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Ravi Ravon Limited
Annual Report 1998
CONTENTS
Board of Directors
Notice of Meeting
Chief Executive's Report
Auditors' Report
Balance Sheet
Profit & Loss Account
Statement of Changes
in Financial Position
(Cash Flow Statement)
Notes to the Accounts
Pattern of Holding of Shares
BOARD OF DIRECTORS
CHAIRMAN
DR. MUHAMMAD AMJAD
CHIEF EXECUTIVE
MR. IFTIKHAR MAHMOOD RANDHAWA
DIRECTORS
MR. NAVEED AHMAD
SYED MUKHTAR HAlDER SHAH
MR. MUHAMMAD SHAFI
MR. ZAHID AHMAD
DR. MASOOD FAIZULLAH
DR. ZAFARULLAH SHEIKH
SECRETARY
MR. LIAQAT ALl KHAN
BANKERS
UNITED BANK LIMITED
INDUSTRIAL DEVELOPMENT BANK OF PAKISTAN
AUDITORS
FORD, RHODES, ROBSON, MORROW
Chartered Accountants
REGISTERED OFFICE & WORKS
KALA SHAH KAKU
District Sheikhupura
NOTICE OF MEETING
Notice is hereby given that the 37th Annual General Meeting of the Shareholders of the Company
will be held at Faletti's Hotel, Lahore, on Tuesday, January 26, 1999 at 3.00 p.m. under the
Chairmanship of the Chief Executive to transact the following business.
1. To confirm the minutes of the last Annual General Meeting held on 30-03-1998.
2. To receive and adopt the accounts of the Company for the year ended June 30, 1998
together with the Auditors' and Directors' report thereon.
3. To appoint Auditors for the year 1998-99 and to fix their remuneration.
M/s. Ford, Rhodes, Robson, Morrow, Chartered Accountants, the retiring Auditors,
being eligible offer themselves for re-appointment.
4. To transact any other business of the Company that may be placed before the meeting
with the permission of the Chairman.
The Share Transfer Books of the Company will remain closed from 24th January to 26th January,
1999 (Both days inclusive).
by Order of the Board
LIAQAT ALl KHAN
Lahore: Secretary
Dated: 01-01-1999. Corporate Affairs
NOTES:
1. A member entitled to attend and vote at this meeting may appoint another member as
his/her proxy to attend the meeting and vote instead of him/her. Proxies in order to be
effective must be received by the Company not less than 48 hours before the meeting.
2. Shareholders are requested to promptly notify the Company of any changes in their
addresses.
CHIEF EXECUTIVE'S REVIEW FOR SHAREHOLDERS
I on behalf of the Board of Directors present the 37th Annual Report together with audited
accounts for the year ended 30th June 1998. During the year under review Company sustained a
loss of Rs. 206.865 million.
I had informed you in my last year's review for the shareholders that the operations of the
Company have been closed down following the decision of Cabinet Committee on Privatization
(CCOP). The Committee had also decided in the same meeting to pick up all liabilities of the
Company which as on 31-5-1997 stood at Rs. 840 million and relieve the employees by offering
them GHs/vss before re-offering Ravi Rayon Ltd. for privatization. As administrative measure, 98
workers who had not taken GHS were transferred to FCCCL. High Court, however, granted them
'Stay' and their case is now being heard in NIRC. Apart from these 98 workers, 40 executives
remain on roll. Funds for their release under VSS are awaited from Privatization Commission.
As a result of forementioned reasons all production activities of the Company remained suspended
and burden of fixed overheads such as salaries and wages for remaining 40 officers and 98
workers of the Company, utility bills and other expenses. were financed through borrowings from
the holding Corporation, M/s. Federal Chemical & Ceramics Corporation Limited.
Net sales out of the stocks during the year under review were Rs. 74.214 million as compared to
last year sales of Rs. 464.918 million. Inventories of Finished Goods have now almost exhausted.
