PakSearch.com - Pakistan's Best Business site with Annual Reports, Laws and Articles

For business information, annual reports, laws, ordinances, regulations and articles.

National Foods Limited

(Annual Report 1996)

Contents

Board of Directors

Notice of Meeting

Chairman's Review

Report of the Directors

Auditors' Report to the Members

Balance Sheet

Profit and Loss Account

Statement of Changes in Financial Position

(Cash Flow Statement)

Notes to the Accounts

Pattern of Share Holdings

Board of Directors

MR. A. MAJEED

Chairman

MR. WAQAR HASAN

Managing Director

Chief Executive

MR. KHAWAR M. BUTT

Director

MR. ABRAR HASAN

Director

MR. SIRAJUDDIN AHMAD

Director (I.C.P. Nominee)

MR. ZAHID MAJEED

Director

MS. JAMILA WAQAR

Director

MS. M. E. MAJEED

Director

MR. HABIB A. ISMAIL

Company Secretary

REGISTERED OFFICE:

12/CL-6, Claremont Road, Civil Lines, Karachi-75530.

Phones: 515564, 515740, 515981, 5662687

P.O. Box No. 15509 Fax No. 5684870

Tlx: 20191 CATEL PK.

AUDITORS:

Riaz Ahmad, Saqib, Gohar & Company

Chartered Accountants,

5-Nasim Cooperative Housing Society Ltd,

Major Nazir Bhatti Road,

Off Shahid-e-Millat Road,

Karachi.

Phones: 4945427 - 4932629

REGISTRAR

Noble Computer Services (Pvt.) Limited

1st Floor, AI-Manzoor Building,

Dr. Ziauddin Ahmad Road, Karachi.

Phones: 2635511-14

BANKERS

Muslim Commercial Bank Limited,

Clifton Corporate Branch,

Kulsom Court, Clifton,

Karachi.

Bank Al-Habib Limited

Mackvolk Building,

I. I. Chundrigar Road, Karachi.

Notice of Meeting

Notice is hereby given that the 25th Annual General Meeting of National Foods Limited will be

held at the Registered Office situated at 12/CL-6, Claremont Road, Civil Lines, Karachi on Sunday

the 22nd December 1996, at 10.00 a.m. to transact the following business:-

1. To read and confirm the minutes of last Annual General Meeting held on 26th December 1995.

2. To receive consider and approve the Audited Accounts of the Company for the year ended

30th June 1996.

3. To approve payment of Cash Dividend at 10% (Re. 1 per share of Rs. 10 each) as recommended

by the Directors.

4. To approve issue of Bonus Shares @ 10% to such shareholders, whose names appear on the

members book on 22nd December 1996.

5. To appoint Auditors for the year 1996-97 and to fix their remunerations. The present

auditors Messrs Riaz Ahmed, Saqib, Gohar & Co., Chartered Accountants retire, being

eligible for re-appointment.

(Consent received from Messrs Riaz Ahmad, Saqib, Gohar & Company for appointment

as Auditors).

6. To transact any other business with the permission of the Chairman.

By Order of the Board

Karachi; 30th November, 1996.

( HABIB A. ISMAIL )

Company Secretary

NOTES:

1. The share transfer books of the Company will remain closed from 15th. December 1996

to 26th December, 1996 (Both days inclusive).

2. All members are entitled to attend and vote at the meeting.

3. A member entitled to attend and vote at the Meeting may appoint a proxy to attend, speak

and vote for him/her. A proxy needs to be a member of the Company.

4. In order to be valid, an instrument of proxy and the Power of Attorney or other authority

(if any) under which it is signed, or a notarially certified copy of such power or authority,

must be deposited at the Registered Office of the Company not less than 48 hours before

the time of the meeting.

5. Shareholders are requested to notify immediately, any change in their Registered

address.

