTL the exclusive right to handle and store
liquid/gaseous liquid chemicals at Port Qasim. EPTL has also received an Indenture of lease
from Port Qasim Authority for approximately 100 acres of land for the facility. EPTL has signed
a User agreement with ICI Pakistan Limited to provide handling and storage facilities for
imported bulk chemical raw material for ICI's PTA plant and is also negotiating with other
potential users for providing similar services at the facility. EPTL has also signed foreign
currency loan agreements with International Finance Corporation and Commonwealth
Development Corporation for USS 17 million and US$ 8 million respectively, and
markup/morhaba and other agreements with a consortium of banks in Pakistan for provision
of rupee financing equivalent to approximately US$ 14 million as well as provision of
Working Capital, Guarantee and L/C facilities are being finalised.
The Lenders have required EPTL and its sponsors to sign project funds and financial support
agreements whereby, under certain circumstances, inter ail in case of EPTL failing to achieve
project completion due to a shortage of funds or an overrun in the cost of the project or in case
EPTL is not able to meet its financial obligations, the two sponsors i.e. the Company and Paktank
have undertaken to provide further funds to EPTL upto a maximum of the equivalent of USS 7.5
million plus Rs. 58.5 million each. Under the agreements, the sponsors have the option to provide
the funds by way of further share capital subscriptions or provision of subordinated loans, i.e.
loans whose rights are subservient to those being provided by the lenders. The sponsors have
jointly determined that in case funds have to be provided under these agreements, it would be
more beneficial for them to do so by way of subordinated loans as that enables the funds to be
returned to them, while share capital subscriptions will tie up their funds indefinitely. For
information of the shareholders it is stated that EPTL's project construction is on schedule and
within budget with completion due in September 1997 and therefore it is not expected that these
loans will have to be made, but consent of the shareholders is being sought by way of abundant
caution.
The rate of interest/return to be charged by the Company to EPTL shall not be less than the
interest/return payable by ECPL for ordinary commercial loans of like maturities, but subject to
this the rate shall be finally decided at the time of extending the loans. For indicative purposes,
the Company should presently be able to obtain similar loans at a rate of around five percent
over the return on Short Term Federal Bonds. As both sponsors are also the owners of all the
shares of EPTL and as the lenders anyway have prior rights and charges, no collateral security
will be obtained for these loans. The period and terms of the repayment of the loans shall be
linked to repayment of the loans of some of the lenders, repayments of which is to be in
quarterly instalments ending in the year 2006. Consequently, repayment of the subordinated loan
shall be in approximately equal quarterly instalments, on around the same dates as that of such
lenders with payments of interest/return also being made on such dates. Payments of
interest/return and payments and/or prepayments of principal however can only be made out of
cash flow from operations and only if, after giving effect to such payments, the current ratio would
not be less than 1:2 and the long term debt to equity ratio would not exceed 60:40. Modern project
financing, especially foreign currency loans, are generally not obtainable except with the sort of
sponsor support outlined above, and consequently the benefit to EPTL i.e. the obtaining of its
project finance is also a benefit to the Company which owns half EPTL's shares.
At the Extraordinary General Meeting of the Company held on October 4, 1995 the shareholders
consented to an investment of Rs. One billion in EPTL which was also approved by the Corporate
Law Authority. A sum of Rs. 450 million has already been invested for acquiring 45 million shares
of EPTL.
Section 208 of the Companies Ordinance 1984 as amended has placed a limit of 30% of the paid
up capital plus free reserves of the investing company as the amount that can be invested in its
Associated Companies, though the Federal Government has been empowered to relax the limit in
respect of any company having foreign investment. Consequently an application for such
relaxation/permission will be filed with the Federal Government with respect to the subordinated
loan, which is also classified as an investment for the purposes of the Section.
The directors of ECPL are interested in the business to the extent that some of the directors of
ECPL are also directors of EPTL and that some of the Directors of ECPL are shareholders of ECPL.
By Order of the Board
DIRECTORS' REPORT
The Board of Directors is pleased to present the thirty-first annual report of Engro
Chemical Pakistan Limited for the year ended December 31, 1996.
Engro Chemical Pakistan Limited is a public limited company incorporated in Pakistan.
Major shareholders are ECPL Employees and the ECPL Employees' Trust,
Commonwealth Development Corporation (CDC), International Finance Corporation
(IFC) and Asian Finance and 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, 1996 is shown in the annexed statement.
The Company continued to perform well during 1996 and set new records for
production, sales and profit. Fertilizer sales of all products exceeded the million ton
mark for the first time and closed at 1,046,000 tons. Engro Urea production increased
from 649,700 tons in 1995 to 738,200 tons in 1996. The profit after tax was Rs. 1386.0
million versus previous year's profit of Rs. 782.7 million.
Your Board recommends that the net profit of Rs. 1386.0 million earned during the .
year together with the balance of unappropriated profit of Rs. 0.5 million brought
forward from prior year be appropriated as follows:
MILLION RUPEES
Total profit available for appropriation 1386.5
Appropriation
Transfer to general reserve 795.0
Transfer to capital reserve for tax on issue
of bonus share 29.2
First interim dividend on 70.088 million
shares of Rs. 10 each at Rs. 3.00 per
share declared on August 12, 1996 210.3
Second interim dividend on 70.088 million
shares of Rs. 10 each at Rs. 2.00 per
share declared on November 12, 1996 140.1
Proposed final dividend on 70.088 million
shares of Rs. 10 each at Rs. 3.00 per share 210.30
--------
Total Dividend for the year 560.70
--------
Unappropriated profit carried forward 1.6
========
The Board recommends that bonus shares in the ratio of one bonus share for every
four shares be issued by capitalization of Rs. 175.2 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, 1996.
