| PAKISTAN ENGINEERING COMPANY LIMITED |
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| ANNUAL
REPORT 1998 |
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| CONTENTS |
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| Company
Information |
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| Notice
of Annual General Meeting |
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| Chairman's
Review |
|
| Directors'
Report |
|
| Pattern
of share holding |
|
| Ten
Years at a Glance |
|
| Auditors'
Report |
|
| Balance
Sheet |
|
| Profit
and Loss Account |
|
| Cash
Flow Statement |
|
| Notes
to the Accounts |
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|
|
| COMPANY
INFORMATION |
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|
| CHAIRMAN |
|
Mr. Hussain Ahmad
Siddiqui |
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|
|
| CHIEF
EXECUTIVE |
Mr. M. Javed Sahibzada |
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|
| DIRECTORS |
|
Mr. Sajjad Haider |
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|
Mr. Mairaj Ahmed Sheikh |
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|
Mr. Afaq Jamal Hussain |
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|
Mr. S. M. Ahsan Raza |
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|
Syed Aijaz Ali Abbasi |
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|
Mr. Liaqat Mohammad |
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|
Mr. Mohammad Shabir Malik |
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|
Sheikh Asif Salam |
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|
| BANKERS |
|
National Bank of Pakistan |
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|
National Development
Finance Corporation |
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|
Habib Bank Limited |
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|
| AUDITORS |
|
S.M. Masood |
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|
Chartered Accountants |
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| REGISTERED
OFFICE |
6-Ganga Ram Trust
Building, |
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|
Shahrah-e-Quaid-e-Azam, |
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|
Lahore. |
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| BRANCHES |
|
Karachi |
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Islamabad |
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Peshawar |
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Quetta |
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| PLANT |
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Kot Lakhpat, Lahore |
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| NOTICE
OF ANNUAL GENERAL MEETING |
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| Notice
is hereby given that the 49th Annual General Meeting of PAKISTAN |
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| ENGINEERING
COMPANY LIMITED will be held at Hotel Ambassador, 7-Davis Road, |
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| Lahore.
on Thursday December 31, 1998 at 10.30 A.M. to transact the following |
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| business:- |
|
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| 1)
To confirm minutes of 48th Annual General Meeting held on |
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| December,
29, 1997. |
|
|
| 2)
To receive, consider and adopt the Audited Accounts of the |
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| Company
for the year ended June 30, 1998 together with the |
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| Auditors'
and Directors' reports thereon. |
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| 3)
To appoint auditors for the year ending June 30, 1999 and to fix |
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| their
remuneration. The present Auditors NVs. S.M. Masood |
|
| Company,
Chartered Accountants being eligible for reappointment |
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| have
offered themselves for reappointment. |
|
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| 4)
To transact any other business with the permission of the Chair. |
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|
BY ORDER OF THE BOARD |
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|
(M. IMTIAZ-UR-RAHEEM) |
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| Dated:
December 5, 1998 |
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COMPANY SECRETARY |
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| NOTES: |
|
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| 1.
The Share Transfer Books of the Company shall remain closed from |
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| December
29, 1998 to January 5, 1999 (Both days inclusive). |
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|
|
| 2.
A member entitled to attend and vote at this meeting may appoint |
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| any
person as his/her proxy to attend the meeting and vote for |
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| him/her.
Proxies in order to be effective must be received by the |
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| Company
not less than 48 hours before the meeting. |
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|
|
|
| 3.
