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CHASHMA SUGAR MILLS LIMITED
Annual Reports 2003
CONTENTS
COMPANY INFORMATION
VISION AND MISSION STATEMENT
STATEMENT OF ETHICS AND BUSINESS PRACTICES
STATEMENT OF COMPLIANCE
REVIEW REPORT TO THE MEMBERS
PATTERN OF SHAREHOLDING
TEN YEARS GROWTH AT A GLANCE
TEN YEARS REVIEW
NOTICE OF MEETING
DIRECTORS' REPORT
AUDITORS' REPORT TO THE MEMBERS
BALANCE SHEET
PROFIT AND LOSS ACCOUNT
CASH FLOW STATEMENT
STATEMENT OF CHANGES IN EQUITY
NOTES TO THE ACCOUNTS
COMPANY INFORMATION
BOARD OF DIRECTORS Khan Aziz Sarfaraz Khan Chairman/Chief Executive
Begum Zari Sarfaraz
Begum Laila Sarfaraz
Ms. Zarmine Sarfaraz
Mr. Iskander M. Khan
Begum Mehmooda Salim Khan
Mr. Abdul Qadar Khattak
BOARD AUDIT COMMITTEE Begum Zari Sarfaraz
Begum Mehmooda Salim Khan
Mr. Iskander M. Khan
COMPANY SECRETARY/ Mujahid Bashir
CHIEF FINANCIAL OFFICER
AUDITORS Messers Hameed Chaudhri & Co.
Chartered Accountants
COST AUDITORS Messers Munawar Associates
Chartered Accountants
TAX CONSULTANT Messers Hameed Chaudhri & Co.
Chartered Accountants
LEGAL ADVISOR Messers Khokhar Law Chambers
Advocates & Corporate Counsel
BANKERS National Bank of Pakistan
Habib Bank Limited
Muslim Commercial Bank Limited
The Bank of Khyber
Bank Al-Falah Limited
Bank Al-Habib Limited
Standard Chartered Bank Limited
REGISTERED OFFICE Banglow No 16, PSM Colony,
Nowshera Road, Mardan
HEAD OFFICE 20-A, Markaz F-7, Islamabad
Phone: 2650805-7
Fax: 2651285-6
FACTORY Dera Ismail Khan
Phone: 750090, 750091
Fax: 750092
VISION STATEMENT
Efficient organization with professional competence of top order is engaged to remain a Market leader in
the sugar industry in manufacturing and marketing of white sugar.
To ensure attractive returns to business associates and shareholders as per their expectations.
MISSION STATEMENT
Quality objectives are designed with a view to enhance customer satisfaction and operational efficiencies.
To be a good corporate citizen to fulfill the social responsibilities.
Commitment to building Safe, Healthy and Environment friendly atmosphere.
We, with our professional and dedicated team, ensure continual improvement in quality and productivity
through effective implementation of Quality Management System. Be a responsible employer and reward
employees according to their ability and performance.
We value the social and economic well being of our partners and strive for a harmonious environment
conductive to team performance.
The quality policy also encompasses our long term Strategic Goals and Core Values, which are integral
part of our business.
STRATEGIC GOALS
Providing Customer Satisfaction by serving with superior quality production of white sugar at
lowest cost.
Ensuring Security and Accountability by creating an environment of security and accountability
for employees, production facilities and products.
Expanding Customer Base by exploring new national and international markets and undertaking
product research and development in sugar industry.
Ensuring Efficient Resource Management by managing human, financial, technical and infra-
structural resources so as to support all over strategic goals and to ensure highest possible value
addition to stakeholders.
CORE VALUES
Striving for continuous improvement and innovation with commitment and responsibility;
Treating stakeholders with respect, courtesy and competence;
Practising highest personal and professional integrity;
Maintaining teamwork, trust and support with open and candid communication;
Ensuring cost consciousness in all decisions and operations.
STATEMENT OF ETHICS AND BUSINESS PRACTICES
The articulation of this statement is based on the following points :-
Elimination of improper payments or use of the Company's assets.
Elimination of political contributions.
Elimination of reporting violations.
Accuracy of books and records of the Company and its safe custody.
Authentic and genuine payment of amounts due to customers, agents or suppliers.
Respect of employees, suppliers, agents, customers and shareholders.
Integrity and scrupulous dealings.
Health and safety environments.
Conflicts of interests.
Strict observance of the laws of the country.
Respect of basic human rights.
Teamwork, trust, determination and delegation of powers.
Our dealings with all stakeholders, especially with the government and financial
institutions, are based on honesty and equality. Our accounting & finance policies are
guided by prevailing corporate regulations, Companies Ordinance, 1984, and the Code of
Corporate Governance. Further, we aim to fully comply with International Accounting
Standards (IAS) in the preparation of financial statements whereas any departure
therefrom is adequately disclosed.
Chashma Sugar Mills Limited is committed to ensure that this Statement of Ethics & Business
Practices is understood and implemented by all concerned individuals in letter and spirit.
STATEMENT OF COMPLIANCE WITH THE CODE OF
CORPORATE GOVERNANCE
The statement is being presented to comply with the Code of Corporate Governence contained in
Listing Regulation No. 37 of the Karachi Stock Exchange and Chapter XIII of the listing
regulations of the Lahore Stock Exchange for the purpose of establishing a framework of good
governance, whereby a listed Company is managed in compliance with the best practices of
corporate governance.
The Company has applied the principles contained in the Code in the following manner;
1. The directors have confirmed that none of them is serving as a director in more than ten
listed Companies including this Company.
2. All the directors of the Company are registered as taxpayers and none of them has defaulted
in payment of any loan to a banking company, a DFI or an NBFI or, being a member of a
stock exchange, has been declared as defaulter by that stock exchange.
3. No casual vacancies were occurred ir the Board during the year.
4. The Company has prepared a "Statement of Ethics and Business Practices", which has
been signed by all the directors and employees of the Company.
5. The Board has developed a vision/mission statement, overall corporate strategy and
significant policies of the Company. A complete record of particulars of significant policies
along with the dates on which they were approved of amended has been maintained.
6. All the powers of the Board have been duly exercised and decisions on material transactions
have been taken by the Board.
7. The meetings of the Board were presided over by the Chairman when he was present, and
the Board met at least once in every quarter. Written notices of the Board meetings along
with agenda, were circulated at least seven days before the meetings. The minutes of the
meetings were appropriately recorded and circulated.
8. There were no new appointments of CFO / Company Secretary during the year.
9. The Directors' Report for this year has been prepared in compliance with the requirements
of the Code and it fully describes the salient matters required to be disclosed.
10. The financial statements of the Company were duly endorsed by the CEO and the,CFO
before approval by the Board.
11. The directors, CEO and executives do not hold any interest in the shares of the Company
other than that disclosed in the pattern of shareholding.
12. The Company has complied with all the corporate and financial reporting requirements of
the Code.
13. The Board has formed and Audit Committee, which comprises of three members.
14. The meetings of the Audit Committee were held at least once every quarter prior to approval
of interim and final results of the Company and as required by the Code. The terms of
reference of the Committee have been formulated and advised to the Committee for
compliance.
15. The Board has set-up an effective internal audit function.
16. The statutory auditors of the Company have confirmed that they have been given a
satisfactory rating under the quality control review programme of the Institute of Chartered
Accountants of Pakistan (ICAP), that they or any of the partners of the firm, their spouses
and minor children do not hold shares of the Company and that the firm and all its partners
are in compliance with International Federation of Accountants (IFAC) guidelines on code of
ethics as adopted by ICAP.
17. The statutoiy auditors or the persons associated with them have not been appointed to
provide other services except in accordance with the Listing Regulations and the auditors
have confirmed that they have observed IFAC guidelines in this regard.
18. We confirm that all other material principal" contained in the Code have been compiled
with.
For and on behalf of the Board
Mardan KHAN AZIZ SARFARAZ KHAN
December 8, 2003 CHIEF EXECUTIVE
REVIEW REPORT TO THE MEMBERS ON STATEMENT OF
COMPLIANCE WITH BEST PRACTICES OF THE CODE OF
CORPORATE GOVERNANCE
We have reviewed the Statement of Compliance with the best practices contained in the Code of
Corporate Governance prepared by the Board of Directors of Chashma Sugar Mills Limited to
comply with the Listing Regulation No. 37 of the Karachi Stock Exchange (Guarantee) Limited,
Chapter XIII of Listing Regulations of Lahore Stock Exchange (Guarantee) Limited and chapter
XI of listing regulations of the Islamabad Stock Exchange where the Company is listed.
