| Fauji Fertilizer Company Limited |
|
|
|
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|
|
| Annual
Report 1998 |
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| CONTENTS |
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|
| Ten
Years at a Glance |
|
| Company
Information |
|
| Notice
of Meeting |
|
| Report
of the Directors |
|
| Auditors'
Report to the Members |
|
| Balance Sheet |
|
|
| Profit
And Loss Account |
|
| Cash
Flow Statement |
|
| Notes
to the Accounts |
|
| Pattern
of Shareholding |
|
|
|
| COMPANY
INFORMATION |
|
|
| Board
of Directors |
|
Lt Gen Muhammad Maqbool
(Retd), HI(M), S Bt |
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|
Chairman |
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Lt Gen Zia Ullah Khan
(Retd), HI(M), |
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Chief Executive &
Managing Director |
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|
Dr Haldor Topsoe |
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|
Mr. Iltifat Rasul Khan |
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|
Brig Ashfaq Ahmad (Retd) |
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|
Brig Muhammad Saeed Baig
(Retd) |
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|
Brig Ghulam Hussain
(Retd) |
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Mr. Mean Mumtaz Abdullah |
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|
Mr. Adnan Ahmad Ale |
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|
Mr. Asadullah Khawaja |
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|
Dr. Amjad Waheed |
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|
Brig Muhammad Akram Ale
Khan (Retd) |
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|
Mr. Hussain Ahmad Khan |
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|
| Secretary |
|
|
Brig Muhammad Akram Khan
(Retd) |
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|
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| Registered
Office |
|
93-Harley Street, |
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|
Rawalpindi Cantt. |
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| Plantsite |
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Goth Machhi, Sadikabad, |
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|
Rahim Yar Khan. |
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| Marketing
Division |
|
Lahore Trade Centre, |
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|
11
Shahrah-e-Aiwan-e-Tijarat, |
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|
Lahore. |
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| Karachi Office |
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|
D-143, Block-4, KDA
Scheme- 5, |
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|
Kehkashan Clifton, |
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Karachi. |
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| Auditors |
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|
A.F. Ferguson & Co., |
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|
Chartered Accountants |
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| NOTICE
OF MEETING |
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| Notice
is hereby given that the 21st Annual General Meeting of the Shareholders of
Fauji Fertilizer |
|
| Company
Limited will be held at Pearl Continental Hotel, The Mall, Rawalpindi, on
Thursday June 24, 1999 |
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| at
1100 hours to transact the following business:- |
|
|
| Ordinary
Business |
|
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| 1.
To confirm the minutes of the 20th Annual General Meeting held on June 29,
1998. |
|
|
| 2.
To receive, consider and adopt the Audited Accounts of the Company together
with the Directors' |
|
| and
Auditors' Reports for the year ended December 31, 1998. |
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|
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| 3.
To appoint Auditors for the year 1999 and to fix their remuneration. |
|
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| 4.
To approve payment of Final Dividend for the year ended December 31, 1998 as
recommended |
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| by
the Board of Directors. |
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|
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| 5.
To transact any other business with the permission of the Chairman. |
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|
By Order of the Board, |
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| May 23, 1999 |
|
|
Brig Muhammad Akram Khan (Retd) |
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| Rawalpindi. |
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|
Company Secretary |
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|
| NOTES: |
|
|
| 1.
The share transfer books of the Company will remain closed from June 11, to
June 24, 1999 |
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| (both
days inclusive). |
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|
|
|
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| 2.
A member of the Company entitled to attend and vote at the Annual General
Meeting may appoint a |
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| person/representative
as proxy to attend and vote in place of the member at the Meeting. Proxies in |
|
| order
to be effective must be received at the Company's Registered Office,
93-Harley Street, |
|
| Rawalpindi
not later than 48 hours before the time of holding the Meeting. |
|
|
| REPORT
OF THE DIRECTORS |
|
| FOR
THE YEAR ENDED DECEMBER 31, 1998 |
|
|
| The
Directors of FAUJI FERTILIZER COMPANY LIMITED present herewith the 21st
Annual Report |
|
| alongwith
the audited statements of account for the year ended December 31, 1998. |
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|
| ACHIEVEMENTS |
|
|
| Despite
the economic turmoil in the country, by the grace of God, the Company
maintained its upward |
|
| trends
and achieved excellent financial results in 1998 as compared with the
previous years. The results |
|
| are
summarised below: |
|
|
| *
Total fertilizer sales of 1,806 thousand tonnes were the highest ever since
inception and 6% in |
|
| excess
of 1997 sales. |
|
|
|
|
|
|
| *
Earned record net profit after tax of Rs. 3,760 million, which was 12% higher
as compared to 1997. |
|
| Whereas
the Company achieved better profit, it also contributed record Rs. 3.8
billion for the |
|
| Government
revenues in 1998, 19% higher than the last year. |
|
|
|
| PRODUCTION |
|
|
| *
Operation of both plants remained steady during the year and production
target was successfully |
|
| achieved.
