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International Industries Limited
Annual Report 1998
CONTENTS
COMPANY INFORMATION
MILESTONE
NOTICE OF MEETING
CHAIRMAN'S REVIEW
TEN YEARS AT A GLANCE
REPORT OF THE DIRECTORS
AUDITORS' REPORT
BALANCE SHEET
PROFIT & LOSS ACCOUNT
STATEMENT OF CHANGES IN FINANCIAL POSITION
NOTES TO THE ACCOUNTS
PATTERN OF SHAREHOLDINGS
Company Information
CHAIRMAN J.R. RAHIM
DIRECTORS R.E. BANKWALLA
K.M.M. SHAH
M. ATEEQULLAH
S.M. KHALID
MUSTAPHA A. CHINOY
KAMAL A. CHINOY
ZAKA U. KHAN
RAZI-UR-RAHMAN KHAN Representing NIT
ABDUL LATIF UQAILI Representing ICP
MANAGING DIRECTOR &
CHIEF EXECUTIVE TOWFIQ H. CHINOY
SECRETARY MOHAMED H. WALLI
AUDITORS FORD, RHODES, ROBSON, MORROW
BANKERS STANDARD CHARTERED BANK
ANZ GRINDLAYS BANK LIMITED
AMERICAN EXPRESS BANK LTD.
HONGKONG & SHANGHAI BANKING CORPORATION
THE BANK OF TOKYO-MITSUBISHI, LTD.
MUSLIM COMMERCIAL BANK LTD.
BANK AL-HABIB LTD.
AL-TOWFEEK INVESTMENT BANK LTD.
AL-BARAKA ISLAMIC INVESTMENT BANK B.S.C. (E.C.)
SONERI BANK LTD.
SOCIETE GENERALE
OMAN INTERNATIONAL BANK S.A.O.G.
LEGAL ADVISORS J.H. RAHIMTOOLA & COMPANY
REGISTERED HAKIMSONS BUILDING, 19 WEST WHARF ROAD
OFFICE P.O. Box 4775, KARACHI-74000
TELEPHONE NOS. 2313508-14 FAX: 2314260
E-MAIL: iil@ khi.fascom.com
BRANCH SALAM CHAMBERS, LINK McLEOD ROAD
OFFICE LAHORE-54000
TELEPHONE NOS: 7229752-55 FAX: 7220384
E-MAIL: iil@ brain.net.pk.
FACTORY LX 15-16, LANDHI INDUSTRIAL AREA
KARACHI-75160
TELEPHONE NOS: 7738868-70 FAX: 7738573
E-MAIL: iilfty@cyber.net.pk
MILESTONES
The Company through the Years
Development
and Growth
1948 Established as Sultan Chinoy and Company
1949 Incorporated as International Industries Limited
Sponsored Pak Chemicals Limited, Pakistan.
1953 Sponsored Pakistan Cables Limited, Karachi as a Joint
Venture with BICC, UK
1965 Ventured into manufacturing of high quality Electric
Resistance Welding Steel Pipe
1983 Launched Galvanised Pipe. "ILL GI PIPE" is born
1984 Converted to a Public Limited Company
1990 Set up the country's first Cold Rolling Mill in the
private sector
1992 Became a "BILLION" rupee company
1995 Entered the international market with export of
Galvanised Pipes
1997 Certification under ISO 9001
1998 Commemorates 50 years and awarded international
credit rating by Duff & Phelps
Notice of Meeting
Notice is hereby given to the Members that the 50th Annual General Meeting of the Company
will be held on Thursday 12th November, 1998 at 11:00 a.m. at the "Raffia Choudri Memorial
Centre", Sidco Avenue Centre, 264-R. A. Lines, Karachi to transact the following business:
ORDINARY BUSINESS
1. To receive, consider and adopt the Audited Accounts of the Company for the year ended
30th June, 1998 and the Reports of the Directors and Auditors thereon.
2. To consider and approve payment of 17.5% Final Cash Dividend making a total of 32.5%
for the financial year ended 30th June, 1998 as recommended by the Board of Directors.
