| BABRI COTTON MILLS LTD. |
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| 27TH
ANNUAL REPORT 1997 |
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| CONTENTS |
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| COMPANY'S
PROFILE |
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| NOTICE
OF ANNUAL GENERAL MEETING |
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| DIRECTORS'
REPORT |
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| AUDITORS'
REPORT |
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| BALANCE
SHEET |
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| PROFIT
& LOSS ACCOUNT |
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| CASH FLOW STATEMENT |
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| NOTES
TO THE ACCOUNTS |
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| PATTERN
OF SHAREHOLDING |
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| COMPANY'S
PROFILE |
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| BOARD
OF DIRECTORS |
RAZA KULI KHAN KHATTAK |
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|
Chairman/Chief Executive |
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BEGUM TEHMINA HABIBULLAH
KHAN |
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|
AHMAD KULI KHAN KHATTAK |
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|
Brig. (Retd.) MAHMUD JAN |
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|
HOSHANG M. KANDAWALA |
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MUHAMMAD AZHAR KHAN |
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MUSHTAQ AHMAD KHAN, FCA |
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|
SHAHEEN TARIQ KHALIL |
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M. JAWAID KHAN (SLIC) |
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| AUDITORS |
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HAMEED CHAUDHRI &
CO., |
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|
Chartered Accountants |
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| SECRETARY |
|
AMIN-UR-RASHEED |
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|
(Manager Corporate
Affairs) |
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| BANKERS |
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ALLIED BANK OF PAKISTAN
LTD. |
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|
HABIB BANK LIMITED |
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UNITED BANK LIMITED |
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| REGISTERED
OFFICE |
HABIBABAD, KOHAT |
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| & MILLS |
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Phone (0922) 512931 -
510063 |
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Fax: (0922) 510474 |
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| NOTICE
OF ANNUAL GENERAL MEETING |
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| Notice
is hereby given that 27th Annual General Meeting of the |
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| shareholders
of BABRI COTTON MILLS LIMITED will be held at Mills premises |
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| Habibabad,
Kohat on Monday, 30 March, 1998 at 01.15 P.M. to transact the |
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| following
business:- |
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| 1.
To confirm the minutes of the Annual General Meeting held on |
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| 31
March, 1997. |
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| 2.
To receive, consider and adopt the annual Audited Accounts |
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| together
with the Directors' and Auditors' reports thereon for the |
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| year
ended 30 September, 1997. |
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| 3.
To appoint Auditors for the year 1997-98 and fix their |
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| remuneration. |
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| 4.
To consider any other business which may be placed before the |
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| meeting
with the permission of the chair. |
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| NOTES: |
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| 1.
A member entitled to attend and vote at this meeting may appoint |
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| another
member as his/her proxy to attend and vote instead of him/her. |
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| The
instrument of proxy in order to be effective must be received by the |
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| company
not less than 48 hours before the meeting. |
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| 2.
The Register of Members and Share Transfer Books of the company shall |
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| remain
closed from 26 March, 1998 to 6 April, 1998 (both days |
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| inclusive).
Transfer of shares received in order at the Registered Office of |
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| the
company at the close of business hours on 25 March, 1998 will be |
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| considered
in time. |
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| 3.
Shareholders are requested to notify the change of address, if any, |
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| immediately. |
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| DIRECTORS'
ANNUAL REPORT TO THE SHAREHOLDERS |
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| Dear
Shareholders, |
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| The
Directors of your company are pleased to present the 27th annual report |
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| with
the balance sheet as on 30 September, 1997. The profit and loss account |
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| for
the year alongwith auditors' report on these accounts is also being |
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| presented.
We are pleased to report that performance of the company has |
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| improved
during the year under review. The company has earned net profit of |
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| Rs.
