| FAUJI FERTILIZER COMPANY LIMITED |
|
|
|
|
|
|
|
|
|
| Annual
Report 1997 |
|
|
|
|
| C
0 N T E N T S |
|
| Ten
Years at a Glance |
|
| Company
Information |
|
| Notice
of Meeting |
|
| Report
of the Directors |
|
| Auditors'
Report to the Members |
|
| Balance
Sheet |
|
| Profit
And Loss Account |
|
| Cash
Flow Statement |
|
| Notes
to the Accounts |
|
| Pattern
of Shareholding |
|
|
| COMPANY
INFORMATION |
|
|
| Board
of Directors |
|
| Lt
Gen Khalid Latif Moghal (Retd), HI(M), S Bt |
|
| Chairman |
|
| Lt
Gen Zia Ullah Khan (Retd), HI(M), |
|
| Chief
Executive & Managing Director |
|
| Dr
Haldor Topsoe |
|
| Mr
Iltifat Rasul Khan |
|
| Brig
Riaz Ahmed Qureshi (Retd) |
|
| Brig
Ashfaq Ahmad (Retd) |
|
| Brig
Muhammad Saeed Baig (Retd) |
|
| Mr
Razi-ur-Rehman Khan |
|
| Mr
Mian Mumtaz Abdullah |
|
| Mr
Adnan Ahmad All |
|
| Mr
Asadullah Khawaja |
|
| Brig
Sayyed Ifzal Hussain (Retd), SI (M) |
|
| Mr
M Tahsin Khan Iqbal |
|
|
| Secretary |
|
|
| Brig
Muhammad Akram Khan (Retd) |
|
|
| Registered
Office |
|
| 93-Harley
Street, |
|
| Rawalpindi
Cantt. |
|
|
| Plantsite |
|
|
| Goth
Machhi, Sadikabad, |
|
| Rahim
Yar Khan |
|
|
| Marketing
Division |
|
| Lahore
Trade Centre, |
|
| 11
Shahrah-e-Aiwan-e-Tijarat, |
|
| Lahore. |
|
|
| Karachi
Office |
|
| D-143,
Block-4, KDA Scheme-5, |
|
| Kehkashan
Clifton, |
|
| Karachi. |
|
|
| Auditors |
|
|
| A.F.
Ferguson & Co., |
|
| Chartered
Accountants |
|
|
| NOTICE
OF MEETING |
|
| Notice
is hereby given that the 20th Annual General Meeting of the Shareholders of
Fauji Fertilizer |
|
| Company
Limited will be held at Pearl Continental Hotel, The Mall, Rawalpindi, on
Monday June 29, 1998 |
|
| at
1100 hours to transact the following business:-- |
|
|
| Ordinary
Business |
|
| 1.
To confirm the minutes of the 19th Annual General Meeting held on June 23,
1997 |
|
|
| 2.
To receive, consider and adopt the Audited Accounts of the Company together
with the |
|
| Directors'
and Auditors' Reports for the year ended December 31, 1997. |
|
|
| 3.
To appoint Auditors for the year 1998 and to fix their remuneration. |
|
|
| 4.
To approve payment of Final Dividend for the year ended December 31, 1997 as
recommended |
|
| by
the Board of Directors. |
|
|
| 5.
To transact any other business with the permission of the Chairman. |
|
|
| By
Order of the Board, |
|
|
| NOTES: |
|
| 1.
The share transfer books of the Company will remain closed from June 16, to
June 29, 1998 |
|
| (both
days inclusive). |
|
|
| 2.
A member of the Company entitled to attend and vote at the Annual General
Meeting may appoint |
|
| a
person/representative as proxy to attend and vote in place of the member at
the Meeting. Proxies |
|
| in
order to be effective must be received at the Company's Registered Office,
93-Harley Street, |
|
| Rawalpindi
not later than 48 hours before the time of holding the Meeting. |
|
|
|
|
| REPORT
OF THE DIRECTORS FOR THE YEAR ENDED DECEMBER 31, 1997 |
|
| The
Directors of Fauji Fertilizer Company Limited take pleasure in presenting the
20th Annual Report |
|
| together
with the Company's Financial Statements for the year ended December 31, 1997
and the |
|
| Auditors'
Report thereon. |
|
|
| ACHIEVEMENTS |
|
| Despite
decline in fertilizer offtake in the country due to suppressed demand, the
Company achieved |
|
| excellent
results in 1997 as compared with the previous years and maintained its growth
momentum. The |
|
| results
are summarized below: |
|
|
| Achieved
the highest 'Sona' production of 1,507 thousand tonnes and also the highest
'Sona' sales of 1,483 thousand tonnes; this represented an improvement over
the previous years; |
|
| Earned
record net profit after tax of Rs 3,370 |
|
|
|
| million,
which was 37% higher as compared to |
|
|
|
| 1996. |
|
|
|
|
|
|
| Contributed
Rs 3.2 billion for the Government |
|
|
|
|
| revenues
in 1997, which was 95% of the |
|
|
|
| Company's
profit of Rs 3.4 billion. |
|
|
|
|
|
|
| PRODUCTION |
|
| 1997
was a landmark year for production. The operation of both plants remained
smooth and these |
|
| continued
to operate without annual maintenance turnaround and any major repairs.
