| BAIG SPINNING MILLS LIMITED |
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| Annual
Report 1997 |
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| CONTENTS |
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| COMPANY INFORMATION |
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| NOTICE
OF ANNUAL GENERAL MEETING |
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| DIRECTORS' REPORT TO THE
SHAREHOLDERS |
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| AUDITORS' REPORT TO THE MEMBERS |
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| BALANCE SHEET |
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| PROFIT AND LOSS ACCOUNT |
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| STATEMENT OF CHANGES IN
FINANCIAL POSITION |
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| NOTES TO THE ACCOUNTS |
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| PATTERN OF SHAREHOLDING |
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| COMPANY
INFORMATION |
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|
| BOARD
OF DIRECTORS |
|
|
| Mr.
Mirza Ikhtiar Baig |
Chairman & Chief
Executive |
|
| Mr.
Mirza Ishtiaq Baig |
Director |
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| Mr.
Mirza Mukhtar Baig |
Director |
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| Mrs.
Qudsia Baig |
|
Director |
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| Mrs.
Shireen Baig |
|
Director |
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| Mrs.
Afreen Baig |
|
Director |
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| Mr.
Taj Muhammad |
|
Director (Nominee I.C.P.) |
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| COMPANY
SECRETARY |
|
| Nadeem
Khan |
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| AUDITORS |
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| Hyder
Bhimji & Co. |
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| Chartered
Accountants |
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| REGISTERED OFFICE |
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| 208-A,
Clifton Centre, Block - 5, |
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| Clifton
Karachi-Pakistan. |
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| Telephone
' (92-21) 5863931-35 |
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| Fax · (92-21) 5874195 |
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| E.
mail. mibaig@baiggrp.khi.erum.com.pk
:-:~, |
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|
| MILLS |
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| A-5/A,
Manghopir Road, S.I.T.E., |
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| Karachi
- Pakistan. |
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| Tel
· 2426927 - 2426932 |
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| Fax
' 2423593 |
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| BANKERS |
|
| Citi
Bank, N.A. |
|
| Islamic
Investment Bank Limited |
|
| Habib
Bank Limited |
|
| Allied
Bank Limited |
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| National
Bank of Pakistan Limited |
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| United
Bank Limited |
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| Metropolitan
Bank Limited
: |
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| NOTICE
OF 25th ANNUAL GENERAL MEETING |
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| Notice
is hereby given. that the 25th Annual General Meeting of the shareholders of
Baig Spinning |
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| Mills
Limited will be held on Monday 30th, March 1998 at 2:00 p.m. at Company
Registered office, |
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| Karachi
to transact the following business |
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| 1.
To receive and adopt the Audited Accounts of the Company for the year ended
September 30, |
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| 1997
together with Directors and Auditors report thereon. |
|
|
| 2.
To appoint auditors for the period ending on the date of next annual general
meeting and fix |
|
| their
remuneration. The retiring Auditors M/s. Hyder Bhimji and Co. Chartered
Accountants, |
|
| have
offered themselves for Re-appointment. |
|
|
| 3.
To transact any other business with the permission of the Chair. |
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|
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| Dated:
March 7th, 1998 |
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| NOTES: |
|
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| 1.
The Share Transfer books of the Company will be closed from March 24th, 1998
to March |
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| 30th,
1998 (both days inclusive) |
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|
| 2.
A Members of the Company entitled to attend and vote may appoint another
person as his/ |
|
| her
proxy to attend and vote instead of himself/herself. |
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|
|
| DIRECTORS'
REPORT TO THE SHAREHOLDERS |
|
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| Your
Directors are pleased to place before you Company's Annual Report together
with audited |
|
| account
and auditors report thereon for the year ended 30th September 1997. The year
under |
|
| review
has proved to be a better year of operation as there has considerable
improvements in |
|
| the
sales, gross profit and profit before financial charges. Though the net
result before tax ended |
|
| in
loss, mainly due to heavy financial charges, the loss for. the year has been
substantially lower |
|
| than
the pervious year. |
|
|
| MANUFACTURING
AND OPERATING RESULTS |
|
|
| a)
Production |
|
|
| The
company has attained 91% (as against 89 % in 1996) utilization in production |
|
| capacity
of Cotton Yarn. Both production volume and sales revenue reached a |
|
| level
where it could be anticipated that the company would at least break |
|
| even.
