| SHAHMURAD SUGAR MILLS LTD. |
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| 19th
Annual Report and Accounts 1996-97 |
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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 TO THE MEMBERS |
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| BALANCE
SHEET |
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| PROFIT
AND LOSS ACCOUNT |
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| CASH
FLOW STATEMENT |
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| NOTES
ON ACCOUNTS |
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| SHAREHOLDERS'
STATISTICS |
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| BOARD
OF DIRECTORS |
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MR. ELLIAS H. ZAKARIA |
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Chairman |
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MR. ISMAIL H. ZAKARIA |
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Vice Chairman |
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MR. YUSUF AYOOB |
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Managing Director |
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MR. SULEMAN AYOOB |
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MR. A. KADER JAFFER |
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MR. A. AZIZ AYOOB |
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MR. ZIA I. ZAKARIA |
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Resident Director |
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MR. SALIM AYOOB |
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MR. SHAMSHAD AHMED |
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(N.I.T. Nominee) |
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| COMPANY
SECRETARY: |
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M. YAKOOB ADMANEY |
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FCIS. FCMA. |
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| LEGAL
ADVISOR: |
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DR. RAEES M. MUSHTAQ
& CO. |
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Advocate |
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| AUDITORS: |
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A. R. DIWAN & COMPANY |
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Chartered Accountants |
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| REGISTERED
OFFICE: |
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96-A, SINDHI MUSLIM
SOCIETY, |
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KARACHI. |
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| FACTORY: |
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JHOK SHARIF, |
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TALUKA MIRPUR BATHORO, |
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DISTRICT THATTA (SINDH) |
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| NOTICE
OF MEETING |
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| Notice
is hereby given that the 19th Annual General Meeting of SHAHMURAD SUGAR MILLS
LIMITED will be |
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| held
at the Registered Office of the Company at 96-A, Sindhi Muslim Society,
Karachi on Friday, April 17, 1998 at |
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| 10.30
a.m. to transact the following business: |
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| 01.
To read and confirm the Minutes of the 18th Annual General Meeting of the
Company held on March 31, |
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| 1997. |
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| 02.
To read and consider the Accounts for the year ended September 30, 1997 and
reports of Directors and |
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| Auditors
thereon. |
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| 03.
To approve dividend as recommended by the Board. |
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| 04.
To appoint Auditors and to fix their remuneration. |
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| 05.
To elect directors of the Company under section 178 of the Companies
Ordinance, 1984. The number of |
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| directors
fixed by the Board is 9. The retiring directors are Mr. Ellias H. Zakaria,
Mr. Ismail H. Zakaria, Mr. |
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| Yusuf
Ayoob, Mr. Suleman Ayoob, Mr. A. Kader Jaffer, Mr. A. Aziz Ayoob, Mr. Zia I.
Zakaria, Mr. Salim |
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| Ayoob
and Mr. Shamshad Ahmed. |
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| 06.
To consider and approve the remuneration of Chief Executive and Working
Directors of the Company for a |
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| period
of three years. |
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| 07.
To transact any other business with permission of the chair. |
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| The
Share Transfer Book of the Company will remain closed from April 12, 1998 to
April 17, 1998 (both days |
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| inclusive). |
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| NOTE: |
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| 1.
A member of the Company entitled to attend and vote may appoint any member as
his/her proxy to attend and |
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| vote
on his/her behalf. PROXIES MUST BE RECEIVED AT THE REGISTERED OFFICE OF THE |
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| COMPANY
NOT LESS THAN 48 HOURS BEFORE THE MEETING. |
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| 2.
Nomination for election for the office of directors should be received at the
Registered Office of the Company |
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| not
less than 14 days before the Annual General Meeting. |
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| 3.
