| NAFEES COTTON MILLS LIMITED |
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|
|
|
|
|
|
|
|
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| ANNUAL
REPORT 1997 |
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| NOTICE
OF MEETING |
|
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| NOTICE
is hereby given that the 29th annual general meeting of the members of the
Company will |
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| be
held on Tuesday, March 31, 1998 at 11.00 a.m. at the Registered Office at |
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| Ismail
Aiwan-i-Science, Shahrah-i-Jalaluddin Roomi, Lahore, to transact the
following business:- |
|
|
| 1.
To confirm minutes of the 28th annual general meeting. |
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|
|
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| 2.
To receive, consider and adopt the directors report and the audited accounts
for the |
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| year
ended September 30, 1997, together with the auditors report thereon - |
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| annexed. |
|
|
|
| 3.
To appoint auditors for 1997-98 and to fix their remuneration. |
|
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| 4.
Any other business with the permission of the Chairman. |
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| The
share transfer books of the Company will remain closed from March 28, 1998 to
March 31, |
|
| 1998
(both days inclusive). |
|
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| A
member entitled to attend and vote at this meeting may appoint another member
as his proxy to |
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| attend
and vote. The form of proxy is annexed, which duly completed, should reach
the Registered |
|
| Office
of the Company at least 48 hours before the time of the meeting. |
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|
|
| BOARD
OF DIRECTORS |
MR. NASEERA. SHAIKH -
Chairman |
|
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|
MR. HUMAYUN N. SHAIKH |
|
|
|
MR. AHMED H. SHAIKH -
Chief Executive |
|
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|
MR. AEHSUN M. H. SHAIKH |
|
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|
MS. NASREEN H. SHAIKH |
|
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|
MS. AMMILH. SHAIKH |
|
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|
SYED ABID HUSAIN |
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| BANKERS |
|
Muslim Commercial Bank
Limited |
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|
Standard Chartered Bank |
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|
Credit Agricole Indosuez |
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|
Habib Bank Limited |
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|
National Bank of Pakistan |
|
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| LEGAL
ADVISOR |
Syed Sajjad, Advocate |
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|
|
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| AUDITORS |
|
Hameed Chaudhri & Co. |
|
|
|
Chartered Accountants |
|
|
|
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| REGISTERED
OFFICE |
Ismail Aiwan-i-Science |
|
|
|
Shahrah-i-Jalaluddin
Roomi |
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|
La ho re - 54600 |
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|
Fax: 5712987 |
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|
Phones: 5756751,5756801 |
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| MILLS |
|
Alipur Road, Muzaffargarh |
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|
Fax: 422652 |
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|
Phones: 423585, 3398 |
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|
| DIRECTORS
REPORT TO THE MEMBERS |
|
|
| Dear
members |
|
|
| I
am pleased to report the performance of the company along with Auditors
Report thereon for the |
|
| year
ended September 30, 1997. |
|
|
| The
results for the year are improved over the preceding year despite very
difficult economic |
|
| conditions.
Recession continues to plague the domestic economy. The Pak rupee continues
to |
|
| devalue
and liquidity is tight throughout Pakistan. |
|
|
| In
spite of these difficult conditions the company managed to turn a profit of
Rs. 6.527 Million |
|
| compared
to a loss of Rs. 10.527 Million for the previous year. Sale improved by 6.3%
equal to |
|
| Rs.
