| MAPLE LEAF CEMENT FACTORY LIMITED |
|
|
|
|
|
|
| Kohinoor
Maple Leaf Group |
|
| ANNUAL
REPORT 1997 |
|
|
|
| Contents |
|
| Company
Information |
|
| Notice
of Meeting |
|
| Chairman's
Review |
|
| Directors'
Report |
|
| Pattern
of Holding of Shares |
|
| Auditors'
Report |
|
| Balance
Sheet |
|
| Profit
and Loss Account |
|
| Statement
of Changes in |
|
| Financial
Position (Cash Flow Statement) |
|
| Notes
to the Accounts |
|
|
|
|
|
| COMPANY
INFORMATION |
|
|
| Board
of Directors |
|
Auditors |
|
| Mr.
Tariq Sayeed Saigol |
1. Ford, Rhodes, Robson,
Morrow |
|
| Chairman |
|
Chartered Accountants |
|
|
| Mr.
Mohammad Hanif |
|
2. Amin, Mudassar &
Co. |
|
| Chief
Executive |
|
Chartered Accountants |
|
|
| Mr.
Taufique Sayeed Saigol |
|
| Mr.
Usman Said |
|
Legal Advisors |
|
| Mr.
Aamir Fayyaz Sheikh |
1. Cornelious Lane and
Mufti |
|
| Mr.
Sarmad Amin |
|
Nawa-e-Waqt Building, |
|
| Mr.
Palle O. Jorgensen |
|
4-Fatima Jinnah Road,
Lahore. |
|
| (Representing
FLS & IFU) |
2. Ch. Sadiq Hussain |
|
| Mr.
Sk. Jahangir |
|
Advocate, |
|
| (Representing
NIT) |
|
Supreme Court of
Pakistan, |
|
|
Lahore High Court. |
|
| Company
Secretary |
|
| Mr.
Mohammad Sharif |
|
Registered Office |
|
|
42-Lawrence Road, Lahore. |
|
| Bankers
of the Company |
|
Phone: 6305883, 6278904-5 |
|
| Muslim
Commercial Bank Limited |
Fax: (042) 6363184 |
|
| Union
Bank Limited |
|
| Habib
Bank Limited |
|
Factory |
|
| National
Bank of Pakistan |
Iskanderabad Distt
Mianwali. |
|
| Soneri
Bank Limited |
|
Phones: (0459) 392237 - 8 |
|
| American
Express Bank Limited |
|
| The
Bank of Punjab |
|
|
| NOTICE
OF THE ANNUAL GENERAL MEETING |
|
|
| Notice
is hereby given that the 37th Annual |
|
| General
Meeting of the members of Maple |
|
Notes: |
|
| Leaf
Cement Factory Limited will be held at its |
|
| registered
office, 42-Lawrence Road, Lahore |
|
1. Shares Transfer Books
of the company will |
|
| on
Tuesday, 30th December, 1997 at 3.00 |
|
remain closed from 27th
December, |
|
| P.M.
to transact the following business: |
|
1997 to 3rd January, 1998
(both days |
|
|
inclusive). Transfers
received in order at |
|
| 1)
To confirm the minutes of last Annual |
|
company's Shares
Department, |
|
| General
Meeting. |
|
42 - Lawrence Road,
Lahore upto the |
|
|
close of business on 26th
December, |
|
| 2)
To receive and adopt Audited Accounts |
|
1997 will be considered
in time. |
|
| of
the company for the year ended June |
|
| 30,
1997 together with the Auditors and |
2. |
|
2. A member eligible to
attend and vote at |
|
| Directors
Reports thereon. |
|
this meeting may appoint
another |
|
|
member as his/her proxy
to attend and |
|
| 3)
To appoint the Auditors and fix their |
|
vote instead of him/her.
Proxies in order |
|
| remuneration.
