Dar Es Salaam Textile Mills Ltd. - Annual Reports 2003

Dar Es Salaam Textile Mills Limited

Annual Reports 2003

CONTENTS

COMPANY INFORMATION

Board of Directors

Mr. Shahid Hussain

Chairman

Mr. Arif Saeed

Chief Executive

Directors

Mr. Ahmed Javed

Mr. Zahid Hussain

Mr. Shahid H. Kardar

Mr. Zulfiqar Ahmad Malik

Mr. Mansoob A. Akhtar (N.I.T. Nominee)

Secretary

Mr. Sultan Anwar

Auditors

S. M. Masood & Co.

Chartered Accountants

Bankers

Habib Bank Limited

Prime Commercial Bank Limited

United Bank Limited

Union Bank Limited

Bank Alfalah Limited

Registered Office

Servis House,

2 Main Gulberg,

Lahore-54662

Factory

10th Km Mundke-Sheikhupura Road, Muridke.

DIRECTORS' REPORT

The Directors are pleased to present the Annual Report of your Company and the Audited

Financial Statements for the year ended 30th September, 2003.

Our sales increased by just over 5% and registered at Rs. 479.019 million (last year: Rs. 453.846

million). However, our gross profit ratio declined to 8.41% (last year: 11.92%). This is despite

lowering of operating expenses from 6% of sales to 5.7% and a similar curtailment in the financial

expenses from 4.4% of sales to 3.98%. The operation resulted in a loss before tax of Rs. 5.230

million (last year: profit of Rs. 6.148 million).

The principal cause of the reduced gross profit was the increase in raw material cost from 59.7%

to 66.7 % of sales. Due to extraordinary developments in the world: most notably the SARS

epidemic in Hong Kong and China (our biggest markets) and weak economic indicators in the

United States (the principal market for our customers), knitwear sales were suppressed and yarn

prices did not rise to match the increase in cotton prices.

We are pleased to report that our combers have been installed and at the time of writing this

report our new back process machinery has been shipped. This will now enable us to proceed

with an increase in spindleage within 2004. These measures are intended to reduce our spindle

cost and enable our Company to be more competitive at any given cotton and yarn prices.

PROSPECTS FOR THE YEAR

The cotton market has displayed an upward trend during the current cotton season which started

in September - October 2003. Cotton prices in Pakistan rose from a level of Rs. 2.400/- per

maund and peaked at Rs. 3.600/- per maund before settling at slightly lower levels. Such a

marked increase in cotton price was not easily or immediately absorbed in yarn prices. However,

we are confident that the market will reset itself to reflect current levels. We are now focused on

the growth of this Compdny after having gone through a period of consolidation during the last 3

years and are confident that this will result in enhancing shareholder value.

EARNING PER SHARE

Loss per share for the year is Rs. 1.22 compared with a profit per share of Rs. 0.48 in the

previous year. The Board of Directors has recommended nil dividend for the year under review on

account of losses and in view of the expansion plans of the Company.

CORPORATE GOVERNANCE

The Board of Directors hereby declares that for the year ended September 30, 2003.

a. The financial statements, prepared by the Management of the Company, fairly present

its state of affairs, the results of its operation, cash flow, and changes in equity.

b. The Company has maintained proper books of account.

c. Appropriate accounting policies have been consistently applied in the preparation of

financial statements and accounting estimates are based on reasonable and prudent

judgment.

Vision Statement

To achieve the highest possible return on investment through a

process of continuous improvement and while upholding the highest

standards of integrity in all operations.

Mission Statement

To be a result-oriented and profitable Company by consistently

improving in terms of productivity, quality, technological expertise,

diversity, presentation, reliability and customer acceptance.

To establish the Company as a growing concern while ensuring

optimum return on investment for snareholders.

To be a responsible employer and create an environment where a

professional, highly-motivated management team can prosper.

To be a good corporate citizen who supports charitable causes and

follows environmentally friendly policies.

STATEMENT OF COMPLIANCE WITH THE BEST PRACTICES OF

CORPORATE GOVERNANCE

This statement is being presented to comply with the Code of Corporate Governance contained in

Regulation No. 37 (Chapter XI) of the Karachi Stock Exchange (Guarantee) Limited and Listing

Regulation No. 40 (Chapter XIII) of the Lahore Stock Exchange (Guarantee) Limited 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 Company encourages representation of independent non-executive directors and

directors representing minority interests on it's Board of Directors. At present the Board

included one independent director representing Financial Institution and 5 non-executive

directors.

2. The directors have confirmed that none of them is serving as a director in more than ten

listed companies including this Company.

3. All the resident directors of the Company are registered as taxpayers and none of them

has defaulted in payment of any loan to a banking company, a DPI or an NBFI or, being a

member of a stock exchange, has been declared as a defaulter by that stock exchange.

4. No casual vacancy occurred during the financial year 2002-2003.

5. The Company has prepared a "Statement of Ethics and Business Practices", which has

been signed by all the directors and employees of the Company.

6. 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 dates on which they were approved or amended has been maintained.

7. All the powers of the Board have been duly exercised and decisions on material

transactions, including appointment and determination of remuneration and terms and

conditions of employment of the CEO and other executive directors, have been taken by

the Board.

The meetings ol the Board were presided over by the Chairman and, in his absence, by a

director elected by the Board for this purpose and the Board met at least once in every

quarter. Written notices of the Board meetings, along with agenda and working papers,

were circulated at least seven days before the meetings. The minutes of the meeting

were appropriately recorded and circulated.

d. International accounting standards, as applicable in Pakistan, have been followed in

the preparation of financial statements and any departure therefrom has been

adequately disclosed.

e. The system of internal control is sound in design and has been effectively

implemented and monitored.

f. There are no significant doubts upon the Company's ability to continue as a going

concern.

g. There has been no material departure from the best practices of corporate

governance, as detailed in listing regulations.

h. Operating and financial data and key ratios of the last six years are annexed.

i. Value of investment of Provident Fund based on the last audited accounts of said fund

is Rs. 5.88 million.