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Atlas Honda Limited
Annual Report 2000
MISSION STATEMENT
To be a dynamic, profitable and growth
oriented company through market leadership,
excellence in quality and service adding
value to the shares and maximizing exports.
To give attractive return to business
associates, share-holders as per their
expectations and market value and
employees according to their abilities and
performance, and to be a good corporate
citizen to fulfill its social responsibilities.
CONTENTS
Company Information
Notice of Annual General Meeting
Ten Years Growth at a Glance
Chairman's Review
Directors' Report
Auditors' Report to the Members
Balance Sheet
Profit & Loss Account
Cash Flow Statement
Statement of changes in Shareholders' Equity
Notes to the Accounts
Pattern of Shareholding
Atlas Group Companies
COMPANY IN FORMATION
BOARD OF DIRECTORS
Chairman Yusuf H. Shirazi
Chief Executive Officer Aamir H. Shirazi
Directors Aitzaz Shahbaz
Firasat Ali (representing National Investment Trust Ltd.)
Motohide Sudo (representing Honda Motor Company Ltd.)
Nasim Beg (representing National Investment Trust Ltd.)
Sherali Mundrawala
Takemi Ishikawa (representing Honda Motor Company Ltd.)
Company Secretary Saleem Ahmed
GROUP EXECUTIVE COMMITTEE
Chairman Yusuf H. Shirazi
Members Jawaid Iqbal Ahmed
Frahim Ali Khan
Iftikhar H. Shirazi
Aamir H. Shirazi
Saquib H. Shirazi
Secretary Amjad Hussain
GROUP PERSONNEL COMMITTEE
Chairman Yusuf H. Shirazi
GROUP AUDIT COMMITTEE
Chairman Sanaullah Qureshi
COMPANY MANAGEMENT
Chief Executive Officer Aamir H. Shirazi
Technical Director Takemi Ishikawa
Director Finance Saleem Ahmed
General Manager Marketing Nurul Hoda
General Manager Human Resources Zamir Haider
Auditors Hameed Chaudhri & Co.
Chartered Accountants
Legal Advisors Mohsin Tayebaly & Co.
Tax Advisors Mahmood Law Associates
Bankers Credit Agricole Indosuez
Deutsche Bank AG
Emirates Bank International P.J.S.C.
Habib Bank Limited
Muslim Commercial Bank Limited
National Bank of Pakistan
The Bank of Tokyo-Mitsubishi Limited
United Bank Limited
Lending Institutions Atlas Investment Bank Limited
Muslim Commercial Bank Limited
Saudi Pak Industrial and Agricultural
Investment Company (Pvt) Limited
Registered Office 1-McLeod Road, Lahore-54000
Tel: (92-42) 7225015-17, 7233515-17
Fax: (92-42) 7233518
Email: ahl@lhr.atlasgrouppk.com
Factories F-36, Estate Avenue, S.I.T.E., Karachi-75730
Tel: (92-21) 2575561-65Fax: (92-21) 2563758
Email: ahl@atlasgrouppk.com
26-27 KM, Lahore-Sheikhupura Road, Sheikhupura-39321
Tel: (92-4931) 6655-57, (92-42) 7222222
Fax: (92-342) 354111
Email: ahlskp@lhr.atlasgrouppk.com
Branch Offices Azmat Wasti Road, Multan
Tel: 31990, 571989, 72028 Fax: 541690
Room 9, 2nd Floor, Sunny Plaza, Chandni Chowk,
Murree Road, Rawalpindi. Tel: 455328 Fax: 847928
Show Room
West View Building, Preedy Street, Saddar, Karachi.
Tel: 7720833, 7727607
Spare Parts Division F-36, Estate Avenue, S.I.T.E., Karachi-75730
Tel: (92-21) 2575561-65 Fax: (92-21) 2563758
Warranty & Training Centres 7-Pak Chambers, West Wharf Road, Karachi. Tel: 2310142
28 Mozang Road, Lahore. Tel: 6375360
Azmat Wasti Road, Multan. Tel: 72028
366/A, Gulistan Colony No.2, Near Millat Chowk,
Shaikhupura Road, Faisalabad-38700
NOTICE OF ANNUAL GENERAL MEETING
The Thirty-sixth Annual General Meeting of the Company will be held on Thursday, 14 December, 2000
at 10.30 A.M. at 1-McLeod Road, Lahore to transact the following business:
1. To confirm the minutes of the Annual General Meeting held on 8 December, 1999.
2. To receive and adopt the Audited Accounts of Atlas Honda .Limited together with the
Directors' and Auditors' reports for the year ended 30 June, 2000.
3. To approve the dividend @ 20% for the year ended 30 June, 2000 as recommended
by the Board of Directors.
4. To appoint the Auditors for the year 2000-2001 and to fix their remuneration.
5. To transact such other ordinary business as may be placed before the meeting with
the permission of the chair.
BY ORDER OF THE BOARD
Lahore: November 23, 2000 SECRETARY
N.B. Shareholders are requested to take note of the following:
NOTES:
1. The share transfer book of the Company will be closed from 7 December, 2000 to
14 December, 2000 (both days inclusive).
2. A member entitled to attend and vote at the Annual General Meeting is entitled to appoint
another member as a proxy to attend and vote on his/her behalf. Proxies in order to be effective
must be received at the Registered Office of the Company not less than 48 hours before the
time appointed for the meeting.
3. No person shall act as proxy unless he is a member of the Company.
4. Signature of the shareholder on Proxy Application must agree with the specimen signature
registered with the Company. Appropriate revenue stamp should be affixed on the Proxy
Application.
5. For the convenience of the shareholder a Proxy Application format is attached with this report.
6. Shareholders are requested to immediately notify the Company of any change in their
addresses.
7. Any individual Beneficial Owner of the Central Depository Company, entitled to vote at this
meeting must bring his/her National Identity Card with him/her to prove his/her identity, and
in the case of proxy, must enclose an attested copy of his/her National Identity Card,
Representative of corporate members should bring the usual documents required for such purpose.
TEN YEARS GROWTH AT A GLANCE
(Rs. in Million)
Years 2000 1999 1998 1997 1996 1995* 1994 1993 1992 1991
Sales 3,397.5 3,424.9 3,423.5 3,498.1 3,092.5 2,139.7 1,836.5 1,940.2 1,655.5 1,562.5
Gross Profit 352.9 396.8 424.5 396.8 338.4 160.7 176.8 151.3 141.2 103.8
Profit Before Tax 101.9 180.9 190.9 188.6 176.1 31.4 18.7 17.7 7.9 0.9
Profit After Tax 60.2 123.4 125.6 124.9 101.5 20.6 11.5 13.4 (0.4) (10.5)
Share Capital 145.98 145.98 145.98 132.71 120.64 120.64 120.64 109.68 109.68 58.75
Share Holders' Equity 585.00 554.02 481.70 392.6 287.53 204.17 211.95 200.50 187.12 85.61
Fixed Assets - Net 490.27 366.73 379.37 374.86 270.83 289.24 296.69 319.53 340.66 315.85
Total Assets 1,491.35 1,225.24 1,537.96 1,208.46 1,039.67 788.27 757.16 852.55 833.73 829.88
Dividend
Cash 20% 35% 25% 15% 15% 15% 0% 0% 0% 0%
Stock 0% 0% 0% 10% 10% 0% 0% 10% 0% 0%
Ratios:
Profitability (%)
Gross Profit 10.4% 11.6% 12.4% 11.3% 10.9% 7.5% 9.6% 7.8% 8.5% 6.6%
Profit Before Tax 3.0% 5.3% 5.6% 5.4% 5.7% 1.5% 1.0% 0.9% 0.5% 0.0%
Profit After Tax 1.8% 3.6% 3.7% 3.6% 3.3% 1.0% 0.6% 0.7% 0.0% (0.7)%
Return To Shareholders
R.O.E. - Before Tax 17.4% 32.7% 39.6% 48.0% 61.3% 15.4% 8.8% 8.8% 4.2% 1.1%
R.O.E. -AfterTax 10.3% 22.3% 26.1% 31.8% 35.3% 10.1% 5.4% 6.7% (0.2)% (12.3)%
E.P.S. - After Tax 4.12 8.45 8.60 9.41 8.41 1.71 0.95 1.22 (0.04) (1.79)
Activity
Sales To Total Assets 2.28 2.80 2.23 2.89 2.97 2.71 2.43 2.28 1.99 1.88
Sales To Fixed Assets 6.93 9.34 9.02 9.33 11.42 7.40 6.19 6.07 4.86 4.95
Liquidity/Leverage
Current Ratio 1.53 1.64 1.31 1.21 1.10 1.01 1.05 1.06 0.98 0.85
Break up value
per share 40.07 37.95 33.00 29.58 23.83 16.92 17.57 18.28 17.06 14.57
Long Term Debts To
Equity (Times) 0.36 1.14 0.39 0.36 0.26 0.48 0.53 0.76 0.79 1.67
Total Liabilities
To Equity (Times) 1.43 1.21 2.19 2.08 2.62 2.86 2.57 3.25 3.46 8.69
* Annualized
CHAIRMAN'S REVIEW
It is my pleasure to present to you the 36th Annual
Report and review of the performance of your
company for the year ended 30th June 2000.
