| Cyanamid (Pakistan) Limited |
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| Annual
Report 1998 |
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| Contents |
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| CORPORATE
PROFILE |
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| NOTICE
OF ANNUAL GENERAL MEETING |
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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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| CASH
FLOW STATEMENT |
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| NOTES TO THE ACCOUNTS |
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| 10
YEARS HISTORY |
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| PATTERN
OF SHAREHOLDING |
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| Corporate Profile |
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| |
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| BOARD
OF DIRECTORS |
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| Roger Kimmett |
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Chairman, Chief Executive
& Managing Director |
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| John R. Stafford |
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(Alternate: S. Anwarul
Haque) |
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| Bernard Poussot |
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(Alternate: M. Mustafa
Khan) |
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| Marco A. Fonseca |
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(Alternate: Nadeem
Tufail) |
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| Luciano
Giovanni DePortu |
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| Frederick
Paul Theobald III |
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| Khwaja
Bakhtiar Ahmed |
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| Razi-ur-Rehman
Khan |
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| COMPANY
SECRETARY |
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| Khwaja
Bakhtiar Ahmed |
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| BANKERS |
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| ABN-Amro Bank |
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| American
Express Bank Limited |
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| ANZ
Grindlays Bank |
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| Bank
of America NT&SA |
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| Habib Bank Limited |
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| Muslim
Commercial Bank Limited |
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| Standard
Chartered Bank |
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| AUDITORS |
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| A.F.
Ferguson & Company |
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| LEGAL
ADVISORS |
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| Orr.
Dignam & Company |
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| SHARE
REGISTRAR |
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| T.H.K.
Associates (Pvt) Ltd. |
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| Ground Floor, |
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| Shaikh
Sultan Trust Building No. 2, |
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| Beaumont
Road, Karachi. |
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| Ph.
# 5689021, 5686658 |
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| HEAD
OFFICE / REGISTERED OFFICE |
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| S-33,Hawkesbay
Road, S.I.TE., |
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| G.P.O.
Box No. 167, Karachi. |
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| Telephone:
2567411-34 & 111-777-333 |
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| Fax: 92-21-2564428 |
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| Notice
of Annual General Meeting |
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| NOTICE
is hereby given that the Fiftieth Annual General Meeting of Cyanamid
(Pakistan) Limited will be |
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| held
on Friday, May 28, 1999 at 10:00 a.m. at the Registered Office of the
Company, S-33, Hawkesbay |
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| Road,
S.I.T.E., Karachi to transact the following business: |
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| ORDINARY
BUSINESS: |
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| 1.
To confirm the minutes of the Forty Ninth Annual General Meeting of the
Company held on May 29, |
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| 1998. |
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| 2.
To receive, consider and adopt the Audited Accounts together with the
Directors' and Auditors' Report |
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| for
the year ended November 30, 1998. |
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| 3.
To elect eight Directors as fixed by the Board in accordance with the
provisions of Section 178 of the |
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| Companies Ordinance, 1984.The present
Directors Messrs. Roger Kimmett, John R. Stafford, Bernard |
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| Poussot, Marco A. Fonseca, Luciano Giovanni
DePortu, Frederick Paul Theobald III, Khwaja Bakhtiar |
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| Ahmed and Razi-ur-Rehman Khan are retiring
on May 31,1999. |
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| 4.
To appoint Auditors for the year ending November 30, 1999. |
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| By
Order of the Board |
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|
| Khwaja
Bakhtiar Ahmed |
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| Director
/ Company Secretary |
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| Karachi:
May 07, 1999 |
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| NOTES: |
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| 1.
The Shares Transfer Books of the Company will remain closed from Friday, May
21, 1999 to Friday, |
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| May
28, 1999 (both days inclusive). |
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| 2.
A member entitled to attend and vote at the Annual General Meeting may
appoint a proxy to attend, |
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| speak and vote instead of him/her. A proxy
need not be a member of the Company. Proxies, in order |
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| to be valid, must be received at the
Registered Office of the Company not later than 48 hours before |
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| the meeting. |
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| 3.
