| FAZAL CLOTH MILLS LTD. |
|
|
|
|
|
|
| ANNUAL
REPORT 1997 |
|
|
|
| CONTENTS |
|
| Board
of Directors |
|
| Notice
of Meeting |
|
| Director's Report |
|
| Auditor's
Report to the Members |
|
| Balance
Sheet |
|
| Profit
& Loss Account |
|
| Cash
Flow Statement |
|
| Notes
to the Accounts |
|
| Pattern
of Holdings of the Shareholders |
|
|
|
|
| Board
of Directors: |
|
| SH.
NASEEM AHMAD |
|
CHAIRMAN |
|
| SH.
MUBARAK AHMAD |
|
CHIEF EXECUTIVE |
|
| MR.
A.K.M. SAYEED |
|
N.I.T. |
|
| SH.
UMAR FAROOQ |
|
| SH.
SHAUKAT MASUD |
|
| MR.
MUZAFFAR AHMAD |
|
| MRS.
FARR UKH MUKHTAR |
|
|
| Company
Secretary: |
|
| MR.
M.D. KANWAR |
|
|
| Auditors: |
|
| M/S.
HAMEED CHAUDHRI & CO. |
|
| CHARTERED
ACCOUNTANTS |
|
|
| Bankers: |
|
| HABIB
BANK LIMITED |
|
| NATIONAL
BANK OF PAKISTAN |
|
| MUSLIM
COMMERCIAL BANK LTD. |
|
| ASKARI
COMMERCIAL BANK LTD. |
|
|
| Mills: |
|
|
|
| FAZAL
NAGAR, JHANG ROAD, |
|
| MUZAFFAR
GARH. |
|
|
|
| Registered
Office: |
|
| 2-A,
MUMTAZABAD,. |
|
| MULTAN. |
|
|
|
|
| NOTICE
OF MEETING |
|
|
| Notice
is hereby given that the 32nd Annual General Meeting of the Shareholders of |
|
| FAZAL
CLOTH MILLS LIMITED will be held on Tuesday, the 31st day of March, 1998. at |
|
| 10:30
a.m. at 2-A, Mumtazabad, Multan to transact the following business.:- |
|
|
| 1.
To confirm the minutes of the last meeting dated 31.03.1997. |
|
|
| 2.
To receive, consider and adopt the Audited Accounts of the Company for the
year |
|
| ended
30th September, 1997, together with the Auditors' and Directors' Reports
thereon. |
|
|
| 3.
To appoint Auditors for the year 1997-98 and fix their remuneration. |
|
|
| 4.
Any other business with the permission of the Chairman. |
|
|
| NOTES: |
|
| i)
The Share Transfer Books of the Company will remain closed from 27th March,
1998 |
|
| to
06th April, 1998 (both days inclusive). |
|
|
| ii)
A Member entitled to attend and vote at the meeting may appoint another
member as |
|
| his/her
proxy to attend and vote instead of him/her. A Corporate Body being a member |
|
| of
the Company may appoint its proxy either under its seal or under the hand of
any |
|
| Officer
or Attorney duly authorised. The instrument of appointing proxy must be
deposited |
|
| at
the Company's' Registered Office at 2-A, Mumtazabad, Multan not less than 48 |
|
| hours
before the time of Meeting. |
|
|
| iii)
Shareholders are requested to promptly notify the Company of any change in
their |
|
| addresses. |
|
|
|
| DIRECTORS'
REPORT TO THE SHAREHOLDERS |
|
|
| Dear
Shareholders, |
|
| Assalam-u-Alaikum, |
|
|
| I
feel pleasure to welcome you to the 32nd Annual General Meeting of the
Company |
|
| and
place before you the Audited Balance Sheet and Profit & Loss Account of
the Company |
|
| for
the year ended 30th September, 1997. |
|
|
| By
the grace of Almighty Allah, your Company has earned pretax Profit of |
|
| Rs.
12,004,669/- after charging all operational, administrative, selling and
financial expenses |
|
| including
depreciation of Rs. 30,006,820/-, Workers'(Profit) Participation Fund of |
|
| Rs.