3. To elect Directors for a period of 3 years commencing from 12th November, 1998.
4. To appoint Auditors for the year 1998-99 and fix their remuneration.
5. To transact with the permission of the Chair any other business which may be transacted
at an Annual General Meeting.
By Order of the Board
sd/-
Mohamed H. Walli
Karachi: October 15, 1998 Company Secretary
Notes:
1. The Share Transfer Books of the Company will remain closed from 2rid November, 1998
to 12th November, 1998 (both days inclusive). Transfers received in order at the Registered
Office of the Company by close of business on 31st October, 1998 will be treated in
time for the purpose of payment of final cash dividend to the transferees.
2. A Member entitled to attend, speak and vote at the General Meeting is entitled to appoint
another member as his/her proxy to attend, speak and vote on his/her behalf.
3. Instrument appointing proxy and the power of attorney or other authority under which
it is signed or a notarially certified copy of the power or authority must be deposited
at the registered office of the Company at least 48 hours before the time of the meeting.
Form of proxy is enclosed.
4. Members are requested to advise change in address, if any.
5. Members are requested to consider and approve the following resolution regarding election
of Directors:
Item-3
a) To elect 11 Directors being the number fixed by the Board of Directors for election
for a period of three years from the date of the Annual General Meeting,
b) the elected Directors who retire at the meeting are:
Messrs J. R. Rahim, R. E. Bankwalla, K. M. M. Shah, S. M. Khalid, Zaka U.
Khan, M. Ateequllah, Mustapha A. Chinoy, Kamal A. Chinoy, Towfiq H. Chinoy,
the nominated Directors are:
Messrs Razi-ur-Rahman Khan and Abdul Latif Uqaili representing NIT and ICP
respectively.
c) any person or retiring Director who seeks to contest election of the office of
the Director must file with the Company, not later than fourteen days before the
date of meeting, notice of his/her intention to offer himself/herself for election.
Chairman's Review
It is with pleasure that I present to you on behalf of the Board, the 50th Annual Report
for the year ended 30th June, 1998.
DIRECTORS
Consequent to Mr. Amir Sultan Chinoy's sad demise on January 22 1998, Mr. Mustapha
A. Chinoy was appointed a Director for the remaining tenure of the current Board. We
welcome him and look forward to his contribution. There was no other change in your
Board during the year.
SALES
The domestic sales continued to be affected by the prevailing economic conditions and
only a nominal growth was witnessed during the year. However, your Company's ability
to manufacture high quality product conforming to International Standards enabled it to achieve
a substantial growth in the export market. In some of these international markets your
Company's product has been accepted as a permanent feature with a growing reputation
for consistent quality and availability.
By the grace of Allah, your Company has now acquired ISO-9001 certification which should
Inshallah enable it to further consolidate the quality image that it has built and defended
so successfully over the past 50 years.
RAW MATERIALS
Supply of steel from Pakistan Steel Mills was satisfactory, as a result of which the Company's
requirement for domestic sales was met entirely through local purchases. Import of steel
was restricted to meet export requirements only.
The Zinc prices witnessed sharp movements at the beginning of the fiscal year because
of speculation by major players in the international markets. The prices in the second
half of the year have dropped and continue to remain at low levels owing to depressed
international demand.
FINANCIAL RESULTS
The growth in volume has resulted mostly from the export sales where intense
international competition restricts the margins to levels lower than on domestic sales.
Thus, although the net sales value is higher than the previous year by almost
10%, the gross profit at Rs. 276 million is at the same level. Freight and forwarding
expenses have increased by Rs. 20 million because of the increase in exports
and financial charges are Rs. 9.0 million less.
The profit before tax at Rs. 94 million is 10% lower as compared to the previous
year's profit of Rs. 105 million. After providing for the current year's tax, the
after tax profit is Rs. 64 million.
FUTURE PROSPECTS
The prevailing uncertainty in the domestic market will restrict growth of local sales to nominal
levels. Growth in export sales is possible but the lower margins will affect the overall
profitability of the Company.