THE ECONOMY
The year ending June 30, 2000 remained under
the shadow of the international and domestic political
and economic situation prevailing in the year 1999.
Nuclear detonation, Kargil issue and ultimately
army take over have had its impact on the political,
economic and social fabric of the country. Good
cotton, rice and wheat crops, however did help in
raising the GDP growth but inept pricing and other
policy measures could not yield the desired
economic-socio benefits at the grass roots so as
to uplift the economy on the whole. It was against
this background that the National Budget for the
year 2000-2001 was presented as a part of 3 years
Perspective Plan aimed at achieving a 6% GDP
growth and budgetary deficit below 5% by the year
ending 2003.
The GDP growth for the year 1999-2000 was 4.8%,
agriculture being highest at 7.2%, manufacturing
the lowest at 1.1% and service sector at 4.5%.
Inflation was claimed to be 3.6% which was the
lowest in the past decade. The GDP growth target
set for the year 2000-2001 vis-a-vis 1999-2000 is
at 5%, up by only 0.2% from the previous year.
Agriculture growth is projected at 3.9%, services
at 5.2%, and the manufacturing at 5.9%. The target
growth rates are an encouraging sign. The inflation
for the year 2000-2001 is estimated at 4.5%, 0.9%
higher than last year. Despite government's
emphasis on agriculture sector, a projection of lower
growth as compared to last year seems reasonably
cautious keeping in view the current water shortage
and vagaries of the weather. In the present
circumstances, the growth in manufacturing at 5.9%
seems to be optimistic but achievable! Similarly,
the budgetary deficit target set at 4.6% of GDP
vis-a-vis 6.5% of last year and 6.6% average of the
last 4 years seems to be somewhat realistic thought
with a lot of focus on the rough edges of the
economy. The revenue target hinges on collection
of an extra Rs.100 bn. It is essential that all these
targets are met in the wake of prevailing economic
situation particularly the IMF conditionalities and
the overall external pressures, which are becoming
increasingly arduous for the borrowing nations with
Pakistan the most hard hit at the present time.
On the other hand, in July 2000 the State Bank of
Pakistan chose to remove the restrictions on the
inter bank market and freed the rupee-dollar parity
which caused the rupee to fall from Rs.52.36 to
Rs.59.30 a dollar in early October 2000, about a
13.3% devaluation within a period of 10 weeks. In
the kerb .market, the rupee went as low as Rs.63
to a dollar- resulting in cost-push pressures in the
long run. This was stated to meet one of the IMF
conditionalities - before any settlement with them
in sight. There is thus no alternative but to come
out of the vicious circle of ever rising debts, falling
rupee, debt servicing and costlier imports,
consequently rendering exports incompetitive due
to rising internal costs. This can only be done by
a better business environment, which promotes
greater investment and savings. The devaluation
has indeed made everything costlier without a
corresponding increase in investment and
production - productivity, value addition and volume
growth. Full utilization of capacity needs to be the
focus, which alone will bring the cost down and
result in export competitiveness.
In order to revive the economy, the world financing
agencies prescription may be just marginal. It has
hardly helped any developing country so far. A
recommendation in this connection to phase out
seven main industries in Pakistan - steel, fertiliser,
sugar, oil refineries, chemicals, pharmaceuticals
and automobile, constituting over 50% of the
economy, being not competitive by world standards,
will further damage the economy as a whole. What
will then remain for achieving self-reliance, a view
the Government does espouse. Unemployment is
becoming a bigger concern and challenge day by
day. Similarly, a report that localization programmes
will be done away will only discourage investment.
Equally important is the competitive advantage of
the local industry being eroded without which
localization is effected. Imagine the rate of custom
duty is being reduced from 35% to 25%, without a
corresponding reduction in raw material duty which
remains at 10%. Since the automobile engineering
industry clearly does not come under the world
financing institutions and other regulatory agencies
- WTO - there is no reason to succumb to any
pressure from any other international agency.
Otherwise such policies will suspend investment,
production and export - and above all, any
entrepreneurial initiatives in these industries, to say
the least, unless the situation is rectified or clarified
in bold letters:
(The state secrets are the preservatives of the statesmen)
THE AUTOMOBILE INDUSTRY
During the year under review, the automobile
industry in general did not perform well except the
tractor segment. The production of tractors increased
to 34,559 units from 26,644 units in the previous
year, up 30%. The sales at 33,201 units were, up
21%, from 27,414 units in the previous year, mainly
due to support from the agricultural sector.
Production of cars on the whole, however, was at
32,461 units against 38,682 units in the previous
year, down 16%. The sale was also down 15% to
31,759 units from 37,262 units in the previous year.
However, the industry witnessed rise in the
production of cars in the category of 1300 cc and
above - HONDA MARKET - and stood at 17,326
units by June 2000 against 15,190 units by June
1999, up 14%. The sales also increased to 17,452
units against 14,653 units of the last year, up 19%
with Honda cars increasing production from 3,926
to 4,744 up 21%.
Following are the relevant production figures relating
to the automobile industry, as a whole, for the year
under review:
Particulars 2000 1999 Incr/(Decr) %age
Cars 32,461 38,682 (6,221) -16.08%
Motorcycles 86,959 87,504 (545) -0.62%
Tractors 34,559 26,644 7,915 +29.71%
Buses, trucks & LCVs 9,409 10,908 (1,499) -13.75%
------------------ ------------------ ------------------ ------------------
Total 163,388 163,738 350 -0.21%
========== ========== ========== ==========
Atlas Honda motorcycles 59,357 59,639 (282) -0.48
========== ========== ========== ==========
Source: PAMA
The production of the motorcycles also fell to 86,959
units from 87,504 units of the previous year, down
0.62%. In this declining situation, Atlas Honda,
however, maintained its market share of 64% by
producing 59,357 units and selling 58,597 units.
This is despite the entry of the Chinese motorcycle
in the market, who have managed however to
achieve only 8% of the market. The Honda
motorcycles have thus continued to dominate the
market despite the adverse circumstances prevailing
in the Industry.
The total installed capacity of the motorcycle industry
comprising six units is, however, about 275,000
with Honda at about 125,000 motorcycles.
According to generally accepted principles the ratio
of sale of motorcycle to a car should be 10:1.
According to the sales figure of cars shown above,
the production of motorcycles should be above
300,000 units. With annual new car sales of between
40,000 units to 50,000, sale of the motorcycles
should be atleast 400,000 units against an actual
figure of less than 90,000 a year. Considering the
above production figures, the industry's capacity
utilization is hardly 35% of the total installed capacity,
with Honda at 65%. If this capacity is used fully
the prices of motorcycles will reduce,' more so on
localization. However, some of the motorcycle
manufacturers operating in this country are without
valid sanction or a deletion program, from the
Engineering Development Board, the only
competent authority. This all is happening right
under the Government's nose! The deviators,
however, continue with irregular import or
procurement from one unrecognized source or
another! In the interest of the industry, formalization
of all the units under one umbrella will be in the
interest of the industry. Equally important is the
competitive advantage being eroded without which
localization is affected. Imagine the rate of custom
duty being the same 35% for CKD and for spare
parts. Since automobile engineering clearly does
not come under the ambit of WTO, there is no
reason to succumb to any pressure from any other
multilateral agency. The above anomaly must be
rectified in the larger interest of the economy, much
less the industry and particularly to promote
investment, production and export.