The responsibility for compliance with the Code of Corporate Governance is that of the Board of
Directors of the Company. Our responsibility is to review, to the extent where such compliance
can be objectively verified, whether the Statement of Compliance reflects the status of the
Company's compliance with the provisions of the Code of Corporate Governance and report if it
does not. A review is limited primarily to inquiries of the Company's personnel and review of
various documents prepared by the Company to comply with the Code.
As part of our audit of the financial statements we are required to obtain an understanding of the
accounting and internal control systems sufficient to plan the audit and develop an effective
audit approach. We have not carried out any special review of the internal control system to
enable us to express an opinion as to whether the Board's statement on internal control covers
all controls and the effectiveness of such internal controls.
Based on our review, nothing has come to our attention which causes us to believe that the
Statement of Compliance does not appropriately reflect the Company's compliance, in all
material respects, with the best practices contained in the Code of Corporate Governance as
applicable to the Company for the year ended 30 September, 2003.
LAHORE; HAMEED CHAUDHRI & CO.,
December 09, 2003 CHARTERED ACCOUNTANTS.
PATTERN OF HOLDING OF THE SHARES HELD BY THE SHAREHOLDERS
AS AT 30 SEPTEMBER. 2003
Total
Shareholders Shareholding Shares Held
167 From 1 to 100 Shares 16,675
1,082 From 101 to 500 Shares 498,637
178 From 501 to 1,000 Shares 173,522
262 From 1,001 to 5,000 Shares 712,966
68 From 5,001 to 10,000 Shares 513,000
19 From 10,001 to 15,000 Shares 241,900
13 From 15,001 to 20,000 Shares 240,700
14 From 20,001 to 25,000 Shares 318,000
8 From 25,001 to 30,000 Shares 221,800
5 From 30,001 to 35,000 Shares 163,200
5 From 35,001 to 40,000 Shares 188,400
2 From 40,001 to 45,000 Shares 85,200
3 From 45,001 to 50,000 Shares 143,500
1 From 50,001 to 55,000 Shares 52,000
1 From 55,001 to 60,000 Shares 59,800
1 From 60,001 to 65,000 Shares 60,500
1 From 75,001 to 80,000 Shares 76,500
1 From 80,001 to 85,000 Shares 81.8
1 From 85,001 to 90,000 Shares 88,500
4 From 90,001 to 100,000 Shares 488,600
2 From 100,001 to 110,000 Shares 208,000
3 From 110,001 to 200,000 Shares 514,600
1 From 200,001 to 210,000 Shares 205,000
1 From 245,001 to 250,000 Shares 250,000
1 From 280,001 to 290,000 Shares 290,000
2 From 400,001 to 450,000 Shares 880,000
1 From 900,001 to 910,000 Shares 908,400
1 From 1,910,001 to 1,915,000 Shares 1,912,800
1 From 1,915,001 to Above Shares 9,534,000
1,849 19,128.00
Categories of Shareholders Numbers Shares Held Percentage
Associated Companies 3 10,174,500 53.19
NIT and ICP - - -
Directors & Relatives 11 2,424,300 ,12.67
Executive - - -
Public Sector Companies and Corporations 32 855,900 4.47
Banks, Development Finance Institutions,
Non Banking Financial Institutions, Insurance
Companies, Moderabas and Mutual Funds 4 1,997,900 10.44
Individuals 1,797 3,380,400 17.67
Charitable Trusts 2 295,000 1.54
1,849 19,128,000 100
Categories of Shareholders Numbers Shares Held Percentage of Paid-up Capital
Associated Companies. Undertakings and Related Parties 3 10,174,500 53.19
Phipson & Co. (Pak) Limited 205,000 1.07
Azlak Enterprises (Pvt) Limited 435,500 2.28
The Premier Sugar Mills Limited 9,534,000 49.84
NIT and ICP - - -
Directors and Relatives 11 2,424,300 12.67
Executive - - -
Public Sector Companies and Corporation 32 855,900 4.47
Asif Mushtaq & Company 1,500 0.01
Neelum Textile Mills (Pvt) Limited 25,000 0.13
Paramount Spinning Mills Limited 21,100 0.11
Shakil Express (Pvt) Limited 17,700 0.09
Valika Properties (Pvt) Limited 4,500 0.02
Khadam Ali Shah Bukhari & Co. Limited 90,000 0.47
Moosa, Noor Muhammad, Shahzada & Co. (Pvt) Ltd. 12,000 0.06
Rahat Securities Limited 500 0
Invest Capital & Securities (Pvt) Limited 19,800 0.1
Y. S. Securities & Services (Pvt) Limited 1,000 0.01
Saphire Agencies (Pvt) Limited 35,000 0.18
Paramount Spinning Mills Limited 94,100 0.49
Amer Cotton Mills (Pvt) Limited 59,800 0.31
Molasses Export Co. (Pvt) Limited 275,000 1.44
Bulk Management Pakistan (Pvt) Limited 24,500 0.13
Shakoo (Pvt) Limited 37,600 0.2
S. H. Bukhari Securities (Pvt) Limited 1,400 0.01
Aqeel Karim Dhedhi Securities (Pvt) Limited 500 0
Ace Securities (Pvt) Limited 1,000 0.01
Salim Chamdia Securities (Pvt) Limited 3,000 0.02
Munaf Sattar Securities (Pvt) Limited 56,000 0.29
Memon Securities (Pvt) Limited 2,500 0.01
Fawad Yusuf Securities (Pvt) Limited 5,000 0.03
M. S. Securities (Pvt) Limited 2,500 0.01
Bawa Securities (Pvt) Limited 5,500 0.03
pillion Capital Securities (Pvt) Limited 1,000 0.01
Mazhar Hussain Securities (Pvt) Limited 1,000 0.01
A.H.K.D. Securities (Pvt) Limited 2,000 0.01
DJM Securities (Pvt) Limited 500 0
Ample Securities (Pvt) Limited 15,000 0.08
Irfan Mazhar Securities (Pvt) Limited 30,000 0.16
Villika Arts Fabrics Limited 9,900 0.05
Banks, Development Finance Institutions. Non Banking Financial Institutions. Insurance
Companies. Modarabas and Mutual Funds 4 1,997,900 10.44
Investement Corporation of Pakistan 3,200 0.02
Bank of Punjab 100 -
National Bank of Pakistan 1,912,800 10
State Life Insurance Corporation of Pakistan 81,800 0.43
Individuals 1,797 3.380.400 17.67
Charitable Trusts 2 295,000 1.54
Sarfaraz District Hospital 290,000 1.52
Trustees Moosa Lawari Foundation 5,000 0.03
1,849 19.128,000 100
Shareholders holding 10% or more voting ,
Interest in the Company
The Premier Sugar Mills Limited 9,534,000 49.84
National Bank of Pakistan 1,912,800 10
TEN YEARS GROWTH AT A GLANCE
PARTICULARS 2003 2002 2001 2000 1999 1998 1997 1996 1995
(RUPEES IN THOUSAND)
Sales 576,598 1,286,688 712,165 1,181,589 1 ,111,550 811,335 538,518 626,719 598,079
Cost of sales 577,039 1,106,529 695,170 868,964 932,608 719,697 480,013 506,238 495,106
Operating (Loss) /Profit -29,261 152,362 -4,886 290,320 160,631 73,059 43,233 105,903 89,481
(Loss) /Profit before tax -42,646 124,183 -50,741 224,129 88,835 11,506 -8,846 53,054 44,376
(LossJ/Profit after tax -43,348 103,470 -61,218 224,129 87,711 212 1,930 49,911 41,385
Share capital 191,280 191,280 191,280 191,280 191,280 191,280 191,280 191,280 191,280
Shareholders' equity 436,211 479,558 414,884 476,101 347,613 298,157 297,945 296,016 255,669
Fixed assets - net 355,405 365,272 392,576 424,009 436,765 472,557 522,826 557,099 552,543
Total assets 1,014,280 628,082 780,345 678,032 774,216 809,721 691,051 643,085 668,634
Long term liabilities - - - 20,186 40,594 98,485 152,710 171,394 242,661
Dividend Cash dividend 30% 50% 20% 5%
Ratios:
Profitability (%}
Operating (Loss) /Profit -5.07 11.84 -0.69 24.57 14.45 9 8.03 16.9 14.96
(Loss) /%ofit before tax -7.4 9.65 -7.12 18.97 7.99 1.42 -1.64 8.47 7.42
(Loss) /Profit after tax -7.52 8.04 -8.6 18.97 7.89 0.03 0.36 7.96 6.92
Return to Shareholders
ROE - Before tax 9.78 25.9 -12.23 47.08 25.56 3.86 -2.97 17.92 17.36
ROE - After tax 9.94 21.58 -14.76 47.08 25.23 0.07 0.65 16.86 16.19
Return on Capital
