| NATIONAL FOODS (PVT) LIMITED |
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| ANNUAL
REPORT 1997 |
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| CONTENTS |
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| Board
of Directors |
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| Notice
of Meeting |
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| Chairman's
Review |
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| Report
of the Directors |
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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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| Statement
of Changes in Financial Position |
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| (Cash Flow Statement |
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| Notes
to the Accounts |
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| Pattern
of Share Holdings |
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| Board
of Directors |
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| MR. A. MAJEED |
|
Chairman |
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| MR.
WAQAR HASAN |
|
Managing Director |
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Chief Executive |
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| MR.
KHAWAR M. BUTT |
|
Director |
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| MR.
ABRAR HASAN |
|
Director |
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| MR.
SIRAJUDDIN AHMAD |
|
Director (I.C.P. Nominee) |
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| MR.
ZAHID MAJEED |
|
Director |
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| MS.
JAMILA WAQAR |
|
Director |
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| MS.
M. E. MAJEED |
|
Director |
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| MR.
HABIB A. ISMAlL KHAIRANI |
Company Secretary |
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| REGISTERED
OFFICE |
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12/CL-6, Claremont Road,
Civil Lines, Karachi-75530. |
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Phones: 515564, 515740,
515981,5662687 |
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P.O. Box No. 15509 Fax
No. 5684870 |
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TIx: 20191 CATEL PK. |
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| AUDITORS |
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Riaz Ahmad, Saqib, Gohar
& Company |
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Chartered Accountants, |
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5-Nasim Cooperative
Housing Society Ltd, |
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Major Nazir Bhatti Road, |
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Off Shahid-e-Millat Road, |
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Karachi. |
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Phones: 4945427 - 4946112 |
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Fax: 4932629 |
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| REGISTRAR |
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Noble Computer Services
(Pvt.) Limited |
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1st FIoor, AI-Manzoor
Building, |
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Dr. Ziauddin Ahmad Road,
Karachi. |
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Phones: 2635511-14 |
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| BANKERS |
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Muslim Commercial Bank
Limited, |
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Clifton Corporate Branch, |
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Kulsom Court, Clifton,
Karachi. |
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Phones: 5872286 - 5831835 |
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Fax :5872058 |
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Bank Al-Habib Limited |
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Mackvolk Building, |
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I. I. Chundrigar Road,
Karachi. |
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Phones: 2412986 (10
lines) |
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Fax : 2419752 |
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| Notice
of Meeting |
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| Notice
is hereby given that the 26th Annual General Meeting of National Foods
Limited |
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| will
be held at the Registered Office situated at 12/CL-6, Claremont Road, Civil
Lines |
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| Karachi,
on Saturday the 27th December 1997, at 4.00 p.m.
to transact the following |
FOOD |
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| business: |
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| 1.
To read and confirm the minutes of the Last Annual General Meeting held on |
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| 22nd
December 1996. |
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| 2.
To Receive, consider and approve the Audited Accounts for the year ended 30th |
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| June 1997. |
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| 3.
To Approve issue of bonus shares @ 12.5% to such shareholders whose names |
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| appear
on the members' book on 27th December 1997. |
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| 4.
To elect Directors for a period of 3 years. The Board of Directors has fixed
number |
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| of
Directors to be elected as 7 (seven) excluding any director(s) nominated |
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| by
Development Financial Institutions.. Following are the retiring directors who |
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| are
also eligible to offer themselves for re-election: |
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| ·
Mr. A. Majeed |
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| ·
Mr. Waqar Hasan |
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| ·
Mr. Khawar M. Butt |
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| ·
Mr. Abrar Hasan |
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| ·
Mr. Zahid Majeed |
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| ·
Ms. Jamila Waqar |
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| ·
Ms. M. E. Majeed |
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| Any
person who seeks to contest the election of directors may file his (her)
consent |
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| to
the company in accordance with Companies Ordinance, 1984. |
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| 5.
To appoint Auditors for the year 1997-1998 and fix their remuneration. The
present |
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| auditors
Messrs. Riaz Ahmad, Saqib, Gohar & Company, Chartered Accountants |
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| retire,
being eligible, have offered themselves for re-appointment as Auditors. |
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| Special
Business: |
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| 6.
To approve the remuneration payable to the full time working Directors of the |
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| Company. |
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| 7.
