| National Foods Limited |
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| Annual
Report 1998 |
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| CONTENTS |
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| Quality
Policy |
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| Board
of Directors |
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| Chairman's
Review |
|
| Chief
Executive's Report |
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| Notice
of Meeting |
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| Pattern
of Share Holdings |
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| Auditors'
Report to the Members |
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| Balance
Sheet |
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| Profit
and Loss Account |
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| Statement
of Changes in Financial Position |
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| (Cash
Flow Statement) |
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| Notes
to the Accounts |
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| Quality
Policy |
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| 1.
OUR CORPORATE MISSION |
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| 1
Quality, productivity & competitive position. |
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| 2.
To be a consumer driven company, to satisfy consumers' needs |
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| and
expectations better than anyone else. |
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| 3.
To treat our people with dignity, fairness, and provide opportunities |
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| for
enhancing their knowledge and skills. |
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| 4.
To operate with honesty and integrity in everything we do. |
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| 5.
To achieve excellence in business results, which include increased |
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| market
share, new products, food safety, cost control and profit growth. |
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| 2.
OPERATING PRINCIPLES |
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| 1.
Be innovative and resourceful in achieving continuous |
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| improvement in
operation and product quality. |
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| 2.
Set specific goals to improve our speed and productivity on an annual basis. |
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| 3.
Involvement of all employees in problem solving and solution implementation. |
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| 4.
Provide training, development and growth opportunities to our employees. |
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| 5.
Quality is the key to customer satisfaction, to inculcate quality |
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| culture
throughout the organisation. |
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|
|
Mr. Abdul Majeed |
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|
Mr. Waqar Hasan |
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|
Chairman |
|
Managing Director |
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| ISO 9001 |
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| At
National Foods, we selected ISO 9001 as our model for Quality Assurance. |
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| ISO
9001 is the most comprehensive quality standard available internationally. |
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| It
covers all activities in the product cycle from product idea to post-sales |
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| consumer
behaviour. This rigorous standard introduces modern systems |
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| techniques
to product design/development, production, installation and servicing. |
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| Research
& Development |
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| We
aim to build a team of innovators at National Foods |
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| in
order to conceive and nurture pioneering products |
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| for
the future. |
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| It
is our goal to create products with a difference, |
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| combining
sensation with science, |
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| and
Pakistani tastes with Western technology. |
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| Quality
Assurance |
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| We
aim to maintain international standards of quality in all |
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| our
products through our TQM (Total Quality Management) |
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| system
and HACCP (Hazard Analysis Critical |
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| Control
Points) programme, |
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| Technology |
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| We
aim to improve quality, productivity and efficiency |
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| by
investing in new technologies and modernising our |
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| production
facilities. We intend to adopt the newest, |
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| most
appropriate technologies at National Foods. |
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|
| Organisational
Development |
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| We
aim to support our Corporate Growth Plan with a |
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| modern,
flexible, proactive and responsible organisation, |
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| capable
of meeting the challenges of the future. |
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|
| Board
of Directors |
|
|
| MR.
A. MAJEED |
|
Chairman |
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| MR.
WAQAR HASAN |
|
Managing Director/Chief
Executive |
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| MR.
KHAWAR M. BUTT |
|
Director |
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| MR.
ABRAR HASAN |
|
Director |
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| MR.
ZAHID MAJEED |
|
Director |
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| MR.
M. AFZAL-ULLAH SIDDIQUI |
Director (N.I.T. Nominee) |
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| MR.
MOHAMMED SHAFI |
|
Director (N.I.T. Nominee) |
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| MR.
HABIB A. ISMAlL KHAIRANI |
Company Secretary |
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| REGISTERED
OFFICE |
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| 12/CL-6,
Claremont Road, Civil Lines, Karachi-75530. |
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| P.O.
Box No. 15509 Tlx: 20191 CATEL PK |
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| Phones:
5662687, 5670540, 5670585, 5670646, 5670793 |
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| &
5672268 Fax No. 5684870 & 5671225 |
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| AUDITORS |
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| RIAZ
AHMAD, SAQIB, GOHAR & COMPANY, |
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| Chartered
Accountants, |
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| 5-Nasim
Co-operative Housing Society Ltd, |
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| Major
Nazir Bhatti Road, Off Shahid-e-Millat Road, Karachi. |
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| Phones:
4945427 - 4946112 Fax: 4932629 |
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| REGISTRAR |
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| NOBLE
COMPUTER SERVICES (PVT.) LIMITED |
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| 1st
Floor, Al-Manzoor Building, |
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| Dr.