MARKET REVIEW
Be it as it may, the year under review, however,
was no less difficult than the previous year. The
large manufacturing sector, with the exception of
textiles, witnessed a sharp decline whose impact
was evident in the motorcycle industry. Dealers
incentive scheme, "Holiday In Malaysia", was offered
to Atlas Honda dealers in the last quarter of the
previous year, the spill over of which effected the
company's sales in the very first month of the
financial year under review. Moreover, liquidity
crunch in the market due to many cash prize
schemes offered by the financial institutions, also
had an impact on the traditional liquidity available
to motorcycle customers. Inspire of a bumper
cotton crop, no economic benefit was passed on
to the farmers due to the low cotton rates - also
because of the excess stocks imported last year-
so as to benefit the economy at its grassroots.
Though the government expressed a desire to
establish the cotton prices but this vital issue was
not settled in time; the growers were left alone at
the mercy of the 'market forces'! At a later stage,
the T.C.P. did intervene and fixed the cotton prices,
which, however, were much lower than the
expectations of the growers. Payment of cotton
purchased by T.C.P. was also not timely. All this
resulted in deprivation of the customer in the rural
areas, in particular, the cotton belt - the backbone
of the economy. Due to these factors your company
was unable to meet its targets for the first half of the year.
The government also started tax survey in order
to document the economy, covering 13 big cities,
to begin with. The government has targeted about
Rs. 100 billion additional revenue collection from
this survey. Tax amnesty scheme resulted in
additional collection of revenue of over Rs. 10
billion. This scheme had the highest response over
all the previous such schemes. With the collection
of Rs. 10 billion, wealth of Rs. 100 billion came into
the net of regular economy, a welcome step indeed.
Although there has been unrest among the traders
and the stockist in the market which has affected
normal business activities, it is hoped that the matter
will be settled sooner than better!
Situation started to improve in the new millennium
with a bumper wheat crop duly supported with
better prices offered to the growers and payments
made in time. About 60 billion rupees were statedly
pumped into the economy due to payments made
on this account. Being vigilant of the market
situation, your company encashed this opportunity
by timely introduction of new models of the two
motorcycles i.e. CD70 and CG125. This prompt
activity proved to be a success. The change of the
model of the CG125 was especially successful
among 100 - 125 cc model customers. Due to
these favourable conditions, your company was
not only able to meet the target of the 2nd half but
was also able to make up some losses of the first
half as well. As a result, Honda market share was
maintained at 64% which reflects the confidence
of the discontinuing customer in Honda products.
It also reflects the continued success of the
marketing policies of your management.
During the year, your company also continued its
efforts to strengthen the dealership network. Dealers
investment was maintained and their return on
investment was ensured. Upgradation and
renovation was also carried out in the dealer
showrooms and new design shop boards were
installed to give a millennium look to our dealerships.
Your company's policy to place "Customer
Satisfaction at the Top" was supported by our service
dealers network. Warranty claims settlement time
was further shortened to provide speedier service
to customers through countrywide spread of antenna
dealers network. Free service camps were arranged.
Your company imparted technical training about
our product including a 4-Stroke technology transfer
to general mechanics throughout Pakistan. Service
training courses called Honda Service Training
Courses (H.S.T.C.) for our dealers were arranged.
The company supported Government sponsored
Vocational Training Institutions (V.T.I.) all over
Punjab by providing essential training material and
preparing syllabus for their courses. In the Karachi
market, value added activity of "One Year Free
Maintenance & Warranty" was carried out to retain
customers and to penetrate the institutional clientele.
The operations of the Parts Division were shifted
to the factory premises to improve working efficiency
and to provide faster service to dealers. Your
company successfully launched Honda Motorcycle
Engine Oil in collaboration with Total Atlas Lubricants
Pakistan (Pvt) Ltd. during the year. This was a long
awaited demand of our customers which was a
success in line with our expectations.
INDIGENIZATION
The Government has clearly stated, once again,
that the world financial and other regulatory
institutions conditionalities are not applicable to the
automobile industry. So a reasonable protection to
the industry as determined by the Government itself
will continue and so will the localization programmes.
The Government is preparing the next 5 years
deletion programme for the automobile industry as
a whole, which we believe will be economically
viable. I dare say that Honda prides itself in following
the policies of the local governments, wherever
they have setup plants - in 33 countries - all over
the world. For Honda, Pakistan is no exception to this rule.
Atlas thus continues to vigorously pursue its policy
of indigenization- to control cost, to reduce impact
of exchange fluctuation and to introduce broad-
base technology. During the year deletion of 2.48%
and 1.12% was achieved in CD70and CG125,
totaling around 79% and 75% respectively. Focus
for the year 2000-2001 shall be on local
manufacturing of switch assembly, light & winker.
crankshaft forging and preparing a feasibility study
to localize the last major undeleted engine part -
cylinder head.
The machines and equipment for the crankshaft
project costing Rs 200 mn were received in the
Sheikhupura factory in April 2000. Installation,
testing, and commissioning was completed
according to the original plan. Deletion for both the
models i.e. CD70 and CG125 was confirmed from
June, 2000 shipment. Mass production has
commenced from June 14, 2000 after successful
completion of the project. The introduction of the
crankshaft technology in Pakistan is a major step
for the engineering industry as a whole. This process
of indigenization and technology transfer will
continue in the best interest of the economy at
large and ultimately the consumer which would be
to our satisfaction.
COMPANY OPERATIONS
As explained above, the unit sales were lower than
last year. In the rural cotton belt areas, which is the
traditional motorcycle market, the cotton prices
were exceptionally low inspite of a bumper crop as
described above. The sales targets particularly in
the 2nd quarter of the year were not met. However,
the market began to show signs of recovery in the
3rd quarter. As a result, the company was able to
sell 58,597 motorcycles in the year under review
as compared to 61,481 motorcycles in the previous
year, not bad at all, in the given circumstances!
The sales revenue for the year was also down to
Rs.3.40 bn. This figure, however, includes exports
of 1000 units worth about Rs. 40 mn against Rs.
8 mn in the previous year. Accordingly, the profit
before tax was down to Rs.101.91 mn as compared
to Rs. 181.00 mn for the preceding year. Resultantly,
the gross profit ratio for the year was down 10.39%
against 11.58% of the previous year. In addition,
lower sales volume than the previous year was
also partly because of the unfavourable currency
exchange rates. The total cost push could not be
passed onto the customer due to the availability
of cheaper alternatives in the market.
The operating expenses increased by 6.6% to
Rs.198.94 mn due to a newly introduced performance
based compensation structure recommended by
the Remuneration Committee. This will be a major
motivator for the staff to improve performance and
reduce cost in the years to come. Financial
expenses for the year under review were Rs.57.7
million as compared to Rs.56.7 million last year.
Your company paid taxes amounting to Rs.1.138
billion on account of sales tax, income tax and custom
duties, against Rs. 1.125 billion of the last year.
Since the tax holiday period ended in 1972 -your
company has paid Rs 8.4 bn to the government
exchequer, by no means a small contribution.
Before tax your company achieved an ROE of
16.6% and EPS of Rs.6.9 down from 32.7% and
Rs. 12.3 respectively of last year.
The equity of the company stands at Rs. 585.00
mn, including reserves amounting to Rs. 439.02
mn, reflecting a sound financial position.
Liquidity remained positive with cash balance
aggregating to Rs.252.68 mn.
Your directors have proposed a cash dividend of
Rs 2 per share absorbing Rs 29.20 mn and the
balance of Rs 31.0 mn to be carried forward to the
reserves totaling Rs 585.00 mn against a paid up
capital of Rs.145.98 mn.
HUMAN RESOURCE
The Group Personnel Committee headed by the
Chairman is continuously working to shape group
personnel policies, so that the employees are
motivated and rewarded according to their
contribution in meeting the company's objectives.
As a result, where the number of staff decreased
from 870 during 1991 to 792 during the year, the
total wage bill increased to Rs. 204.30 mn during
the year from Rs. 68.30 mn in 1991 correspondingly
increasing salary per person from Rs. 78,510during
1991 to Rs. 257,960 during the year and sale per
person from Rs. 1.80 mn during 1991 to Rs. 4.29
mn during the year under review.
Further, all benchmark job descriptions were written
in accordance with the Hay's format and then
evaluated. Consequently, your company is being
restructured to meet the challenges of the
millennium and to be competitive in the face of
globalization. It is only through a world class team
that the company will be able to compete globally.
The Management Committee has been
reconstituted with the general managers of the five
major functions represented. Mr. Amir Awan who
has been with the company for 19 years, has been
promoted as General Manager Production.
The company lays great stress on training of its
personnel. In the year under review eight persons
went abroad for training. Mr. Nurul Hoda, GM
Marketing, attended the PMD course at the Harvard
Business School.