13.931 million and with extra ordinary gain on account of remission |
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| granted
by PICIC as a result of final settlement, the profit before taxation is Rs. |
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| 20.534
million as compared to Rs. 3.492 million for the previous year - 1996. |
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| The
operating profit has also increased to Rs. 30.352 million (1996: Rs. 19.644 |
|
| million).
This improvement in profitability is mainly due to production of super |
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| fine
counts and improved market conditions alongwith superior quality of yarn |
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| produced
by your mills during the year under review. |
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| FUTURE
OUTLOOK |
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| During
the last five months due to the unprecedented financial turmoil in south |
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| Asian
countries and massive devaluation of their currencies, the demand for |
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| Pakistan's
exportable yarn and cloth has gone down. Thus there is a glut in the |
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| domestic
market. The number of mills spinning super fine yarn has also |
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| increased.
Thus for the future we are expecting tougher competition in our |
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| speciality
of super fine counts. |
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| The
textile industry as a whole is being affected by the devaluation of Pakistani |
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| rupee
thus raising the price of imported materials. The rise in power tariff is
also |
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| an
unfavourable factor leading to the increase in the cost of production. |
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| Since
July 1996 sales tax @ 10% was levied on gross sales. This tax was further |
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| enhanced
on 1st March, 1997 to 12.55%. The imposition of the above |
|
| mentioned
sales tax has increased the cost of production of the company by |
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| Rs.
28.00 million per annum. For all the above mentioned reasons there is |
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| going
to be an increase in cost of production which we will not be able to |
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| pass
on to the consumer, so next year we are expecting lower profits. |
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| FINANCIAL
RESULTS |
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| The
total sales for the year under review were Rs. 260,205 million (1996: |
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| Rs.
253,592 million). Gross profit for the year amounted to Rs. 36.725 million |
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| which
is higher by Rs. 11.432 million when compared to the gross profit of |
|
| 1
996. Gross profit percentage also improved to 14.11% (1996: 9.97%). We are |
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| pleased
to report that the company has increased its operating profit to Rs. |
|
| 30.352
million (1996: Rs. 19.645 million). After adding other income of Rs. |
|
| 0.241
million and the extra ordinary gain of Rs. 6.603 million on account of |
|
| loans
liability waived off by PICIC towards payments made under the final |
|
| settlement
package offered by the PICIC. |
|
|
| Since
a total remission of Rs. 1 7.603 million has been offered, out of this only |
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| Rs.
6.603 million has been included in the profit of the current year. The |
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| remaining
amount of the waiver will be availed as and when the company will |
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| further
liquidate its remaining liabilities of Rs. 25 million to be paid in full by |
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| 30th
June, 1999. |
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|
| OPERATING
PERFORMANCE |
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| The
company with installed capacity of 25056 spindles has produced |
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| 1470191
kgs (1996:1831112 kgs) of super fine counts of yarn during the year |
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| under
review. Average count spun was 58.70 (1996:50.13), when converted |
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| into
20s count, the actual production works out to 7.392 million kgs (1996: |
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| 7.266
million kgs). The capacity of the plant was utilised to the extent of |
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| 98.58%
(1996; 98.55%). |
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| INVESTMENT
IN PLANT AND MACHINERY |
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| We
are pleased to inform you that inspire of financial constraints due to large |
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| payments
to PICIC on account of final settlement, we have managed to invest |
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| Rs.