Unfortunately due to high financial charges, raise in the power traffic |
|
| and
turnover tax burden (inspite of assessed losses) the operation has turned |
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| into
loss. |
|
|
| b)
Sales and Marketing |
|
|
| During
the year under review the company's overall sales have improve to |
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| Rs.
390.36 M from 349.28 M the previous year, recorded an increase of |
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| about
12%. However, the company's export have sharply declined tol.78 |
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| M
from Rs. 41 .00 M in the previous year. This is mainly due to our Yarn |
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| Prices
could not complete in the world market coupled with economic crises in |
|
| the
Far Eastern countries. |
|
|
| c)
Gross and Net Profit |
|
|
| Gross
profit for the year under review increased by 4.7% to Rs . 33.793 M from |
|
| Rs.
13.806Mthe previous year mainly due to increase in the sales volume |
|
| leading
to reduction in the per unit fixed cost and incidental reduction in the cost |
|
| of
sales by 4.7% to Rs. 356.576 M form Rs. 335.478 M the previous year. The |
|
| administrative
and selling expenses though fractionally reduce by 0.37% reflect |
|
| appreciable
control in the face of double digit inflation. The profit before financial |
|
| charges
has increase by 5% to Rs. 23.827 M from Rs 3. 815 M in the previous year. |
|
| The
company is carrying heavy financial charges. During the year the company |
|
| could
succeed to reduce financial charges by 14.7% to 40.86 M from Rs .47.90 |
|
| M
the previous year. However, the operation could not absorb financial charges
in |
|
| tote
and there is a loss before tax of Rs 17.039 M as compared to loss of Rs. |
|
| 44.094
M in the previous year. After decision of the Honourable Supreme Court in |
|
| favour
of CBR the company has paid 1/2% turnover tax for the previous three years |
|
| of
operations. The after tax loss of Rs. 23.464 M for the year with previous
accumulated |
|
| losses
of Rs. 96.742 M are instrumental in complete erosion of the equity base and |
|
| turning
it into negative equity at Rs. 13.207 M. |
|
|
| EXPANSION |
|
|
| The
existing project of 12,186 spindles is an undersize unit and the only way to
make it |
|
| viable
is to increase the number of spindles to about 14,000 plus. The directors
have decided |
|
| to
enhance production capacity of the cotton yarn by increasing the existing
spindles from |
|
| 12,816
to 14,560 spindles the maximum possible numbers the project can operate with |
|
| within
the space constraints. The expansion will make the project more cost
effective and |
|
| will
also result in additional cash generation. The expansion work has already
been undertaken |
|
| which
envisages setting up of four additional rings frames of 1744 spindles
alongwith one |
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| blow
room scutcher, three cards, two draw frames, one match coner, one simplex,
two |
|
| compressors.
The replacement of spindles with bloster and electric motors have also been |
|
| undertaken
in order to improve production. The majority of the machineries have arrived |
|
| and
the erection and related civil work is in progress. |
|
|
| The
total capital outlay on the expansion program was estimated to fall in the
region of |
|
| Rs.
22.00 M and the best of it was that the directors intended not to resort to
costly outside |
|
| borrowings
but to meet the substantial part of the cost through their own resources. In
this |
|
| connection
the directors have already given interest free loan of Rs. 13.00 M to the
company. |
|
| During
the year under review the company has incurred cost of Rs. 18.362 M on the
expansion |
|
| plan.
The expansion would generate additional production of lbs 1,100,000 per annum
and |
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| additional
cash generation would be about Rs. 10.00 M which will help redeeming debt |
|
| burden
of the company. Needles to mention that the company will also have increased |
|
| profitability. |
|
|
| BORROWING
AND PAYMENTS |
|
|
| The
Directors have regularized all loan accounts of the company with the banks.
