| Frontier Ceramics Limited |
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| ANNUAL
REPORT 1998 |
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| Contents |
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| Company Information |
|
| Notice of Meeting |
|
| Director's
Report |
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| Auditor's
Report |
|
| Balance
Sheet |
|
| Profit
and Loss Account |
|
| Cash
Flow Statement |
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| Notes
to the Accounts |
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| Pattern of Share holding |
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| COMPANY
INFORMATION |
|
|
| BOARD
OF DIRECTORS |
|
| Mr.
S.U. Durrani |
|
Chairman |
|
| Mr.
Iqbal Hussain Khattak |
|
| Mrs.
A. Matloob |
|
| Mr.
M. Akram Khan (N.B.P.) |
|
| Mr.
Z.I. Saifi (B.E.L.) |
|
| Mr.
M. Sharif Shafique (NDFC.) |
|
| Mr.
Ansarullah Khan |
|
Managing Director &
Chief Executive |
|
| Mr.
Shamsul Hassan |
|
| Ms
Zainab Ibrahim |
|
| Lt.
Col. (R) Saadat Hussain |
Company Secretary |
|
|
| BANKERS |
|
|
| National
Bank of Pakistan |
|
| United
Bank Limited |
|
| The
Bank of Khyber |
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| Banker's
Equity Limited |
|
| Pakistan
Industrial Credit & Investment Corporation Limited |
|
| National
Development Finance Corporation |
|
|
| AUDITORS |
|
| Messrs.
Rahim Jan & Co. Chartered Accountants. |
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|
| LEGAL
ADVISOR |
|
| Col
( R ) Qazi Nazirullah Advocate |
|
|
| REGISTRARS
AND SHARE TRANSFER OFFICE: |
|
| Ghafoor
& Company Chartered Accountants, Rehmat Lane, Saddar Road, |
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|
| HEAD
OFFICE / REGISTERED OFFICE: |
|
|
| Jamrud
Industrial Estate, Jamrud Road, Peshawar, N.W.F.P |
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| Tel:
812360, 812746, Tlx: 52456 FCL PR PK Fax: 92-91-812757 |
|
|
| ZONAL
OFFICES: |
|
|
| LAHORE: |
61, Shah Jamal, Ferozepur
Road, Lahore. |
|
|
Tel: 7573090 Fax:
92-42-7574179 |
|
|
| PESHAWAR: |
Industrial Estate, Jamrod
Road, Peshawar |
|
|
Tel: 812360, 812746 |
|
|
| RAWALPINDI: |
78-A, Satellite Town,
Rawalpindi |
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|
Tel: 410998 Fax:
92-51-425523 |
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|
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| NOTICE
OF THE MEETING |
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| Notice
is hereby given that the sixteenth Annual General Meeting of FRONTIER
CERAMICS LIMITED will be held at |
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| Industrial
Estate, Jamrud Road, Peshawar on Saturday, December 26, 1998 at 9:00 A.M. to
transact the following business: |
|
|
| 1.
To confirm the minutes of the Fifteenth Annual General meeting of the company
held |
|
| on
December 27, 1997. |
|
|
| 2.
To receive, consider and adopt the Audited Accounts together with the
Directors and Auditors Reports for the year |
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| ended
June 30, 1998. |
|
|
| 3.
To appoint Auditors for the year ending June 30, 1998 and fix their
remuneration. The present Auditors, M/s Kahim |
|
| Jan
& Co Chartered Accountants, being eligible have offer themselves for
reappointment. |
|
|
| 4.
To elect Directors of the Company ,including the chief Executive, for a
period of three years, under section 178 (1) of |
|
| the
Companies Ordinance 1984. All directors of the company retire and the
following Directors being eligible, have |
|
| notified
their intention to offer themselves for election: |
|
|
| 1.
Mr. S.U. Durrani |
|
5. Lt. Col (R) Saadat
Hussain |
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| 2. Mr. Iqbal Hussain Khattak |
6. Ms. Zainab Ibrahim |
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| 3.
Mrs. A. Matloob |
|
7. Mr. Shamsul Hassan |
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| 4.
Mr. Ansarullah |
|
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| 5.