To transact any other business with the permission of the Chairman. |
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| NOTES: |
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| 1.
The share transfer books of the Company will remain closed from 20th December |
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| 1997
to 27th December 1997. (Both days inclusive). |
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| 2.
All members are entitled to attend and vote at the meeting. |
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| 3.
A member entitled to attend and vote at the meeting may appoint a proxy to |
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| attend,
speak and vote for him/her. A proxy needs to be a member of Company. |
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| 4.
In order to be valid, an instrument of proxy and the power of Attorney or
other |
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| authority
(if any) under which it is signed, or a notarially certified copy of such |
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| power
of authority, must be deposited at the Registered Office of the Company |
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| not
less than 48 hours before the time of the meeting. |
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| 5.
Shareholders are requested to notify immediately, any change in their
Registered |
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| address. |
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| 6.
Statement under section 160 of the Companies Ordinance1984 pertaining to the |
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| Special
Business are being sent to the shareholders with this Notice. |
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| STATEMENT
OF MATERIAL FACTS UNDER SECTION 160 OF THE COMPANIES ORDINANCE 1984. |
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| To
pass the following special resolutions with or without modification: |
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| The
Company requires the approval of the shareholders of the remuneration |
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| payable
to the Chief Executive and Directors of the Company. For this purpose, |
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| it
is intended to pass the following Resolutions:- |
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| "RESOLVED
THAT the company hereby approves and authorizes the payment |
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| consisting
of salary and allowances to the Directors, namely Messrs. Waqar Hasan. |
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| A.
Majeed, Abrar Hasan, Zahid Majeed and Mrs. Jamila Waqar, not exceeding |
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| Rs.
2,242,800/= (Rupees twenty two lacs fourty two thousands eight hundred only) |
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| per
annum exclusive of perquisites, bonus and retirement benefits paid in |
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| accordance
with the Company's policy. |
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| ALSO
RESOLVED THAT the Chief Executive of the Company be and is hereby |
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| authorized
to increase the above remuneration in future not exceeding 20% per |
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| annum. |
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| FURTHER
RESOLVED THAT in the event of any of the aforesaid offices falling vacant, |
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| the
approval hereby given shall equally applicable to any other person appointed |
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| to
fill such vacancy." |
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| Chairman's
Review |
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| Moving
Towards HI-TECH and Value Addition |
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| National
Foods Limited., like other Companies in Pakistan is passing through a phase
of |
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| restructuring.
The year under review has many bright features such as: |
|
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| (a)
Quality Standards throughout have improved. |
|
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| (b)
The new Pickle Plant went into production and our pickles are rated in top
bracket |
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| locally
as well as in export markets. Further improvements in storage and preparatory |
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| methods
are under study which will yield better profitability by reducing wastage |
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| of
materials and efficient use of space available. |
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| (c)
The new Processing Plant to produce Wet Products such as Tomato Ketchup,
Pastes |
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| Table
& Cooking sauces has just gone into production and the first launch of
Tomato |
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| Ketchup
is underway. This will open up new avenues to bring into the market |
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| INNOVATIVE
Products. We hope that new range of products will enhance Company's |
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| Profitability. |
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| (d)
Human Resource department is in place and working, Each and every job is
being |
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| defined,
Scales are being fixed, Training and Development Programs are underway. |
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| Hopefully
new talents will be attracted which will help the Company to move |
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| forward
into the next millennium. |
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| On
Financial side the Company is actively engaged to devise ways for efficient
use of |
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| Resources,
some Results are reflected in the Balance Sheet. The prominent features are: |
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| 1.
PICIC Long Terms Loan has been fully paid. The Company is availing the
Leasing |
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| Facilities
for capital expenditures where needed. |
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| 2.
Export Re-Finance Limit has increased from 21.4 millions to 28.5 millions
which will |
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| reduce
the cost of finances. |
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| 3.
There has been a net increase of 15.580 millions in the Fixed Assets through
self |
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| financing
and 2,393 millions through leasing. |
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| 4.
Inventory Control has improved. |
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| Sales
Tax Rates revised from 15% to 18% with effect from 1st. July 1996, in the
Federal |
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| Budget.