652,700/-. |
|
|
| ACCOUNTS: |
|
|
RUPEES |
|
|
|
|
| Net
Profit for the year |
|
12,004,669 |
|
| Less: |
|
|
| Provision
for taxation |
|
7,230,769 |
|
|
|
|
---------- |
|
| Profit
after taxation |
|
4,773,900 |
|
| Un-appropriated
Profit-brought forward |
119,786,785 |
|
|
---------- |
|
|
|
124,560,685 |
|
|
========== |
|
| DIVIDEND: |
|
| Due
to tight liquidity the Board of Directors decided to pass over the Dividend. |
|
|
| EXPORT
SALES: |
|
| Export
Sales for the year under review are Rs. 844~809,185/- as compared to |
|
| the
last year figure of Rs. 690,311,196/-. |
|
|
| PRODUCTION: |
|
| During
the year under review, the production of Cotton Yarn is 12,380,015 |
|
| Kgs.,
as compared to 12,180,743 Kgs., during the last year. |
|
|
| BALANCING
& MODERNIZATION: |
|
| The
process of Balancing & Modernization is in progress. Letters of Credit
for |
|
| Import
of 11 sets Chinese Ring Frame and 2 Mach-Coners have been established. |
|
| Machinery
under the above Letters of Credit is expected to arrive very soon. |
|
|
| FUTURE
PROSPECTS: |
|
| Due
to continue crop failure for the consecutive three seasons, Textile Industry |
|
| is
in severe crisis. Quality of Cotton is not upto the standard for export of
yarn and its |
|
| rates
are very high. Besides this, as a result of levy of sales tax, huge funds are
piled |
|
| up
in sales tax, the procedure of refund is very lengthy. We have to sustain
extra |
|
| burden
of markup on balance piled up in sales tax. However, we are trying to procure |
|
| Comparable
good quality of cotton for our requirements at competitive rates. |
|
|
| Due
to ever increasing cost of Electricity, your Directors have decided to
implement |
|
| the
installation of Power Plant at the Mills premises, consent of which has
already |
|
| been
granted by the Corporate Law Authority. Power Plant is expected to commence |
|
| production
by the end of the current year Insha Allah. |
|
|
| AUDITORS: |
|
| M/s.
Hameed Chaudhri & Co., Chartered Accountants, Lahore, Auditors of the |
|
| Company
retire, and being eligible offer themselves for re-appointment for the year |
|
| 1997-98. |
|
|
| LABOUR/MANAGEMENT
RELATIONS: |
|
| The
Management/Labour relations remained warm and cordial throughout the |
|
| year. |
|
|
|
| AUDITORS'
REPORT TO THE MEMBERS |
|
|
| We
have audited the annexed Balance Sheet of FAZAL CLOTH MILLS LIMITED as at |
|
| 30
September, 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, |
|
| except
for the contents of note 22.1, 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, except for |
|
| the
change in an accounting policy stated in .note 2.11 with which we |
|
| concur; |
|
|
|
|
| (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 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, |
|
| except
for the contents of notes 7(d) & 1(].2, respectively give a true and fair |
|
| view
of the state of the Company's affairs as at 30 September, 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 deducted by the Company and deposited in the Central Zakat Fund |
|
| established
under Section 7 of that Ordinance. |
|
|
|
|
|
|
|
HAMEED CHAUDHRI & CO |
|
| LAHORE:
March 3, 1998 |
|
CHARTERED ACCOUNTANTS |
|
|
|
|
|
|
|
| BALANCE
SHEET AS AT 30th September, 1997 |
|
|
|
|
|
1997 |
1996 |
|
| CAPITAL
AND RESERVES |
|
|
Note |
Rupees |
Rupees |
|
| Authorised
capital |
|
|
|
| 10,000,000
ordinary shares of |
|
|
| Rs.