To transact any other business with the permission of the Chair. |
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|
|
BY ORDER OF THE BOARD |
|
|
|
|
| December
4, 1998 |
|
Lt. Col. (R) Saadat
Hussain |
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|
Company Secretary |
|
| NOTES: |
|
|
| 1.
The Register of Members of the Company will be closed from Deembet 19, 1998
to December 26, 1998 (both days in- |
|
| clusive). |
|
|
| 2.
A member entitled to attend and vote at the General Meeting is entitled to
appoint a proxy to attend and vote on his/her |
|
| behalf.
Proxy forms must be deposited at the company's Registered Office atleast 48
hours before the meeting. |
|
|
| 3.
Members are requested to notify the Company or the Registrar of the Company
any change in their address. |
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|
| DIRECTORS
REPORT |
|
|
| Your
Director's are pleased to present hereunder the 16th Annual Report together
with audited accounts for the year ended |
|
| June
30, 1998. |
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|
|
| APPROPRIATIONS |
|
(Rs. in Million) |
|
|
1998 |
1997 |
|
|
| Sales |
|
151.35 |
204.83 |
|
|
--------- |
--------- |
|
| Gross
Profit |
|
23.464 |
58.791 |
|
| Less:
Admin, selling & Distribution Expenses |
|
26.385 |
24.899 |
|
|
--------- |
--------- |
|
| Operating
(Loss) / Profit |
|
(2.921) |
33.892 |
|
| Add:
other Income |
|
1.061 |
1.561 |
|
|
--------- |
--------- |
|
|
(1.860) |
35.45 |
|
| Financial
Expenses |
|
15.913 |
31.920 |
|
| Worker
Participation Fund |
|
- |
0.119 |
|
| Provision
for Taxation |
|
1.147 |
1.024 |
|
| Net
(Loss) Profit carried |
|
--------- |
--------- |
|
| forward
to Balance Sheet |
|
(18.920) |
2.390 |
|
|
========== |
========== |
|
| REVIEW
OF OPERATIONS |
|
|
| The
year under review was a difficult one for the national Economy and
specifically for the industrial sector. The profitability |
|
| of
a number of companies was eroded and the viability of some was threatened due
to circumstances beyond control. Your |
|
| company
could not be an exception to this general phenomena. |
|
|
| The
deteriorating law and order situation in Karachi (which is the nation's
commercial and industrial hub) coupled with the |
|
| credit
squeeze and the recession in the market increased the prevailing uncertainly
and dealt a serious blow to the economy. This |
|
| crisis
in the economy was further accentuated by the declining value of the Pak
rupee. The general spiral of price level and con- |
|
| tinuing
inflation pushed the cost of input which increased the cost of goods
produced. |
|
|
| (A)
During the year under review the factory produced 454, 642 Sq. Metres of
Tiles against 526, 378 Sq. Metre Tiles in the |
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| previous
year and 1,171 ton sanitary ware against 1,645 tons in the previous year. |
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| Sales
decreased by 26.11 percent to 151.349 million from 204.825 million in the
previous year. Gross profit margin |
|
| declined
to 15.5 percent (1997:28.7 percent) owing to increase in the cost of goods
sold. The decrease in production |
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| and
sales and the substantial increase in cost of goods were mainly due to: |
|
|
| 1.
Lower production resulting from disconnection of Gas during winter. |
|
| 2.
Heavily adulterated and low quality Furnace oil supply not suitable for plant
operations. |
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| 3.
The increasing quantity of smuggled tiles and sanitaryware freely available
in the Peshawar and Quetta mar- |
|
| kets. |
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| 4.
