| Fauji Cement Company Limited |
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| Annual
Report 1998 |
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| CONTENTS |
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| Company
Information |
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| Notice
of the Sixth Annual General Meeting |
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| Report
of the Directors |
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| Auditors'
Report |
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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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| The
Pattern of Shareholdings as on 30 June 1998 |
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| COMPANY
INFORMATION AT A GLANCE |
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| Board
of Directors |
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| Lt
General Khalid Latif Moghal, HI(M), SBt |
Chairman & |
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Chief Executive |
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| Lt
General Nazar Hussain, HI(M), T Bt |
Additional Managing |
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Director |
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| Mr.
Iltifat Rasul Khan |
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Director |
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| Brig
Riaz Ahmed Qureshi, SI(M) (Retd) |
Director |
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| Brig
Ashfaq Ahmad, SI(M) (Retd) |
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Director |
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| Brig
Muhammad Saeed Baig, SI(M) (Retd) |
Director |
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| Brig
Muhammad Akram Ali Khan (Retd) |
Director |
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| Company
Secretary: |
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Brig Bashir Hussain
Tareen (Retd) |
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| Registered
Office: |
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70-Harley Street,
Rawalpindi Cantt, Pakistan |
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| Plant Site: |
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Near Village Jhang,
Tehsil Fateh Jhang |
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District Attock, Pakistan |
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| Marketing/Sales |
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M-40-1, Ist Floor, Hotel
Pakland, |
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| Department |
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Bank Road, Rawalpindi
Cantt |
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Pakistan |
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| Auditors: |
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A.F. Ferguson & Co. |
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Chartered Accountants |
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| Legal
Advisors: |
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Orr, Dignam & Co.
Advocates. |
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| NOTICE
OF THE SIXTH ANNUAL GENERAL MEETING |
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| Notice
is hereby given that the Sixth Annual General Meeting of the Company |
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| will
be held at 10:30 A.M, on Monday, 21 December 1998 at Hotel Pearl |
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| Continental,
The Mall, Rawalpindi to transact the following business:- |
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| a.
To consider, approve and adopt the Audited Accounts of the Company |
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| for
the period commencing from 01 July 1997 ending on 30th June 1998. |
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| b.
To consider and approve the Directors' Report for the period ending on |
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| 30th
June 1998. |
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| c.
To appoint Auditors of the Company in place of present auditors |
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| Messrs
A. F. Ferguson & Company who retire and offer themselves for |
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| re-appointment
and to fix their remuneration. |
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| d.
To transact any other business with the permission of the Chain |
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By order of the Board |
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| Place:
Rawalpindi |
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Brig Bashir Hussain Tareen (Retd) |
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| Date:
24 November 1998 |
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Company Secretary |
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| Note:
The Member entitled to attend and vote at the Annual General Meeting |
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| may
appoint a person/representative as proxy to attend and vote in place |
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| of
the Member at the Meeting. Proxies in order to be effective must be |
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| received
at the Company's Register Office not later than 19 December |
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| 1998.
Proxy form is attached. |
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| REPORT
OF THE DIRECTORS |
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| 1. General |
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| The
Directors take pleasure in presenting their Sixth Annual Report together |
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| with
the Company's audited accounts for the year ended 30 June 1998, and |
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| the
Auditors' Report thereon. During the year under review, the Company |
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| attained
a significant milestone of having completed the Project and having |
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| put
it into 100% production. |
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| 2.
The Plant Site |
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| a.
The Directors are pleased to inform the shareholders that commission- |
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| ing
of the Plant went smooth and without any mishap. After success- |
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| ful
commissioning, Performance/Guarantee tests of all the major sec- |
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| tions
were carried out until March 1998. After getting all the minor |
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| defects
removed in the Plant, it was taken over on 22nd May 1998. The |
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| Plant
is under warrantee/guarantee for one year from this date. |
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| b.
After the Plant was provisionally taken over by the Company, the for- |
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| eign
experts from F L Smidth/CPC left the Site. The Plant operation is |
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| now
being entirely manned by the FCCL personnel. Its performance |
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| remains
satisfactory with a well knit team of our managers, engineers, |
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| supervisors,
the technicians and other members of management and |
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| administrative
staff. |
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| 3. Marketing |
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| a.