Production of |
|
| 1,507
thousand tonnes 'Sona' urea surpassed previous record of 1996 by a
significant margin of |
|
| 100
thousand tonnes. Annual production efficiency achieved by the original unit
was 1 1 1%, while it |
|
| was
1 16% for the expansion unit. Overall efficiency was 1 13% as compared to
106% for last year. |
|
|
|
|
| Achieved
ISO-9002 certification for quality management system of the production
division. The |
|
| Company
was the first to achieve this distinction in the fertilizer industry. |
|
|
|
|
| Safety
performance was maintained at a high level with no lost time injury during
the year and 6.58 |
|
| million
man hours of safe operations were completed. |
|
|
| The
Company's Technical Training Centre conducted 3 management courses and 9
skill |
|
| improvement
courses were also conducted in plant operation and maintenance. Besides,
specific |
|
| training
on DCS control systems was imparted to 7 instructors of Pak-German Technical
Training |
|
| Centre,
Lahore. Technical facilities were also extended to apprentices of an
associated Company |
|
| FFC-Jordan
Fertilizer Company Limited. |
|
|
| MARKETING |
|
| Domestic
urea market demand in the earlier months significantly declined due to
depressed market |
|
| and
liquidity crunch in the country but revived in the second half of the year as
a result of attractive |
|
| support
price announced by the Government for wheat, loan package announced for
farmers, |
|
| favourable
weather conditions and better agro economic environment. |
|
|
| The
urea price, however, remained |
|
| unchanged
during this trying period |
|
| although the value of rupee
diclined and |
|
| inflationary
pressures intensified. |
|
|
| During
the year 1997, the Company |
|
| achieved
46% urea market participation |
|
| as
compared to 42% last Year. |
|
|
| Total
fertilizers sales volume was 1,711 |
|
| thousand
tonnes, including 81 thousand |
|
| tonnes
of phosphatic fertilizer and 147 |
|
| thousand
tonnes of imported urea. |
|
|
| FINANCIAL
RESULTS |
|
| The
growth in net profit by 37% over the previous year is mainly attributable to
higher 'Sona' sales |
|
| volume
and lower trading in high priced imported urea. |
|
|
| The
Earning Per Share in 1997 was Rs. 13.14 compared to Rs. 9.57 achieved last
year. |
|
|
| Excellent
liquidity, debt service cover and operating ratios contributed to the
financial strength of |
|
| the
Company to honour contractual commitments and contemplate expansion. |
|
|
| The
Company has given an undertaking to a lender of an associated Company through
an |
|
| agreement
to provide funding in the form of loan or additional equity equal to the
deficiency notified |
|
| by
the lender. |
|
|
| Feasibility
of investment in different projects is being considered. In order to meet
this requirement, |
|
| and
for balanced distribution of dividend, Rs. 1,400 million are being proposed
to be transferred to |
|
| general
reserve. |
|
|
| The
Company's ranking in the Karachi Stock Exchange list of top 25 companies
improved from fifth |
|
| position
in 1995 to second position in 1996. |
|
|
| APPROPRIATION
OF PROFIT |
|
| The
net profit for the year is recommended to be appropriated as follows: |
|
|
|
|
Rupees |
|
|
|
Thousand |
|
|
| Net
profit after taxation |
|
|
3,370,201 |
|
| Unappropriated
profit brought forward |
|
432,869 |
|
|
|
|
|
---------- |
|
| Total
available for appropriation |
|
3,803,070 |
|
| Appropriations |
|
|
|
| Transfer
to general reserve |
|
1,400,000 |
|
|
| Dividends
on ordinary shares |
|
| First
interim @ 20% |
|
512,992 |
|
| Second
interim @ 20% |
|
512,992 |
|
| Proposed
final @ 40% |
|
1,025,984 |
|
|
---------- |
|
|
|
2,051,968 |
|
|
|
---------- |
|
|
|
3,451,968 |
|
|
|
---------- |
|
| Unappropriated
profit carried forward |
|
351,102 |
|
|
========= |
|
|
|
| OUTLOOK
1998 |
|
| The
fertilizer demand has shown a significant increase in first quarter as
compared to previous year |
|
| and
earlier estimates due to better Rabi crop, favourable weather conditions and
better liquidity |
|
| position.
