| Elahi Cotton Mills Limited |
|
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|
|
|
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|
|
|
| Annual
Report 2000 |
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|
| COMPANY'S
INFORMATION |
|
|
| BOARD
OF DIRECTORS |
|
| MAHBOOB
ELAHI |
|
| MAHFOOZ
ELAHI |
|
| MAHMOOD
ELAHI |
|
| ABDUL
RASHEED |
|
| FARRUKH
AHMED |
|
| NAVEED
AKHTER |
|
| SHAHID
ANWAR |
|
|
| CHIEF
EXECUTIVE |
|
| MAHBOOB
ELAHI |
|
|
|
| AUDITORS |
|
| M/S.
S. M. MASOOD & CO. |
|
| CHARTERED
ACCOUNTANTS |
|
| 23
EAST, SAEED PLAZA, |
|
| BLUE AREA, |
|
| ISLAMABAD. |
|
|
| REGISTERED
OFFICE |
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| 270-SECTOR
I-9, |
|
| INDUSTRIAL
AREA, |
|
| ISLAMABAD. |
|
|
| MILLS |
|
| JURIAN,
MANDRA, |
|
| TEHSIL
GUJAR KHAN, |
|
| DISTRICT
RAWALPINDI. |
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|
|
| DIRECTORS
REPORT TO THE MEMBERS |
|
|
| The
Directors of the Company are pleased to welcome you to the 30th Annual
General |
|
| Meeting
of your Company and feel pleasure in presenting their Annual Report alongwith |
|
| audited
financial statements for the year ended September 30, 2000. |
|
|
| The
year under report, was favourable as compared to the last year. The financial
results of |
|
| the
company for the year under review are given below: |
|
|
|
|
|
RUPEES |
|
|
|
|
IN MILLION |
|
|
| Operating
profit / (Loss) |
|
|
(6.269) |
|
| Add.
Financial Charges |
|
|
(8.604) |
|
| Other Income |
|
|
7.046 |
|
|
|
|
------------------ |
|
| Loss
before taxation |
|
|
(7.827) |
|
| Add.
Provision for taxation |
|
|
(0.819) |
|
|
|
|
------------------ |
|
| Net
Loss after taxation |
|
|
(8.646) |
|
| Accumulated
loss brought forward |
|
(85.217) |
|
|
|
|
------------------ |
|
| Accumulated
loss carried forward |
|
|
(93.863) |
|
|
========== |
|
|
| The
net loss sustained by the Company has been reduced from Rs. 34.460 million to
Rs. |
|
| 8.646
million. This loss is attributed mainly due to heavy un-announced electric |
|
| breakdowns,
increase in purchase prices of polyester and non availability of working
capital |
|
| from
Banks. Due to shortage of working capital, the company was not able to
"Cash in" the |
|
| advantage
of decrease in Cotton prices during the season. Being a smaller unit of
12,432 |
|
| spindles,
the mills is suffering more by the above adverse situation. |
|
|
| The
company produced 2.608 million kgs of polyester - cotton yarn after
conversion into |
|
| 20/1
as against 1.131 million kgs in the previous year, showing a production
increase of |
|
| 130
%. The net sales were Rs. 163.863 million as compared to Rs. 64.203 million
in the |
|
| previous
year, showing increase of 155 %. |
|
|
| AUDITORS |
|
| The
auditor M/S. S.M. Masood & Company, Chartered Accountants, retire and
being |
|
| eligible
offer themselves for re-appointment. |
|
|
| SHAREHOLDING |
|
| A
statement showing the pattern of share holding by the shareholders of the
Company as |
|
| on
September 30, 2000 is attached herewith. |
|
|
|
| FUTURE
PROSPECTS AND OUTLOOK |
|
| In
the present circumstances, it is necessary to increase the spindles and
replace some of |
|
| the
existing machinery. The company has approached various DFI's for financing
BMR plan |
|
| for
revival of unit which will improve the profitability of the Company. At
present the textile |
|
| industry
is moving towards consolidation and it is hoped that the next year for
spinning |
|
| Sector
would be better and profitable. |
|
|
| The
labour- management remained pleasantly co-operative throughout the year and
I, |
|
| together
with fellow Directors, wish to acknowledge our gratitude to the labour as
well as |
|
| staff
members for performing their duties so efficiently. |
|
|
| The
Directors have to comment on Auditors qualification as under: |
|
|
| The
company incurred loss of Rs. 8.646 million. This loss was mainly due to
shortage of |
|
| working
capital, un-announced electric breakdowns and increase in prices of
polyester. |
|
| Due
to these factors, the Company could not operate at 100 % capacity and
incurred |
|
| losses.