Shareholders are requested to notify the change of address, if any, |
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| immediately. |
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| CHAIRMAN'S
REVIEW |
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|
| I
welcome you to the 49th Annual General meeting of the Company and |
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| to
present its audited accounts for the year ended June 30, 1998 alongwith |
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| Auditors'
Report. |
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|
| OPERATING
RESULTS: |
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| The
year under review was full of domestic and international events which |
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| had
affected the economic activities in the country. The major customers of your |
|
| Company
are WAPDA and other Government departments. With the installation of |
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| power
projects in private sector and privatization of WAPDA's Generation Plants, |
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| the
resources of WAPDA were adversely squeezed. Economic sanctions imposed |
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| by
the lending agencies also affected WAPDA. The Third Circuit Project valuing |
|
| approximately
Rs. 650 million, which was recommended in April 1997 to be |
|
| awarded
to your Company under financial arrangement with World Bank, was |
|
| consequently
not implemented. This was a great set-back to your Company as it |
|
| had
severe impact on the operations during the year under review. Because of |
|
| non-availability
of foreign loans to WAPDA, it was forced to ask for bidders' long |
|
| term
financing on turn key basis. Unfortunately, due to many structural changes in |
|
| WAPDA.,
even the projects based on suppliers credit could not be finalized. The |
|
| result
was that during the year under review, there was not a single order placed |
|
| by
WAPDA on PECO. |
|
|
| The
above factors coupled with increase in energy cost and general |
|
| inflationary
trend in the country had a stunning blow on the operating results of |
|
| your
Company during the year ended June 30, 1998. Due to shrinkage of |
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| industrial
activity, there was cut throat competition with private sector in other |
|
| areas
of business. With no option available, some products had to be sold on |
|
| marginal
cost to atleast recover the variable cost. The sales resultantly declined |
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| from
Rs. 603 million during previous year to Rs. 358 million during the current |
|
| year.
As a result, the Company incurred a loss of Rs. 167 million as against a |
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| profit
of Rs. 26 million last year. |
|
|
| FUTURE
OUT LOOK: |
|
| Since
it was not possible to handle WAPDA's project on turn key basis |
|
| and
arrange long term credit, the Company participated as sub-contractors to the |
|
| foreign
,suppliers. Direct participation was made where the financing was available |
|
| to
WAPDA from some foreign banks. It is hoped that some business will be |
|
| available
from WAPDA/foreign suppliers. |
|
|
| The
Management however took a few remedial measures to overcome the |
|
| order
shortage with a view to utilize the available production facilities. It |
|
| succeeded
in obtaining some orders for supply of iron bars for Ghazi Brotha |
|
| Project
from the foreign contractors, besides few private sector construction |
|
| companies.
The Company was also able to secure orders from PTCL for steel |
|
| poles
and structure. Steel fabrication jobs are also being negotiated, besides |
|
| providing
special steel to POF and other such customers. |
|
|
| The
Company is also negotiating with foreign organizations to improve its |
|
| technology
in the fields of Textile Looms and Pumps. The designing capabilities, |
|
| which
had been deteriorated over time, are also being seriously considered for |
|
| improvement
and up-gradation. The Management of the Company is seriously |
|
| working
on these short term plans to maximize utilization of production facilities. |
|
| The
other area which is receiving special attention of the Management is
marketing |
|
| and
sales promotion of Company's products in order to promote sales, |
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| particularly
through exports. |
|
|
| Your
Company is on active privatization list of the Government. The |
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| Privatization
Commission has already appointed a Financial Advisor to assist the |
|
| Government
in the privatization process of the Company. |
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|
| PROGRESS
OF MACHINERY SHIFTING: |
|
| The
installation and erection of Machinery and Steel Structure, as |
|
| indicated
in the last year's review, was in its final stage. During the current year, |
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| Rolling
Mills have been fully commissioned, while Cast Iron Foundry and Pattern |
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| Shop
are in advanced stage of completion. As no further release of funds was |
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| made
by the Government, installation of these shops is being carried out through |
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| Company's
own resources. |
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| ACKNOWLEDGEMENT: |
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| In
the end, I would like to appreciate the efforts of the Directors, |
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| Management,
Executives, Staff and Workers who are contributing to the best of |
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| their
abilities to combat the adverse economic factors affecting the operations of |
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| your
Company and trying to steer it out from the present predicament. |
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|
| Thank you. |
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|
|
|
HUSSAIN AHMAD SIDDIQUI |
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|
|
CHAIRMAN |
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| Dated:
December 5, 1998 |
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|
|
| DIRECTORS'
REPORT TO THE SHAREHOLDERS |
|
|
| The
Directors have privilege to place before you the 49th Annual Report |
|
| with
the Audited Accounts for the year ended June 30, 1998 together with |
|
| Auditors'
Report thereon: |
|
|
| ACCOUNTS |
|
|
(RUPEES IN THOUSAND) |
|
| Loss
for the year before taxation |
|
167,128 |
|
| Taxation
(Turnover Tax) |
|
1,790 |
|
| Loss
after taxation |
|
168,918 |
|
| Loss
Brought Forward |
|
779,802 |
|
| Accumulated
Loss |
|
948,720 |
|
|
| BOARD
OF DIRECTORS |
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| During
the year under review Mr. Hussain Ahmad Siddiqui Chairman SEC and |
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| Mr.
