| SAPPHIRE FIBRES LIMITED |
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| 18TH
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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| Directors
Report |
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| Auditors'
Report |
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| Balance
Sheet |
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| Profit
& Loss Account |
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| Cash
Flow Statement |
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| Notes
to the Accounts |
|
| Pattern
of Shareholding |
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| BOARD
OF DIRECTORS |
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| Chief
Executive |
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SHAHID ABDULLAH |
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| Directors |
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MOHAMMAD ABDULLAH |
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NADEEM ABDULLAH |
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|
AMER ABDULLAH |
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MOHAMMAD YOUNUS |
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MOHAMMAD YAMIN |
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|
RAZI-UR-REHMAN KHAN |
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(NIT NOMINEE) |
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| Secretary |
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S.W.A. WARSI |
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| Auditors |
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MUSHTAQ & COMPANY |
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CHARTERED ACCOUNTANTS |
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| Management
Consultants |
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M. YOUSUF ADIL &
COMPANY |
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CHARTERED ACCOUNTANTS |
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| Tax
Consultants |
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MUSHTAQ & COMPANY |
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CHARTERED ACCOUNTANTS |
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| Bankers |
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HABIB BANK LIMITED |
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NATIONAL BANK OF PAKISTAN |
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| Registered
Office |
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P-2, YARN MARKET, |
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AL-ABBAS CENTRE, |
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MONTGOMERY BAZAR, |
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FAISALABAD. |
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| Mills |
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KHARIANWALA |
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TEHSIL AND DISTRICT |
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SHEIKHUPURA |
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FEROZE WATWAN |
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TEHSIL AND DISTRICT |
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SHEIKHUPURA. |
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| NOTICE
OF ANNUAL GENERAL MEETING |
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| NOTICE
IS HEREBY GIVEN THAT the 18th Annual General Meeting of SAPPHIRE FIBRES
LIMITED |
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| will
be held on Monday the 30th day of March, 1998 at 3.00 p.m. at Registered
Office of the Company, |
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| P-2,
Yarn Market, Al-Abbas Center Montgomery Bazar, Faisalabad to transact the
following business: |
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|
| 1.
To confirm the minutes of 17th Annual General Meeting. |
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|
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| 2.
To receive, consider and adopt the report of the Directors and Auditors and
Audited |
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| Accounts
of the Company for the year ended 30th September, 1997. |
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|
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| 3.
To approve the dividend as recommended by the Board of Directors. |
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| 4.
To appoint auditors for the year ending 30th September, 1998 and to fix their
remuneration. |
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| 5.
To transact any other business with the permission of the Chair. |
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| NOTE: |
|
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| 1.
A member entitled to attend and vote at this meeting may appoint another
member as his/her |
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| proxy
to attend and vote on his/her behalf. Proxies in order, to be valid must be
deposited at |
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| the
Principal/Registered Office of the Company not less than 48 hours before the
time of the |
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| meeting. |
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| 2.
The share transfer books of the company shall remain closed from 27th March,
1998 to 2nd |
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| April,
1998. (both days inclusive). |
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| 3.
Shareholders are requested to notify the company of any change in their
addresses. |
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| DIRECTORS
REPORT TO THE SHAREHOLDERS |
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| The
Directors have pleasure in submitting their report to the shareholders with
audited accounts of the company |
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| for
the year ended 30th September, 1997. |
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| By
the Grace of Almighty Allah, this year again the results of the Company
remained satisfactory despite several |
|
| negative
factors, the operations of the Company have resulted in net profit of Rs.
140,067,849 after meeting |
|
| all
operational, administrative, financial and other expenses and providing for
Income Tax amounting to |
|
| Rs.
20.276,322. The Board of Directors unanimously recommended the following
appropriations. |
|
|
| Net Profit |
|
Rs. |
140,067,849 |
|
| Unappropriated
Profit Brought Forward |
Rs. |
469,067,033 |
|
| Available
Surplus |
|
Rs. |
609,134,882 |
|
| Appropriations: |
|
|
|
| Transferred
to General Reserve |
|
Rs. |
450,000,000 |
|
| Proposed
Dividend @ 20% (Rs. 2.00 per share) |
Rs. |
28,000,000 |
|
| Unappropriated
Profit Carried Forward |
Rs. |
131,134,882 |
|
|
| Our
exports during the year 1996-97 were Rs. 1,692,169,768 as compared to Rs.