Imports are becoming increasingly difficult and the imposition of a 30?/o cash margin on
letters of credit and an ever increasing value of the Dollar will make import of Zinc and
spare parts very expensive.
Local costs, particularly fuel and energy charges under the influence of a double digit inflation
are also on the rise, and a corresponding increase in prices, particularly in the already
depressed market, will not be easily possible.
In view of the foregoing, it appears that your Company is faced with the prospects of
even lower margins than the current level.
The only redeeming factor in this bleak scenario is the Government's resolve to bring the
tax evaders to book. If this effort succeeds and the playing field becomes level, your
Company will benefit.
DIVIDEND
Your Board is pleased to propose a final dividend of 17.5% , making a total for the year
of 32.5%. This would leave only a third of the profit for the year to be taken to reserves.
STAFF
The Company's relationship with all its employees is cordial. Negotiations with the Employees'
Union were held and concluded in a peaceful atmosphere. The Company is proud of
its zealous and dedicated employees.
In keeping with our social responsibility and in memory of our founder Chairman, the late
Mr. Amir S. Chinoy, a school has been sponsored in the vicinity of the factory operated
by "The Citizens Foundation" an eminent NGO in the field of education. This school allows
concessional quality education to children of our factory workers.
We are grateful to our Bankers for their continued support and to our customers for their
loyalty and assure them of our continued determination to provide them with quality products
and serve them according to needs of the market place.
Ten Years at a Glance
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
(Rs. 000)
Assets Employed
Fixed Assets (Owned & leased) 302,659 309,390 234,304 245,894 257,842 268,421 260,205 281,343 298,284 217,179
Capital Work In Progress 2,045 2,567 8,618 1,929 7,373 3,388 9,410 3,573 2,962 49,052
Long term deposits 2,073 1,940 3,003 3,586 3,320 4,252 4,480 4,459 4,559 2,771
Net Current Assets/(Liabilities) 14,475 41,716 66,145 22,583 33,900 16,660 (7,613) (35,582) 144 46,990
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Total Assets Employed 321,252 355,613 312,070 273,992 302,435 292,721 266,482 253,793 305,949 315,992
==========================================================================================================================
Financed by
Shareholders' Equity (includes
revaluation of land) 303,752 281,547 216,270 208,432 197,778 151,999 133,070 120,388 124,236 137,978
Long term & deferred liabilities 17,500 74,066 95,800 65,560 104,657 140,722 133,412 133,405 181,713 178,014
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
321,252 355,613 312,070 273,992 302,435 292,721 266,482 253,793 305,949 315,992
==========================================================================================================================
Sales & Profits
Sales-Net                     1,773,157 1,613,998 1,702,917 1,286,339 1,328,018 1,098,387 919,449 821,935 734,148 709,427
Gross Profit 275,646 274,278 253,799 168,943 155,709 150,341 121,274 77,316 47,743 101,512
Profit before interest & taxation 160,468 180,496 174,707 115,770 110,374 109,950 89,374 44,905 19,577 73,910
Profit/(Loss) before taxation 94,384 105,386 90,498 29,983 18,397 18,929 9,167 (21,897) (30,624) 47,048
Profit/(Loss) after taxation 64,084 78,886 36,831 29,983 18,397 18,929 12,682 (26,096) (30,739) 43,205
Cash Dividend 41,879 48,322 28,993 19,329 12,886 -- -- -- -- --
Retained Earnings/(Loss) 22,205 30,564 7,838 10,654 5,511 18,929 12,682 (26,096) (30,739) 43,205
Financial Ratios
Gross Profit as a percentage of sales 15.5 17.0 14.9 13.1 11.7 13.7 13.2 9.4 6.5 14.3
Net profit/(Ioss) before tax as
a percentage of sales (excluding
contract income) 5.3 6.5 5.3 2.3 1.4 1.7 1.0 (2.6) (4.2) 6.7
Current ratio 1.02 1.06 1.12 1.04 1.08 1.03 0.98 0.89 1.0 1.24
Long term debt: equity 06:94 21:79 31:69 24:76 35:65 48:52 50:50 53:47 59:41 56:44
Earning/(Loss) per share 4.97 6.12 2.86 2.33 1.43 2.35 1.69 (3.48) (5.42) 10.09
Cash Dividend (%) 32.5 37.5 22.5 15 10 -- -- -- -- --
Bonus Shares (%) -- -- -- -- -- 10 7.5 -- -- 25
Right Shares (%) -- -- -- -- -- 50 -- 32 20 --
Report of the Directors
The Directors have pleasure in submitting their Report and Audited Accounts for the year
ended 30th June, 1998.
