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

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

CLARIANT PAKISTAN LIMITED

ANNUAL REPORT 1997

CONTENTS

Company Information

Chairman

Dr. Hanspeter Knopfel

Chief Executive &

Managing Director

Farhat A. Mirza

Directors

J. Mahler

F.E. Fetzer

Albert Hug

Herbert Wohlmann

Razi-ur-Rehman Khan

Secretary

S.K. Mehdi

Bankers

ABN-Amro Bank

Allied Bank of Pakistan Limited

ANZ Grindlays Bank Plc

Bank of Tokyo & Mitsubishi Ltd.

Credit Agricole Indosuez-The Global French Bank

Citibank N.A.

Deutsche Bank

Emirates Bank International PJSC

Habib Bank Limited

The Hongkong & Shanghai Banking Corporation Limited

Muslim Commercial Bank Limited

National Bank of Pakistan

Standard Chartered Bank

Societe Generale-The French and International Bank

Auditors

A.F. Ferguson & Co., Chartered Accountants

Registered Office

5th Floor, Bahria Complex,

24, M.T. Khan Road,

Karachi

Share Registrars

Ferguson Associates (Pvt). Ltd.,

State Life Building 1-A,

I.I. Chundrigar Road,

Karachi

Factories

Petaro Road, Jamshoro.

Korangi Industrial Area, Karachi.

Katarband Road, Thokar Niaz Baig, Lahore.

Milestones

1886

Sandoz begins producing textile dyes in Basle

1919

Diversification into dyes and chemicals for paper

1926

Business expanded to include textile chemicals

1931

Production of leather dyes begins

1948

Start of production at Muttenz plant near Basle

1963

Sandoz (Pakistan) Limited incorporated

1965

Karachi pilot project started for manufacturing of Chemicals and Dyestuffs

1970

Manufacturing of Chemicals products commenced at Jamshoro factory

1980

Pilot project for manufacturing of Dyestuffs also shifted to Jamshoro factory

1989

Leased dyestuffs manufacturing plant at Lahore, subsequently, acquired in 1995

1994

Masterbatch factory at Korangi, Karachi started

1995

Sandoz Chemicals Division globally demerged by establishment of Clariant Ltd. at Muttenz

1996

Clariant Pakistan Limited incorporated by demerging Chemicals Divisions of Sandoz (Pakistan) Limited.

1997

Acquisition of Specialty Chemicals Business of Hoechst.

Report of the Board of Directors

The Directors of your company take pleasure in

presenting the Annual Accounts for the operating

year of the Company ended on 31 December 1997.

Board of Director

Messrs Raymond Bilger, Michael Willome and

Dr. S. Mubarik Ali resigned from the Board on 22

April 1998. Messrs J. Mahler, Albert Hug and

F.E. Fetzer joined the Board as nominees of Clariant

International Limited. The Board places on record its

appreciation for the valuable contribution made by

the outgoing directors and welcomes the new

members on the Board.

Business Overview

The Board is pleased to record that sales grew by

15% during the year. This is despite the continued

low activity in the textile processing units and a

continuation of a somewhat depressed business

activity in the Industrial Line Leather. Selling prices

remained under pressure due to cheaper import of

dyes and chemicals.

The integration of the Specialty Chemicals business

of former Hoechst Pakistan Limited into Clariant

Pakistan through on Assets Purchase Deal has

enlarged the product range of your Company and

provides synergies in textile and leather chemicals

in addition to making available a good range of

products in the field of Cellulose, Ethers and

Polymerisates which have a promising future. It has

also enlarged the scope for indenting and ex-stock

business in Surfactants, Fine Chemicals, Pigments

and Additives.

Sale of Masterbatches continues to grow at a

satisfactory rate despite severe competition from

domestic and foreign suppliers.

Profit for the year is lower than 1996 mainly due to

the decision taken by your Company to make full

provision against long overdue outstandings and

initiating legal proceedings against defaulters. In

line with Company established policy, slow moving

and obsolete stocks had to be fully provided for so

that the enlarged Clariant brings clarity & transpar-

ency to ensure more meaningful monitoring of

business performance.

Finance and Accounts

Despite the need for making large provisions against slow

moving and obsolete stocks and doubtful debts as mentioned

earlier, control on costs and improvement in productivity have

enabled the Company to earn a profit after tax of Rs.36.27

Mio, leading to earning per share of Rs.3.60.

The need to conserve cash for business needs continued.

According, the Directors have decided to propose a stock

dividend (bonus shares) of 35%.