1,596,604,012 during the |
|
| preceding
year. The exports have increased by about 6% over last year and sales
increased by about 11%. |
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| The
management of the company consistently applying prudent management policies
which include, consolidation |
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| of
operations. purchase of quality cotton and effective marketing with a focus
on costs. Due to increased cost |
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| of
all the inputs. and with the levy of 12.5% Sales Tax on Raw Cotton, the
finance requirements has considerably |
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| been
increased. |
|
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| As
reported Last year the Company has started to move towards value addition and
a most modern Dyeing and |
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| Finishing
Unit for the Knitted Fabrics has been installed which has already started
Commercial Production. The |
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| management
is considering to add value added items to its existing production in order
to sustain the pressure |
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| on
prices of Cotton Yarn. |
|
|
| The
future outlook of yarn in the international as well as local market is not
favorable due to Far East economy |
|
| crisis.
Further due to excessive and untimely rainfall in Cotton growing areas the
quality of Raw Cotton has |
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| deteriorated
which would generally effect the yield and quality. |
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| The
management is endeavoring for getting maximum production of value added
items, balancing and updating |
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| the
machinery, marketing efforts, control over the Cost of production, to produce
good results for the coming |
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| year. |
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| AUDITORS |
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| You
are requested to appoint auditors for the year 1997-98 and fix their
remuneration. The present auditors |
|
| Messers
Mushtaq & Company Chartered Accountants, retire and offer themselves for
reappointment. |
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|
| STAFF
AND WORKERS |
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| Relations
continued to be good, and on behalf of the Board, I would like to thanks
workers and staff at all levels |
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| for
the hard work put in by them in enabling the company to operate efficiently
and hope thief efforts will continue |
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| during
the year and coming years. |
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| AUDITORS'
REPORT TO THE MEMBERS |
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| We
have audited the annexed Balance Sheet of SAPPHIRE FIBRES LIMITED as at
September 30~ |
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| 1997
and the related profit and loss account and the cash flow statement ,
together with the notes |
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| 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 |
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| our
audit and, after due verification thereof, we report that: |
|
|
| (a)
in our opinion, proper books of accounts have been kept by the Company as
required |
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| by
the Companies Ordinance 1984: |
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|
|
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| (b)
in our opinion: |
|
|
| (i)
the balance sheet and profit and loss account together with the notes thereon
have |
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| been
drawn up in conformity with the Companies Ordinance, 1984 and are in |
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| agreement
with the books of account and are further in accordance with accounting |
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| policies
consistently applied: |
|
|
| (ii)
the expenditure incurred during the year was for the purpose of the Company's |