M/s Ford, Rhodes, |
|
to be effective must
reach the company's |
|
| Robson,
Morrow, Chartered Accountants |
|
registered office not
less than 48 hours |
|
| and
M/s Amin, Mudassar & Co., |
|
before the time for
holding the Meeting. |
|
| Chartered
Accountants the retiring joint |
|
| auditors, being
eligible, offer themselves |
|
3. Shareholders are
requested to |
|
| for
reappointment for the next year. |
|
immediately notify the change in |
|
|
address, if any. |
|
| 4)
To transact any other business with the |
|
| permission
of Chair. |
|
|
|
| CHAIRMAN'S
REVIEW |
|
| I
am pleased to present annual report of the |
|
| company
for the year ended June 30, 1997. |
|
|
| In
my previous year's review I have mentioned in |
|
| detail
factors responsible for worst-ever crisis in |
|
| the
cement industry. While the present |
|
| government
has removed some of the irritants |
|
| like
adoption of uniform policy of levy of sales |
|
| tax
for all the cement units throughout the |
|
| country,
the state of the industry remains |
|
| economically
depressed. The demand for |
|
| cement
has not picked up while increased input |
|
| costs
have further deteriorated the profitability |
|
| of
cement units particularly those with wet |
|
| process.
Depressed demand, heavy taxation |
|
| and
impediments to export have caused a glut |
|
| of
cement in the market. Accordingly, the |
|
| selling
price of cement during the year under |
|
| review
declined inspite of substantial increase in |
|
| the
cost of production. In order to overcome this |
|
| problem
it was suggested in my review of |
|
| previous
year that export of cement by road to |
|
| neighbouring
countries like Afghanistan, Iran |
|
| and
Central Asian Republics would be helpful |
|
| and
a step in the right direction. This would |
|
| save
the industry from crisis and would also |
|
| earn
foreign exchange for the country. The |
|
| present
government in its trade policy |
|
| announced
in July, 1997 has allowed the export |
|
| of
cement by sea. |
|
|
| The
Finance Act, 1997 inflicted yet another |
|
| blow
upon the industry and cement industry in |
|
| particular
as it was already working under |
|
| severe
economic pressure. Through an |
|
| amendment
introduced in the Finance Act, |
|
| 1997,
the long established basis of payment of |
|
| advance
tax under section 53 of the Income Tax |
|
| Ordinance,
1979 was changed. The |
|
| calculation
of advance tax was shifted from |
|
| "income
base" to "turnover base" with the |
|
| revenue
oriented motive to get higher tax |
|
| collection.
The assumption that turnover of each |
|
| year
has a direct correlation with the net income |
|
| is
rather illogical. Even with increased turnover, |
|
| income
may reduce substantially due to multiple |
|
| factors
including enhanced depreciation for |
|
| expansion
units or lease rentals. The new |
|
| provisions
are highly discriminatory as these hit |
|
| companies
who are required to pay advance |
|
| tax
regardless of their estimation of profit or loss |
|
| in
the current year. |
|
|
| With
regard to taxation policy, another |
|
| controversy
has recently emerged relating to |
|
| "lease
transactions". Consequent upon the |
|
| decision
of the government to eliminate |
|
| interest/riba
from the economy a number of |
|
| financing
arrangements and modes were |
|
| introduced. These include
Modaraba, |
|
| Musharika and Leasing. All these |
|
| arrangements are essentially and |
|
| predominantly
modes of financing and has |
|
| been so admitted by the
central Board of |
|
| Revenue. |
|
|
| The
execution of lease finance arrangement |
|
| cannot
be termed as purchase or sale of |
|
| commercial
goods. This view was also endorsed |
|
| by
the tax department and the transfer/sale of |
|
| assets
by the lessee to the leasing company was |
|
| not
assessed as deemed income under section |
|
| 80-C
of the Income Tax Ordinance. However, |
|
| recently
the tax department has taken different |
|
| view.
