| Atlas Honda Limited |
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| Annual
Report 2000 |
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| MISSION
STATEMENT |
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To be a dynamic, profitable and growth |
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oriented company through market leadership, |
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excellence in quality and service adding |
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value to the shares and maximizing exports. |
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To give attractive return to business |
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associates, share-holders as per their |
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expectations and market value and |
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employees according to their abilities and |
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performance, and to be a good corporate |
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citizen to fulfill its social responsibilities. |
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| CONTENTS |
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| Company
Information |
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| Notice
of Annual General Meeting |
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| Ten
Years Growth at a Glance |
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| Chairman's
Review |
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| Directors'
Report |
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| Auditors'
Report to the Members |
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| Balance Sheet |
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| Profit
& Loss Account |
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| Cash
Flow Statement |
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| Statement
of changes in Shareholders' Equity |
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| Notes
to the Accounts |
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| Pattern
of Shareholding |
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| Atlas
Group Companies |
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| COMPANY
IN FORMATION |
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BOARD OF DIRECTORS |
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| Chairman |
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Yusuf H. Shirazi |
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| Chief
Executive Officer |
Aamir H. Shirazi |
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| Directors |
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Aitzaz Shahbaz |
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Firasat Ali |
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(representing National
Investment Trust Ltd.) |
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Motohide Sudo |
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(representing Honda Motor
Company Ltd.) |
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Nasim Beg |
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(representing National
Investment Trust Ltd.) |
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Sherali Mundrawala |
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Takemi Ishikawa |
(representing Honda Motor
Company Ltd.) |
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| Company
Secretary |
Saleem Ahmed |
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GROUP EXECUTIVE COMMITTEE |
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| Chairman |
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Yusuf H. Shirazi |
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| Members |
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Jawaid Iqbal Ahmed |
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Frahim Ali Khan |
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Iftikhar H. Shirazi |
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Aamir H. Shirazi |
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Saquib H. Shirazi |
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| Secretary |
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Amjad Hussain |
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GROUP PERSONNEL COMMITTEE |
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| Chairman |
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Yusuf H. Shirazi |
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GROUP AUDIT COMMITTEE |
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| Chairman |
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Sanaullah Qureshi |
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COMPANY MANAGEMENT |
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| Chief
Executive Officer |
Aamir H. Shirazi |
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| Technical
Director |
Takemi Ishikawa |
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| Director
Finance |
Saleem Ahmed |
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| General
Manager Marketing |
Nurul Hoda |
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| General
Manager Human Resources |
Zamir Haider |
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| Auditors |
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Hameed Chaudhri & Co. |
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Chartered Accountants |
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| Legal Advisors |
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Mohsin Tayebaly & Co. |
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| Tax Advisors |
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Mahmood Law Associates |
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| Bankers |
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Credit Agricole Indosuez |
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Deutsche Bank AG |
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Emirates Bank
International P.J.S.C. |
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Habib Bank Limited |
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Muslim Commercial Bank
Limited |
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National Bank of Pakistan |
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The Bank of
Tokyo-Mitsubishi Limited |
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United Bank Limited |
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| Lending
Institutions |
Atlas Investment Bank
Limited |
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Muslim Commercial Bank
Limited |
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Saudi Pak Industrial and
Agricultural |
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Investment Company (Pvt)
Limited |
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| Registered
Office |
1-McLeod Road,
Lahore-54000 |
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Tel: (92-42) 7225015-17,
7233515-17 |
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Fax: (92-42) 7233518 |
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Email:
ahl@lhr.atlasgrouppk.com |
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| Factories |
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F-36, Estate Avenue,
S.I.T.E., Karachi-75730 |
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Tel: (92-21)
2575561-65Fax: (92-21) 2563758 |
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Email:
ahl@atlasgrouppk.com |
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26-27 KM,
Lahore-Sheikhupura Road, Sheikhupura-39321 |
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Tel: (92-4931) 6655-57,
(92-42) 7222222 |
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Fax: (92-342) 354111 |
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Email:
ahlskp@lhr.atlasgrouppk.com |
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| Branch Offices |
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Azmat Wasti Road, Multan |
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Tel: 31990, 571989, 72028
Fax: 541690 |
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Room 9, 2nd Floor, Sunny
Plaza, Chandni Chowk, |
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Murree Road, Rawalpindi.