Ziauddin Ahmad Road, Karachi. |
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| Phones:
2635511-14 |
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| BANKERS |
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| MUSLIM
COMMERCIAL BANK LIMITED, |
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| Clifton
Corporate Branch, Kulsom Court, Clifton, Karachi. |
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| Phones
:5872286-5831835 Fax:5872058 |
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| Wahdat
Road Branch, Lahore. |
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| Phones:
7235737 |
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| BANK
AL-HABIB LIMITED |
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| Mackinnons
Building, I. I. Chundrigar Road, Karachi. |
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| Phones
: 2412986 (10 lines) Fax: 2419752 |
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| S.I.T.E.
Branch, |
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| Plot
# B/76 S.S. Chambers S.I.T.E., Karachi. |
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| Phones:
2571710-11 (92-21) 2571522 |
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| CITI
BANK NA, |
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| State
Life Building No. 1, I. I. Chundrigar Road, Karachi. |
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| Phones:
2412641-50 Fax: 2426773 |
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| HABIB
BANK LIMITED |
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| Hub
River Road Branch, Karachi. |
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| Phone:
2572197 |
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| Chairman's
Review |
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| MOVING
AHEAD |
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| Inspite
of the turbulent conditions prevailing around us, National Foods Limited has
completed another |
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| successful
year, There are many bright features; |
|
|
| a)
Gross Sales increased approximately, 27.6%, inspite of decline in export
sales. |
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|
| b)
Pre-tax profit increased by 48.7% which by any standard reflects excellent
management of |
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| all
the resources. |
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| c)
Consumption of material percentage is favourable as compared to the past year
which was |
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| made
possible by continuous process improvement and efficient process control. |
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| d)
Reduction in financial expenses is the result of efficient use of financial
resources. |
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| Your
company is moving towards its declared objectives rapidly which are:- |
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| 1.
Imaginative marketing and careful cost control. |
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| 2.
Introduction of new products in the range of convenience food of Ultra High
Quality. |
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| 3.
Entrance into Global Food Market of processed Food Varieties. |
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| 4.
Introduction of better Packaging, to face the Environmental Laws in export
markets. |
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| My
congratulations to the team for getting National Foods Ltd., ISO 9001
CERTIFICATION. Your |
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| Company
is entering the new year full of confidence and hopefully we will see an
upsurge in Export |
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| during
the current year. We are also hoping to see value chain systems in place
throughout our |
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| processes
including procurement and storage. |
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| Congratulation
again to the young team for continuous progress. |
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|
|
A. MAJEED |
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|
Chairman |
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|
|
| Chief
Executive's Annual Report |
|
| to
the Shareholders for the year |
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| It
gives me great pleasure once again to present before you the annual
performance of your company |
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| for
the year 1997-98. |
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|
| PERFORMANCE |
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| The
company has ended the year with a total Sales figure of Rs. 628,932,228, with
a growth of 27.6 % |
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| over
last year's Gross Sales. These Sales were achieved through a Local Growth of
35.4 % and a |
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| disappointing
decline of 7.94 % in Exports. |
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| The
decline in Exports was caused mainly in the Saudi Arabian market. The reason
was expulsion of |
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| large
number of illegal immigrants in a clean up exercise. As the large number of
immigrants were Ethnic |
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| based,
this resulted in a temporary setback in exports due to a somewhat
recessionary phase in that |
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| market. |
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|
| QUALITY
MANAGEMENT |
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| For
the past couple of years, the company is seeing stagnant or negative growth
in the Export markets. |
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| This
has made us realize that we have to strengthen our Export Marketing
Infrastructure and develop |
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| products
that are geared towards the Mainstream Markets. |
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| With
this mission in front of us, the company embarked on a challenge in February
1998 to certify its |
|
| quality
through international standards as set forth through ISO 9000. The discipline
selected was ISO |
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| 9001
as it certifies our development and process at the same time thus enabling us