Under the provision of section 80-C of the |
|
| Ordinance,
tax deducted at source is adjusted |
|
| towards
a separate block of income meaning |
|
| thereby
that its credit is not available towards |
|
| the
income not falling under section 80-C which |
|
| is
actual and real income. While this issue still. |
|
| remains
unresolved, the Sales Tax Department |
|
| has
also joined this controversy and is |
|
| demanding
sales tax on this paper transaction |
|
| on
the plea that this being a sale made by the |
|
| company
to the leasing company, the payment |
|
| of
sale tax has become due. The entire |
|
| scenario
is a reflection of the unjust approach of |
|
| our
tax collectors in their effort of raising |
|
| revenue
from the public. It is imperative that |
|
| remedial
measures are urgently taken for |
|
| removal
of the fiscal anomaly. |
|
|
| The
cement industry continues to operate under |
|
| pressure
of inconsistent Government policies |
|
| announced
from time to time. These briefly are:- |
|
|
| i)
Capacity taxation was abolished |
|
| from
August 1993 which took away |
|
| special
incentives for increased pro |
|
| duction
which, in turn could have |
|
| revived
the industry in the larger |
|
| national
interest. |
|
|
| ii)
The taxes & duties on inputs have |
|
| constantly
been increased. Presently, |
|
| the
excise duty on cement is 40% |
|
| leviable
on retail price basis. This |
|
| system
of charge of excise duty is |
|
| extremely
unfair as cement being |
|
| voluminous product, freight and |
|
| allied charges vary widely from |
|
| place
to place. |
|
|
| iii)
The price of furnace oil, a major cost |
|
| component
of cement manufacture, |
|
| was
almost doubled in the previous |
|
| year. |
|
|
| iv)
Import of machinery for expansion |
|
| project
was exempt from import |
|
| duties
and sales tax vide Notification |
|
| No.
SRO 484 (1)/92 which expired |
|
| on
June 30, 1995 and additional |
|
| 10%
regulatory duty was imposed on |
|
| imported
goods. This has increased |
|
| capital
cost of the on-going projects |
|
| in
addition to the effect |
|
| devaluation
of Pak Rupee. |
|
|
| Despite
the adverse circumstances faced by the |
|
| industry,
the overall performance of your |
|
| company
in comparison of other wet process |
|
| plants
in the year under review has been |
|
| satisfactory.
The Expansion Project of 3300 |
|
| tonnes
clinker capacity based on most |
|
| modern
energy efficient dry process |
|
| technology
and up grading the existing plant |
|
| has
been completed and commissioned. I feel |
|
| immense
pleasure to proudly announce that the |
|
| project
was completed in record time inspite of |
|
| the
unfavourable circumstances faced by the |
|
| industry
in recent years. On completion of the |
|
| project,
the production capacity of your |
|
| company
has increased from 0.5 million tonnes |
|
| to
1.5 million tonnes per year. |
|
|
| The
completion of the expansion project could |
|
| not
have been possible without the continued |
|
| guidance
and help of International Finance |
|
| Corporation
Washington, F.L. Smidth & Co.(the |
|
| expansion
plant suppliers) and IFU (Danish |
|
| government
fund for developing countries), |
|
| local
banks and the team of our dedicated |
|
| executives
and workers. I wish to record my |
|
| sincere
appreciation to all these agencies and |
|
| personnel
for their efforts towards timely |
|
| completion
of the job. |
|
|
| I
would also like to convey my sincere thanks to |
|
| our
workers, executives and stockists of their |
|
| valuable
contribution to the affairs of the |
|
| company
and hope for better and prosperous |
|
| future. |
|
|
|
| FIVE
YEARS SUMMARY |
|
|
|
1996-97 |
1995-96 |
1994-95 |
1993-94 |