Your Board proposes that the Authorized Share capital of the Company be increased
from Rs. 1,000,000,000 to Rs. 2,000,000,000 to provide for future growth and
diversification.
Your Board is pleased to report that substantial progress has been made in detailed
engineering and procurement for the Daharki expansion and modernization project.
The project will increase the urea production capacity from 750,000 to 850,000 tons
annually, improve plant energy efficiency by more than 10% and further strengthen
environmental conservation measures. The project is on schedule for completion by
March 1998 at a cost of USS 59 million. Loan agreements were successfully negotiated
with IFC and CDC to secure long term foreign currency debt of USS 29 million for
the project.
Engro Paktank Terminal Limited (EPTL), the Company's Joint Venture with Royal
Pakhoed of the Netherlands, commenced construction work on the Jetty and
Chemical Terminal facility being set up at Port Qasim. The USS 65 million project is
expected to be ready in September 1997. A long term usage agreement was
successfully concluded during the year between EPTL and ICI to handle feed stock
requirements of the ICI PTA project at Port Qasim. Engro's equity investment in EPTL
is being financed through retained earnings.
The company has also signed a Memorandum of Understanding with Mitsubishi
Corporation and Asahi Glass Company of Japan to build a Poly Vinyl Chloride (PVC)
Resin facility at Port Qasim. The detailed feasibility report on the project has been
completed and is currently under review by the potential joint venture partners. The
project is estimated to cost approximately USS 80 million with an initial production
capacity of 100,000 tons per annum. Commercial production is targeted for 1999.
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 & Company, retire and offer themselves for
re-appointment.
BOARD OF DIRECTORS
The term of office of the present Board expires in April 1997. Pursuant to Section
178(1) of the Companies Ordinance, 1984, the Board of Directors has fixed the
number of elected directors of the Company to be elected for the next term of three
year commencing from April 22, 1997 at ten. The retiring Directors are Messrs. Javed
Akbar, Mahmud Dossa, Michael G. Essex, Behram Hasan, Nasim A. Jafarey, Zaffar A. Klan,
Nisar A. Memon, Shaukat R. Mirza, Imtiaz Samee, and Abdul Shakur.
Mr. Stephen Potter has been nominated on the Board of Directors of the Company by the
Commonwealth Development Corporation, a creditor of the Company, by virtue of
contractual arrangements, and is not subject to retirement.
On behalf of the Board of Directors
Pattern of holding of the shares held by the shareholders of
Engro Chemical Pakistan Ltd. as at December 31, 1996
No. of Shareholders Shareholding Total Shares 
held
594 holding from 1 to 100 31,908
1,782 holding from 101 to 500 482,606
1,210 holding from 501 to 1000 880,519
1,604 holding from 1001 to 5000 3,527,320
359 holding from 5001 to 10000 2,511,271
136 holding from 10001 to 15000 1,678,307
56 holding from 15001 to 20000 973,262
34 holding from 20001 to 25000 759,255
44 holding from 25001 to 30000 1,215,983
21 holding from 30001 to 35000 678,092
14 holding from 35001 to 40000 528,414
11 holding from 40001 to 45000 459,447
19 holding from 45001 to 50000 898,414
7 holding from 50001 to 55000 361,577
6 holding from 55001 to 60000 349,185
3 holding from 60001 to 65000 185,886
5 holding from 65001 to 70000 336,965
5 holding from 70001 to 75000 363,168
2 holding from 75001 to 80000 152,086
2 holding from 80001 to 85000 165,366
3 holding from 85001 to 90000 263,410
5 holding from 90001 to 95000 466,167
2 holding from 95001 to 100000 197,423
2 holding from 100001 to 105000 204,992
3 holding from 105001 to 110000 320,436
6 holding from 110001 to 115000 676,817
2 holding from 125001 to 130000 257,176
1 holding from 130001 to 135000 133,334
1 holding from 135001 to 140000 135,476
6 holding from 140001 to 145000 852,947
2 holding from 145001 to 150000 295,160
1 holding from 150001 to 155000 151,396
1 holding from 155001 to 160000 156,293
1 holding from 160001 to 165000 165,000
2 holding from 165001 to 170000 333,028
1 holding from 170001 to 175000 173,600
1 holding from 175001 to 180000 178,562
3 holding from 185001 to 190000 564,152
1 holding from 190001 to 195000 190,802
2 holding from 240001 to 245000 488,844
1 holding from 245001 to 250000 245,734
2 holding from 290001 to 295000 583,388
1 holding from 295001 to 300000 296,692
1 holding from 320001 to 325000 320,160
1 holding from 365001 to 370000 366,700
1 holding from 410001 to 415000 413,456
1 holding from 430001 to 435000 434,700
1 holding from 445001 to 450000 446,555
No. of Shareholders Shareholding Total Shares 
held
1 holding from 500001 to 505000 504,760
1 holding from 645001 to 650000 649,800
1 holding from 660001 to 665000 662,600
1 holding from 760001 to 765000 762,380
1 holding from 780001 to 785000 784,080
1 holding from 930001 to 935000 933,023
1 holding from 935001 to 940000 939,900
1 holding from 1000001 to 1005000 1,002,864
1 holding from 1005001 to 1010000 1,006,200
1 holding from 1055001 to 1060000 1,056,860
1 holding from 1260001 to 1265000 1,262,540
1 holding from 1365001 to 1370000 1,366,410
1 holding from 1650001 to 1655000 1,651,538
1 holding from 1680001 to 1685000 1,680,534
1 holding from 1740001 to 1745000 1,741,121