Shareholders are requested to inform the Company of any change in address
immediately. |
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| DIRECTORS'
REPORT |
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| To: |
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| The
Shareholders, |
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| We
take pleasure in submitting before you the Annual Report along with Audited
Accounts for the year ended |
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| September
30, 1997. The Accounts could not be presented to you earlier as the Accounts
were not ready and the |
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| Company
has obtained extension from the Corporate Law Authority for holding the
Annual General Meeting, By the |
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| grace
of Almighty Allah, during the year, your Company has earned a net profit of
Rs.10.051 million. After adding last |
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| year's
un-appropriated profit of Rs.8.497 million, a sum of Rs. 18.548 million is
available which we propose to |
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| appropriate
as follow: |
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(Rs. in million) |
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| Dividend
@ 71/2% |
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|
Rs.15.839 |
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| Unappropriated
profit carried forward |
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Rs. 2.709 |
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---------- |
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TOTAL: |
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Rs. 18.548 |
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---------- |
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| Your
directors proposed to pay cash dividend @ 71/2%. After tax earning per share
of the Company is Rs.0.47 per share |
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| during
the year. |
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| During
the year under report, your Mill started crushing on November 1, 1996 and
season ended on March 30, 1997 |
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| with
an average crushing of 685,185 metric tons (1996:791,599 metric tons) of
sugarcane. Sugar produced was 73,195 |
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| metric
tons (1996:82,800 metric tons) with an average recovery of 10.685%
(1996:10.46%). Molasses produced during |
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| the
year was to the extent of 33,869 metric tons (1996:38,033 metric tons). |
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| During
the year, Company had to pay Rs.91.801 million to the sugarcane growers on
account of higher recovery @
~'::)~ |
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| paisa
27 per 40 kg. for every 0.1% over and above 8.7%. As reported to you earlier,
Government has increased the |
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| minimum
support price from Rs.21.75 to Rs.24.50 per 40 kg. In addition, quality
premium was payable @ paisa 27 per
~:~ |
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| 40
kg. for every 0.1% excess recovery for over and above 8.7%. |
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| Due
to shortage of sugarcane price of sugarcane shot upto a level which was
completely uneconomical. To meet the |
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| fixed
overhead, management had no option except to buy sugarcane at whatever price
it is available and despite |
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| production
of 73,195 metric tons which was 12% lower than last year's production, we
could only manage small |
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| earnings.
Sugar Mills in the lower Sindh are installed at very closed range from each
other, therefore, Mills are forced to |
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| buy
sugarcane from far flung areas to meet their capacity requirement. Your Mill
is one of those which have been |
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| effected
by these policies of the Government. During the year, 50% of sugarcane was
procured by your Mill from far |
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| flung
areas at very high cost. |
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| During
the year, Government allowed import of sugar from India and other countries
which resulted that Mills located in |
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| Sindh
province were badly effected and we were forced to hold the stocks till
imported stocks were exhausted which |
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| resulted
that a very handsome quantity of sugar valuing R~.36,300,000/= was lying in
the godowns of the Mill on |
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| September
30, 1997. |
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| The
High Court has already given its verdict on Income Tax under section 80-D,
accordingly, your management has |
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| fully
provided for the tax liability under section 80-D through deferred taxation
adjustment. |
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| ELECTION
OF DIRECTORS: |
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| As
the term of existing directors expires, election of directors for fresh term
of three years will be held in the Annual |
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| General
Meeting under section 178(1) of the Companies Ordinance, 1984. The number of
elected directors fixed by the |
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| Board
of Directors is 9. The retiring directors are Mr. Ellias H. Zakaria, Mr.