Tel: 455328 Fax: 847928 |
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Show Room |
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West View Building,
Preedy Street, Saddar, Karachi. |
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Tel: 7720833, 7727607 |
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| Spare
Parts Division |
F-36, Estate Avenue,
S.I.T.E., Karachi-75730 |
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Tel: (92-21) 2575561-65
Fax: (92-21) 2563758 |
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| Warranty
& Training Centres |
7-Pak Chambers, West
Wharf Road, Karachi. Tel: 2310142 |
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28 Mozang Road, Lahore.
Tel: 6375360 |
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Azmat Wasti Road, Multan.
Tel: 72028 |
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366/A, Gulistan Colony
No.2, Near Millat Chowk, |
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Shaikhupura Road,
Faisalabad-38700 |
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| NOTICE
OF ANNUAL GENERAL MEETING |
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| The
Thirty-sixth Annual General Meeting of the Company will be held on Thursday,
14 December, 2000 |
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| at
10.30 A.M. at 1-McLeod Road, Lahore to transact the following business: |
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| 1.
To confirm the minutes of the Annual General Meeting held on 8 December,
1999. |
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| 2.
To receive and adopt the Audited Accounts of Atlas Honda .Limited together
with the |
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| Directors'
and Auditors' reports for the year ended 30 June, 2000. |
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| 3.
To approve the dividend @ 20% for the year ended 30 June, 2000 as recommended |
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| by
the Board of Directors. |
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| 4.
To appoint the Auditors for the year 2000-2001 and to fix their remuneration. |
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| 5.
To transact such other ordinary business as may be placed before the meeting
with |
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| the
permission of the chair. |
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BY ORDER OF THE BOARD |
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| Lahore:
November 23, 2000 |
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SECRETARY |
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| N.B.
Shareholders are requested to take note of the following: |
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| NOTES: |
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| 1.
The share transfer book of the Company will be closed from 7 December, 2000
to |
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| 14
December, 2000 (both days inclusive). |
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| 2.
A member entitled to attend and vote at the Annual General Meeting is
entitled to appoint |
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| another
member as a proxy to attend and vote on his/her behalf. Proxies in order to
be effective |
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| must
be received at the Registered Office of the Company not less than 48 hours
before the |
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| time
appointed for the meeting. |
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| 3.
No person shall act as proxy unless he is a member of the Company. |
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| 4.
Signature of the shareholder on Proxy Application must agree with the
specimen signature |
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| registered
with the Company. Appropriate revenue stamp should be affixed on the Proxy |
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| Application. |
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| 5.
For the convenience of the shareholder a Proxy Application format is attached
with this report. |
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| 6.
Shareholders are requested to immediately notify the Company of any change in
their |
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| addresses. |
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| 7.
Any individual Beneficial Owner of the Central Depository Company, entitled
to vote at this |
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| meeting
must bring his/her National Identity Card with him/her to prove his/her
identity, and |
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| in
the case of proxy, must enclose an attested copy of his/her National Identity
Card, |
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| Representative
of corporate members should bring the usual documents required for such
purpose. |
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| TEN
YEARS GROWTH AT A GLANCE |
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(Rs. in Million) |
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| Years |
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2000 |
1999 |
1998 |
1997 |
1996 |
1995* |
1994 |
1993 |
1992 |
1991 |
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| Sales |
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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 |
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| Gross Profit |
|
352.9 |
396.8 |
424.5 |
396.8 |
338.4 |
160.7 |
176.8 |
151.3 |
141.2 |
103.8 |
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| Profit
Before Tax |
101.9 |
180.9 |
190.9 |
188.6 |
176.1 |
31.4 |
18.7 |
17.7 |
7.9 |
0.9 |
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| Profit After Tax |
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60.2 |
123.4 |
125.6 |
124.9 |
101.5 |
20.6 |
11.5 |
13.4 |
(0.4) |
(10.5) |
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| Share Capital |
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145.98 |
145.98 |
145.98 |
132.71 |
120.64 |
120.64 |
120.64 |
109.68 |
109.68 |
58.75 |
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| Share
Holders' Equity |
585.00 |
554.02 |
481.70 |
392.6 |
287.53 |
204.17 |
211.95 |
200.50 |
187.12 |
85.61 |
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| Fixed
Assets - Net |
490.27 |
366.73 |
379.37 |
374.86 |
270.83 |
289.24 |
296.69 |
319.53 |
340.66 |
315.85 |
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| 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 |
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| Dividend |