Cement market in Pakistan is facing a situation of glut for two main |
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| reasons:
first the installed capacity of the Country is in excess by seven |
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| million
metric tons per annum. Secondly because of financial crunch |
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| the
development activity in the country is at very low ebb. We faced |
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| great
difficulty in selling the product when we entered the market. |
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| However
due to aggressive and sound strategy, the Fauji Cement was |
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| able
to establish itself in a very short time. We were able to achieve |
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| capacity
utilization of 65% within first half of the Financial year which |
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| then
increased to 80-90% during the second half. As against 8% share |
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| in
the installed capacity, Fauji Cement was able to capture 12% of the |
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| Market
share during the period under review. It is now an established |
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| brand
with reputation and we have no problem in sale of cement on |
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| competitive
prices. |
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| b.
In the next couple of years the demand for cement is likely to remain |
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| sluggish
unless there are some rapid changes in the socio-economic |
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| conditions
due to infusion of capital by some multi-nationals. The |
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| industry
is likely to continue facing tremendous pressure in the form |
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| of
escalation of prices of the inputs and very unfavourable excise duty |
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| structure.
The Board of Directors strongly feels that the Government |
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| can
save the industry by rationalizing both the duty structure (prefer- |
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| ably
it should be reduced from 40% to 20%) and reduction in the cost |
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| of
inputs. More-so, the Government should encourage export of |
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| cement
through incentives in the form of favourable duty draw-backs |
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| and
facilitating dedicated infrastructure at the Port. |
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| 4.
The Pattern of Share-holdings |
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| A
statement showing the pattern of share-holding in the Company as at June |
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| 30,
1998 is attached. |
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| 5. Personnel |
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| Relationship
between Management and the workers remained cordial. |
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| 6. Directors |
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| a.
On resignation of Brigadier Muneeb-Ur-Rehman Farooqui (Retd), |
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| Brigadier
Muhammad Akram All Khan (Retd) was appointed as |
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| Director
of the Company. |
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| b.
The Board places on record its appreciation for the valuable advice |
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| and
services rendered by the retired Director and welcomes the new |
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| Director
on the Board. |
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| 7. Auditors |
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| M/s
A.F. Ferguson & Company, Chartered Accountants, retire at the conclu- |
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| sion
of the Sixth Annual General Meeting and, being eligible, have offered |
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| themselves
for re-appointment. |
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| 8. Dividend |
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| Much
that the Management would love to present a healthy balance sheet, |
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| our
esteemed shareholders are aware of the multiplicity of problems faced by |
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| the
industry as highlighted in para 3 above. With these problems, prices of |
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| our
cement donot break even, which is why we are not in a position to pay |
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| any
dividends. With our present inability to make any profit, it has not been |
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| possible
to carry any amount to Reserve Fund, General Reserve Fund or |
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| Reserve
Account. |
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| 9.
Financial Position |
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| Further
there are no material changes affecting business or the financial posi- |
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| tion
of the Company, which have occurred between the end of the Financial |
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| Period
of the Company to which the Balance Sheet relates and the date of the |
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| Report. |
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| 10.
Year 2000 Compliance of Computer Systems |
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| The
Company is fully aware of the issue of "Millennium Bug" and is
taking |
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| appropriate
steps, including upgrading the computer systems, to overcome |
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| the problem. |
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| 11.