Employed 9.78 21.55 -14.75 45.06 22.59 0.05 0.43 10.68 8.3
E.P.S. - After tax 2.27 5.41 -3.2 11.72 4.59 0.01 0.1 2.61 2.16
Activity
Income to total assets 0.57 2.05 0.91 1.74 1.44 1 0.78 0.97 0.89
Income to fixed assets 1.62 3.52 1.81 2.79 2.54 1.72 1.03 1.12 1.08 ,
Liquidity / Leverage
Current ratio 1.09 1.63 1.03 1.29 -0.8 -0.78 -0.66 -0.42 -0.49
Break up value per share 22.80 25.03 21.69 24.89 18.17 15.59 15.58 15.48 13.37
Total Liabilities to
equity (Times) 1.32 0.31 0.88 0.42 1.17 1.72 1.32 1.17 1.62
TEN YEAR'S REVIEW
YEAR CANE CRUSHED TONS RECOVERY % SUGAR PRODUCED TONS
1994 436,302 8.41 36,701
1995 507,706 8.66 44,001
1996 495,543 8.02 38,884
1997 370,489 7.72 28,616
1998 744,391 8.47 63,025
1999 828,703 7.84 64,963
2000 668,578 8 53,495
2001 575,031 6.82 40,646
2002 845,048 8.07 68,185
2003 889,074 7.28 64,698
NOTICE OF MEETING
NOTICE IS HEREBY GIVEN that 16* Annual General Meeting of the shareholders of
Chashma Sugar Mills Limited, will be held on 31st December, 2003 at 10:00 A.M. at the
Registered Office of the Company at Banglow No. 16, PSM Colony, Nowshera Road, Mardan
for transacting the following business :-
1. To confirm the minutes of the last meeting held on 20 March, 2003.
2. To receive and consider the Audited Accounts of the Company together with the Directors'
and Auditors' reports for the year ended 30 September, 2003.
3. To appoint Auditors for the year 2003-2004 and to fix their remuneration.
4. To transact any other business of the Company as may be permitted by the Chair.
The share transfer books of the Company will remain closed from 21 December, to 31 December,
2003 (both days inclusive).
BY ORDER OF THE BOARD
MARDAN, (MUJAHID BASHIR)
08 December, 2003 Company Secretary
NOTE:
1. Member unable to attend in person may kindly send proxy form attached with the Balance
Sheet signed and witnessed to the Company at least 48 hours before the time of the
meeting. No person shall act as proxy unless he is entitled to be present and vote in his own
right.
2. Members are requested to notify any change in address immediately.
3. C.D.C shareholders desiring to attend the meeting are requested to bring their original
National Identity Cards, Account and participants I.D numbers, for identification purpose,
and in case of proxy, to enclose an attested copy of his/her National Identity Card.
DIRECTORS' REPORT
The Directors are pleasured to present the Annual Report along with the Audited Accounts of the
Company for the year ended 30 September, 2003.
FINANCIAL RESULTS
The Financial Results of the Company for the year under review are as under: -
2O03 2002
Rupees Rupees
(Loss) / Profit before taxation -42,646,211 124, 183,162
Provision for taxation
Current year 3,000,000 26,163,000
Prior year -1,487,873
Deferred -810,000 -5,450,000
702,127 20,713,000
(Loss) / Profit after taxation -43,348,338 103,470,162
Prior years Excise Duty on sugar -Reversed 0 18,589,175
Un appropriated profit - Brought forward 278,887 603,550
(Loss) / Profit available for appropriation -43,069,451 122,662,887
Appropriation:
Transfer from / to General Reserve 44,000,000 65,000,000
Proposed Dividend - Nil (2002 @ 30%) 0 57,384,000
44,000,000 122,384,000
Un-appropriated profit-Carried to Balance Sheet 930,549 278,887
(Loss) / Earning per share -2.27 6.83
GENERAL
1. SUGARCANE SEASON 2002-2003
The sugarcane crushing season started on 18th November, 2002 and ended on 10th April, 2003.
We crushed 889,074 tons of sugarcane and produced 64,698 tons of sugar at an average
recovery of 7.28% as compared to last year's 845,043 tons, 68,185 tons and 8.07% respectively.
The efficiency of sugar mills primarily depends on the quality of sugarcane i.e. sucrose
contents. Unfortunately, as the government policy for sugarcane support price based on
the weight rather quality, therefore, as a result the growers cultivate Indian varieties having
excessive weight and low sucrose contents, this adversely effects the sugar mills production
efficiency. Beside this, the attack of Pyrilla (Pest) and disease of Redrot on sugarcane crop
supplied during the crushing season also contributed towards the low recovery i.e. 7.28%
as compared to the last year average recovery of 8.07%.
Furthermore, due to the record sugar production in the country during the year and the
carry over stocks in the mills due to excessive imports in the previous years, there is a glut
in the market, resulting in depressed selling prices and slow oil take of sugar. The high
prices of raw material, low selling price of sugar and financial cost on borrowings from the
banks to pay to the growers and suppliers have adversely affected the profitability of the
Company.
2. CURRENT SEASON 2003-2O04
The current season started on 30th November, 2003, we anticipate to crush 950,000 tons of
sugarcane during the season to produce approximately 76,000 tons of sugar and 47,000
tons of molasses. Due to record sugar production expected this year and the carry over
stocks in the mills, we foresee the persistence of prevailing crises unless the Government
ensures that the surplus sugar is exported out of country. We have informed the
Government of Pakistan if the glut in the market continues then both industry and farmers
would sustain major losses.
3. CHANGE OF SUGARCANE VARIETIES
We are concentrating on the development of superior sugarcane varieties, and our cane
department is distributing variety sugarcane seed and has launched the awareness
campaign amongst the growers to cultivate sugarcane having high yield and sucrose
contents. We are confident that our efforts will further enhance the present prosperity
brought by Chashma Sugar Mills to Dera Ismail Khan which was once one of the most
underdeveloped are?s in the Frontier Province.
4. DIVIDEND
The Directors do not recommend any dividend due to loss suffered by the Company.
5. GENERAL RESERVE
A sum of Rs. 44.00 million has been transferred from general reserve to appropriation
account.
6. STAFF
The Labour and Management relations remained cordial during the year. All employees of
the Company were paid bonus equivalent to 3 months salary in addition to other amenities
and statutory benefits.
7. AUDITORS
The present Auditors Messrs Hameed Chaudhri & Co. Chartered Accountants Lahore and
Messrs Munawar Associates Chartered Accountants Lahore retire and being eligible offer
themselves for re-appointment for the financial year ending 30 September, 2004.
8. NOTES OF THE ACCOUNTS NO 10.3
On expiry of lease, the vehicle will be returned therefore, the lease amount has been
changed to profit & loss account.
9. PATTERN OF SHAREHOLDING
The pattern of shareholding as required under section 236 (2) (d) of the Companies
Ordinance 1984 is enclosed.
10. CORPORATE AND FINANCIAL REPORTING FRAMEWORK
The financial statements, prepared by the management of Chashma Sugar Mills
Limited, present fairly its state of affairs, the result of its operations, cash flows and
changes in equity.
Proper books of account have been maintained.
International Accounting Standards, as applicable in Pakistan, have been followed in
operation of the financial statements.
