| Suraj Cotton Mills Limited |
|
|
|
|
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|
| Annual
Report 1997 |
|
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| CONTENTS |
|
| Company
Information |
|
| Notice
of Meeting |
|
| Chief
Executives Review |
|
| Financial
Highlights |
|
| Directors'
Report |
|
| Auditors'
Report |
|
| Balance
Sheet |
|
| Profit
and Loss Account |
|
| Statement
of Changes in Financial Position |
|
| Notes
to the Accounts |
|
| Pattern
of Holding of Shares |
|
|
|
| COMPANY
INFORMATION |
|
|
| Board
of Directors |
|
|
| Mr.
Nadeem Maqbool |
|
(Chief Executive) |
|
|
| (In
Alphabetic Order) |
|
| Mr.
Ahsan Bashir |
|
| Mr.
Ahsan M. Saleem |
|
| Mr.
Amjad Mahmood |
|
| Mr.
Asif Bashir |
|
| Mr.
Humayun Maqbool |
|
| Mr.
Muhammad Murtaza |
|
|
| Auditors |
|
| M.
Yousuf Adil & Company |
|
| Chartered
Accountants |
|
|
| Bankers |
|
| National
Bank of Pakistan |
|
| Prime
Commercial Bank Limited |
|
| United
Bank Limited |
|
| Pakistan
Industrial Credit and Investment Corporation Limited |
|
| Crescent
Investment Bank Limited |
|
| Prudential
Commercial Bank Limited |
|
| Metropolitan
Bank Limited |
|
|
| Registered
Office |
|
| 83,
Baber Block, |
|
| New
Garden Town, |
|
| Lahore. |
|
| Tel:
(042) 588 1974- 75 |
|
| Fax:
(042) 588 1976 |
|
|
|
|
| NOTICE
OF ANNUAL GENERAL MEETING |
|
|
|
| NOTICE
IS HEREBY GIVEN THAT the 13th Annual General Meeting of the shareholders of
Suraj Cotton Mills Limited will be held |
|
| on
Thursday the March 26, 1998 at 10:00 a.m. at Registered Office, 83- Babar
Block, New Garden Town, Lahore to transact the |
|
| following
business: |
|
|
| 1.
To receive, consider and adopt the Audited Accounts of the Company for the
year ended September 30, 1997 together with the |
|
| Directors'
and Auditors' Reports thereon. |
|
|
|
|
| 2.
To appoint Auditors and fix their remuneration. The Present Auditors M/s. M.
Yousuf Adil & Co., Chartered Accountants, retire |
|
| and
being eligible, offer themselves for re-appointment. |
|
|
|
|
| 3.
To elect Directors of the Company for a period of three years commencing from
March 27, 1998 in accordance with the provi- |
|
| sions
of the Companies Ordinance, 1984. The following retiring Directors shall be
eligible to offer themselves for re-election:- |
|
|
| 1
Mr. Ahsan Bashir |
|
| 2
Mr. Ahsan M. Saleem |
|
| 3.
Mr. Amjad Mahmood |
|
| 4.
Mr. Asif Bashir |
|
| 5.
Mr, Humayun Maqbool |
|
| 6.
Mr. Muhammad Murtaza |
|
| 7.
Mr. Nadeem Maqbool |
|
|
| The
Board of Director have fixed the number of elected Directors as eight. |
|
|
| BOOK
CLOSURE: |
|
|
| The
share transfer books of the company will remain closed from March 25, 1998 to
March 31, 1998 ( both days inclusive |
|
|
| Registered
Office: |
|
| 83-Babar
Block, New Garden Town, Lahore. |
|
| Tel:
(042) 5881974-75 |
|
| Fax:
(042) 5881976 |
|
|
| Note: |
|
| 1.
Nominations from shareholders for the office of Directors must be received at
the Registered Office of the Company at least 14 |
|
| clear
days before the date of the meeting. |
|
| 2.
