| CHANAMID PAKISTAN LTD |
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| ANNUAL
REPORT 1997 |
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| CONTENTS |
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| NOTICE
OF ANNUAL GENERAL MEETING |
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| COMPANY
NEWS |
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| REPORT
OF THE DIRECTORS |
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| GRAPHS |
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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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| CASH
FLOW STATEMENT |
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| NOTES
TO THE ACCOUNTS |
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| 10
YEARS HISTORY |
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| PATTERN
OF SHAREHOLDING |
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| Notice
of Annual General Meeting |
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| NOTICE
is hereby given that the Forty Ninth Annual General Meeting of Cyanamid
(Pakistan) |
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| Limited
will be held on Friday, May 29, 1998 at 10.30 a.m. at the Registered Office
of the Company, |
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| S-33,
Hawkesbay Road, S.I.T.E., Karachi to transact the following business: |
|
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| ORDINARY
BUSINESS: |
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| 1.
To confirm the minutes of the Forty Eighth Annual General Meeting of the
Company held on May 30, |
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| 1997. |
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| 2.
To receive, consider and adopt the Audited Accounts together with the
Directors' and Auditors' Reports |
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| for
the year ended November 30, 1997. |
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| 3.
To approve Dividend. |
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| 4.
To appoint Auditors for the year ending November -30, 1998, at a fee to be
Fixed by the Board of |
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| Directors. |
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| NOTES: |
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| 1.
The Share Transfer Books of the Company will remain closed from Friday, May
22,1998 to Friday, |
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| May
29, 1998 (both days inclusive). |
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|
| 2.
A member entitled to attend and vote at the Annual General Meeting may
appoint a proxy to attend and |
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| vote
instead of him/her. A Proxy need not be a member of the Company. Proxies in
order to be valid, |
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| must
be received at the Registered Office of the Company not later than 48 hours
before the meeting. |
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| 3.
Members are requested to promptly communicate to the Company Registrar Messrs
T.H.K. |
|
| Associates
(Pvt) Limited any change in their address. |
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| Company
News |
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| BOARD
OF DIRECTORS |
|
| Farooq
Hadi |
Chairman & Managing
Director (C.E.O.) |
|
| Akber
Saifi |
|
| S.
Masood Abbas Jaffery |
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| J.
R. Stafford |
(Alternate: S. Anwarul
Haque) |
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| Marco
A. Fonseca |
(Alternate: Khwaja
Bakhtiar Ahmed) |
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| Bernard
Poussot |
(Alternate: M. Mustafa
Khan) |
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| Razi-ur-Rahman
Khan |
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| COMPANY
SECRETARY |
|
| Khwaja
Bakhtiar Ahmed |
|
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| BANKERS |
|
| ABN-Amro
Bank |
|
| American
Express Bank Limited |
|
| ANZ
Grindlays Bank |
|
| Bank
of America NT&SA |
|
| Habib
Bank Limited |
|
| Muslim
Commercial Bank Limited |
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| Mashreq
Bank |
|
| Standard
Chartered Bank |
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|
| AUDITORS |
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| A.F.
Ferguson & Company |
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|
| LEGAL
ADVISORS |
|
| Orr.
Digham & Company |
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| SHARE
REGISTRAR |
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| T.H.K.
Associates (Pvt) Ltd. |
|
| Ground
Floor, |
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| Shaikh
Sultan Trust Building No.2, |
|
| Beaumont
Road, |
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| Karachi. |
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| REGISTERED
OFFICE |
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| S-33,
Hawkesbay Road, S.I.T.E., |
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| G.P.O.
Box No. 167, Karachi. |
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| Telephone:
2564306-10 & 111-777-333 |
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| Fax:
92-21-2564428 |
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| Report
of the directors |
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|
| Your
Directors take pleasure in presenting their Report and Accounts for the year
ended November 30, |
|
| 1997. |
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|
| OPERATIONS |
|
|
| While
sales for the year increased by 7.4%, Profit Before Tax showed a substantial
decline of 52.1%. The |
|
| decline
in profits was primarily due to such factors as: |
|
|
| ·
Three major devaluations of the Rupee during the period September 1996 to
October 1997. |
|
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| ·
Imposition of Import Duty on pharmaceutical raw and packaging materials. |
|
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| ·
Continued high inflation and a totally inadequate increase in prices. |
|
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| The
Directors feel that the results would have been much better if these adverse
factors had not affected |
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| the
operations. In this situation, such matters as strict control of expenses and
improved efficiencies |
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| continue
to be the focus of Management's attention. |
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| Your
Company introduced three new products during the last quarter of the year.