The system of internal controls is scjmd in design and has been effectively
implemented and monitored.
There is no doubts upon Chashma Sugar Mills Limited's ability to continue as a 'going
concern'
There has been no material departure from the best practices of corporate governance,
as detailed in the listing regulations.
Key operating and financial data for the last decade in summarized form is annexed.
There are no statutory payments on account of taxes, duties, levies and charges which
are outstanding as at 30 September, 2003, except for those disclosed in the financial
statements.
The Directors, CEO, CFO, Company Secretary and their spouses and minor children
have made no transactions in the Company's shares during the year;
During the year five (5) meetings of the Board of Directors were held. Attendance by
each Director is as follow:-
Name of Directors No. of Meetings Attended
Khan Aziz Sarfaraz Khan 5
Begum Zari Sarfaraz 5
Begum Laila Sarfaraz 2
Ms. Zarmine Sarfaraz 1
Mr. Iskander M Khan 5
Begum Mehmooda Salirn Khan 2
Mr. Abdul Qadar Khattak 5
Leave of absence was granted to Directors who could not attend some of the Board
meetings.
11. COMPLIANCE WITH THE CODE OF CORPORATE GOVERNANCE
The requirements of the Code of Corporate Governance set out by the Karachi and Lahore
Stock Exchanges in their Listing Rules, relevant to the year ended 30 September, 2003 have
been duly complied with. A statement to this effect is annexed with the report.
12. ROLE OF SHAREHOLDERS
The Board aims to ensure that the Company's shareholders are timely informed about the
major developments affecting the Company's state of affaires. To achieve this objective,
information is communicated to the shareholders through quarterly, half yearly and
annual reports. The Board encourages the shareholder's participation at the annual
general meeting to ensure high level of accountability.
13. ACKNOWLEDGEMENT
The Directors would like to express their gratitude for hard work and dedication displayed
by Staff and Executives of the Organization and the invaluable continuing support of our
Bankers.
Finally, the Board wishes to thank the valued shareholders for their patronage and
confidence reposed in the Company and consistent support in the present challenging
scenario.-
ON BEHALF OF THE BOARD
Mardan KHAN AZIZ SARFARAZ KHAN
08 December, 2003 Chairman / Chief Executive
AUDITORS' REPORT TO THE MEMBERS OF
CHASHMA SUGAR MILLS LIMITED
We have audited the annexed balance sheet of CHASHMA SUGAR MILLS LIMITED as at
30 September, 2003 and the related profit and loss account, cash flow statement and statement of
changes in equity together with the notes forming part thereof, for the year then ended and we stale
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.
It is the responsibility of the Company's management to establish and maintain a system of internal
control, and prepare and present the above said statements in conformity with the approved
accounting standards and the requirements of the Companies Ordinance, 1984. Our responsibility is
to express an opinion on these statements based on our audit.
We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These
standards require that we plan and perform the audit to obtain reasonable assurance about whether
me above said statements are free of any material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the above said statements. An audit
also includes assessing the accounting policies and significant estimates made by management, as
well as, evaluating the overall presentation of the above said statements. We believe that our audit
provides reasonable basis for our opinion and, after due verification, 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) incur 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 except for the change as stated in note 2.5(b) with which we concur;
(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, cash flow statement and statement of changes in
equity together with the notes forming part thereof, except for IAS 17 (note 10.3), confirm with
approved accounting standards as applicable in Pakistan, and, 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 September, 2003 and of the loss, its cash flows
and changes in equity for the year then ended: and
(d) in our opinion, Zakat deductible at source under the Zakat and Ushr Ordinance, 1980 (XVIII of
1980), was deducted by the Company and deposited in the Central Zakat Fund established
under Section 7 of that Ordinance.
LAHORE; HAMEED CHAUDHRI & CO.,
December 09, 2003 CHARTERED ACCOUNTANTS.
BALANCE SHEET
2003 2002
Note Rupees Rupees
SHARE CAPITAL AND RESERVES
Authorised capital
22,000,000 ordinary shares of
Rs. 10 each 220,000,000 220,000,000
Issued, subscribed and paid-up capital
19. 128,000 ordinary shares of
Rs. 10 each fully paid in cash 3 191,280,000 191,280,000
General reserve 244,000,000 288,000,000
Unappropriated profit 930,549 278,887
436,210,549 479,558,887
LIABILITIES AGAINST ASSETS SUBJECT
TO FINANCE LEASE 4 262,892 659,003
DEFERRED TAXATION 5 0 550,000
CURRENT LIABILITIES
Current portion of liabilities against assets
subject to finance lease 4 396,111 1,084,429
Short term finances 6 522,515,952 73,633
Creditors, accruals and other liabilities 7 28,748,215 37,162,812
Excise duty and sales tax payable 8 15,892,006 17,074,478
Provision for taxation 9 7,881,704 31,044,704
Workers' welfare fund O 1,545,500
Unclaimed dividends 2,372,915 1,944,465
Proposed dividend 0 57,384,000
577,806,903 147,314,021
CONTINGENCIES AND COMMITMENTS 10 - -
1,014,280,344 628,081,911
The annexed notes form an integral part of these financial statements.
DIRECTOR CHIEF EXECUTIVE
2003 2002
- Note Rupees Rupees
FIXED CAPITAL EXPENDITURE
Operating fixed assets 11 355,405,451 365,272,281
Capital work-in-progress 12 11,134,044 8,192,427
Stores held for capital expenditure 17,364,517 14,648,165
383,904,012 388,112,873
DEFERRED TAXATION 5 260,000 0
SECURITY DEPOSITS 159,940 105,765
CURRENT ASSETS
Store and spares 13 55,887,688 50,421,308
Stock-in-trade 14 439,550,000 39,774,000
Trade debtors - unsecured
- considered good 45,642,683 75,012,537
Advances, deposits, prepayments and
other receivables 15 22,409,057 36,183,440
Cash and bank balances 16 16,466,964 38,471,988
629,956,392 239,863,273
1,014,280,344 628,081,911
PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 30 SEPTEMBER. 2OO3
2003 2002
Note Rupees Rupees
SALES - Net 17 576,598,119 1,286,688,113
COST OF SALES 18 577,038,705 1,106,528,525
GROSS (LOSS) / PROFIT -440,586 180,159,588
ADMINISTRATIVE AND GENERAL EXPENSES 19 26,796,376 25,498,749
SELLING AND DISTRIBUTION EXPENSES 20 2,024,360 2,344,056
28,820,736 27,842,805
OPERATING (LOSS) / PROFIT -29,261,322 152,316,783
OTHER INCOME 21 2,730,527 4,867,005
-26,530,795 157,183,788
FINANCIAL CHARGES 22 16,124,770 23,350,780
MISCELLANEOUS CHARGES 23 118,900 508,596
WORKERS' (PROFIT) PARTICIPATION FUND 0 7,595,750
WORKERS' WELFARE FUND -128,254 1,545,500
16,115,416 33,000,626
(LOSS) / PROFIT BEFORE TAXATION -42,646,211 124,183,162
TAXATION
Current vear 9 3.OOO.OOO 26,163,000
Prior year 9 -1,487,873 0
Deferred 5 -810,000 -5,450,000
702,127 20,713,000
(LOSS) / PROFIT AFTER TAXATION -43,348,338 103,470,162
PRIOR YEARS' EXCISE DUTY ON SUGAR - Reversed 24 0 18,589,175
-43,348,338 122,059,337
UNAPPROPRIATED PROFIT - Brought forward 278,887 603,550
(LOSS) / PROFIT AVAILABLE FOR APPROPRIATION -43,069,451 122,662,887
APPROPRIATIONS:
Transfer from / to genera] reserve 44,000,000 65,000,000
Proposed dividend Nil (2002: Rs. 3 per share ) 0 57,384,000
44,000,000 122,384,000
(ACCUMULATED LOSS) / UNAPPROPRIATED PROFIT
- Carried to balance Sheet 930,549 278,887
(LOSS) / EARNINGS PER SHARE 25 -2.27 . 6.38
The annexed notes form an integral part of these financial statements.