|
| business:
and |
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|
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| (iii)
the business conducted, investments made and the expenditure incurred during
the |
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| year
were in accordance with the objects of the Company; |
|
|
| (c)
m 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 |
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| 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 |
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| the
state of the Company's affairs as at September 30, 1997 and of the profit and
cash |
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| flows
for the year then ended; and |
|
|
| (d)
in our opinion', Zakat deductible at source under Zakat and Ushr Ordinance
1980 has been |
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| deducted
by the Company and deposited in the Central Zakat Fund established under
section |
|
| 7
of the Ordinance. |
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|
Mushtaq & Company |
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| Karachi:
March 5, 1998 |
|
CHARTERED ACCOUNTANTS |
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|
|
| BALANCE
SHEET AS AT SEPTEMBER 30, 1997 |
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|
1997 |
1996 |
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|
|
NOTE |
RUPEES |
RUPEES |
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| SI-IARE
CAPITAL AND RESERVES |
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|
|
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| AUTHORISED
CAPITAL |
|
|
|
| I5,000,000
Ordinary Shares |
|
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| of
Rs. 10/ each. |
|
|
150,000,000 |
150,000,000 |
|
| ISSUED,
SUBSCRIBED AND |
|
|
========== |
========== |
|
| PAID
UP CAPITAL |
|
3 |
140,000,000 |
140,000,000 |
|
|
|
|
|
| RESERVES |
|
|
|
| General
reserve |
|
4 |
450,000,000 |
- |
|
| Share
premium |
|
5 |
58 240,000 |
58,240,000 |
|
| Unappropriated
profit |
|
|
131,134,882 |
469,067.033, |
|
|
|
|
---------- |
---------- |
|
|
|
|
639,374,882 |
527,307,033 |
|
|
|
|
---------- |
---------- |
|
| Share
holder's equity |
|
|
779,374,882 |
667,307,033 |
|
| LONG
TERM LIABILITIES |
|
|
|
---------- |
---------- |
|
| Supplier's
credit |
|
6 |
- |
15,324,882 |
|
| Loans
from banks and |
|
|
|
| financial
institutions |
|
7 |
151,985,827 |
82,376,460 |
|
| Liabilities
against assets |
|
|
|
| subject
to finance lease |
|
8 |
- |
3,115,683 |
|
| Custom
duty payable |
|
9 |
2,182,791 |
2,910,388 |
|
|
|
|
---------- |
---------- |
|
|
|
|
154,168,618 |
103,727,413 |
|
|
|
|
|
| DEFERRED
LIABILITIES |
|
|
|
| Gratuity
payable |
|
10 |
20,606,665 |
17,299,584 |
|
|
|
|
| CURRENT
LIABILITIES |
|
|
|
| Short
term bank borrowings |
|
11 |
254,806,596 |
257,302,865 |
|
| Current
maturity of long term liabilities |
12 |
59,706,162 |
60,139,406 |
|
| Creditors,
accrued and |
|
|
| other
liabilities |
|
13 |
80,939,336 |
103,645,179 |
|
| Dividend |
|
14 |
28,000,000 |
14,000,000 |
|
|
|
|
---------- |
---------- |
|
|
|
|
423,452,094 |
435,087,450 |
|
|
|
|
---------- |
---------- |
|
|
|
|
1,377,602,259 |
1,223,421,480 |
|
|
|
|
========== |
========== |
|
| The
annexed notes form an integral part of these accounts. |
|
|
| PROPERTY
AND ASSETS |
|
|
|
|
|
|
|
| TANGIBLE
FIXED ASSETS |
|
|
|
| OPERATING
ASSETS |
|
|
| CAPITAL
WORK IN PROGRESS |
|
15 |
638,840,290 |
520,349,309 |
|
|
|
16 |
40,410,691 |
50,292,513 |
|
|
|
|
---------- |
---------- |
|
|
|
|
679,250,981 |
570,641,822 |
|
| LONG
TERM INVESTMENTS |
|
17 |
191,739,472 |
184,491,472 |
|
| LONG
TERM DEPOSITS |
|
18 |
860,148 |
2,160,567 |
|
|
|
|
| CURRENT
ASSETS |
|
|
| Stores,
spares and loose tools |
|
19 |
43,426,263 |
25,227.95 |
|
| Stock
in trade |
|
20 |
104,004,521 |
87,999,554 |
|
| Trade
debtors |
|
21 |
254,533,315 |
235,634,961 |
|
| Loans
and advances |
|
22 |
14,729,896 |
13,267,559 |
|
| Deposits,
prepayments and other receivables |
23 |
22,675,342 |
31,553,047 |
|
| Short
term investments |
|
24 |
31,272,423 |
51,639,758 |
|
| Cash
and bank balances |
|
25 |
35,109,898 |
20,804,793 |
|
|
|
|
---------- |
---------- |
|
|
|
505,751,658 |
466,127,619 |
|
|
|
|
---------- |
---------- |
|
|
|
|
|
|
|
|
1,377,602,259 |