24.842 million for addition of fifteen new Chinese Ring Spinning Frames |
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| towards
major renovation of the plant and addition of other fixed assets, the |
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| detail
of which is as under:- |
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|
(RUPEES IN 000) |
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| Buildings |
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|
743 |
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| PLANT
& MACHINERY: |
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| 1)
Cost OF 15-Ring Spinning |
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| Frames |
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|
18,586 |
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| 2)
Major replacements and |
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| renovations
capitalised |
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|
4,652 |
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| Tools,
machines and other |
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| office
machinery |
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|
69 |
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| Vehicles |
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|
792 |
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|
---------- |
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|
24,842 |
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========== |
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| PAYMENT
TO FINANCIAL INSTITUTIONS |
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| The
company has paid Rs. 29.902 million to the financial institutions. National |
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| Bank
of Pakistan was paid Rs. 11.902 million on account of mark up charges |
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| on
Cash Finance Limit, and PICIC Rs. 18.00 million, out of which Rs. 15.00 |
|
| million
were accounted for payment towards final settlement package made |
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| in
June, 1997. Another amount of Rs. 10.00 million has also been paid to PICIC |
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| subsequently
during December, 1997. |
|
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| The
company was required to pay PICIC Rs. 40.00 million in full and final |
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| settlement
of the total loans liability, out of which Rs. 25.00 million have been |
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| paid
upto 31 December, 1997 and the balance amount of Rs. 15.00 million is |
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| Payable
in installments of Rs. 5.00 million each by 30 June, 1998, 31 |
|
| December,
1998 and 30 June, 1999. We feel that the final 'settlement |
|
| Package
made with PICIC by the management, will finally relieve the |
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| company
of a 27 years old debt burden detained for the purchase of |
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| machinery
and shall contribute towards improvement of the profitability of the |
|
| company. |
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| DIVIDEND |
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| In
view of accumulated loss of Rs. 20.561 million being carried forward, your |
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| Directors
have decided not to recommend dividend to the ordinary shareholders of |
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| the
company. |