Members are requested to promptly communicate to the Company Registrar Messrs
T.H.K. Associ- |
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| ates
(Pvt.) Limited, any change in their address. |
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| Report
of the Directors |
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| Your
Directors present their Report and Audited Accounts for the year ended
November 30, 1998. |
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| OPERATIONS |
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| Sales
for the year reduced by 6.5%, the loss before tax was Rs. 117 million. The
loss was mainly due to the |
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| following factors: |
|
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| No
price increase received on Pharma products, moreover grossly unfair pricing
policy of the |
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| government
remained unchanged. |
|
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| - Imposition of Import Duty on pharmaceutical
raw and packaging materials. |
|
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| - Uncertain economic situation after nuclear
test in May 1998. |
|
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| -
Rupee devaluations in late 1997 and in first half of 1998. Application of
composite rate on all |
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| imports
instead of State Bank of Pakistan exchange rate. |
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| - Introduction of L/C margin deposits on all
imports. |
|
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| -
Target growth of Agro-chemical could not be achieved due to Dealers strike in
the peak cotton |
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| season. |
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| The
Directors feel that the results would not have been that bad if above adverse
factors had not affected the |
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| operations. |
|
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| No
new pharmaceutical products could be introduced during the year due to delay
in registration by the |
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| Ministry
of Health. However your Company is determined to launch Ledradine
(Cephradine) an antibiotic for |
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| Intra
Abdominal Respiratory Tract, Skin and Soft Tissue Infection and to launch
line extensions of Zoton |
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| (Lansoprazole)
an Anti-Ulcerant and Premarin (Conjugated Estrogens) a Hormone Replacement
Therapy |
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| for
females in1999. Your Company introduced in 1998 three new crop protection
products in Agro-chemical |
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| business.
Cascade, Acrobat and Thimet. Further in 1999 it plans to introduce three new
products i.e. Pirate |
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| and
Assert for crop protection business and Fendone 10% for malaria control.
Moreover Agro-chemical |
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| business
have plans to enter into business of Urban Pesticides Control (UPC). |
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| DIRECTORS |
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| During
the year Mr. Roger Kimmett, Mr. Khwaja Bakhtiar Ahmed, Mr. Fred Theobald and
Mr. Luciano DePortu |
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| joined
the Board. Mr. Farooq Hadi, S. Shaukat All, Mr. Akber Saifi and Mr. S. Masood
Abbas Jaffery left the |
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| Board.
The Board of Directors wish to place on record their appreciation of the
services rendered by the |
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| former
Directors and welcome the new Directors. Further the Board also welcome Mr.
Roger Kimmett as |
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| new
Chairman, Chief Executive and Managing Director of the Company. |
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| PROSPECTS |
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| The
pharmaceutical industry which has long suffered due to strict price controls
continue to view the future |
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| as
somewhat bleak. No price increases have been forthcoming since November 1996.
