| Dadex Eternit Ltd. |
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| Annual
Report 1997-98 |
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| Board
of Directors |
|
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| KASSIM
DADA, S.K. (Pak.), Off. L.II (Belgium) |
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| Chairman |
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| SIKANDER
DADA |
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| Managing
Director & Chief Executive |
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| ABU
TALIB H.K. DADA |
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| M.
IRSHAD UDDIN |
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| MAQBOOL
H. RAHIMTOOLA |
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| ZAHID
ZAHEER |
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| A.
A, BHOJANI |
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| G. A. ZAFAR |
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| PHILIPPE
COENS |
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| JACQUES
STIEVENART |
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| Director |
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| Corporate
Affairs |
TARIQ ALl JAFRI |
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| Director |
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| Technical
& Projects |
ZAIMUDDIN AHMED |
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| Company
Secretary |
AMANULLAH KHANANI |
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FCA |
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| Auditors |
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A. F. FERGUSON & CO, |
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|
Chartered Accountants |
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HYDER BHIMJI & CO. |
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|
Chartered Accountants |
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| Bankers |
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AMERICAN EXPRESS BANK
LIMITED |
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|
ANZ GRINDLAYS BANK |
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BANK OF AMERICA |
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HABIB BANK LIMITED |
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MUSLIM COMMERCIAL BANK
LIMITED |
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| Registered
Office |
KASSAM MANZIL, RANDAL
ROAD, |
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P.O. BOX NO. 7429, |
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KARACHI, 74400. |
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| NOTICE
OF MEETING |
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| Notice
is hereby given that the 39th Annual General Meeting of the shareholders will
be held on |
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| Wednesday,
November 18, 1998 at 11:30 a.m. at the Auditorium of Institute of Chartered |
|
| Accountants
of Pakistan, G-31/8, Kehkashan, Clifton, Karachi to transact the following
business: |
|
|
| 1.
To receive and adopt the Report of Directors and Audited Accounts for the
financial year |
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| ended
June 30, 1998. |
|
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| 2.
To consider the dividend recommended by the Board of Directors. |
|
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| 3.
To appoint Auditors for the year 1998-99 and fix their remuneration. |
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| NOTES: |
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| 1.
The Share Transfer Books will remain closed from Friday, November 6, 1998 to
Wednesday, |
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| November
18, 1998 (both days inclusive). |
|
|
| 2
A member entitled to attend and vote at the Annual General Meeting is
entitled to appoint |
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| another
member as a proxy to attend and vote in his absence. The instrument
appointing a |
|
| proxy
must be received at the Registered Office of the Company not later than
forty-eight |
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| hours
before the time of the meeting. |
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| 3.
A transport will be available for members at 10:45 a.m. sharp outside the
premises of |
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| Karachi
Stock Exchange Building to take them to the venue of the meeting. |
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| DIRECTORS'
REPORT |
|
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| The
Shareholders |
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| Dadex
Eternit Ltd. |
|
|
| Gentlemen |
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|
| Your
directors have pleasure in placing before you the 39th Annual Report with
audited |
|
| accounts
for the financial year ended June 30, 1998 as follows: |
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|
(Rupees in '000) |
|
|
| Net
profit before taxation |
|
85,142 |
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| Less'
Provision for taxation |
|
19,262 |
|
|
|
|
--------------- |
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| Net
profit after taxation |
|
65,880 |
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| Add:
Unappropriated profit brought forward |
|
10,686 |
|
|
|
|
--------------- |
|
| Profit
available for appropriation |
|
76,566 |
|
| Your
directors have decided to appropriate as under: |
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| Transfer
to General Reserve |
|
36,000 |
|
| Proposed
final dividend Rs. 3.75 per share (37.5%) |
|
40,365 |
|
|
|
|
--------------- |
|
|
|
|
76,365 |
|
|
|
|
--------------- |
|
| Unappropriated
profit carried forward |
|
201 |
|
|
|
|
========== |
|
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| Estimated
break up value per share is Rs. 35.82 treating deferred taxation as a part of
free |
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| reserve. |
|
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| M/s.
Hyder Bhimji & Co., and M/s. A. F. Ferguson & Co., auditors of the
company retire and offer |
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| their
services for the ensuing year. |
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|
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| CHAIRMAN'S
REVIEW |
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| It
is my pleasure to present you the report for 1997-98, the 39th year of the
company. |
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| The
year ended on a heartening note. We were able to achieve higher sales
turnover and better |
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| volumes
over last year. Better management control and prudent use of resources helped
in |
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| achieving
improved results under the present scenario. One will appreciate the fact
that while |
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| turnover
increased by nearly 20%, the cost of goods sold was fairly well contained.