10/- each. |
|
|
100,000,000 |
100,000,000 |
|
|
|
|
========== |
========== |
|
| Issued,
subscribed and |
|
|
|
| paid-up
capital |
|
|
3 |
63,360,000 |
63,360,000 |
|
| Unappropriated
profit |
|
|
|
124,560,685 |
119,786,785 |
|
|
|
|
---------- |
---------- |
|
|
|
|
187,920,685 |
183, 146,785 |
|
| REDEEMABLE
CAPITAL |
|
|
4 |
0 |
2,500,000 |
|
| LONG
TERM LOANS AND FINANCES |
|
---------- |
---------- |
|
| Supplier's
Credit |
|
|
5 |
12,460,147 |
17,444,206 |
|
| Long
term finance |
|
|
6 |
1,500,000 |
0 |
|
| Demand
finances |
|
|
7 |
38,875,974 |
24,262,839 |
|
|
|
|
---------- |
---------- |
|
|
|
|
52,836,121 |
41,707,045 |
|
| CUSTOMS
DUTIES AND DEBENTURES |
|
8 |
7,448,425 |
7,856,678 |
|
| DEFERRED
LIABILITY FOR GRATUITY |
|
|
6,938,334 |
6,605,949 |
|
| CURRENT'
LIABILITIES |
|
|
|
| Current
portion of redeemable |
|
|
| capital
and long term liabilities |
|
9 |
2,908,253 |
13,379,188 |
|
| Short
term supplier's credit |
|
10 |
19,465,978 |
0 |
|
| Short
term finances |
|
|
11 |
134,016,955 |
103,948,436 |
|
| Creditors,
accruals and other |
|
|
| liabilities |
|
12 |
50,408,385 |
63,670,942 |
|
| Provision
for taxation |
|
|
13 |
8,448,000 |
17,570,907 |
|
| Dividends |
|
|
|
14 |
349,202 |
6,650,724 |
|
|
|
|
|
---------- |
---------- |
|
|
|
|
215,596,773 |
205,220,197 |
|
| CONTINGENCIES AND COMMITMENTS |
|
15 |
|
|
|
|
---------- |
---------- |
|
|
|
|
470,740,338 |
447,036,654 |
|
|
|
|
========== |
========== |
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
| TANGIBLE
FIXED ASSETS |
|
|
|
|
|
|
| Operating
fixed assets |
|
16 |
272,412,524 |
261,586,710 |
|
| Capital
work-in-progress |
|
17 |
275,448 |
2,923,702 |
|
|
|
|
---------- |
---------- |
|
|
|
|
272,687,972 |
264,510,412 |
|
| LONG
TERM INVESTMENTS |
|
18 |
677,202 |
677,202 |
|
| LONG
TERM LOANS |
|
19 |
742,349 |
406,900 |
|
| LONG
TERM DEPOSITS |
|
|
1,652,205 |
1,220,755 |
|
|
|
|
| CURRENT
ASSETS |
|
|
|
|
|
|
| Stores,
spares and tools |
|
20 |
24,899,500 |
20,490,187 |
|
| Stock-in-trade |
|
21 |
95,776,000 |
77,1.73,000 |
|
| Trade
debtors |
|
22 |
54,577,938 |
40,428,532 |
|
| Advances,
deposits, prepayments |
|
|
| and
other receivables |
|
23 |
10,567,393 |
32,802,105 |
|
| Cash
and bank balances |
|
24 |
9,159,779 |
9,327,561 |
|
|
|
|
---------- |
---------- |
|
|
|
|
194,980,610 |
180,221,385 |
|
|
|
|
---------- |
---------- |
|
|
|
|
|
470,740,338 |
447,036,654 |
|
|
|
|
========== |
========== |
|
|
| PROFIT
& LOSS ACCOUNT |
|
| FOR
THE YEAR ENDED 30 SEPTEMBER, 1997 |
|
|
|
|
1997 |
1996 |
|
|
Note |
Rupees |
Rupees |
|
|
|
|
| SALES - Net |
|
|
1,317,861,849 |
########### |
|
| COST
OF SALES |
|
1,168,094,139 |
########### |
|
|
|
|
---------- |
---------- |
|
| GROSS PROFIT |
|
|
|
149,767,710 |
123,915,477 |
|
|
|
|
|
| ADMINISTRATIVE
AND SELLING |
|
|
| EXPENSES |
|
|
|
27 |
56,949,832 |
51,408,624 |
|
|
|
|
|
---------- |
---------- |
|
| OPERATING
PROFIT |
|
|
|
92,817,878 |
72,506,853 |
|
|
|
|
|
| OTHER INCOME |
|
|
|
28 |
6,703,386 |
8,349,168 |
|
|
|
|
|
|
---------- |
---------- |
|
|
|
|
|
99,521,264 |
80,856,021 |
|
| OTHER
CHARGES |
|
|
|
---------- |
---------- |
|
| Financial |
|
29 |
85,561,364 |
58,200,938 |
|
| Miscellaneous |
|
30 |
1,140,131 |
527,851 |
|
| Workers'
(Profit) Participation Fund |
|
|
652,700 |
1,106,360 |
|
| Workers'
Welfare Fund |
|
|
|
162,400 |
505,092 |
|
|
|
|
---------- |
---------- |
|
|
|
|
87,516,595 |
60,340,241 |
|
|
|
|
---------- |
---------- |
|
| PROFIT
BEFORE TAXATION |
|
|
|
12,004,669 |
20,515,780 |
|
| PROVISION
FOR TAXATION |
|
|
13 |
7,230,769 |
7,470,461 |
|
|
|
|
|
|
---------- |
---------- |
|
| PROFIT