However, the net loss during the year has been reduced from Rs. 34.460
million to |
|
| Rs.
8.646 million which shows that the Company is moving towards improvement and
will |
|
| recoup
pad of losses accumulated and will continue its operations. |
|
|
|
|
BY ORDER OF THE BOARD |
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|
|
|
|
| Islamabad, |
|
(MAHBOOB ELAHI) |
|
| March 03, 2001, |
|
Chief Executive |
|
|
|
|
|
| AUDITORS'
REPORT TO THE MEMBERS |
|
|
| We
have audited the annexed balance sheet of ELAHI COTTON MILLS LIMITED, |
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| as
at September 30,2000 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 our knowledge and belief, were necessary for
the |
|
| purpose
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 statements. We believe that our audit provides a reasonable |
|
| basis
for our opinion and, after due verification, we state that:- |
|
|
| The
company has suffered net loss of Rs. 8.6 million for the year ended September |
|
| 30,
2000 and has accumulated loss of Rs. 93.8 million. Current liabilities
exceeded |
|
| its
current assets by Rs. 26.16 million and total liabilities exceeded its total
assets by |
|
| Rs. 47.64 million. |
|
|
| The
Company is also facing difficulties in meeting its financial obligation.
Habib |
|
| Bank
Limited has filed a petition for recovery of Rs. 95.88 million in Honourable |
|
| Lahore
High Court, Rawalpindi Bench. This petition is pending as at the date of |
|
| report. |
|
|
| These
accounts have been prepared on the going concern assumption. Considering |
|
| significance
of the above matters, we are unable to form an opinion on the validity of |
|
| the
use of going concern assumption. Consequently adjustments may be required to |
|
| the
recorded assets and classification of liabilities. |
|
|
| Except
for the effect of adjustments, if any, as might have been determined to be |
|
| necessary,
had we been able to satisfy ourselves as to the matters set out above, we
report |
|
| that
we have obtained all the information and explanations which to the best of
our |
|
| knowledge
and belief were necessary for the purpose of our audit and, after due
verification |
|
| thereof,
we report that |
|
|
| a)
in our opinion, proper books of account have been kept by the |
|
| company
as required by the Companies Ordinance, 1984; |
|
|
| b)
in our opinion: |
|
|
| i)
the balance sheet and profit and loss account together with the notes |
|
| thereon
have been drawn up in conformity with the Companies |
|
| Ordinance,
1984, and are in agreement with the books of account |
|
| and
are further in accordance with accounting policies consistently |
|
| applied; |
|
|
|
|
|
|
| ii)
the expenditure incurred during the year was for the purpose of the |
|
| company's
business; and |
|
|
|
|
|
| iii)
the business conducted, investments made and the expenditure |
|
| incurred
during the year were in accordance with the objects of the |
|
| company; |