1992-93 |
|
|
| Quantitative
Data (M.Tonnes): |
|
|
| Grey
Cement: |
|
| Production |
|
471,070 |
488,961 |
487,785 |
497,651 |
521,060 |
|
| Sales |
|
474,415 |
481,881 |
492,661 |
489,494 |
520,225 |
|
|
| White
Cement: |
|
| Production |
|
33,412 |
34,720 |
38,299 |
35,125 |
36,008 |
|
| Sales |
|
33,405 |
34,450 |
38,375 |
35,091 |
36,113 |
|
|
| Sales(Rs.000) |
|
| Gross Sales |
|
1,911,471 |
1,675,074 |
1,803,122 |
1,528,307 |
1,346,968 |
|
| Less: Excise Duty |
|
604,718 |
397,782 |
433,530 |
267,787 |
231,266 |
|
| Sales Tax |
|
277,944 |
235,457 |
260,118 |
196,795 |
151,004 |
|
| Rebate |
|
15,090 |
11,001 |
13,542 |
39 |
- |
|
|
|
---------- |
---------- |
---------- |
---------- |
---------- |
|
| Net Sales |
|
1,013,719 |
1,030,834 |
1,095,932 |
1,063,334 |
964,698 |
|
|
========== |
========== |
========== |
========== |
========== |
|
| Profitability
(Rs.000) |
|
| Gross
Profit |
|
52,081 |
201,972 |
352,405 |
359,366 |
346,838 |
|
| Profit
Before Tax |
|
40,041 |
238,554 |
342,817 |
314,360 |
259,972 |
|
| Provision
for Income Tax |
12,200 |
98,000 |
126,000 |
113,219 |
83,500 |
|
|
---------- |
---------- |
---------- |
---------- |
---------- |
|
| Profit
After Tax |
|
27,841 |
140,554 |
216,817 |
201,141 |
176,472 |
|
|
========== |
========== |
========== |
========== |
========== |
|
| Financial
Position (Rs,000) |
|
| Tangible
Fixed Assets |
|
5,966,034 |
3,780,420 |
1,481,822 |
606,396 |
513,606 |
|
| Long
Term Investments & Other Assets |
364,466 |
380,163 |
376,870 |
215,710 |
112,167 |
|
|
6,330,500 |
4,160,583 |
1,858,692 |
822,106 |
625,773 |
|
| Current
Assets |
|
844,219 |
1,880,883 |
2,102,296 |
468,992 |
536,610 |
|
| Current
Liabilities |
|
(554,900) |
(380,854) |
(324,1021 |
(324,947) |
(359,363) |
|
| Net
Working Capital |
|
289,319 |
1,500,029 |
1,788,194 |
144,045 |
177,247 |
|
| Capital
Employed |
|
6,619,819 |
5,660,612 |
3,636,886 |
966,151 |
803,020 |
|
| Less
Long Term Loan & Other Liabilities |
(3,116,454) |
(2,557,172) |
(673,999) |
(350,955) |
(388,965) |
|
|
---------- |
---------- |
---------- |
---------- |
---------- |
|
| Share
Holder's Equity |
|
3,503,365 |
3,103,440 |
2,962,887 |
615,196 |
414,055 |
|
|
========== |
========== |
========== |
========== |
========== |
|
| Represented
by: |
|
| Share
Capital |
|
1,302,293 |
930,209 |
826,853 |
129,901 |
129,901 |
|
| Reserves
& Un-app. Profit |
2,201,072 |
2,173,231 |
2,136,034 |
485,295 |
284,154 |
|
|
---------- |
---------- |
---------- |
---------- |
---------- |
|
|
3,503,365 |
3,103,440 |
2,962,887 |
615,196 |
414,055 |
|
|
========== |
========== |
========== |
========== |
========== |
|
| Ratios |
|
|
|
| Gross
Profit to Sales (% age) |
5 14 |
19.59 |
32.16 |
33.80 |
35.95 |
|
| Net
Profit to Sales (% age) |
2.75 |
13.63 |
19.78 |
18.92 |
18.29 |
|
| Debt
Equity Ratio |
|
45:55 |
44:56 |
15:85 |
26:74 |
38:62 |
|
| Current
Ratio |
|
1.52 |
4.94 |
6.49 |
1.44 |
1.49 |
|
| Break
up Value per share of Rs.10 each |
26.90 |
33.36 |
35.83 |
47.36 |
31.87 |
|
|
|
| DIRECTORS'
REPORT TO THE SHAREHOLDERS |
|
|
| The
directors have pleasure in presenting the |
|
your company has closed
the year with |
|
| annual
report alongwith audited accounts |
|
marginal profit. |
|
| and
auditors' report thereon for the year |
|
| ended
June 30,1997. |
|
The net sales revenue for
the year under |
|
|
report amounted to
Rs.1,013.719 million |
|
| OPERATING
RESULTS |
|
(1996: Rs. 1,030.834
million) and pre-tax |
|
|
profit Rs.40.041 million
(1996:Rs.238.554 |
|
| The
overall recession in the country has |
|
million). The decrease in
profit over the last |
|
| affected
the economy. The political instability |
|
year is mainly
attributable to increased cost |
|
| and
insecure environment also contributed |