On request |
|
| of
the company the HBL has enhanced cash finance limit from Rs. 10.00 m to Rs.
50.00 m. |
|
| During
the year under review the company have. made financial payments to the banks
of |
|
| Rs.
46.767 M comprising of interest and mark-up of Rs. 36.810 M and F.C.. loan
installment |
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| of
Rs. 9.957 M against financial charges and custom debentures of Rs. 12.415 M
paid |
|
| during
the previous year. The company have also cleared turnover tax liability of
Rs. 4.473 |
|
| M
of the previous three years of operations of the company. |
|
|
| FUTURE
PROSPECTS |
|
|
| On
raw cotton front the spinners have mixed feelings. However, there are no sign
of crisis |
|
| so
far. During the current year the company has been maintaining average raw
cotton |
|
| purchase
price at Rs. 2250/- which is almost at the year under review level. The
current |
|
| operation
of the company has so far followed positive trends set by the year under
review |
|
| and
the directors anticipate that this pursuit would continue and Insha-Allah we
will see |
|
| current
year as yet another year of good result. |
|
|
| However,
the long term future prospects of the Yarn and Fabric local industry is
uncertain. |
|
| Our
exports have been badly effected by the crises in the Far Eastern Countries.
The textile |
|
| sector
is already facing anti-dumping duty threat by the European union on Pakistani
Fabric. |
|
| The
devaluation of Pak Rupee has failed to brink any positive impact on country's
export. |
|
|
| Recently
the America has propose. d the introduction of Yarn, Fabric forward policy in
the |
|
| WTO
rules which the Asian Countries have out rightly rejected deeming it a
serious threat to |
|
| their
textile industry. If U.S.A proposal succeed it would prove more injurious
than dumping |
|
| charges. |
|
|
| EMPLOYEES
RELATIONSHIP |
|
|
| Directors
are happy to report that we have cordial relationship with all our workers,
staff and |
|
| executives
who have been very co-operative and responsive to the need of the Company. |
|
|
| AUDITORS |
|
|
| The
present Auditors M/s. Hyder Bhimji & CO, Chartered Accountants, retire
and being |
|
| eligible
offer themselves for re-appointment. |
|
|
| ACKNOWLEDGMENT |
|
|
| In
the end we wish to express special thanks to our Bankers and financial
institutions for |
|
| their
support and cooperation. We would also like to thank all the personnel of the
Company |
|
| for
their hard work and dedication. |
|
|
|
| AUDITORS'
REPORT TO THE MEMBERS |
|
|
| We
have audited the annexed balance sheet of BAIG SPINNING MILLS LIMITED as at
30th September, |
|
| 1997
and the related profit and loss account and statement of changes in Financial
Position (Cash |
|
| Flow),
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 purpose 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 the 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 respectively |
|
| give
a true and fair view of the state of the Company's affairs as at September
30, 1997 |
|
| and
of the loss and the' changes in financial position (Cash Flow) 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 the Note No. 27 in the Financial