Acknowledgements |
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| The
Directors also express their appreciation for the continued support and |
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| contributions
by the employees, suppliers, the Government and various other |
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| agencies
throughout the year. Notwithstanding the problems highlighted |
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| above,
the Directors are confident that the outlook for the Company remains |
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| positive,
and thank their shareholders and lenders for their continued faith |
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| and
confidence. |
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For and on behalf of the Board |
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|
Sd/- |
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| Rawalpindi |
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|
Lt General Khal Latif Moghal, HI(M), S Bt |
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| 24
November 1998 |
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Chairman and Chief Executive |
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| AUDITORS'
REPORT TO THE MEMBERS |
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| We
have audited the annexed balance sheet of Fauji Cement Company Limited |
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| as
at June 30, 1998 and the related profit and loss account and cash flow |
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| statement
for the period then ended together with the notes forming part thereof, |
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| and
we state that we have obtained all the information and explanations which to |
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| the
best of our knowledge and belief were necessary for the purposes of our audit |
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| and
after due verification thereof, we report that: |
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| (a)
in our opinion, proper books of account have been kept by the |
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| Company
as required by the Companies Ordinance, 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 |
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| notes
thereon have been drawn up in conformity with the |
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| Companies
Ordinance, 1984, and are in agreement with the |
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| books
of account and are further in accordance with the |
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| Company's
accounting policies consistently applied; |
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| (ii)
the expenditure incurred during the year was for the purpose |
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| of
the Company's business; and |
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| (iii)
the business conducted, investments made and the |
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| expenditure
incurred during the year were in accordance with |
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| the
objects of the Company; |
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| (c)
in our opinion and to the best of our information and according to the |
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| explanations
given to us, the balance sheet, profit and loss account |
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| and
the cash flow statement, together with the notes forming part |
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| thereof,
give the information required by the Companies Ordinance, |
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| 1984,
in the manner so required and respectively give a true and fair |
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| view
of the state of the Company's affairs as at June 30, 1998 and of |
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| the
loss and cash flows for the period then ended; and |
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| (d)
in our opinion no Zakat was deductible at source under the Zakat and |
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| Ushr
Ordinance, 1980. |
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|
Sd/- |
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| Islamabad |
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|
A.F. Ferguson & Co. |
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| 25
November 1998 |
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Chartered Accountants |
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| BALANCE
SHEET AS AT JUNE 30, 1998 |
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|
1998 |
1997 |
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Note |
Rupees |
Rupees |
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| SHAREHOLDERS
EQUITY |
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| Share
Capital |
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| Authorised
capital |
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| 250,000,000
ordinary shares of Rs l 0 each |
|
2,500,000,000 |
2,500,000,000 |
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|
========== |
========== |
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| Issued,
subscribed and paid-up capital |
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| 171,310,499
ordinary shares of Rs 10 each |
|
1,713,104,990 |
1,713,104,990 |
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|
|
|
| Advance
against shares to be issued |
|
443,144,000 |
- |
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|
|
|
| Accumulated
loss |
|
(511,244,937) |
- |
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|
|
---------- |
---------- |
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|
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|
1,645,004,053 |
1,713,104,990 |
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| LONG
TERM LOANS |
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3 |
3,041,113,629 |
3,554,224,462 |
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| CURRENT
LIABILITIES |
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| Current
portion of long term loans |
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3 |
655,632,321 |
338,861,104 |
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| Creditors,
accrued and other liabilities |
4 |
673,939,188 |
337,056,397 |
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|
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|
---------- |
---------- |
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|
|
|
1,329,571,509 |