The emphasis on human resource development is
the hallmark of the Atlas Group of which your
company is a constituent member. This is based
on strategic vision dovetailed with operational
efficiency, team work and individual performance.
Individual compensation has been linked with
individual performance with executive bonus being
on an agreed basis for the team as a whole. This
year our emphasis is more on the role of leadership,
management practices and integrity in terms of
executive profile, with a view to further improve our
performance. In order to implement the Hay's
system, the company reviewed and restructured
the management salaries to make them competitive
in the market. This will enable the company to
recruit, train and retain the right employees and a
motivated team to face the fast approaching
globalisation.
At the Sheikhupura plant, the Charter of Demands
has been settled. increased working hours have
been negotiated resulting in increased capacity
and productivity. Ala Mayar activities at Company
and Vendors end have progressed well. Your
company will host Asia Oceania Quality Circle
Convention in the year 2001. Company gave away
gold medals as Long Service Award to 293
employees. Employers' Federation of Pakistan
gave away Excellence Award to Atlas Honda
limited being among top ten companies for its
human resource/industrial relation policies and
practices.
FUTURE OUTLOOK
The industry capacity utilization, on the whole, is
less than 35%. Your company, however, is better
at 65%. In addition, the industry is constantly facing
the cost increase challenges due to the depreciation
of the rupee. In July last, State Bank of Pakistan
free floated the rupee. Within 75 days the rupee
value slipped down by 12.5% against the US dollar.
Cost of imported raw materials and components
has escalated thus bringing more pressure on cost.
Banks had imposed a 30% cash margin on LCs
cost. The mark-up rates are likely to go up after
recent hikes in key rates by 2% by the State Bank of
Pakistan. This will also have a cost push impact.
The long term solution to controlling cost is
localization. With this objective in mind, the company
will continue to focus on deletion. In the two models,
CD70 and CG125, deletion level now stands at
79% and 75% respectively. Investment in localization
has not only saved foreign exchange, it has also
minimized the effect of rupee devaluation and
brought in new technologies thus creating
employment. This is a real value addition.
The Government has, however, taken a number of
major steps for revival of the economy which are
beginning to take effect. The indicators have an
upward trend and are expected to continue to
improve. The indicators from the agriculture sector
- particularly the cotton crop- which constitutes
25% (services 50% and manufacturing 25% being
the other constituents) of the country's GDP are
again positive and thus generally encouraging for
the economy. Agriculture is the backbone of our
economy catering to the socio-economic well being
of 70% of the population. The timely announcement
of support prices for cotton and wheat and the
relevant economic policies of the Government in
support of the agriculture sector are expected to
help the economy to perform better in the ensuing
year. The number of tax payers from the current
figure of 1.3 million is targeted to increase to 3
million and will generate more revenue to bridge
the deficit, a welcome trend to lower the debt burden.
Your management is determined to face future
challenges including embarking upon exports of
complete units and parts. Your company is blessed
with a dedicated team of staff and workers. We
have further linked reward with performance, which
is a great motivator. I am confident that despite
difficult times, your company's management team
is fully geared to tackle the surmountable situation.
We foresee a better future of your company and,
as such, a fair shareholders value and reward to
the company employees.
ACKNOWLEDGEMENT
Mr. Aamir H. Shirazi took over as Chief Executive
Officer of Atlas Honda in Dec'91 in an extremely
challenging situation. The company was losing both
money and experienced management due to the
onslaught of the then competitive environment.
In 9 years, he provided determined leadership, built
a new team and created a new vision to overcome
the crisis of the time. During his tenure, the company
has been converted into a high dividend paying,
cash rich company. He successfully completed
three major expansion projects for deletion during
these years, costing Rs 510 mn with a total capital
investment of Rs 622 mn besides vendor investment
of Rs 210.5 mn in about a dozen hi-tech value
added components. Localization of parts increased
by 15% in CD70 and 18% in CG125 motorcycles
during this period, a commendable job indeed,
particularly in view of hi-tech high value added
content of complex vital components in uncertain
condition. As a result of his success at your
company, Mr. Aamir H. Shirazi has been elevated
as President of the Atlas Group, heading also the
Group Executive Committee. On your behalf, may
I thank him for his valuable and substantive
contribution, without which your company would
not have been at this level.
Mr. Saquib H. Shirazi, the new Chief Executive
Officer of your company was previously the Chief
Executive Officer of another Group company, Atlas
Investment Bank Limited, where he was a
considerable success. He has a Masters degree
in Business Administration from the Harvard
Business School brings to the job a rich experience
in finance, administration and marketing.
Mr. Saleem Ahmed, Director Finance has been
elevated as Member, Group Executive Committee
and made Group Director Strategic Planning &
Management Audit. He is a Chartered Accountant
with 22 years experience of meritorious service
with the Group.
Mr. Kanji Kashiwagi representing Honda Motor
Company Ltd., Japan upon his new assignment,
also resigned from the Board. He was replaced by
Mr. Motohide Sudo. Mr. Nasim Beg and Miss Sara
Jawaid, both representatives of National Investment
Trust Ltd. have also resigned from the Board, and
have been replaced by Mr. Istaqbal Mehdi and Mr.
Firasat Ali.
I would like to take this opportunity to place on
record my appreciation of the valuable contribution
made by Mr. Kashiwagi, Mr. Beg and Miss Jawaid.
I welcome Mr. Motohide Sudo, Mr. Istaqbal Medhi
and Mr. Firasat Ali on the Board and look forward
to their support in managing the affairs of your
company.
It is my pleasure to thank Honda Motor Company
for their continued help and cooperation and
particularly during the year in setting up the Crank
Shaft Project and their continued support particularly
in localization of parts and components.
I also thank our bankers, shareholders, Board of
Directors, Group Executive Committee, associates,
vendors and customers for their support and
guidance at all time.
Yusuf H. Shirazi
DIRECTORS' REPORT
The Directors of your Company take pleasure in presenting their report to9ether with the Audited Accounts
and Auditors' Report thereon for the year ended 30 June, 2000.
FINANCIAL RESULTS
The financial results of your Company for the year ended 30 June, 2000 are summarised as follows:
(Rupees in 000's)
1999 2000
Profit before taxation 101,905 180,988
Taxation:
Current 28,000 59,744
Prior year 6,723 (9,846)
Deferred 7,000 7,696
------------------ ------------------
41,723 57,594
------------------ ------------------
Profit after taxation 60,182 123,394
Unappropriated profit brought forward 622 320
------------------ ------------------
Available for appropriation 60,804 123,714
Appropriation:
Transfer to General Reserve 31,000 72,000
Cash Dividend 20% (1999: 35%) 29,195 51,092
------------------ ------------------
60,195 123,092
------------------ ------------------
Unappropriated profit carried forward 609 622
========== ==========
DIVIDEND
Directors propose cash dividend at the rate of 20% i.e (Rs.2.0 per share).
CHAIRMAN'S REVIEW
The review included in the Annual Report deals inter alia with the performance of the Company for the
year ended 30 June, 2000 and future prospects. The Directors endorse the contents of the review.
PATTERN OF SHAREHOLDING
The pattern of shareholding of the company is annexed.
AUDITORS
The present Auditors M/s. Hameed Chaudhri & Co., retire and being eligible offer themselves for reappointment.
For and on behalf of the
BOARD OF DIRECTORS
AAMIR H. SHIRAZI
Karachi: 13 November, 2000 Chief Executive Officer
AUDITORS' REPORT TO THE MEMBERS
We have audited the annexed Balance Sheet of ATLAS HONDA LIMITED as at 30 June, 2000
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 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 the
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 statement. 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 the 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;
(ii) the expenditure incurred during the year was for the purpose of Company's business; and
(iii) the business conducted, investments made and the expenditures 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, 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 June 2000 and of the Profit, its Cash Flows and Changes in Equity
for the year ended; and
(d) in our opinion, Zakat deductible at source under Zakat and Ushr Ordinance, 1980 was deducted
by the Company and deposited in the Central Zakat Fund established under Section 7 of that
Ordinance.
HAMEED CHAUDHRI & CO.
