| Emco Industries Limited |
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| Annual
Report 2000 |
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| Contents |
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| Company
Information |
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| Business Items |
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| Notice
of Meeting |
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| Director's
Report to the Members |
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| Financial
Highlights |
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| Ten
Years at a Glance |
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| Chairman's
Review |
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| Auditors'
Report |
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| Balance Sheet |
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| Profit
and Loss Account |
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| Cash
Flow Statement |
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| Notes
to the Accounts |
|
| Pattern
of Shareholdings |
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| Company
Information |
|
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| Board
of Directors |
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| Mr.
S. A. Mannan, Chairman |
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| Mr.
Tariq Rehman, Chief Executive |
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| Mr. A. Rehman |
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| Mr.
Shafiq A. Siddiqi |
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| Mr. T.M. Sheikh |
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| Mr.
Haris Noorani |
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| Mr.
Suhail Mannan |
|
| Mr.
Tahir Rehman |
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| Mr. Iqbal Shafiq |
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| Mr.
Muhammad Shafiq Gill-ICP Nominee |
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| Auditors |
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| S.A.
Salam & Co. |
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| Chartered
Accountants, |
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| Lahore |
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|
| Bankers |
|
| Habib Bank Ltd. |
|
| United
Bank Ltd. |
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| Standard
Chartered Bank |
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| Emirates
Bank International |
|
| Deutsche
Bank A.G. |
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| American
Express Bank Ltd. |
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| Citibank N.A. |
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| Registered
Office |
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| 2nd
Floor, Emirates Bank Building, |
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| 14-Kashmir-Egerton
Road, |
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| Lahore-54000 |
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| Factory |
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| 19-Kilometre,
Lahore-Sheikhupura Road, |
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| Lahore. |
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| Business
Items |
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| Porcelain
Insulators |
|
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| ·
Suspension Insulator |
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| · Pin Insulator |
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| ·
Line Post Insulator |
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| ·
Cap and Pin Type Support Insulator |
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| ·
Station Post Insulator |
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| ·
Indoor Switch and Bus Insulator |
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| ·
Apparatus Insulator |
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| ·
Insulator for Railway Electrification |
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| ·
Telephone Insulator |
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| ·
Low Voltage Insulator |
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| ·
Dropout Cutout Insulator |
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| · Bushings |
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| Switchgear |
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| ·
Disconnect Switches upto 145 kV |
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| ·
Metal Oxide Surge Arresters upto 430 kV |
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| (Under
Licence from Siemens, Germany) |
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| Chemical
Porcelain |
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| ·
Acid Proof Wares and Bricks |
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| ·
Raschig Rings and Saddles |
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| ·
Acid Proof Porcelain Pipes and Fittings |
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| ·
Acid Proof Cement |
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| Special
Porcelain |
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| ·
Special Refractories |
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| ·
High Alumina Porcelain |
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| ·
Lining & Grinding Media |
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|
| Ceramic
Glazed Wall Tiles |
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| ·
Coloured & Decorative Glazed Wall Tiles |
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| 15
cm x 15 cm x 6 mm |
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| 20
cm x 20 cm x 6 mm |
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| 20
cm x 25 cm x 6 mm |
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|
| Ceramic
Glazed Floor Tiles |
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| ·
Vitreous & Semi Vitreous Decorative Glazed |
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| Floor Tiles |
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| 30
cm x 30 cm x 8 mm |
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| ·
Semi Vitreous Glazed Floor Tiles |
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| 40
cm x 40 cm x 8 mm |
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| ·
Floor and Facing Tiles |
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| 10
cm x 30 cm x 8 mm |
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| Notice
of Meeting |
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| NOTICE
IS HEREBY GIVEN that the 45th Annual General Meeting of the Members of |
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| EMCO
INDUSTRIES LIMITED, will be held on 30th December, 2000 at 11.00 A.M. at the
Registered |
|
| Office
of the Company, 2nd Floor, Emirates Bank Building, 14-Kashmir/Egerton Road,
Lahore, to transact |
|
| the
following business:- |
|
|
| 1.