Planned turnaround of Base Unit was postponed to 1999 in view of high
standard of |
|
| maintenance
and operation, thus improving the service factor, while the turnaround of
Expansion |
|
| Unit
was satisfactorily carried out during the year after 30 months. |
|
|
| *
Production of 1,426 thousand tonnes of "Sona" was 7% in excess of
the designed capacity but 5% |
|
| less
than last year, as maintenance turnaround of both plants was not carried out
during 1997. |
|
|
| *
Bureau Varitas Quality International performed surveillance audit of our
Plantsite Quality |
|
| Management
System. As a result of successful assessment, the auditors have ratified ISO
9002 |
|
| certification. |
|
|
|
| *
Safety performance was maintained at a high level with no lost time injury
during the year and 9.21 |
|
| Million
man-hours of safe operations were completed. |
|
|
| *
The Company's Technical Training Centre conducted 17 management courses, 16
technical courses |
|
| for
management and 54 skill improvement courses for staff. Besides these,
specialized training on |
|
| 6
different topics was imparted to outside companies like Attock Refinery
Limited, Abdul Hakeem |
|
| Thermal
Power Project and Hainan General Chemical Works China. Internship training of
8-10 |
|
| weeks
was also conducted for engineering students from NFC Multan, UET Lahore &
UET Taxila. |
|
|
| MARKETING |
|
|
|
| *
The year 1998 was a record year in respect of sales volume. The volume was
1,806 thousand tonnes |
|
| including
187 thousand tonnes of DAP sales and 170 thousand tonnes of Imported urea
sales. |
|
|
| *
Due to lower availability of product in 1998 "Sona" sales volume at
1,449 thousand tonnes was 2% |
|
| lower
as compared to 1997. |
|
|
| *
Substantial quantities of fertilizer were imported by the Company for
maintaining the demand and |
|
| supply
balance of fertilizer in the country. |
|
|
|
| *
The selling price of "Sona" urea has not increased during the year
1998 primarily due to no increase |
|
| in gas tariff. |
|
|
| *
During the year 1998, despite product limitation, the Company maintained its
market leadership by |
|
| achieving
43% participation. The Company's sales and market participation in 1998 could
have been |
|
| better
if more product had been available. |
|
|
|
| *
The total sales revenue of Rs.13.5 billion is the highest generated so far in
any year. |
|
|
| *
In order to promote balanced fertilizer use FFC continued to provide soil and
water testing facilities |
|
| at
nominal cost through laboratories at Hyderabad, Goth Machhi and Faisalabad.