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| AUDITORS |
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| Your
company's auditors M/s Hameed Chaudhri & Co., Chartered |
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| Accountants,
H.M.House, 7-Bank Square, Lahore retire and as are eligible, offer |
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| themselves
for re-appointment for the next year. |
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| ACKNOWLEDGMENT |
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| Your
Directors acknowledge with thanks the efforts and cooperation of the |
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| team
of management and the work force. With good quality of imported cotton and |
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| investment
in machinery, specially the combers and the new Ring Frames, it is hoped |
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| that
with hard work and good planning, it will lead to higher profit for |
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| the
next year. |
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| We
also express our gratitude to the financial institutions i.e. National Bank
of |
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| Pakistan
and PICIC for their cooperation and financial assistance extended to |
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| company. |
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|
| AUDITORS'
REPORT TO THE MEMBERS |
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| We
have audited the annexed Balance Sheet of BABRI COTTON MILLS LIMITED as at |
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| 30
September, 1997 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 |
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| 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
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 |
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| 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 |
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| the
Company's business; and |
|
|
| (iii)
the business conducted, investments made and the |
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| expenditure
incurred during the year were in accordance with |
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| 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 Cash Flow Statement, together with the notes forming part |
|
| thereof,
give the information required i3y the Companies Ordinance, |
|
| 19.84
in the manner so required and, except for the contents of note |
|
| 15.2
and the extent to which these may affect the annexed accounts, |
|
| respectively
give a true and fair view of the state of the company's |
|
| affairs
as at 30 September, 1.997 and of the profit and cash flows for |
|
| the
year then ended; and |
|
|
| (d)
in our opinion, no Zakat was deductible at source under the Zakat and |
|
| Ushr
Ordinance, 1980. |
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|
|
|
HAMEED CHAUDHRI & CO. |
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| LAHORE:
MARCH 02, 1998 |
|
CHARTERED ACCOUNTANTS |
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|
|
| BALANCE
SHEET AS AT 30 SEPTEMBER, 1997 |
|
|
|
|
1997 |
1996 |
|
|
Note |
Rupees |
Rupees |
|
|
|
|
| SHARE
CAPITAL AND RESERVE |
|
|
| Authorised
capital |
|
|
|
| 5,000,000,ordinary
shares |
|
|
| of
Rs. 10 each |
|
3 |
50,000,000 |
50,000,000 |
|
|
|
|
========== |
========== |
|
| Issued,
subscribed and paid-up capital |
|
| 2,000,000
ordinary shares |
|
|
| of
Rs. 10 each issued for cash |
|
|
20,000,000 |
20,000,000 |
|
| Capital
Reserve |
|
|
4 |
6,000,000 |
6,000,000 |