47.5 Million. |
|
|
| New
markets developed i.e., specialized cotton yarns and the export markets, have
helped to |
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| improve
the company's operating results and bring it back into the black. |
|
|
| During
the coming year the situation continues to be difficult. Efforts continue
based on a |
|
| specialized
approach to try and fight off these difficult times. Given the continuing
poor state of the |
|
| economy
the future continues to look tough. |
|
|
| The
management hereby places on record its profound appreciation and thanks for
the dedicated |
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| services
rendered by all the Employees, Bankers, and Financial Institutions. |
|
|
| The
present Auditors, Messrs. Hameed Chaudhri and Company retire, and being
eligible, offer |
|
| themselves
for re-appointment. |
|
|
| Note
to the Accounts Number 33 fully explains the reservations expressed in the
Auditors Report. |
|
| Pattern
of holding of shares held by the shareholders is given at page 28. |
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|
|
|
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| CONSOLIDATED
BALANCE SHEET |
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| AS
AT 30 SEPTEMBER, 1997 |
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|
1997 |
1996 |
|
|
|
|
Rupees |
Rupees |
|
|
|
|
| PROPERTY
AND ASSETS |
|
|
|
|
|
|
| Tangible
fixed assets |
|
|
524,562,829 |
489,189,789 |
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| Long
term investments, deposits and deferred costs |
1,330,463 |
1,285,802 |
|
| Current
assets: |
|
|
---------- |
---------- |
|
| Inventories |
|
|
221,198,172 |
177,833,490 |
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| Trade
and other receivables |
|
|
94,600,801 |
90,802,340 |
|
| Cash
and bank balances |
|
|
17,101,751 |
5,578,351 |
|
|
|
---------- |
---------- |
|
|
|
|
332,900,724 |
274,214,181 |
|
|
|
|
---------- |
---------- |
|
|
|
858,794,016 |
764,689,772 |
|
|
|
========== |
========== |
|
| CAPITAL
AND LIABILITIES |
|
|
|
| Shareholders
equity |
|
|
369,740,008 |
363,076,789 |
|
| Minority
interest |
|
|
|
1,527,541 |
1,527,541 |
|
| Long
term debt |
|
|
|
113,781,006 |
88,956,588 |
|
| Current
liabilities: |
|
|
|
---------- |
---------- |
|
| Current
portion of long term debt |
|
|
41,923,809 |
49,427,840 |
|
| Short
term debt |
|
|
118,497,510 |
71,639,531 |
|
| Creditors,
accrued and other liabilities |
|
213,324,142 |
190,061,483 |
|
|
|
---------- |
---------- |
|
|
|
373,745,461 |
311,128,854 |
|
|
|
---------- |
---------- |
|
|
|
858,794,016 |
764,689,772 |
|
|
|
========== |
========== |
|
|
|
| AUDITORS'
REPORT TO THE MEMBERS |
|
|
| We
have audited the annexed Balance sheet of NAFEES COTTON MILLS LIMITED as at |
|
| 30
September, 1997 and the related Profit and Loss Account and the Cash Flow
Statement, |
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| together
with the notes forming part thereof, for the year then ended and we state
that we have |