Chairman's Review

FOCUS ON THE FUTURE

National Food Ltd., is passing through a difficult period. The year in review brought out a strange

scenario, sales increased by 63% in the first half of the year but then stagnated with an increase

of only 10% in the second half. The excellent performance in the first six months boosted over

all sales, yet the gap between the first and second halves is so great that it cannot be blamed

on external factors only.

This has prompted the management to look into each and every Department critically keeping

our focus on the future. We are on record as makin9 the commitment that employees are our

assets; business is not machines and buildings only - without competent staff at all levels, no

Organisation's future can be bright. The management is, therefore, busy in evaluating the present

Organisation structure, re-writing the assignments of staff, reducing the management layers and

simplifying the information procedures.

I am also pleased to report that brought, new educated young talent has been inducted in costing,

marketing and purchase sections. The main objective, apart from repairing the Organisation

for the future, is to further reduce the cost of production which will result in the increase of

profits.

On the process development side, the new salt plant at Lahore is in production and after teethin9

problems is producing quality products.

A new pickle plant is almost ready to go into production which will improve the quality and

will result in cost reduction. A new project for wet processing is being planned for Karachi

in technical collaboration with CEREBOS FOODS, a reputed Multinational flood Company based

in Australia. This new venture will increase our range of value-added products for local sales

and export marketing.

These steps will certainly diversify the Company product wise and geographically.

A new initiative, has also been taken to reorganise agencies in exporting Countries, which has

already started yielding results. Hopefully the export sales will grow significantly this year and

in future. Moreover this business is on strictly L/C at sight basis, thus enhancing the liquidity

of the Company.

The present process of evaluation will give us an opportunity to improve Company's performance

for future and enhancing our corporate image locally as well as in export. When this evaluation

process is completed, a11 the members of the Company at higher as well as lower level will clearly

have description of the goal which will be specific, measurable, attainable and realistic. This

process is time related and will be completed within this calendar year.

Lastly it is my pleasant duty to congratulate National Foods' Management for their achievement

in the present difficult circumstances of stagflation and I sincerely hope that they will continue

to work on the professional lines defined so that the future of your Company is secured.

A. MAJEED

Chairman

Chairman's Review

RESULT AND PERFORMANCE

The audited accounts for the financial year ending 1995-96 are presented herewith. A summary

of the key financial indicators along with the profit and appropriations are presented below:-

PROFIT AND APPROPRIATIONS

1996

1995

Profit after taxation

7,790,939

9,933,708

Un-appropriated profit

17,027,728

12,524,500

----------

24,818,667

22,458,208

Appropriations:

Proposed Cash Dividend

2,986,764

2,715,240

Reserve for issue of Bonus Shares

2,986,764

2,715,240

----------

5,973,528

5,430,480

----------

18,845,139

17,027,728

==========

CASH DIVIDEND / BONUS

The company has generated a profit of Rs.7,790,939, after tax and after adding to the Un-

appropriated Profit of Rs.17,027,728 brought forward from last year, the Board of Directors

have announced 10% Cash Dividend & 10% Bonus Shares to be issued in the ratios of 1:10;

i.e. one Bonus Share for every ten Ordinary Shares held by the members whose names appear

in the members register on 22-12-1996.

PERFORMANCE REPORT

This year we have had a moderate growth of 20.9% compared to the previous years. One of

the poor performers was export which finished with reduced growth of 25.7%. On the other

hand the local sales had a tremendous growth of 31.7%. Needless to say this growth has been

achieved under tremendous inflationary pressures and the entire marketing and sales staff needs

to be congratulated. Operating profit on the other hand is lower by 15.3% in monetary terms

compared to last year.

Despite an overall growth, the profit has reduced primarily due to change in contribution of the

local and export sales. This year we finished with an approximate ratio of 90:10 whereas last

year the ratio was 80:20.

The reduction of profitable export sales by 25.7% has led to reduced earnings this year. Primary

reasons are:

1. Ban on export of Red Chillies continues. It is three years now and the government

has not moved towards purging this prohibition.

ii. Change of our Saudi Arabian distributors and appointment of new USA distributor.