TAZOCIN (Tazobactam/ |
|
| Piperacillin)
- a highly effective antibiotic for first line treatment of hospital
infections, EFEXOR |
|
| (Venlafaxine),
the world's first SNRI, a new anti-depressant and MONOTRATE (Isosorbide
Mononitrate), a |
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| cardiovascular
product for Angina Pectoris. As the initial results for all three products
show promise, we |
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| are
hopeful that during the coming years these products will contribute
substantially to the sales and profit |
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| of
your Company. |
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| FINANCIAL
RESULTS |
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| Operating
results for the year ended November 30, 1997 together with Directors'
recommendations of |
|
| appropriations
are provided as follows: |
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|
(Rupees '000) |
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|
| Profit
After Tax |
|
|
|
49,734 |
|
| Unappropriated
Profit brought forward |
|
2,004 |
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|
|
---------- |
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|
51,738 |
|
| Appropriations: |
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|
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| Dividend |
|
|
|
14,216 |
|
| Transfer
to General Reserve |
|
36,000 |
50,216 |
|
| Unappropriated
Profit carried forward |
---------- |
---------- |
|
|
|
|
1,522 |
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|
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|
========== |
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| DIVIDEND |
|
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| The
Directors recommend a Dividend of 10% for the year ended November 30, 1997. |
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| DIRECTORS |
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| During
the year Mr. Aijaz K. Khan retired as Chairman of the Board and Mr. Farooq
Hadi replaced him in |
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| that
position. Mr. Aijaz Khan was replaced on the Board by Mr. S. Masood Abbas
Jaffery. The Board of |
|
| Directors
wish to place on record their appreciation of the services rendered by the
former Chairman and |
|
| welcome
the new Director. |
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| PROSPECTS |
|
|
| While
the investment policies of the present government are amongst the most
attractive anywhere in |
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| Asia,
the implementation of these policies as well as concerns about the
consistency of these policies |
|
| remain
a major hurdle to further investment. |
|
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| The
pharmaceutical industry which has long suffered due to strict price controls
continue to view the future |
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| as
somewhat bleak. The present government which had introduced a transparent
pricing formula for |
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| controlled
drugs while at the same time decontrolling others has also not moved on this
front. No price |
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| increases
have been forthcoming since November 1996. This together with major
devaluation as well as |
|
| continued
high inflation, seriously affect the operations of this Industry and of your
Company. |
|
|
| While
your Company through several Industry for a has been making extensive efforts
to make the |
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| government
realize that the situation is serious and the credibility of the government's
own policies is at |
|
| stake,
so far the efforts have not brought about any change in the situation.
However, with the |
|
| government's
intentions of seeking foreign investment as well as liberalizing the economy,
we continue to |
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| hope
that some sense will eventually prevail. |
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| SUBSEQUENT
EVENTS |
|
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| No
material changes or commitment affecting financial position of the Company
have taken place |
|
| between
the end of financial year and the date of this report. |
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| AUDITORS |
|
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| The
present Auditors, A.F. Ferguson & Company retire and being eligible offer
themselves for |
|
| reappointment. |
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| EMPLOYEES |
|
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| The
Directors are pleased to acknowledge that relations between management and
workers remained |