However, there has been a sharp decline during April. Off take is expected to
improve |
|
| marginally
in the year due to Government's incentives given to farmers. |
|
|
|
| Turnaround
of both plants has been planned for 1998. Production level is thus expected
to decline |
|
| as
compared to the previous year. Due to higher demand in 1998 urea is also
being imported. |
|
|
| Recent
reports regarding changes in pricing policy for natural gas have created
uncertainty. There |
|
| is
a need for clarification in view of prior commitments. In line with the
Government's announced |
|
| policy
of continued support to the agriculture sector it is expected that the
situation would be |
|
| clarified
soon to allay such apprehensions. In case of increase in gas price the
operating results |
|
| could
be affected. |
|
|
| Barring
any unforeseen constraints, prospects for the current year are positive. |
|
|
| EMPLOYEE
RELATIONS AND SOCIAL WELFARE |
|
| During
1997 employees' relationship with management was conducive. Contributions of
the |
|
| employees
( the most valuable assets of the Company) were instrumental in generating
good .. |
|
| operating
results throughout the year. |
|
|
| The
Company is extending full medical facilities to its employees and their
families at Plant in fully |
|
| equipped
medical centre having specialist doctors, and also extending full medical
facilities to its |
|
| employee
at other locations. |
|
|
| Schooling
facilities are being extended to the children of all employees working at
Plantsite. |
|
| Scholarship
scheme for children studying in higher classes is also available. The Company |
|
| continued
to financially support the Government school adjacent to the Plant for the
children of |
|
| surrounding
localities. |
|
|
| PATTERN
OF SHARE HOLDING |
|
| As
of December 31, 1997 there were 3,054 shareholders including individuals and
numerous institutions, |
|
| as
described in the appended pattern of share holding. |
|
|
| DIRECTORS |
|
| The
Board places on record its appreciation for the advice and valuable services
rendered by Brig. |
|
| Muneeb-ur-Rehman
Farooqui (Retd.) the retiring director. The Board also takes the opportunity
to welcome |
|
| Brig.
Muhammad Saeed Baig (Retd.) who has replaced him on the Board of FFC. |
|
|
| AUDITORS |
|
| A.
E Ferguson & Co., Chartered Accountants retire at the conclusion of the
20th Annual General Meeting |
|
| and
being eligible, have offered themselves for reappointment. |
|
|
| ACKNOWLEDGE EM |
|
| The
directors also express their appreciation for the contributions by the
customers, suppliers, employees, |
|
| shareholders
and the Government and its agencies during the year. |
|
|
|
| AUDITORS'
REPORT TO THE MEMBERS |
|
| We
have audited the annexed balance sheet of Fauji Fertilizer Company 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, investment 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 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 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. |
|
|
|
|
| Islamabad |
|
|
A.F Ferguson & Co. |
|
| 21-May-98 |
|
Chartered Accountants |
|
|
|
|
|
| BALANCE
SHEET AS AT DECEMBER 31, 1997 |
|
|
|
|
|
|
1997 |
1996 |
|
|
|
Note |
(Rupees '000) |
|
|
| SHARE
CAPITAL AND RESERVES |
|
| Share capital |
|
| Authorised |
|
|
|
3 |
3,000,000 |
3,000,000 |
|
|
======== |
======== |
|
| Issued,
