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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 ex