It was realised that our past distributor in Saudi Arabia was operating with a huge credit margin

with us and our receivable were unnecessarily high. Also sales being managed by them were static

and no positive growth was being accomplished. We have appointed a better and bigger

distributor for that territory and all sales are being transacted on L/C at site basis.

The same move was realised in USA and we have managed to increase our sales to this region

alongwith payments realising on L/C at site basis.

All our export distributors are now operating with us on L/C at site basis. The effect of reduction

in our financial expenditure will be tremendous and will be realised next year. The effect can

however be seen this Fear in the reduction in the number of receivables in days compared to

previous years in the financial charts presented below.

Salt market on the other hand has levelled out and the boom that was seen in the last two years

has somewhat diminished.

INFLATIONARY TRENDS

The growth of last year has been nullified by increased inflation in the raw and packaging

materials. The chilli crop, despite the ban this year is very good but the local prices prevailing

in the market are still very high.

Increase import costs of various packaging material suppliers has been passed on to us with a

minimum effect of 18%. Imposition of sales tax on all inputs has also caused our cost of goods

sold to rise.

All this increased costs have prompted us to increase our prices as well and they have been

effected more then twice in a year. However, with very increased competition in the local market,

the entire increase in cost can not be passed on to the consumer due to choice and availability

of other brands. This has resulted in tremendous inflationary pressures and have forced us to

reduce our expenditures and operate with minimal costs.

We have also reduced our inventory levels at the plant so as to reduce our financial cost of carrying

stock. This effect can also be seen in the various charts presented below.

The effect of taking these measures will inshallah be realised in the next financial year.

FUTURE

Seeing the current economic trends it was predicted couple of years back by our Board of

Directors that such an inflationary period will become part of our lives and this trap would

eventually become unavoidable.

This thinking promulgated us to change our strategy and start concentrating on developing our

expert markets. The very first step was to identify the kinds of food markets available outside

and then work out a positioning strategy for our present range of products in that market.

Also new range of products need to be developed for the mainstream markets and work on them

has already started.

One of the main needs for improving our export performance was to develop a proper and reliable

export distribution system. This was one of our main reasons for changing the distribution Saudi

Arabia and USA.

The outlook for the future has already been realised and work is underway. Export marketing

is the key to the survival of NFL in this inflationary trend.

AUDITORS

The present auditors M/s. Riaz Abroad, Saqib, Gohar & Company, Chartered Accountants retire,

being eligible for re-appointment.

Consent has received from M/s. Riaz Ahmad, Saqib, Gohar & Company, Chartered Accountants

for re-appointment as auditors for the year 1996-97, on the same remuneration.

PATTERN OF SHARE HOLDING

The pattern of Share Holding as referred by Section 236 of the Companies Ordinance 1984

is enclosed.

RECOGNITION

In the end I am very grateful to the entire team of National Foods for their very good performance

last year.

Though times are tough and general outlook on economic conditions are not very conducive

the team has been working with highly motivated spirits and has transacted their jobs timely and

efficiently.

I congratulate them all and hope that performances would be improved further enabling us to

reach new pinnacles.

On behalf of the Board of Directors of National Foods Limited.

Auditors' Report to the Members

We have audited the annexed balance sheet of National Foods Limited as at 30 June,

1996 and the related profit and loss account and the cash flow statement, together with the

notes forming part thereof, for the year then ended and we state that we have obtained all

the information and explanations which 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, investment made and the expenditure incurred during

the year were in accordance with the objects of the company;

given to us, the balance sheet, profit and loss account and the cash flow statement,

together with the notes forming part thereof, give the information required by the

Companies Ordinance, 1984 in the manner so required and respectively give a true

and fair view of the state of the company's affairs as at 30 June 1996 and of the

profit for the year then ended; and

(d) In our opinion, Zakat deductable 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.

RIAZ AHMAD, SAQIB, GOHAR & CO.

