| Nestle Milkpak Limited |
|
|
|
|
|
|
|
|
|
| Annual
Report 1998 |
|
|
|
| Contents |
|
| Directors'
Report To The Shareholders |
|
| General
Information |
Management |
|
|
|
|
Organisation |
|
|
|
|
Company Directory |
|
|
|
Sales Offices |
|
|
|
|
|
| Group History |
|
About Nestle S.A. |
|
| Business
Review |
Milk Collection |
|
|
|
|
Production |
|
|
|
|
Marketing |
|
|
|
|
Exports |
|
|
|
|
|
| Notice
of Annual General Meeting |
|
| Auditors' Report |
|
|
| Balance Sheet |
|
|
|
| Profit
& Loss Account |
|
|
| Cash
Flow Statement |
|
|
| Notes
to the Accounts |
|
|
| Pattern
of Share-holding |
|
|
|
|
|
|
|
| Directors'
Report to the Shareholders |
|
|
| The
Directors are pleased to submit their annual report along |
|
| with
the audited financial statements of the company for the |
|
| year
ended June 30, 1998. |
|
|
| OPERATING
RESULTS |
|
| The
operating results during the year under report clearly |
|
| illustrate
that in the face of difficult economic environment |
|
| and
un-satisfactory law and order situation, the company con- |
|
| tinued
to advance at an encouraging pace and its overall per- |
|
| formance
remained well in line with our expectations. This |
|
| further
strengthened the position of the company as a market |
|
| leader
in the food category in Pakistan. |
|
|
| Sales
registered a substantial growth of 32% and stood at Rs.4.27 billion as |
|
| compared
to Rs.3.22 billion for the year ended June 30, 1997. The after tax |
|
| profit
earned was Rs.212.52 million as against the after tax profit of |
|
| Rs.
166.34 million made in the corresponding period of last year. |
|
|
| MARKETING |
|
| The
encouraging growth in sales revenue was possible due to strong brands |
|
| and
high product quality that continued to enhance consumer confidence. |
|
| To
support our business expansion, the sales and distribution structure is |
|
| being
re-organized. Two new products - dessert mixes under the brand name |
|
| NESTLE
SWEET TREATS and infant cereal NESTLE WHEAT were launched |
|
| and
were well received by the consumers. |
|
|
| EXPORTS |
|
| Notwithstanding
the financial crisis in the country and currency convertibil- |
|
| ity
issue in Uzbekistan, export of company products to Central Asian |
|
| Republics,
Bangladesh and Afghanistan have shown excellent growth. The |
|
| exports
have increased from PKR 148.2 million to PKR 321.3 million during |
|
| the
year under review. |
|
|
| MILK
COLLECTION |
|
| Fresh
milk collection has remained well above our expectations. Major |
|
| efforts
were directed at further strengthening and increasing self-collection |
|
| during
the year ended June 30,1998. Under the milk quality improvement |
|
| programme
launched earlier, special efforts were made to improve overall |
|
| hygienic
conditions throughout the milk supply chain. To reduce the cost of |
|
| transportation
and optimize the use of installed chilling facilities, major |
|
| emphasis
was placed on increasing milk collection from within the existing |
|
| milk shed area. |
|
|
| APPROPRIATIONS |
|
Rupees (mln) |
|
|
| Net
profit for the year |
|
212.52 |
|
|
| Un-appropriations |
|
257.95 |
|
|
|
|
|
--------------- |
|
|
|
|
|
470.47 |
|
|
|
|
|
--------------- |
|
|
| Appropriations |
|
|
|
| First
interim dividend of Rs.5.00 per share |
|
|
|
| paid
in December 1997 |
|
150.88 |
|
|
|
|
|
| Second
interim dividend of Rs.1.50 per share |
|
|
|
| paid
in March, 1998 |
|
45.26 |
|
|
| Final
dividend of Rs. 3.00 per share |
|
|
|
| now proposed |
|
|
90.53 |
|
|
|
|
|
--------------- |
|
|
|
|
|
286.67 |
|
|
|
|
|
--------------- |
|
|
| Un-appropriated
profit carried forward |
183.80 |
|
|
|
|
|
========== |
|
|
|
| APPOINTMENT
OF AUDITORS |
|
|
| The
present auditors M/s A.F. Ferguson 8 Co. Chartered Accountants |
|
| retired
and being eligible, offer themselves for re-election. |
|
|
| DIRECTOR |
|
| Election
was held during the year to elect the new Board of Directors The |
|
| Board
of Directors wishes to record their appreciation for the valuable ser- |
|
| vices
rendered by Messrs. Lira Khing Fong and Tariq Hamid during their |
|
| tenure
as directors of the company. |
|
|
| The
term of office of the present directors will expire on June 26, 2001 |
|
|
|
|
| PERSONNEL |
|
| Relationship
with staff, specially the workers, remained cordial and the |
|
| directors
are pleased to record their appreciation for the hard work and ded- |
|
| ication
shown by every staff member during the year. |
|
|
| FUTURE
OUTLOOK |
|
|
|
| The
company has ambitious plans to launch new products and expand busi- |
|
| ness.