The entire requirement of funds is, therefore, being met through borrowings from FCCCL.
The plant and machinery, due to long period of closure had started showing signs of rust and
damage. However, in order to preserve valuable hardware of your Company, FCCCL has very
kindly given a special grant of Rs. 2.4 million. With the help of these funds essential maintenance
from point of view of preserving the plant and machinery has been carried out and completed in
November, 1998 which will prevent any permanent damage being done to the plants for some
time.
ACKNOWLEDGEMENT
We are grateful to Federal Chemical & Ceramics Corporation Limited, Ministry of Industries &
Production, and Privatization Commission, for providing necessary support and extending' every
help in guiding the affairs of the Company. Their valuable guidance and financial help gave us
support in dealing with various difficulties.
AUDITORS
The present Auditors M/s. Ford, Rhodes, Robson, Morrow, retire and being eligible offer
themselves for re-appointment as Auditors for the year 1998-99.
PATTERN OF SHAREHOLDERS
The pattern of shareholding is annexed.
For and on behalf of the Board of Directors
IFTIKHAR MAHMOOD RANDHAWA
Chief Executive
AUDITORS' REPORT TO THE MEMBERS
We have audited the annexed Balance Sheet of Ravi Rayon Limited as at June 30, 1998 and the
related Profit and Loss Account and Statement of Sources and Application of Funds, 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 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) (i) The going concern basis used for the preparation of financial statements is not
appropriate because the company's manufacturing operation was shut down in
July 1997 and most of the employees were laid off as explained in Note-1 to the
financial statements. Further there is no concrete evidence available which
suggests that the company would reactivate its operation in the foreseeable
future. Consequently, adjustment may be required to the recorded assets
amounts and classification of liabilities. The financial statements do not disclose
this fact.
(ii) Except for the omission of the information included in paragraph (c) (i) above, 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 Sources and
Application of Funds, 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 sources and
application of funds for the year then ended; and
(d) in our opinion no Zakat was deductible at source under the Zakat and Ushr Ordinance, 1980.
Lahore: FORD, RHODES, ROBSON, MORROW
Date: 08-12-1998 Chartered Accountants
BALANCE SHEET AS AT JUNE 30, 1998
Notes 1998 1997
 (Rupees in thousands)
SHARE CAPITAL AND RESERVES
Share Capital
Authorised
15,000,000 ordinary shares or Rs. 10 each 150,000 150,000
========== ==========
Issued, subscribed and paid up 4 93,576 93,576
ACCUMULATED LOSS (841,838) (634,602)
---------- ----------
(748,262) (541,026)
LONG TERM LOANS 5 144,674 144,674
APPLICATION MONEY FOR PARTICIPATION
TERM CERTIFICATES 6 23,368 23,368
LIABILITIES AGAINST ASSETS SUBJECT
TO FINANCE LEASE 7 - 198
DEFERRED LIABILITIES 8 12,000 12,000
CURRENT LIABILITIES
Long Term Loans:-
Current maturity 5 13,950 13,950
---------- ----------
Overdue 5 13,950 13,950
Current maturity and overdue of liabilities against
assets subject to finance lease 7 - 304
Short term loans and running finances 9 44,732 47,519
Creditors, accruals and other liabilities 10 704,869 630,239
Provision for Sales-tax 30,504 31,494
---------- ----------
794,055 723,506
CONTINGENCIES AND COMMITMENTS 29 - -
---------- ----------
225,835 362,720
========== ==========
FIXED ASSETS - TANGIBLE
Operating assets 11 91,019 101,372
LONG TERM INVESTMENTS 12 465 465
LONG TERM LOANS AND ADVANCES 13 63,793 63,793
LONG TERM DEPOSITS 14 157 282
CURRENT ASSETS
Stores, spares and loose tools 15 35,896 36,917
Stock-in-trade 16 11,173 71,107
Trade debtors 17 4,914 27,402
Loans and advances 18 2,081 27,871
Deposits and prepayments 19 527 24,302
Income tax refundable 10,491 9,896
Cash and bank balances 20 5,319 (687)
---------- ----------
70,401 196,808
---------- ----------
225,835 362,720
========== ==========
Auditors' Report of even date is attached hereto.