A member eligible to attend and vote at this meeting may appoint another
member as his/her proxy, to attend and vote instead |
|
| of
him/her. Proxies in order to be effective must be received by the Company at
the Registered office not later than 48 hours |
|
| before
the time for holding the Meeting. |
|
| 3.
Shareholders are requested to immediately notify the change in their address,
if any. |
|
|
|
|
| CHIEF
EXECUTIVE'S REVIEW |
|
| During
the year under review, with the grace of Allah, your company's results
depicted a marked overall improvement in all spheres of its |
|
| operations.
Our consistent efforts to meet our goals succeeded to a large extent with
both the spinning and weaving divisions making a |
|
| meaningful
contribution towards better operating results. |
|
|
| The
company's diversification into blended yarn was also successful and we were
able to grasp both domestic and international markets. In |
|
| this
connection we were helped by the abundant availability of Polyester Fibre,
manufacturing capacity of which has increased in Pakistan. |
|
| Polyester
Staple Fibre was available freely and our dependence on cotton as a raw
material decreased. The cotton crop in the country, |
|
| although
short of target, was available in enough quantity to enable the textile
industry to meet its requirements. Our optimism, last year, on |
| the
state of the industry was well founded and strong demand for yarn and fabrics
continued throughout the year. |
|
|
| Our
weaving unit was able to penetrate and capitalize on the demand for high
quality fabrics in both Europe and the far-East. This was a |
|
| direct
result of the efforts of our marketing team and I am happy to inform you of a
very positive contribution by the weaving division both |
| in
terms of turnover and profitability. |
|
|
| Operating
Results |
|
| During
the year, gross sales of the company increased from Rs. 1,316/- million to
Rs. 1,342 million and gross profit increased by 82.18% from |
| Rs.
128.44 million to Rs. 233.99 million. We were able to control financial
charges which decreased from Rs. 137.58 million to Rs. 115.76 |
|
| million.
Electricity charges continue to rise because of exorbitant wapda tariffs
although, we have succeeded to cap them to some extent by |
| buying
cheaper and better power from an associated private power generation company. |
|
|
| The
Management continued cost control measures and the results depict our
efforts. Cost of goods sold declined by 5.5% and administrative |
|
| expenses
increased by Rs. 2.19 million. This percentage was mainly due to inflationary
factors. |
|
|
| Future
Prospects |
|
| As
it is a usual tendency, the new season has opened on a very optimistic note
with a raw cotton output targets set very high. The prices of |
| raw
cotton remained steady with the prices of Polyester Fibre showing a declining
trend. Market for yarn and fabric in the first quarter |
|
| continue
to remain strong with fabric offtake being exceptionally good. Good fabric
offtake means strong demand for yarn which augurs |
|
| well
for the industry. The Government remained committed to its structural reforms
and the markup rates were reduced with fuel and |
|
| power
rates remaining locked at their existing levels. We hope that these measures
will enable a revival of the country's economy in all |
|
| sectors. |
|
|
| Board
Room Changes |
|
| Mr.