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| 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 Ordnance 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 ac. counting 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 |
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| 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 fact that provision for gratuity aggregating Rs. 2.457 million (note 33)
has not |
|
| been
made in these accounts and the extent to which this may affect the annexed |
|
| accounts,
respectively give a true and fair view of the state of the Company's affairs |
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| as
at 30 September, 1997 and of the profit for the year after current year's
taxation |
|
| and
cash flows for the year then ended; and |
|
| (d)
in our opinion, no Zakat was deductible at source under the Zakat and Ushr |
|
| Ordnance
1980. |
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|
Hameed Chaudhri & Co. |
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| Lahore:
March 6, 1998 |
|
Chartered Accountants |
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|
|
| BALANCE
SHEET AS AT 30 SEPTEMBER, 1997 |
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|
|
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|
Note |
1997 |
1996 |
|
|
|
|
|
Rupees |
Rupees |
|
|
|
|
|
|
|
| SHARE
CAPITAL & RESERVES |
|
|
| Authorised
Capital |
|
|
|
| 8,900,000
ordinary shares of Rs. 10 each |
|
89,000,000 |
89,000,000 |
|
|
|
|
|
|
========== |
========== |
|
| Issued,
subscribed and paid-up capital |
3 |
86,989,000 |
86,989,000 |
|
| Capital
reserve |
|
|
4 |
5,436,813 |
5,436,813 |
|
| Unappropriated
profit |
|
|
|
55,805,633 |
61,978,332 |
|
|
|
|
---------- |
---------- |
|
|
|
|
148,231,446 |
154,404,145 |
|
| SURPLUS
ON REVALUATION OF |
|
|
|
| FIXED
ASSETS |
|
5 |
159,035,052 |
159,035,052 |
|
|
|
|
|
| REDEEMABLE
CAPITAL |
|
|
|
|
| Long
term finances under mark- up |
|
|
---------- |
---------- |
|
| arrangements |
|
6 |
1,049,778 |
2,044,095 |
|
| Term
finance certificates |
|
7 |
0 |
2,054,343 |
|
|
|
|
---------- |
---------- |
|
|
|
|
1,049,778 |
4,098,438 |
|
| LONG
TERM LOANS |
|
8 |
34,761,128 |
16,084,604 |
|
| LIABILITIES
AGAINST ASSETS |
|
|
|
| SUBJECT
TO FINANCE LEASE |
|
9 |
67,434,336 |
34,022,740 |
|
|
|
|
|
| DEFERRED
TAXATION |
|
14.4 |
9,600,000 |
9,600,000 |
|
| LONG
TERM DEPOSITS |
|
10 |
935,764 |
319,359 |
|
|
|
|
| CURRENT
LIABILITIES |
|
|
|
| Current
portion of redeemable capital and |
|
|
|
| long
term liabilities |
|
11 |
41,923,809 |
49,427,840 |
|
| Short
term finances |
|
|
12 |
118,497,510 |
71,639,531 |
|
| Creditors,
accruals and other liabilities |
13 |
188,010,936 |
193,552,265 |
|
| Provision
for taxation |
|
|
14 |
24,700,000 |
8,000,000 |
|
| Workers'
welfare fund |
|
|
|
600,000 |
464,081 |
|
| Unclaimed
dividend |
|
|
|
10,705 |
10,705 |
|
|
|
|
---------- |
---------- |
|
|
|
|
|
373,742,960 |
323,094,422 |
|
| CONTINGENCIES AND
COMMITMENTS |
15 |
|
|
|
|
|
---------- |
---------- |
|
|
|
|
794,790,464 |
700,658,760 |
|
|
|
========== |
========== |
|
|
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
| TANGIBLE
FIXED ASSETS |
|
|
|