Lahore: FORD, RHODES, ROBSON, MORROW
Date: 08-12-1998 Chartered Accountants
The attached notes form an integral part of these accounts.
IFTIKHAR MAHMOOD RANDHAWA DR. ZAFARULLAH SHEIKH
Chief Executive Director
PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED JUNE 30, 1998
Notes 1998 1997
 (Rupees in thousands)
NET SALES 21 74,214 464,918
COST OF SALES 22 161,626 636,313
---------- ----------
GROSS LOSS (87,412) (171,395)
OPERATING EXPENSES
Administrative, selling and general 23 30,694 41,166
Financial 24 39,828 42,496
---------- ----------
70,522 83,662
---------- ----------
OPERATING LOSS (157,934) (255,057)
OTHER INCOME/CHARGES 25 (48,931) (13,432)
---------- ----------
LOSS BEFORE TAXATION (206,865) (268,489)
TAXATION 26 (371) (2,325)
---------- ----------
LOSS AFTER TAXATION (207,236) (270,814)
ACCUMULATED LOSS BROUGHT FORWARD (634,602) (363,788)
---------- ----------
ACCUMULATED LOSS CARRIED FORWARD (841,838) (634,602)
========== ==========
The attached notes form an integral part of these accounts.
IFTIKHAR MAHMOOD RANDHAWA DR. ZAFARULLAH SHEIKH
Chief Executive Director
STATEMENT OF SOURCES AND APPLICATION OF FUNDS
(CASH FLOW) FOR THE YEAR ENDED JUNE 30, 1998
1998 1997
 (Rupees in thousands)
CASH FLOW FROM OPERATING ACTIVITIES
Net (Loss) after taxation (207,236) (270,814)
Adjustment for:
Depreciation 9,941 11,164
Profit on sale of Fixed Assets (248) (99)
Provision against expired work-in-process 2,623 -
Provision against Spares in Transit 280 10,783
Provision against Raw Material in Transit 689 4,892
---------- ----------
13,285 26,740
---------- ----------
(193,951) (244,074)
(Increase)/Decrease in Current Assets
Stores Spares & Loose Tools 741 (2,370)
Stock in Trade 56,622 18,556
Trade Debtors 22,488 4,459
Loans and Advances 25,790 (6,960)
Deposits and Prepayments 2,186 515
Income Tax Refundable (595) (4,537)
---------- ----------
107,232 9,663
Increase/(Decrease) in Current Liabilities
Short Term Loans (2,787) (1,014)
Creditors, Accruals and other Liabilities 74,630 202,546
Provision for Taxes (990) 29,165
---------- ----------
70,853 230,697
---------- ----------
NET CASH FROM OPERATING ACTIVITIES (15,866) (3,714)
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of Fixed Assets (18) (3,166)
Sale proceeds from disposal of Fixed Assets 678 632
Long Term Loans and Advances - -
Long Term Deposits 21,714 (1,653)
---------- ----------
NET CASH FROM INVESTING ACTIVITIES 22,374 (4,187)
CASH FLOW FROM FINANCING ACTIVITIES
Repayment of obligation under Finance Lease (502) (302)
---------- ----------
NET INCREASE/(DECREASE) IN CASH
AND BANK BALANCE 6,006 (8,203)
CASH AND BANK BALANCES
AT THE BEGINNING OF THE YEAR (687) 7,516
CASH AND BANK BALANCE ---------- ----------
AT THE END OF THE YEAR 5,319 (687)
========== ==========
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED JUNE 30, 1998
1. THE COMPANY AND ITS OPERATIONS
The Company is a public limited company quoted on the stock exchanges. The majority of its
share capital is held by the Federal Government through Federal Chemical and Ceramics
Corporation Limited (FCCCL) and certain financial institutions owned by the Government.