Ismall H. Zakaria, Mr. Yusuf Ayoob, Mr. |
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| Suleman
Ayoob, Mr. A. Kader Jaffer, Mr. A. Aziz Ayoob, Mr. Zia I. Zakaria, Mr. Salim
Ayoob and Mr. Shamshad |
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| Ahmed. |
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| LABOUR
MANAGEMENT RELATIONS: |
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| We
are happy to report that labour management relations are better than last
year. Your directors appreciates the spirit of |
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| cooperation
shown by the workers and hope it will continue. |
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| STAFF: |
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| Your
directors also place on record deep appreciation of hard work, loyalty and
devotion to duty shown by the officers |
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| and
staff of the Company. |
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| AUDITORS: |
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| Messrs
A.R. Diwan and Company, Chartered Accountants, Auditors of the Company,
retire and offer their services for |
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| the
ensuing year. |
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| FUTURE
OUTLOOK: |
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| For
the current year, Government has fixed the sugarcane support price at Rs.36/=
per 40 kg. and quality premium has |
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| been
raised from paisa 27 to paisa 32 per 40 kg. for every 0.1% over and above
recovery of 8.7%. With this increase in |
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| the
rate of quality premium, sugar mills have been deprived of benefits which
have been achieved through better |
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| efficiencies,
and efforts through modernization and balancing of plant has not been
considered while calculating the |
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| benefits
of recovery achieved. |
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| The
current crushing season started on November 12, 1997 and crushing upto March
17, 1998 was 655,237 metric tons |
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| with
an average recovery of 10.86%. |
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| AUDITORS'
REPORT TO THE MEMBERS |
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| We
have audited the annexed Balance Sheet of Shahmurad Sugar Mills Limited as at
September 30, 1997 and the |
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| related
Profit and Loss Account and Cash Flow Statement, together with the notes
forming part thereof, for the year then |
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| ended
and we state that we have obtained all the information and explanations which
to the best of our knowledge and |
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| belief
were necessary for the purposes of our audit and after due verification
thereof, we report that: |
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| (A)
in our opinion, proper books of account have been kept by Company as required
by the Companies Ordinance, |
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| 1984. |
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| (B)
in our opinion: |
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| (i)
the Balance Sheet and Profit and Loss Account together with the notes thereon
have been drawn up in |
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| conformity
with the Companies Ordinance, 1984 and are in agreement with the books of
account and |
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| are
further in accordance with accounting policies consistently applied; |
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| (ii)
the expenditure incurred during the year was for the purpose of the Company's
business; and |
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| (iii)
the Business conducted, investments made and the expenditure incurred during
the year were in |
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| accordance
with the objects of the Company; |
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| (c)
in our opinion and to the best of our information and according to the
explanations given to us, the Balance Sheet |
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| and
Profit and Loss Account and the Cash Flow Statement, together with the notes
forming part thereof, give the |
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| information
required by the Companies Ordinance, 1984 in the manner so required and
respectively give a true |
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| and