To confirm the minutes of the last Annual General Meeting held on 29th
December, 1999. |
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|
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| 2.
To consider and adopt the Audited Accounts of the Company for the year ended
30th June, 2000 and |
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| reports
of the Auditors and Directors thereon. |
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|
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| 3.
To appoint Auditors and fix their remuneration. |
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|
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| 4.
To consider and if thought fit to pass the following resolution as a special
resolution: |
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| RESOLVED
that the following clause be and is hereby incorporated in the Memorandum of |
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| Association
of the Company. |
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|
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| "To
borrow or raise or get financial facilities and services from banks and
financial or other |
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| Institutions
or secure the payment of moneys in such a manner as the Company shall think
fit, by the |
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| issue
of debentures or debenture stock perpetual or otherwise charged upon all or
any of the |
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| Company's
property both present and future including its uncalled capital and to
purchase, redeem |
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| or
pay off any such securities and to provide security, guarantee, mortgage,
pledge, hypothecation |
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| and
whatever is agreed upon with the lender or bank or financial or other
institution for any facility |
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| or
accommodation". |
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| The
above addition is subject to the approval of the Securities and Exchange
Commission of |
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| Pakistan,
Islamabad. |
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By order of the Board |
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|
(HARIS NOORANI) |
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| Lahore:
December 02, 2000 |
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DIRECTOR CORPORATE AFFAIRS |
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| NOTES: |
|
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| i)
The Shares Transfer Books of the Company will remain closed and no transfer
of Shares will be |
|
| accepted
for registration from 23rd December, 2000 to 30th December, 2000 (both days
inclusive). |
|
|
| ii)
A member entitled to attend and vote at the General Meeting may appoint
another member as his/her |
|
| proxy
to attend and vote instead of him/her at the meeting. Proxies must be
deposited at the |
|
| Company'
s Registered Office not less than forty eight hours before the time of
holding the meeting. |
|
| Form
of proxy is enclosed. |
|
|
| iii)
Members are requested to notify immediately the change of address, if any. |
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|
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| Directors'
Report |
|
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| The
Board of Directors is pleased to present the 45th Annual Report of EMCO Industries Limited for the |
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| year
ended June 30, 2000 |
|
|
| Financial
Results |
|
Rupees |
|
|
|
|
| Net
loss for the year after taxation |
|
(148,382,543) |
|
| Prior
Year Adjustment |
|
1,731,813 |
|
| Unappropriated
loss brought forward |
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|
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| from prior year |
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|
(204,615,519) |
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------------------ |
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| Unappropriated
loss carried forward |
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(351,266,249) |
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|
========== |
|
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| Pattern
of Holding of Shares |
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| A
statement showing the pattern of holding of shares in the Company as on June
30, 2000 appears |
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| on page 37. |
|
|
| Auditors |
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| The
retiring auditors, Messrs. S.A. Salam & Co, being eligible, offer
themselves for re-appointment. |
|
|
| Chairman's
Review |
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| The
accompanying Chairman's review deals with the performance of the Company
during the year and the |
|
| future
outlook. The Directors endorse the contents of the review. |
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|
On behalf of the Board of Directors |
|
|
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|
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|
TARIQ REHMAN |
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| Lahore:
December 02, 2000 |
|
(Chief Executive) |
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| FINANCIAL
HIGHLIGHTS |
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|
|
June 30, |
June 30, |
|
|
|
2000 |
1999 |
|
|
| Net Sales |
|
Rs. in Million |
489 |
480 |
|
| Profit/(Loss)
before tax |
|
Rs. in Million |
(142.86) |
(143.90) |
|
| Income Tax |
|
Rs. in Million |
5.5 |
2.4 |
|
| Profit
/ (Loss) after tax |
|
Rs. in Million |
(148.38) |
(146.30) |
|
| Earning
Per Share |
|
Rs. |
(9.68) |
(9.57) |
|
| No.