This in itself |
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| is
an achievement in an inflationary environment. |
|
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| As
we are all aware, conditions in the market were and continue to be
unpredictable and extremely |
|
| difficult.
The country has been going through economic turmoil for a considerable period
which has |
|
| led
to recessionary pressures on the economy. Uncertain political conditions and
deteriorating law |
|
| and
order situation in Karachi affected the business environment. Increases in
the cost of inputs |
|
| like
cement, power, fuel and wages, as well as general inflation and currency
devaluation, added |
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| to
the cost of products. Unfair competition from manufacturers of substandard
and substitute |
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| products
added to the numerous problems your company has to face. |
|
|
| Nevertheless,
there can be no respite in our determination to continue on the path of
improving |
|
| operations.
Attempts are continuously being made to explore new markets and find
opportunities. |
|
|
| Although
there was a general resources crunch in the government development schemes,
we |
|
| were
able to secure turnkey jobs where quality was required not only in terms of
the product but |
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| also
in terms of workmanship. The role of the construction management division has
therefore |
|
| been
one of the key elements in this aspect. We actively started pursuing this
activity a few years |
|
| ago
and have gradually been able to justify venturing into this field. Even this
year we are likely |
|
| to
benefit from this division. |
|
|
| The
industrial activity in the country remained subdued which affected our sales
negatively. This |
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| segment
of the market is unlikely to improve this coming year. |
|
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| Construction
activities improved marginally with the result that sales in this sector were
better than |
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| the
previous year. Further, we were able to improve our market share which is
currently dominated |
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| by
substitute materials. Efforts in this direction will be maintained. |
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| We
are making satisfactory progress towards getting the company certified under
the ISO 9000 |
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| standard
and we hope to achieve certification by the end of 1998 |
|
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| Your
Board has decided to conserve cash resources as far as possible. This is in
anticipation of |
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| a
possible downturn in the company's activities in the forthcoming year as well
as the capital and |
|
| investment
requirements. |
|
|
| I
would like to conclude by conveying my appreciation to staff whose
contribution have resulted |
|
| in
the improved results and whose efforts will be required in surmounting the
problems we may |
|
| have
to face in the coming years. |
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|
|
| AUDITORS'
REPORT TO THE MEMBERS |
|
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| We
have audited the annexed Balance Sheet of Dadex Eternit Limited as at June
30, 1998 |
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| 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 |
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| 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: |
|
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| (i)
the Balance Sheet and Profit and Loss Account together with the notes thereon |
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| have
been drawn up in conformity with the Companies Ordinance, 1984 and are |
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| 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 |
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| business; and |