The Company is engage in manufacture of Acetate Rayon Yarn. Major intermediate products
are Alcohol, Acetic Acid, Acetone, Acetic Anhydride, Bleached Linters and Yeast. Due to
heavy losses the management of the company, on the instructions of Government of
Pakistan shut down its manufacturing operations in July 1997. A Golden Handshake Scheme
fully funded by Government of Pakistan, was announced to all the employees who opted and
were paid during the year except 98 workers and 40 officers of the Company.
2. COMPLIANCE WITH - I A S
These accounts comply with International Accounting Standards, wherever, applicable in all
material aspects.
3. ACCOUNTING POLICIES
(i) Revenue recognition -
Sales are recorded upon delivery of goods to the carrier.
(ii) Fixed assets -
Company owned fixed assets
Fixed assets are stated at historical cost less accumulated depreciation, except freehold
land and capital work-in-progress which are stated at cost. Depreciation is calculated at
rates mentioned in Note-11 according to the reducing balance method. Acquisitions
during the year are depreciated for a full year irrespective of the date of purchase and
no depreciation is charged on assets in the year of their disposal.
All repairs and maintenance expenditure is charged to income currently and material
betterments are capitalised.
Profits or losses on disposal of fixed assets are recognized as income or expenses
respectively in the year of occurrence.
Leased assets
Leased assets held under finance lease are stated at cost less depreciation at the rates
and basis applicable to company owned assets. The outstanding obligations under the
lease less finance charges allocated to future periods are shown as a liability. The
financial charges are calculated at the interest rates implicit in the lease and are
charged to the profit and loss account.
(iii) Investments
Investments are stated at cost. Provision for diminution in value of investments is
deducted from cost wherever applicable.
(iv) Stores, spares and stock-in-trade
These are valued at lower of cost and net realizable value. The cost is determined as
follows:
Stores, tools and engineering stores - at moving average cost.
Raw materials - at moving average cost.
Work-in-process - at annual average cost of manufacture.
Finished goods - at annual average cost of manufacture.
Stores and raw material in transit - at cost.
Other inventories - at moving average cost.
Cost of manufacture denotes factory cost of production without addition of
administrative and other overheads.
(v) Employees severance benefits -
All the employees of the Company are members of the contributory provident fund.
The Company also maintains a funded gratuity scheme approved by tax authorities for
all its employees based on length of service.
(vi) Taxation -
The charge for taxation is based on income as adjusted for tax purposes and after
taking into account all tax credits and rebates.
The Company accounts for deferred taxes arising on all major timing differences
according to the liability method.
(vii) Overall valuation policy -
The accounts are stated at historical cost without any effect for the changes in
purchasing power of money.
(viii) Associated companies -
Companies under the common control of Federal Chemical and Ceramics Corporation
Limited have been treated as associated companies..
(ix) Development expenditure-
Development expenditure on new products or processes is deferred and amortized
over the period of expected benefit.
Other accounting policies are disclosed wherever relevant in the following notes.
1998 1997
 (Rupees in thousands)
4. SHARE CAPITAL
Authorised -
15,000,000 ordinary shares of Rs. 10 each 150,000 150,000
========== ==========
Issued, subscribed and paid up -
8,408,850 ordinary shares of Rs. 10 each
issued for cash 84,089 84,089
948,710 ordinary shares of Rs. 10 each
issued for consideration other than cash 9,487 9,487
---------- ----------
93,576 93,576
========== ==========
4.1 Federal Chemical & Ceramics Corporation Ltd. FCCCL held 3,776,894 (1997: 3,776,894)
ordinary shares of Rs. 10 each as at June 30, 1998.
5. LONG TERM LOANS