subscribed and fully paid |
|
3 |
2,564,959 |
2,564,959 |
|
| Capital
reserve |
|
4 |
160,000 |
160,000 |
|
| General
reserve |
|
|
3,000,000 |
1,600,000 |
|
| Unappropriated
profit |
|
|
351,102 |
432,869 |
|
|
|
---------- |
---------- |
|
|
|
6,076,061 |
4,757,828 |
|
|
| LONG
TERM LOANS |
|
5 |
2,323,159 |
2,901,274 |
|
|
|
|
|
| DEFERRED
TAXATION |
|
6 |
727,000 |
942,000 |
|
|
|
| CURRENT
LIABILITIES AND PROVISIONS |
|
| Current
maturity of long term loans |
|
5 |
530,204 |
536,003 |
|
| Creditors,
accrued and other liabilities |
|
7 |
1,638,523 |
1,634,418 |
|
| Taxation
- net |
|
|
602,586 |
247,479 |
|
| Dividend payable |
|
-- |
512,992 |
|
|
| Proposed
dividend |
|
|
1,025,984 |
641,240 |
|
|
|
|
----------- |
----------- |
|
|
|
|
3,797,297 |
3,572,132 |
|
| CONTINGENT
LIABILITIES AND COMMITMENTS |
|
|
8 |
|
|
|
|
----------- |
----------- |
|
|
12,923,517 |
12,173,234 |
|
| The
annexed notes form an integral part of these accounts. |
|
|
| FIXED
CAPITAL EXPENDITURE |
|
| Fixed assets |
|
|
|
9 |
4,473,762 |
5,222,191 |
|
| Capital
work in progress |
|
|
10 |
21,013 |
6,201 |
|
|
|
4,494,775 |
5,228,392 |
|
| LONG
TERM INVESTMENTS |
|
11 |
2,322,330 |
1,373,330 |
|
| LONG
TERM LOANS AND ADVANCES |
12 |
35,090 |
66,603 |
|
| LONG
TERM DEPOSITS, PREPAYMENTS |
|
| AND
DEFERRED COSTS |
|
13 |
14,008 |
29,888 |
|
|
|
| CURRENT
ASSETS |
|
| Stores
and spares |
|
14 |
801,338 |
716,439 |
|
| Stock
in trade |
|
15 |
307,587 |
278,389 |
|
| Trade debts |
|
16 |
745,789 |
419,305 |
|
| Loans,
advances, deposits, prepayments |
|
| and
other receivables |
|
17 |
362,370 |
205,982 |
|
| Short
term investments |
|
18 |
3,509,064 |
3,686,500 |
|
| Cash
and bank balances |
|
19 |
331,166 |
168,406 |
|
|
|
|
----------- |
----------- |
|
|
|
|
6,057,314 |
5,475,021 |
|
|
|
|
|
|
|
|
|
----------- |
----------- |
|
|
|
|
12,923,517 |
12,173,234 |
|
|
========= |
========= |
|
|
|
|
|
|
|
| PROFIT
AND LOSS ACCOUNT FOR THE YEAR ENDED DECEMBER 31, 1997 |
|
|
|
|
|
|
|
1997 |
1996 |
|
|
|
Note |
(Rupees '000) |
|
|
|
|
| Sales |
|
|
20 |
12,055,669 |
11,739,116 |
|
| Less:
Cost of goods sold |
|
21 |
6,001,005 |
7,023,150 |
|
|
|
|
----------- |
----------- |
|
| GROSS
PROFIT |
|
|
6,054,664 |
4,715,966 |
|
|
|
|
|
|
|
| Less:
Selling and distribution expenses |
|
22 |
856,106 |
695,886 |
|
| Financial
charges |
|
23 |
413,770 |
495,163 |
|
|
----------- |
----------- |
|
|
|
1,269,876 |
1,191,049 |
|
|
|
|
|
|
----------- |
----------- |
|
|
|
4,784,788 |
3,524,917 |
|
| Other
income |
|
24 |
623,518 |
718,572 |
|
|
----------- |
----------- |
|
|
|
5,408,306 |
4,243,489 |
|
|
| Other
charges |
|
25 |
385,105 |
296,780 |
|
|
|
|
----------- |
----------- |
|
| NET
PROFIT BEFORE TAXATION |
|
5,023,201 |
3,946,709 |
|
|
| Provision
for taxation |
|
26 |
1,653,000 |
1,493,000 |
|
|
----------- |
----------- |
|
| NET
PROFIT AFTER TAXATION |
|
3,370,201 |
2,453,709 |
|
|
| Unappropriated
profit brought forward |
|
432,869 |
246,384 |
|
|
----------- |
----------- |
|
| Profit
available for appropriation |
|
3,803,070 |
2,700,093 |
|
|
| APPROPRIATIONS: |
|
| Transfer
to general reserve |
|
1,400,000 |
600,000 |
|
|
|
|
|
| Dividends: |
|
| First
interim @ 20% (1996: 20%) |
|
512,992 |
512,992 |
|
| Second
interim @ 20% (1996: 20%) |
|
512,992 |
512,992 |
|
| Proposed
final @ 40% (1996: 25%) |
|
1,025,984 |
641,240 |
|
|
----------- |
----------- |
|
|
|