This together with |
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| major
devaluation as well as continued high inflation, seriously affect the
operations of this Industry and your |
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| Company as well. |
|
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| While
your Company through several Industry fora has been making extensive efforts
to make the govern- |
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| ment
realise that the situation is serious and the credibility of the government's
own policies is at stake, so |
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| far
the efforts have not brought about any change in the situation. If this
situation remains any more we will |
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| have
no option except to rationalize the operation. |
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| SUBSEQUENT
EVENTS |
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| No
material changes or commitment affecting financial position of the company
have taken place between |
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| the
end of financial year and the date of this report. |
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| AUDITORS |
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| The
present Auditors, A.F. Ferguson & Company retire and being eligible offer
themselves for reappoint- |
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| ment. |
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| YEAR
2000 COMPLIANCE |
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| We
are well underway in our efforts to address the Year 2000 issue and have
already established a Program |
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| Management
Office on a global basis. Our objective is to avoid or atleast minimize as
much as possible any |
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| disruptions
that may experience as we enter the next century. Stated simply, the Year
2000 effort is one of |
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| the
top priorities for the entire company. We are confident that we will address
the Year 2000 challenge. |
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| EMPLOYEES |
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| The
Directors are pleased to acknowledge that relations between management and
workers remained cor- |
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| dial
throughout the year. |
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| The
Directors wish to thank all employees for their hard work and devotion to
duty and expect them to |
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| continue
in the same spirit in future. |
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| PARENT
COMPANIES |
|
| American
Home Products Corporation incorporated in the State of Delaware, U.S.A. holds
576,470 (40.55%) |
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| shares
and American Cyanamid Company, New Jersey, U.S.A. (100% owned company of
American Home |
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| Products
Corporation) holds 448,560 (31.55%) shares thus the total holding of both the
companies is 72.10% |
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|
| PATTERN
OF SHAREHOLDING |
|
| A
statement of Pattern of Shareholding of the Company as at November 30, 1998
is shown on Page 29 |
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| Earning
per share for the year is negative Rs. 101.74 (1997 Rs. 34.98). |
|
|
| By
Order of the Board |
|
|
|
Roger Kimmett |
|
Khwaja Bakhtiar Ahmed |
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| Karachi: |
Chairman & Managing
Director (C.E.O.) |
|
Director |
|
| April 22, 1999. |
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| Auditors'
Report to the Members |
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| We
have audited the annexed balance sheet of Cyanamid (Pakistan) Limited as at
November 30, 1998 and |
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| the
related profit and loss account and cash flow statement, together with the
notes forming part thereof, for |
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| the
year then ended and we state that we have obtained all the information and
explanations which to the |
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| best
of our knowledge and belief were necessary for the purpose of our audit and,
after due verification |