CASH FLOW STATEMENT
FOR THE YEAR ENDED 30 SEPTEMBER. 20O3
2003 2002
Rupees Rupees
CASH FLOW FROM OPERATING ACTIVITIES
(Loss) / Profit for the year before taxation and workers' welfare fund -42,774,465 125,728,662
Adjustments for:
Depreciation 39,004,413 40,266,967
Gain on disposal of vehicles -362,630 0
Receivable balances written-off 0 146,651
Interest and profit on bank deposits -1,123,261 -2,558,055
Payable balances written-back 0 -373,064
Financial charges 15,187,932 22,163,623
CASH INFLOW FROM OPERATING ACTIVITIES 9,931,989 185,374,784
- Before taxation capital changes
(Increase) / decrease in the current assets:
Stores and spares -5,466,380 -8,345,274
Stock-in-trade -449,776,000 128,735,177
Trade debtors 29,369,854 19,464,933
Advances, deposits, prepayments and other receivables 3,533,991 6,584,545
Increase / (decrease) in current liabilities
Creditors, accruals and other liabilities -9,115,682 15,846,860
Sales tax -1,182,472 -8,957,567
-432,636,689 153,328,674
CASH (OUTFLOW) / INFLOW FROM OPERATING ACTIVITIES
- Before taxation -422,704,700 338,703,458
Income tax paid -15,978,673 -4,465,474
NET CASH (OUTFLOW) / INFLOW FROM OPERATING
ACTIVITIES - After taxation -438,683,373 334,237,984
CASH FLOW FROM INVESTING ACTIVITIES
Fixed capital expenditure -35,182,922 -19,531,921
Sales proceeds of vehicles 75O.OOO 0
Interest and profit on bank deposits 1,249,953 2,325,332
Security deposits -54,175 0
NET CASH OUTFLOW FROM INVESTING ACTIVITIES -33,237,144 -17,206,589
-471,920,517 317,031,395
CASH FLOW FROM FINANCING ACTIVITIES
Lease finances - net -1,084,429 656,028
Long term loan instalments repaid 0 -20,871,498
Financial charges paid -14,486,847 -23,865,926
Short term finances 522,515,952 -262,207,849
Dividend paid -56,955,550 -62,610
NET CASH INFLOW / (OUTFLOW) FROM FINANCING ACTIVITIES 449.989,126 (306.351.855)
(DECREASE) / INCREASE IN CASH AND CASH EQUIVALENTS -21,931,391 10,679,540
CASH AND CASH EQUIVALENTS - At the beginning of the year 38,398,355 27,718,815
CASH AND CASH EQUIVALENTS - At the end of the year 16,466,964 38,398,355
YEAR END CASH AND CASH EQUIVALENTS COMPRISED OF :
Bank balances 16,466,964 38,471,988
Temporary bank overdraft 0 -73,633
16,466,964 38,398,355
The annexed notes form an integral part of these financial statements.
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 SEPTEMBER. 2OO3
Share General Unappropriated Profit/ Total
Capital Reserve (accumulated loss)
Rupees
Balance as at 30 September, 2001 191,280,000 223,000,000 603,550 414,883,550
Profit for the year ended
30 September, 2002 0 0 122,059,337 122,059,337
Transfer to general reserve 0 65,000,000 -65,000,000 0
Proposed dividend 0 0 -57,384,000 -57,384,000
Balance as at 30 September. 2002 191,280,000 288,000,000 278,887 479,558,887
Loss for the year ended
30 September, 2003 0 0 -43,348,338 -43,348,338
Transfer from general reserve 0 -44,000,000 44,000,000 0
Balance as at
30 September, 2003 191,280,000 244,000,000 930,549 436,210,549
The annexed notes form an integral part of these financial statements.
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 3O SEPTEMBER. 2OO3
1. THE COMPANY AND ITS OPERATIONS
The Company was incorporated on 5 May, 1988 as a Public Company and it commenced commercial
production from 01 October, 1992. The Company is principally engaged in manufacture and sale of
white sugar. Its shares are quoted on Stock Exchanges in Pakistan.
2. SIGNIFICANT ACCOUNTING POLICIES
2.1 Statement of compliance
These financial statements, except for International Accounting Standard (IAS) 17 (Leases),
have been prepared in accordance with the approved accounting standards as applicable in
Pakistan and the requirements of the Companies Ordinance, 1984. Approved accounting
standards comprise of such lASs as notified under the provisions of the Companies Ordinance,
1984. Wherever the requirements of the Companies Ordinance, 1984 or directives issued by
the Securities and Exchange Commission of Pakistan differ with the requirements of these
standards; the requirements of the Companies Ordinance, 1984 or the requirements of the
said directives take precedence.
2.2 Accounting convention
These financial statements have been prepared under the historical cost convention modified by
adjustments of exchange rate fluctuations on foreign currency loans as referred to in note 2.3.
2.3 Foreign currency translations
Transactions in foreign currencies are accounted for in Pak Rupees at the exchange rates
prevailing on the dale of transactions. Assets and liabilities in foreign currencies are translated
into Pak Rupees at rates of exchange ruling on the balance sheet date. Exchange differences in
respect of foreign currency loans, obtained for acquisition of fixed assets, were incorporated in
the cost of relevant assets. All other exchange differences are included in income currently.
2.4 Staff retirement benefits (defined contribution plan)
The Company operates a defined contribution provident fund scheme for all its permanent
employees. Equal monthly contributions at the rate of 8.25 % of the basic salary are made to
the fund both by the Company and employees.
2.5 Taxation
(a) Current
Provision for current taxation is based on taxable income at the current rates of taxation after
taking into account tax credits and tax rebates available, if any. or minimum tax at the rate of
0.5% of turnover, whichever is higher.
(b) Deferred
During the current year, the Company has changed its accounting policy in respect of deferred
taxation. The change has been made to comply with the requirements of the revised IAS 12
(Income Taxes) which became applicable for financial periods beginning on or after 01
January, 2002. Accordingly, deferred tax is now recognised using the balance sheet liability
method in respect of all temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for taxation purposes.
Deferred tax assets are recognised to the extent that it is probable that taxable profits will be
available against which the deductible temporary differences, unused tax losses and tax
credits can be utilised. Deferred tax liability is based on the expected tax rates applicable at the
time of reversal.
Until last year, the Company had accounted for deferred tax liability using the liability method
on all major timing differences; however, no deferred tax debits were recognised. Had the policy
not been changed, the loss for the year would have been higher by Rs. 260,000.
2.6 Provisions
Provisions are recognised when the Company has a present, legal or constructive obligation as
a result of past events and it is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation and a reliable estimate of the obligation can be
made. Provisions are-reviewed at each balance sheet date and adjusted to reflect the current
best estimate.
2.7 Tangible fixed assets and depreciation thereon
Owned:
Operating lixed assets are stated at cost less accumulated depreciation except freehold land
and capital work-in-progress which are stated at cost.
Depreciation is charged to income applying reducing balance method to write-off the cost over
estimated remaining useful life of assets. Rates of depreciation are stated in note 11.
No depreciation is provided on assets in the year of disposal whereas full year's depreciation is
charged in the year of purchase. Gains / losses on disposal of fixed assets are taken to profit
and loss account.
Normal repairs and replacements are taken to profit and loss account. Major improvements
and modifications are capitalised and assets replaced, if any. other than those kept as standby
are retired.
Leased:
These are stated at the lower of present value of minimum lease payments under the lease
agreements and the fair value of the assets. The related obligations of lease are accounted for as
liabilities. Finance charges are allocated to accounting periods in a manner so as to provide a
constant periodic rate of financial cost on the remaining balance of principal liability for each
period.
Depreciation is taken to profit and loss account at the rates stated in note 11 applying reducing
balance method to write-off the cost of the asset over its estimated remaining useful life in view
of certainty of ownership of asset at the end of the lease period.
Financial charges and depreciation on leased assets are charged to income currently.
2.8 Stores and spares
These are valued at moving average cost. Stores-in-transit are valued at cost accumulated to
the balance sheet date. Obsolete and used items are recorded at nil value.
2.9 Stock-in-trade
Basis of valuation are as follows:
Particulars Mode of valuation
Finished goods -At lower of cost and net realisable value.
Sugar-in-process -At cost.
Molasses -At net realisable value.
- Cost in relation to finished goods and sugar-in-process represents the annual average
manufacturing cost which consists of prime cost and appropriate production overheads.