Karachi: 19th November, 1996.

Chartered Accountants

Balance Sheet as on 30th June 1996,

NOTE

1996

1995

Rupees

CAPITAL AND LIABILITIES

Capital and Reserve

Authorised Capital 5,000,000

(1995: 5,000,000) Ordinary

Shares of Rs.10/- each

50,000,000

Issued, Subscribed and Paid-up Capital

29,867,640

27,152,400

Capital Reserve - Share Premium

6,102,100

Reserve for Issue of Bonus shares

2,986,764

2,715,240

Unappropriated Profit

18,845,139

17,027,728

----------

Long Term loans - Secured

57,801,643

52,997,468

Long term loans

333,268

625,268

Liabilities against assets subject finance lease

1,330,141

----------

1,663,409

625,268

Deferred Liabilities

Deferred Taxation

1,450,000

Current Liabilities and Provision

Current portion of long term loans

1,558,580

132,000

Finances utilized under mark-up

arrangements - Secured

61,674,985

45,902,791

Creditors, accrued & other liabilities

35,412,368

36,237,670

Proposed cash dividend

2,986,764

2,715,240

----------

101,632,697

84,987,701

Contingencies and Commitments

----------

162,547,749

140,060,437

==========

The annexed notes form an integral part of these accounts.

PROPERTY AND ASSETS

Fixed Capital Expenditure

Fixed assets

44,007,001

41,075,385

Assets subject to finance lease

2,873,428

Capital work-in-progress

10,970,239

7,342,816

----------

57,850,668

48,418,201

Long Term Deposits

718,851

365,731

Current Assets

Stock-in-trade

78,251,712

57,968,521

Trade debts - Unsecured -

Considered good

14,154,820

23,830,045

Advances, deposits, prepayments, and

other receivables

10,507,876

8,897,266

Cash and bank balances

1,063,822

580,673

----------

103,978,230

91,276,505

----------

162,547,749

140,060,437

==========

Profit and Loss Account

For the year ended 30th June 1996

NOTE

1996

1995

Rupees

Sales

337,202,404

278,950,463

Less: Cost of sales

269,257,624

222,566,535

Gross profit

67,944,780

56,383,928

Less: Administrative expenses

11,772,599

10,118,247

Selling and distribution expenses

38,923,752

31,089,036

Financial expenses

7,976,678

5,169,701

Workers' profit participation Fund

551,000

632,000

----------

59,224,029

47,008,984

----------

Operating Profit

8,720,751

9,374,944

Add: Other income

1,470,188

2,658,764

----------

Profit before taxation

10,190,939

12,033,708

Taxation

2,400,000

2,100,000

----------

Profit after taxation

7,790,939

9,933,708

Add: Unappropriated profit brought

forward from pervious year

17,027,728

12,524,500

----------

Profit available for appropriation

24,818,667

22,458,208

APPROPRIATION:

Proposed cash dividend 10% (1995: 10%)

2,986,764

2,715,240

Reserve for Issue of Bonus Share

(1995: 10%)

2,986,764

2,715,240

----------

5,973,528

5,430,480

Unappropriated profit carried forward

----------

to balance sheet

18,845,139

17,027,728

==========

The annexed notes form an integral part of these accounts.

WAQAR HASAN

KHAWAR M. BUTT

CHIEF EXECUTIVE

DIRECTOR

Statement of Changes in Financial Position

(Cash Flow Statement)

For the year ended 30th June 1996

1996

1995

NOTE

Rupees

CASH FLOW FROM OPERATIING ACTIVITIES

Profit before taxation

10,190,939

12,033,708

Adjustments for non cash charges and other items

Depreciation

5,838,804

5,615,272

Amortisation of leased assets

528,982

Profit on sale of fixed assets

(333,689)

(282,740)

Financial charges

7,976,678

5,169,701

----------

14,010,775

10,502,233

----------

Operating profit before working capital changes

24,201,714