|
|
| (iii)
the business conducted, investments made and the expenditure incurred during |
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| the
year were in accordance with the objects of the company; |
|
|
| (c)
in our opinion and to the best of our information and according to the
explanations given |
|
| to
us, the Balance Sheet, Profit and Loss Account and 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
the state of the company's affairs as at June 30, 1998 and of the profit and
cash flows |
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| for
the year then ended; and |
|
|
| (d)
in our opinion Zakat deductible at source under the Zakat and Ushr Ordinance,
1980 |
|
| was
deducted by the company and deposited in the Central Zakat Fund established
under |
|
| section
7 of that Ordinance. |
|
|
|
A.F. Ferguson & Co. |
Hyder Bhimji & Co. |
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|
Chartered Accountants |
Chartered Accountants |
|
|
|
| BALANCE
SHEET |
|
| AS
AT JUNE 30, 1998 |
|
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|
Note |
1998 |
1997 |
|
|
(Rupees '000) |
|
|
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| SHARE
CAPITAL AND RESERVES |
|
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| Authorised
capital |
|
3 |
200,000 |
200,000 |
|
|
|
|
========== |
========== |
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| Issued,
subscribed and paid-up capital |
|
4 |
107,640 |
107,640 |
|
| Reserves |
|
|
|
| Capital |
|
5 |
97,000 |
97,000 |
|
| Revenue |
|
5 |
178,000 |
142,000 |
|
| Unappropriated
profit |
|
|
201 |
10,686 |
|
|
|
|
--------------- |
--------------- |
|
|
|
|
|
275,201 |
249,686 |
|
|
|
|
|
--------------- |
--------------- |
|
|
|
|
|
382,841 |
357,326 |
|
| LIABILITIES
AGAINST ASSETS |
|
|
|
| SUBJECT
TO FINANCE LEASES |
|
6 |
-- |
10,278 |
|
|
|
|
|
| DEFERRED
LIABILITY - TAXATION |
|
7 |
2,680 |
3,581 |
|
| CURRENT
LIABILITIES AND PROVISIONS |
|
|
| Short-term
running finances utilised |
|
|
|
| under
mark-up arrangements |
|
8 |
86,582 |
28,817 |
|
| Current
portion of liabilities against |
|
|
|
| assets
subject to finance leases |
|
6 |
10,278 |
12,863 |
|
| Creditors,
accrued and other |
|
|
|
| liabilities |
|
9 |
93,509 |
226,079 |
|
| Taxation |
|
|
28,925 |
50,032 |
|
| Proposed
dividend |
|
|
40,365 |
-- |
|
|
|
|
--------------- |
--------------- |
|
|
|
|
259,659 |
317,791 |
|
| COMMITMENTS |
|
10 |
|
|
|
|
--------------- |
--------------- |
|
|
|
645,180 |
688,976 |
|
|
|
========== |
========== |
|
|
|
| TANGIBLE
FIXED ASSETS |
|
|
| Operating
fixed assets |
|
11 |
61,452 |
77,426 |
|
| Capital
work-in-progress |
|
12 |
15,838 |
1,493 |
|
|
|
|
--------------- |
--------------- |
|
|
|
|
77,290 |
78,919 |
|
| LONG-TERM
INVESTMENT |
|
13 |
-- |
320 |
|
| LONG-TERM
LOANS AND ADVANCES |
|
14 |
779 |
1,055 |
|
| LONG-TERM
DEPOSITS |
|
15 |
3,830 |
8,230 |
|
| CURRENT
ASSETS |
|
|
|
| Stores
and spares |
|
16 |
65,134 |
69,409 |
|
| Stock-in-trade |
|
17 |
316,237 |
356,709 |
|
| Trade debts |
|
18 |
48,638 |
33,348 |
|
| Loans
and advances |
|
19 |
6,443 |
5,055 |
|
| Trade
deposits and short-term |
|
|
|
|
| prepayments |
|
20 |
19,435 |
13,538 |
|
| Other
receivables |
|
21 |
3,461 |
4,101 |
|
| Investments |
|
22 |
47,964 |
72,772 |
|
| Cash
and bank balances |
|
23 |
55,969 |
45,520 |
|
|
|
|
--------------- |
--------------- |
|
|
|
|
563,281 |
600,452 |
|
|
|
|
--------------- |
--------------- |
|
|
|
|
|
645,180 |
688,976 |
|
|
|
|
|
========== |
========== |
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
| PROFIT
AND LOSS ACCOUNT |
|
| FOR
THE YEAR ENDED JUNE 30, 1998 |
|
|
|
Note |
1998 |
1997 |
|
|
|
|
(Rupees '000) |
|
|
|
|
| Sales |
|
|
587,365 |
492,215 |
|
| Cost
of goods sold |
|
24 |
404,491 |
335,562 |
|
|
|
|
--------------- |
--------------- |
|
|
|
|
182,874 |
156,653 |
|
|
|
|
|
| Administration,
selling and |
|
|
|
|
| distribution
expenses |
|
25 |
81,885 |
62,764 |
|
|
|
|
--------------- |
--------------- |
|
| Operating
profit |
|
|
100,989 |
93,889 |
|
| Other income |
|
26 |
22,559 |
16,915 |
|
|
|
|
--------------- |
--------------- |
|
|
|
|
123,548 |