- Net realisable value signifies the selling price in the ordinary course of business less cost
necessary to be incurred to effect such sale.
2.10 Trade debtors
Trade debtors are carried at original invoice amount less an estimate for doubtful debtors
based on review of outstanding amounts at the year-end. Bad debts are written-off when
identified.
2.11 Cash and cash equivalents
For the purpose of cash flow statement, cash and cash equivalents comprise of cash & bank
balances and tempoi ary bank overdraft.
2.12 Revenue recognition
- Sales are recorded on despatch of goods.
- Income on deposit/saving accounts is accounted for on 'accrual basis'.
2.13 Development expenditure
Expenditure incurred on development of sugar cane is expensed in the year of incurrence.
2.14 Borrowing costs
Borrowing costs incurred on finances obtained for acquisition of fixed assets are capitalised
upto the date of commissioning of the respective assets. All other borrowing costs are taken to
profit and loss account.
2.15 Financial assets and liabilities
All financial assets and liabilities are initially measured at cost, which is the fair value of the
consideration given and received respectively. These financial assets and liabilities an
subsequently measured at fair value, amortised cost or cost, as the case may be.
All purchases and sales of financial assets are recognised on the trade date.
2.16 Off setting of financial instruments
Financial assets and liabilities are off-set and the net amount reported in the balance sheet
when there is a legally enforceable right to set-off the recognised amounts and there is an
intention to settle on a net basis, or realise the asset and settle the liability simultaneously.
2.17 Related party transactions
Sales, purchases and other transactions with related parties are made at arm's length prices
determined in accordance with the comparable uncontrolled price method except for the
allocation of expenses relating to combined offices shared with the associated companies,
which are on the actual basis.
3. ISSUED, SUBSCRIBED AND PAID-UP CAPITAL
Premier Sugar Mills and Distillery Co. Ltd., Azlak Enterprises (Pvt.) Ltd. and Phipson & Co. Pakistan
(Pvt.) Ltd. (the associated companies) held 9,534,000, 435,500 and 205,000 ordinary shares
respectively as at 30 September, 2003 and 30 September, 2002.
4. LIABILITIES AGAINST ASSETS SUBJECT TO FINANCE LEASE
Up to one year From one year to five years 2O03 2002
R u p e e s
Minimum lease payments 475,800 337,300 813,100 2,223,285
Less: Financial charges allocated
to future periods 79,689 14,658 94,347 285,953
396,111 322,642 718,753 1,947,332
Less: Security deposits adjustable
on expiry "of lease terms 0 59,750 59,750 203,900
Present value of minimum
lease payments 396,111 262,892 659,003 1,743,432
Less: Current portion grouped under 396,111 1,084,429
current liabilities
262,892 659,003
4.1 The Company has entered into a finance lease agreement with ORTX Leasing Pakistan Limited
to acquire vehicle. The liabilities under the lease agreement are payable in monthly
instalments by 30 April, 2005 and are subject to finance charge at the rate of 16.5% per
annum. The liability is secured against demand promissory note. The Company intends to
exercise its option to purchase the leased vehicle upon completion of the lease term.
2O03 2002
Note Rupees Rupees
5. DEFERRED TAXATION
The deferred taxation asset (2002: liability) comprises
of temporary differences arising due to:
(Debit) / credit balances arising in respect of:
- accelerated tax depreciation allowances -217,000 876,000
- lease finances -43,000 -326,000
-260,000 550,000
6. SHORT TERM FINANCES
Cash, term and running finances - secured 6.1 522,515,952 0
Temporary bank overdraft - unsecured 0 73,633
522,515,952 73,633
6.1 Short term finance facilities under mark-up arrangements available from National Bank of
Pakistan, Habib Bank Ltd., Bank Alfalah Ltd., The Bank of Khyber and Bank Al Habib Ltd.
aggregate Rs. 1 100 billion (2002: Rs. 525 million). These facilities, during the year, carried
mark-up at the rates ranging from 2.75% to 9% per annum. Facilities available for opening
letters of credit and guarantee aggregate Rs. 20 million (2002: Rs. 70 million).
These facilities are secured against hypothecation / pledge of stock-in-trade, personal
guarantees of the directors and lien on import documents. The expiry dates of these facilities
range between October, 2003 to January, 2004.
7. CREDITORS, ACCRUALS AND OTHER LIABILITIES
Due to associated companies 649,028 1,268,613
Creditors 15,086,702 11,167,732
Bills payable 410,881 828,451
Accrued expenses 6,584,592 11,173,793
Retention money 232,414 232,414
Security deposits - interest free repayable on demand 317,851 353,577
Advance payments 566,007 52,815
Mark-up accrued on secured short term finances 4,582,248 3,881,163
Due to provident fund trust 111,975 0
Income tax deducted at source 206,517 299,977
Workers' (profit) participation fund 7. 1 0 7,904,277
28,748,215 37,162,812
7. 1 Workers' (profit) participation fund
Opening balance 7,904,277 276,707
Add: Interest on funds utilised in the Company's business 196,569 31, '820
8,100,846 308,527
Less:
- Amount paid to the fund 6,334,681 0
- Amount deposited in the Government Treasury 1,766,165 0
8,100,846 0
Add: Allocation for the year 0 7,595.75
0 7,904,277
2003 2002
Note Rupees Rupees
8. EXCISE DUTY AND SALES TAX PAYABLE
Excise duty on sugar 8.1 4,967,163 4,967,163
Sales tax payable 10,924,843 12,107,315
15,892,006 17,074,478
8.1 Provision for excise duty has been shown net of adjustment of Rs. 1,041,868 representing
current account balance.
8.2 The Additional Collector of Customs and Central Excise raised excise duty demand amounting
Rs.6,009,031 on the mandatory quantity of sugar required to be exported by the Company
under various SROs, but was not exported during prior years. The Company filed a writ
petition with the Peshawar High Court against the said demand, which suspended the
operations of the impugned notices. The Company has also filed an appeal with the Collector
(Adjudication) Customs, Central Excise and Sales Tax, Rawalpindi against the said demand,
which is pending adjudication. Provisions for excise duty amounting Rs. 6,009,031, however,
exist in the books of account.
8.3 The Sales Tax Department, during the year ended 30 September, 1999, raised sales tax,
additional tax and penalty demands aggregating Rs. 11,668,685 on in-house consumption of
bagasse as fuel during the accounting year ended 30 September, 1997. The Company filed an
appeal with the Collector of Sales Tax (Appeals), Rawalpindi against these levies, who
dismissed the said appeal.
The Company afterwards filed an appeal with the Customs, Excise & Sales Tax Appellate
Tribunal, Peshawar Bench, which also dismissed the Company's appeal vide its order dated 15
June, 2002; the Tribunal, however, remitted the penalty. The Company has filed an appeal
with the Peshawar High Court against the Tribunal's order, which is pending adjudication.
The Company, however, paid full amount of the said demands during the accounting year
ended 30 September, 2000.
9. PROVISION FOR TAXATION - Net
Opening balance 31,044,704 4,881,704
Add: Provision made during the year current year prior year 3,000,000 (1,487,873) 26,163,000 0
1,512,127 26,163,000
32,556,831 31,044,704
Less: Payments / adjustments made against
completed assessments 24,675,127 0
7,881,704 31,044,704
9.1 Income tax assessments of the Company have been completed upto the Income Year ended 30
September, 1999 (Assessment Year 2000-01).
9.2 Provision made during the year represents minimum tax at the rate of 0.5% of the Company's
turnover for the year payable under section 113 of the Income Tax Ordinance, 2001.
9.3 No numeric tax rate reconciliation is given in these financial statements as the Company is
liable for minimum tax.
10. CONTINGENCIES AND COMMITMENTS
10.1 No commitments for irrevocable letters of credit were outstanding as at 30 September, 2003
(Commitments for irrevocable letters of credit outstanding as at 30 September, 2002 were for
Rs.4.300 million).
Commitments for capital expenditure aggregating Rs. 2.642 million were outstanding as at
30 September, 2003 (2002: Rs. 3.030 million).
10.2 The Company entered into a lease agreement with Premier Sugar Mills & Distillery Company
Limited (PSM) - an associated company during December, 1994 to acquire machinery, i.e.