Statement |
|
| wherein
the events more fully explained in the said note substantiates that the
Company |
|
| will
be able to continue as a going concern. |
|
|
HYDER BHIMJI & CO. |
|
| Karachi
24th February, 1998 |
|
Chartered Accountants |
|
|
|
|
|
| BALANCE
SHEET AS AT SEPTEMBER |
|
|
|
1997 |
1996 |
|
|
Note |
Rupees |
Rupees |
|
| CAPITAL
& LIABILITIES. |
|
|
|
| SHARE
CAPITAL. |
|
|
| Authorised |
|
| 10,000,000
Ordinary Shares of Rs. 10/- Each. |
|
100,000,000 |
100,000,000 |
|
|
========== |
========== |
|
| Issued,
Subscribed and Paid-up. |
|
| 9,100,000
Ordinary Shares of |
|
| Rs:
10/- each fully paid in Cash. |
|
91,000,000 |
91,000,000 |
|
|
| CAPITAL
RESERVE. |
|
16,000,000 |
16,000,000 |
|
| ACCUMULATED
(LOSS). |
|
(120,207,004) |
(96,742,326) |
|
|
---------- |
---------- |
|
| SURPLUS
ON REVALUATION |
|
(13,207,004) |
10,257,674 |
|
| OF
FIXED ASSETS. |
|
29,828,087 |
29,828,087 |
|
|
| LOAN
FROM DIRECTORS. |
|
3 |
13,000,000 |
-- |
|
| REDEEMABLE
CAPITAL. |
|
4 |
96,080,863 |
74,662,150 |
|
| DEBENTURES
& LONG-TERM LOAN. |
|
5 |
79,657,061 |
99,571,327 |
|
| DEFERRED
LIABILITY-Gratuity. |
|
6 |
726,962 |
745,936 |
|
| CURRENT
LIABILITIES. |
|
| Short
Term Finance Utilized under |
|
| Mark-up
arrangements. |
|
7 |
45,860,921 |
36,010,644 |
|
| Overdue
Custom Debentures. |
|
|
4,995,590 |
4,995,590 |
|
| Current
Portion of Long-Term Loan. |
|
5.1 |
19,914,266 |
19,914,266 |
|
| Creditors,
Accrued & Other Liabilities. |
|
8 |
13,351,257 |
21,509,262 |
|
| Provision
for Turnover Tax. |
|
24 |
1,951,883 |
-- |
|
|
---------- |
---------- |
|
|
86,073,917 |
82,429,762 |
|
| CONTINGENCIES
AND COMMITMENTS. |
|
9 |
-- |
-- |
|
|
|
|
|
---------- |
---------- |
|
|
Total |
|
292,159,886 |
297,494,936 |
|
|
=========== |
=========== |
|
|
| PROPERTY
AND ASSETS. |
|
| TANGIBLE
FIXED ASSETS. |
|
| Operating
Fixed Assets. |
|
10 |
179,008,057 |
191,881,767 |
|
| CAPITAL
WORK IN PROGRESS. |
|
11 |
18,362,119 |
-- |
|
| LONG-TERM
DEPOSITS AND |
|
|
|
| DEFERRED
COST. |
|
12 |
2,979,667 |
4,163,861 |
|
|
| CURRENT
ASSETS. |
|
|
| Stores,
Spares & Loose 'tools |
|
13 |
6,175,377 |
5,974,516 |
|
| Stock-in-Trade. |
|
14 |
51,012,356 |
55,584,824 |
|
| Trade
Debts. |
|
15 |
27,257,742 |
25,565,456 |
|
| Advances,
Deposits & Prepayments. |
|
16 |
3,960,823 |
2,044,158 |
|
| Cash
& Bank Balances. |
|
17 |
3,403,745 |
12,280,354 |
|
|
---------- |
---------- |
|
|
91,810,043 |
101,449,308 |
|
|
---------- |
---------- |
|
|
Total |
|
292,159,886 |
297,494,936 |
|
|
=========== |
=========== |
|
|
| NOTE:
The annexed notes form an integral part of these accounts. |
|
|
|
| PROFIT
AND LOSS ACCOUNT |
|
| FOR
THE YEAR ENDED SEPTEMBER 30, 1997. |
|
|
|
1997 |
1996 |
|
|
Note |
Rupees |
Rupees |
|
| Sales |
|
18 |
390,369,783 |
349,284,865 |
|
| Cost
of Sales |
|
19 |
356,576,598 |
335,478,205 |
|
|
|
---------- |
---------- |
|
| Gross
Profit |
|
|
33,793,185 |
13,806,660 |
|
| Operating
Expenses: |
|
|
|
|
| Administrative |
|
20 |
6,653,003 |
6,387,281 |
|
| Selling
& Distribution. |
|
21 |
3,593,501 |
4,062,448 |
|
|
|
---------- |
---------- |
|
|
|
10,246,504 |
10,449,729 |
|
|
|
---------- |
---------- |
|
| Operating
Profit. |
|
|
23,546,681 |
3,356,931 |