(Rs. 000's)
The profit for the year amounts to 64,084
Amount of unappropriated profit
brought forward from previous year 107
---------------
64,191
The Directors recommend:
Interim dividend already paid at the rate of
Rs. 1.50 per share (15%) 19,329
Final dividend at the rate of
Rs. 1.75 per share (17.5%) 22,550
Transfer to General Reserve 22,000
---------------
63,879
Leaving an unappropriated profit ---------------
carried forward to next year 312
=========
The Chairman's review on pages 6 & 7 covers significant activities of your Company during
the year.
The Management of the Company has taken cognizance of the possible effects of the millennium
bug and steps have been taken to ensure smooth operation at the change of the millennium.
Non listed associated companies are not likely to be affected. Our major suppliers and debtors
have been requested to take measures to avoid complications arising out of the millennium bug.
The pattern of shareholdings is provided on page 31.
The present auditors, M/s. Ford, Rhodes, Robson, Morrow retire and offer themselves for
re-appointment.
On behalf of the Board
sd/-
Towfiq H.Chinoy
Karachi: 15th October, 1998 Managing Director & Chief Executive
Auditors' Report to the Members
We have audited the annexed balance sheet of INTERNATIONAL INDUSTRIES LIMITED
as at 30th June, 1998 and the related profit and loss account and statement of changes
in financial position, (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 statement of changes
in financial position, (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 30th June, 1998 and of the profit and the changes in financial position (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.
sd/-
Ford, Rhodes, Robson, Morrow
Karachi: 5th October, 1998 Chartered Accountants
Balance Sheet as at 30th June, 1998
Note 1998 1997
              (Rs. 000's)
SHARE CAPITAL AND RESERVES
Authorised capital
15,000,000 (1997: 15,000,000) ordinary
shares of Rs. 10/- each 150,000 150,000
========== ==========
Issued, subscribed and paid up capital 3 128,859 128,859
Reserves 4 125,166 102,961
--------------- ---------------
254,025 231,820
SURPLUS ON REVALUATION OF LAND 5 49,727 49,727
--------------- ---------------
303,752 281,547
REDEEMABLE CAPITAL 6 17,880 73,843
DEFERRED LIABILITIES
Gratuity -- 603
CURRENT LIABILITIES
Current portion of redeemable capital, long term loan
and finance leases 43,963 51,382
Short term running & Morabaha finances 7 252,622 375,509
Creditors, accrued and other liabilities 8 350,987 277,815
--------------- ---------------
647,572 704,706
COMMITMENTS                                    9 --------------- ---------------
969,204 1,060,699
========== ==========
OWNED FIXED ASSETS 10 304,704 305,360
LEASED FIXED ASSETS 11 -- 6,597
INVESTMENT 12 380 380
LONG - TERM DEPOSITS 2,073 1,940
CURRENT ASSETS
Stores and spares 13 46,336 49,067
Stock-in-trade 14 358,142 413,032
Contract work-in-progress 15 4,588 3,635
Trade debtors 16 191,894 158,672
Contract debtors 17 424 579
Advances, deposits, prepayments and
other receivables 18 45,978 30,587
Cash and bank balances 19 14,685 90,850
--------------- ---------------
662,047 746,422
--------------- ---------------
969,204 1,060,699
========== ==========
The annexed notes form an integral part of these accounts.
Sd/- Sd/-
K.M.M. Shah Towfiq H. Chinoy
Director Managing Director & Chief Executive