|
inputs i.e. furnace oil,
diesel & POL, power |
|
| towards
decline in GDP growth and slow |
|
tariff, stores &
spares and depressed sales |
|
| down
of infra-structure development |
|
price of cement. |
|
| activities
during the year. These factors |
|
| grossly
squeezed the aggregate demand for |
|
In the national budget
1997-98, the regional |
|
| cement
in the country. |
|
disparity in sales tax
has been removed to |
|
|
provide level playing
field for all . The sales |
| The
year under review has been the most |
|
tax exemption on cement
sales despite the |
|
| miserable
in the history of cement industry. It |
|
increase in excise duty
from 35% to 40% will |
|
| witnessed
heavy currency devaluation, |
|
give some relief to the
industry. The duty |
|
| exorbitant
increase in furnace oil prices, |
|
drawback on cement export
has been notified |
|
| general
inflation in consumables and increase |
|
and will hopefully reduce
the over-supply |
|
| in
sales tax from 15% to 18% and excise duty |
|
position in the country
and earn much |
|
| from
25% to 35%. The regional |
|
needed foreign exchange. |
|
| discriminatory
benefit to units located in |
|
| NWFP
created price war ultimately lowering |
|
PRODUCTION & SALES |
|
| selling
price. The increased cost inputs, heavy |
|
| taxes
and lowered retention price resulted in |
|
The production and sales
for the year under |
|
| operating |
losses to the industry.
However, |
|
review are given as
under: |
|
|
|
|
|
|
Grey |
|
White |
|
|
|
Clinker |
Cement |
Clinker |
Cement |
|
|
| PRODUCTION |
(M.Tonnes) |
|
| 1997 |
|
407,620 |
471,070 |
31,319 |
33,412 |
|
| 1996 |
|
488,933 |
488,961 |
34,581 |
34,720 |
|
|
| SALES |
(M.Tonnes) |
|
| 1997 |
474,415 |
|
33,405 |
|
| 1996 |
481,881 |
|
34,450 |
|
|
| The
shortfall in production of grey clinker was due to temporary closure of old
production line |
|
| of
400 tonnes per day. Despite the depressed demand, there was only nominal
decrease in |
|
| production
and sales of grey cement. |
|
|
| APPROPRIATION |
|
| Available
profits have been appropriated as under · |
|
|
|
(Rupees in Thousands) |
|
|
1997 |
1996 |
|
|
| Net
profit for the year after tax |
|
27,841 |
140,554 |
|
| Un-appropriated
profit brought forward |
|
4,731 |
4,177 |
|
|
---------- |
---------- |
|
| Available
for appropriation |
|
32,572 |
144,731 |
|
|
========== |
========== |
|
| Appropriations: |
|
|
| Your
Directors propose following appropriation of profit: |
|
|
| Transfer
to General Reserve |
|
30,000 |
140,000 |
|
| Balance
Carried Forward |
|
2,572 |
4,731 |
|
|
---------- |
---------- |
|
|
32,572 |
144,731 |
|
|
========== |
========== |
|
|
|
|
| In
view of reduced profitability and self financing for expansion project, cash
dividend for the |
|
| year
1996-97 has not been recommended. |
|
|
| PRODUCTION & SALES |
PRODUCTION & SALES |
|
| EXPANSION
PROJECT |
|
|
| AI
Hamad-u-Lilah, the Expansion Project of |
|
| 3300
Metric Tonnes per day clinker capacity |
|
| based
on most modern dry process |
|
| technology
has started production. The plant, |
|
| supplied
by world renowned cement plant |
|
| manufacturers
M/s F.L.Smidth & Co., |
|
| Denmark,
is pollution free and meet the |
|
| Environmental
Guidelines of the World Bank. |
|
| It
is an IFC ( World Bank subsidiary) financed |
|
| project
who have contributed US $ 65.0 |
|
| million
as long term loan and US $ 5.7 |
|
| million
as equity. F L Smidth & Co Denmark, |
|
| the
plant supplier and The Danish |
|
| Government
Fund for Developing Countries |
|
| (IFU)
,Denmark have also contributed US $ |
|
| 5.5
million each as equity investment. Both |
|
| Muslim
Commercial Bank Ltd and The Bank of |
|
| Punjab
have provided Rs. 246.9 million and |
|
| Rs.