In addition to this few more products previously exempt from Sales Tax were |
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| included
in the Tax Bracket. Although the present Government reduced the Sales Tax |
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| Rates
from 18% to 12.5% from the month April 1997, however, the adverse impact of
almost |
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| 7.2
millions for the first 9 months, is reflected in the results for the year
under report. |
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| Despite
our entire efforts, we have not been able to check increase in costs of |
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| infrastructures,
utilities, promotional and payroll costs etc. Unfortunately we have to |
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| live
with these Inflationary fluctuations, we can only minimize the effects by
increasing |
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| efficiency. |
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| The
Net Sale has increased by 17.2% only which is one of the lowest for many
years but |
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| fortunately
we are able to maintain the Gross Profit. The young and energetic management |
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| must
be complemented for preparing the company to face future challenges and |
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| moving
fast towards new innovative products. |
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|
| Managing
Director's Write Up |
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| for
Annual Report 1996-97 |
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| It
gives me great pleasure to present the audited results of National Foods
Limited for |
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| the
year 1996-97 |
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| RESULTS
AND PERFORMANCE |
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| A
summary of the key financial indicators along with the profit and
appropriations are |
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| presented
below:- |
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| PROFIT
AND APPROPRIATIONS |
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|
1997 |
1996 |
|
|
| Profit
after taxation |
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|
8,463,413 |
7,790,939 |
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| Un-appropriated
profit |
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|
18,845,139 |
17,027,728 |
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|
---------- |
---------- |
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|
27,308,552 |
24,818,667 |
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| Appropriations: |
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| Proposed
Cash Dividend |
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|
- |
2,986,764 |
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| Reserve
for issue of Bonus Shares |
|
4,106,800 |
2,986,764 |
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|
---------- |
---------- |
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|
4,106,800 |
5,973,528 |
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|
---------- |
---------- |
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|
23,201,752 |
18,845,139 |
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|
========== |
========== |
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| BONUS |
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| The
company has generated a profit of Rs.8,463,413 after tax and after adding to
the un- |
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| appropriated
Profit of Rs. 18,845,139 brought forward from last year, the Board of
Directors |
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| have
announced 12.5% Bonus Shares to be issued in the ratios of 125 Bonus Shares
for every |
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| 1000
Ordinary Shares held by the members whose names appear in the members
register |
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| on
27-12-1997. |
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|
| PERFORMANCE |
|
|
|
| NFL
has registered a growth of 17.17% and the profit registered has increased
from last |
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| tear
at a rate of 2.97% before tax. |
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| The
reason of this somewhat |
|
| stagnant
performance has |
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| been
mostly attributed to |
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| the
rampant growth in |
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| inflation
that had persisted |
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| in
the market with the then |
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|
|
| present
government. The |
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|
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| major
increase has been |
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|
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| witnessed
in the material |
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|
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| inputs
like Raw Material and |
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|
| Packaging
material. Adjust- |
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|
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| ment
for this haphazard |
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|
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| inflationary trend
was |
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|
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| accounted
for through price |
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|
|
| increase,
control of input |
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|
|
| costs
and wastage control |
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|
|
| exercises.
Also work on making the organization lean and efficient is underway. |
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| However
due to the above mentioned factor, the growth in profit could not be
sustained. |
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| overall
the trend has 'dissipated to an extent and expenses have been controlled. |
|
| Inflationary
prices were responsible for the slow growth of the company compared to |
|
| last
year. The market witnessed a decrease in consumer spending due to this factor |
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| and
people switched over to the unbranded Market to maximize their spending on |
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| household
items. |
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| Further,
due to liquidity |
|
| crunch
that prevailed during |
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| the
period, the shopkeeper |
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| witnessed less buying |
|
|
|
| strength,
which forced the |
|
|
| distributors
to keep the stocks |
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| at
minimum at their |
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| warehouses. |
|
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| On
the other hand, efforts |
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| to
increase exports were |
|
| fruitful
and we registered a |
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| growth
of 92.95%. Our primary |
|
| efforts
were to establish a |
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| distribution
network with the |
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| help
of our present distributors |
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|
|
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| in
the various parts of the |
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| world,
To an extent, |
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| performance
has greatly improved in the Middle East and North American markets. |
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| As
far as bulk exports are concerned, Red Chillies continued to be a problem.
The |
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| government,
however in the latter part of the year allowed Exports of Red Chillies once |
|
| again.
