NISHAT (CHINIAN) LIMITED
Annual Reports 2003
Brief Profile
The company was incorporated in 1990 as a public limited company with an equity investment of PKR 100 million. A
spinning mill having a capacity of 14,400 spindles was established at Bhai Pheru, Tehsil Chunian. It started commercial
production on March 10, 1991. The capacity was enhanced to 19,200 spindles in 1998. In 1998, the company diversified
its business interests by venturing into a weaving project with the installation of 99 air jet looms. A new state of the art
spinning unit started production in November 2000, increasing the total spinning capacity to about 40,872 spindles.
Subsequently weaving capacity has been increased to 212 air jet looms while the spinning capacity has been enhanced
to 50,952 spindles. The company is now equipped with the most modern manufacturing facilities in the country to
produce high quality specialized products for its customers all over the world.
Contents
COMPANY INFORMATION
DIRECTORS' REPORT
FINANCIAL HIGHLIGHTS
NOTICE OF ANNUAL GENERAL MEETING
STATEMENT OF COMPLIANCE WITH THE CODE OF CORPORATE GOVERNANCE
AUDITORS' REPORT
BALANCE SHEET
PROFIT AND LOSS ACCOUNT
CASH FLOW STATEMENT
STATEMENT OF CHANGES IN EQUITY
NOTES TO THE ACCOUNTS
PATTERN OF SHAREHOLDING
PROXY FORM
Company Information
Board of Directors:		Mr. Muhammad Saleem		Chairman
		Mr. Shahzad Saleem		Chief Executive
		Mr. Yahya Saleem
		Mr. Asif Jameel		Nominee NIT
		Mr. Khalid Niaz Khawaja
		Syed Jawad Gillani
		Mr. Fa rid Fazal
Audit Committee:		Mr. Shahzad Saleem		Chairman
		Mr. Farid Fazal		Member
		Syed Jawad Gillani		Member
Company Secretary:		Mr. Farrukh Ifzal
Bankers to the Company:		ABNAMROBankN.V
		American Express Bank
		Askari Commercial Bank
		Citi Bank N.A
		Credit Agricole Indosuez
		Faysal Bank Limited
		Habib Bank Limited
		PICIC Commercial Bank Limited
		Standard Chartered Bank
		Union Bank Limited •
		United Bank Limited
Auditors:		Riaz Ahmad & Company
		Chartered Accountants
Head Office:		31 -Q, Gulberg-ll,
		Lahore, Pakistan.
		Phone   : 5761 730-39
		Fax        : 5878696-97
Mills:		Spinning 1
		49th Kilometre, Multan Road,
		Bhai Pheru, Tehsil Chunian,
		District Kasur.
		Spinning 2 & Weaving
		49th Kilometre, Multan Road,
		Kamogal, Tehsil Pattoki
		District Kasur.
Economic Environment
During the year under review the economy moved into the most
stable phase experienced in the recent history. All the major indicators
like inflation, exchange rates and balance of payment remained very
stable. Interest rates came down to the lowest ever level in the history
of the country. Security situation also improved with improvement in
law and order and de-escalation of border tension. However, the
international economic scenario remained bleak with the continuation
of the worldwide recession. Iraq war and outbreak of SARS aggravated
the slow down in the world economy. The export sector of Pakistan,
although benefiting from the positive developments at home, remained
under pressure because of the unfavorable international conditions
and a further appreciation of Pak Rupee against the US Dollar.
Performance of the Company
Sales increased by 4.3% during the year to Rs 4.227 billion while net
profit decreased by 34.9% to Rs 327.418 million. Net profit margin
reduced to 7.7 % from 12.4% last year. The illustration shows the
cyclical nature of the business during the last five years. The
performance of the company, although not as good as the last year's
historic best, is impressive as compared to the industry. The drop
in the profitability is because of a number of factors. The cotton
prices remained high during the year as compared to last year,
whereas the prices of yarn and fabric remained under pressure
because of the worldwide recession and the effects of Iraq war and
SARS. The Pak Rupee continued to appreciate against the US Dollar
making a negative impact on the bottom line of the exporters.