The three Farmer |
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| Advisory
Centres at Hyderabad, Multan and Faisalabad also continued to provide free of
cost and |
|
| effective
guidance to farmers for optimizing the use of various farm inputs for
increasing their farm |
|
| productivity
and net income per acre. |
|
|
|
|
| FINANCIAL
RESULTS |
|
|
| *
The growth in net profit by 12% over the last year is primarily attributable
to overall higher fertilizer |
|
| sales
and increase in investment income. |
|
|
|
| *
The earnings per share in 1998 was Rs.14.66 which is 12% higher than last
year. |
|
|
| *
The financial position of the Company remained strong with excellent
liquidity and operating ratios |
|
| despite
adverse economic conditions. |
|
|
|
|
|
| *
The Company has given an undertaking to a lender of an associated Company
through an |
|
| agreement
to provide funding in the form of loan or additional equity equal to the
deficiency notified |
|
| by
the lender. No deficiency has so far been notified. |
|
|
| *
Investments in different projects including increase in production are under
consideration. In order |
|
| to
meet this requirement, and for balanced distribution of dividend, Rs.1,500
million is being |
|
| proposed
to be transferred to general reserve. |
|
|
| *
As a result of excellent performance over the years, the Company's ranking in
the Karachi Stock |
|
| Exchange
list of 25 Companies improved from fifth position in 1995 to second in 1996,
and it was |
|
| awarded
the first position in 1997. |
|
|
|
|
| APPROPRIATION
OF PROFIT |
|
|
| The
net profit for the year is recommended to be appropriated as follows: |
|
|
|
|
Rupees "000" |
|
|
| Net
profit after taxation |
|
3,759,858 |
|
| Unappropriated
profit brought forward |
|
351,102 |
|
|
|
|
------------------ |
|
| Total
available for appropriation |
|
4,110,960 |
|
| Appropriations |
|
|
| Transfer
to general reserve |
|
1,500,000 |
|
|
| Dividends
on ordinary shares |
|
| First
interim @ 20% |
|
|
512,992 |
|
| Second
interim @ 30% |
|
|
769,487 |
|
| Third
interim @ 20% |
|
|
512,992 |
|
| Proposed
final @ 20% |
|
|
512,992 |
|
|
------------------ |
|
|
|
2,308,463 |
|
|
|
------------------ |
|
|
|
3,808,463 |
|
|
------------------ |
|
| Unappropriated
profit carried forward |
|
302,497 |
|
|
========== |
|
|
| OUTLOOK
1999 |
|
|
| *
Production level in 1999 is expected to remain in line with the previous
year's level. |
|
|
| *
The prevailing uncertainty caused by the reports in respect of change in
pricing policy of gas needs |
|
| to
be clarified in the best interests of agricultural growth. |
|
|
|
| *
Restrictions continue to be imposed by State Bank of Pakistan on repayment of
foreign loans. |
|
|
| *
The support of Government towards agricultural sector, which is necessary
under the circumstances |
|
| mentioned
above, would have a positive impact on the fertilizer industry during 1999. |
|
|
| EMPLOYEES'
RELATIONS AND SOCIAL WELFARE |
|
|
| *
Due to excellent relations between employees and management during 1998, the
Company |
|
| achieved
exemplary results and agreements with Employees Union and Workers Union for
further |
|
| two
years have been amicably concluded. |
|
|
|
|
|
|
| *
The Company is extending full medical facilities to all employees at all
locations. At Plant, schooling |
|
| facilities
to the children of all employees are available. The Company continued to
financially support |
|
| the
Government school adjacent to the Plant for the children of surrounding
localities. |
|
|
| YEAR
2000 COMPLIANCE |
|
|
| The
Company has conducted a thorough review of its existing computing resources
and other equipment |
|
| to
determine the current state of readiness and to identify and prioritize the
areas that need to be addressed |
|
| for
millennium compliance. |
|
|
| Essential
millennium compliance activities consisting of repairing, replacing, testing
and retiring of |
|
| systems