| Operating
fixed assets |
|
16 |
455,265,704 |
390,045,524 |
|
| Capital
work in progress |
|
17 |
3,936,801 |
33,765,809 |
|
|
|
|
---------- |
---------- |
|
|
|
|
459,202,505 |
423,811,333 |
|
|
|
|
|
| LONG
TERM INVESTMENTS |
|
18 |
2,197,924 |
2,197,263 |
|
|
|
|
|
| SECURITY
DEPOSITS |
|
|
|
441,250 |
397,250 |
|
|
|
|
|
| CURRENT
ASSETS |
|
|
|
---------- |
---------- |
|
| Stores,
spares and loose tools |
|
19 |
7,675,442 |
5,298,510 |
|
| Stock
in trade |
|
|
20 |
213,522,730 |
172,534,980 |
|
| Trade
debtors |
|
|
21 |
42,868,073 |
39,260,866 |
|
| Advances,
deposits, prepayments and |
|
|
|
| other
receivables |
|
22 |
51,780,789 |
51,580,207 |
|
| Cash
and bank balances |
|
|
23 |
17,101,751 |
5,578,351 |
|
|
|
|
---------- |
---------- |
|
|
|
|
|
332,948,785 |
274,252,914 |
|
|
|
|
|
---------- |
---------- |
|
|
|
|
|
794,790,464 |
700,658,760 |
|
|
|
|
========== |
========== |
|
|
|
|
| PROFIT
AND LOSS ACCOUNT |
|
| FOR
THE YEAR ENDED 30 SEPTEMBER, 1997 |
|
|
|
Note |
1997 |
1996 |
|
|
|
Rupees |
Rupees |
|
|
|
|
| SALES - Net |
|
24 |
808,990,988 |
761,463,980 |
|
| COST
OF SALES |
|
25 |
730,178,652 |
718,267,302 |
|
|
|
|
---------- |
---------- |
|
| GROSS
PROFIT |
|
|
78,812,336 |
43,196,678 |
|
| ADMINISTRATIVE
AND SELLING EXPENSES |
|
26 |
27,408,605 |
19,867,868 |
|
|
|
|
---------- |
---------- |
|
| OPERATING
PROFIT |
|
|
51,403,731 |
23,328,810 |
|
| OTHER
INCOME |
|
27 |
1,602,674 |
702,503 |
|
|
|
|
---------- |
---------- |
|
|
|
|
|
53,006,405 |
24,031,313 |
|
| OTHER
CHARGES |
|
|
|
---------- |
---------- |
|
| Financial-
Net |
|
28 |
40,930,647 |
35,748,094 |
|
| Miscellaneous |
|
29 |
850,876 |
1,378,359 |
|
| Workers'
(Profit) Participation Fund |
|
561,662 |
0 |
|
| Workers'
Welfare Fund |
|
135,919 |
0 |
|
|
|
---------- |
---------- |
|
|
|
42,479,104 |
37,126,453 |
|
|
|
|
| PROFIT
/ (LOSS) FOR THE YEAR |
|
|
| -Before
current year's taxation |
|
|
10,527,301 |
(13,095,140) |
|
|
|
|
|
|
| CURRENT
YEAR'S TAXATION |
|
14 |
(4,000,000) |
0 |
|
|
|
|
---------- |
---------- |
|
| PROFIT/(LOSS)
FOR THE YEAR |
|
|
| -After
current year's taxation |
|
|
6,527,301 |
(13,095,140) |
|
|
|
|
| PRIOR
YEARS' TAXATION |
|
30 |
(12,700,000) |
0 |
|
|
|
|
| UNAPPROPRIATED
PROFIT |
|
|
|
| -
Brought forward |
|
61,978,332 |
75,073,472 |
|
|
|
|
| UNAPPROPRIATED
PROFIT |
|
|
|
---------- |
---------- |
|
| -
Carried to Balance Sheet |
|
|
55,805,633 |
61,978,332 |
|
|
|
|
========== |
========== |
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
|
| CASH
FLOW STATEMENT |
|
| FOR
THE YEAR ENDED 30 SEPTEMBER, 1997 |
|
|
|
|
1996 |
1997 |
|
|
|
Rupees |
Rupees |
|
| NET
CASH FLOW FROM OPERATING |
|
|
|
| ACTIVITIES
(note 34) |
|
63,501,980 |
82,042,167 |
|
|
|
|
|
| CASH
FLOW FROM FINANCING ACTIVITIES |
|
|
|
| Repayment
of redeemable capital |
|
(5,001,244 |
(6,994,826) |
|
| Loan
from Associated/Subsidiary |
|
|
|
|
|
(683,758 |
(8,000,000) |
|
| Repayment
of long term loans and |
|
|
|
|
| redemption
of debentures |
|
|
(6,187,066 |
(762,876) |
|
| Lease
finances obtained |
|
|
29,288,329 |
|
0 |
|
| Lease
finances repaid |
|
|
(40,188,114 |
(17,408,000) |