to market our products |
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| with
a guaranteed support for the international market. |
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| By
the grace of God and the very hard work of our Management, the company was
successful in acquiring |
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| the
certification in only 9 months, thus enabling us to be positioned on a strong
platform in all the markets. |
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| ISO
9001 has proven to be a strong discipline for our team as it has helped us in
streamlining our system |
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| so
that future growth can be handled easily. |
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|
| PRODUCT
DEVELOPMENT |
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| In
our bid to sustain our growth and also to diversify ourselves into a food
company, new products are |
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| being
launched and developed for the local as well as the export market. A lot of
interesting projects are |
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| being
worked at, this moment. |
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| These
products will help in establishing a clear positioning in the local as well
as the export market. The |
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| products
for the Export Market are being designed to meet the challenge of separate
markets in terms |
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| of
taste profiles, quality packaging and quality standards. Hopefully this
strategy will boost our Export |
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| sales
and give us stability for the future. We also hope to contribute heavily to
the country's much needed |
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| foreign
exchange. |
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|
| OUTLOOK |
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| As
against the current financial crisis that the crisis that the country is
facing, the outlook for the company |
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| on
the other hand is quite encouraging. Despite problems of L/C margin's and
elevated costs at all domestic |
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| levels,
the company is working continuously and very hard in terms of reducing
expenditure. |
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| Work
is being done by Re-engineering a lot of old processes to make them more
efficient. This is being |
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| brought
about by Work, Time and Motion studies by deploying Industrial Engineering
principles. A dedicated |
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| department
for this very purpose has been created and through their recommendations,
automation and |
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| new
work methods are being designed and deployed at the floor level. This should
help us in reducing |
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| our
process wastage as well. |
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| Through
all these measures the company hopes to achieve and sustain its present rate
of growth and |
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| deliver
a higher net return in the future for its shareholders. |
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|
| DIRECTORS |
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| During
the yea/under report, the following changes have taken place in the Board of
Directors. The following |
|
| directors
were elected un-opposed for three years, in the last Annual General Meeting
held on 27th December |
|
| 1997. |
|
|
| Mr.
A. Majeed |
|
| Mr.
Waqar Hasan |
|
| Mr.
Khawar M. Butt |
|
| Mr.
Abrar Hasan |
|
| Mr.
Zahid Majeed |
|
| Mr.
Abdul Waheed Mian (Nominee N.I.T.) |
|
| Mr.
Muhammad Shafi (Nominee N.I.T.) |
|
| Mr.
Waqar Hasan was re-appointed as Chief Executive for three years. |
|
|
| Mr.
Muhammad Afzalullah Siddiqui, was appointed as nominee of National Investment
Trust Limited in |
|
| place
of Mr. Abdul Waheed Mian. The Board wishes to place on records its
appreciation of the valuable |
|
| services
rendered to the company by all the outgoing directors, during their
respective tenures. |
|
|
| AUDITORS |
|
| The
present Auditors Messrs. Riaz Ahmad, Saqib, Gohar & Company, Chartered
Accountants, retire, |
|
| being
eligible for re-appointment, have offered themselves, for re-appointment as
auditors for the year |
|
| 1998-1999. |
|
|
| PATTERN
OF SHARE HOLDING |
|
| The
Pattern of Share Holding as referred by Section 236 of Companies Ordinance
1984 is enclosed. |
|
|
| MANAGEMENT |
|
| Once
again I am delighted by the management's performance. The management team has
to be congratulated |
|
| for
its efforts in working as a team to achieve the company's Goals and
Objectives; thus fulfilling the Strategic |
|
| Vision
set forth by the company. |
|
|
| I
hope the following year will help us in achieving all the Goals set forth and
we hope to deliver next |
|
| year
even stronger results. |
|
|
|
|
WAQAR HASAN |
|
|
|
Managing Director |
|
|
|
| Notice
of Meeting |
|
|
| Notice
is hereby given that the 27th Annual General Meeting of National Foods
Limited will be held at the |
|
| Registered
Office situated at 12/CL-6, Claremont Road, Civil Lines Karachi, on Wednesday
the 30th |
|
| December
1998, at 12.30 p.m. to transact the following business: |
|
|
| 1.
To read and confirm the minutes of the Last Annual General Meeting held on
27th December |
|
| 1997. |
|
|
|
|
|
| 2.
To receive, consider and approve the Audited Accounts for the year ended 30th
June 1998. |
|
|
|
|
| 3.
To approve issue of bonus shares @ 15% to such share-holders whose names
appear on the |
|
| members'
book on 30th December 1998. |
|
|
| 4.
To appoint Auditors for the year 1998-1999 and to fix their remuneration. The
present auditors |
|
| Messrs.
Riaz Ahmad, Saqib, Gohar & Company, Chartered Accountants retire, being
eligible, have |
|
| offered
themselves for re-appointment as Auditors. |
|
|
| 5.
To transact any other business with the permission of the Chairman. |
|
|
| By
order of the Chairman |
|
|
| Karachi:
6th December, 1998 |
|
(HABIB A. ISMAlL KHAIRANI) |
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|
|
|
Company Secretary |
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|
|
|
|
|
| NOTES: |
|
|
| 1.