fair view of the state of the Company's affairs as at September 30, 1997 and
of the profit and the cash flows |
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| for
the year then ended; and |
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| (d)
in our opinion, no Zakat was deductible at source under Zakat and Ushr
Ordinance, 1980. |
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|
A.R. Diwan & Co. |
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| Karachi:
March 18, 1998 |
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Chartered Accountants |
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| BALANCE
SHEET AS AT 30TH SEPTEMBER 1997 |
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Note |
1997 |
1996 |
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|
(Rupees in thousand) |
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| SHARE
CAPITAL AND RESERVES |
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| Authorised
Capital |
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| 25,000,000
ordinary shares of Rs. 10.00 each |
|
250,000 |
200,000 |
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|
========== |
========== |
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| Issued,
subscribed and paid-up capital |
2 |
211,187 |
191,988 |
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| Reserve: |
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3 |
---------- |
---------- |
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| General
Reserve |
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|
92,000 |
92,000 |
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| Reserve
for issue of Bonus Shares |
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|
- |
19,199 |
|
| Unappropriated
profit |
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|
2,709 |
8,497 |
|
|
|
|
---------- |
---------- |
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|
|
|
94,709 |
119,696 |
|
|
|
|
---------- |
---------- |
|
|
|
|
305,896 |
311,684 |
|
| REDEEMABLE
CAPITAL |
|
4 |
97,159 |
85,036 |
|
| LONG
TERM LOAN |
|
5 |
2,275 |
4,549 |
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| LIABILITIES
AGAINST ASSETS SUBJECT |
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| TO
FINANCE LEASE |
|
6 |
20,281 |
45,282 |
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| DEFERRED
LIABILITIES |
|
7 |
77,851 |
131,452 |
|
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|
| CURRENT
LIABILITIES AND PROVISIONS |
|
|
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|
|
| Short
term running finance and borrowings |
8 |
358,355 |
75,791 |
|
| Current
maturity of redeemable capital, long term |
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| loan
and finance lease |
|
9 |
71,245 |
86,229 |
|
| Creditors
accrued and other liabilities |
10 |
125,814 |
74,544 |
|
| Taxation |
|
|
14,221 |
2,277 |
|
| Proposed
Dividend |
|
|
15,839 |
- |
|
|
|
|
---------- |
---------- |
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|
|
|
585,474 |
238,841 |
|
| CONTINGENCIES AND
COMMITMENTS |
11 |
- |
- |
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|
---------- |
---------- |
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|
1,088,936 |
816,844 |
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|
========== |
========== |
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| The
annexed notes form an integral part of these accounts. |
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| FIXED
ASSETS |
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| Operating
assets |
|
12 |
596,256 |
1,618,455 |
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| Capital
work-in-progress |
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13 |
- |
2,598 |
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|
---------- |
---------- |
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|
596,256 |
621,053 |
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| LONG
TERM INVESTMENT |
|
14 |
5,000 |
5,000 |
|
| LONG
TERM LOANS AND ADVANCES |
|
15 |
442 |
567 |
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| LONG
TERM DEPOSITS |
|
16 |
12,708 |
15,861 |
|
| CURRENT
ASSETS |
|
|
---------- |
---------- |
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| Stores
and spares |
|
17 |
74,715 |
75,127 |
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| Stock-in-trade |
|
18 |
363,121 |
14,186 |
|
| Loans,
advances, prepayments and other receivables
19 |
31,420 |
47,287 |
|
|
|
|
| Bank
and cash balance |
|
20 |
5,274 |
37,763 |
|
|
|
|
---------- |
---------- |
|
|
|
|
474,530 |
174,363 |
|
|
|
|
---------- |
---------- |
|
|
|
|
|
1,088,936 |
816,844 |
|
|
|
|
========== |
========== |
|
|
|
| PROFIT AND LOSS ACCOUNT FOR THE
YEAR |
|
| ENDED
30TH SEPTEMBER, 1997 |
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|
Note |
1997 |
1996 |
|
|