1,223,421,480 |
|
|
|
========== |
========== |
|
|
|
| PROFIT
AND LOSS ACCOUNT |
|
| FOR
THE YEAR ENDED SEPTEMBER 30, 1997 |
|
|
|
|
1997 |
1996 |
|
|
NOTE |
RUPEES |
RUPEES |
|
|
|
|
| Sales |
|
26 |
2,029,859,859 |
1,830,492,171 |
|
| Cost
of sales |
|
27 |
1,586,501,382 |
1,438,835,372 |
|
|
|
|
---------- |
---------- |
|
| Gross profit |
|
|
443,358,477 |
391,656,799 |
|
|
|
|
| OPERATING
EXPENSES |
|
|
| Administrative |
|
28 |
22,247,234 |
22,280,374 |
|
| Selling
and distribution |
|
29 |
91,089,195 |
94,437,812 |
|
|
|
|
---------- |
---------- |
|
|
|
|
113,336,429 |
116,718,186 |
|
|
|
|
---------- |
---------- |
|
| Operating
Profit |
|
|
330,022,048 |
274,938,613 |
|
| Add:
Other income |
|
30 |
6,927,187 |
1,695,811 |
|
|
|
|
---------- |
---------- |
|
|
|
|
336,949,235 |
276,634,424 |
|
|
|
|
| OTHER
CHARGES |
|
|
| Financial |
|
31 |
1,462,085,031 |
132,280,478 |
|
| Other
charges |
|
32 |
30,396,561 |
11,957,565 |
|
|
|
|
---------- |
---------- |
|
|
|
|
176,605,064 |
144,238,043 |
|
|
|
|
---------- |
---------- |
|
| Net
profit before taxation |
|
|
160,344,171 |
132,396,381 |
|
|
|
|
|
|
| TAXATION |
|
|
|
|
|
| Current year |
|
|
19,756,739 |
16,101,404 |
|
| Prior year |
|
|
519,583 |
780,023 |
|
|
|
---------- |
---------- |
|
|
|
20,276,322 |
16,881,427 |
|
|
|
|
---------- |
---------- |
|
| Net
profit after taxation |
|
|
140,067,849 |
115,514,954 |
|
| Add:
Unappropriated profit brought forward |
|
469,067,033 |
367,552,079 |
|
|
|
|
---------- |
---------- |
|
| Profit
available for appropriation |
|
609,134,882 |
483,067,033 |
|
|
|
|
| APPROPRIATIONS |
|
|
|
| Transferred
to general reserve |
|
450,000,000 |
- |
|
| Proposed
dividend @ 20% (1996: 10%) |
|
28,000,000 |
14,000,000 |
|
|
|
---------- |
---------- |
|
|
|
478,000,000 |
14,000,000 |
|
|
|
---------- |
---------- |
|
| Unappropriated
profit carried forward |
|
131,134,882 |
469,067,033 |
|
|
|
========== |
========== |
|
|
|
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
| CASH
FLOW STATEMENT |
|
| FOR
THE YEAR ENDED SEPTEMBER 30, 1997 |
|
|
|
|
1997 |
1996 |
|
|
NOTE |
RUPEES |
RUPEES |
|
|
|
|
| CASH
FLOW FROM OPERATING ACTIVITIES: |
|
|
|
|
| Cash
generated from operations |
|
A |
306,036,531 |
295,767,565 |
|
| Financial
charges paid |
|
(144,237,271) |
(129,452,857) |
|
| Income
Tax paid |
|
(20,960,261) |
(20,256,459) |
|
| Gratuity
Paid |
|
(1,393,014) |
(1,310,744) |
|
|
|
---------- |
---------- |
|
| Net
cash inflow from operating activities |
|
139,445,985 |
144,747,505 |
|
|
|
|
|
| CASH
FLOW FROM INVESTING ACTIVITIES: |
|
|
|
| Fixed
capital expenditure |
|
(176,455,964) |
(85,231,314) |
|
| Sale
proceeds of short term investments - net' |
|
995,627 |
4,900,703 |
|
| (Increase)
in long term investments |
|
(7,248,000) |
(3,890,920) |
|
| (Increase)
in security deposits |
|
(32,870) |
(76,700) |
|
| Sale
proceeds of fixed assets |
|
12,413,729 |
845,000 |
|
| Decrease/(increase)
in advance |
|
|
|
| for
purchase of land and shares |
|
1,540,760 |
11,440,745 |
|
| Decrease
in lease deposits |
|
4,594,434 |
197,615 |
|
| Dividend,
interest and other income |
|
5,420,867 |
330,117 |
|
|
|
---------- |
---------- |
|
| Net
cash (outflow) from investing activities |
|
(158,771,417) |
(71,484,754) |
|
|
|
---------- |
---------- |
|
| Net
cash inflow/(outflow) before financing activities |
(19,325,432) |
73,262,751 |
|
|
|
========== |
========== |
|
| CASH
FLOW FROM FINANCING ACTIVITIES: |
|
| Long
term loan received |
|
114,966,367 |
- |
|
| Repayment
of long term loans |
|
(35,204,000) |
(17,428,831) |
|
| Repayment
of supplier's credit |
|
(15,324,676) |
(21,995,970) |
|
| Repayment
of finance lease |
|
(13,702,133) |
(13,095,487) |
|
| Repayment
of custom duty |
|
(727,597) |
(4,275,693) |
|
| Dividend
paid |
|
(13,881,155) |
(35,335) |
|
| Net
cash inflow/(outflow) from |
|
---------- |
---------- |
|
| financing
activities |
|
36,126,806 |
(56,831,316) |
|
|
|
---------- |
---------- |
|
| Net
increase in cash and cash equivalents |
|
16,801,374 |
16,431,435 |
|
| Cash
and cash equivalents at the beginning of the year |
(236,498,072) |
(252,929,507) |
|
|
|
---------- |
---------- |
|
| Cash
and cash equivalents at the end of the year |
B |
(219,696,698) |
(236,498,072) |
|
|
|
|
============ |
============ |
|
|
|
|
|
|
|
|
1997 |
1996 |
|
|
|
|
|
RUPEES |
RUPEES |
|
| A.
