Faisal Spinning Mills Ltd. - Annual Report2003

FAISAL SPINNING MILLS LIMITED

Annual Reports 2003

Company Information

BOARD OF DIRECTORS

Mr. Mohammad Sharif

Chief Executive / Director

Mr. Mohammad Salim

Director

Mr. Mohammad Shaheen

Director

Mr. Mohammad Shakeel

Director

Mr. Khurram Salim

Director

Mr. Bilal Sharif

Director

Mr. Hasan Mahmood

Director (Resigned on April

17,2003)

Mr. Iqbal Mehboob

Director (Appointed on April

17,2003)

COMPANY SECRETARY

Mr. Asif Mahmood

FCA, FCIS, FITM, FIGS, APA

CHIEF FINANCIAL OFFICER

Mr. Anwar Hussain, FCA

AUDIT COMMITTEE

Khurram Salim

Chairman

Bilal Sharif

Member

Mohammed Shakeel

Member

AUDITORS

M/s Mushtaq & Company

Chartered Accountants

407, Commerce Centre

Hasrat Mohani Road

Karachi.

LEGAL ADVISOR

Mr. Shahid Pervaiz Jami,

Advocates

BANKERS

Citi Bank, N.A.

Hong Kong and Shanghai Banking Corporation

Standard Chartered Bank

United Bank Limited

REGISTERED OFFICE

Umer Chambers,

10/2, Bilmoria Street,

Off. 1. 1. Chundrigar Road,

Karachi.

Tel : (021) 2635916 -17

Fax:(021)263-7826

E-mail : khioff@umergroup.com

website : www.umergroup.com

LIAISON/CORRESPONDENCE

OFFICE :

6-K, Main Boulvard,

Gulberg II, Lahore.

Tel: (042) 5770001 -3

Fax:(042)5770015

E-mail : lhroff@umergroup.com

Website : www.umergroup.com

MILLS AT

Spinning Unit :

A-150S.I.T.E.

Nooriabad

Ph : (02202) 660002

Weaving Unit :

18-KM, Shaikhupura Faislabad Road,

Feroz Watwan

Distt. Shaikhupura

NOTICE OF THE ANNUAL GENERAL MEETING

NOTICE is hereby given that the 19th Annual General Meeting of the members of Faisal Spinning Mills Limited will be held on

December 30, 2003 at 3:00 P.m., at the registered office of the company i.e. Umer Chambers, 10/2, Bilmoria Street, Off: 1.1. Chundrigar

Road, Karachi, to transact the following business:

1. To confirm the minutes of the last Annual General Meeting held on January 25, 2003.

2. To receive, consider and adopt the audited financial statements of the company for the year ended on September

30, 2003 together with the auditors' and directors' report thereon.

3. To approve the dividend as recommended by the Board of Directors, for the year ended on September 30, 2003.

4. To appoint the auditors and fix their remuneration for the year ended on September 30, 2004.

5. To elect eight directors as fixed by the Board for a term of three years in accordance with Section 178 of the Companies

Ordinance, 1984. The names of retiring directors are M/s Mohammad Salim, Mohammad Sharif, Mohammad Shaheen,

Mohammad Shakeel, Khurram Salim, Bilal Sharif and Mr. Iqbal Mehboob. The following members have filed their

consent to act as director in the forthcoming election.

Mohammad Salim

Mohammad Sharif

Mohammad Shaheen

Mohammad Shakeel

Khurram Salim

Bilal Sharif

Mohammad Amin

Adil Shakeel

6. To transact any other business with the permission of the chairman.

KARACHI: December 08, 2003 By the order of the Board)

Asif Mahmood

FCA, FCIS

Company Secretary

NOTES:

1. The Shares Transfer Books of the Company will remain closed from 29 December 2003 to 5 January 2004 (both

days inclusive). Transfers received in order at the registered office of the company i.e. Umer Chambers 10/2 Bilmoria

Street, Off: 1.1.Chundrigar Road, Karachi by 28 December, 2003 will be treated in fr,ne for the purpose of entitlement

of dividend in respect of the year ended September 30, 2003.

2. A member entitled to attend and vote at the General Meeting is entitle to appoint a proxy to attend and vote instead

of him/ her. No person other than a member shall act as proxy.

3. An instrument appointing a proxy and the power of attorney or other Authority (if any) under which it is signed or a

notarially certified copy of such power of authority, in order to be valid, must be deposited at the registered office of

the Company at least 48 hours before the time of the meeting and must be duly stamped, signed and witnessed.

4. Any individual Beneficial Owner of CDC, entitled to attend and vote at this meetinq. must bring his/her original N!C

an attested copy of his/her NIC of Passport. Representatives of corporate members should bring the usual documents

required for such purpose. The account/ sub account holders of CDC will further have to follow the guidelines as laid

down in Circular No. 1 of 2000 dated January 26, 2000 issued by Securities & Exchange Commission of Pakistan.

5. Any person seeking to contest in election to the office of the Directors should file with the company not later then

fourteen (14) days before the date of the meeting, a notice of his/ her intention to offer himself herself for election of

directors.

6. Members are requested to immediately inform of any change in their addresses.

DIRECTOR S'REPORTTO THE SHAREHOLDERS

Your directors take this opportunity to present the annual report and the audited financial statements of

the company for the year ended September 30, 2003.