|
|
|
|
| (c)
in our opinion and to the best of our information and according to the |
|
| explanations
given to us, the balance sheet, profit and loss account, cash |
|
| flow
statement and statement of changes in equity together with the notes |
|
| forming
part thereof, conform with approved accounting standards as |
|
| applicable
in Pakistan, and, give the information required by the Companies |
|
| Ordinance,
1984, in the manner so required and respectively give a true and |
|
| fair
view of the state of the company's affairs as at September 30, 2000, and |
|
| of
the loss and cash flow and changes in equity for the year then ended; and |
|
|
|
|
| (d)
in our opinion no Zakat was deductible at source under the Zakat and Ushr |
|
| Ordinance,
1980 (XVII of 1980). |
|
|
|
| ISLAMABAD, |
|
|
S.M. MASOOD & COMPANY |
|
|
| February
28, 2001. |
|
|
Chartered Accountants |
|
|
|
|
| BALANCE
SHEET AS AT 30TH SEPTEMBER, 2000 |
|
|
| CAPITAL
AND LIABILITIES |
|
NOTE |
2000 |
1999 |
|
|
|
|
RUPEES |
RUPEES |
|
|
|
| SHARE
CAPITAL |
|
| Authorised |
|
| 5,000,000
ordinary shares of Rs. 10/- each |
|
50,000,000 |
50,000,000 |
|
|
|
========== |
========== |
|
|
|
|
| ISSUED,
SUBSCRIBED AND PAID UP |
|
13,000,000 |
13,000,000 |
|
| 1300,000
ordinary share of Rs. 10/- each |
|
|
|
| fully
paid in cash |
|
|
| ACCUMULATED
LOSS |
|
|
(93,863,454) |
(85,217,303) |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
(80,863,454) |
(72,217,303) |
|
|
|
|
| REVALUATION
RESERVE |
|
3 |
33,215,659 |
33,215,659 |
|
|
|
|
|
| LONG
TERM & DEFERRED LIABILITIES |
|
|
| Obligation
under finance lease |
|
5 |
2,074,742 |
2,145,789 |
|
| Provision
for gratuity |
|
6 |
2,147,246 |
2,400,361 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
88,668,720 |
98,053,754 |
|
|
| CURRENT
LIABILITIES |
|
| Short
Term Running Finance - secured |
7 |
2,998,908 |
4,569,801 |
|
| Current
maturity of long term liabilities |
8 |
19,714,275 |
22,427,261 |
|
| Due to Directors |
|
|
-- |
4,638,575 |
|
| Creditors,
Accrued & other liabilities |
9 |
34,735,603 |
54,103,352 |
|
| Provision
for Taxation |
|
10 |
6,051,394 |
5,232,077 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
63,500,180 |
90,971,066 |
|
| CONTINGENCIES
& COMMITMENTS |
11 |
-- |
-- |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
104,521,105 |
150,023,176 |
|
|
|
|
========== |
========== |
|
|
| AUDITORS
REPORT TO THE MEMBERS IS ANNEXED |
|
| The
annexed notes form an integral part of these accounts |
|
|
| PROPERTY
AND ASSETS |
|
|
|
|
| FIXED
CAPITAL EXPENDITURE |
|
|
| Operating
assets (at cost less depreciation) |
12 |
67,114,554 |
71,119,009 |
|
| Capital
work in progress |
|
13 |
-- |
474,884 |
|
| Long
term investments |
|
14 |
25,000 |
25,000 |
|
| Long
term security deposits |
|
|
41,656 |
41,656 |
|
|
|
|
|
|
| CURRENT
ASSETS |
|
|
|
| Stock in trade |
|
15 |
19,361,634 |
37,684,116 |
|
| Stores,
spares and loose tools |
|
16 |
1,735,866 |
1,776,327 |
|
| Due
from associated undertakings / directors |