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| thereof,
we report that: |
|
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| (a)
in our opinion, proper books of account have been kept by the Company as
required by the Compa- |
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| nies
Ordinance, 1984; |
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| (b) in our opinion: |
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|
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| (i)
the balance sheet and profit and loss account together with the notes thereon
have been |
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| drawn
up in conformity with the Companies Ordinance, 1984 and are in agreement with
the |
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| books
of account and are further in accordance with accounting policies
consistently |
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| applied
except for the change as stated in note 2.4 to the accounts with which we
concur; |
|
|
| (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 |
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| in
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 |
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| balance
sheet and profit and loss account 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 and fair view of 'the state of the Company's affairs as at November
30, 1998 and of the |
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| loss
and cash flows for the year then ended; and |
|
|
| (d)
in our opinion zakat deductible at source under the Zakat and Ushr Ordinance,
1980 was deducted |
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| by
the Company and deposited in the Central Zakat Fund established under Section
7 of that Ordi- |
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| nance. |
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|
A.F. Ferguson & Co. |
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| Karachi:
April 29, 1999 |
Chartered Accountants |
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|
| BALANCE
SHEET AS AT NOVEMBER 30, 1998 |
|
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|
Note |
1998 |
1997 |
|
|
|
|
(Rupees '000) |
|
|
|
|
| Fixed
Assets- Tangible |
|
3 |
170,373 |
170,611 |
|
| Capital
Work-in-Progress |
|
4 |
37 |
14,437 |
|
| Goodwill |
|
5 |
8,376 |
10,051 |
|
| Long
term Loans, deposits and prepayments |
6 |
15,767 |
12,715 |
|
|
|
---------------------- |
---------------------- |
|
| CURRENT
ASSETS |
|
|
|
| Stores,
spares and loose tools |
|
7 |
41,405 |
38,380 |
|
| Stock-in-trade |
|
8 |
742,425 |
504,326 |
|
| Trade debts |
|
9 |
374,167 |
629,516 |
|
| Loans,
advances, deposits, prepayments and |
|
|
|
| other receivables |
|
|
10 |
95,632 |
81,295 |
|
| Taxation |
|
11 |
165,969 |
68,343 |
|
| Cash
and bank balances |
|
12 |
2,601 |
1,255 |
|
|
|
---------------------- |
---------------------- |
|
|
|
1,422,199 |
1,323,115 |
|
| LESS:
CURRENT LIABILITIES |
|
|
|
| Current
maturity of liability against assets |
|
|
|
| subject
to finance leases |
|
18 |
8,226 |
6,600 |
|
| Short
term loans- unsecured |
|
|
- |
419,070 |
|
| Running
finance under mark-up arrangements |
13 |
592,846 |
78,435 |
|
| Creditors,
accrued and other liabilities |
|
14 |
561,156 |
452,967 |
|
| Dividends |
|
|
15 |
10,871 |
14,584 |
|
|
|
|
|
---------------------- |
---------------------- |
|
|
|
1,173,099 |
971,656 |
|
|
|
---------------------- |
---------------------- |
|
| NET
CURRENT ASSETS |
|
|
249,100 |
351,459 |
|
|
|
|
|
---------------------- |
---------------------- |
|
| NET ASSETS |
|
|
|
443,653 |
559,273 |
|
|
|
|
|
============ |
============ |
|
| FINANCED BY: |
|
|
|
|
| Share Capital |
|
|
16 |
142,161 |
142,161 |
|
| Reserves |
|
|
17 |
382,147 |
382,147 |
|
| (Accumulated
loss)/Unappropriated profit |
|
|
(143,109) |
1,522 |
|
|
|
|
---------------------- |
---------------------- |
|
| Shareholders'
equity |
|
|
381,1 99 |
525,830 |
|
| Liability
against assets subject to finance leases |
18 |
17,238 |
7,849 |
|
| Deferred Liabilities |
|
19 |
45,216 |
25,594 |
|
|
|
---------------------- |
---------------------- |
|
| CONTINGENCIES
AND COMMITMENTS |
|
20 |
443,653 |
559,273 |
|
|
|
============ |
============ |
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
| Sd/- |
|
|
Sd/- |
|
| Roger Kimmett |
|
|
Khwaja Bakhtiar Ahmed |
|
| Chairman
& Managing Director (C.E.O.) |
|
|
Director |
|
|
|
|
|
| PROFIT
AND LOSS ACCOUNT FOR THE YEAR ENDED NOVEMBER 30, 1998 |
|
|
|
|