300.0 million respectively for the project |
|
| as
long term loan. The total production |
|
| capacity
of the company has increased from |
|
| 0.5
million to 1.5 million tonnes cement |
|
| annually.
The new plant is of national |
|
| importance
as it has provided job |
|
| opportunities
in the local areas with number |
|
| of
down stream benefits. |
|
|
| M/s
INCEM provided the Civil Drawings of |
|
| the
project and civil work was done by M/s |
|
| Builders
Associate (Pvt) Limited and M/s Izhar |
|
| Construction
(Pvt) Limited. The plant & |
|
| machinery
was supplied by M/s F.L. Smidth & |
|
| Co
Denmark and local equipment by M/s FLS |
|
| Pakistan
(Pvt) Ltd. The work of mechanical |
|
| erection
was contracted to M/s HDK,EKL and |
|
| Asiacon
and electrical erection work |
|
| was
carried by M/s Siemens Pakistan |
|
| Engineering
Company Ltd. M/s PEG, |
|
| Switzerland
has provided the project |
|
| Monitoring
services. |
|
|
| ENVIRONMENTAL
IMPROVEMENT AND |
|
| UPGRADING
OF EXISTING PLANT |
|
| M/s
FLS miljo, Denmark and FLS Pakistan |
|
| (Pvt)
Ltd supplied the Environmental Control |
|
| equipment
for the existing plant. The |
|
| equipment
installed will ensure pollution free |
|
| operations
complying with the National |
|
| Environment
Control Standards. House |
|
| keeping
to improve drainage, oil handling |
|
| and
existing building structure has been |
|
| completed
in consultation with NESPAK. |
|
|
| AUDITORS |
|
| M/s
Ford, Rhodes, Robson, Morrow, |
|
| Chartered
Accountants and M/s Amin, |
|
| Mudassar
& Co, Chartered Accountants the |
|
| retiring
joint auditors, being eligible, offer for |
|
| re-appointment for the |
year ending June |
|
| 30,1998. |
|
|
| PATTERN
OF SHAREHOLDING |
|
| The
Shareholding Pattern of the company as |
|
| on
June 30,1997 is included in the Annual |
|
| Report. |
|
|
| LABOUR
MANAGEMENT RELATIONSHIP |
|
| The
Board wishes to place on record its |
|
| appreciation
of the efforts and services |
|
| rendered
by the officers and workers who |
|
| worked
as a team throughout the year. It is |
|
| expected
that the same would be coming forth |
|
| in
the years to come. |
|
|
| ACKNOWLEDGMENT |
|
| The
Directors would like to place on record |
|
| their
heartiest thanks to M/s International |
|
| Finance
Corporation, Washington D.C. , |
|
| F.
LSmidth & Co, and IFU ( Danish |
|
| Government
Fund for Developing Countries) |
|
| Denmark
and all local contractors for their |
|
| co-operation
and co-ordination during the |
|
| implementation
of the expansion project. |
|
|
| The
Directors also appreciate the Chief |
|
| Executive
and his team for striving hard to |
|
| complete
this multi billion project within the |
|
| target
time. |
|
|