The management is determined to continue striving for strong busi- |
|
| ness
growth in the future, undeterred by the current uncertainties. |
|
|
| GENERAL
INFORMATION |
|
|
|
| Management |
|
|
| Board
of Directors |
|
| Syed Yawar Ali |
|
Chairman |
|
|
| Graham
Campbell |
Managing Director |
|
| Syed Babar Ali |
|
|
|
|
| M.W.O. Garrett |
|
|
|
|
| J.D. Luthi |
|
(Alternate: M. Hanif
Rajput) |
|
| D. Dupont |
|
(Alternate: Nimal
Koswanage) |
|
| Syed Hyder Ali |
|
|
| Company
Secretary |
|
| M. Hanif Rajput |
|
|
|
| Company
Directory |
|
|
| Registered & |
308 - Upper Mall, Lahore |
|
|
| Corporate |
PABX : 5757082-95 |
|
|
| Office |
Fax : 5711820 |
|
|
|
|
|
|
| Factories |
Sheikhupura |
|
|
|
29th Kilometer, Lahore -
Sheikhupura Road |
|
|
Sheikhupura, Punjab,
Pakistan |
|
|
|
Phone : (042) 6369321 -
26 8- 7228300 |
|
|
Fax: (042) 6368710 |
|
|
|
|
|
|
Kabirwala |
|
|
|
|
Khanewal- Kabirwala Road,
Kabirwala |
|
|
District Khanewal,
Punjab, Pakistan |
|
|
Phone : (0692) 53168 |
|
|
|
Fax: (0692) 53169 |
|
|
|
|
|
|
|
| Auditors |
A.F. Ferguson & Co.
(Chartered Accountants) |
|
|
|
|
| Legal Advisors |
Cheema & Ibrahim
(Advocates) |
|
|
|
|
|
| Bankers |
ABN Amro Bank |
|
|
|
American Express Bank
Ltd. |
|
|
|
ANZ Grindlays Bank Ltd. |
|
|
|
Bank of America |
|
|
|
Bank of Tokyo-Mitsubishi,
Ltd. |
|
|
|
Citibank N.A. |
|
|
|
Credit Agricole Indosuez |
|
|
|
Deutsche Bank A.G. |
|
|
|
Habib Bank Ltd. |
|
|
|
Muslim Commercial Bank
Ltd. |
|
|
|
|
| Regional
Sales Offices |
|
|
| Karachi |
Lackson Square Building
No.1, 5th Floor |
|
|
Block C, R.A. Lines,
Sarwar Shaheed Road, |
|
|
Karachi Cantt., Sind,
Pakistan |
|
|
Phone: (021) 5689815,
5689217, 5689712 |
|
|
(021) 5689721, 5689722 |
|
|
Fax: (021) 5682775,
5689815 |
|
|
|
|
| Hyderabad |
155-D, Block-C,
Latifabad-6, |
|
|
Hyderabad, Sind, Pakistan |
|
|
Phone: (0221) 860618 |
|
|
Fax: (0221) 860618 |
|
|
|
|
| Lahore |
29-B, Main Gulberg, |
|
|
Lahore, Punjab, Pakistan |
|
|
Phone: (042) 5754335-8 |
|
|
Fax: (042) 5711820 |
|
|
|
|
| Multan |
Surij Mani Road, Chungi
No.1, |
|
|
Multan, Punjab, Pakistan |
|
|
Phone: (061) 515061 |
|
|
Fax: (061) 515061 |
|
|
|
|
| Faisalabad |
House No.24-Y-103 Madina
Town, |
|
|
Faisalabad, Punjab,
Pakistan. |
|
|
Phone: (041) 726993 |
|
|
Fax: (041) 726993 |
|
|
|
|
| Gujranwala |
23 D.C. Road, Gujranwala,
Punjab, Pakistan |
|
|
Phone: (0431) 256320 |
|
|
Fax: (0431) 256320 |
|
|
|
|
| Peshawar |
2nd Floor, City Tower,
Jamrud Road, B Block, |
|
|
201, Peshawar, N.W.F.P.,
Pakistan |
|
|
Phone: (091) 840859,
43901 |
|
|
Fax: (091) 45516 |
|
|
|
|
| Quetta |
2-39/39 Hari Krishan
Street, Masjid Road, |
|
|
Quetta, Baluchistan,
Pakistan |
|
|
Phone: (081) 825265 |
|
|
Fax: (081) 825265 |
|
|
|
|
| Islamabad |
74-W, Yaseen Plaza, 1st
Floor, Blue Area, |
|
|
Islamabad, Pakistan |
|
|
Phone: (051) 271874-75,
824328, 824384, 274376 |
|
|
Fax: (051) 821899 |
|
|
|
|
| Group History |
|
|
|
|
|
|
| The
Nestle Story |
|
|
|
| Nestle
S.A., the present Switzerland |
|
|
|
| based
international food group, |
|
|
|
| originally
consisted of two compa- |
|
|
|
| nies
and two products: Henri |
|
|
|
| Nestle
and his baby food in Vevey, |
|
|
|
| and
the Anglo-Swiss Condensed |
|
|
|
| Milk