General:

The principal activity of the company is manufacturing and sale of yarn and cloth. The spinning unit of the

company is located at Nooriabad and the weaving unit is located at Skeikhupura. In compliance with the

requirements of Securities and Exchange Commission of Pakistan vide SRO 764(1)72001 and subsequent

amended in the Companies Ordinance, 1984, the company has started to issue quarterly financial

statements.

Financials and Appropriations:

Allhumdullilah, your company is maintaining the pace of regular improvement in all areas and by the grace

of Almighty Allah, your company continued to perform well and posted a profit after tax of Rs. 103,029

million (2002: Rs. 58.816 million). The balance sheet as on September 30, 2003 indicates total assets

of Rs. 1.733 billion with a growth of about 67.67% over the previous year. The allocation of profits for the

year before tax is summarized as under:

Rupees

Profit before taxation

122,415,405

TAXATION:

Current year

20,307,790

Prior year

-921,300

19,386,490

Net profit after taxation

103,028,915

Un appropriated profit brought forward

93,872

Profit available for appropriation

103,122,787

Appropreations:

Proposed cash dividend

15,000,000

Transfer to general reserves

Un appropriate profit carried forward

88,122,787

The gross turnover of the company has increased by Rs. 182.344 million with a growth of 10.84% over

the last year. The major contribution in the growth of turnover is from the weaving unit. The gross profit

margin has slightly increased by 1.82 %. The increase in the administrative expenses includes a provision

for doubtful debts amounting to Rs. 10.575 million, rest shows a normal growth. The selling expenses have

been increased. The effect of decrease in financial charges is visible by Rs. 13.012 million, which further

added towards profit.

Break up Value & Earning per share.

The break up value of your shares as on September 30, 2003 was Rs.54.22 as compared to Rs. 45.42

of last year. The earning per share of the year under review was Rs. 10.30 as compared to Rs. 5.88 of

the last year.

Dividend

Your directors have pleasure in recommending a final cash dividend of 15% i.e. Rs. 1.50 per share (2002:

@ 20% i.e. Rs. 2.00 per share) for the approval of shareholders at forthcoming the Annual General Meeting.

Year under review

The year under review was a good year in terms of profits. There was no major change in the scenario

of spinning unit. The weaving unit performed well during the year under review. Mashallah your company

has posted its name for the quality out put and able to get better prices. The weaving unit had contributed

a major portion towards the total profit before taxation.

Though September 11 and the subsequent wars added to the difficulties of Pakistani exporters, the country

managed to maintain its yarn export level at around 1/3'"^of production. Nevertheless, the sharp appreciation

in the rupee / dollor parity during financial year 2003 caused a 12.5% drop in yarn export earnings. By

and large, textile exporters escaped adverse pressures because of the government initiative of interest

rates cuts. The cheaper loans helped companies to boost their earnings.

Future Prospects

The cotton prices remained high from the beginning of the cotton season due to shortfall in the target of

cotton crop. The prices of cotton in the international market are also on higher side due to cotton shortage

in the China.

The textile sector expected to register growth in the coming years spurred by the Textile Vision 2005

especially in the value added segment. The Textile Vision is directed towards an open, market driven textile

industry which is globally competitive to exploit the opportunities created by the WTO, which calls for a

level playing filed through removal of quotas and tariff barriers. Nevertheless, the increase competition

spurred by the WTO and the removal of trade barriers may pose a challenge to the local exporters.

Expansion Plan

Weaving Unit

The capacity of the weaving unit has been increased by adding 5 air jet looms. After the satisfactory

results of weaving unit, the management has further set up shed. No. 2 of weaving unit in the same

premises. The shed No. 2 of weaving unit comprises of 80 air jet looms with other related equipment.

Power Generation Unit

It is pleased to inform you the gas based power generation unit has started working satisfactorily.

The capacity of the power generation unit is 2,700 Kwe. The management is hopeful that with the

addition of self-power generation the performance of spinning unit will improve due to un-interrupt

power supply.

Human Resource

The management of the company believes that the organization can not be successful in the absence of

motivated and professional human resources. Keeping in view, your company has embarked on a serious

effort of upgrading its manpower through induction of qualified staff.

Corporate & Financial Reporting Framework:

The board of directors is mindful of its responsibilities as established by the Code of

Corporate Governance by Stock Exchanges and the Securities and Exchange Commission

of Pakistan. Your company is always committed to the standards of corporate governance

and continually seeking improvements in the existing system. However, we are pleased

to report that your company has taken necessary steps to comply with the provisions of

Code of Corporate Governance as incorporated in the listing rules of the Stock Exchanges.

a) The financial statements, presented by the management of the company, present fairly

its state of affairs, the result of its operations and cash flow & changes in equity.

b) Proper books of accounts of the Company have been maintained.

c) Appropriate accounting policies have been consistently applied in preparation of

financial statements and the accounting estimates are based on reasonable and prudent

judgement.

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

preparation of financial statements and departure there from, if any, has been adequately

disclosed.

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

and monitored. The process of review is ongoing and any emerging weaknesses in

control will be addressed effectively.

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

concern.