2,051,968 |
1,667,224 |
|
|
|
|
|
|
|
----------- |
----------- |
|
|
|
3,451,968 |
2,267,224 |
|
|
|
|
|
|
----------- |
----------- |
|
| UNAPPROPRIATED
PROFIT CARRIED FORWARD |
351,102 |
432,869 |
|
|
|
========= |
========= |
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
| CASH
FLOW STATEMENT FOR THE YEAR ENDED DECEMBER 31, 1997 |
|
|
|
|
1997 |
1996 |
|
|
|
Note |
(Rupees '000) |
|
|
|
| CASH
FLOWS FROM OPERATING ACTIVITIES |
|
|
| Cash
generated from operations |
|
29 |
5,239,417 |
3,922,870 |
|
| Payments
for: |
|
|
| Financial
charges |
|
|
(479,598) |
(488,572) |
|
| Income tax |
|
|
(1,512,893) |
(1,451,248) |
|
|
|
|
----------- |
----------- |
|
| Net
cash provided by operating activities |
|
3,246,926 |
1,983,050 |
|
|
| CASH
FLOWS FROM INVESTING ACTIVITIES |
|
|
| Fixed
capital expenditure |
|
|
(149,779) |
(217,522) |
|
| Sale
proceeds of fixed assets |
|
24,035 |
12,214 |
|
| Income
received on loans, deposits and investments |
|
563,388 |
552,273 |
|
| Increase
in investments |
|
|
(753,913) |
(715,859) |
|
| (lncrease)/decrease
in balance due from associated company |
(55,490) |
592 |
|
|
----------- |
----------- |
|
| Net
cash used in investing activities |
|
(371,759) |
(368,302) |
|
|
| CASH
FLOWS FROM FINANCING ACTIVITIES |
|
| Redemption
of preference shares |
|
-- |
(120,000) |
|
| Repayment
of redeemable capital |
|
-- |
(43,800) |
|
| Repayment
of long term loans |
|
(535,608) |
(566,758) |
|
| Dividends
paid |
|
|
(2,176,878) |
(1,097,641) |
|
|
|
|
----------- |
----------- |
|
|
|
|
|
|
| Net
cash used in financing activities |
|
(2,712,486) |
(1,828,199) |
|
|
|
|
----------- |
----------- |
|
| Net
increase/(decrease)in cash and cash equivalents |
162,681 |
(213,451) |
|
| Cash
and cash equivalents at beginning of the year |
|
168,406 |
381,857 |
|
| Effect
of exchange rate changes |
|
79 |
-- |
|
|
|
|
| Cash
and cash equivalents at close of the year, |
|
----------- |
----------- |
|
| representing
cash and bank balances |
|
19 |
331,166 |
168,406 |
|
|
========= |
========= |
|
|
|
|
|
| NOTES
TO THE ACCOUNTS FOR THE YEAR ENDED DECEMBER 31, 1997 |
|
|
| 1.
STATUS AND NATURE OF BUSINESS |
|
| The
Company is a public company incorporated in Pakistan under the Companies Act,
1913, |
|
| (now
Companies Ordinance, 1984) and its shares are quoted on the stock exchanges
in Pakistan. |
|
| The
principal activity of the Company is manufacturing, purchasing and marketing
of fertilizers. |
|
|
| 2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
|
|
| 2.1
Accounting convention |
|
| These
accounts have been prepared under the historical cost convention. |
|
|
| 2.2
Retirement benefits |
|
| The
Company has the following plans for its employees: |
|
|
|
|
| a)
Defined benefit funded gratuity for all employees who complete qualifying
period of |
|
| service
and age. |
|
|
|
| b)
Defined contributory provident fund for all employees for which contributions
are charged to |
|
| income. |
|
|
|
|
|
| c)
Defined benefit funded pension for management employees who complete
qualifying period |
|
| of
service and age. |
|
|
|
| These
funds are administered by trustees. Annual contributions to the gratuity fund
are |
|
| based
on actuarial valuation every three years using a projected benefits valuation
method; |
|
| contributions
to the management staff pension fund are based on actuarial valuation using
an |