Severe competition from substandard goods being produced by our cottage
industry. |
|
|
| (B)
This affected the company's market and resulted in accumulation of stocks
resulting in adverse financial consequences. |
|
| Smuggled
goods are sold below our cost of production. In order to match our
competitors there is need that we start |
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| producing
various sizes of tiles. |
|
|
| (c) Decreased in production volume, coupled
with increased cost of electricity and gas contributed to increase in cost of |
|
| sale
and pushed up administration and selling expenses. |
|
|
| on
Markup charges being levied. With the announcement of the State Bank of
Pakistan Scheme for stuck up loans in |
|
| June
1997, it was hoped that a resolution of issues was possible but this was not
the case and it was in this back drop |
|
| that
the company's Advisers and Lawyers recommended that the company seek legal
remedies. In September 1997, |
|
| suits
were filed for recovery against DFI's in the Sind High Court. |
|
|
| (D)
FUTURE OUTLOOK |
|
| The
company's viability/survival now rests on the resolution of the disagreements
with DFI's, either through courts of |
|
| law
or by agreeing a settlement with them. The ministry of petroleum and natural
resources will be requested again to |
|
| solve.
The long pending issue of natural gas supply to the company on twelve month
basis instead of nine months of |
|
| the
year so that heavy revenue losses are avoided. |
|
|
| (E)
Balancing and modernisation of the plant is essential, in view of the
technology advances made in the Industry. There |
|
| is
a pressing demand from customers for a variety of sizes in tiles. |
|
|
| SALES TAX |
|
|
| It
is also hoped that the sale Tax refund will be awarded in favour of the
company so that the necessary changes / |
|
| improvements
in the plant and machinery can be brought about to enable essential balancing
and modernisation. The |
|
| matter
is now subjudice in the High Court. |
|
| It
is also necessary to state that the collectorate of Sale Tax Peshawar has
raised a demand of |
|
| Rs.
18,092,402 against your company as more fully described in note no. 10 to
these financial statements. The man- |
|
| agement
is hopeful that this demand will be set side in appeal which has already been
filed. |
|
|
| DIVIDEND |
|
|
| In
view of the current financial condition of your company, the Directors are
not recommending a dividend for the |
|
| year
1997-98. |
|
|
| ACKNOWLEDGMENT |
|
|
| The
Board acknowledges the devotion and hard work of the staff and employees of
the Company during the year. |
|
|
| PATTERN
OF SHAREHOLDING |
|
|
| The
pattern of shareholding is given on page no. 25. |
|
|
| AUDITORS |
|
|
| The
present Auditors, M/s Rahim Jan & Co. Chartered Accountants, retire and
being eligible, offer themselves |
|
| for
re-appointment. |
|
|
| On
behalf of the Board of Directors |
|
|
| S.U.
DURRANI |
|
| CHAIRMAN |
|
|
|
| AUDITOR'S
REPORT TO THE MEMBERS |
|
|
| We
have audited the annexed balance sheet of FRONTIER CERAMICS LIMITED as at
June 30, 1998 and the related |