17 |
7,982,859 |
27,614,230 |
|
| Trade
debtors - unsecured considered good |
|
31,415 |
230,904 |
|
| Advances,
deposits, prepayments and |
|
|
| other
receivables |
|
18 |
7,780,821 |
10,908,199 |
|
| Cash
and bank balances |
|
19 |
447,300 |
148,851 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
37,339,895 |
78,362,627 |
|
|
|
|
------------------ |
------------------ |
|
|
|
104,521,105 |
150,023,176 |
|
|
|
========== |
========== |
|
|
|
|
|
|
| PROFIT
& LOSS ACCOUNT FOR THE YEAR ENDED SEPTEMBER 30, 2000 |
|
|
|
|
2000 |
1999 |
|
|
NOTE |
RUPEES |
RUPEES |
|
|
| Sales (Net) |
|
20 |
163,863,387 |
64,203,276 |
|
| Cost of Sales |
|
21 |
166,611,940 |
79,825,826 |
|
|
|
|
------------------ |
------------------ |
|
| Gross loss |
|
|
(2,748,553) |
(15,622,550) |
|
|
|
| OPERATING
EXPENSES |
|
|
|
| Administrative |
|
22 |
3,438,861 |
4,845,150 |
|
| Selling
& Distribution |
|
23 |
81,105 |
583,216 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
3,519,966 |
5,428,366 |
|
|
|
|
------------------ |
------------------ |
|
| Operating loss |
|
|
(6,268,519) |
(21,050,916) |
|
| Other Income |
|
24 |
7,046,021 |
5,298,113 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
777,502 |
( 15,752,803) |
|
| Financial
Charges |
|
25 |
8,604,336 |
18,359,783 |
|
|
|
|
------------------ |
------------------ |
|
| NET
LOSS BEFORE TAXATION |
|
(7,826,834) |
(34,112,586) |
|
|
|
| PROVISION
FOR TAXATION - Current |
|
819,317 |
347,507 |
|
|
|
------------------ |
------------------ |
|
| NET
LOSS AFTER TAXATION |
|
|
(8,646,151) |
(34,460,093) |
|
|
|
|
| BALANCE
BROUGHT FORWARD |
|
(85,217,303) |
(50,757,210) |
|
|
|
|
------------------ |
------------------ |
|
| BALANCE
CARRIED FORWARD |
|
(93,863,454) |
(85,217,303) |
|
|
|
|
========== |
========== |
|
| LOSS
PER SHARE |
|
26 |
(6.65) |
(26.51) |
|
|
|
|
|
|
|
|
|
| AUDITORS
REPORT TO THE MEMBERS IS ANNEXED. |
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
Chief Executive |
|
Director |
|
|
|
| CASH
FLOW STATEMENT |
|
| FOR
THE YEAR ENDED SEPTEMBER 30, 2000. |
|
|
|
|
2000 |
1999 |
|
|
|
RUPEES |
RUPEES |
|
|
| CASH
FLOW FROM OPERATING ACTIVITIES |
|
|
|
| Net
(Loss) before Taxation |
|
|
(7,826,834) |
(34,112,586) |
|
| Adjustment for: |
|
|
|
|
| Depreciation |
|
|
4,600,857 |
5,056,100 |
|
| Financial
charges |
|
|
8,604,336 |
18,359,783 |
|
| Provision
for gratuity- Net |
|
|
354,013 |
184,999 |
|
| Fixed
assets in Bangladesh |
|
|
-- |
1,334,214 |
|
| Gain
on sale of fixed assets |
|
|
(251,138) |
(162,085) |
|
|
|
|
------------------ |
------------------ |
|
| LOSS
BEFORE WORKING CAPITAL CHANGES |
|
5,481,234 |
(9,339,575) |
|
|
| Changes
in working capital: |
|
| Decrease
/ (Increase) in inventories |
|
18,362,943 |
(11,091,754) |
|
| Decrease
in Trade debtors |
|
|
199,489 |
3,607,837 |
|
| Decrease
in advances, deposits, prepayments and |
|
|
|
| other receivable |
|
|
3,127,378 |
12,350,570 |
|
| Increase
/ (Decrease) in short term finances |
|
(1,570,893) |