Zahid Bashir Chairman Board of Directors resigned effective December 29,
1997. The Directors would be missing his presence in the |
|
| Board
Room. I would like to express sincerest appreciation for his valuable
contribution and guidance to the company. His presence in the |
|
| Board
Room was always of special significance. With his participation, the
discussions in the meetings were more meaningful. His interest in |
| the
operations of the company and readily offering sound advise when needed both
in and outside Board meetings was of immense help. I |
|
| take
this opportunity to thank him for his time and attention to the company
during his stay as Director and Chairman of the Board. I am sure |
| that
the company will continue to receive his guidance in future as well. |
|
|
| As
the year progresses, our optimism becomes guarded with the whole of the
Far-East in the throes of a currency and economic turmoil. The |
|
| Far
East is our primary customer and the effects of turmoil will eventually
become apparent in Pakistan. Already yarn and fabric offtake has |
| tapered
off with demand becoming sluggish. However, we feel that when these economics
and their currencies stabilize, demand will again |
|
| be
there albeit with reduced margins for our exporters. |
|
|
| Acknowledgment: We appreciate the support of the Board of Directors and the
Management team and look forward to their continued |
|
| support
and guidance. We thank our share holders, bankers and suppliers for the
support and our staff and workers for their dedication and |
|
| hard work. |
|
|
|
| FINANCIAL
SUMMARY. |
|
|
| Operating
Results: (Rs. 000's) |
|
1997 |
1996 |
1995 |
|
|
| Net Sales |
|
1,329,844 |
1,288,034 |
1,064.25 |
|
| Cost
of Sales |
|
1,095,853 |
1,159,593 |
1,036,133 |
|
| Administration |
|
17,145 |
14,958 |
11,798 |
|
| Selling |
|
26,995 |
28,982 |
21,904 |
|
| Financial
Charges |
|
115,763 |
137,578 |
87,581 |
|
| Other
Income |
|
3,169 |
1,442 |
2,614 |
|
| Profit/(Loss)
before taxation |
|
73,395 |
(51,635) |
(90,550) |
|
| Taxation |
|
6,900 |
8,500 |
5,293 |
|
| Profit/(Loss)
after taxation |
|
66,495 |
(60,135) |
(95,843) |
|
|
|
|
| Per
Share Results and Returns |
|
|
|
|
|
|
| Earning/(Loss)
per share (Rupees) |
|
7.39 |
(6,68) |
(10.65) |
|
| Net
Income/(Loss) to Sales (%) |
|
5.0 |
(4.7) |
(9.0) |
|
| Return/(Loss)
on average assets (%) |
|
7.17 |
(6.54) |
(10.45) |
|
|
|
|
| Financial
Position |
|
|
|
|
|
|
| Current
Assets |
|
321,133 |
258,450 |
213,105 |
|
| Current
Liabilities |
|
297,114 |
324,333 |
403,933 |
|
| Operating
Fixed Assets |
|
597,635 |
648,401 |
700,591 |
|
| Total
Assets |
|
933,649 |
920,869 |
916,786 |
|
| Long
Term Debts |
|
485,131 |
498,152 |
368,901 |
|
| Shareholders'
Equity |
|
116,809 |
50,314 |
110,449 |
|
| Break-up
Value per share (Rupees |
|
12.98 |
5.59 |
12.27 |
|
|
|
|
| Financial
Ratios |
|
|
|
|
|
|
| Current
Assets to Current Liabilities |
1.08 |
0.80 |
0.53 |
|
| Debt
Equity Ratio (%) |
|
81 |
91 |
77 |
|
| Inventory
Turnover (Times) |
|
83.78 |
89.32 |
84.30 |
|
| Fixed
Assets Turnover (Times) |
|
12.26 |
13.32 |
12.70 |
|
| Total
Assets Turnover (Times) |
|
2.23 |
1.99 |
1.52 |
|
|
1.42 |
1.40 |
1.16 |
|
|
|
| DIRECTORS'
REPORT |
|
|
| The
Directors are pleased to present Thirteenth Annual Report of your Company,