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| cordial
throughout the year. |
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| The
Directors wish to thank all employees for their hard work and devotion to
duty and expect them to |
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| continue
in the same spirit in future. |
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| PARENT
COMPANIES |
|
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| American
Home Products Corporation, incorporated in the State of Delaware, U.S.A. with
its principal |
|
| place
of business located in Madison, New Jersey, U.S.A. holds 576,470 (40.55%)
shares of the Company; |
|
| and
American Cyanamid Company, incorporated in the State of Maine, U.S.A. with
its principal place of |
|
| business
located in Madison, New Jersey, U.S.A. (100% owned company of American Home
Products |
|
| Corporation)
holds 448,560 (31.55%) shares of the Company; thus, the total holding of both
the |
|
| Companies
is 72.10%. |
|
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| PATTERN
OF SHAREHOLDING |
|
|
| A
statement of Pattern of Shareholding of the Company as at November 30, 1997
is shown on Page 33. |
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| Earning
per share for the year is Rs. 34.98. |
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|
| Auditors'
report to the members |
|
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| We
have audited the annexed balance sheet of Cyanamid (Pakistan) Limited as at
November 30, 1997 |
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| 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 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; |
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|
|
|
| (b)
in our opinion: |
|
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| (i)
the balance sheet and profit and loss account together with the notes thereon
have been |
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| drawn
up in conformity with the Companies Ordinance, 1984 and are in agreement with |
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| the
books of account and are further in accordance with accounting policies
consistently |
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| applied; |
|
|
| (ii)
the expenditure incurred during the year was for the purpose of the Company's |
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| business;
and |
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|
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| (iii)
the business conducted, investments made and the expenditure incurred during
the year |
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| were
in accordance with the objects of the Company; |
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|
|
| (c)
in our opinion and to the best of our information and according to the
explanations given to us, the |
|
| balance
sheet and profit and loss account 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
November 30, |
|
| 1997
and of the profit and cash flows for the year then ended; and |
|
|
| (d)
in our opinion Zakat deductible at source under the Zakat and Ushr Ordinance,
1980 was |
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| deducted
by the Company and deposited in the Central Zakat Fund established under
Section, |
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| of
that Ordinance. |
|
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|
|
A.F. FERGUSON |
|
| Karachi:
April 21, 1998 |
CHARTERED ACCOUNTANTS |
|
|
|
| BALANCE
SHEET AS AT NOVEMBER 30, 1997 |
|
|
|
Note |
1997 |
1996 |
|
|
(Rupees '000) |
|
|
|
|
| Fixed
Assets - Tangible |
|
3 |
170,611 |
171,588 |
|
| Capital
Work-in-Progress |
4 |
14,437 |
3,099 |
|
| Goodwill |
|
5 |
10,051 |
11,726 |
|
| Deferred
Cost |
|
6 |
- |
5,761 |
|
| Long
term Loans, deposits and prepayments |
7 |
12,715 |
8,347 |
|
|
|
|
|
| CURRENT
ASSETS |
|
|
---------- |
---------- |
|
| Stores,
spares and loose tools |
8 |
38,380 |
39,053 |
|
| Stock-in-trade |
|
9 |
504,326 |
538,562 |
|
| Trade
debts |
|
10 |
629,516 |
358,156 |
|
| Loans,
advances, deposits, prepayments and |
|
| other
receivables |
|
11 |
81,295 |
72,211 |
|
| Taxation |
|
12 |
68,343 |
- |
|
| Cash
and bank balances |
|
13 |
1,255 |
15,261 |
|
|
|
|
---------- |
---------- |
|
|
|
|
####### |
####### |
|
| LESS:
CURRENT LIABILITIES |
|
| Current
maturity of liability against assets |
|
|
| subject
to finance leases |
|
6,600 |
4,075 |
|
| Short
term loans - unsecured |
14 |
419,070 |
40,361 |
|
| Running
Finance under mark-up arrangements |
15 |
78,435 |
172,593 |
|
| Creditors,
accrued and other Liabilities |
16 |
452,967 |
445,105 |
|
| Dividends |
|
17 |
14,584 |
29,275 |
|
| Taxation |
|
|
- |
5,749 |
|
|
|
|
---------- |
---------- |
|
|
|
|
971,656 |
697,158 |
|
|
|
|
---------- |
---------- |
|
| NET