|
| Short
term finances - Net |
|
|
46,857,979 |
6,599,413 |
|
| Financial
Charges paid |
|
|
|
(54,480,708) |
(28,685,257) |
|
|
|
|
|
---------- |
---------- |
|
| NET
CASH OUTFLOW FROM FINANCING ACTIVITIES |
|
(30,394,582) |
(55,251,546) |
|
| CASH
FLOW FROM INVESTING ACTIVITIES |
|
|
|
| Tangible
fixed assets acquired |
|
|
|
| excluding
exchange fluctuations |
|
|
|
| loss
of Rs. 128,548 |
|
|
|
---------- |
---------- |
|
| (1996:
Rs. 1,086,120) |
|
|
|
(32,241,727 |
(43,958,265) |
|
| Sale
proceeds of fixed assets |
|
|
1,550,000 |
1,768,000 |
|
| Sale
proceeds of long term investments |
|
0 |
8,364,869 |
|
| Income
from deposits and financial charges received |
9,107,729 |
11,348,104 |
|
|
|
---------- |
---------- |
|
| NET
CASH OUTFLOW FROM INVESTING ACTIVITIES |
|
(21,583,998) |
(22,477,292) |
|
|
|
|
|
---------- |
---------- |
|
| NET
INCREASE IN CASH AND CASH EQUIVALENTS |
|
11,523,400 |
4,313,329 |
|
| CASH
AND CASH EQUIVALENTS |
|
|
| -
At the beginning of the year |
|
5,578,351 |
1,265,022 |
|
|
|
|
---------- |
---------- |
|
| CASH
AND CASH EQUIVALENTS |
|
|
| -
At the end of the year |
|
17,101,751 |
5,578,351 |
|
|
|
|
|
|
========== |
========== |
|
|
| The
annexed notes form an integral part of this statement. |
|
|
|
| NOTES
TO THE ACCOUNTS FOR THE YEAR ENDED 30 SEPTEMBER, 1997 |
|
|
| 1.
THE COMPANY AND ITS OPERATIONS |
|
|
| The
Company was incorporated in Pakistan on 13 February, 1969 as a Public Company
and its |
|
| shares
are quoted on Karachi Stock Exchange (Guarantee) Limited. It is principally
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 except that |
|
| certain
fixed assets have been included at revaluation and certain exchange elements |
|
| referred
to in notes 2.4 and 2.5 have been incorporated in the cost of relevant
assets. |
|
|
| 2.2
Staff retirement benefits |
|
|
| The
Company operates a Provident Fund Scheme for its employees and contribution
to |
|
| the
fund is made monthly to cover obligation under the Scheme. The Company also |
|
| operates
an unfunded gratuity scheme for those employees whose full length of service
is |
|
| not
covered by the Provident Fund Scheme and it is accounted for on 'payment
basis'. |
|
|
|
|
| 2.3
Taxation |
|
|
| Provision
for current taxation is made on taxable income for the year, if any. Tax
credits, |
|
| rebates
and brought forward losses are recognized for arriving at taxable income. The |
|
| Company
accounts for deferred taxation using the liability method on all major timing |
|
| differences
to the extent these differences are expected to reverse in the foreseeable
future. |
|
|
| 2.4
Foreign currency translations |
|
|
| Liabilities
in foreign currencies are translated into Pak Rupees at rates of exchange
ruling |
|
| on
the balance sheet date except where forward exchange rates have been booked
which |
|
| are
translated at the contracted rates. Export bills outstanding at year end are
stated at |
|
| amounts
subsequently realized. Exchange gains/losses on principal loans are |
|
| transferred
to the cost of plant and machinery acquired out of the proceeds of such |
|
| loans.