The share transfer books of the Company will remain closed from 23rd December
1998 to |
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| 30th
December 1998. (Both days inclusive). |
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|
|
| 2.
All members are entitled to attend and vote at the meeting. |
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|
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| 3.
A member entitled to attend and vote at the Meeting may appoint a proxy to
attend, speak |
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| and
vote for him/her. A proxy needs to be a member of the Company. |
|
|
| 4.
In order to be valid, an instrument of proxy and the Power of Attorney or
other authority (if |
|
| any)
under which it is signed, or a notarially certified copy of such power of
authority, must |
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| be
deposited at the Registered Office of the Company not less than 48 hours
before the |
|
| time
of the meeting. |
|
|
| 5.
Share-holders are requested to notify immediately, any change in their
Registered address. |
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|
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| NATIONAL
FOODS LIMITED |
|
| RATIO
ANALYSIS |
|
|
|
1994 |
1995 |
1996 |
1997 |
1998 |
|
| LIQUIDITY
RATIOS |
|
| Current
Ratio |
|
1.24 |
1.07 |
1.02 |
1.01 |
1.04 |
|
| Acid
Test Ratio |
|
0.60 |
0.39 |
0.25 |
0.28 |
0.26 |
|
|
|
|
|
| GEARING
RATIOS |
|
|
|
| Debt/Equity
Ratio |
|
5.09% |
3.92% |
5.39% |
4.61% |
7.91% |
|
| interest
Cover |
|
3.39 |
3.33 |
2.28 |
2.28 |
2.94 |
|
|
|
|
| OPERATING
RATIOS |
|
|
| Return
On shareholder's Equity |
15.71% |
18.74% |
13.48% |
12.77% |
12.54% |
|
| Gross
Profit Margin |
|
23.41% |
20.21% |
20.15% |
20.21 |
22.48% |
|
| Operating
Profit |
|
9.79% |
8.59% |
6.27% |
6.15% |
7.70% |
|
| Net
Profit Margin |
|
3.57% |
3.56% |
2.31% |
2.14% |
1.89% |
|
|
|
|
|
|
| TURNOVER
RATIOS |
|
|
|
|
| Asset
Turnover |
|
1.91 |
1.99 |
2.07 |
2.31 |
2.48 |
|
| Equity
Turnover |
|
4.40 |
5.26 |
5.83 |
5.96 |
6.65 |
|
| Debtor's
Turnover |
|
9.20 |
11.23 |
17.75 |
23.79 |
27.02 |
|
| Receivable
Days |
|
39.69 |
32.49 |
20.56 |
15.34 |
13.51 |
|
| Inventory
Turnover |
|
4.94 |
4.69 |
3.95 |
4.16 |
4.65 |
|
| Days
Inventory |
|
73.81 |
77.86 |
92.33 |
87.82 |
78.55 |
|
|
|
|
|
|
| OPERATING
EXPENSES |
|
|
|
| Administrative
Expenses |
3.99% |
3.63% |
3.50 |
3.50 |
3.38% |
|
| Selling
Expenses |
|
13.00% |
11.15% |
11.54% |
12.20% |
14.37% |
|
| Financial
Expenses |
|
2.14% |
1.85% |
2.38 |
2.08 |
1.60% |
|
|
|
|
|
|
|
|
| COST
OF SALES |
|
|
|
|
|
| Materials |
|
83.62% |
84.87% |
84.80% |
84.94% |
83.24% |
|
| Direct
Labor |
|
4.43% |
4.65% |
4.93% |
4.59% |
4.61% |
|
| Overheads |
|
11.95% |
10.48% |
10.27% |
10.47% |
12.15% |
|
|
|
|
| OPERATING
EXPENSES (% OF GP) |
|
| Admin. |
|
17.04% |
17.95% |
17.33% |
17.25% |
15.05% |
|
| Selling |
|
55.55% |
55.14% |
57.30 |
60.43 |
63.96 |
|
| Financial |
|
9.16% |
9.17% |
11.74% |
10.27% |
7.10% |
|
|
|
|
|
|
| STOCK
MARKET RATIOS |
|
|
|
| Earnings
Per Share |
|
3.18 |
3.66 |
2.61 |
2.58 |
2.57 |