identified as requiring correction are in progress and the Company plans to
attain year 2000 |
|
| readiness
by the end of third quarter of 1999. |
|
|
| PATTERN
OF SHARE HOLDING |
|
|
| As
of December 31, 1998 there were 4,140 shareholders including individuals and
numerous institutions, |
|
| as
described in the appended pattern of shareholding. |
|
|
| DIRECTORS |
|
|
| The
Board places on record its appreciation for the advice and valuable services
rendered by Lt. Gen. |
|
| Khalid
Latif Moghal (Retd.), Brig. Riaz Ahmad Qureshi (Retd.), Brig. Sayyed Ifzal
Hussain (Retd.), Mr. |
|
| Tahsin
Khan Iqbal and Mr. Razi-ur-Rehman Khan the retiring directors. The Board also
takes the |
|
| opportunity
to welcome Lt. Gen. Muhammad Maqbool (Retd.), Brig. Ghulam Hussain (Retd.),
Brig. |
|
| Muhammad
Akram Ali Khan (Retd.), Mr. Hussain Ahmad Khan and Dr. Amjad Waheed who
replaced them |
|
| on
the Board of FFC. |
|
|
| AUDITORS |
|
|
| The
present auditors A.F. Ferguson & Co., Chartered Accountants retire at the
conclusion of the 21st |
|
| Annual
General Meeting and being eligible, have offered themselves for
reappointment. |
|
|
| ACKNOWLEDGEMENTS |
|
|
| The
directors appreciate the strenuous efforts made by Company's dealers,
suppliers, employees, |
|
| shareholders
and the support of Government and its agencies during the year for best
results achieved by |
|
| the
Company. It is hoped that they would continue with the same spirit and zeal
in the future. |
|
|
|
|
For and on behalf of the Board |
|
|
|
|
|
|
|
|
|
CHAIRMAN |
|
| Rawalpindi |
|
|
Lt. Gen. (Retd.) |
|
| May 13, 1999 |
|
|
Muhammad Maqbool |
|
|
|
| AUDITORS'
REPORT TO THE MEMBERS |
|
|
| We
have audited the annexed balance sheet of Fauji Fertilizer Company Limited as
at December |
|
| 31,
1998 and the related profit and loss account and cash flow statement,
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, the |
|
| balance
sheet, profit and loss account and the cash flow statement, 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 the Company's
affairs as at |
|
| December
31, 1998 and of the profit 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
by the Company and deposited in the Central Zakat Fund established under
section 7 of |
|
| that Ordinance. |
|
|
|
|
| Islamabad |
|
|
A.F. Ferguson & Co. |
|
| May 13, 1999 |
|
|
Chartered Accountants |
|
|
|
| BALANCE
SHEET AS AT DECEMBER 31, 1998 |
|
|
|
|
|
Note |
1998 |
1997 |
|
|
|
|
|
(Rupees
'000) |
|
|
|
|
| SHARE
CAPITAL AND RESERVES |
|
|
|
|
|
| Share capital |
|
|
|
| Authorised |
|
3 |
3,000,000 |
3,000,000 |
|
|
|
|
========== |
========== |
|
| Issued,
subscribed and fully paid |
|
3 |
2,564,959 |
2,564,959 |
|
| Capital reserve |
|
4 |
160,000 |
160,000 |
|
| General reserve |
|
|
4,500,000 |
3,000,000 |
|
| Unappropriated
profit |
|
302,497 |
351,102 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
7,527,456 |
6,076,061 |
|
|
|
|
| LONG
TERM LOANS |
|
5 |
1,820,931 |
2,323,159 |
|
|
|
|
| DEFERRED
TAXATION |
|
6 |
589,000 |
727,000 |
|
|
|
|
|
| CURRENT LIABILITIES AND
PROVISIONS |
|
|
|
|
|
| Current maturity of long term
loans |
|
5 |
811,682 |
530,204 |
|
| Creditors,
accrued and other liabilities |
|
7 |
2,461,454 |
1,638,523 |
|
| Taxation - net |
|
|
867,027 |
602,586 |
|
| Dividend
payable |
|
|
512,992 |
-- |
|
| Proposed
dividend |
|
|
512,992 |
1,025,984 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
5,166,147 |
3,797,297 |
|
|
|
|
| CONTINGENT
LIABILITIES AND COMMITMENTS |
8 |
------------------ |
------------------ |
|
|
|
|
15,103,534 |
12,923,517 |
|
|
|
|
========== |
========== |
|
|
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
|
|
|
Note |
1998 |
1997 |
|
|
|
|
|
(Rupees
'000) |
|
|
|
|
| FIXED
CAPITAL EXPENDITURE |
|
|
| Fixed assets |
|
9 |
3,733,834 |
4,473,762 |
|
| Capital
work in progress |
|
10 |
87,157 |
21,013 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
3,820,991 |
4,494,775 |
|
|
|
|
| LONG