110,804 |
|
|
|
|
--------------- |
--------------- |
|
| Financial
charges |
|
27 |
30,351 |
27,759 |
|
| Other charges |
|
28 |
8,055 |
6,190 |
|
|
|
|
--------------- |
--------------- |
|
|
|
|
38,406 |
33,949 |
|
|
|
|
--------------- |
--------------- |
|
| Profit
before taxation |
|
|
85,142 |
76,855 |
|
| Taxation |
|
29 |
19,262 |
27,062 |
|
|
|
|
--------------- |
--------------- |
|
| Profit
after taxation |
|
|
65,880 |
49,793 |
|
| Unappropriated
profit brought forward |
|
|
10,686 |
1,258 |
|
|
|
|
--------------- |
--------------- |
|
| Profit
available for appropriation |
|
|
76,566 |
51,051 |
|
| Appropriations: |
|
|
|
| Transfer
to Revenue reserve - general |
|
36,000 |
-- |
|
| Dividend |
- Interim Rs. Nil (1997:
Rs. 3.75) per share |
|
-- |
40,365 |
|
|
- Proposed final Rs 3.75
(1997' Rs. Nil) per share |
40,365 |
-- |
|
|
|
--------------- |
--------------- |
|
|
|
76,365 |
40,365 |
|
|
|
--------------- |
--------------- |
|
| Unappropriated
profit carried forward |
|
201 |
10,686 |
|
|
|
|
========== |
========== |
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
| CASH
FLOW STATEMENT |
|
| FOR
THE YEAR ENDED JUNE 30, 1998 |
|
|
|
Note |
1998 |
1997 |
|
|
(Rupees '000) |
|
|
|
|
| CASH
FLOW FROM OPERATING ACTIVITIES |
|
| Cash
generated from operations |
|
34 |
49,971 |
171,163 |
|
| Interest paid |
|
|
(28,767) |
(26,253) |
|
| Taxes paid |
|
|
(41,270) |
(42,7~2) |
|
| Long-term
loans and advances (net) |
|
|
276 |
(816) |
|
| Long-term
deposits (net) |
|
|
4,400 |
(1,440) |
|
|
|
|
--------------- |
--------------- |
|
| Net
cash (outflow)/inflow from operating activities |
|
(15,390) |
99,922 |
|
|
|
|
|
|
|
| CASH
FLOW FROM INVESTING ACTIVITIES |
|
|
| Fixed
capital expenditure |
|
|
(20,910) |
(15,722) |
|
| Investments
encashed |
|
|
24,808 |
9,950 |
|
| Sale
proceeds of fixed assets |
|
|
2,007 |
14,853 |
|
| Interest
received |
|
|
14,514 |
13,237 |
|
|
|
|
--------------- |
--------------- |
|
| Net
cash inflow from investing activities |
|
|
20,419 |
22,318 |
|
|
|
|
|
|
| CASH
FLOW FROM FINANCING ACTIVITIES |
|
|
| Finance
lease borrowings less repayments |
|
|
(12,863) |
(12,549) |
|
| Dividends paid |
|
|
(39,482) |
(24,021) |
|
|
|
|
--------------- |
--------------- |
|
| Net
cash outflow from financing activities |
|
|
(52,345) |
(36,570) |
|
|
|
|
--------------- |
--------------- |
|
| Net
(decrease)/increase in cash and cash equivalents |
|
(47,316) |
85,670 |
|
| Cash
and cash equivalents at beginning of the year |
|
16,703 |
(68,967) |
|
|
|
|
--------------- |
--------------- |
|
| Cash
and cash equivalents at end of the year |
|
35 |
(30,613) |
16,703 |
|
|
|
|
========== |
========== |
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
| NOTES
TO THE ACCOUNTS |
|
| FOR
THE YEAR ENDED JUNE 30, 1998 |
|
|
| 1.
THE COMPANY AND ITS OPERATIONS |
|
| Dadex
Eternit Limited is incorporated in Pakistan and is listed on the Karachi
Stock Exchange. |
|
| It
is engaged in manufacture and sale of construction materials namely fibre
cement sheets, |
|
| nalidar
beams, fibre cement and PVC pressure pipes, building pipes, polyethylene
pipes and |
|
| other
allied products. |
|
|
| 2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
|
|
| 2.1
Accounting convention |
|
| These
accounts have been prepared under the historical cost convention. |
|
|
| 2.2
Staff retirement benefit |
|
| The
company operates an approved contributory provident fund for all permanent
employees. |
|
|
| 2.3 Taxation |
|
|
| Provision
for current taxation is based on taxable income after taking into account tax
credits |
|
| available,
if any. |
|
|
|
|
| The
company accounts for deferred taxation on all material timing differences
using the liability |
|
| method. |
|
|
|
|
| 2.4
Tangible fixed assets |
|
|
| a) Owned |
|
|
| Operating
fixed 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
signifies historical cost and exchange differences capitalised as referred to
in note 2.7. |
|
|
|
|
| Depreciation
on operating fixed assets except plant and machinery is calculated at varying |
|
| rates
used for income tax purposes and is charged to income applying the reducing
balance |
|
| method.