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| Cash |
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20% |
35% |
25% |
15% |
15% |
15% |
0% |
0% |
0% |
0% |
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| Stock |
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0% |
0% |
0% |
10% |
10% |
0% |
0% |
10% |
0% |
0% |
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| Ratios: |
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| Profitability (%) |
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| Gross Profit |
|
10.4% |
11.6% |
12.4% |
11.3% |
10.9% |
7.5% |
9.6% |
7.8% |
8.5% |
6.6% |
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| Profit
Before Tax |
3.0% |
5.3% |
5.6% |
5.4% |
5.7% |
1.5% |
1.0% |
0.9% |
0.5% |
0.0% |
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| Profit After Tax |
|
1.8% |
3.6% |
3.7% |
3.6% |
3.3% |
1.0% |
0.6% |
0.7% |
0.0% |
(0.7)% |
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| Return
To Shareholders |
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| 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) |
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| Activity |
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| 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 |
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| Liquidity/Leverage |
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| Current Ratio |
|
1.53 |
1.64 |
1.31 |
1.21 |
1.10 |
1.01 |
1.05 |
1.06 |
0.98 |
0.85 |
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| Break up value |
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| per share |
|
40.07 |
37.95 |
33.00 |
29.58 |
23.83 |
16.92 |
17.57 |
18.28 |
17.06 |
14.57 |
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| Long
Term Debts To |
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| Equity (Times) |
|
0.36 |
1.14 |
0.39 |
0.36 |
0.26 |
0.48 |
0.53 |
0.76 |
0.79 |
1.67 |
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| Total Liabilities |
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| To
Equity (Times) |
1.43 |
1.21 |
2.19 |
2.08 |
2.62 |
2.86 |
2.57 |
3.25 |
3.46 |
8.69 |
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| * Annualized |
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| CHAIRMAN'S
REVIEW |
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| It
is my pleasure to present to you the 36th Annual |
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| Report
and review of the performance of your |
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| company
for the year ended 30th June 2000. |
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| THE
ECONOMY |
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| The
year ending June 30, 2000 remained under |
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| the
shadow of the international and domestic political |
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| and
economic situation prevailing in the year 1999. |
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| Nuclear
detonation, Kargil issue and ultimately |
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| army
take over have had its impact on the political, |
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| economic
and social fabric of the country. Good |
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| cotton,
rice and wheat crops, however did help in |
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| raising
the GDP growth but inept pricing and other |
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| policy
measures could not yield the desired |
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| economic-socio
benefits at the grass roots so as |
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| to
uplift the economy on the whole. It was against |
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| this
background that the National Budget for the |
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| year
2000-2001 was presented as a part of 3 years |
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| Perspective
Plan aimed at achieving a 6% GDP |
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| growth
and budgetary deficit below 5% by the year |
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| ending 2003. |
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| The
GDP growth for the year 1999-2000 was 4.8%, |
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| agriculture
being highest at 7.2%, manufacturing |
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| the
lowest at 1.1% and service sector at 4.5%. |
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| Inflation
was claimed to be 3.6% which was the |
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| lowest
in the past decade. The GDP growth target |
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| set
for the year 2000-2001 vis-a-vis 1999-2000 is |
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| at
5%, up by only 0.2% from the previous year. |
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| Agriculture
growth is projected at 3.9%, services |
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| at
5.2%, and the manufacturing at 5.9%. The target |
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| growth
rates are an encouraging sign. The inflation |
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| for
the year 2000-2001 is estimated at 4.5%, 0.9% |
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| higher
than last year. Despite government's |
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| emphasis
on agriculture sector, a projection of lower |
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| growth
as compared to last year seems reasonably |
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| cautious
keeping in view the current water shortage |
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| and
vagaries of the weather. In the present |
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| circumstances,
the growth in manufacturing at 5.9% |
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| seems
to be optimistic but achievable! Similarly, |
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| the
budgetary deficit target set at 4.6% of GDP |
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| vis-a-vis
6.5% of last year and 6.6% average of the |
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| last
4 years seems to be somewhat realistic thought |
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| with
a lot of focus on the rough edges of the |
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| economy.