CURRENT ASSETS |
|
|
351,459 |
326,085 |
|
|
|
|
---------- |
---------- |
|
| NET
ASSETS |
|
559,273 |
526,606 |
|
|
|
|
|
========== |
========== |
|
| FINANCED
BY: |
|
|
|
|
|
|
|
| Share
capital |
|
18 |
142,161 |
142,161 |
|
| Reserves |
|
19 |
382,147 |
346,147 |
|
| Unappropriated
profit |
|
|
1,522 |
2,004 |
|
|
|
|
---------- |
---------- |
|
| Shareholders'
equity |
|
|
525,830 |
490,312 |
|
| Liability
against assets subject to finance leases |
20 |
7,849 |
8,363 |
|
| Deferred
Liabilities |
|
21 |
25,594 |
27,931 |
|
| CONTINGENCIES
AND COMMITMENTS |
22 |
---------- |
---------- |
|
|
|
559,273 |
526,606 |
|
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|
========== |
========== |
|
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| The
annexed notes form an integral part of these accounts. |
|
|
|
| PROFIT AND LOSS ACCOUNT FOR THE |
|
| YEAR
ENDED NOVEMBER 30, 1997 |
|
|
|
|
|
|
Note |
1997 |
1996 |
|
|
|
|
|
(Rupees '000) |
|
|
|
|
| Sales
- Net |
|
|
23 |
####### |
####### |
|
| Cost
of goods sold |
|
24 |
####### |
####### |
|
|
|
|
---------- |
---------- |
|
| Gross
profit |
|
|
|
513,170 |
519,952 |
|
|
|
|
---------- |
---------- |
|
| Administrative
and general expenses |
25 |
128,149 |
106,334 |
|
| Selling
and distribution expenses |
26 |
226,056 |
188,493 |
|
|
|
|
|
|
---------- |
---------- |
|
|
|
|
|
|
354,205 |
294,827 |
|
|
|
|
|
|
---------- |
---------- |
|
|
|
|
|
|
158,965 |
225,125 |
|
| Other
income |
|
|
27 |
4,920 |
5,868 |
|
|
|
|
|
|
---------- |
---------- |
|
|
|
|
163,885 |
230,993 |
|
|
|
|
---------- |
---------- |
|
| Financial
charges |
|
28 |
73,907 |
50,891 |
|
| Amortization
of goodwill |
|
1,675 |
1,675 |
|
| Amortization
of deferred cost |
|
5,761 |
7,682 |
|
| Research
and development contribution |
874 |
1,481 |
|
| Workers'
profits participation fund |
4,178 |
8,548 |
|
| Workers'
welfare fund |
|
|
2,144 |
3,403 |
|
|
|
|
|
|
---------- |
---------- |
|
|
|
|
|
|
88,539 |
73,680 |
|
|
|
|
|
|
---------- |
---------- |
|
| Profit
before taxation |
|
|
75,346 |
157,313 |
|
| Taxation |
|
|
|
---------- |
---------- |
|
| Current
year |
|
|
30,928 |
55,981 |
|
| Prior
year's |
|
|
- |
(4,479) |
|
| Deferred |
|
|
(5,316) |
(4,426) |
|
|
|
|
---------- |
---------- |
|
|
|
|
25,612 |
47,076 |
|
|
|
|
---------- |
---------- |
|
| Profit
after taxation |
|
|
49,734 |
110,237 |
|
| Unappropriated
profit brought forward |
2,004 |
714 |
|
|
|
|
|
|
---------- |
---------- |
|
| Profit
available for appropriation |
51,738 |
110,951 |
|
| Dividend |
|
|
|
---------- |
---------- |
|
| Interim |
|
|
29 |
- |
14,731 |
|
| Proposed
final Rs10 (1996: Rs 10 per share) |
14,216 |
14,216 |
|
|
|
|
---------- |
---------- |
|
|
|
|
14,216 |
28,947 |
|
| Transfer
to general reserve |
|
36,000 |
80,000 |
|
|
|
|
---------- |
---------- |
|
| Unappropriated
profit carried forward |
1,522 |
2,004 |
|
|
|
|
========== |
========== |
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
| CASH
FLOW STATEMENT FOR THE YEAR ENDED NOVEMBER 30, 1997 |
|
|
|
Note |
1997 |
1996 |
|
|
|
(Rupees '000) |
|
| CASH
FLOW FROM OPERATING ACTIVITIES |
|
|
|
|
| Cash
(used in)/generated from operations |
33 |
(74,118) |
79,642 |
|
|
|
|
---------- |
---------- |
|
| Interest
and mark-up paid |
|
(40,712) |
(25,069) |
|
| Lease
finance charges paid |
|
(2,475) |
(2,731) |
|
| Income
tax paid |
|
(111,343) |
(89,973) |
|
| Payment
of gratuity |
|
(3,240) |
(2,684) |
|
| Interest
received |
|
- |
1,293 |
|
| (Increase)/Decrease
in long-term loans, deposits |
|
| and
prepayments |
|
(4,145) |
1,530 |
|
|
|
---------- |
---------- |
|
|
|
(161,915) |
(117,634) |
|
|
|
---------- |
---------- |
|
| Net
cash outflow from operating activities |
(236,033) |
(37,992) |
|
|
|
|
| CASH
FLOW FROM INVESTING ACTIVITIES |
|
| Fixed
capital expenditure |
|
(38,576) |
(30,574) |
|
| Sale
proceed of fixed assets |
|
3,372 |
1,316 |
|
|
|
---------- |
---------- |
|
| Net
cash outflow from investing activities |
(35,204) |
(29,258) |
|
|
|
|
|
| CASH
FLOW FROM FINANCING ACTIVITIES |
---------- |
---------- |
|
| Dividend
paid |
|
(28,907) |
(27,181) |
|
| Increase/(Decrease)
in short term loans |
378,709 |
(25,319) |
|
| Increase/(Decrease)
in liability against |
|
| assets
subject to finance leases |
2,011 |
(4,923) |
|
| Other |
|
(424) |
303 |
|
|
|
|
---------- |
---------- |
|
| Net
cash inflow/(outflow) from financing activities |
351,389 |
(57,120) |
|
|
|
|
---------- |
---------- |
|
| Net
increase/(decrease)in cash and cash equivalents |
80,152 |
124,370) |
|
| Cash
and cash equivalents at the beginning of the year |
(157,332) |
(32,962) |
|
|
|
|
---------- |
---------- |
|
| Cash
and cash equivalents at the end of the year |
34 |
(77,180) |
(157,332) |
|
|
|
|
========== |
========== |
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
| NOTES
TO THE ACCOUNTS FOR THE YEAR ENDED NOVEMBER 30, 1997 |
|
|
|
| 1.