|
| Accumulated
loss |
|
|
|
(20,560,923 |
(39,214,920) |
|
|
|
|
---------- |
---------- |
|
|
|
|
5,439,077 |
(13,214,920) |
|
|
|
|
| DEFERRED
LOAN |
|
|
5 |
0 |
24,288,949 |
|
| LONG
TERM LOANS |
|
|
6 |
10,000,000 |
25,336,398 |
|
| DEFERRED
CREDIT |
|
|
6.3(F) |
11,000,000 |
0 |
|
| DEFERRED
LIABILITIES |
|
|
|
| Provision
for gratuity |
|
|
|
5,939,429 |
5,063,017 |
|
|
|
|
| CURRENT
LIABILITIES |
|
|
|
---------- |
---------- |
|
| Current
portion of long |
|
|
6 |
15,000,000 |
8,860,946 |
|
| term loans |
|
|
|
7 |
85,366,940 |
41,645,510 |
|
| Short
term finances |
|
|
|
| Creditors,
accruals and |
|
|
8 |
20,561,934 |
15,240,515 |
|
| other
liabilities |
|
|
9 |
2,574,788 |
7,216,000 |
|
| Provision
for taxation |
|
|
|
306,580 |
306,674 |
|
|
|
|
|
|
---------- |
---------- |
|
| Unclaimed
dividend |
|
|
|
123,810,242 |
73,269,645 |
|
| CONTINGENCIES
AND COMMITMENTS |
|
10 |
|
|
|
|
|
156,188,748 |
114,743,089 |
|
|
|
|
========== |
========== |
|
|
|
|
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
| FIXED
CAPITAL EXPENDITURE |
|
|
|
|
|
| Operating
fixed assets |
|
11 |
43,629,568 |
43,595,319 |
|
| Non-operating
fixed assets |
|
12 |
1,448,222 |
1,448,222 |
|
| Capital
work-in-progress |
|
13 |
18,586 127 |
0 |
|
| Stores
held for capital |
|
|
|
| expenditure |
|
|
|
1,230,912 |
1,542,846 |
|
|
|
|
---------- |
---------- |
|
|
|
|
64,894,829 |
46,586,387 |
|
| LONG
TERM INVESTMENTS |
|
|
14 |
2,531,100 |
2,531,100 |
|
| DEPOSIT
FOR INVESTMENTS |
|
|
15 |
1,498,900 |
1,498,900 |
|
| LONG
TERM ADVANCES |
|
|
16 |
174,847 |
120,820 |
|
| LONG
TERM DEPOSITS AND |
|
|
|
| DEFERRED
COSTS |
|
|
17 |
640,746 |
61,780 |
|
|
|
|
| CURRENT
ASSETS |
|
|
|
| Stores,
spares and loose tools |
|
18 |
4,062,974 |
3,699,005 |
|
| Stock-in-trade |
|
19 |
73,268,110 |
44,206,900 |
|
| Trade
debtors |
|
20 |
40,000 |
704,495 |
|
| Advances,
deposits, prepayments |
|
|
| and
other receivables |
|
21 |
8,098,145 |
14,506,061 |
|
| Cash
and bank balances |
|
22 |
979,097 |
827,641 |
|
|
|
|
---------- |
---------- |
|
|
|
86,448,326 |
63,944,102 |
|
|
|
|
---------- |
---------- |
|
|
|
|
|
156,188,748 |
114,743,089 |
|
|
|
|
========== |
========== |
|
|
|
| PROFIT
AND LOSS ACCOUNT |
|
| FOR
THE YEAR ENDED 30 SEPTEMBER, 1997 |
|
|
|
|
|
1997 |
1996 |
|
|
|
|
Rupees |
Rupees |
|
|
|
|
| SALES - Net |
|
|
23 |
260,204,766 |
253,592,155 |
|
| COST
OF SALES |
|
24 |
223,479,839 |
228,299,242 |
|
|
|
|
---------- |
---------- |
|
| GROSS
PROFIT |
|
|
36,724,927 |
25,292,913 |
|
| ADMINISTRATIVE
AND SELLING |
|
|
| EXPENSES |
|
25 |
6,373,322 |
5,648,395 |
|
|
|
|
---------- |
---------- |
|
| OPERATING
PROFIT |
|
|
30,351,605 |
19,644,518 |
|
|
|
|
| OTHER
INCOME |
|
26 |
240,939 |
1,987,251 |
|
|
|
|
---------- |
---------- |
|
|
|
|
30,592,544 |
21,631,769 |
|
| OTHER
CHARGES |
|
|
---------- |
---------- |
|
| Financial
- Net |
|
27 |
14,653,625 |
17,505,887 |
|
| Miscellaneous |
|
28 |
876,480 |
242,316 |
|
| Donation
to Waqf-e-Kuli Khan Trust |
|
377,060 |
130,365 |
|
| Workers'
(Profit) Participation fund |
|
754,125 |
260,730 |
|
|
|
---------- |
---------- |
|
|
|
16,661,290 |
18,139,298 |
|
|
|
|
---------- |
---------- |
|
| PROFIT
BEFORE EXTRAORDINARY ITEMS |
|
|
| AND
TAXATION |
|
|
13,931,254 |
3,492,471 |
|
| EXTRAODINARY
ITEM |
|
6.3(f) |
6,602,542 |
0 |
|
|
|
|
---------- |
---------- |
|
| PROFIT
BEFORE TAXATION |
|
|
20,533,796 |
3,492,471 |
|
| PROVISION
FOR TAXATION |
|
|
|
|
| Current |
|
|
1,311,735 |
1,305,000 |
|
| Prior years |
|
|
568,064 |
5,911,000 |
|
|
|
|
---------- |
---------- |
|
|
|
|
1,879,799 |
7,216,000 |
|
|
|
|
---------- |
---------- |
|
| PROFIT/(LOSS)
- after taxation |
|
|
18,653,997 |
(3,723,529) |
|
| (ACCUMULATED