Sajjad Haider of Ministry of Industries & Production replace Dr. M. Akram |
|
| Sheikh
and Mr. Imtiaz Rasool respectively as Directors. |
|
|
| AUDITORS |
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| The
retiring auditors Messrs S.M. Masood & Company, Chartered |
|
| Accountants
offer themselves for re-appointment. |
|
|
|
|
On behalf of the Board |
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|
|
|
|
|
|
(HUSSAN AHMAD SIDDIQUI) |
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|
|
CHAIRMAN |
|
|
| Dated:
December 5, 1998 |
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|
|
| PATTERN
OF SHARE HOLDING AS AT JUNE 30, 1998 |
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|
| No. of |
|
Total |
|
| Shareholders |
|
Shareholding |
|
Shares held |
|
|
Ordinary |
|
| 1,495 |
From |
1 |
To |
100 |
Shares |
47,212 |
|
|
| 758 |
" |
101 |
" |
500 |
" |
193,107 |
|
|
| 262 |
" |
501 |
" |
1,000 |
" |
193,071 |
|
|
| 221 |
" |
1,001 |
" |
5,000 |
" |
510,847 |
|
|
| 54 |
" |
5,001 |
" |
10,000 |
" |
409,008 |
|
|
| 18 |
" |
10,001 |
" |
15,000 |
" |
224,888 |
|
|
| 10 |
" |
15,001 |
" |
20,000 |
" |
181,400 |
|
|
| 2 |
" |
20,001 |
" |
25,000 |
" |
47,890 |
|
|
| 1 |
" |
25,001 |
" |
30,000 |
" |
29,800 |
|
|
| 3 |
" |
30,001 |
" |
35,000 |
" |
102,738 |
|
|
| 1 |
" |
35,001 |
" |
40,000 |
" |
37,800 |
|
|
| 1 |
" |
40,001 |
" |
45,000 |
" |
43,776 |
|
|
| 2 |
" |
50,001 |
" |
55,000 |
" |
101,920 |
|
|
| 1 |
" |
65,001 |
" |
70,000 |
" |
66,600 |
|
|
| 1 |
" |
115,001 |
" |
120,000 |
" |
116,600 |
|
|
| 1 |
" |
160,001 |
" |
165,000 |
" |
163,457 |
|
|
| 1 |
" |
165,001 |
" |
170,000 |
" |
165,254 |
|
|
| 1 |
" |
320,001 |
" |
325,000 |
" |
322,532 |
|
|
| 1 |
" |
480,001 |
" |
485,000 |
" |
480,840 |
|
|
| 1 |
" |
835,001 |
" |
840,000 |
" |
835,782 |
|
|
| 1 |
" |
1,415,001 |
" |
1,420,000 |
" |
1,415,723 |
|
|
| ---------- |
|
|
|
|
|
---------- |
|
|
| 2,836 |
|
TOTALS |
|
5,690,245 |
|
|
| ========== |
|
========== |
|
|
|
| CATEGORIES
OF |
|
NUMBER OF |
SHARES HELD |
PERCENTAGE |
|
| SHAREHOLDERS |
|
SHAREHOLDERS |
|
|
|
| Individuals |
|
2802 |
2021905 |
35.53 |
|
|
| Investment
Companies (Govt, Owned) |
2 |
213577 |
3.75 |
|
|
|
(Private) |
4 |
11870 |
21 |
|
|
| Insurance
Companies (Govt. Owned) |
2 |
209030 |
3.67 |
|
|
|
(Private) |
3 |
130528 |
229 |
|
|
| Financial
Institutions (Govt. Owned) |
7 |
1326120 |
23.31 |
|
|
|
(Private) |
4 |
341467 |
6.00 |
|
|
| Modaraba
Companies |
|
2 |
11800 |
0.21 |
|
|
| OTHERS |
|
|
|
|
| The
Custodian of Enemy Property |
1 |
390 |
1 |
|
|
| M/s.