AFTER TAXATION |
|
|
|
4,773,900 |
13,045,319 |
|
| UNAPPROPRIATED
PROFIT |
|
|
|
| Brought
forward |
|
|
|
119,786,785 |
113,077,466 |
|
|
|
|
---------- |
---------- |
|
|
|
|
124,560,685 |
126,122,785 |
|
|
|
|
| APPROPRIATION |
|
|
|
| Proposed
dividend Nil |
|
|
|
| (1996
' @ 10%) |
|
|
|
0 |
6,336,000 |
|
|
|
|
| UNAPPROPRIATED
PROFIT |
|
|
|
---------- |
---------- |
|
| Carried
to Balance Sheet |
|
|
|
124,560,685 |
119,786,785 |
|
|
|
|
========== |
========== |
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
| CASH
FLOW STATEMENT |
|
| FOR
THE YEAR ENDED 30 SEPTEMBER, 1997 |
|
|
|
|
|
1997 |
1996 |
|
|
|
|
Rupees |
Rupees |
|
|
|
|
| NET
CASH INFLOW FROM OPERATING |
|
|
|
| ACTIVITIES
(note 'A') |
|
|
76,749,253 |
49,725,623 |
|
| CASH
FLOW FROM INVESTING ACTIVITIES |
|
---------- |
---------- |
|
| Fixed
capital expenditure |
|
(39,503,453) |
(10,847,494) |
|
| Proceeds
from disposals of fixed assets |
|
1,726,797 |
4,982 |
|
| Sale
proceed of investments |
|
0 |
126,250 |
|
|
|
|
| NET
CASH OUTFLOW FROM INVESTING |
|
|
---------- |
---------- |
|
| ACTIVITIES |
|
|
(37,776,656) |
(10,716,262) |
|
|
|
|
---------- |
---------- |
|
|
|
|
|
|
| CASH
FLOW FROM FINANCING ACTIVITIES |
|
|
|
| Repayment
of redeemable capital |
|
(5,000,000) |
(5,000,000) |
|
| Supplier's
credit's installments paid |
|
(4,984,059) |
(4,984,059) |
|
| Long
term finance obtained |
|
1,500,000 |
0 |
|
| Demand
finances obtained |
|
|
7,490,000 |
7,796,5~9 |
|
| Customs
debentures redeemed/ |
|
|
|
| customs
duties paid |
|
|
(408,254) |
1,294,253) |
|
| Lease
finances repaid |
|
|
(595,809) |
1,022,855) |
|
| Short
term finances - net |
|
30,068,519 |
24,699,948 |
|
| Short
term supplier's credit |
|
|
|
| obtained |
|
19,465,978 |
0 |
|
| Financial
charges' paid |
|
|
(80,375,232) |
(52,791,627) |
|
| Dividend
paid |
|
|
(6,301,522) |
(608) |
|
|
|
|
| NET
CASH OUTFLOW FROM |
|
|
---------- |
---------- |
|
| FINANCING
ACTIVITIES |
|
|
(39,140,379) |
(32,596,855) |
|
|
|
---------- |
---------- |
|
| NET
(DECREASE)/INCREASE IN CASH AND |
|
|
|
| CASH
EQUIVALENTS |
|
|
(167,782) |
6,412,506 |
|
|
|
|
|
| CASH
AND CASH EQUIVALENTS |
|
|
|
| -
At the beginning of the year |
|
9,327,561 |
2,915,055 |
|
|
|
|
|
| CASH
AND CASH EQUIVALENTS |
|
---------- |
---------- |
|
| -
At the end of the year |
|
|
9,159,779 |
9,327,561 |
|
|
|
========== |
========== |
|
|
| 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 |
|
12,004,669 |
20,515,780 |
|
| Adjustments
for: |
|
|
|
| Depreciation |
|
30,006,820 |
28,802,589 |
|
| Provision
for gratuity - net |
|
332,385 |
0 |
|
| Deferred
income credited |
|
0 |
(300,000) |
|
| Gain
on disposals of fixed assets |
|
(530,619) |
0 |
|
| Profit
on sale of investments |
|
0 |
(45,736) |
|
| Financial
charges |
|
85,561,364 |
58,200,938 |
|
| Depreciation
reversed |
|
0 |
(3,650,137) |
|
| CASH
FLOW FROM OPERATING ACTIVITIES |
|
|
---------- |
---------- |
|
| -
Before working capital changes |
|
127,374,619 |
103,523,434 |
|
|
|
---------- |
---------- |
|
| (Increase)/Decrease
in current assets |
|
|
| Stores
and spares |
|
(4,409,313) |
(2,160,919) |
|
| Stock-in-trade |
|
(18,603,000) |
(34,516,533) |
|
| Trade
debtors |
|
(14,149,406) |
(6,742,424) |
|
| Advances,
deposits and other |
|
|
|
| receivables
(excluding taxes paid |
|
|
|
| and
current portion of long term |
|
|
|
| loans
to employees) |
|
12,579,279 |
(9,586,369) |
|
| (Decrease)/Increase
in creditors, |
|
|
|
| accruals
and other liabilities |
|
|
|
| (excluding
accrued financial charges) |
|
(18,577,784) |
5,562,367 |
|
|
|
---------- |
---------- |
|
|
|
43,160,224) |
(47,443,878) |
|