The proposed appropriation of profit of the Company is as

under:

(Rs '000)

Profit for the year after taxation

36,265

Unappropriated profit brought forward

2,603

----------

Profit available for appropriation

38,868

Appropriation:

Proposed stock dividend @35%

35,162

----------

Unappropriated profit carried forward

3,706

----------

Pattern of shareholding

A statement of the pattern of shareholding is shown on

page 32.

Holding company

The company is a subsidiary of Clariant International Limited

incorporated in Switzerland.

Auditors

The present auditors, Messrs A.F. Ferguson & Co., retiring on

the date of Annual General Meeting, being eligible, have

offered themselves for reappointment.

Future Outlook

Government's efforts to brighten the economic scene has so

far not had much success perhaps due to administrative

reasons which are now under Government's full control. The

impact of currency turmoil in the Asean Region has yet to

come on Pakistan's economy but signs are visible that it will

take its toll.

Your company is fully aware of these developments and is

taking every possible step to mitigate the effect on its

operations. Greater emphasis is being placed on exports and

some success has been achieved in obtaining sizeable orders

for the export of dyes to Switzerland and other countries.

Moreover, the synergies arising from the Clariant/Hoechst

integration envisaged for 1997 have been materialised and

synergies pertaining to times ahead augurs well for the

future. This will enhance company's competitive ability in

market coverage, prices and unmatched quality of service.

The sale of products belonging to Cellulose, Ethers &

Polymerisates is showing encouraging results and your

company is fast regaining the market lost to competitors

during the past two to three years. The direct indenting

business for the new range of products belong to Surfactants,

Fine Chemicals, Pigments and Additives is also increasing

despite severe competition in these fields from all over the

world.

Acknowledgment

1997 was yet another year of transition which created stress

in all spheres of operations. The speedy integration of the

Specialty Chemicals business of former Hoechst Pakistan

Limited into Clariant Pakistan Limited speaks volumes for the

dedication of all staff members and workers to achieve the

goals set by the corporate management in Muttenz. The

Board is pleased to record its recognition for this excellent

effort and looks forward to their continued dedication and

interest to meet challenges in the future.

On behalf of the Board

Farhat A. Mirza

Managing Director

Karachi: 22 April 1998

Notice of Meeting

NOTICE is hereby given that the Second Annual

General Meeting of Clariant Pakistan Limited will be

held at the Overseas Investors Chamber of Com-

merce & Industry, Chamber of Commerce Building,

Talpur Road, Karachi on Friday, 5 June 1998 at

10:00 a.m., for the purpose of transacting the

following business:

Ordinary Business:

1. To receive and approve the Audited Accounts

for the year ended 31 December 1997

alongwith the Directors' Report thereon.

2. To appoint auditors for the year ending 31

December 1998 and to fix their remunera-

tion. M/s A.F. Ferguson & Company, Char-

tered Accountants, the retiring auditors offer

themselves for reappointment.

Special Business:

ORDINARY RESOLUTION

3. To approve 35% stock dividend (bonus

shares) as recommended by the directors and

to adopt the following ordinary resolution.

"RESOLVED that in pursuance of Article 109

of the Articles of Association of the Com-

pany, a sum of Rs. 35, 161,750 out of the

Company's profit be and is hereby capitalized

by issue of 3,516,175 bonus shares and for

this purpose the directors be and are hereby

authorized to apply the said sum in making

payment in full of 3,516,175 ordinary shares

of Rs 10 each and the said shares be allotted

as fully paid to such members who are

registered in the books of the Company on 5

June 1998 in the proportion of 35% of the

shares held by them and that such new

shares shall rank pari passu in all respects

with the existing ordinary shares.

FURTHER RESOLVED that the fractional

bonus entitlements will be consolidated into

whole shares and issued in the name of any

one of the directors to be disposed of by him

in the market and the proceeds thereof shall

be paid out to the respective shareholders

according to their entitlements. For this

purpose Messrs Farhat A. Mirza, S.K. Mehdi

and M. Veqar Arif be and are hereby autho-

rized to execute all necessary documents and

to complete all formalities with joint signa-

tures by any two of them to settle any

dispute that may arise with regard to the

distribution of the said bonus shares or in the

payment of sale proceeds of the fractional

entitlements as they deem fit."

SPECIAL RESOLUTION

4. To increase the authorised capital of the

Company from Rs 200 Million to Rs 500

Million and to adopt the following special

resolution:

"RESOLVED that the authorised capital of the

Company be increased from Rs 200 Million

divided into 20 Million Shares of Rs 10 each

to Rs 500 Million divided into 50 Million

Shares of Rs 10 each."

FURTHER RESOLVED That the existing clause

V of Memorandum of Association of the

Company be deleted and substituted by the

following amended clause V.