Company and its condensed |
|
|
|
| milk
in Cham, both in Switzerland. |
|
|
|
|
|
|
|
|
| In
1886 the Page Brothers from the |
|
|
|
| United
States set up a new industry |
|
|
|
| in
Chain, making condensed milk |
|
|
|
| from
a raw material that was avail- |
|
|
|
| able
in abundance in the region. In |
|
|
|
| 1867
Henri Nestle, a chemist in |
|
|
|
|
| Vevey,
created a milk and cereal |
|
|
|
| based
food which promptly saved |
|
|
|
| the
life of a baby which its mother |
|
|
|
| could
not feed. The companies |
|
|
|
|
| competed
vigorously until 1905, |
|
|
| when
they merged and became the |
|
| starting
point of the present food group. |
|
|
|
|
| Dynamic
Expansion |
|
|
| The
history of Nestle includes the |
|
| development
of many different |
|
|
| products
as well as acquisitions, |
|
|
| mergers
and the purchasing of |
|
|
| shares
in companies, mainly |
|
|
| abroad.
Over the course of the |
|
|
| years,
this enabled it to broaden its |
|
| range
of products and diversify its |
|
| operations,
while at the same time |
|
| strengthening
the economic foun- |
|
| dations
of the company. Amongst |
|
| the
most important acquisitions |
|
|
| were
Carnation in Los Angeles |
|
|
| (milk,
culinary products and pet |
|
|
| foods)
and more recently Rowntree |
|
| Mackintosh
in York (chocolate and |
|
| confectionery),
Buitoni in Perugia |
|
| (pasta)
as well as Perrier in France |
|
| (mineral water). |
|
|
| Nestle,
which does 98% of its busi- |
|
| ness
outside Switzerland, also has |
|
| interests
in non-food sectors, in |
|
| cosmetics
(a large share holding in |
|
| L'Oreal)
and ophthalmic products |
|
| (acquisition
of Alcon laboratories |
|
| Inc.)
while continuing to give priori- |
|
| ty
to food products. |
|
|
|
|
|
|
|
|
| Nestle
is now the world's largest |
|
| food
company. It is present on all |
|
| five
continents, has an annual |
|
| turnover
of 60 billion Swiss francs, |
|
| runs
495 factories in 75 countries, |
|
| 200
operating companies, 1 basic |
|
| research
center and 20 technologi- |
|
| cal
development groups and more |
|
| than
220,000 employees the world over. |
|
|
| The
Company owes its current sta- |
|
| tus
to the pioneering spirit inherited |
|
| from
its founders which continues |
|
| to
inspire it, to its concern with |
|
|
| quality
and to its constant search |
|
|
| for
new ways of satisfying man's |
|
| nutritional
needs. |
|
|
|
| Wherever
possible, it sets up facto- |
|
| ries
locally, employs personnel from |
|
| the
country .concerned and relies |
|
| on
indigenous raw materials. Its |
|
|
| agricultural
services provide assis- |
|
| tance
to improve the quality and |
|
|
| yield
of the raw materials it uses. |
|
| Much
attention is devoted to pro- |
|
| fessional
training and to the inte- |
|
|
| gration
of the company in its eco- |
|
| nomic
and social environment. |
|
|
|
|
|
|
|
|
| Business
Review |
|
| A
decade of achievement (1988-98) |
|
|
| Milk
Collection |
|
| The
core raw material of Nestle |
|
| Milkpak
is milk. Over the last ten |
|
| years,
the company's prime con- |
|
| cern
has been to improve the qual- |
|
| ity
and volume of milk for UHT pro- |
|
| cessing
and for other milk based |
|
| products.