However the management effectively took advantage of the positive
developments such as reduction in the interest rates, restoration of
confidence of the export customers and better marketing capability
of the company after increase in capacity. The company has retained
its position as one of the most profitable textile companies in the
country. Return on equity this year is 28.6 %, while earning per share
is Rs 7.38. The average return on equity during the last five years is
55%. Our target is to maintain a long term ROE of around 30%.
Credit Rating by PACRA
Pakistan Credit Rating Agency (PACRA) has assigned long term
entity rating of A+ to our company. We are proud to mention that
this is the highest rating assigned to any textile company in the
country. The rating denotes a low expectation of credit risk and a
strong capacity for timely payment of financial commitments.
Investments and Sources of Financing
During the year Rs. 489 million were invested in the fixed assets to
complete the installation of 10,000 spindles in November 2002 and
for the addition of 24 air jet looms in June 2003. Depreciation cash
flow of Rs. 196 million and retained earnings were used to finance
this expansion. Total long term loan also reduced from Rs. 890 million
to Rs. 700 million. Internal cash flows were used to repay the long
term loan.
Financial Structure
A conservative financial structure has been employed in view of the
seasonality and cyclicality of the textile industry. We have identified
the targeted levels of critical financial ratios such as the current ratio,
debt to equity ratio and leverage. Decisions for future investments
are made subject to the constraints of the targeted financial ratios.
The illustration shows the historic figures of our current ratio and
leverage. The management took effective measures to take advantage
of the fall in the interest rates and re-profiled the entire long term
and short term debt. The result is a sharp reduction in the financial
charges from Rs. 185.19 million in the last year to Rs. 119.08 million
this year. The full impact of the restructuring of the debt will be visible
next year with a further steep fall in the financial charges. The
illustration shows the last five years financial charges as a percentage
of sales depicting the declining trend.
Business Strategy
Aggressive marketing has been the major factor in our consistent
profitability over the past years. Our strategy is to remain at the
cutting edge in terms of exploring new markets and new products.
The focus is on niche marketing with specialized products. Our
quality products are supplemented with professional customer service
to build long term relationships with the customers. We have
differentiated our company through consistent quality, reliable delivery
and proactive handling of customers' needs. Investment in state of
the art technology and top quality human resources has been the
key element of our business strategy. The organizational structure
is kept lean with very little hierarchy and bureaucracy compared to
other organizations of similar size. This gives us the flexibility to
respond quickly to the changes in the market situation.
Board Meetings
During the year under view 4 meetings were held. Attendance by
each director is as follows:
Name of Director		Attendance
Mr. Muhammad Saleem		1
Mr. Shahzad Saleem		4
Mr. Yahya Saleem		3
Mr. Asif Jameel *		2
Mr. Khalid Niaz Khawaja **		1
Mr. Anis Wahab Zuberi ***		1
Syed Jawad Gillani		1
Mr. Farid Fazal		3
Mr. Shujaat Mirza ****		1
*       Elected in Annual General Meeting on March 31, 2003.