Karachi: 13 November, 2000 CHARTERED ACCOUNTANTS
BALANCE SHEET AS AT JUNE 30, 2000
(Rupees in 000's)
NOTE 2000 1999
SHARE CAPITAL
Authorised
20,000,000 ordinary shares of Rs. 10/- each 200,000 200,000
========== ==========
Issued, subscribed & paidup capital 3 145,977 145,977
RESERVES & UNAPPROPRIATED PROFIT
Reserves 4 4,384,181 407,418
Unappropriated profit 609 622
------------------ ------------------
439,027 408,040
------------------ ------------------
585,004 554,017
REDEEMABLE CAPITAL 5 46,242 65,119
LONG TERM LOAN 6 80,366 --
SUPPLIER'S CREDIT 7 20,931 41,861
OBLIGATION UNDER FINANCE LEASE 8 -- 471
DEFERRED LIABILITIES
Staff gratuity 9 17,129 15,572
Deferred taxation 10 44,000 37,000
------------------ ------------------
61,129 52,572
CURRENT LIABILITIES
Short term loans 11 109,281 59,669,073
Current maturity of long term liabilities 12 60,389
Creditors, provisions, accrued charges
& other liabilities 13 393,882 336,069
Taxation 14 30,000 61,744
Dividend 15 32,127 53,096
------------------ ------------------
625,679 511,209
CONTINGENT LIABILITIES & COMMITMENTS 16
------------------ ------------------
1,419,351 1,225,249
========== ==========
FIXED CAPITAL EXPENDITURE
Operating fixed assets 17 490,269 366,734
DEFERRED COST 18 -- 1,343
INVESTMENTS 19 5,863 8,390
LONG TERM LOANS, DEPOSITS
& PREPAYMENTS 20 10,055 10,409
CURRENT ASSETS
Stores 21 33,378 31,200
Stocks 22 410,074 378,824
Trade debtors 23 39,673 27,287
Advances, deposits,
prepayments & loans 24 177,360 214,291
Cash & bank balances 25 252,679 186,771
------------------ ------------------
913,164 838,373
------------------ ------------------
1,419,351 1,225,249
========== ==========
The annexed notes form an integral part of the accounts.
SHERALI MUNDRAWALA AAMIR H. SHIRAZI YUSUF H. SHIRAZI
DIRECTOR CHIEF EXECUTIVE OFFICER CHAIRMAN
PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 30 JUNE, 2000
(Rupees in 000's)
NOTE 2000 1999
SALES 26 3,397,441 3,424,853
COST OF SALES 27 3,044,539 3,028,018
------------------ ------------------
GROSS PROFIT 352,902 396,835
OPERATING EXPENSES
Administrative 28 1,027,771 91,075
Selling & distribution 29 96,158 95,575
------------------ ------------------
198,935 186,650
------------------ ------------------
OPERATING PROFIT 153,967 210,185
MISCELLANEOUS REVENUE 30 16,036 40,744
------------------ ------------------
170,003 250,929
OTHER CHARGES
Financial expenses 31 57,704 56,702
Provision for diminution in value of investment 2,527 1,054
Workers' profit participation fund 5,489 9,658
Workers' welfare fund 2,378 2,527
------------------ ------------------
68,098 69,941
------------------ ------------------
PROFIT BEFORE TAXATION 101,905 180,988
TAXATION - Current 14 28,000 59,744
- Prior Year 6,723 (9,846)
- Deferred 7,000 7,696
------------------ ------------------
41,723 57,594
------------------ ------------------
PROFIT AFTER TAXATION 60,182 123,394
UNAPPROPRIATED PROFIT BROUGHT FORWARD 622 320
------------------ ------------------
60,804 123,714
APPROPRIATION:
Transfer to General Reserve 31,000 72,000
Proposed dividend @ 20% (1999: 35%) 29,195 51,092
------------------ ------------------
60,195 123,092
------------------ ------------------
UNAPPROPRIATED PROFIT CARRIED FORWARD 609 622
========== ==========
BASIC EARNINGS PER SHARE 32 4.12 8.45
========== ==========
The annexed notes form an integral part of the accounts.
SHERALI MUNDRAWALA AAMIR H. SHIRAZI YUSUF H. SHIRAZI
DIRECTOR CHIEF EXECUTIVE OFFICER CHAIRMAN
CASH FLOW STATEMENT
FOR THE YEAR ENDED 30 JUNE, 2000
(Rupees in 000's)
NOTE 2000 1999
Net cash inflow from operating activities 33 238,167 145,611
Return on investments and servicing of finance
Mark-up/interest paid (53,401) (50,032)
Financial charges on leased assets (305) (856)
Mark-up/interest received on advances 152 --
Mark-up/interest received on deposits 14,848 35,754
Dividend received 602 452
Dividend paid (50,164) (35,833)
Net cash outflow from return on investments and ------------------ ------------------
servicing of finance (88,268) (50,515)
Taxation
Taxes paid (including tax deducted at source) (53,020) (82,829)
Investing activities
Fixed capital expenditure (186,294) (36,585)
Sale proceeds of fixed assets 5,025 12,250
Investment in shares -- (750)
Software development cost -- (2,686)
------------------ ------------------
(181,269) (27,771)
------------------ ------------------
Net cash (outflow) before financing activities (84,390) (15,504)
Financing activities
Long term loan 100,458 --
Increase/(Decrease) in short term borrowings 108,678 (207,140
Repayment of redeemable capital/loan (15,952) (29,440
Repayment of supplier's credit (41,861) --
Repayment of obligation under finance lease (1,671) (3,831
Increase in long term deposits 646 1,712
------------------ ------------------
Net cash inflow / (outflow) from financing activities 150,298 (238,699)
------------------ ------------------
Increase / (Decrease) in cash & cash equivalents 34 65,908 (254,203)
========== ==========
The annexed notes form an integral part of the accounts.
SHERALI MUNDRAWALA AAMIR H. SHIRAZI YUSUF H. SHIRAZI
DIRECTOR CHIEF EXECUTIVE OFFICER CHAIRMAN
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED 30 JUNE, 2000
(Rupees in 000's)
Share General Share Gain on Unappropriated Total
Capital Reserve Premium sale of Land Profit
Balance as at 1 July, 1998 145,977 295,300 39,953 165 320 481,715
Profit for the year -- -- -- -- 123,394 123,394
Dividend -- -- -- -- (51,092) (51,092)
Transferred during the year -- 72,000 -- -- (72,000) --
------------------ ------------------ ------------------ ------------------ ------------------ ------------------
Balance as at 30 June, 1999 145,977 367,300 39,953 165 622 554,017
Profit for the year -- -- -- -- 60,182 60,182
Dividend -- -- -- -- (29,195) (29,195)
Transferred during the year -- 31,000 -- -- (31,000) --
------------------ ------------------ ------------------ ------------------ ------------------ ------------------
Balance as at 30 June, 2000 145,977 398,300 39,953 165 609 585,004
========== ========== ========== ========== ========== ==========
The annexed notes form an integral part of the accounts.
SHERALI MUNDRAWALA AAMIR H. SHIRAZI YUSUF H. SHIRAZI
DIRECTOR CHIEF EXECUTIVE OFFICER CHAIRMAN
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30 JUNE, 2000
1. THE COMPANY AND ITS OPERATIONS
The company was incorporated as a public limited company on 16 October, 1962 and its
shares are quoted on stock exchanges in Pakistan. The company is principally engaged in
progressive manufacture and sales of motorcycles and pads.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.1 Basis of preparation
These accounts have been prepared in accordance with the requirement of the Companies
Ordinance, 1984 and International Accounting Standards as applicable in Pakistan.
2.2 Accounting convention
These accounts have been prepared under historical cost convention as modified by the exchange
rate fluctuation as referred to in note 2.9.
2.3 Employees' benefits
The company operates an unfunded gratuity scheme for its non management staff and workers,
whose period of service is five years of more and on retirement at the age of sixty years. Annual
provision is made to cover the obligation under the scheme.
Providend Fund
The Company operates a recognised providend fund scheme for its employees. Equal monthly
contribution at the rate of 11 percent of the basic salary are made to the fund both by the
company and employee.
2.4 Taxation
Current taxation is provided on taxable income at the current rates of taxation after taking into
account tax credit available, if any:
The company accounts for deferred tax on all material timing differences using the liability
method. However, deferred tax is not provided if it can be established with reasonable
probability that the timing difference will not reverse in the foreseeable future.
2.05 Fixed assets and depreciation
Operating fixed assets including leased assets are stated at cost less accumulated depreciation.
Depreciation is charged on reducing balance basis without considering extra shift workings, at the
annual rates of 2.5% to 20% of written down value, depending on the class of asset. Full year's
depreciation is provided on additions during the year, while no depreciation is charged in the year
of disposal.