4.000 K.W. Horizontal Multi Stage Turbo Alternator Set, complete with all equipment on lease
at prime cost of Rs. 30 million at an annual lease rent of Rs. 6 million for a period of three years.
PSM, during the year ended 30 September, 2001, extended the lease period of the said
machinery for further period of three years at annual lease rentals of Rs. 3.4 million. The
Agreement is secured against demand promissory note of Rs. 18 million.
10.3 The Company, during the year, has acquired a vehicle from ORIX Leasing Pakistan Ltd. Under
finance lease arrangements, which has been treated as operating lease in these financial
statements contrary to the requirements of IAS 17 (Leases) and the provisions of the
Companies Ordinance, 1984. Commitments for rentals under the lease agreement aggregate
Rs. 1.081 million as at 30 September, 2003, which are payable as follows:
Financial Year Rupees
2003-04 447,480
2004-05 447,480
2005-06 186,450
1,081,410
11. OPERATING FTXED ASSETS-Tangible
COST DEPRECIATION
PARTICULARS As at 30 Additions (Disposals)/ transfers As at 30 To 30 For the On To 30
September, during the during the September, Kate September, Year (disposals) September,
2002 year 2003 % 2002 / transfers 2003
year
Owned:
Freehold land 8,413,440 0 0 8,413,440 0 0 0 0 0
Buildings and loads 140,875,392 1,291,783 0 142,167,175 10 84,189.29 5,797,789 0 89,987,079
Plant and machinery 675,451,022 24,339,969 0 699,790,991 10 396,455,768 30,333,522 0 426,789,290
Electric installations 19,248,695 0 0 19,248,695 10 10,916,812 833,188 0 11,750,000
Office equipment 6,425,331 3,342,364 0 10,327,695 10 2,359,305 791,239 0 3,206,544
560,000 560,000
Furniture and
fixtures 7,929,068 550,837 0 8,479,905 10 4,088,571 439,133 0 4,527,704
Vehicles 7,694,985 0 -1,317,400 8,7 00,585 20 5,431,442 613,110 -930,030 6,248,146
2,323,000 1,323,624
866,037.93 29,524,953 -1,317,400 897,128,486 503.441,188 38,807,981 -930,030 524,508,763
Leased: 2,883,953 1,189.62
Office equipment , 560,000 0 -560,000 0 10 56,000 0 -560,000 0
Vehicles 3,550,700 0 -2,323,000 1,227,700 20 1,379,164 196,432 1,333,624) 441,972
4,110,700 0 (7.883,000) 1,227,700 1,435,164 196,432 1,189,624) 441,972
20O3 Rupees 870,148,633 29,524,953 -1,317,400 898,356,186 504,876,352 39,004,413 -930,030 542,950,735
0 0
2002 Rupees 857,185,043 12,963,590 0 870,110,633 464,609,385 40,266,967 0 504,876,352
11.1 Disposal of vehicles
Particulars Cost Accumulated depreciation Book value Sale proceeds Gain Made of disposal Insurance claim received from / sold to:
Toyota land cruiser 340,730 209,388 131,342 450,000 318,658 Insurance Royal & Sun Alliance
claim Insunance Company
Ltd., Lahore
Honda Civic 976,670 720,642 256,028 300,000 43,972 Negotiation Major Mahboob Haq.
House # 32, Street #18
1,317,400 930,030 387,370 750,000 362,630 Sector F-6/2, Islamabac
2003 2002
11.2 Depreciation for the year has been allocated as follow! Rupees Rupees
Cost of sales 36,964,498 38,223,694
Administrative and general expenses 2,039,915 2,043,273
39,004,413 40,266,967
2003 2002
Note Rupees Rupees
12. CAPITAL WORK-IN-PROGRESS
This comprised of:
Buildings on freehold land
Cost of materials 569,827 1,604,537
Advance payments 5,000 5,000
574,827 1,609,537
Plant and machinery
Cost of materials 8,697,880 2,480,962
Advance payments 896,310 4,063,708
Electric installations 9,594,190 6,544,670
Cost of materials 965,027 38,220
11,134,044 8,192,427
13. STORES AND SPARES
Stores including in transit valuing R? 256 , 673
(2002 :Rs. 1,294,610) 49,176,774 43,944,774
Spares 6,710,914 6,476,534
55,887,688 50,421,308
14. STOCK-IN-TRADE
Finished goods 14.1 488,250,000 38,674,000
Sugar-in-process 1,300,000 1,100,000
489,550,000 39,774,000
14.1 These have been valued at net relisable value (2002: at cost).
15. ADVANCES, DEPOSITS, PREPAYMENTS AND OTHER RECEIVABLES
Advance payments to
- employees 688,377 638,231
- suppliers and contractors 12,903,440 16,808,987
15.1 13,591,777 17,447,218
Due from associated companies 15.2 1,224,803 704,753
Letters of credit 0 16,096
Tax deducted at source 9,866,728 9,606,862
Prepayments 56,790 180,881
Profit accrued on bank deposits 106,031 232,723
Income tax-refundable 0 8,373,566
Corporate assets tax-refundable 0 2,000,000
Due from provident fund trust 0 58,413
24,846,129 38,620,512
Less: Provision for doubtful advances 2,437,072 2,437,072
22,409,057 36,183,440
15.1 These are unsecured and considered good except for Rs. 2.437 million, which have been
fully provided for in the books of account.
2003 2002
15.2 Due from associated companies in respect Note Rupees Rupees
of current account transactions:
The Frontier Sugar Mills & Distillery Ltd. 398,936 398,936
National Computers (Pvt.) Ltd. 235,050 0
Phipson and Co. Pakistan (Pvt.) Ltd. 590,817 305,817
1,224,803 704,753
(a) Aggregate transactions with associated companies during the year were as follows:
- Purchase of goods and services 17,434,452 15,553,594
- Purchase of computers 2,932,000 0
- Machinery lease rentals 3,400,000 3,400,000
-Sale of goods 8,542,934 10,165,187
(b) Maximum aggregate debit balance of associated companies at any month-end during the
year was Rs. 12,556,866(2002 : Rs. 10,045,594).
16. BANK BALANCES
Cash at banks on:
-current accounts 16.1 3,120,312 4,969,445
-PLS accounts 10,795,571 23,271,096
-deposit accounts 2,551,081 10,231,447
16,466,964 38,471,988
16.1 These include dividend account balance of Rs. 687,063 (2002: Rs. 27,007).
17. SALES -Net
Turnover 682,002,356 1,522,820,284
Less:
Commission 2,509,091 5,261,162
Sales tax 102,895,146 230,871,009
105,404,237 236,132,171
576,598,119 1,286,688,113
2003 2002
Note Rupees Rupees
18. COST OF SALES
Raw materials consumed 903,761,941 850,752,617
Chemicals and stores consumed 23,014,372 25,146,880
Salaries, wages and benefits 18.1 32,597,831 33,022,250
Power and fuel 5,229,899 5,116,666
Repair and maintenance 20,791,791 21,108,280
Insurance 1,054,373 1,022,961
Machinery lease rentals 3,400,000 3,400,000
Depreciation 10.2 36,964,498 38,223,694
1,026,814,705 977,793,348
Adjustment of sugar -in-process
Opening 1,100,000 1,450,000
Closing (1.300.0001 -1,100,000
-200,000 350,000
Cost of goods manufactured 1,026,614,705 978,143,348
Adjustment of finished goods
Opening stock 38,674,000 167,059,177
Closing stock -488,250,000 -38,674,000
-449,576,000 128,385,177
577,038,705 1,106,528,525
18.1 These include Rs. 480,388 (2002 : Rs. 433,332) in respect of staff retirement benefits.
19. ADMINISTRATIVE AND GENERAL EXPENSES
Salaries and benefits 19.2 13,208,204 12,937,778
Travelling and conveyance:
-directors 2,760,548 1,737,915
-others 479,473 738,381
Vehicles running and maintenance 2,123,970 2,681,690
Rent, rates and taxes 553,214 540,163
Communication 1,549,351 1,319,393
Printing and stationery 771,450 672,177
Insurance 310,807 352,848
Repair and maintenance 1,020,288 1,330,719
Fees and subscription 824,820 587,934
Depreciation 2,039,915 2,043,273
Auditors' remuneration 19.3 281,550 188,000
Legal and professional charges (other than Auditors') 614,407 137,062
General 258,469 231,416
26,796,376 25,498,749
19.1 The Company, during the year, shared expenses aggregating Rs. 4,181,160 (2002:
Rs.5,191,883) with its associated companies on account of combined office expenses. These
expenses have been booked in the respective heads of account.