Driven by its commit- |
|
| ment
to quality and having realized |
|
| that
only self collection could elim- |
|
| inate
its dependence on poor qual- |
|
| ity
milk available from outside |
|
| sources,
the company successfully |
|
| established
its own collection sys- |
|
| tem
and expanded its operations |
|
| over
a very large milk shed area in |
|
| Punjab
over the last ten years. |
|
| Owing
to this tremendous growth |
|
| in the volume of an extremely
high |
|
| quality raw milk, Nestle
Milkpak |
|
| now
produces a superior quality |
|
| and better tasting UHT milk,
with |
|
| longer shelf life. |
|
|
|
| Today,
Nestle Milkpak can boast of |
|
|
| the
largest milk collection network |
|
|
| in
the country, unmatched in size, |
|
|
| productivity
and efficiency. Milk is |
|
|
| collected
through a vast network of |
|
|
| village
milk centers (VMCs), sub- |
|
| centers
and centers. At these cen- |
|
| ters,
chillers have been installed to |
|
| preserve
milk prior to long hauls to |
|
| the
factories, which are undertaken |
|
| by
a large fleet designed tankers. |
|
|
| In
terms of quality, the milk collected by Nestle |
|
| Milkpak
is low in sodium, high in fat and solid-non- |
|
| fats
(SNF) and very low in Total Plate Count |
|
| (TPC)
which, stated simply, means the bacteria |
|
| count.
This was achieved through a comprehensive |
|
| strategy
and sustained efforts to overhaul the milk |
|
| collection
process, intensive educa- |
|
|
|
| tion
program for the farmers and |
|
|
|
| the
milk collection staff, upgrada- |
|
|
|
| tion
of milk loading and transporta- |
|
|
|
| tion
system, increase in the chilling |
|
|
|
| capacity
and above all, adherence |
|
|
|
| to
the highest acceptance stan- |
|
|
|
| dards
at all milk collection points, |
|
|
|
| including
the factories. |
|
|
|
|
|
|
|
|
| As
a service to farmers, Nestle |
|
|
|
| Milkpak
has established an |
|
|
|
| Extension
Service, staffed by |
|
|
|
| qualified
veterinary doctors, who |
|
|
|
| assist
them in vaccination and |
|
|
|
| treatment
of livestock, improved |
|
| breeding,
good animal husbandry |
|
| practices,
provision of high yield |
|
| fodder
seed etc. By taking |
|
| professional
help and guidance to |
|
| their
doorsteps, which they |
|
| otherwise
find difficult to access, |
|
| coupled
with incentives and a good |
|
| and
prompt return for their milk, |
|
| Nestle
Milkpak has created a |
|
| mutually
beneficial relationship |
|
| with
the farmers, which translates |
|
| into
opportunities of economic |
|
| uplift
for the rural population. |
|
|
|
|
| Production |
|
|
| Sheikhupura
Factory |
|
| The
joint venture between Nestle SA of Switzerland and Milkpak Ltd. |
|
| came
about in 1988, as a consequence of which the existing production |
|
| facility
of Milkpak in Sheikhupura became a part of Nestle Milkpak. |
|
|
| The
Milkpak plant had originally begun operations in 1979 as a producer |
|
| of
UHT milk. By 1988, it had expanded its operation and was also pro- |
|
| ducing
butter, cream, desi ghee - all under the brand name of Milkpak, |
|
| and
juice drinks under the brand name FROST. |
|
|
| For
the large food market that |
|
|
| Pakistan
offered, the joint venture |
|
|
| had
an ambitious portfolio of |
|
|
| expansion
plans. While re-organiz- |
|
|
| ing
and re-inforcing the production |
|
|
| of
existing brands, it lost no time in |
|
|
| giving
shape to new production |
|
|
| lines.