alongwith financial statements for the year ended 30th |
|
| September,
1997 and the auditors report thereon. |
|
|
| The
operations, during the period under review, have improved significantly and
show tremendous growth as compared to previous years. |
|
|
| During
the year the company was able to report the operating profit of Rs. 189.852
million for the year. Profit before tax of Rs. 73.395 million |
| after
accounting for financial and other charges of Rs. 119.625 million. |
|
|
| Financial
results for the year are as follows: |
|
|
|
|
(Rupees in thousands) |
|
|
| Operating
profit for the year |
|
189,852 |
|
| Add:
Other income |
|
|
3,169 |
|
|
|
|
---------- |
|
|
|
|
193,021 |
|
| Less:
Financial and other charges |
|
119,626 |
|
|
|
|
---------- |
|
| Profit
before tax |
|
|
73,395 |
|
| Less
:Taxation |
|
|
6,900 |
|
|
|
|
---------- |
|
| Profit
for the year after tax |
|
66,495 |
|
| Accumulated
loss brought forward |
|
(158,398) |
|
|
|
|
---------- |
|
| Accumulated
loss carried over to Balance Sheet |
|
(91,903) |
|
|
========== |
|
|
| Auditors |
|
| Messrs
M. Yousuf Adil & Co., Chartered Accountants, retire and are eligible for
re-appointment. |
|
|
| Review
of operations |
|
| Financial
position and future prospects for the company, as required under section
236(2) of the Companies Ordinance, 1984, are stated in |
|
| the
Management Review which forms part of this report. |
|
|
| We
are continuing our efforts for improvement in the operating results of the
Company. |
|
| We
appreciate tile support and co-operation extended by our shareholders,
employees, customers and suppliers. |
|
|
|
| AUDITORS'
REPORT TO THE MEMBERS |
|
|
| We
have audited the annexed balance sheet of SURAJ COTTON MILLS LIMITED as at
September 30, 1997 and the related profit and loss |
|
| account
and statement of changes in financial position, 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, investments 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, except for the effect of the matter |
|
| referred
to in Note No. 14.1, the balance sheet and profit and loss account and the
statement of changes in financial position, |
|
| 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 Company's affairs
as at September 30, 1997 and of the profit and |
|
| the
changes in the financial position for the year then ended; and |
|
|
|
|
| d)
in our opinion, no Zakat was deductible at source under Zakat and Ushr
Ordinance, 1980. |
|
|
|
M. YOUSUF ADIL & CO. |
|
| Lahore:
February 16, 1998 |
|
Chartered Accountants |
|
|
|
| BALANCE
SHEET AS AT SEPTEMBER 30, 1997 |
|
|
|
|
|
Note |
1997 |
1996 |
|
|
|
(Rupees in thousand) |
|
| Capital
& Liabilities |
|
|
|
|
|
|
| Share
capital and reserves |
|
|
| Authorized
capital |
|
|
|
| 10,000,000
OrdinaD7 shares of Rs. 10/- each |
|
100,000 |
100,000 |
|
|
|
|
========== |
========== |
|
| Issued,
subscribed and paid-up capital |
3 |
90,000 |
90,000 |
|
| Capital
reserve- Share premium |
|
|
29,000 |
29,000 |
|
| Accumulated
loss |
|
(91,903) |
(158,398) |
|
|
|
---------- |
---------- |
|
|
|
27,097 |
(39,398) |
|
|
|
|
| Surplus
on revaluation of fixed assets |
4 |
89,712 |
89,712 |
|
| Redeemable
capital |
|
5 |
29,598 |
43,614 |
|
| Debentures
and long term loans |
|
|
---------- |
---------- |
|
| Debentures |
|
|
6 |
2,129 |
3,174 |
|
| Long