|
| Other
Income. |
|
22 |
280,361 |
458,631 |
|
|
|
---------- |
---------- |
|
| Profit
before Financial Charges. |
|
|
23,827,042 |
3,815,562 |
|
| Financial
Charges. |
|
23 |
(40,866,392) |
(47,909,593) |
|
|
|
---------- |
---------- |
|
| Loss
before Tax |
|
|
(17,039,350) |
(44,094,031) |
|
| Provision
for Income Tax - |
Current |
|
24 |
(1,951,883) |
-- |
|
|
- |
Prior years |
|
25 |
(4,473,445) |
-- |
|
|
|
|
---------- |
---------- |
|
| Net
(Loss) for the year |
|
(23,464,678) |
(44,094,031) |
|
| Accumulated
(Loss) brought forward |
|
(96,742,326) |
(52,648,295) |
|
|
---------- |
---------- |
|
| Accumulated
(Loss) carried to Balance Sheet |
|
(120,207,004) |
(96,742,326) |
|
|
========== |
========== |
|
| NOTE:
The annexed notes form an integral part of these accounts. |
|
|
|
| STATEMENT
OF CHANGES IN FINANCIAL POSITION |
|
| FOR
THE YEAR ENDED SEPTEMBER 30, 1997. |
|
|
|
1997 |
1996 |
|
|
Rupees |
Rupees |
|
| CASH
INFLOW FROM OPERATING ACTIVITIES |
|
| (Loss)
before taxation |
|
(17,039,350) |
(44,094,031) |
|
| Adjustment
for :Depreciation |
|
13,103,016 |
14,226,230 |
|
|
:Financial Charges |
|
40,866,392 |
47,909,593 |
|
| Loss
on disposal of Fixed Asset |
|
15,536 |
8,000 |
|
| Provision
for gratuity |
|
269,668 |
357,849 |
|
| Amortization
of Deferred Costs |
|
1,242,144 |
1,242,145 |
|
|
---------- |
---------- |
|
| Cash
generated from operations before |
|
|
|
| working
capital changes |
|
38,457,406 |
19,649,786 |
|
|
|
|
| Changes
in Working Capital |
|
|
| (Increase)/Decrease
in Current Assets |
|
| Stores,
Spares and Loose Tools |
|
(200,861) |
(4,812,924) |
|
| Stock-in-Trade |
|
4,572,468 |
(20,706,426) |
|
| Trade
Debts |
|
(1,692,286) |
9,652,426 |
|
| Advances,
Deposits, Prepayments |
|
|
|
| and
other Receivable |
|
(1,872,052) |
5,208,813 |
|
| Increase
in Short Term Finance |
|
9,850,277 |
7,748,690 |
|
| Increase/(Decrease)
in Creditors, Accrued and |
|
|
|
| other
liabilities. |
|
(752,245) |
3,380,265 |
|
|
---------- |
---------- |
|
|
9,905,301 |
470,844 |
|
|
---------- |
---------- |
|
| Cash
inflow from operations |
|
48,362,707 |
20,120,630 |
|
| Financial
Charges Paid |
|
(36,810,572) |
12,054,983) |
|
| Payment
of Income Tax |
|
(4,518,058) |
(611,246) |
|
| Long
Term Deposits |
|
(57,950) |
800 |
|
| Payment
of Gratuity |
|
(288,643) |
(192,008) |
|
|
---------- |
---------- |
|
| Net
Cash Inflow from operating activities |
|
6,687,484 |
7,263,193 |
|
|
|
|
| CASH
FLOW FROM INVESTING ACTIVITIES |
|
|
|
| Proceeds
from disposal of Fixed Asset |
|
50,000 |
20,000 |
|
| Fixed
Capital Expenditure |
|
(18,656,960) |
(1,543,927) |
|
|
---------- |
---------- |
|
| Net
Cash utilised in Investing Activities |
|
(18,606,960) |
(1,523,927) |
|
|
| CASH
FLOW FROM FINANCING ACTIVITIES |
|
|
| Demand
Finance. |
|
21,418,713 |
40,284,463 |
|
| Loan
from Directors. |
|
13,000,000 |
-- |
|
| Payment
of Debentures & Long-Term Loans. |
|
(9,957,133) |
(361,268) |
|
| Transfer
of Long Term Loan to Demand Finance. |
|
(9,957,133) |
(19,914,266) |
|
| Settlement
of Interest by Demand Finance. |
|
11,461,580) |
(20,370,197) |
|
|
---------- |
---------- |
|
| Net
Cash inflow/(outflow) from financing activities. |
|