TERM INVESTMENTS |
|
11 |
3,437,408 |
2,322,330 |
|
| LONG
TERM LOANS AND ADVANCES |
|
12 |
27,775 |
35,090 |
|
|
|
|
| LONG
TERM DEPOSITS, PREPAYMENTS |
|
|
| AND
DEFERRED COSTS |
|
13 |
215,243 |
14,008 |
|
|
|
|
|
| CURRENT
ASSETS |
|
|
| Stores
and spares |
|
14 |
819,236 |
801,338 |
|
| Stock in trade |
|
15 |
37,110 |
307,587 |
|
| Trade debts |
|
16 |
436,813 |
745,789 |
|
| Loans,
advances, deposits, prepayments |
|
|
| and
other receivables |
|
17 |
479,635 |
362,370 |
|
| Short
term investments |
|
18 |
4,682,088 |
3,509,064 |
|
| Cash
and bank balances |
|
19 |
1,147,235 |
331,166 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
7,602,117 |
6,057,314 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
15,103,534 |
12,923,517 |
|
|
|
|
========== |
========== |
|
|
|
Chairman |
|
Chief Executive |
|
Director |
|
|
|
| PROFIT
AND LOSS ACCOUNT FOR THE YEAR ENDED DECEMBER 31, 1998 |
|
|
|
|
|
|
Note |
1998 |
1997 |
|
|
|
|
|
(Rupees
'000) |
|
|
|
|
| Sales |
|
|
13,561,685 |
12,055,669 |
|
| Less:
Cost of goods sold |
|
7,224,115 |
5,956,742 |
|
|
|
------------------ |
------------------ |
|
| GROSS
PROFIT |
|
6,337,570 |
6,098,927 |
|
|
|
|
|
|
| Less:
Selling and distribution expenses |
|
22 |
842,739 |
900,369 |
|
| Financial
charges |
|
23 |
277,774 |
413,770 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
1,120,513 |
1,314,139 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
5,217,057 |
4,784,788 |
|
| Other income |
|
24 |
894,744 |
623,518 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
6,111,801 |
5,408,306 |
|
| Other charges |
|
25 |
435,943 |
385,105 |
|
|
|
|
------------------ |
------------------ |
|
| NET
PROFIT BEFORE TAXATION |
|
|
5,675,858 |
5,023,201 |
|
| Provision
for taxation |
|
26 |
1,916,000 |
1,653,000 |
|
|
|
|
------------------ |
------------------ |
|
| NET
PROFIT AFTER TAXATION |
|
|
3,759,858 |
3,370,201 |
|
| Unappropriated
profit brought forward |
|
|
351,102 |
432,869 |
|
|
|
|
------------------ |
------------------ |
|
| Profit
available for appropriation |
|
|
4,110,960 |
3,803,070 |
|
|
|
|
|
|
| APPROPRIATIONS: |
|
|
| Transfer
to general reserve |
|
|
1,500,000 |
1,400,000 |
|
| Dividends: |
|
|
|
|
|
|
|
| First
interim @ 20% (1997: 20%) |
|
512,992 |
512,992 |
|
| Second
interim @ 30% (1997: 20%) |
|
769,487 |
512,992 |
|
| Third
interim @ 20% (1997: Nil) |
|
512,992 |
-- |
|
| Proposed
final @ 20% (1997: 40%) |
|
512,992 |
1,025,984 |
|
|
|
------------------ |
------------------ |
|
|
|
2,308,463 |
2,051,968 |
|
|
|
------------------ |
------------------ |
|
|
|
2,308,463 |
3,451,968 |
|
|
|
------------------ |
------------------ |
|
| UNAPPROPRIATED
PROFIT CARRIED FORWARD |
|
302,497 |
351,102 |
|
|
|
|
========== |
========== |
|
|
|
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
Chairman |
|
Chief Executive |
|
Director |
|
|
|
|
|
| CASH
FLOW STATEMENT FOR THE YEAR ENDED DECEMBER 31, 1998 |
|
|
|
|
|
|
Note |
1998 |
1997 |
|
|
|
|
|
(Rupees
'000) |
|
|
|
|
| CASH
FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
| Cash
generated from operations |
|
29 |
6,867,062 |
5,239,417 |
|
| Payments for: |
|
|
|
|
|
|
| Financial
charges |
|
(238,240) |
(479,598) |
|
| Income tax |
|
(1,789,559) |
(1,512,893) |
|
|
|
------------------ |
------------------ |
|
| Net
cash provided by operating activities |
|
4,839,263 |
3,246,926 |
|
|
|
|
| CASH
FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
| Fixed
capital expenditure |
|
|
(215,597) |
(149,779) |
|
| Sale
proceeds of fixed assets |
|
|
19,646 |
24,035 |
|
| Income
received on loans, deposits and investments |
|
812,600 |
563,388 |
|
| Increase
in investments |
|
|
(2,282,071) |
(753,913) |
|
| Increase
in balance due from associated company |
|
|
(79,779) |
(55,490) |
|
|
|
|
------------------ |
------------------ |
|
| Net
cash used in investing activities |
|
|
(1,745,201) |
(371,759) |
|
|
|
|
| CASH
FLOWS FROM FINANCING ACTIVITIES |
|
|
|