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| profit
and loss account and the cash flow statement, together with the notes forming
pan thereof, for the year then ended |
|
| and
we state that we have obtained all the information and explanation which to
the best of our knowledge and belief were neces- |
|
| sary
for the purpose 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 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 con- |
|
| tinuity
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 company's
business; and |
|
|
| (iii)
The business conducted, investments made and 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 respectively give
a true and fair view of the |
|
| company's
affairs as at June 30, 1998 and the Loss and cash flow for the year then
ended, and |
|
|
| (d)
No Zakat was deductible at source under Zakat and Ushar Ordinance 1980. |
|
|
| Karachi |
|
RAHIM JAN & COMPANY |
|
| 02nd
November, 1998. |
|
Chartered Accountants. |
|
|
|
| BALANCE
SHEET AS AT JUNE 30, 1998 |
|
|
|
1998 |
1997 |
|
|
NOTES |
(Rs.) |
(Rs.) |
|
| PROPERTY
AND ASSETS |
|
|
| Fixed
Assets - at cost less depreciation |
11 |
397,231,145 |
427,371,145 |
|
|
|
|
| Long
Term deposits and deferred cost |
12 |
742,700 |
742,700 |
|
|
|
|
| CURRENT
ASSETS: |
|
|
|
| Stores,
spares and loose tools - at cost |
13 |
29,677,339 |
25,685,612 |
|
| Stock
in Trade - at cost |
|
14 |
146,842,040 |
142,751,213 |
|
| Trade
Debtors |
|
15 |
70,241,570 |
64,356,607 |
|
| Advances,
Deposits, Pre payments & |
|
| Other
receivables |
|
16 |
36,373,319 |
35,888,712 |
|
| Cash
and Bank Balances |
|
17 |
12,672,493 |
12,806,816 |
|
|
295,806,761 |
281,488,960 |
|
| CURRENT
LIABILITIES: |
|
| Finance
under Mark-up Arrangements |
7 |
86,322,156 |
79,820,395 |
|
| Current Portion of Long term
Loan |
8 |
73,307,208 |
73,307,208 |
|
| Liabilities |
|
|
|
|
| Creditors,
Accruals and other Liabilities |
9 |
46,788,130 |
50,192,118 |
|
|
|
---------- |
---------- |
|
|
|
206,417,494 |
203,319,721 |
|
|
|
---------- |
---------- |
|
| Working
Capital |
|
|
89,389,267 |
78,169,239 |
|
|
|
---------- |
---------- |
|
| Total
Assets |
|
|
487,363,112 |
506,283,084 |
|
| Long
Term Loans |
|
6 |
(107,095,109) |
(107,095,109) |
|
|
|
---------- |
---------- |
|
| Net Assets |
|
380,268,003 |
399,187,975 |
|
|
| REPRESENTED
BY: |
|
| Issued,
subscribed and paid up capital |
3 |
77,412,000 |
77,412,000 |
|
| Profit
& Loss - debit balance |
|
(52,296,595) |
(33,376,623) |
|
| Redeemable
Capital |
|
5 |
71,226,822 |
71,226,822 |
|
| Surplus
on Revaluation of fixed assets |
4 |
283,925,776 |
283,925,776 |
|
|
|
---------- |
---------- |
|
|
|
380,268,003 |
399,187,975 |
|
| Contingencies
and Commitments |
10 |
========== |
========== |
|
|
| ANSARULLAH
KHAN |
|
Lt. Col. (R) SAADAT
HUSSAN |
|
| CHIEF
EXECUTIVE |
|
DIRECTOR |
|
|
| The
Annexed Notes Form an integral part of these accounts. |
|
|
|
| PROFIT
AND LOSS ACCOUNT FOR THE YEAR ENDED JUNE 30,1998 |
|
|
|
|
1998 |
1997 |
|
|
NOTES |
(Rs.) |
(Rs.) |
|
|
| Sales - Net |
|
18 |
151,349,789 |
204,825,312 |
|
| Cost
of Sales |
|
19 |
127,885,687 |
146,033,998 |
|
|
|
---------- |
---------- |