term loans |
|
7 |
483,002 |
494,978 |
|
|
|
|
---------- |
---------- |
|
|
|
|
485,131 |
498,152 |
|
| Liability
against assets subject to finance lease |
8 |
- |
89 |
|
| Deferred
liabilities- Staff gratuity |
|
4,997 |
4,367 |
|
| Current
liabilities and provisions |
|
|
---------- |
---------- |
|
| Finance
utilized under mark-up arrangements |
9 |
78,847 |
137,898 |
|
| Short
term loans- Secured |
|
10 |
10,000 |
10,000 |
|
|
|
|
|
| Current
portion of long term liabilities |
11 |
55,445 |
37,255 |
|
| Creditors,
accrued and other liabilities |
12 |
142,714 |
128,766 |
|
| Provision
for taxation |
|
|
10,108 |
10,414 |
|
|
|
|
---------- |
---------- |
|
|
|
|
297,114 |
324,333 |
|
| Contingencies
and commitments |
|
13 |
-- |
-- |
|
|
|
|
---------- |
---------- |
|
|
|
|
933,649 |
920,869 |
|
|
========== |
========== |
|
| The
annexed notes form an integral part of these accounts |
|
|
| Property
& Assets |
|
|
|
|
|
|
| Operating
assets |
|
14 |
597,635 |
644,077 |
|
| Capital
work in progress- Civil work |
|
- |
4,324 |
|
|
|
|
---------- |
---------- |
|
|
|
|
597,635 |
648,401 |
|
|
|
|
| Long
term investments |
|
15 |
13,196 |
13,196 |
|
|
|
|
| Long
term security deposits and deferred costs |
|
1,685 |
822 |
|
|
|
|
| Current
assets |
|
|
|
|
|
|
---------- |
---------- |
|
| Stores
and spares |
|
|
12,088 |
8,576 |
|
| Stock
in trade |
|
16 |
107,265 |
109,665 |
|
| Trade debts |
|
17 |
103,243 |
99,646 |
|
| Advances,
deposits, prepayments and other receivables |
18 |
62,594 |
26,055 |
|
| Short
term investments |
|
19 |
8,795 |
8,795 |
|
| Cash
and bank balances |
|
20 |
27,148 |
5,713 |
|
|
|
|
---------- |
---------- |
|
|
|
|
321,133 |
258,450 |
|
|
|
|
---------- |
---------- |
|
|
|
|
|
933,649 |
920,869 |
|
|
|
|
========== |
========== |
|
|
|
| PROFIT
AND LOSS ACCOUNT FOR THE YEAR |
|
| ENDED
SEPTEMBER 30, 1997 |
|
|
|
|
|
Note |
1997 |
1996 |
|
|
|
|
|
(Rupees in thousand) |
|
|
|
|
| Sales |
|
21 |
1,329,844 |
1,288,034 |
|
| Cost
of sales |
|
22 |
1,095,852 |
1,159,593 |
|
|
|
|
---------- |
---------- |
|
| Gross
profit |
|
|
233,992 |
128,441 |
|
| Operating
expenses |
|
|
|
|
|
| Administration |
|
|
23 |
17,145 |
14,958 |
|
| Selling |
|
|
24 |
26,995 |
28,982 |
|
|
|
|
---------- |
---------- |
|
|
|
|
44,140 |
43,940 |
|
|
|
|
---------- |
---------- |
|
| Operating
profit |
|
|
|
189,852 |
84,501 |
|
| Other
income |
|
|
25 |
3,169 |
1,442 |
|
|
|
|
---------- |
---------- |
|
|
|
|
193,021 |
85,943 |
|
|
|
|
---------- |
---------- |
|
| Financial
charges |
|
|
26 |
115,763 |
137,578 |
|
| Workers'
Profit Participation Fund |
|
|
3,863 |
- |
|
|
|
|
---------- |
---------- |
|
|
|
|
119,626 |
137,578 |
|
|
|
|
---------- |
---------- |
|
| Profit/(1oss)
before taxation |
|
|
73,395 |
(51,635) |
|
| Taxation |
|
|
27 |
6,900 |
8,500 |
|
|
|
|
---------- |
---------- |
|
| Profit/(loss)
after taxation |
|
|
66,495 |
(60,135) |
|
| Accumulated
loss brought forward |
|
|
(158,398) |
(98,263) |
|
|
|
|
---------- |
---------- |
|
| Accumulated
loss carried forward |
|
|
(91,903) |
(158,398) |
|
|
|
|
========== |
========== |
|
|
|
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
| STATEMENT
OF CHANGES IN FINANCIAL POSITION (CASH FLOW STATEMENT)FOR THE YEAR ENDED |
|
| SEPTEMBER
30, 1997 |
|
|
|
|
|
|
|
1996 |
1997 |
|
| A.