|
|
---------- |
---------- |
|
| CASH
FLOW FROM OPERATING ACTIVITIES |
|
|
|
| - Before taxation |
|
84,214,395 |
56,079,556 |
|
| Taxes paid |
|
|
(6,595,001) |
(6,404,593) |
|
| CASH
FLOW FROM OPERATING ACTIVITIES |
|
---------- |
---------- |
|
| -
After taxation |
|
77,619,394 |
49,674,963 |
|
| Long
term loans to employees - net |
|
(438,691) |
50,660 |
|
| Long
term deposits |
|
(431,450) |
0 |
|
| NET
CASH INFLOW FROM |
|
---------- |
---------- |
|
| OPERATING
ACTIVITIES |
|
76,749,253 |
49,725,623 |
|
|
|
========== |
========== |
|
|
|
| NOTES
TO THE ACCOUNTS |
|
| FOR
THE YEAR ENDED 30 SEPTEMBER, 1997 |
|
|
| 1.
THE COMPANY AND ITS OPERATIONS |
|
| The
Company was incorporated in Pakistan in 1966 as a Public Company and its
shares |
|
| are
quoted on Karachi and Lahore Stock Exchanges. The Company is engaged in |
|
| manufacture
and sale of yarn. |
|
|
| 2.
SIGNIFICANT ACCOUNTING POLICIES |
|
| 2.1
Accounting convention |
|
| These
accounts have been prepared under the historical cost convention modified |
|
| by
exchange rate adjustments on foreign currency loans as referred to in notes |
|
| 2.2 & 2.5. |
|
|
|
|
|
| 2.2
Foreign currency translations |
|
| Assets
and liabilities in foreign currencies are translated into Pak Rupees at the |
|
| exchange
rates ruling on the balance sheet date except where forward exchange |
|
| rates
are booked which are translated at the contracted rates. |
|
|
|
|
| Exchange
gains/losses and exchange risk coverage fee on principal loans are |
|
| capitalised
as part of cost of plant and machinery acquired out of the proceeds of |
|
| such
loans. Other exchange gains/losses are taken to Profit and Loss Account, |
|
|
| 2.3
Staff retirement benefits |
|
| The
Company operates an un-funded gratuity scheme for its permanent employees. |
|
| Provision
is made annually to cover obligation under the scheme. |
|
|
| 2.4 Taxation |
|
| Provision
for current taxation is based on taxable income for the year at the current |
|
| rates
of taxation. Tax credits and rebates are recognised for arriving at taxable |
|
| income. |
|
|
| The
Company does not account for deferred taxation arising due to major timing |
|
| differences
if it can be established with reasonable probability that these timing |
|
| differences
are not likely to reverse in the foreseeable future. |
|
|
| 2.5
Tangible fixed assets and depreciation |
|
| Operating
fixed assets are stated at cost less accumulated depreciation except |
|
| freehold
land and capital work-in-progress which are stated at cost. |
|
|
| Cost
of some plant and machinery consists of historical cost, exchange rate |
|
| fluctuations
and exchange risk coverage fee on foreign currency loans capitalised. |
|
|
| Depreciation
is charged to income applying Reducing Balance Method to write-off |
|
| the
cost and capitalized exchange differences and exchange risk coverage fee |
|
| over
estimated remaining useful life of assets. Rates of depreciation are stated
in |
|
| note 1 6. |
|
|
|
|
|
| No
depreciation is provided on assets in the year of disposal whereas full
year's |
|
| depreciation
is charged in the year of purchase/operations. |
|
|
|
|
| Gain/loss
on disposal of fixed assets is taken to Profit and Loss Account. |
|
|
|
|
| Major
improvements and modifications are capitalised and assets replaced, if not |
|
| kept
as stand-by, are retired. Minor repairs and replacements are taken to Profit |
|
| and
Loss Account. |
|
|
| Leased: |
|
| These
are stated at cost less accumulated depreciation. Depreciation is charged |
|
| to
income at the same rates and basis as applicable to the Company's owned |