Normal repairs and maintenance are charged to expenses as and when incurred. Major
renewals and replacements are capita zed Gain or loss on disposal of fixed assets is
included in the profit and loss account.
Leased assets
The company accounts for assets acquired under finance lease by recording the assets and
related liability. Amounts are determined on the basis of discounted value of minimum lease
payment. Financial charges is allocated to accounting period in a manner so as to produce a
constant periodic rate of charge on the outstanding liability.
2.6 Investments
These are stated at cost. Provision for diminution in value of investments is made, if considered
permanent.
2.7 Stores
These are valued at average cost. Items in transit are stated at cost accumulated to balance
sheet date.
2.8 Stocks
These are valued at lower of cost and net realisable value. Goods in transit are valued at cost
accumulated to the balance sheet date.
2.9 Foreign Currency Translation
Assets and liabilities in foreign currencies are translated into rupees at the exchange rates prevailing
on the balance sheet date except for liabilities covered under forward exchange contract which are
translated at the contracted rates. Exchange gains or losses on translation of foreign currency loans
utilised for the acquisition of plant and machinery are included in the cost of plant and machinery.
All other exchange differences are included in the income.
2.10 Revenue recognition
Sales are recorded on dispatch of goods to the customers. Dividend income is recognised on receipt
basis.
2.11 Borrowing cost
Borrowing costs are recognised as an expense in the period in which these are incurred.
2.12 Deferred cost
Software development cost is amortised over a period of two years.
2.13 Presentation
Figures in these accounts have been rounded off to the nearest thousand rupees. Corresponding
figures have been rearranged, wherever necessary, for the purpose of comparison.
(Rupees in 000's)
2000 1999
3. ISSUED, SUBSCRIBED & PAID-UP SHARE CAPITAL
Ordinary shares of Rs. 10/- each.
6,352,748 Fully paid-up in cash 63,528 63,528
7,985,678 Issued as fully paid bonus shares 79,856 79,856
259,300 Issued for consideration other than cash 2,593 2,593
------------------ ------------------ ------------------
14,597,726 145,977 145,977
========== ========== ==========
4. RESERVES
Capital Reserves
Share Premium 39,953 39,953
Gain on Sale of Land 165 165
------------------ ------------------
40,118 40,118
------------------ ------------------
General Reserve
Balance as at 1 July 367,300 295,300
Transferred during the year 31,000 72,000
------------------ ------------------
398,300 367,000
------------------ ------------------
438,418 407,418
========== ==========
5. REDEEMABLE CAPITAL
Saudi Pak Industrial & Agricultural Investment
Co. (Pvt.) Ltd. (Note 5.1) 36,242 50,119
Atlas Investment Bank Limited (Note 5.2) 10,000 15,000
------------------ ------------------
46,242 65,119
========== ==========
5.1 Mark-up Finance Agreement
Saudi Pak Industrial & Agricultural Investment
Company (Private) Limited
Balance as at 1 July 61,071 70,000
Repaid during the year 11,147 8,929
------------------ ------------------
49,924 61,071
Less: installment due within the following
twelve months 13,682 10,952
------------------ ------------------
Balance as at 30 June 36,242 50,119
========== ==========
(a) The company has arranged long term finance facility from Saudi Pak Industrial &
Agricultural Investment Company (Private) Limited (Saudi Pak). In terms of Mark-up finance
agreement, Saudi Pak has agreed to purchase certain assets of the company for a sum
of Rs. 70 million and the company has agreed to buy back the said assets for a sum of
Rs. 125.143 million. The rate of mark-up on this facility has been reduced during the year
from 21.5 percent to 19.33 percent per annum. Liquidated charges at the rate of 0.73 per
Rs. 1,000 per day will be payable on the overdue amounts.
(b) The finance facility is repayable in ten half yearly installments commencing from
3 September, 1998 and ending on 3 March, 2003;
(c) The finance facility is secured against first parri passu equitable mortgage on company's
immovable assets and a first parri passu floating charge and hypothecation of all moveable
equipments and future assets of the company.
(d) A demand promissory note.
5.2 Atlas Investment Bank Limited
Balance as at 1 July 20,000 25,000
Repaid during the year 5,000 5,000
------------------ ------------------
15,000 20,000
Less: installments due within the following
twelve months 5,000 5,000
------------------ ------------------
10,000 15,000
========== ==========
(a) The company has arranged long term finance facility from Atlas Investment Bank Limited,
(the bank) an associated undertaking. In terms of Mark-up finance agreement, the bank
purchased certain assets of the company for a sum of Rs. 25 million and the company
simultaneously repurchased the said assets for a sum of Rs. 42.489 million. The mark-up
rate is 18% (1999-21.5%) per annum;
(b) The facility carries project monitoring fee at the rate of 0.25 percent on outstanding
amount representing repurchase price. In case of default in payment on due dates,
liquidated damages will be payable at the rate of 20% on the default amount;
(c) The 'mark-up price' is repayable in 10 half yearly installments commencing on
10 January, 1998 and ending on 10 January, 2003; and
(d) The facility is secured against a first mortgage ranking parri passu on immovable
properties of the company, a first ranking parri passu charge by way of
hypothecation of all fixed assets of the company and a demand promissory note.
6. LONG TERM LOAN
Muslim Commercial Bank Limited
Disbursed during the year 100,458 --
------------------ ------------------
100,458 --
Less: Installments due within the following
twelve months 20,092 --
------------------ ------------------
Balance as at 30 June 80,366 --
========== ==========
(a) The Company has arranged Demand Finance amounting to Rs. 100.458 million from
Muslim Commercial Bank Limited For import of Crank Shaft Machinery.
(b) The demand Finance is repayable in 10 half yearly installments commencing on 22
September, 2000 and ending on 22 March, 2005.
(c) The demand Finance carries mark-up at the rate of 3 percent over Treasury Bills to be
fixed on annual basis, presently 13.88 percent, subject to a ceiling of 16 percent per annum.
(d) The Demand Finance is secured against first parri passu equitable mortgage on company's
immovable properties.
7. SUPPLIER'S CREDIT
Honda Trading Corporation
Foreign Currency Loan - Unsecured
Balance as at 1 July, 83,721 83,721
Repaid during the year 41,860 --
------------------ ------------------
41,861 83,721
------------------ ------------------
Overdue installment -- 20,930
Installment due within the following twelve month 20,930 20,930
------------------ ------------------
20,930 41,860
------------------ ------------------
20,931 41,861
========== ==========
(a) The company has arranged Supplier's Credit from Honda Trading Corporation, Japan
amounting to JY 298,683,070/- equivalent to Rs. 104,651,678/- for import of Machinery
& Equipment for the manufacture of gears for the motorcycles.
(b) Supplier's Credit is repayable in 5 yearly installments commencing from 30 May, 1998
and ending on 30 May, 2002.
(c) The Supplier's Credit carries interest at the rate 17.86 percent per annum including
exchange risk fee of 13.36 percent per annum.
8. OBLIGATION UNDER FINANCE LEASE
Balance as at 1 July 2,356 6,187
Less: Repaid during the year 1,671 3,831
------------------ ------------------
685 2,356
Less: installments due within the
following twelve months 685 1,885
------------------ ------------------
Balance as at 30 June -- 471
========== ==========
The amount of future minimum lease payment and the year during which these payments will
become due are:
Year ending June 30,
2000 492 2,204
2001 493 517
------------------ ------------------
985 2,721
Less: Financial charges allocated to future periods 300 365
------------------ ------------------
685 2,356
Less: Current portion shown under current liabilities 685 1,885
------------------ ------------------
-- 471
========== ==========
(a) The company has entered into lease agreements with leasing companies including an
associated undertaking for lease of Motor Vehicles, Office Equipment and Plant & Machinery.
(b) The lease rentals which include financial charges at the rate of 18.23 % to 22 % per annum and
are payable in equal quarterly / monthly installments.