**     Appointed to fill casual vacancy on January 27, 2003.
***    Retired on March 31, 2003.
**** Resigned on January 27, 2003.
On behalf of the board
Muhammad Saleem
Lahore: December 05, 2003                                 Chairman
	1994	1995	1996	1997	1998	1999	2000	2001	2002	2003
					(Rupees in thousand)
Capital	120,000	144,000	144,000	144,000	144,000	144,000	403,200	403,200	403,200	443,520
Reserves	86,730	64,306	86,988	110,627	162,237	194,792	192,289	340,409	742,888	919,106
Net Worth	206,730	208,306	230,988	254,627	306,237	338,792	595,489	743,609	1,146,088	1 ,362,626
Long Term Liabilities	116,660	50,657	34,737	26,765	270,431	280,856	567,030	476,321	865,539	589,843
Current Liabilities	200,045	242,494	235,245	201 ,965	702,242	1,015,989	619,802	1,130,202	773,885	1,110,076
Total Liabilities	523,435	501,457	500,970	483,357	1,278,910	1 ,635,637	1,782,321	2,350,132	1 ,639,424	3,062,545
Fixed Assets	326,765	299,319	271,695	258,221	886,593	956,365	1,202,614	1.537,288	1,829,775	1 ,954,767
Long Term Deposits	6,311	4,707	2,059	311	227	227	527	545	545	426
Current Assets	190,359	197,431	227,216	224,825	392,090	679,045	579,180	812,298	955,192	1,107,352
Total Assets	523,435	501,457	500,970	483,357	1,278,910	1,635,637	1,782,321	2,350,132	2,785,512	3,062,545
Sales	663,261	838,915	971,188	1,111,537	1,148,551	2,094,958	2,367,018	3,066,830	4,054,099	4,226,715
Gross Profit	162,425	92,821	172,615	186,017	183,371	362,475	628,457	684,287	966,745	742,242
Operating Profit plus Other Income	125,212	54,421	148,573	144,251	156,465	290,531	533,773	523,634	781 ,787	519,004
Financial & Other charges	56,633	47,620	91 ,423	91 ,225	93,244	185,936	155,772	237,811	218,099	143,586
Taxation	10,232	5,225	5,669	7,787	11,611	13,000	20,504	36,903	60,409	48,000
Net Profit	58,347	1,576	51,481	45,239	51,610	91 ,595	357,497	248,920	503,279	327,418
Gross Margin	24.50%	11.10%	17.80%	16.70%	16.00%	17.30%	26.60%	22.30%	23.80%	17.60%
Net Margin	8.80%	0.20%	5.30%	4.10%	4.50%	4.40%	15.10%	8.10%	12.40%	7.70%
Current Ratio	0.95	0.81	0.97	1.11	0.56	0.67	0.93	0.72	1.23	1
Current Ratio as per SBP Regulations	1.38	1.12	1.04	1.16	0.61	0.8	1.52	0.87	1.3	1.12
Leverage (Total Liab./Net Worth)	1.53	1.41	1.17	0.9	3.18	3.83	1.99	2.16	1.43	1.25
Long Term Debt : Equity	36:64	20:80	13:87	10:90	47:53	45:55	49:51	39:61	43:57	30:70
EPS	4.86	0.11	3.58	3.14	3.58	6.36	8.87	6.17	12.48	7.38
EPS (Adjusted for bonus shares)	4.86	0.13	4.29	3.77	4.3	7.63	29.79	20.74	41.93	27.28
Notice of Annual General Meeting
Notice is hereby given that the 14th Annual General meeting of the Shareholders of Nishat (Chunian) Limited will
be held at the Registered Office of the Company, 31-Q, Gulberg II, Lahore on January 5, 2004 (Monday) at 10:30 a.m.
to transact the following business:-
1.       To confirm the minutes of the last General Meeting.
2.       To receive and adopt audited accounts of the Company for the year ended September 30, 2003 together with
Directors' and Auditors' reports thereon.
3.       To approve 25% Cash Dividend (i.e. Rs.2.5 Per share) as recommended by the Directors.
4.      To appoint auditors for the year ending September 30, 2004 and to fix their remuneration. The present Auditors
M/s Riaz Ahmad & Company, Chartered Accountants, retire and being eligible offer themselves for reappointment.
5.       To transact any other business with the permission of the Chair.
BOOKS CLOSURE
The Share Transfer Books of the Company will remain closed from 30-12-2003 to 05-01-2004 (both days inclusive) for
the entitlement of dividend.
By Order of the Board
Farrukh Ifzal
Lahore: December 05, 2003                                                                                Company Secretary
Notes:
1.       The Cash Dividend will be paid to the shareholders, whose names will appear in the register of members as at
the close of business on December 29, 2003.
2.      All members should bring their Original National Identity Cards for identification purpose.
3.       The beneficia