|
| Dividend
Per Share |
|
2.00 |
2.00 |
2.00 |
1.25 |
1.50 |
|
| Dividend
Cover |
|
1.59 |
1.83 |
1.30 |
2.06 |
1.71 |
|
|
|
|
|
| Pattern
of Share Holding |
|
| as
at 30th June, 1998 |
|
|
|
|
FORM 34 |
|
|
|
THE COMPANIES ORDINANCE 1984 |
|
|
|
(SECTION 236) |
|
|
| Number of |
Share Holdings |
Total |
|
|
| Shareholders |
From |
To |
Shares Held |
|
|
|
| 1,064 |
1 |
100 |
16,643 |
|
|
| 278 |
101 |
500 |
63,209 |
|
|
| 66 |
501 |
1,000 |
47,392 |
|
|
| 117 |
1,001 |
5,000 |
235,235 |
|
|
| 9 |
5,001 |
10,000 |
64,135 |
|
|
| 3 |
10,001 |
15,000 |
38,178 |
|
|
| 1 |
15,001 |
20,000 |
17,339 |
|
|
| 3 |
20.00 |
25,000 |
72,646 |
|
|
| 2 |
45.00 |
50,000 |
91,316 |
|
|
| 1 |
60.00 |
65,000 |
63,239 |
|
|
| 1 |
70.00 |
75,000 |
73,243 |
|
|
| 1 |
105.00 |
110,000 |
106,042 |
|
|
| 1 |
110.00 |
115,000 |
112,510 |
|
|
| 1 |
115,001 |
120,000 |
119,053 |
|
|
| 1 |
150,001 |
155,000 |
152,668 |
|
|
| 1 |
165,001 |
170,000 |
167,350 |
|
|
| 1 |
280,001 |
285,000 |
280,759 |
|
|
| 1 |
850001 |
855,000 |
854,911 |
|
|
| 1 |
1,120,001 |
1,125,000 |
1,120,252 |
|
|
| ---------- |
|
---------- |
|
|
| 1,553 |
|
|
3,696,120 |
|
|
| ========== |
|
========== |
|
|
| CATEGORIES
OF |
|
NUMBER OF |
SHARES |
|
|
| SHAREHOLDERS |
|
SHARE |
HELD |
PERCENTAGE |
|
|
HOLDERS |
|
| 1.
INDIVIDUALS |
|
1,540 |
1,495,684 |
40.467 |
|
| 2.
INVESTMENT COMPANIES |
1 |
17,339 |
0.469 |
|
| 3.
INSURANCE COMPANIES |
|
1 |
152,668 |
4.130 |
|
| 4.
JOINT STOCK COMPANIES |
4 |
855,028 |
23.133 |
|
| 5.
FINANCIAL INSTITUTIONS |
1 |
1,120,252 |
30.309 |
|
| 6. MODARABA |
|
3 |
6,139 |
0.166 |
|
| 7.
FOREIGN INVESTORS |
|
- |
- |
- |
|
| 8.
CO-OPERATIVE SOCIETIES |
1 |
45,132 |
1.221 |
|
| 9.
CHARITABLE TRUSTS |
|
1 |
3,358 |
0.091 |
|
| 10. OTHERS |
|
1 |
520 |
0.014 |
|
|
|
---------- |
---------- |
---------- |
|
|
|
1,553 |
3,696,120 |
100.000 |
|
|
========== |
========== |
========== |
|
|
|
|
|
| Auditors'
Report to the Members |
|
|
| We
have audited the annexed balance sheet of National Foods Limited as at 30
June, 1998 and the |
|
| related
profit and loss account and the 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, investment 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 30 June 1998 and of the profit 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. |
|
|
|
|
|
RIAZ AHMAD, SAQIB, GOHAR & CO. |
|
| Karachi:
30th November, 1998. |
|
Chartered Accountants |
|
|
|
| Balance
Sheet |
|
| as
on 30th June 1998 |
|
|
|
|
|
NOTE |
1998 |
1997 |
|
|
|
|
Rupees |
Rupees |
|
| CAPITAL
AND LIABILITIES |
|
|
|
|
|
| Capital
and Reserves |
|
|
|
|
|
|
| Authorised
Capital 5,000,000 |
|
|
| (1997:
5,000,000) ordinary |
|
|
| shares
of Rs.10/- each |
|
|
50,000,000 |
50,000,000 |
|
|
|
|
========== |
========== |
|
| Issued,
subscribed and paid-up capital |
2 |
36,961,200 |
32,854,400 |
|
| Capital
reserve - share premium |
|
|
6,102,100 |
6,102,100 |
|
| Reserve
for Issue of bonus shares |
|
|
5,544,180 |
4,106,800 |
|
| Unappropriated
profit |
|
|
27,161,624 |
23,201,752 |
|
|
|
|
---------- |
---------- |
|
|
|
75,769,104 |
66,265,052 |
|
|
|
|
| Long
Term liabilities - Secured |
|
|