Loss) - brought forward |
|
(39,214,920) |
(35,491,391) |
|
|
|
|
---------- |
---------- |
|
| (ACCUMULATED
LOSS] - carried |
|
|
|
|
| to
Balance Sheet |
|
|
20,560,923 |
(39,214,920) |
|
|
|
|
========== |
========== |
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
|
| CASH
FLOW STATEMENT |
|
| FOR
THE YEAR ENDED 30 SEPTEMBER, 1997 |
|
|
|
|
|
1997 |
1996 |
|
|
|
|
Rupees |
Rupees |
|
|
|
|
| CASH
INFLOW FROM OPERATING |
|
|
|
| ACTIVITIES
(note 'A') |
|
|
|
14,461,035 |
23,394,012 |
|
|
|
|
| CASH
FLOW FROM FINANCING ACTIVITIES |
|
|
---------- |
---------- |
|
| Long
term loans repaid created |
|
|
(16,612,007) |
7,888,344 |
|
| Short
term finances - net |
|
|
43,721,430J |
2,019,487 |
|
| Financial
charges paid |
|
|
|
(17,483,497) |
(27,064,046) |
|
| Dividend
paid |
|
|
|
(94) |
(3,180) |
|
|
|
|
|
---------- |
---------- |
|
| NET
CASH INFLOW/(OUTFLOW)/FROM |
|
|
|
| FINANCING
ACTIVITIES |
|
|
9,625,832 |
(17,159,395) |
|
|
|
---------- |
---------- |
|
| CASH
FLOW FROM INVESTING ACTIVITIES |
|
|
|
| Fixed
capital expenditure |
|
|
(24,531,311) |
(6,150,785) |
|
| Sale
proceeds of fixed assets |
|
1,21 4,350 |
138,375 |
|
| Long
term deposits |
|
|
(500,000) |
0 |
|
| Deferred
costs incurred |
|
|
(118,450) |
0 |
|
|
|
|
|
---------- |
---------- |
|
| NET
CASH (OUTFLOW) FROM INVESTING |
|
|
|
| ACTIVITIES |
|
|
|
(23,935,411) |
(6,012,410) |
|
|
|
|
|
---------- |
---------- |
|
| NET
INCREASE IN CASH AND CASH |
|
|
|
| EQUIVALENTS |
|
151,456 |
222,207 |
|
|
|
|
|
|
| CASH
AND CASH EQUIVALENTS |
|
|
|
| -
At the beginning of the year |
|
|
827,641 |
605,434 |
|
|
|
|
|
|
| CASH
AND CASH EQUIVALENTS |
|
|
---------- |
---------- |
|
| -
At the end of the year |
|
|
979,097 |
827,641 |
|
|
|
|
|
========== |
========== |
|
|
| The
annexed note 'A' forms an integral part of this statement. |
|
|
|
| NOTE 'A' |
|
|
|
1997 |
1996 |
|
|
|
Rupees |
Rupees |
|
| CASH
FLOW FROM OPERATING ACTIVITIES |
|
|
|
| Profit
for the year - before taxation |
|
|
| and
extra-ordinary item |
|
|
13,931,254 |
3,492,471 |
|
| Adjustments
for: |
|
|
|
|
| Depreciation |
|
|
|
|
| Loss/Gain)
on disposal |
|
|
4,584,483 |
4,516,246 |
|
| of
fixed assets |
|
|
|
424,036 |
(81,956) |
|
| Provision
for gratuity - net |
|
|
876,412 |
1,783,450 |
|
| Provision
for diminution in value |
|
|
|
| of
investments written -back |
|
|
|
(1,800,975) |
|
| Deferred
cost amortised |
|
|
39,484 |
43,716 |
|
| Financial
charges |
|
|
16,063,505 |
18,386,189 |
|
|
|
|
|
---------- |
---------- |
|
| CASH
FLOW FROM OPERATING ACTIVITIES |
|
|
|
|
| -
Before working capital changes |
|
|
35,919,174 |
26,339,141 |
|
| (Incre72se)/Decrease
in current assets |
|
---------- |
---------- |
|
| Stores,
spares and loose tools |
|
|
(363,969) |
(478,4,13) |
|
| Stock
in trade |
|
|
(29,061,210) |
(2,689,754) |
|
| Trade
debtors |
|
|
664,495 |
(542,728) |
|
| Advances,
deposits, prepayments |
|
|
|
| and
other receivables (excluding |
|
|
|
| taxes
paid and current portion |
|
|
| of
long term advances) |
|
|
3,705,022 |
565,828 |
|
| Increase
in creditors, accrued and |
|
|
|
|
| other
liabilities (excluding accrued |
|
|
|
| financial
charges) |
|
|
7,469,667 |
3,046,798 |
|
|
|
|
|
---------- |
---------- |
|
|
|
(17,585,995) |
(98,269) |
|
| CASH
INFLOW FROM OPERATING |
|
|
---------- |
---------- |
|
| ACTIVITIES
- Before taxation |
|
|
18,333,179 |
26,240,872 |
|
| Taxes paid |
|
|
|
(3,779,117) |
(2,798,692) |
|
|
|
---------- |
---------- |
|
| CASH
INFLOW FROM OPERATING |
|
|
|
| ACTIVITIES
- After taxation |
|
|
14,554,062 |
23,442,180 |
|
|
|
|
| Net
increase in long term |
|
|
|
| advances |
|
|
(93,027) |
(48,168) |
|
|
|
|
---------- |
---------- |
|
|
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