675,917,501 |
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| CONTINGENCIES
AND COMMITMENTS |
|
5 |
|
|
|
---------- |
---------- |
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|
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|
6,015,689,191 |
5,943,246,953 |
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|
|
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|
========== |
========== |
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| FIXED
CAPITAL EXPENDITURE |
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| Operating
assets |
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6 |
5,352,923,242 |
162,735,975 |
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| Capital
work in progress |
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7 |
2,955,420 |
5,167,323,730 |
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| Stores
held for capital expenditure |
|
91,101,203 |
2,145,331 |
|
|
|
|
---------- |
---------- |
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|
|
|
5,446,979,865 |
5,332,205,036 |
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|
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|
| LONG
TERM SECURITY DEPOSITS |
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|
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| AND
RECEIVABLE |
|
8 |
45,853,363 |
48,772,234 |
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|
|
|
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| DEFERRED
COST |
|
9 |
12,300,972 |
18,412,138 |
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|
|
| CURRENT
ASSETS |
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|
|
|
|
| Stores,
spares and loose tools |
|
10 |
50,262,364 |
5,160,755 |
|
| Stock-in-trade |
|
11 |
60,571,988 |
9,165,000 |
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|
|
|
| Trade
debtors - unsecured considered good |
|
13,740,526 |
- |
|
|
|
|
|
| Advances,
deposits, prepayments and other |
|
|
| receivables |
|
12 |
240,612,355 |
9,424,193 |
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| Cash
and bank balances |
|
13 |
145,367,758 |
435,289,859 |
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|
|
|
---------- |
---------- |
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|
|
|
510,554,991 |
543,857,545 |
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|
|
|
---------- |
---------- |
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|
|
|
|
6,015,689,191 |
5,943,246,953 |
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|
|
========== |
========== |
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| The
annexed notes form an integral part of these accounts. |
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|
Sd/- |
|
Sd/- |
Sd/- |
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|
|
Chairman/Chief Executive |
|
Director |
Director |
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| PROFIT
AND LOSS ACCOUNT |
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| FOR
THE PERIOD NOVEMBER 16, 1997 TO JUNE 30, 1998 |
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|
Note |
Rupees |
|
|
| SALES |
|
|
|
|
1,401,386,777 |
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| Less:
Excise duty |
|
|
|
590,109,388 |
|
|
|
|
|
---------- |
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| NET SALES |
|
|
|
|
811,277,389 |
|
|
|
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| Less:
Cost of sales |
|
14 |
848,812,102 |
|
|
|
|
---------- |
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| GROSS LOSS |
|
|
(37,534,713) |
|
|
|
|
---------- |
|
| General
and administration expenses |
15 |
17,120,253 |
|
| Selling
and distribution expenses |
|
16 |
6,770,342 |
|
|
|
|
---------- |
|
|
|
|
23,890,595 |
|
|
|
|
---------- |
|
| OPERATING
LOSS |
|
|
(61,425,308) |
|
|
|
|
|
|
| OTHER INCOME |
|
17 |
6,949,664 |
|
|
|
|
---------- |
|
|
|
|
(54,475,644) |
|
|
|
|
| Financial
charges |
|
18 |
452,520,523 |
|
|
|
|
---------- |
|
| LOSS
BEFORE TAXATION |
|
|
(506,996,167) |
|
| Provision
for taxation |
|
|
4,248,770 |
|
|
|
|
---------- |
|
| LOSS
AFTER TAXATION |
|
|
(511,244,937) |
|
|
|
|
========== |
|
|
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
|
|
Sd/- |
|
Sd/- |
Sd/- |
|
|
|
Chairman/Chief Executive |
|
Director |
Director |
|
|
|
|
|
| CASH
FLOW STATEMENT |
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| FOR
THE YEAR ENDED JUNE 30, 1998 |
|
|
|
|
|
|
|
|
1998 |
1997 |
|
|
|
|
Rupees |
Rupees |
|
|
|
|
| CASH
FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
| Loss
before taxation |
|
|
|
|
- |
|
|
|
|
| Adjustment
for non cash charges and other items: |
|
|
|
|
| Depreciation |
|
349,461,220 |
- |
|
| Amortisation
of deferred cost |
|
6,150,486 |
- |
|
| Income
on bank deposits |
|
(6,619,475) |
- |
|
| Financial
charges |
|
452,520,523 |
- |
|
| Increase
in stores and stocks |
|
(96,508,597) |
- |
|
| Increase
in receivables |
|
(54,505,077) |
- |
|
| Increase
in payables |
|
53,621,467 |
- |
|
| Taxes paid |
|
(13,154,787) |
- |
|
|
|
---------- |
---------- |
|
| Net
cash provided by operating activities |
|
183,969,593 |
- |
|
|
|
|
| CASH
FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
| Fixed
capital expenditure |
|
(191,078,291) |
(594,115,555) |
|
| Long
term deposits |
|
2,918,871 |
(54,300) |
|
| Deferred
cost |
|
(39,320) |
(9,470,717) |
|
| Income
received on bank deposits |
|
19,785,239 |
76,986,093 |
|
|
|
---------- |
---------- |
|
| Net
cash used in investing activities |
|
(168,413,501) |
(526,654,479) |
|
|
|
|
| CASH
FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
| Proceeds
from issue of shares |
|
|
- |
204,530,000 |
|
| Advance
received against shares to be issued |
|
443,144,000 |
- |
|
| Long
term loans received |
|
|
- |
184,841,405 |
|
| Repayment
of long term loans |
|
|
(207,133,519) |
- |
|
| Financial
charges paid |
|
|
(541,488,674) |
(508,916,918) |
|
|
|
---------- |
---------- |
|
| Net
cash used in financing activities |
|
(305,478,193) |
(119,545,513) |
|
|
|
---------- |
---------- |
|
| Net
decrease in cash and bank balances |
|
(289,922,101) |
(646,199,992) |
|
| Cash
and bank balances at the beginning of the year |
435,289,859 |
1,081,489,851 |
|
|
|
---------- |
---------- |
|
| Cash
and bank balances at the end of the year |
|
145,367,758 |
435,289,859 |
|
|
|
========== |
========== |
|
|
|
|
|
|
Sd/- |
|
Sd/- |
Sd/- |
|
|
|
Chairman/Chief Executive |
|
Director |
Director |
|
|
|
|
|
|
| NOTES
TO THE ACCOUNTS |
|
| FOR
THE YEAR ENDED JUNE 30, 1998 |
|
|
| The
Company was incorporated in Pakistan on November 23, 1992 as a |
|
| public
limited company for the establishment and operation of a cement |
|
| plant
at Fateh Jang, District Attock, Punjab. Its shares are quoted on the |
|
| stock
exchanges in Pakistan. The Company commenced its commercial |
|
| production
from November 16, 1997. |
|
|
| 2.