Note |
1998 |
1997 |
|
|
|
(Rupees '000) |
|
|
|
|
|
|
| Sales-Net |
|
21 |
2,007,853 |
2,148,243 |
|
| Cost of goods sold |
|
22 |
1,585,125 |
1,635,549 |
|
|
|
---------------------- |
---------------------- |
|
| Gross profit |
|
|
|
422,728 |
512,694 |
|
| Administrative
and selling expenses |
|
23 |
444,564 |
353,729 |
|
|
|
---------------------- |
---------------------- |
|
|
|
(21,836) |
158,965 |
|
| Other income |
|
24 |
5,423 |
4,920 |
|
|
|
|
---------------------- |
---------------------- |
|
|
|
(16,413) |
163,885 |
|
|
|
|
| Financial charges |
|
25 |
98,478 |
73,907 |
|
| Amortization
of goodwill |
|
|
1,675 |
1,675 |
|
| Amortization
of deferred cost |
|
|
- |
5,761 |
|
| Research
and development contribution |
|
|
- |
874 |
|
| Workers'
profits participation fund |
|
|
- |
4,178 |
|
| Workers'
welfare fund |
|
|
- |
2,144 |
|
|
|
---------------------- |
---------------------- |
|
|
|
|
100,153 |
88,539 |
|
|
|
|
---------------------- |
---------------------- |
|
| (Loss)/Profit
before taxation |
|
|
(116,566) |
75,346 |
|
| Taxation |
|
|
|
|
Current |
|
|
23,265 |
30,928 |
|
|
Prior years |
|
|
8,156 |
- |
|
|
Deferred |
|
|
(3,356) |
(5,316) |
|
|
|
|
---------------------- |
---------------------- |
|
|
|
|
28,065 |
25,612 |
|
|
|
|
---------------------- |
---------------------- |
|
| (Loss)/Profit
after taxation |
|
|
(144,631) |
49,734 |
|
| Unappropriated
profit brought forward |
|
1,522 |
2,004 |
|
|
---------------------- |
---------------------- |
|
| (Accumulated
loss)/Profit available for appropriation |
|
(143,109) |
51,738 |
|
| Proposed
final dividend Nil (1997: Rs l0 per share) |
|
- |
14,216 |
|
| Transfer
to general reserve |
|
- |
36,000 |
|
|
|
---------------------- |
---------------------- |
|
| (Accumulated
loss)/Unappropriated profit carried forward |
|
(143,109) |
1,522 |
|
|
|
============ |
============ |
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
Sd. |
|
Sd. |
|
|
Roger Kimmett |
|
Khwaja Bakhtiar Ahmed |
|
|
Chairman & Managing
Director (C.E.O.) |
|
Director |
|
|
|
| CASH
FLOW STATEMENT FOR THE YEAR ENDED NOVEMBER 30, 1998 |
|
|
|
|
Note |
1998 |
1997 |
|
|
|
|
(Rupees '000) |
|
|
| CASH
FLOW FROM OPERATING ACTIVITIES |
|
|
|
| Cash
generated from / (used in) operations |
|
29 |
167,482 |
(74,118) |
|
|
|
|
|
|
|
|
| Interest
and mark-up paid |
|
|
(93,158) |
(40,712) |
|
| Lease
finance charges paid |
|
|
(4,486) |
(2,475) |
|
| Income tax paid |
|
|
|
(129,047) |
(111,343) |
|
| Payment of gratuity |
|
|
|
(3,841) |
(3,240) |
|
| Increase
in long-term loans, deposits |
|
|
|
| and prepayments |
|
|
(3,059) |
(4,145) |
|
|
---------------------- |
---------------------- |
|
|
|
(233,591) |
(161,915) |
|
|
|
---------------------- |
---------------------- |
|
| Net
cash outflow from operating activities |
|
(66,109) |
(236,033) |
|
|
|
|
|
| CASH
FLOW FROM INVESTING ACTIVITIES |
|
| Fixed
capital expenditure |
|
|
(41,141) |
(38,576) |
|
| Sale
proceeds of fixed assets |
|
|
5,953 |
3,372 |
|
|
---------------------- |
---------------------- |
|
| Net
cash outflow from investing activities |
|
(35,188) |
(35,204) |
|
|
|
|
|
|
| CASH
FLOW FROM FINANCING ACTIVITIES |
|
| Dividend paid |
|
|
|
(3,713) |
(28,907) |
|
| (Decrease)/Increase
in short term loans |
|
|
(419,070) |
378,709 |
|
| Increase
in liability against assets subject to finance leases |
|
11,015 |
2,011 |
|
| Other |
|
|
- |
(424) |
|
|
|
|
|
---------------------- |
---------------------- |
|
| Net
cash (outflow)/inflow from financing activities |
|
(411,768) |
351,389 |
|
|
|
---------------------- |
---------------------- |
|
| Net
(decrease)/increase in cash and cash equivalents |
|
(513,065) |
80,152 |
|
| Cash
and cash equivalents at the beginning of the year |
|
(77,180) |
(157,332) |
|
|
|
|
---------------------- |
---------------------- |
|
| Cash
and cash equivalents at the end of the year 30 |
|
(590,245) |
(77,180) |
|
|
============ |
============ |
|
| The
annexed notes form an integral part of these accounts. |
|
|
| Sd. |
|
|
Sd. |
|
| Roger Kimmett |
|
|
Khwaja Bakhtiar Ahmed |
|
| Chairman
& Managing Director (C.E.O.) |
|
Director |
|
|
|
| NOTES
TO THE ACCOUNTS FOR THE YEAR ENDED NOVEMBER 30, 1998 |
|
|
| 1.
STATUS AND NATURE OF BUSINESS |
|
|
| Cyanamid
(Pakistan) Limited is a public limited company quoted on the Karachi and
Lahore Stock |
|
| Exchanges.
The current business activities of the company consist of the manufacture and
market- |
|
| ing
of research based ethical specialities and other pharmaceutical and
agro-chemical products. |
|
|
| 2.