However, due to extremely low prices offered by the Indians in the global |
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| market,
their domination still continues and no favourable outcome can be expected |
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| till
the local market prices come down. However, we still managed to export two |
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| containers
of Red Chillies in the last quarter of the year to our bulk customers in the
North |
|
| American
market. |
|
|
| Salt
and Pickles continue to be leading brands in the market today and have shown |
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| a
steady growth over a last couple of years. Recipe range is also one of the
fastest |
|
| growing
categories at this time and the growth rate is being sustained. |
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|
| OUTLOOK
FOR THE FUTURE |
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| Due
to stagnant growth in plain spices, it has become evident that a move has to
be |
|
| made
towards more value added products. In this regard, the new range of Ketchup |
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| has
been launched in November 1997. This launch comprises of 3 varieties in
consumer |
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| bottles,
one variety in the economy bottle and also a bulk catering pack for the food |
|
| services.
Expansion and step-up of plant in this regard is also complete. |
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|
| By
start of ketchup or wet based products, NFL will become well placed in the
market |
|
| to
launch other similar products. |
|
|
| AUDITORS |
|
| The
present auditors M/s. Riaz Ahmad, Saqib, Gohar & Company, Chartered
Accountants |
|
| retire,
being eligible for re-appointment, have offered themselves, for
re-appointment |
|
| as
auditors for the year 1997-1998. |
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|
| PATTERN
OF SHARE HOLDING |
|
| The
Pattern of Share Holding as referred by Section 236 of the Companies
Ordinance |
|
| 1984,
is enclosed. |
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|
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| MANAGEMENT |
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| Special
thanks and appreciation to the marketing and operations staff of National |
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| Foods
is due. They have worked very hard to keep the company stable during the
tough |
|
| economic
conditions. This was possible through their coherent ability to work as a
team |
|
| and
generate effective and efficient results. They must be congratulated for a
job well |
|
| done. |
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| NATIONAL
FOODS LIMITED |
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| RATIO
ANALYSIS |
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|
1993 |
1994 |
1995 |
1996 |
1997 |
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| LIQUIDITY
RATIOS |
|
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|
|
|
| Current
Ratio |
|
1.21 |
1.24 |
1.07 |
1.02 |
1.01 |
|
|
| Acid
Test Ratio |
|
0.60 |
0.60 |
0.39 |
0.25 |
0.28 |
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|
| Super
Quick Ratio |
|
0.18 |
0.15 |
0.11 |
0.11 |
0.10 |
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| GEARING
RATIOS |
|
|
|
|
|
| Gearing
Ratio |
|
6.30% |
4.84% |
3.77% |
5.11% |
4.41% |
|
|
| Debt
/ Equity Ratio |
|
6.72% |
5.09% |
3.92% |
5.39% |
4.61% |
|
|
| Interest
Cover |
|
307.60% |
339.34% |
332.77% |
227.76% |
228.07% |
|
|
| OPERATING
RATIOS |
|
|
|
|
|
|
|
| Return
On Capital Employed |