Other exchange differences are taken to the profit and loss account
currently. |
|
|
| 2.5
Tangible fixed assets and depreciation |
|
|
| Owned: |
|
|
|
| Operating
fixed assets, except freehold land, are stated at cost or revalued amounts
less |
|
| accumulated
depreciation. Freehold land is stated at revalued amount. Capital work-in- |
|
| progress
is stated at cost. Cost of plant and machinery consists of historical cost
and |
|
| exchange
fluctuations on foreign currency loans utilized for acquisition thereof. |
|
| Depreciation
on operating assets is charged applying reducing balance method to write |
|
| off
the cost, revaluation adjustments and capitalized exchange fluctuations over |
|
| remaining
useful life of assets. Rates of depreciation are stated in note 16. No |
|
| depreciation
is provided on assets in the year of disposal whereas full year's
depreciation |
|
| is
charged in the year of purchase. |
|
|
| Gains/losses
on disposal of fixed assets are taken to profit and loss account. Normal |
|
| maintenance
and repairs are charged to income as and when incurred. Major renewals and |
|
| improvements
are capitalized and assets replaced, if not kept as stand-by, are retired. |
|
|
| Leased: |
|
|
|
| These
are stated at cost less accumulated depreciation. The assets not installed or |
|
| erected
upto the balance sheet date are stated at cost. Depreciation is charged at
the |
|
| same
rates and basis as applicable to the company's owned assets. Outstanding |
|
| obligation
under the lease less financial charges allocated to future period is shown as
a |
|
| liability.
The financial charge is calculated at the interest rate implicit in the lease
and is |
|
| charged
to current income. |
|
|
| 2.6
Borrowing Cost |
|
|
| Borrowing
costs pertaining to construction/erection period are capitalized as part of |
|
| historical
cost of respective fixed assets. |
|
|
| 2.7
Investments |
|
|
| These
are stated at cost less permanent diminution in value. Bonus shares are |
|
| accounted
for by increase in number of shares without any change in value. |
|
|
| 2.8
Stores, spares and loose tools |
|
| These
are valued at moving average cost except items-in-transit which are valued at
cost |
|
| accumulated
to the balance sheet date. |
|
|
| 2.9
Stock-in-trade |
|
| Basis
of valuation are as follows: |
|
| Particulars |
|
|
Mode of valuation |
|
| Raw
materials |
|
| At mills |
|
|
-At lower of cost (FIFO)
and net realizable value. |
|
| In transit |
|
|
-At cost accumulated to
balance sheet date. |
|
| Work-in-process |
|
| Materials
in process |
|
-At raw materials cost. |
|
| Unpacked
yarn |
|
-At lower of cost and net
realizable value. |
|
| Finished
goods |
|
-At lower of cost and net
realizable value. |
|
| Waste |
|
|
-At realizable value. |
|
|
|
|
| -
Cost in relation to unpacked yarn and finished goods represents annual
average cost |
|
| which
consists of prime cost and appropriate production overheads. |
|
|
|
|
| -
Net realizable value signifies the selling price in the ordinary course of
business less |
|
| cost
of completion and cost necessary to be incurred to effect such sale. |
|
|
| 2.10
Revenue recognition |
|
|
| -
Local sales are accounted for when goods are delivered to customers and
invoices |
|
| raised. |
|
|
| - Export sales
are accounted for on shipment basis. |
|
|
|
|
| -
Income from investments and deposits is accounted for on 'Receipt Basis'. |
|
|
| 3.
ISSUED, SUBSCRIBED AND PAID UP CAPITAL |
|
1997 |
1996 |
|
|
|
Rupees |
Rupees |
|
| 2,674,725
ordinary shares of Rs. 10 each |
|
|
| issued
for cash |
|
26,747,250 |
26,747,250 |
|
| 6,024,175
ordinary shares of Rs. 10 each |
|
|
| issued
as bonus shares |
|
60,241,750 |
60,241,750 |
|
|
|
---------- |
---------- |
|
|
|
86,989,000 |
86,989,000 |
|
|
|
========== |
========== |
|
|
|
|
| In
case the Company raises its capital during the subsistence of local currency
loan stated in note |
|
| 8.1,
Industrial Development Bank of Pakistan (IDBP) has right to subscribe for and
receive |
|
| preferential
allotment of shares at par value upto 20% of the outstanding balance of the
loan. The |