"The share capital of the Company is

Rs 500,000,000 (Rupees Five Hundred

Million) divided into 50,000,000 (Fifty

Million) share of Rs 10 (Ten) each."

FURTHER RESOLVED that Article 4 of the

Articles of Association of the Company be

deleted and substituted by the following

amended Article 4:

"The authorised capital of the Company is

Rs 500,000,000 (Rupees Five Hundred

Million) divided into 50,000,000 (Fifty

Million) shares of Rs 10 (Ten) each."

5. To transact any other ordinary business with

the permission of the Chair.

By Order of the Board

S.K. Mehdi

Secretary

Karachi: 22 April 1998

NOTES:

1. The share transfer books of the Company will remain closed from 26 May to 5 June 1998 (both days inclusive). Transfers received

in order by the Share Registrars, Ferguson Associates (Private) Limited at State Life Building No. 1-A, I.I. Chundrigar Road, Karachi

by 25 May 1998 will be in time to entitle the transferees for the bonus issue and to attend and vote at the Annual General Meeting.

2. A member entitled to attend and vote at the Annual General Meeting may appoint a proxy to attend and vote instead of him/her. A

proxy need not be a member of the Company. Proxies, in order to be valid must be received at the Registered Office of the Company not later than 48 hours before the Meeting.

Statement under Section 160 of the Companies Ordinance 1984:

1. In the opinion of the Directors the financial position of the Company justifies a bonus issue of 35%.

2. The increase in the authorised capital of the Company from Rs 200 Million divided into 20 Million shares of Rs 10 each to Rs 500

Million divided into 50 Million shares of Rs 10 each is to enable the Board of Directors of the Company to increase the paid-up

capital from time to time for meeting the future financial needs of the Company.

3. The Directors are interested in the Special Business only to the extent of their shareholdings in the Company.

Auditors' Report to the Members

We have audited the annexed Balance Sheet of Clariant

Pakistan Limited as at December 31, 1997 and the related

Profit and Loss Account and 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, investments made

and the expenditure incurred during the year

were in accordance with the objects of the

company;

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

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

December 31, 1997 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.

A.F. Ferguson & Co.

Chartered Accounts

Karachi: 29 April 1998

Balance Sheet as at December 31, 1997

Note

1997

1996

(Rupees '000)

Share Capital and Reserves

Authorised capital

20,000,000 (1996: 20,000,000) ordinary shares of Rs 10 each

200,000

==========

Issued, subscribed and paid-up capital

100,462

74,416

Capital reserves

35,162

26,046

Revenue Reserves

162,000

Unappropriated profit

3,706

2,603

----------

301,330

265,065

Redeemable Capital

162,600

236,225

Deferred liability

Provision for staff gratuity

18,775

19,853

Current Liabilities

Current portion of redeemable capital

218,225

59,917

Current portion of long-term loan

2,618

Short-term loans

841,400

527,546

Short-term running finance utilised

under mark-up arrangements

502,857

435,401

Creditors, accrued and other liabilities

352,752

399,468

----------

1,915,234

1,424,950

Contingent Liabilities and Commitments

----------

2,397,939

1,946,093

==========

The annexed notes form an integral part of these accounts.

Tangible Fixed Assets

Operating assets

608,408

480,429

Capital work-in-progress

6,727

30,543

----------

615,135

510,972

Long-term Loans and Advances

2,947

3,090

Long-term Deposits and Prepayments

5,261

1,846

----------

Current Assets

Stores and spares

45,984

39,029

Stock-in-trade

743,798

549,044

Trade debts

747,579

670,274

Loans and advances

6,870

8,172

Deposits and short-term prepayments

19,162

12,252

Taxation recoverable

99,275

29,383

Other receivables

65,247

83,625

Cash and bank balances

46,682

38,406

----------

1,774,596

1,430,185

----------

2,397,939

1,946,093

==========

Profit and Loss Account

for the year ended December 31, 1997

Note

1997

1996

(Rupees '000)

Turnover

2,138,495

1,864,512

----------

Discount and commission

107,659

90,462

Excise duty and sales tax

243,468

220,265

----------

351,127

310,727

----------

Net Sales

1,787,368

1,553,785

Cost of Sales:

Cost of goods sold

1,345,661

1,142,115

Administration and marketing expenses

223,981

131,462

----------

1,569,642

1,273,557

----------

217,726

280,208

Indent commission-

net of payment of Rs 1.550 million (1996: Rs 3.230 million)

7,925

6,863

----------

Operating profit

225,651

287,071

Other income

70,173

6,231

----------

295,824

293,302

----------

Financial charges

223,937

197,004

Other charges

6,622

8,071

----------

230,559

205,075