Corporate Law Authority |
1 |
1 |
- |
|
|
| State
Engineering Corpn, Ltd, |
1 |
1415723 |
24.88 |
|
|
| The
Deputy Administrator |
|
|
|
| Abandoned
Properties |
|
1 |
5754 |
10 |
|
|
| Foreign
Participation |
|
6 |
2080 |
0.04 |
|
|
|
---------- |
---------- |
---------- |
|
|
| TOTAL |
|
2836 |
5690245 |
100.00 |
|
|
|
========== |
========== |
========== |
|
|
|
|
| TEN
YEARS AT A GLANCE |
|
|
|
|
|
(Rupees in Thousand) |
|
|
|
|
| DESCRIPTION |
|
1,989 |
1,990 |
1,991 |
1992 |
1993 |
1994 |
1995 |
1996 |
1997 |
1998 |
|
|
|
|
|
| Sales (Net) |
|
802,055 |
837,033 |
571,349 |
668,049 |
862,675 |
449,081 |
360,742 |
842,255 |
603,433 |
358,081 |
|
| Cost
of Sales |
|
650,942 |
706,131 |
485,628 |
594,496 |
775,818 |
504,372 |
411,142 |
757,423 |
466,359 |
397,251 |
|
| Trading
Profit/(Loss) |
|
151,113 |
130,902 |
85,721 |
73,553 |
86,857 |
(55,291) |
(50,400) |
84,832 |
137,074 |
(39,170) |
|
| Other
Income |
|
8,325 |
7,965 |
8,736 |
8,656 |
4,964 |
2,539 |
5,122 |
11,444 |
15,403 |
12,658 |
|
| Admin.
General Selling Exp. |
50,888 |
55,578 |
69,100 |
66,745 |
72,688 |
72,223 |
55,798 |
61,903 |
61,672 |
64,576 |
|
| Financial
Expenses |
|
94,516 |
117,107 |
102,131 |
107,098 |
122,408 |
132,552 |
16,877 |
51,893 |
56,458 |
63,010 |
|
| Workers'
Profit Participation Fund |
656 |
- |
- |
- |
- |
- |
- |
- |
1,374 |
- |
|
| Other
Charges |
|
3,000 |
- |
- |
- |
850 |
1,259 |
6,955 |
15,152 |
6,860 |
13,030 |
|
| Net
Profit/(Loss) for the year |
10,378 |
(33,818) |
(76,774) |
(91,634) |
(104,125) |
(258,786) |
(124,908) |
(32,672) |
26,113 |
(167,128) |
|
| Prior
year's Adjustments |
- |
- |
(52,827) |
(3,328) |
(4,767) |
- |
- |
4,110 |
- |
- |
|
| Profit/(Loss)
before Taxation |
10,378 |
(33,818) |
(129,601) |
(94,962) |
(108,892) |
(258,786) |
(124,908) |
(28,562) |
26,113 |
(167,128) |
|
| Provision
for Taxation |
|
5,800 |
- |
(1,547) |
(3,840) |
2,833 |
- |
8,458 |
4,226 |
3,017 |
1,790 |
|
| Profit/(Loss)
after Taxation |
4,578 |
(33,818) |
(131,148) |
(98,802) |
(106,059) |
(258,786) |
(133,366) |
(32,788) |
23,096 |
(168,918) |
|
| Dividends |
|
375 |
- |
- |
375 |
- |
- |
- |
- |
8,535 |
- |
|
| Paid
up Capital |
|
61,902 |
56,902 |
56,902 |
56,902 |
56,902 |
56,902 |
56,902 |
56,902 |
56,902 |
56,902 |
|
| Fixed
Capital Expenditure |
93,868 |
97,773 |
97,907 |
1,016,653 |
1,010,478 |
1,003,567 |
1,005,336 |
1,034,404 |
1,295,224 |
1,259,635 |
|
|
|
|
|
|
|