SIGNIFICANT ACCOUNTING POLICIES |
|
|
| 2.1
Accounting convention |
|
| The
accounts have been prepared under the historical cost convention. |
|
|
| 2.2
Retirement benefits |
|
| The
Company has approved contributory provident fund for all employees |
|
| for
which contributions are charged to income. |
|
|
| 2.3 Taxation |
|
|
| Provision
for current taxation is based on taxable income at current rates |
|
| of
taxation or based on half per cent of turnover less excise duty and sales |
|
| tax,
whichever is higher. |
|
|
| 2.4
Fixed capital expenditure |
|
| Operating
fixed assets except freehold land are stated at cost less |
|
| accumulated
depreciation. Freehold land, capital work in progress and |
|
| stores
held for capital expenditure are stated at cost. Cost of fixed assets |
|
| includes
capitalised borrowing cost during construction phase of the |
|
| project
and exchange differences related to foreign currency loans |
|
| obtained
for financing of the project. |
|
|
| Depreciation
is charged to income on straight line method to write off the |
|
| cost
of an asset over its estimated useful life at the rates specified in |
|
| note 6. |
|
|
|
| 2.5
Deferred cost |
|
| Deferred
cost related to Company's incorporation and issue of shares is |
|
| amortised
in equal installments over three years after commencement of |
|
| commercial
production. |
|
|
| 2.6
Foreign currency transactions |
|
| Transactions
in foreign currencies are converted into rupees at the rates of |
|
| exchange
ruling on the date of the transaction. All assets and liabilities in |
|
| foreign
currencies are translated at exchange rates prevailing at the balance |
|
| sheet
date, except for foreign currency loans in respect of which exchange |
|
| risk
coverage has been obtained; such loans are translated at the rate of |
|
| exchange
ruling on the date of disbursement or conversion of foreign |
|
| currency
into rupees, as applicable. Exchange differences are accounted |
|
| for
as follows: |
|
|
| (a)
Exchange differences on translation and repayment of foreign |
|
| currency
loans utilised for acquisition of fixed assets are capitalised |
|
| and
incorporated in the cost of asset. |
|
|
| (b)
All other exchange differences are dealt with through the profit and |
|
| loss
account. |
|
|
| 2.7
Stores, spares and loose tools |
|
| These
are stated at moving average cost. |
|
|
| 2.8
Stock in trade |
|
| Stocks
are valued at lower of cost and net realisable value. Cost in relation |
|
| to
raw materials and packing materials is determined on first-in-first-out |
|
| basis
and in relation to work in process and finished goods it represents |
|
| average
cost comprising direct material, labour and appropriate |
|
| manufacturing
overheads. Net realisable value represents the selling price |
|
| less
costs necessarily to be incurred for sale. |
|
|
| 2.9
Revenue recognition |
|
| Sales
are recorded on despatch of goods to customers. |
|
|
| 2.10
Borrowing cost |
|
| Borrowing
cost incurred upto the date of commencement of commercial |
|
| production
is capitalised. All other borrowing cost is expensed as incurred. |
|
|
|
| 3.
LONG TERM LOANS - SECURED |
|
|
|
|
|
|
Balance outstanding |
|
Repayment terms |
|
|
1998 |
1997 |
Interest/net |
Exchange |
Half yearly |
Final repayment date |
|
|
mark up rate |
risk coverage |
installments |
|
|
Rupees |
Rupees |
per annum % |
fee % |
|
|
| Foreign |
|
|
(Note 3.1) |
|
|
|
| 1.
Commonwealth Development Corporation (CDC) |
|
|
|
| (Pound
Sterling 13,250,000; 1997: 13,250,000) |
|
685,719,300 |
684,613,227 |
11 |
5.90 |
12 |
June 23, 2004 |
|
|
|
|
|
|
|
