Frontier Ceramics Limited- Annual Reports 2003- PakSearch.com,

FRONTIER CERAMICS LIMITED

Annual Reports 2003

COMPANY INFORMATION

BOARD OF DIRECTORS

Mr. S.U. Durrani

Chairman

Maj. Gen. (R) Jehanzeb Khan

Mr. Shamsul Hassan

Chief Executive

Mr. M. Fayyaz Khan

Mr. Rab Nawaz

Mr. Muhammad Iqbal

Mr. Hukam Khan Badshah

Company Secretary & Chief Financial Officer

Mr. Rab Nawaz

BANKERS

National Bank of Pakistan

United Bank Limited

The Bank of Khyber

Bank AI-Habib

AUDITORS

Messrs Muqtadir Mushtaq & Co. Chartered Accountants.

LEGAL ADVISOR

Col. (Rtd) Nazirullah Qazi Advocate

REGISTRAR AND SHARE TRANSFER OFFICE

Saeed Methani Mushtaq & Co. Chartered Accountants, Suite # 23C,Block B,

2nd Floor, Cantonment Plaza, Fakhr-e-Alam Road, Peshawar Carrtt.

HEAD OFFICE / REGISTERED OFFICE

29, Industrial Estate, Jamrud Road, Peshawar, N.W.F.P.

Tel: 92-91 -812360, 812746 Fax: 92-91 -812757

ZONAL OFFICES

PESHAWAR

29-lndustrial Estate, Jamrud Road, Peshawar

Tel: 92-9 1-8 12360, 812746

RAWALPINDI

82-A, Satellite Town Rawalpindi.

Tel: 92-5 ! -44 1 0998 Fax: 92-5 1 -4425523

KARACHI

1* Floor, Kashif Centre,

Shahra-e-Faisal, Karachi.

Tel: 92-2 1-5673006

NOTICE OF THE ANNUAL GENERAL MEETING

Notice is hereby given that the Twenty First Annual General Meeting of Frontier Ceramics Limited will be

held at its registered office, 29-lndustrial Estate, Jamrud Road, Peshawar on Thursday .October 30, 2003, at

09:00 a.m. to transact the following business:

1. To confirm minutes of the Twentieth Annual General Meeting of the Company held on

Octobers 1,2002.

2. To receive, consider and approve the Audited Accounts together with the Directors' and Auditors'

Reports for the year endedjune 30,2003.

3. To appoint Auditors of the Company for the year ending 2003-200-4 and fix their

remuneration. The present auditors Messrs Muqtadir Mushtaq & Co. Chartered Accountants are

retiring.

The Company has received notices from Shareholders under Section 253 of the Companies

Ordinance 1984, proposing the name of Messre Saeed Methani Mushtaq & Co., Chartered

Accountants,23-C,Block-B, 2nd Floor, Cantonment Plaza, Fakhr-e-Alam Road, Peshawar, for the

appointment as auditors of Frontier Ceramics Ltd for the year 2003-2004, which has

recommended by the Audit Committee in its meeting held on September 18,2003.

4. To transact any other business with the permission of the Chair.

BY ORDER OF THE BOARD

September 30, 2003 (Company Secretary)

NOTES:

1. The Register of Members of the Company will remain closed from October 21,2003 to

October 31,2003 (both days inclusive).

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

proxy to attend and vote on his/her behalf. Proxy Forms must reach the Company's

Registered Office, at-least48 hours before the meeting.

3. Shareholders who have deposited their shares into Central Depository Company of

Pakistan Limited, must bring their original National Identity Card (NIC) at the time of

attending the meeting.

4. In case of Corporate entity, the Board of Directors' resolution/power of attorney with

specimen signature of the nominee shall be produced (unless it has been provided earlier) at

the time of the meeting.

5. Members are requested to notify the Company or Registrar of the Company, Messrs

Saeed Methani Mushtaq & Co., Chartered Accountants, Suite No. 23-C, 2^nd Floor,

Block-B, Cantonment Plaza, Fakhr-e-Alam Road Peshawar, for any change in their

mailing address.

DIRECTORS' REPORT

The Board of Directors is pleased to present the 21st Annual Report alongwith the

Audited Accounts for the year ended June 30, 2003.

Gross sales of the Company for the year under review, was Rs. 144.330 million.

The desired results could not be achieved due to interruption of gas supply to the

project in the months of December 2002, January, February and April 2003, which

seriously upset the production in these months. The capacity of the newly installed

Roller Kiln could not be utilized due to Gas supply problems. Additionally, revenue

from sales of Tiles was also reduce due to intense competition in the market and

dumping of under-invoiced imported tiles, which are available in the market at

exceptionally low rates. This has seriously affected your Company's ability to achieve

the desired production/sales targets. These conditions forced the Company

to sell its products on a heavy discount and incentives given to distributors for

promoting the Company's sales.