| REPORT
TO THE MEMBERS |
|
|
| We
have audited the annexed Balance Sheet of PAKISTAN ENGINEERING COMPANY
LIMITED as at |
|
| June
30, 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: |
|
|
| During
the year Company has reduced the rate of depreciation on Building and Plant
& machinery |
|
| from
10% to 5% which has resulted in reduction of depreciation charge as well as
losses for the |
|
| year
by Rs. 14.525 million. |
|
|
| Except
for above and to the extent to which it affect the results of the Company, we
have obtained all the |
|
| information
and explanations which to the best of our knowledge and belief were necessary
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 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,
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 June 30, 1998 and of the LOSS and
the |
|
| Changes
in Financial Position 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. |
|
|
| Date:
December 5, 1998. |
|
(S.M. MASOOD & co.) |
|
| Place:
LAHORE. |
|
Chartered Accountants |
|
|
|
| BALANCE
SHEET AS AT JUNE 30, 1998 |
|
|
|
|
|
(Rupees in Thousand) |
|
|
|
Note |
1998 |
1997 |
|
| FIXED
CAPITAL EXPENDITURE |
|
|
| TANGIBLE
FIXED ASSETS |
|
3 |
1,212,269 |
1,254,125 |
|
| ASSETS
SUBJECT TO FINANCE LEASE |
|
4 |
1,000 |
0 |
|
| CAPITAL
WORK IN PROGRESS |
|
5 |
46,366 |
41,099 |
|
|
|
|
---------- |
---------- |
|
|
|
|
1,259,635 |
1,295,224 |
|
| STATE
ENGINEERING CORPORATION |
|
|
| PENSION
FUND |
|
6 |
20,413 |
33,810 |
|
| LONG
TERM SECURITY DEPOSIT |
|
|
1,777 |
1,818 |
|
| LONG
TERM INVESTMENTS |
|
7 |
315 |
800 |
|
| DEFERRED
COST |
|
8 |
14,482 |
20,189 |
|
|
|
|
1,296,622 |
1,351,841 |
|
| CURRENT
ASSETS |
|
|
|
| Assets
held for Sale |
|
9 |
50,750 |
0 |
|
| Loose Tools |
|
|
25,418 |
25,000 |
|
| Stores
& Spares |
|
10 |
87,041 |
99,801 |
|
| Stock
in Trade |
|
11 |
352,608 |
389,435 |
|
| Trade
Debtors |
|
12 |
166,778 |
328,491 |
|
| Loans
& Advances to Employees |
|
13 |
6,758 |
9,517 |
|
| Advances
to Others |
|
14 |
12,390 |
62,547 |
|
| Trade
Deposits, Prepayments & Other Receivable |
15 |
18,956 |
30,574 |
|
| Cash
& Bank Balances |
|
16 |
7,214 |
14,923 |
|
|
|
|
---------- |
---------- |
|
|
|
|
727,913 |
960,288 |
|
|
|
|
| CURRENT
LIABILITIES |
|
|
|
| Short
Term Loans |
|
|
128,798 |
213,697 |
|
| Privatization
Commission Loan |
|
334,606 |
334,606 |
|
| Government
Escrow Account |
|
161,292 |
146,495 |