9. STAFF GRATUITY
Balance as at 1 July 15,572 14,278
Add: Provision for the year 1,586 1,918
------------------ ------------------
17,158 16,196
Less: Payments during the year 29 624
------------------ ------------------
Balance as at 30 June 17,129 15,572
========== ==========
10. DEFERRED TAXATION
The liability for deferred taxation comprises of timing
differences relating to:
Accelerated tax depreciation allowance 48,640 40,957
Lease rentals 1,295 1,182
Deferred debit arising in respect of
Provision for gratuity (5,935) (5,139)
------------------ ------------------
44,000 37,000
========== ==========
11. SHORT TERM LOANS
Secured (Note 11.1) 108,786 118
Unsecured 495 485
------------------ ------------------
109,281 603
========== ==========
11.1 The Company has arranged short term demand finance amounting to Rs. 80 million from
United Bank Limited for its working capital requirements. The demand finance carries mark-
up at the rate of 10.50 percent per annum. The company has Credit Facilities upto an
aggregate of Rs. 547 million (1999 - Rs. 417 million). The loans carry mark-up at the rate
of Re.0.288 to 0.385 (1999 - Re. 0.356 to Re. 0.460) per thousand per day on daily product
basis. The Short Term Loans are secured against hypothecation of stocks & book debts.
12. CURRENT MATURITY OF LONG TERM LIABILITIES
Redeemable Capital 18,682 15,952
Long term loan 20,092 --
Supplier's Credit 20,930 41,860
Obligation under finance lease 685 1,885
------------------ ------------------
60,389 59,697
========== ==========
13. CREDITORS, PROVISIONS, ACCRUED CHARGES AND OTHER LIABILITIES
Trade creditors (Note 13.1) 115,834 58,787
Accrued expenses 119,244 166,560
Customers advance & credit balances 115,794 74,457
Interest / Mark-up on bank loans - secured (Note 13.2) 11,925 7,713
Interest on supplier's credit- unsecured 165 4,017
Retention money 64 64
Sales tax payable 15,472 3,266
Workers' welfare fund 2,856 4,447
Workers' profit participation fund (Note 13.3) 5,799 9,971
Other liabilities 6,729 6,787
------------------ ------------------
393,882 336,069
========== ==========
13.1 Trade creditors include Rs. 453 thousand (1999 - Rs. 731 thousand) payable to associated
undertaking.
13.2 Interest/Mark-up payable on secured loan includes Rs. 1,304 thousand (1999 - Rs. 2,061
thousand) payable to associated undertaking.
13.3 Workers' Profit Participation Fund
Balance as at 1 July 9,971 10,521
Add: Interest credited 1,878 1,492
------------------ ------------------
11,849 12,013
Less: Payment made during the year 11,539 11,700
------------------ ------------------
310 313
Contribution for the year 5,489 9,658
------------------ ------------------
Balance as at 30 June 5,799 9,971
========== ==========
The Company retains the allocation to this fund for its business operation till the amount is
paid to the fund together with interest at prescribed rates under the Act.
14. TAXATION
Corporate Asset Tax 2,000 2,000
Income Tax 28,000 59,744
------------------ ------------------
30,000 61,744
========== ==========
15. DIVIDEND
Unclaimed dividends 2,890 1,962
Unclaimed bonus fractions 42 42
Proposed dividend 29,195 51,092
------------------ ------------------
32,127 53,096
========== ==========
16. CONTINGENT LIABILITIES & COMMITMENTS
16.1 Guarantees
Issued by banks 6,041 13,469
Guarantees are issued to Collector of Customs and shall be released on submission of
consumption certificates. These are issued under normal operations.
16.2 Commitments
Confirmed letters of credit 125,750 101,859
Forward exchange contracts 46,916 82,998
17. STATEMENT OF OPERATING FIXED ASSETS
(Rupees in 000's)
Cost Depreciation
Particulars As at Additions Disposals As at As at W.D.V. Charge for Rate
01-07-99 30-06-00 30-06-00 30-06-00 the year %
Freehold Land 5,112 -- -- 5,112 -- 5,112 -- --
Lease hold Land 11,187 -- -- 11,187 2,908 8,279 211 2.5
Building on freehold land 19,042 4,077 -- 23,119 13,001 10,118 1,124 10
Building on leasehold land 28,178 -- 502 27,676 21,565 6,111 679 10
Plant & machinery 430,178 142,562 -- 572,740 244,346 328,394 36,487 10
Dies & jigs 136,284 14,677 -- 150,961 89,861 61,100 6,790 10
Factory equipment 7,755 -- -- 7,755 5,392 2,363 262 10
Office equipment 25,926 4,844 501 30,269 13,350 16,919 1,880 10
Furniture & fixture 4,094 21 206 3,909 2,589 1,320 147 10
Fixture & equipment 1,300 -- -- 1,300 1,172 128 14 10
Electric & gas fittings 24,755 6,059 369 30,445 16,950 13,495 1,500 10
Vehicles 54,010 15,045 7,973 61,082 28,769 32,313 8,078 20
Service equipment 448 -- -- 448 252 196 22 10
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------
748,269 187,285 9,551 926,003 440,155 485,848 57,194
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------
Assets under Finance Lease
Plant & machinery 4,478 -- -- 4,478 1,966 2,512 279 10
Vehicles 3,111 -- 2,373 738 360 378 94 20
Office equipment 2,100 -- -- 2,100 569 1,531 170 10
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------
9,689 -- 2,373 7,316 2,895 4,421 543
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------
2000 757,958 187,285 11,924 933,319 443,050 490,269 57,737
========== ========== ========== ========== ========== ========== ==========
1999 737,610 39,581 19,233 757,958 391,224 366,734 43,783
========== ========== ========== ========== ========== ========== ==========
17.1 Lease in respect of two plots is under execution.
17.2 Depreciation for the year has been allocated as follows:
2000 1999
Cost of goods manufactured (Note 27.1) 50,763 37,398
Administrative (Note 28) 6,974 6,385
------------------ ------------------
57,737 43,783
========== ==========
17.3 Disposal of Fixed Assets
(Rupees in 000's)
ASSETS Cost ACC. WDV Sales Profit/ Mode of Particulars of Purchasers
DEP. Proceeds (Loss) Disposal
Building on lease hold
Glazing Work  177 134 43 -- (43) Demolished
Civil Works 283 146 137 -- (137) Demolished
Iron Work Crank Case 42 21 21 -- (21) Demolished
------------------ ------------------ ------------------ ------------------ ------------------
502 301 201 -- (201)
------------------ ------------------ ------------------ ------------------ ------------------
Office Equipment
Air Conditioners (8 Units) 83 63 20 14 (6) Quotation M/s R.S. Refrigeration
Alnoor society F.B Area Karachi.