(68,530,818) |
|
| Decrease
in creditors, accrued and other liabilities |
|
(16,842,667) |
13,797,307 |
|
|
|
|
------------------ |
------------------ |
|
| Cash
generated from operations |
|
|
8,757,484 |
(59,206,433) |
|
|
|
|
------------------ |
------------------ |
|
| Financial
charges paid |
|
|
(11,129,418) |
(19,056,239) |
|
| Income Tax paid |
|
|
-- |
(187,470) |
|
| Gratuity paid |
|
|
(607,128) |
(208,828) |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
(11,736,546) |
(19,452,537) |
|
|
|
|
------------------ |
------------------ |
|
| Net
cash from operating activities |
|
(2,979,062) |
(78,658,970) |
|
|
| CASH
FLOW FROM INVESTING ACTIVITIES: |
|
| Purchase
of fixed assets |
|
|
(990,542) |
(305,391) |
|
| Disposal
of fixed assets |
|
|
645,278 |
225,000 |
|
| Capital
work in progress |
|
|
474,884 |
(11,449) |
|
|
|
|
------------------ |
------------------ |
|
| Net
cash flow from investing activities |
|
129,620 |
(91,840) |
|
|
|
|
------------------ |
------------------ |
|
|
| CASH
FLOW FROM FINANCING ACTIVITIES: |
|
| Long
term financing (Net) |
|
|
(11,773,858) |
82,000,000 |
|
| Obligation
under finance lease |
|
|
(71,047) |
(1,180,826) |
|
| Associated
undertakings / Directors |
|
14,992,796 |
(2,809,947) |
|
|
|
|
------------------ |
------------------ |
|
| Net
cash flow from Financing activities |
|
3,147,891 |
78,009,227 |
|
|
|
|
------------------ |
------------------ |
|
| Net
Increase / (decrease) in cash and cash equivalents |
298,449 |
(741,583) |
|
| Cash
and cash equivalents at the beginning of the year |
148,851 |
890,434 |
|
|
|
|
------------------ |
------------------ |
|
| Cash
and cash equivalents at the end of the year 19 |
|
447,300 |
148,851 |
|
|
|
|
========== |
========== |
|
|
|
|
|
|
|
| NOTES
TO THE ACCOUNTS FOR THE |
|
| YEAR
ENDED SEPTEMBER 30, 2000 |
|
|
| 1.
STATUS AND NATURE OF BUSINESS: |
|
| The
company was incorporated as a public limited company on June 26, 1970 and is
listed on |
|
| Karachi
and Islamabad Stock Exchange. The company is engaged in the manufacturing and
sale of yarn. |
|
|
| 2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: |
|
| The
financial statements have been prepared in compliance with the requirements
of International |
|
| Accounting
standards as adopted by The Institute of Chartered Accountants of Pakistan
which are |
|
| applicable
to the Company. |
|
|
| Following
accounting policies have been consistently applied in preparation of
accounts: |
|
|
| 2.1
ACCOUNTING CONVENTION: |
|
| The
accounts have been prepared under historical cost convention except that
certain fixed assets |
|
| have
been included at revalued amounts. |
|
|
| 2.2
STAFF RETIREMENT BENEFITS: |
|
| The
company operates defined contributory unfunded gratuity scheme for officers
and employees. |
|
| Provision
for gratuity is made on the basis of last drawn salary for each completed
year of service. |
|
| Minimum
qualifying period for gratuity benefit is one year from date of joining.