CASH GENERATED FROM OPERATIONS |
|
|
|
|
|
|
| Profit
before taxation |
|
|
|
160,344,171 |
132,396,381 |
|
|
|
|
| Adjustment
for non-cash charges |
|
|
|
| and
other items |
|
|
|
|
|
|
| Depreciation |
|
|
|
55,135,086 |
54,119,456 |
|
| Provision
for gratuity |
|
|
|
4,700,095 |
4,808,723 |
|
| Provision
for diminution in value of |
|
|
| Short
term investments |
|
|
|
16,231,511 |
- |
|
| (Gain)/Loss on disposal of
fixed assets |
|
297,990 |
(41,735) |
|
| Loss
on disposal of investments |
|
|
3,140,197 |
4,965,025 |
|
| Dividend
interest and other income |
|
|
(5,420,867) |
(330,117) |
|
| Financial
charges |
|
|
|
146,208,503 |
132,280,478 |
|
|
|
|
|
---------- |
---------- |
|
|
|
|
|
220,292,515 |
195,801,830 |
|
|
|
|
|
---------- |
---------- |
|
| Profit
before working capital changes |
|
380,636,686 |
328,198,211 |
|
|
|
|
|
|
|
|
| WORKING
CAPITAL CHANGES |
|
|
|
| (lncrease)/decrease
in current assets: |
|
|
|
|
|
|
|
| Stores,
spares and loose tools |
|
|
(18,198,309) |
4,170,412 |
|
| Stock
in trade |
|
|
|
(16,004,967) |
77,375,610 |
|
| Trade debts |
|
|
|
(18,898,354) |
(130,706,161) |
|
| loans
and advances |
|
|
|
4,537,656 |
1,516,258 |
|
| Deposits,
prepayments and other receivables |
|
(1,924,200) |
(1,220,927) |
|
|
|
---------- |
---------- |
|
|
|
|
(50,488,174) |
(48,864,808) |
|
| Increase/(decrease)
in current liabilities: |
|
|
|
|
|
| Creditors,
accrued and other liabilities |
|
(24,111,981) |
16,434,162 |
|
|
|
|
|
---------- |
---------- |
|
|
|
|
|
306,036,531 |
295,767,565 |
|
|
|
|
|
========== |
========== |
|
| B.
Cash and cash equivalents at the end |
|
|
| of
the year comprise following balance sheet items: |
|
|
|
|
|
|
| Cash
and bank balances |
|
35,109,898 |
20,804,793 |
|
| Short
term borrowings |
|
(254,806,596) |
(257,302,865) |
|
|
|
---------- |
---------- |
|
|
|
(219,696,698) |
(236,498,072) |
|
|
|
========== |
========== |
|
|
|
|
| NOTES
TO THE ACCOUNTS |
|
| FOR
THE YEAR ENDED SEPTEMBER 30, 1997 |
|
|
| 1.
STATUS AND ITS OPERATIONS |
|
|
|
|
| The
Company was incorporated as a Public Limited in Pakistan on June 5, 1979. The
Shares of |
|
| the
Company are listed on Karachi, Islamabad and Lahore Stock Exchanges. The main
business of |
|
| the
company is manufacture and sale of cotton yarn and fabrics. |
|
|
| 2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
|
|
| 2.1
ACCOUNTING CONVENTION |
|
|
|
|
| The
accounts have been prepared under historical cost convention as modified by |
|
| adjustments
of exchange rate fluctuations. |
|
|
|
|
| 2.2
PROVISION FOR GRATUITY |
|
|
|
|
| The
company operates an unfunded gratuity scheme for its confirmed employees.
Provision !~~ |
|
| is
made annually to cover the obligation under the scheme. |
|
|
| 2.3 TAXATION |
|
|
|
|
|
|
| Provision
for current taxation is made on the taxable income, if any. |
|
| The
company does not account for deferred taxation as the timing differences are
not likely |
|
| to
reverse in the foreseeable future. Deferred tax liability if provided would
amount to |
|
| Rs.
75.02 million (1996: Rs. 74.27 million) |
|
|
| 2.4
FIXED ASSETS |
|
|
| i)
COMPANY'S OWNED ASSETS |
|
|
|
|
|
|
| These
are stated at cost less accumulated depreciation except freehold land, |
|
| leasehold
land and capital work-in-progress which are stated at cost. Cost of plant |
|
| and
machinery consists of historical cost and adjustments for exchange gain or
loss |
|
| in
respect of foreign currency loans utilised for acquisition thereof. Borrowing
costs |
|