The first to come was a milk |
|
|
| powder
plant, which not only |
|
|
| began
producing NIDO in 1990, but |
|
|
| was
also critical to the production |
|
|
| of
several milk based products in |
|
|
| the
future. With the installation of |
|
|
| the
roller dryer, the first such prod- |
|
|
| uct
to come was CERELAC - an |
|
|
| internationally
recognized brand of |
|
|
| infant
cereal, in the same year. This |
|
|
| was
followed by NESTUM in 1991. |
|
|
| Utilizing
the milk powder plant, |
|
|
| LACTOGEN
1 & 2 were also |
|
| launched
in 1991. |
|
|
|
|
| The
year 1992 saw the introduction |
|
| of
a tea whitener EVERYDAY and |
|
| milk
powder in bulk packing named |
|
| GLORIA.
MILO and NESLAC came |
|
| under
production in 1994and MILO |
|
| RTD
in 1995. Local packing of |
|
| imported
coffee under the name of |
|
| NESCAFE
3 in 1 commenced the |
|
| same
year. In 1996, Nestle |
|
| Milkpak's
first confectionery plant |
|
| of
POLO was installed and other |
|
| lines
of EVERYDAY UHT MILK, |
|
| NESTLE
ORANGE JUICE and |
|
| NESTEA
were also added. |
|
| Packaging
of coffee under the |
|
| brand
name of NESCAFE CLASSIC |
|
| was
also undertaken the same year. |
|
|
|
|
| Kabirwala
Factory |
|
| Kabirwala
Dairy Ltd. (KDL), as it |
|
| was
then called, was established in |
|
| 1983
as UHT milk processing plant. |
|
| In
1985, Milkpak Ltd. acquired the |
|
| services
of KDL for partial milk pro- |
|
| duction
and later in 1986 for co- |
|
| packing.
Nestle Milkpak acquired |
|
| KDL
in 1990 as a subsidiary and |
|
| began
installation work on a |
|
| MAGGI
NOODLES plant in 1991. |
|
| This
unit went into production in |
|
| 1992
with two flavors: Chicken and |
|
| Masala. |
|
|
| Construction
and installation work |
|
| on
the second milk powder plant at |
|
| Kabirwala
was completed on |
|
| September
15, 1996. The plant pro- |
|
| duces
NIDO, GLORIA and skim milk |
|
| powder.
The UHT line was discon- |
|
| tinued
in June 1996, and the same |
|
| year
witnessed the launching of the |
|
| MAGGI
YAKHNI line with 3 flavors: |
|
| Chicken,
Masala and Chatpata. |
|
|
| With
the merger of this factory with |
|
| Nestle
Milkpak in April 1997, |
|
| Kabirwala
Factory, as it is now |
|
| called,
is a fully owned unit of |
|
| Nestle
Milkpak Ltd |
|
|
|
| Marketing
(Milk) |
|
|
| MILKPAK
UHT MILK |
|
| This
is the flagship product of the |
|
| Milkpak
range. Launched in 1981, |
|
| it
was the second UHT |
|
| milk
brand in Pakistan. |
|
|
|
| Today,
it is the market |
|
|
|
| leader,
with a very high |
|
|
|
| name
recognition and, |
|
|
|
| undoubtedly,
a symbol |
|
|
|
| of
quality. Its re-launch in |
|
|
|
| 1997
with a beautiful |
|
|
|
| new
pack design and its |
|
|
|
| positioning
as perfectly |
|
|
|
| pure,
natural and very |
|
|
|
| high
quality milk, have |
|
|
|
| all
contributed to the tremendous |
|
|
|
| success
and strength of the brand. |
|
|
| MILKPAK
UHT MILK is available in |
|
|
| three
pack sizes of 1000, 500 and |
|
|
| 250 mi. |
|
|
|
|
|
| MILKPAK BUTTER |
|
|
| The
second product introduced |
|
|
|
| under
the Milkpak brand in 1985 |
|
|
|
| was
Milkpak Butter. It has been |
|
|
|
| recently
re-packaged in a crisp |
|
|
|
| white
laminate, the design of |
|
|
|
| which
bears close resemblance |
|
|
|
| to
that of MILKPAK UHT |
|
|
|
| MILK.
While the new pack |
|
|