|
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|
(Rupees in thousand) |
|
|
|
|
|
|
|
| Sales |
|
21 |
1,040,954 |
1,318,317 |
|
| Cost
of sales |
|
22 |
901,716 |
1,113,693 |
|
|
|
|
---------- |
---------- |
|
| Gross
profit |
|
|
139,238 |
204,624 |
|
|
|
|
---------- |
---------- |
|
| Administration
expenses |
|
23 |
50,878 |
47,709 |
|
| Selling
and Distribution expenses |
|
24 |
2,670 |
2,540 |
|
|
|
|
---------- |
---------- |
|
|
|
- |
53,548 |
50,249 |
|
|
|
|
---------- |
---------- |
|
| Operating
profit |
|
|
85,690 |
154,375 |
|
| Other
income |
|
25 |
23,253 |
344 |
|
|
|
|
---------- |
---------- |
|
|
|
108,943 |
154,719 |
|
|
|
---------- |
---------- |
|
| Financial
charges |
|
26 |
97,138 |
96,238 |
|
| Other
charges |
|
27 |
1,754 |
4,467 |
|
|
|
|
---------- |
---------- |
|
|
|
|
98,892 |
100,705 |
|
|
|
|
---------- |
---------- |
|
| Profit
before taxation |
|
|
10,051 |
54,014 |
|
| Taxation |
|
|
28 |
- |
31,084 |
|
|
|
|
---------- |
---------- |
|
| Profit
after taxation |
|
|
10,051 |
22,930 |
|
| Unappropriated
profit brought forward |
|
8,497 |
4,766 |
|
|
|
|
---------- |
---------- |
|
|
|
|
18,548 |
27,696 |
|
| Appropriations |
|
|
|
| Proposed
Cash Dividend ~ 7.5% (1996: nil) |
|
15,839 |
- |
|
| Reserve
for issue of Bonus Shares nil (1996: @10%) |
- |
19,199 |
|
|
|
---------- |
---------- |
|
|
|
15,839 |
19,199 |
|
|
|
---------- |
---------- |
|
| Unappropriated
profit carried forward |
|
2,709 |
8,497 |
|
|
|
========== |
========== |
|
|
|
|
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
| CASH
FLOW STATEMENT |
|
| FOR
THE YEAR ENDED 30TH SEPTEMBER, 1997 |
|
|
|
|
|
|
1997 |
1996 |
|
|
|
|
(Rupees in thousand) |
|
|
|
|
| CASH
FLOW FROM OPERATING ACTIVITIES |
|
|
|
|
|
| Cash
generated from operations |
|
34 |
(189,034) |
244,130 |
|
| Taxes paid |
|
|
(2,902) |
(9,097) |
|
| Payment
for staff retirement benefits |
|
(227) |
(86) |
|
| Financial
charges paid (including interest income) |
(92,835) |
(100,329) |
|
| Long
term loans advances |
|
|
125 |
(345) |
|
| Long
term deposits |
|
|
3,153 |
2,141 |
|
|
|
|
---------- |
---------- |
|
|
|
|
(281,720) |
136,414 |
|
|
|
|
| CASH
FLOW FROM INVESTING ACTIVITIES |
|
|
| Fixed
capital expenditure |
|
|
(3,768) |
(10,399) |
|
| Sale
proceeds of operating assets |
|
|
572 |
577 |
|
|
|
|
---------- |
---------- |
|
| Net
cash outflow from investing activities |
|
(3,196) |
(9,822) |
|
|
|
|
| CASH
FLOW FROM FINANCING ACTIVITIES |
|
|
| Redeemable
capital |
|
|
50,000 |
- |
|
| Obligation
under finance lease |
|
|
6,472 |
3,489 |
|
| Repayment
of redeemable capital, long term loans |
|
|
| and
finance lease |
|
|
(86,610) |
(108,738) |
|
| Dividend
paid |
|
|
1 |
(5) |
|
|
|
|
---------- |
---------- |
|
| Net
cash inflow from financing activities |
|
(30,137) |
(105,254) |
|
|
|
|
---------- |
---------- |
|
| Net
increase / (decrease) in cash and cash equivalents |
(315,053) |
21,338 |
|
| Cash
and cash equivalent at the beginning of the year |
(38,028) |
(59,366) |
|
|
|
|
---------- |
---------- |
|
| Cash
and cash equivalents at the end of the year |
35 |
(353,081) |
(38,028) |
|
|
|
|
========== |
========== |
|
|
|
|
|
|
|
| NOTES
TO THE ACCOUNTS FOR THE YEAR |
|
| ENDED
30TH SEPTEMBER, 1997 |
|
|
| LEGAL
STATUS AND OPERATIONS |
|
|
| The
Company is a public company incorporated in Pakistan under the Companies Act,
1913 (now |
|
| Companies
Ordinance, 1984). Its shares are quoted on Karachi Stock Exchange in Pakistan
and is |
|
| principally
engaged in the production and sale of sugar. |
|
|
| Summary-of
Significant accounting: policies: |
|
|
| 1.1
Accounting convention: |
|
| These
accounts have been prepared under the historical cost convention except that
certain |
|
| exchange
differences have been included in fixed assets referred to in Note 1.4. |
|
|
|
|
| 1.2
Staff retirement benefits: |
|
| The
Company operates a provident fund scheme for all its employees eligible for
the benefits |
|
| and
contributions thereto are made in accordance with the terms of the scheme. |
|
|
| Effective
October 01, 1990, Company had introduced an unfunded gratuity scheme for
those |
|
| permanent
employees who have completed qualifying period and are members of the |
|
| aforestated
provident fund scheme. |
|
|
| 1.3
Taxation: |
|
| Provision
for current taxation for the year is based on taxable income at the current
rate of |
|
| taxation
after taking into account tax credit available, if any. |
|
|
| The
company accounts for deferred taxation on all material timing differences
using the |
|
| liability
method. However, deferred tax is not provided if it can be established with |
|
| reasonable
probability that these timing differences will not reverse in the foreseeable
future. |
|
|
| 1.4
Fixed assets: |
|
|
|
|
| (a) OWN |
|
|
| Operating
assets except freehold land are stated at cost less accumulated |
|
| depreciation.