SIGNIFICANT ACCOUNTING POLICIES |
|
|
| 2.1
Accounting convention |
|
|
| These
accounts have been prepared under the historical cost convention |
|
|
| 2.2
Staff retirement benefits |
|
|
| (i) Staff gratuity |
|
|
| The
company operates a funded gratuity scheme for all its permanent employees
except for certain |
|
| unionised
staff of former Wyeth Laboratories (Pakistan) Limited (Wyeth). Contributions
are made to |
|
| the
fund on the basis of actuarial recommendation at the rate of 8.33% of the
basic salary. Actuarial |
|
| valuation
of the scheme is carried out once in three years, the latest valuation of the
scheme for |
|
| employees
of Cyanamid (Pakistan) Limited and former Wyeth were carried out on November
30, |
|
| 1996.
The fair value of the funds assets and liabilities at the latest valuation
dates were Rs. 36.14 |
|
| million
and Rs. 80.74 million respectively. As the total liability based on actuarial
valuation exceeds |
|
| the
fund's assets, the company maintains a provision in the books for the short
fall. |
|
|
| The
actuarial valuation of the scheme was carried out using entry age normal
method for employees |
|
| of
Cyanamid (Pakistan) Limited and attained age method for employees of former
Wyeth. |
|
|
| Main
valuation assumption used or actuarial valuation were as under: |
|
|
| .
Expected rate of increase in salaries 14% per annum. |
|
| ·
Expected rate of return on investment 14% per annum. |
|
|
| In
respect of former Wyeth. |
|
|
| ·
Expected rate of increase in salaries 12% per annum. |
|
| ·
Expected rate of return on investment 12% per annum |
|
|
| An
unfunded gratuity scheme for certain unionized staff to provide for gratuity
under the West Paki- |
|
| stan
Industrial and Commercial Employment (Standing Order) 1968, for the period
during which they |
|
| were
not covered by the provident fund schemes, the provisions for which are
charged to income |
|
| currently. |
|
|
| (ii) Pension fund |
|
|
| The
Company operates an approved funded pension scheme for the management staff
of the Com- |
|
| pany.
Annual contributions are made to the pension fund on the basis of actuarial
recommendation |
|
| at
the rate of 15.89% per annum of basic salary and additionally a book
provision of Rs. 19 million is |
|
| also
made as per actuarial recommendation. An actuarial valuation is performed
once in three years |
|
| and
the most recent valuation of the scheme was carried out on January 1, 1996
which reflected the |
|
| fair
value of the fund's assets and the liabilities for past services at the
latest valuation date was for |
|
| Rs.12.57
million and Rs.13.73 million respectively. Attained Age Method, using the
following signifi- |
|
| cant
assumptions, is used for valuation of this plan: |
|
|
| ·
Expected rate of increase in salary level 12% per annum. |
|
| ·
Expected rate of return on investment 12% per annum. |
|
|
| (iii) Provident fund |
|
|
| The
company operates an approved contributory Provident Fund for all its
permanent employees. |
|
| Contributions
are made equally by the Company and the employees at the rate mentioned in
provi- |
|
| dent
fund rules of the Company. |
|
|
| Retirement
benefits are payable to staff on completion of prescribed qualifying period
of service |
|
| under
these schemes. |
|
|
| 2.3 Taxation |
|
|
| Current |
|
| The
provision for current taxation is based on taxable income at applicable rates
of taxation. |
|
|
|
| Deferred |
|
| The
company accounts for deferred taxation on all material timing differences
using the liability method. |
|
| However,
as a matter of prudence, the company does not recognise net deferred tax
debit balance in |
|
| the
accounts, which at November 30, 1998 amounted to approximately Rs 12.14
million. |
|
|
| 2.4
Fixed assets and depreciation |
|
|
| (a) Owned |
|
|
| Operating
fixed assets except for freehold and leasehold land are stated at cost less
accumu- |
|
| lated
depreciation. Freehold land, leasehold land and capital work-in-progress are
stated at |
|
| cost. |
|