Daikin Split Units (3 Units) 135 80 55 74 19 Negotiation Atlas Ware Housing (Pvt.) Ltd. D/181-A
S.I.T.E., Karachi.(Associated Undertaking)
Electric Water cooler (2 Units) 23 8 15 20 5 Negotiation - do -
UPS 260 89 171 247 76 Insurance Claim Muslim Insurance Co. 3 Bank Square
Sharah-e-Quaid-e-Azam, Lahore
------------------ ------------------ ------------------ ------------------ ------------------ (Associated Undertaking)
501 240 261 355 94
------------------ ------------------ ------------------ ------------------ ------------------
Electric & Gas fittings
Compressor with
Capacitor (5 Unit)  29 16 13 -- (13) Demolished
Electric Work 340 197 143 -- (143) Demolished
------------------ ------------------ ------------------ ------------------ ------------------
369 213 156 -- (156)
------------------ ------------------ ------------------ ------------------ ------------------
Furniture & Fixture
Furniture 196 170 26 49 23 Negotiation Atlas Ware Housing (Pvt.) Ltd. D/181-A
S.I.T.E., Karachi.(Associated Undertaking)
Refrigerator 10 8 2 10 8 Negotiation - do -
------------------ ------------------ ------------------ ------------------ ------------------
206 178 28 59 31
------------------ ------------------ ------------------ ------------------ ------------------
Vehicles
Bicycle 1 1 -- -- --
Motorcycle CD-70 48 30 18 20 2 Company Policy Employee Naseer Ahmed
Motorcycle CD-70 49 29 20 20 -- Company Policy Employee Saeed Akbar
Motorcycle CD-70 58 28 30 32 2 Company Policy Employee Mughis Ahmed
Motorcycle CD-70 53 31 22 22 -- Company Policy Employee Firasat Ali Khan
Motorcycle CD-70 53 31 22 22 -- Company Policy Employee Mohammad Iqbal
Motorcycle CD-70 53 31 22 22 -- Company Policy Employee Khan Mohammad
Motorcycle CD-70 54 11 43 45 2 Company Policy Ex-Employee Abdul Rauf
Motorcycle CD-70 49 29 20 20 -- Company Policy Employee Khan Zubair Iqbal
Motorcycle CD-70 53 31 22 22 -- Company Policy Employee Tasleem Khan
Motorcycle CD-70 53 31 22 22 -- Company Policy Employee Zia Ahmed
Motorcycle CD-70 53 31 22 22 -- Company Policy Employee Abdul Rauf
Motorcycle CD-70 53 31 22 22 -- Company Policy Employee Liaquat Ali
Motorcycle CD-70 38 27 11 11 -- Company Policy Employee Jamil Ahmed
Motorcycle CD-70 56 27 29 34 5 Insurance Claim Muslim Insurance Co. 3 Bank Square
Sharah-e-Quaid-e-Azam, Lahore
(Associated Undertaking)
Motorcycle CD-70 49 29 20 20 -- Company Policy Employee S. Ansar ul Haq
Motorcycle CD-70 49 29 20 20 -- Company Policy Employee Waseem ul Haq
Motorcycle CD-70 53 31 22 22 -- Company Policy Employee Zulfiqar Khan
Motorcycle CD-70 54 32 22 22 -- Company Policy Employee Mohammad Ariff
Motorcycle CD-70 53 31 22 22 -- Company Policy Employee Sabir Islam
Motorcycle CD-70 49 29 20 20 -- Company Policy Employee Ansar Mahmood
Motorcycle CD-70 53 31 22 22 -- Company Policy Employee Shukat J. Chohan
Motorcycle CD-70 53 31 22 22 -- Company Policy Employee Gulzar Javed
Motorcycle CD-70 59 35 24 24 -- Company Policy Employee Khadim H. Awan
Motorcycle CG-125 66 24 42 48 6 Company Policy Ex-Employee Abdul Qadeer
Motorcycle CG-125 66 24 42 48 6 Insurance Claim Muslim Insurance Co. 3 Bank Square
Sharah-e-Quaid-e-Azam, Lahore
(Associated Undertaking)
Motorcycle CG-125 64 23 41 40 (1) Company Policy Employee Khalid Mahmood
Motorcycle CG-125 29 26 3 5 2 Quotation Samson Enterprise Shershah-Karachi
Motorcycle CG-125 29 26 3 5 2 Quotation -- Do --
Motorcycle CG-125 58 28 30 31 1 Quotation Jalil Autos Shadman Town, Karachi.
Motorcycle CG-125 63 13 50 53 3 Insurance Claim Muslim Insurance Co. 3 Bank Square
Sharah-e-Quaid-e-Azam, Lahore
(Associated Undertaking)
Motorcycle CG-125 59 35 24 24 -- Company Policy Employee Masroor Ahmed
Motorcycle CG-125 63 37 26 26 -- Company Policy Employee Mohammad Asif
Motorcycle CG-125 63 37 26 26 -- Company Policy Employee Abu Naser Javed
Motorcycle CG-125 63 37 26 26 -- Company Policy Employee Shehbaz Ahmed
Motorcycle CG-125 63 37 26 26 -- Company Policy Employee Abdul Nasir
Motorcycle CG-125 63 37 26 26 -- Company Policy Employee Mian Manzoor Hussain
Motorcycle CG-125 63 37 26 26 -- Company Policy Employee Sabir Hussain
Motorcycle CG-125 63 37 26 26 -- Company Policy Employee M. Ayyaz
Motorcycle CG-125 63 37 26 26 -- Company Policy Employee M. Riaz Cheema
Motorcycle CG-125 63 37 26 26 -- Company Policy Employee Nasir Bari
Motorcycle CG-125 63 37 26 26 -- Company Policy Employee Sh. Abid Hussain
Motorcycle CG-125 63 37 26 26 -- Company Policy Employee Syed Mumtaz Hussain
Motorcycle CG-125 66 31 35 31 (4) Company Policy Employee M. Sarfraz
Motorcycle CG-125 69 14 55 58 3 Company Policy Employee Sohail Qaiser
Suzuki Khyber 317 114 203 233 30 Company Policy Employee Arshad Siddiqui
Suzuki Khyber 339 68 271 290 19 Company Policy Employee Shakil Mirza
Suzuki Khyber 281 138 143 112 (31) Company Policy Employee Sohail Raza
Suzuki Khyber 324 158 166 160 (6) Company Policy Ex-Employee Latif Ullah
Suzuki Mehran 345 204 141 160 19 Company Policy Employee Mohammad Akhlaq
Toyota Corolla 380 224 156 157 1 Company Policy Employee Ainus Salikeen
Toyota Corolla 341 202 139 152 13 Company Policy Employee Masaud Aslam
Toyota Corolla 360 213 147 137 (10) Company Policy Employee Wadood Butt
Toyota Corolla 396 194 202 158 (44) Company Policy Employee M. Ashraf
Toyota Corolla 430 254 176 168 (8) Company Policy Employee Iftikhar Ahmed
Honda Civic 816 482 334 750 416 Insurance Claim Muslim Insurance Co. 3 Bank Square
Sharah-e-Quaid-e-Azam, Lahore
(Associated Undertaking)
Honda Civic 593 350 243 243 -- Company Policy Employee Zameer Haider
Honda Civic 593 350 243 243 -- Company Policy Ex-Employee Rafat Iqbal
------------------ ------------------ ------------------ ------------------ ------------------
7,973 4,279 3,694 4,122 428
------------------ ------------------ ------------------ ------------------ ------------------
Sub Toal  9,551 5,211 4,340 4,536 196
------------------ ------------------ ------------------ ------------------ ------------------
Vehicle Under Finance Lease
Honda Civic 593 -- 593 593 -- Leased assets transferred to own assets
Honda Civic 593 -- 593 593 -- Leased assets transferred to own assets
Honda Civic 594 350 244 248 4 Company Policy Employee Mohammad Nazim
Honda Civic 593 350 243 244 1 Company Policy Employee Nurul Hoda
------------------ ------------------ ------------------ ------------------ ------------------
Sub Total 2,373 700 1,673 1,679 5
------------------ ------------------ ------------------ ------------------ ------------------
Grand Total 11,924 5,911 6,013 6,214 201
========== ========== ========== ========== ==========
(Rupees in 000's)
2000 1999
18. DEFERRED COST
Software development cost 1,343 2,686
Amortised during the year (1,343) 1,343
------------------ ------------------
-- 1,343
========== ==========
19. INVESTMENTS
Associated undertaking (Listed)
Atlas Battery Limited
150,500 ordinary shares
of Rs. 10 each 9,548 9,548
Less: Provision for diminution in value of investment 5,560 5,033
------------------ ------------------
Market value Rs. 3,988 thousand (1999 - Rs. 4,515 thousand) 3,988 4,515
Unlisted
Arabian Sea Country Club (Pvt) Limited 2,000 2,000
200,000 ordinary shares of Rs. 10 each
(Name of Chief Executive Mr. Aslam Mohsin Ali)
Break-up value on the basis of audited
accounts for the year ended June 30, 2000
Rs. Nil (1999 - Rs.6.19) per share
Less: Provision for diminution in value of investment 2,000 --
------------------ ------------------
-- 2,000
Automotive Testing & Training Centre (Pvt) Ltd.
187,500 (1999:37,500) ordinary shares of Rs. 10 each 1,875 375
(Name of Chief Executive Mr. Ramzan Ali Khwaja
Break-up value on the basis of audited
account for the year ended June 30, 1999
Rs.10 (1998 - Rs.10) Per share
Deposit for shares -- 1,500
------------------ ------------------
1,875 1,875
------------------ ------------------
5,863 8,390
========== ==========
Investment in associated companies are stated at cost. Had the equity method been applied, the
total profit for the year would have increased by Rs. 436 thousand (1999 -Rs. 2,087 thousand)
while the unappropriated profit brought forward would have been higher/(lower) by Rs. 1,667 thousand
{(1999 -Rs. 419 thousand)} and long term investment would have increased by Rs.2,103 thousand
{1999 - (Rs. 1,065 thousand)}.
20. LONG TERM LOANS, DEPOSITS & PREPAYMENTS
Deposits 1,327 1,327
Prepaid Rent 302 --
Car/Motorcycle loans to staff (Note 20.1) 9,082 9,082
------------------ ------------------
10,055 10,409
========== ==========
20.1 Car/Motorcycle loans to staff
Balance as at 1 July 14,787 15,608
Receivable within the following twelve months 6,238 6,526
------------------ ------------------
8,549 9,082
========== ==========
Car/Motorcycle loans to staff are secured against motorcycles which are registered in name