Depreciation on plant and machinery is calculated using the straight-line
method |
|
| based
on estimated useful lives less residual value. |
|
|
|
|
| Cost
of leasehold land is amortised equally over the period of lease. |
|
|
| Depreciation
on additions to fixed assets during a year is charged for the whole year
while no |
|
| depreciation
is charged on fixed assets disposed of during the year. |
|
|
|
|
| Gains
and losses on disposal of fixed assets are taken to profit and loss account. |
|
|
|
|
| Maintenance
and normal repairs and replacements are charged to income as and when |
|
| incurred.
Major renewals and improvements are capitalised and assets so replaced, if
any, |
|
| are retired. |
|
|
|
| b) Leased |
|
|
| Assets
subject to finance lease are stated at the lower of present value of minimum
payments |
|
| under
the lease agreements and the fair value of assets. Depreciation is charged at
rates used |
|
| for
similar assets whereby the cost of the asset is written off over its
estimated useful life less |
|
| residual value. |
|
|
|
| 2.5
Stores and spares |
|
| Stores
and spares except consumable accessories are valued at moving average cost. |
|
| Consumable
accessories are valued at cost calculated on last-in first-out basis. |
|
|
|
|
| Items
in transit are valued at cost comprising invoice values plus other charges
paid thereon. |
|
|
| 2.6
Stock-in-trade |
|
| (a)
Raw materials |
|
| Asbestos
fibre is valued at cost calculated on last-in first-out basis. Other raw
materials are |
|
| valued
at moving average cost. |
|
| Materials
in transit are valued at cost comprising invoice values plus other charges
paid |
|
| thereon. |
|
|
|
| (b)
Work-in-process |
|
| Work-in-process
is valued at prime cost and an appropriate portion of manufacturing |
|
| overheads. |
|
|
|
| (c)
Finished 0oods |
|
| Finished
goods are valued at lower of moving average cost and net realisable value.
Cost |
|
| includes
prime cost and an appropriate portion of manufacturing overheads. |
|
| Net
realisable value signifies the estimated selling price in the ordinary course
of business less |
|
| costs
necessarily to be incurred to make the sale. |
|
|
| 2.7
Foreign currency translation |
|
| Assets
and liabilities in foreign currencies are translated into rupees at the rates
of exchange |
|
| approximating
those prevailing at the balance sheet date except where forward exchange |
|
| contracts
have been entered into for repayment of liabilities in which case the rates
contracted |
|
| for are used. |
|
|
|
| Exchange
differences in respect of foreign currency loans obtained for acquisition of
fixed |
|
| assets
are incorporated in the cost of the relevant assets. All other exchange
differences are |
|
| taken
to profit and loss account. |
|
|
| 2.8
Investments |
|
| Long-term
investments are stated at cost less amount written off in respect of any
diminution |
|
| due
to permanent impairment in value of the investment. Short-term investments
are stated |
|
| at
the lower of cost and market value. |
|
|
| 2.9
Revenue recognition |
|
| Sales
are recorded on despatch of goods to customers. Dividend income on long-term |
|
| investment
is recognised when declared. Income on short-term investments is recognised
on |
|
| accrual basis. |
|
|
|
| 2.10
Liabilities and finance charge against assets subject to finance leases |
|
| Liabilities
against assets subject to finance leases are accounted for at net present
value of |
|
| minimum
payments under the lease agreements. Finance charges under the lease
agreements |
|
| are
allocated to periods during the lease term so as to produce a constant
periodic rate of |
|
| financial
cost on the remaining balance of principal liability for each period. |
|
|
| 3.
AUTHORISED CAPITAL |
|
|
|
1998 |
1997 |
|
|
|
|
(Rupees '000) |
|
|
|
|
| 12,000,000 |
ordinary shares of Rs. 10
each |
|
120,000 |
120,000 |
|
| 8,000,000 |
'B' class ordinary shares
of Rs. 10 each |
|
80,000 |
80,000 |
|
| --------------- |
|
|
|
--------------- |
--------------- |
|
| 20,000,000 |
|
|
|
200,000 |
200,000 |
|
| ========== |
|
|
========== |
========== |
|
|
|
|
| 4.
ISSUED, SUBSCRIBED AND PAID-UP CAPITAL |
|
|
|
|
|
1998 |
1997 |
|