|
| Gross
Profit |
|
23,464,102 |
58,791,314 |
|
|
|
|
| OPERATING
EXPENSES |
|
| Administrative
expenses |
|
20 |
14,756,979 |
13,360,777 |
|
| Selling
and Distribution expenses |
21 |
11,628,548 |
11,538,639 |
|
|
|
---------- |
---------- |
|
|
26,385,527 |
24,899,416 |
|
| Operating
(loss)/Profit |
|
(2,921,425) |
33,891,898 |
|
| Profit
on Sale of fixed Assets |
22 |
475,612 |
|
| Profit
on PLS Saving Account |
|
550,300 |
548,685 |
|
| Other
Income |
|
35,453 |
1,012,758 |
|
|
---------- |
---------- |
|
|
1,061,365 |
1,561,443 |
|
|
(1,860,060) |
35,453,341 |
|
| Financial
Expenses |
|
23 |
15,913,355 |
31,919,785 |
|
| Taxation:
Current- Turnover Tax |
24 |
1,146,557 |
1,024,126 |
|
| Worker's
Profit Participation Fund |
|
- |
119,496 |
|
|
---------- |
---------- |
|
| (Loss)
/ Profit for the year |
|
(18,919,972) |
2,389,934 |
|
| Accumulated
Loss Brought Forward |
|
(33,376,623) |
(35,766,557) |
|
| Accumulated
Loss Carried to balance Sheet |
|
(52,296,595) |
(33,376,623) |
|
|
========== |
========== |
|
| ANSARULLAH
KHAN |
|
Lt. Col. (R) SAADAT
HUSSAN |
|
| CHIEF
EXECUTIVE |
|
DIRECTOR |
|
|
| The
Annexed Notes Form an integral part of these accounts. |
|
|
|
|
| STATEMENT
OF CHANGES IN FINANCIAL POSITION |
|
| (CASH
FLOW STATEMENT)FOR THE YEAR ENDED JUNE 30, 1998 |
|
|
| Cash
collected from customers |
|
145,464,826 |
199,745,843 |
|
| Cash
paid to suppliers |
|
(98,410,825) |
(116,256,590) |
|
| Administrative
Expenses paid |
|
(13,880,193) |
(12,339,986) |
|
| Selling
& Distribution expenses paid |
|
(11,628,548) |
(11,538,639) |
|
| Bank
charges paid |
|
(323,111) |
(311,389) |
|
| Other
Income received |
|
1,061,365 |
1,561,443 |
|
| Decrease/(increase)
in prepayments and other receivable |
(484,607) |
8,601,766 |
|
| Increase/(Decrease)
in accruals and other liabilities |
(4,550,545) |
6,137,864 |
|
| (Decrease)/Increase
in finance under mark-up arrangement |
6,501,761 |
(234,389) |
|
| Increase
in inventory |
|
(8,082,554) |
(275,933) |
|
|
---------- |
---------- |
|
| Cash
generated from operation |
|
15,667,569 |
75,089,990 |
|
|
| CASH
(OUTFLOWS) INFLOWS FROM |
|
| INVESTING
ACTIVITIES |
|
|
| Addition
in fixed assets |
|
(463,836) |
(1,753,662) |
|
| Change
due to sale of fixed assets |
|
252,188 |
- |
|
| Long
term deposits |
|
- |
500,000 |
|
|
---------- |
---------- |
|
|
(211,648) |
(1,253,662) |
|
|
| CASH
(OUTFLOWS) INFLOWS FROM |
|
| FINANCE
ACTIVITIES |
|
|
| Long
Term Loans - Net |
|
- |
(15,818,515) |
|
| Redeemable
Capital - Net |
|
- |
(16,596,959) |
|
| Dividend
paid |
|
- |
(5,805,900) |
|
| Interest
Expenses |
|
(15,590,244) |
(31,608,396) |
|
|
---------- |
---------- |
|
|
(15,590,244) |
(69,829,770) |
|
| Net-Increase/(Decrease)
in cash & cash equivalent |
(134,323) |
4,006,558 |
|
| Cash
and Cash equivalent as at July l st. |
|
12,806,816 |
8,800,258 |
|
|
---------- |
---------- |
|
| Cash
and Cash equivalent as at June 30th. |
|
12,672,493 |
12,806,816 |
|
|
========== |
========== |
|
| ANSARULLAH
KHAN |
|
Lt.COL. (R) SAADAT HUSSAN |
|
| CHIEF
EXECUTIVE |
|
DIRECTOR |
|
|
|
| NOTES
TO THE ACCOUNTS FOR THE YEAR ENDED JUNE 30, 1998 |
|
|
| 1.