3,042,867 |
(361,268) |
|
|
|
---------- |
---------- |
|
| Net
(Decrease)/increase in Cash and Bank Balances |
|
(8,876,609) |
5,377,998 |
|
| Cash
and bank balances at beginning of the year |
|
12,280,354 |
6,902,356 |
|
|
|
---------- |
---------- |
|
| Cash
and bank balances at the end of the year. |
|
3,403,745 |
12,280,354 |
|
|
========== |
========== |
|
|
|
|
|
| NOTES
TO THE ACCOUNTS |
|
| FOR
THE YEAR ENDED SEPTEMBER 30, 1997. |
|
|
| 1.
STATUS AND NATURE OF BUSINESS: |
|
|
| The
Company was incorporated on 12th August, 1972 as a Private Limited Company
and |
|
| was
converted into Public Limited Company on 4th September, 1990. The Shares of
the |
|
| Company
were quoted on Karachi Stock Exchange on 15th October, 1995. The principal |
|
| activity
of the Company is manufacturing and sale of Cotton Yarn. |
|
|
| 2.
SIGNIFICANT ACCOUNTING POLICIES: |
|
|
| 2.1
Accounting Convention: |
|
|
|
| The
accounts of the Company have been prepared under historical cost convention |
|
| modified
by revaluation of fixed assets. |
|
|
|
| 2.2
Foreign Currency Translation: |
|
|
| Assets
and liabilities in foreign currencies are translated into rupees at the rates
of |
|
| exchange
prevailing on the balance sheet date except where exchange risk cover |
|
| has
been obtained for repayment of liabilities in which case the rate contracted
for |
|
| is
used. Exchange differences in respect of foreign currency loans obtained for |
|
| acquisition
of fixed assets are incorporated in the cost of the relevant assets. All |
|
| others'
exchange differences are taken to profit and loss account. |
|
|
| 2.3
Gratuity: |
|
|
|
| The
company operates an unfunded gratuity scheme for its employees. Provision |
|
| is
made annually to cover obligations under the scheme. |
|
|
| 2.4
Taxation: |
|
|
| The
provision for current income tax is made in accordance with the provisions of |
|
| the
Income Tax Ordinance, 1979. The Company Accounts for deferred taxation for |
|
| all
material timing differences by using the liability method. |
|
|
| 2.5
Tangible Fixed Assets: |
|
|
| These
are stated at cost as modified by revaluation less accumulated depreciation |
|
| except
work in progress which is stated at cost. Depreciation is charged using the |
|
| reducing
balance method. |
|
|
| Full
year depreciation is charged on additions during the year except in case of |
|
| significant
additions or expansions where the charge for depreciation is made with |
|
| reference
to the date of commencement and operations of such assets. No |
|
| depreciation
is charged on assets deleted or retired during the year. |
|
|
| 2.6
Stores, Spares & Loose 'Tools: |
|
|
| Stores,
Spares and Loose Tools are valued at moving average cost except those in |
|
| transit
which are valued at actual cost. |
|
|
| 2.7
Stock-in-Trade: |
|
|
| Raw
and Packing materials are valued at Cost determined on first in first out
(FIFO) |
|
| method.
Work in process is valued at cost of materials plus proportionate overheads. |
|
| Finished
goods are valued at lower of average cost and net realisable value. |
|
|
| 2.8
Trade debts |
|
|
| All
bad debts which are considered irrecoverable are written off where as
provision |
|