FINANCIAL SUMMARY

(Rs. In Million)

Sales

114.007

Gross Profit

26.57

Less: Admin and Selling Expenses

28.265

Operating Profit/(Loss)

(1.694)

Add: Other Income

1.809

0.115

Less: Financial Expenses

(6.440)

Provision for Taxation

(0.982)

Loss after Taxation

(7.308)

Prior year Adjustment

0.097

Accumulated Profit/(Loss) brought forward

(71.689)

Adjustment of incremental

Depreciation out of Revaluation of Fixed Assets

79.253

Profit/(Loss) carried over to Balance Sheet

0.354

DIVIDEND

In view of the current financial position of your Company, the Directors are not

recommending a Dividend for the year under review.

FUTURE OUTLOOK

Under the prevailing market conditions, we foresee a tremendous pressure on the

selling prices of products viz-a-viz our profitability. To overcome this problem

efforts are being made to reduce the cost of production and improve the efficiency

of the plant, which has become inevitable due to continuous increases in the

energy and other input costs of production.

The steps announced by the Government of Pakistan to encourage investments in

the Housing Sector and new demands from Afghanistan should auger well for

your Company's sales efforts.

The Company will explore new avenues for enhancing the sales volume and to

make it a profitable venture in spite of immense pressure for reduction in Custom

Tariff on imported tiles under the WTO Regime, which will encourage dumping

of imported tiles in the local market.

To meet the challanges of our times, the Company is planning to restart the

production of Sanitary-ware alongwith other activities in collaboration with

Foreign manufacturers. Further high value tiles will be produced on the Roller

Kiln, which is an energy saving equipment. Serious efforts are also being made to

induct energy saving machinery/equipment under BMR to enable the Company to

produce at competitive rates, by increasing efficiency levels and reducing our

energy costs.

CORPORATE GOVERNANCE

In compliance of the Code of Corporate Governance we give below a statement

in accordance with the Financial and Corporate Reporting framework:

a) The financial statement, prepared by the management of the Company

present fairly its state of affairs, the results of operation, cash flow statement

and statement of changes in equity.

b) Proper books of accounts have been maintained.

c) Appropriate accounting policies have been consistently applied in preparation

of the financial statements and accounting estimates are based on reasonable

and prudent judgment.

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 existing system of internal control and other procedures is being

continuously reviewed by the internal auditor. The process of review

will continue and any weakness in controls will have immediate attention

of the management.

f) There is no significant doubt about the company's ability to continue as a

going concern.

g) There has been no material departure from the best practice of corporate

governance, as detailed in the listing regulations.

h) Key operating and financial data for the last six years in summarized form

is annexed.

AUDITORS

The present Auditors Messrs Muqtadir Mushtaq & Co. Chartered Accountants

retired and are not eligible for reappointment as per Circular No. 19 dated

27-12-2002 issued by the Securities & Exchange Commission of Pakistan.

In compliance of the Code of Corporate Governance, the Audit Committee

has on the request of the members, recommended the appointment of Messrs

Saeed Methani Mushtaq & Co., Chartered Accountants, 23-C, Block-B, 2nd

Floor, Cantonment Plaza, Fakhre Alam Road Peshawar, as Auditors of the

Company for the year 2003-04.

MEETING OF THE BOARD OF DIRECTORS

During the year five (5) meetings of the Board of Directors were held, which

were attended by the Directors as mentioned below:

Mr. Shakirullah Durrani

4

Maj. Gen (R) Jehanzeb Khan

4

Mr. Muhammad Ayub

4

Mr. Shahid Mehboob

4

Mr. Shamsul Hassan

5

Mr. M. Fayyaz Khan

4

Mr. Azhar Amin

2

Mr. Rab Nawaz

2

PATTERN OF SHAREHOLDING

The Statement of Pattern of Shareholding as at June 30, 2003 is annexed with

the report.

ACKNOWLEDGMENT

We would like to appreciate the positive attitude and cooperation extended by

the employees of the Company during the year of difficulties. We also

acknowledge the dedication and hard work of the employees during this

period. We also express our thanks to our Bankers, Shareholders, Customers

and other stakeholders for their continued support.

On behalf of the Board of Directors.

(Shamsul Hassan)

Chief Executive.