18.50% |
25.76% |
26.41% |
27.41% |
24.55% |
|
|
| Return
On Shareholder's Equity |
13.96% |
15.71% |
18.74% |
13.48% |
12.77% |
|
|
| Gross
Profit- Margin |
|
20.85% |
23.4t% |
20.21% |
20.15% |
20.20% |
|
|
| Operating
Profit |
|
7.67% |
9.79% |
8.59% |
6.27% |
6.15% |
|
|
| Net
Profit Margin |
|
3.25% |
3.57% |
3.56% |
2.31% |
2.14% |
|
|
| TURNOVER
RATIO |
|
|
|
|
|
| Asset
Turnover |
|
1.99 |
1.91 |
1.99 |
2.07 |
2.31 |
|
|
| Invested
Capital Turnover |
4.02 |
4.19 |
5.07 |
5.54 |
5.70 |
|
|
| Equity
Turnover |
|
4.29 |
4.40 |
5.26 |
5.83 |
5.96 |
|
|
| Capital
Intensity |
|
5.20 |
5.95 |
5.76 |
5.83 |
6.09 |
|
|
| Receivable
Days |
|
39.69 |
46.78 |
31.18 |
15.32 |
17.61 |
|
|
| Days
Inventory |
|
70.89 |
87.46 |
95.07 |
106.08 |
85.05 |
|
|
| Inventory
Turnover |
|
5.15 |
4.17 |
3.84 |
3.44 |
4.29 |
|
|
| Working
Capital Turnover |
18.83 |
14.50 |
44.36 |
143.76 |
502.89 |
|
|
| OPERATING
EXPENSES (% OF SALES) |
|
| Admin. |
|
|
4.51% |
3.99% |
3.63% |
3.49% |
3.49% |
|
|
| Selling |
|
|
11.54% |
13.00% |
11.15% |
11.54% |
12.20% |
|
|
| Financial |
|
|
1.86% |
2.14% |
1.85% |
2.37% |
2.07% |
|
|
| COST |
|
|
|
|
|
| Materials |
|
|
83.02% |
83.62% |
84.87% |
84.80% |
84.94% |
|
|
| Direct
Labor |
|
3.70% |
4.43% |
4.65% |
4.93% |
4.59% |
|
|
| Overheads |
|
|
13.28% |
11.95% |
10.48% |
10.27% |
10.47% |
|
|
| Admin. |
|
|
21.61% |
17.04% |
17.95% |
17.33% |
17.25% |
|
|
| Selling |
|
|
55.35% |
55.55% |
55.14% |
57.29% |
60.42% |
|
|
| Financial |
|
|
8.92% |
9.16% |
9.17% |
11.74% |
10.27% |
|
|
| Earnings
Per Share |
|
2.62 |
3.18 |
3.66 |
2.61 |
2.58 |
|
|
|
|
|
| Auditors'
Report to the Members |
|
|
|
|
| We
have audited the annexed balance sheet of National Foods Limited as at 30 |
|
| June,
1997 and the related profit and loss account and the 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 30 June 1997 and of the profit for the year then |
|
| ended; and |
|
|
| (d)
In our opinion, Zakat deductible at source under the Zakat and Ushr Ordi- |
|
| nance,
1980, was deducted by the company and deposited in the Central |
|
| Zakat
Fund established under section 7 of that ordinance. |
|
|
|
RIAZ AHMAD, SADIQ, GOHAR
& CO. |
|
| Karachi:
22nd Nov 1997 |
|
CHARTERED ACCOUNTANTS |
|
|
|
| Balance
Sheet as at 30th June 1997 |
|
|
|
|
|
NOTE |
1997 |
1996 |
|
|
|
|
Rupees |
Rupees |
|
| CAPITAL
AND LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
| Capital
and reserve |
|
|
|
|
|
|
| Authorised
Capital 5,000,000 |
|
|
| (1996:
5,000,000) Ordinary |
|
|
| Shares
of Rs.10/- each |
|
|
50,000,000 |
50,000,000 |
|
|
|
|
========== |
========== |
|
| Issued,
Subscribed and Paid-up Capital |
2 |
32,854,400 |
29,867,640 |
|
| Capital
Reserve - Share Premium |
|
|
6,102,100 |
6,102,100 |
|
| Reserve
for Issue of Bonus shares |
|
|
4,106,800 |
2,986,764 |
|
| Unappropriated
Profit |
|
|
23,201,752 |
18,845,139 |
|
|
|
|
---------- |
---------- |
|
|
|
|
66,265,052 |
57,801,643 |
|
|
|
|
| Long
Term liabilities - Secured |
|
|
| Long
term loans |
|
3 |
- |
3,332,681 |
|
| Liabilities
against assets subject finance lease |
4 |
1,605,027 |
1,330,141 |
|
| Deferred
Tax |
|
|
1,450,000 |
1,450,000 |
|
|
|
|
---------- |
---------- |
|
|
|
|
3,055,027 |
3,113,409 |
|
|
|
|
| Current
Liabilities and Provision |
|
|
| Current
portion of long term liabilities |
5 |
2,041,893 |
1,558,580 |
|
| Finances
utilized under mark-up |
|
|
|
| arrangements
- Secured |
|
6 |
65,928,944 |
61,674,985 |
|
| Creditors,
accrued & other liabilities |
7 |
33,430,005 |
35,412,368 |
|
| Proposed
dividend |
|
|
- |
2,986,764 |
|
|
|
|
---------- |
---------- |
|
|
|
|
101,400,842 |
101,632,697 |
|
| Contingencies
Commitments |
|
8 |
- |
- |
|
|
|
|