The revenue target hinges on collection |
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| of
an extra Rs.100 bn. It is essential that all these |
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| targets
are met in the wake of prevailing economic |
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| situation
particularly the IMF conditionalities and |
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| the
overall external pressures, which are becoming |
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| increasingly
arduous for the borrowing nations with |
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| Pakistan
the most hard hit at the present time. |
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| On
the other hand, in July 2000 the State Bank of |
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| Pakistan
chose to remove the restrictions on the |
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| inter
bank market and freed the rupee-dollar parity |
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| which
caused the rupee to fall from Rs.52.36 to |
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| Rs.59.30
a dollar in early October 2000, about a |
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| 13.3%
devaluation within a period of 10 weeks. In |
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| the
kerb .market, the rupee went as low as Rs.63 |
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| to
a dollar- resulting in cost-push pressures in the |
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| long
run. This was stated to meet one of the IMF |
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| conditionalities
- before any settlement with them |
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| in
sight. There is thus no alternative but to come |
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| out
of the vicious circle of ever rising debts, falling |
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| rupee,
debt servicing and costlier imports, |
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| consequently
rendering exports incompetitive due |
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| to
rising internal costs. This can only be done by |
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| a
better business environment, which promotes |
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| greater
investment and savings. The devaluation |
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| has
indeed made everything costlier without a |
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| corresponding
increase in investment and |
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| production
- productivity, value addition and volume |
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| growth.
Full utilization of capacity needs to be the |
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| focus,
which alone will bring the cost down and |
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| result
in export competitiveness. |
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| In
order to revive the economy, the world financing |
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| agencies
prescription may be just marginal. It has |
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| hardly
helped any developing country so far. A |
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| recommendation
in this connection to phase out |
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| seven
main industries in Pakistan - steel, fertiliser, |
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| sugar,
oil refineries, chemicals, pharmaceuticals |
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| and
automobile, constituting over 50% of the |
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| economy,
being not competitive by world standards, |
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| will
further damage the economy as a whole. What |
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| will
then remain for achieving self-reliance, a view |
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| the
Government does espouse. Unemployment is |
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| becoming
a bigger concern and challenge day by |
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| day.
Similarly, a report that localization programmes |
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| will
be done away will only discourage investment. |
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| Equally
important is the competitive advantage of |
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| the
local industry being eroded without which |
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| localization
is effected. Imagine the rate of custom |
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| duty
is being reduced from 35% to 25%, without a |
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| corresponding
reduction in raw material duty which |
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| remains
at 10%. Since the automobile engineering |
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| industry
clearly does not come under the world |
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| financing
institutions and other regulatory agencies |
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| -
WTO - there is no reason to succumb to any |
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| pressure
from any other international agency. |
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| Otherwise
such policies will suspend investment, |
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| production
and export - and above all, any |
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| entrepreneurial
initiatives in these industries, to say |
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| the
least, unless the situation is rectified or clarified |
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| in bold letters: |
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| (The
state secrets are the preservatives of the statesmen) |
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| THE
AUTOMOBILE INDUSTRY |
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| During
the year under review, the automobile |
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| industry
in general did not perform well except the |
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| tractor
segment. The production of tractors increased |
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| to
34,559 units from 26,644 units in the previous |
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| year,
up 30%. The sales at 33,201 units were, up |
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| 21%,
from 27,414 units in the previous year, mainly |
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| due
to support from the agricultural sector. |
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| Production
of cars on the whole, however, was at |
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| 32,461
units against 38,682 units in the previous |
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| year,
down 16%. The sale was also down 15% to |
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| 31,759
units from 37,262 units in the previous year. |
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| However,
the industry witnessed rise in the |
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| production
of cars in the category of 1300 cc and |
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| above
- HONDA MARKET - and stood at 17,326 |
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| units
by June 2000 against 15,190 units by June |
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| 1999,
up 14%. The sales also increased to 17,452 |
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| units
against 14,653 units of the last year, up 19% |
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| with
Honda cars increasing production from 3,926 |
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| to 4,744 up 21%. |
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| Following
are the relevant production figures relating |
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| to
the automobile industry, as a whole, for the year |
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| under review: |
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| Particulars |
|
2000 |
1999 |
Incr/(Decr) |
%age |
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| Cars |
|
32,461 |
38,682 |
(6,221) |
-16.08% |
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| Motorcycles |
|
86,959 |
87,504 |
(545) |
-0.62% |
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| 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 ex |