KEY OPERTING AND FINACIAL DATA

FROM 1997-98 TO 2002-2003

1998

1999

2000

2001

2002

2003

TILES (SQ.M)

Tiles (SQ.M)

512,652

470,909

533,308

478,129

504,774

S/WARE (TONS)

1,209

949

503

236

_

SALES (RUPEES)

229,645,457

1 85,3 1 0,26 1

222,823,397

148,348,157

144,330,728

OPERATING RESULTS

NET SALES

151,349,789

157,242,701

163,600,945

150,137,255

116,514,208

114,006,559

GROSS PROFIT

23,464,102

33.347,115

30,330,190

44,499,61 1

21,948,594

26,570,037

PRE-TAX PROFIT (LOSS)

-17,773,415

-15,818,191

-19,908,408

4,996, 1 87

-10,914,811

-6,325,606

AFTER TAX PROFIT (LOSS)

-18,919,972

8,437,295

-22,680,264

10,218,384

-11,497,382

-7,307,614

FINANCIAL RESULTS

CURRENT ASSETS

295,806,761

303,327,044

284,275,645

296,705,788

293,404,269

282,401,564

CURRENT LIABILITIES

206,417,494

188,571,625

180,736,441

172,550,016

186,565,461

207,423,160

OPERATING FIXED ASSETS

397,231,145

366,899,704

335,459,859

321,533,246

307,969,492

311,252,533

LONG TERM LIABILITIES

178,321,931

164,929,347

144,306,601

144,841,272

127,033,628

113,181,694

SHARE HOLDERS EQUITY

25,115,405

33,552,700

10,872,436

17,220,220

84,976,276

77,766,050

RATIOS

CURRENT RATIO

1.43

1.61

1.57

1.72

1.58

1.36

GROSS PROFIT (LOSS) TO SALES %

15.5

21.21

18.54

29-64

26.16

23.31

NET PROFIT (LOSS) TO SALES %

-12.5

5.37

-13.86

6.81

-2.05

-5.5

REVIEW REPORT TO THE MEMBERS ON STATEMENT OF COMPLIANCE

WITH BEST PRACTICES OF 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 M/S FRONTIER CERAMICS

LIMITED to comply with the Listing Regulation No. 37 (Chapter XI) of the Karachi Stock

Exchanges (Guarantee) Limited and Section 36 (Chapter XI) of the listing Regulation of the

Islamabad Stock Exchange (Guarantee) Limited 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 personnel and review of

various documents prepared by the Company to comply with the Code.

As part of our audit of 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 compliance, in all material respects,

with the best practices contained in the Code of Corporate Governance.

PESHAWAR MUQTADIR MUSHTAQ & CO.,

September 26,2003. Chartered Accountants

AUDITORS* REPORT OF THE MEMBERS

We have audited the annexed balance sheet of M/S FRONTIER CERAMICS LIMITED as at

June 30,2003 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 state that

we have obtained all the information and explanation which, to the best of our knowledge and

belief, were necessary for the purpose of our audit.

It is the responsibility of the Company's management to established and maintain a system of

internal control and prepare and present the above said statement 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

weather the above said statement 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 a 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) 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;

I I. The expenditure incurred during the year was for the purpose of the

Company's business;

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, conform with the 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 fairview

of the state of the company's affairs as at June 30,2003 and of the loss, its cash flows

and changes in equity fortheyearthen ended, and

D) in our opinion no Zakat was deductible at source under the Zakat & Ushr

ordinance, I960.

PESHAWAR MUQTADIR MUSHTAQ & CO,

September 26, 2003. Chartered Accountants

BALANCE SHEET AS AT JUNE 30, 2003

2003

2002

Notes

Rupees

PROPERTY AND ASSETS

Fixed Assets - at cost less depreciation

12

311,252,533

307,969,492

Capital Work in Progress

13

—

1,675,692

Long Term Deposits

14

1,202,250

198,250

312,454,783

309,843,434

CURRENT ASSETS

Stores, spares and loose tools - at cost

15

33,461,823

32,296,134

Stock in Trade - at cost

16

169,624,034

168,130,759

Trade Debtors

17

64,377,631

70,297,375

Advances, Deposits, Pre-payments &

Other Receivables

18

8,051,643

13,293,738

Cash and Bank Balances

19

6,886,433

9,386,263

282,401,564

293,404,269

CURRENT LIABILITIES

Finance under Markup Arrangements

8

96,825,808

94,825,808

Current Portion of Long Term Loan Liabilities

9

33,492,571

21,745,806

Creditors, Accrual and other Liabilities

10

77_rl04_r78l

69,993,847

207.423.160

186.565.461

Working Capital

74,978,404

106,838,808

Total Assets

387,433,187

416,682,242

Less: Long Term Loans

7

51,451,246

57,667,327

Long Term Loan BEL Consortium

6

25,256,095

33,094,870

Deferred Liabilities

5

36,474,353

36,271,431

Net Assets

274,251,493

289,648,614

REPRESENTED BY

Issued, Subscribed and Paid up Capital

3

77,412,000

Profit & Loss

354,050

75,64,726

Surplus on Revaluation of fixed assets

4

1 96,485,443

204.672,338

274,251,493

289,648,614

Contingencies and Commitments

II

PROFIT & LOSS ACCOUNT

FOR THE YEAR ENDED JUNE 30, 2003

Notes

2003

2002

Rupees

Sales - Net

20

114,006,559

1 16,514,208

Cost of Sales

21

87.436.522

86.037.600

Gross Profit/(l_oss)

26,570,037

30,476,608

OPERATING EXPENSES