Gratuity becomes |
|
| payable
on lumpsump basis on the date of retirement or resignation. The Company does
not contribute |
|
| towards
or maintain any pension or provident fund. |
|
|
| 2.3
TAXATION: |
|
| The
company provides for deferred taxation using liability method on all major
timing differences which |
|
| are
expected to reverse in the foreseeable future. However, provision for
deferred taxation for the |
|
| current
year is not considered necessary due to heavy losses. Deferred taxation on
timing differences |
|
| not
accounted for is due to: |
|
|
|
|
|
(Rupees) |
|
|
|
|
|
|
| -
accelerated tax depreciation |
|
6,784,135 |
|
| -
carry forward of business losses |
|
(34,351,343) |
|
|
|
|
------------------ |
|
|
|
|
(27,567,208) |
|
|
========== |
|
|
| In
view of available tax losses, provision for current taxation represents the
minimum tax due under |
|
| Section
80-D of the Income Tax Ordinance, 1979. For the purpose of current taxation,
unassessed |
|
| losses
available for carry forward at September 30,2000 are estimated at Rs.
104,094,978 (1999 :Rs. |
|
| 96,939,396). |
|
|
| 2.4
FIXED ASSETS |
|
|
|
| OWNED |
|
| Operating
fixed assets except freehold land are stated at cost or revalued amounts less
accumulated |
|
| depreciation
except Freehold land which are valued at cost. |
|
|
| Depreciation
is charged on the basis of written down value method whereby cost or revalued
amount |
|
| of
an asset is written off over its useful life without taking into account any
residual value. The full |
|
| annual
rate of depreciation is applied on the cost of additions while no
depreciation is charged on |
|
| assets
disposed off during the year. Minor renewals or replacement, maintenance and
repairs are |
|
| charged
to income as and when incurred. |
|
|
| Major
renewals and repairs are capitalised and the assets so replaced are retired.
Gains or losses on |
|
| disposal
of fixed assets are accounted for as profit or loss for the year. |
|
|
| LEASED |
|
| Plant
and machinery and vehicles are stated at amounts computed on the basis of
discounted value of |
|
| total
minimum lease payment and residual value of the asset at the end of lease
period guaranteed, if |
|
| any,
by the company. Financial charges are allocated to accounting period in the
manner so as to |
|
| provide
a constant periodic rate of charge on the outstanding liability under finance
lease agreement. |
|
|
| Depreciation
charge is based on the estimated useful life of asset in view of the
certainty of the |
|
| ownership
of the asset at the end of the lease. |
|
|
| 2.5
STORES, SPARES AND LOOSE TOOLS |
|
| These
have been valued using moving average cost. |
|
|
| 2.6
STOCK IN TRADE |
|
| Raw
materials are valued at moving average cost. |
|
|
| Work
in process is valued at production cost which includes related portion of
factory wages and |
|
| overheads. |
|
|
| Finished
goods are valued at lower of cost or net realisable value. Net realisable
value signifies |
|
| prevailing
selling price in the ordinary course of business less costs incidental to
sale of goods. |
|
|
| 2.7
INVESTMENTS |
|
| These
are valued at cost less taking any permanent devaluation in the market value
thereof. Dividends |
|
| in
cash are accounted as income on receipt basis whereas bonus dividend is
accounted by increasing |
|
| the
number of shares held. |
|
|
| 2.8
REVENUE RECOGNITION |
|
| Local
sales are recorded on dispatch of goods to customers and export sales are
recorded on |
|
| shipment
of goods. |
|
|
| 2.9
BORROWING COST |
|
| Mark
up, interest and other borrowing cost are charged to income in the year in
which they are incurred |
|
|
| 2.10
FOREIGN CURRENCY TRANSLATIONS: |
|
| Assets
and liabilities in foreign currencies are translated into Rupees at exchange
rates approximating |
|
| those
prevailing at the Balance Sheet date and exchange difference arising from
translation are taken |
|
| to
profit and loss accounts. |
|
|
| 2.11
CASH AND CASH EQUIVALENTS |
|
| For
the purpose of cash flow statement, cash and cash equivalent comprise cash in
hand , cash at |
|
| Banks
and short term investments with maturity of not later than three months at
known amount in |
|
| Rupees. |
|
|
| 2.12
FINANCIAL INSTRUMENTS. |
|