Freehold land and capital work in progress are stated at cost. Cost |
|
| in
relation to certain fixed assets including capital work in progress signifies |
|
| historical
cost and exchange differences referred to in Note 1.8. |
|
|
| Depreciation
is charged to income at normal tax rate on the written down value of |
|
| the
assets as affected on account of exchange differences referred to in Note
1.8. |
|
| Full
year's depreciation is charged on all assets in the year of acquisition,
except for |
|
| plant
and machinery on which depreciation is charged on the basis of actual |
|
| operating
days of factory. No depreciation is charged on assets in the year of |
|
| disposal. |
|
|
| Maintenance
and normal repairs are charged to income as and when incurred; major |
|
| renewals
and improvements are capitalized and the assets so replaced, if any, are |
|
| retired. |
|
|
| Gain
and loss on disposal of assets are taken to profit and loss account. |
|
|
| (b) LEASED |
|
|
| Assets
held under finance leases are included in operating assets at present value |
|
| of
minimum lease payments. |
|
|
| The
financial charge is calculated at the interest rate implicit in the lease and
is |
|
| charged
to profit and loss account. |
|
|
| Depreciation
is charged at the same rates as company owned assets. However, if |
|
| there
is no reasonable certainty that the company will obtain ownership by the end |
|
| of
the lease term, the assets are depreciated over shorter of the lease term or
its |
|
| useful
life. |
|
|
| 1.5
Long term investments: |
|
| The
company's investments in associated undertaking are stated at cost. The
provision is |
|
| made
there against for permanent diminution, if any, in the value of investment.
Dividends |
|
| received
are reflected in the company's profit and loss account. |
|
|
|
|
| 1.6
Stores, spares and fertilizer: |
|
| Stores,
spares and fertilizer are valued at cost, using FIFO cost flow method. |
|
|
|
|
| Store
in transit are valued at cost comprising invoice value and other charges paid
thereon. |
|
|
|
|
| 1.7
Stock-in-trade: |
|
| Work
in process is valued at average cost and finished goods for sale in open
market are |
|
| valued
at lower of average cost and net realisable value. By-products are valued at
net |
|
| realisable
value. |
|
|
| 1.8
Foreign Currencies Translation: |
|
| Liabilities
in Foreign Currencies have been converted into Pakistani rupees at the |
|
| rate
of exchange ruling at the Balance Sheet date. Exchange gains and losses are |
|
| adjusted
in the value of the related asset. |
|
|
| 1.9
Deferred Cost: |
|
| Deferred
cost consists of preliminary and share issue expenses including brokerage, |
|
| commission
and other. These expenses are being written off during the period of five |
|
| years
including the financial year in which expenses are incurred. |
|
|
|
|
| 1.10
Revenue recognition: |
|
| Sales
are recorded on despatch of goods to customer. |
|
|
| 1.11
Mark-up on Finance: |
|
| The
agreed mark-up and interest on redeemable capital, long term loan and short
term |
|
| running
finance is accounted for on accrual basis. |
|
|
| 1.12
Capitalisation of borrowing costs: |
|
| Borrowing
costs on assets which call for substantial period of time to get them ready |
|
| for
their intended use are taken to fixed capital expenditure. |
|
|
|
|
|
1997 |
1996 |
|
|