CASH FROM OPERATING ACTIVITIES |
(Rupee in thousand) |
|
|
|
|
| Profit/(Loss)
before taxation |
|
73,395 |
(51,635) |
|
| Adjustment
for |
|
|
|
| Depreciation |
|
59,766 |
64,865 |
|
| Provision
for gratuity |
|
1,539 |
1,276 |
|
| (Gain)/Loss
on disposal of fixed assets |
|
(1,624) |
(163) |
|
| Borrowing
cost capitalised |
|
18,663 |
7,823 |
|
| Payment
of gratuity |
|
(909) |
(1,000) |
|
| Financial
charges |
|
115,763 |
137,578 |
|
|
|
---------- |
---------- |
|
| Cash flow from operating
activities |
|
|
| before
changes in working capital |
|
266,593 |
158,744 |
|
|
|
---------- |
---------- |
|
| Changes
in working capital |
|
|
|
| (Increase/decrease
in current assets |
|
|
| Stores,
spares and loose tools |
|
(3,512) |
3,416 |
|
| Stocks
in trade |
|
2,400 |
(25,887) |
|
| Trade debts |
|
|
(3,597) |
(35,844) |
|
| Advances.
deposits, prepayments and other receivables |
|
(34,656) |
1,650 |
|
|
|
|
|
| Increase/(decrease)
in current liabilities |
|
|
|
| Creditors,
accrued and other liabilities |
|
18,275 |
(4,817) |
|
|
|
---------- |
---------- |
|
|
|
(21,090) |
(61,482) |
|
|
|
---------- |
---------- |
|
| Cash
generated from operations |
|
245,503 |
97,262 |
|
| Taxes paid |
|
|
(9,089) |
(8,312) |
|
| Financial
charges paid |
|
(120,091) |
(64,301) |
|
|
|
---------- |
---------- |
|
| Net
cash from operating activities |
|
116,323 |
24,649 |
|
|
|
---------- |
---------- |
|
| 11.
CASH FROM INVESTING ACTIVITIES |
|
|
|
| Proceeds
from disposal of fixed assets |
|
2,738 |
324 |
|
| Fixed
capital expenditure |
|
(10,114) |
(12.8"2) |
|
| Long
term deposits |
|
(863) |
68 |
|
|
|
---------- |
---------- |
|
| Net
cash used in investing activities |
|
(8,239) |
(12,480) |
|
|
|
---------- |
---------- |
|
| C.
CASH FROM FINANCING ACTIVITIES |
|
|
|
| Redemption
of redeemable capital |
|
(8,618) |
(11,809) |
|
| Custom
debenture obtained |
|
- |
2,713 |
|
| Redemption
of custom debentures |
|
(543) |
- |
|
| Repayment
of long term loans |
|
(18,191) |
- |
|
| Repayment
of lease liability |
|
(246) |
(459) |
|
| Increase
in short term borrowings |
|
(59,051) |
(2,762) |
|
|
|
---------- |
---------- |
|
| Net
cash (used in)/from financing activities |
|
(86,649) |
(12,317) |
|
|
|
---------- |
---------- |
|
| NET
(DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (A+B+C) |
21,435 |
(148) |
|
| CASH
AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR |
5,713 |
5,861 |
|
|
|
---------- |
---------- |
|
| CASH
AND CASH EQUIVALENTS AT THE END OF THE YEAR |
|
27,148 |
5,713 |
|
|
|
========== |
========== |
|
|
|
| NOTES
TO THE ACCOUNTS FOR THE YEAR ENDED SEPTEMBER 30, 1997 |
|
|
| 1.
STATUS AND ACTIVITIES |
|
|
| 1.1
The Company was incorporated in Pakistan on December 18, 1984, under the
Companies Act, 1913 repealed by Companies |
|
| Ordinance,
1984 and quoted in Stock Exchanges in Pakistan. It is engaged in the business
of manufacture and sale of yarn and |
|
| cloth. |
|
|
| 1.2
The Spinning Units are located at Nooriabad in the province of Sindh and
Shahkot in the province of Punjab and Weaving Unit |
|
| at
Shahkot in the province of Punjab. |
|
|