STATUS AND NATURE OF BUSINESS |
|
|
| Cyanamid
(Pakistan) Limited is a public limited company quoted on the Karachi and
Lahore Stock |
|
| Exchanges.
The current business activities of the company consist of the manufacture and
marketing |
|
| of
research based ethical specialities and other pharmaceutical and
agro-chemical products. |
|
|
| 2.
SIGNIFICANT ACCOUNTING POLICIES |
|
|
| 2.1
Accounting convention |
|
| These
accounts have been prepared under the historical cost convention |
|
|
| 2.2
Staff retirement benefits |
|
|
| The
Company operates |
|
|
| (a)
An approved funded gratuity scheme for its all permanent employees except
that separate funded |
|
| and
unfunded schemes are in operation for employees of former Wyeth Laboratories
(Pakistan) |
|
| Limited.
Contributions are made annually to the fund on the basis of actuarial
recommendations |
|
| at
the rate of 8.33% of basic salary and additionally a book provision of
Rs.18.751 million is also |
|
| made
as per actuarial recommendation. An actuarial valuation is performed once in
every three |
|
| years
and the most recent actuarial valuation of the scheme was carried out at
November 30, |
|
| 1996,
which reflected the fair value of the fund's assets and the liabilities at
Rs. 15.60 million and |
|
| Rs.34.36
million respectively. The actuarial valuation was carried out using Entry Age
Normal |
|
| Method.
Main valuation assumptions used for actuarial valuation were as under: |
|
|
| ·
Expected rate of increase in salaries 14% per annum. |
|
| ·
Expected rate of return on investment 14% per annum. |
|
|
| (b)
An approved funded gratuity scheme for all employees of former Wyeth
Laboratories (Pakistan) |
|
| Limited
except for certain unionised staff. Annual contributions are made to the
gratuity fund at |
|
| the
rate of 5.55 per cent per annum of basic salaries. Actuarial recommendations
for 1997 |
|
| contribution
rates are 5.67 and 4.32 per cent of annual basic salaries for current cost
and past |
|
| service
liability respectively. The actuarial valuation of the scheme is carried out
every year and |
|
| the
latest valuation was carried out as at November 30, 1996. The fair value of
the Fund's assets |
|
| and
the liabilities for past services at the latest valuation date was for
Rs.20.54 million and |
|
| Rs.46.38
million respectively. The future contribution rate of this plan includes
allowances for |
|
| deficit
and surplus. Attained Age Method, using the following assumptions, is used
for valuation |
|
| of
this plan: |
|
|
| ·
Expected rate of increase in salary level 12 per cent per annum. |
|
| ·
Expected rate of return on investment 12 per cent per annum. |
|
|
| An
unfunded gratuity scheme for certain unionized staff to provide for gratuity
under the West |
|
| Pakistan
Industrial and Commercial Employment (Standing Order) 1968, for the period
during |
|
| which
they were not covered by the provident fund schemes, the provisions for which
are charged |
|
| to
income currently. |
|
|
| (c)
An approved funded pension scheme for the management staff of former Wyeth
Laboratories |
|
| (Pakistan)
Limited. Annual contributions are made to the pension fund on the basis of
actuarial |
|
| recommendations.
The actuarial valuation of the scheme is carried out every year. The latest |
|
| valuation
was carried out on January 1, 1996. The valuation for the year ended November
30, |