19.2 These include Rs. 150,411 (2002: Rs. 120,349) in respect of staff retirement benefits.
2003 2002
Note Rupees Rupees
19.3 Auditors' remuneration:
- Hameed Chaudhri & Co.
statutory audit 75,000 75,000
half yearly review 40.0OO 0
consultancy, tax services and certification charges 82,500 25,000
out-of-pocket expenses 44,050 25,000
241,550 125,000
- Munawar Associates
cost audit fee - current year 30,000 30,000
- prior year 0 33,000
out-of-pocket expenses 10,000 0
40,000 63,000
281,550 188,000
20. SELLING AND DISTRIBUTION EXPENSES
Loading and stacking 20.1 1,710,963 2,029,510
Salaries and benefits 313,397 314,546
2,024,360 2,344,056
20.1 These include Rs. 4,845 (2002 : Rs. 5,456) in respect of staff retirement benefits.
2 1 . OTHER INCOME
Interest/profit on bank deposits 1,123,261 2,558,055
Sale of press mud - net of sales taxRs. 86,418 (2002: Rs. 82, 139) 480,101 456,326
Sale of scrap -net of sales tax Rs. 79,689 (2002: Rs. 23 1 ,836) 442,716 1,299,968
Payable balances written back 0 373,064
Gain on disposal of vehicles 362,630 0
Miscellaneous 321,819 179,592
2,730,527 4,867,005
22. FINANCIAL CHARGES
Mark-up on short term finances 14,799,757 20,934,976
Interest on:
0 1,025,674
- lease finances 191,606 202,973
- workers' (profit) participation fund 196,569 31,820
Commission on bank guarantees 0 185,892
Bank charges 936,838 969,445
16,124,770 23,350,780
23. MISCELLANEOUS CHARGES
Donations (without directors' interest) 118,900 361,945
Receivable balances written-off 0 146,651
118,900 508,596
24. PRIOR YEARS' EXCISE DUTY ON SUGAR
The Additional Collector, Customs & Central Excise, (the Additional Collector), Peshawar vide his
judgment dated 13 February, 1998 ordered the Company to deposit an amount of Rs. 18,589,175 on
the grounds that the Company on account of better production of sugar during the crushing season
of 1994-95 availed concessionary rate of central excise duty stipulated under SRO 545(1)/94 dated
09 June, 1994; the incidence of concession, however, was not passed-over to the consumers.
The Company, against the said demand, made provision to the tune of Rs. 7,295,295 during the year
ended 30 September, 1995 and the balance amounting Rs. 11,293,880 was provided for during the
year ended 30 September, 1998.
The Company filed an appeal with the Collector of Customs, Central Excise and Sales Tax (Appeals)
[the Collector (Appeals)], Northern Zone, Rawalpindi against the aforesaid orders of the Additional
Collector. The Collector (Appeals) decided the appeal and upheld the orders of the Additional
Collector. The Company, thereafter, filed an appeal.with the Customs, Central Excise and Sales Tax
Appellate Tribunal, Islamabad against the orders of the Collector (Appeals), which vide its order
dated 19 March, 2002 accepted the Company's contention and allowed the Company's appeal.
Consequently, excise duty provisions made in prioryears aggregating Rs. 18,589,175 were reversed
during the preceding year.
25. (LOSS) / EARNINGS PER SHARE 2003 Rupees 2002 Rupees
(Loss) / profit attributable to ordinary
shareholders -433,348,338 122,059,337
Weighted average number of shares No. of shares
outstanding during the year 19,128,000 19,128,000
Rup e e s
(Loss) / earnings per share -2.27 6.38
25.1 There is no dilutive effect on the basic (loss) / earnings per share of the Company.
2003 2002
26. NUMBER OF EMPLOYEES Numbers
Total number of employees at the year-end 479 486
27. REMUNERATION OF CHIEF EXECUTIVE, DIRECTORS AND EXECUTIVES
Chief Executive Directors Executives
Particulars 2003 2002 2003 2002 2003 2002
Managerial remuneration
including bonus 1,500,000 1,700,000 187,500 462,500 3,779,239 4,093,356
Allowances and utilities 0 0 0 0 2,026,977 1,709,184
Contribution to
provident fund 0 0 0 0 210,509 151,689
Medical expenses
reimbursed 0 0 0 61,284 4,988 4,000
Rupees 1.500,000 1,700,000 187,500 523,784 4,021,713 5,958,229
No. of persons 1 1 1 2 12 12
27.1 Some of the directors have been provided with free use of Company maintained cars.
2003 2002
M. Tons
28. CAPACITY AND PRODUCTION t
Rated crushing capacity (based on 150 working days) 900,000 900,000
Cane crushed 889,074 845,048
Raw sugar processed 0 2,000
Sugar produced 64,698 70,070
Number
Days worked 144 141
29. FINANCIAL INSTRUMENTS
29.1 Financial assets and liabilities
Interest / mark-up bearing Non Interest/mark-up bearing
Interest / mark-up rates range %per Maturity upto one year Maturity after one year Sub total Maturity upto one year Maturity after one year Sub total Total
annum
Financial assets:
Security deposits 0 0 0 0 159,940 159,940 159,940
Trade debtors 0 0 0 45,642,683 0 45,642,683 45,642,683
Profit on bank
deposits 0 0 0 106,031 0 106,031 106,031
Bank 1.25%
balances to 4% 13,346,352 0 13,546,652 3,120,312 0 3,120,312 16,466,964
2003 1 13,346,652 0 13,346,652 48,869,026 159,940 49,028,966 62,375,618
2002 33,500,790 0 33,500,790 80,216,458 105,765 80,322,223 113,823,013
Financial liabilities
Liabilities agains t
assets subject to
finance lease 16.50% 396,111 262,892 659,003 0 0 0 659,003
Short term 2.75%
finances to 9% 5 22,515,952 0 522,515,952 C 0 C 522,515,952
Creditors, accruals
other liabilities 0 0 0 24,863,716 0 24,863,716 24,863,716
Unclaimed dividend 0 0 0 2,372,915 C 2,372,915 2,372,915
2003 55 12,912,063 262,892 523,174,955 27,236,631 0 27,236,631 550,411,586
2002 1,084,429 659,003 1,743,432 29,655,228 0 29,655,228 ,31,398,660
Off balance sheet items:
Commitments for
- capital expenditure 0 0 0 2,642,OOC 0 2,642,OOC 2,642,000
- machinery lease rentals 0 0 0 3,400,OOC C 3,400,OOC 3,400,000
- vehicle lease rentals 10% 447,480 633,930 1,081,410 C C C 1,081,410
2003: 447,480 633,930 1,081,410 6,042,000 0 6,042,000 7,123,410
2002 0 0 0 10,730,042 0 10,730,042 10,730,042
29.2 Foreign exchange risk management
Foreign currency arises mainly where receivables and payables exist due to transactions
with foreign undertakings. Payables exposed to foreign currency risk are not covered
through any forward foreign exchange contracts or through hedging. No forward foreign
exchange contracts were outstanding at the year-end.
29.3 Concentration of credit risk
Credit risk represents the accounting loss that would be recognised at the reporting date if
counter parties fail completely to perform as contracted. All the Company's financial assets
are subject to credit risk.
29.4 Fair values of financial assets and liabilities
The carrying values of all financial assets and liabilities reflected in the financial
statements approximate to their fair values.
30. DATE OF AUTHORIZATION FOR ISSUE
These financial statements were authorised for issue on 08 December, 2003 by the Board of
Directors of the Company.
31. FIGURES
- Figures in these financial statements have been rounded-off to the nearest Rupee.
- Corresponding figures have neither been rearranged nor reclassified.
DIRECTOR CHIEF EXECUTIVE CHIEF FINANCIAL OFFICER
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