|
| Current
Maturity against Finance Lease |
|
144 |
0 |
|
| Deposits
& Advance Payments |
|
17,188 |
20,595 |
|
| Trade
Creditors |
|
|
8,577 |
86,959 |
|
| Accrued
Liabilities / Mark-up |
|
57,619 |
50,690 |
|
| Provision
for Taxation |
|
|
1,791 |
3,017 |
|
| Unclaimed
Dividend |
|
|
1,153 |
1,153 |
|
| Dividend
Payable |
|
|
372 |
8,907 |
|
| Other
Liabilities |
|
|
90,238 |
60,845 |
|
|
|
|
|
---------- |
---------- |
|
|
|
801,778 |
926,964 |
|
|
|
---------- |
---------- |
|
| CURRENT
ASSETS LESS CURRENT LIABILITIES |
|
(73,865) |
33,324 |
|
|
|
|
|
---------- |
---------- |
|
| TOTAL
ASSETS LESS CURRENT LIABILITIES |
|
1,222,757 |
1,385,165 |
|
| CONTINGENCIES
& COMMITMENTS |
|
23 |
0 |
0 |
|
| LONG
TERM & DEFERRED LIABILITIES |
|
|
| Government
Loan |
|
|
24 |
100,000 |
100,000 |
|
| Federal
Government Bonds |
|
25 |
787,442 |
787,442 |
|
| Liabilities
against Assets Subject to Finance Lease |
26 |
1,045 |
0 |
|
| Deferred
Liabilities |
|
|
|
50,945 |
45,480 |
|
|
|
|
|
|
---------- |
---------- |
|
|
|
|
939,432 |
932,922 |
|
|
|
|
---------- |
---------- |
|
| NET
TOTAL ASSETS |
|
|
283,325 |
452,243 |
|
|
|
|
|
========== |
========== |
|
|
|
|
|
| REPRESENTED
BY |
|
|
|
| Share
Capital |
|
27 |
56,902 |
56,902 |
|
| Revenue
Reserve- General |
|
|
10,000 |
10,000 |
|
| Accumulated
(Loss) |
|
|
(948,720) |
(779,802) |
|
|
|
|
---------- |
---------- |
|
|
|
|
(881,818) |
(712,900) |
|
| Revaluation
Surplus |
|
28 |
1,165,143 |
1,165,143 |
|
|
|
|
---------- |
---------- |
|
| TOTAL
CAPITAL & RESERVES |
|
|
283,325 |
452,243 |
|
|
|
|
========== |
========== |
|
|
| M.
JAVED SAHIBZADA |
LIAQAT MOHAMMAD |
MOHAMMAD SHABIR MALIK |
|
| Managing
Director |
Director |
|
Director |
|
|
|
|
|
| PROFIT
& LOSS ACCOUNT FOR |
|
| THE
YEAR ENDED JUNE 30, 1998 |
|
|
|
|
|
(Rupees in Thousand) |
|
|
|
Note |
1998 |
1997 |
|
|
|
|
| SALES |
|
29 |
358,081 |
603,433 |
|
| COST
OF GOODS SOLD |
|
30 |
397,251 |
466,359 |
|
|
|
|
---------- |
---------- |
|
| GROSS
PROFIT/(Loss) |
|
|
(39,170) |
137,074 |
|
| OPERATING
EXPENSES |
|
|
|
|
|
|
| General
& Administrative |
|
31 |
46,997 |
47,569 |
|
| Selling
& Distribution |
|
32 |
17,579 |
14,103 |
|
|
|
|
---------- |
---------- |
|
|
|
|
64,576 |
61,672 |
|
|
|
|
|
|
| OPERATING
PROFIT/(LOSS) |
|
|
|
(103,746) |
75,402 |
|
| FINANCIAL
CHARGES |
|
|
33 |
63,010 |
56,458 |
|
|
|
|
---------- |
---------- |
|
|
|
|
(166,756) |