THE COMPANY AND ITS OPERATIONS |
|
|
| Frontier
Ceramics Limited was incorporated in Pakistan in July 1982 as a Public
Limited Company, and was listed on |
|
| the
Karachi and Lahore Stock Exchanges in March 1992. |
|
|
| The
principal activity of the company is the manufacture and sale of tiles,
sanitary wares and allied accessories. |
|
|
| 2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
|
|
| 2.01
ACCOUNTING CONVENTION |
|
| The
accounts of the Company have been prepared under the historical cost
convention as modified by cap- |
|
| talisation
of certain exchange differences in the cost of relevant assets without any
adjustments for the effects |
|
| of
inflation except plant & machinery which has been re-valued (Note No. 4) |
|
|
| 2.02
STAFF RETIREMENT BENEFITS |
|
| The
Company operates a provident fund scheme for all its employees, contributions
in respect thereof are |
|
| made
in accordance with the terms of the scheme. |
|
|
| 2.03
TAXATION |
|
| Charge
for current Taxation in the accounts is based on taxable income of the
company after taking in to ac- |
|
| count
rebate, if any allowable to the company. The company accounts for deferred
taxation using liability |
|
| method
arising on all major timing differences. |
|
|
| 2.04
FIXED ASSETS |
|
| Fixed
assets are stated at cost less accumulated depreciation except leasehold land
and capital work in prog- |
|
| ress
which are stated at cost. |
|
| Depreciation
is charged on reducing balance method at the rates specified in Note 11. Full
years depreciation |
|
| is
charged on fixed assets purchased during the first half of the accounting
year but no depreciation is |
|
| charged
on fixed assets acquired during the second half of the accounting year. No
depreciation in charged if |
|
| the
assets are disposed off/deleted in the first half of the accounting year but
charged if disposal/deletion is |
|
| made
in the second half of the accounting year. |
|
| Normal
repairs and maintenance are charged to expenses as and when incurred while
major renewals |
|
| and
replacements are capitalized. Gains and losses on disposal of fixed assets
are taken to profit and loss ac- |
|
| count
currently. |
|
|
| 2.05
STOCK IN TRADE, STORES, SPARES & LOOSE TOOLS |
|
|
| These
are stated as follows: |
|
| Stores,
Spares & Loose Tools |
At Average Cost |
|
| Raw
& Packing Material |
|
At Average Cost, |
|
|
except in transit, which
are |
|
|
stated at actual cost. |
|
| Work
in process |
|
At Cost |
|
| Finished
Goods |
|
At Lower of Cost or
Market Value |
|
|
| 2.06
RATE OF EXCHANGE |
|
| Foreign
currency loans and other foreign currency transactions are recorded at the
rate prevailing on the date |
|
| of
transaction. Repayment of foreign currency loans are made at the rate at
which the same were disbursed |
|
| because
of exchange risk having been covered. |
|
|
| 2.07
REVENUE RECOGNITION |
|
| Sales
are recorded on dispatch of goods to customers. |
|
|
| SHARE
CAPITAL |
|
|
1998 |
1997 |
|
|
NOTES |
(Rs.) |
(Rs.) |
|
| AUTHORIZED: |
|
| 8,000,000
Ordinary Share of Rs. 10/- each |
3 |
80,000,000 |
80,000,000 |
|
|
| Issued
Subscribed and paid-up Capital 7,741,200 ordinary |
|
| shares
of Rs.10/- each issued for cash |
|
77,412,000 |
77,412,000 |
|
|
=========== |
=========== |
|
| SURPLUS
ON REVALUATION OF FIXED ASSETS |
4 |
283,925,776 |
283,925,776 |
|
|
|
=========== |
=========== |
|
|
|
|
|
| Revaluation
of plant & machinery has been carried out as on June 30, 1996 |
|
| by
an independent valuer. M/s Global Engineers (Pvt) Ltd. Faisalabad, and |
|
| duly
certified by R.H. & Co. Cheered Accounts a firm approved by |
|
| the
State Bank of Pakistan for the purpose of revaluation of fixed assets. |
|
| Revaluation
has been carried out on a basis of depreciated replacement |
|
| value. |
|
| (Refer
to note no. 11) |
|
|
|
|
| REDEEMABLE
CAPITAL (SECURED) |
5 |
|
| Participation
Term Certificates (PTCs) |
|
|
| Term
Finance Certificates (TFCs) |
5.01 |
3,174,781 |
3,174,781 |
|
| Accrued Markup and
overdues converted into term |
|
|
| finance
certificate capitalized dues |
5.02 |
90,145,041 |
90,145,041 |
|
|
|
---------- |
---------- |
|
|
93,319,822 |
93,319,822 |
|
| Less:
Transferred to current maturity |
|
22,093,000 |
22,093,000 |
|
|
---------- |
---------- |
|
|
71,226,822 |
71,226,822 |
|
|
========== |
========== |
|
| TERM
FINANCE CERTIFICATE |
|
5.01 |
3,174,781 |
3,174,781 |
|
|
========== |
========== |
|
| Banker
Equity Limited Syndicate sanctioned and Investment of Rs. |
|
| 77.196
million for the purchase of fixed assets. The total redemption value |