of Shares Outstanding |
|
(000's) |
15,333 |
15.33 |
|
| Taxes & Duties |
|
Rs. In
Million |
92* |
84* |
|
|
|
|
| *
For details see Note 32 to the Accounts |
|
|
| APPLICATION
OF REVENUE |
|
|
Rupees |
|
|
|
In Million |
% |
|
|
|
|
| Material
Services & Utilities |
|
345 |
57.02 |
|
| Depreciation |
|
47 |
7.77 |
|
| Taxes & Duties |
|
92 |
15.21 |
|
| Salaries |
|
121 |
20 |
|
|
|
------------------ |
------------------ |
|
|
|
605 |
100% |
|
|
========== |
========== |
|
|
|
|
|
| TEN
YEARS AT A GLANCE |
|
|
|
|
2000 |
1999 |
1998 |
1997 |
1996 |
1994 |
1993 |
1992 |
1991 |
1990 |
|
|
18 Months |
|
|
|
|
| (Rupees
in Million) |
|
|
|
|
| Net Total Sales |
|
489 |
480 |
307 |
490 |
791 |
462 |
348 |
417 |
296 |
238 |
| Exports |
|
86 |
78 |
50 |
50 |
44 |
31 |
20 |
8 |
17 |
23 |
| Employees
Costs |
121 |
114 |
76 |
126 |
183 |
103 |
85 |
81 |
65 |
53 |
| Profit/(Loss)
before tax |
(143) |
(144) |
(63) |
(20) |
38 |
23 |
15 |
25 |
17 |
26 |
| Profit/(Loss)
after tax |
(148) |
(146) |
(64) |
(23) |
54 |
21 |
23 |
15 |
14 |
23 |
| Earning
per share |
(9.68) |
(9.55) |
(5.58) |
(2.25) |
8.97 |
3.45 |
5.83 |
3.78 |
3.54 |
5.74 |
| Capital
Expenditure |
0.30 |
2 |
255 |
29 |
102 |
28 |
15 |
61 |
84 |
84 |
| Cash
Dividend Rate |
-- |
-- |
-- |
-- |
20.0% |
17.5% |
17.5% |
15.0% |
15.0% |
20.0% |
| Stock
Dividend Rate |
-- |
-- |
-- |
15% |
-- |
-- |
-- |
-- |
-- |
-- |
| Shareholders'
Equity |
(68) |
79 |
187 |
251 |
213 |
172 |
159 |
99 |
89 |
81 |
|
|
| CHAIRMAN'S
REVIEW |
|
|
| On
behalf of the Board of Directors I welcome you to the 45th Annual General
Meeting of the Company |
|
| and
present before you the Annual Report and Financial Statements for the year
ended 30th June, 2000. |
|
|
| During
this year your Company has suffered a loss after tax amounting to Rs. 148.382
million as compared |
|
| to
a loss of Rs. 146.358 million last year. Included in the loss is an amount of
Rs. 23.332 million (1999; Rs. |
|
| 23.332
million) on account of carried forward Trial Run losses and deferred amount
of Golden Hand Shake |
|
| which
was capitalized in the year 1997-98 for writing off in the subsequent years.
The Company is |
|
| suffering
losses for the last four years resulting in serious cash flow problems. |
|
|
| Despite
15% increase in the production of Wall Tile, EMCO has not been able to
minimize losses in this |
|
| division.
The net sales of this division has decreased by 12.5%. About 80% of the total
accounting losses of |
|
| the
Company are due to the Wall Tile Plant which can be attributable to
inadequate working capital lines, |
|
| shut
down of Spray Dryer Machine in the month of May & June 2000, lower
recoveries of biscuits and |
|
| unfavorable
quality mix. Higher depreciation and financial charges owing to expansion
with no matching |
|
| revenue
are also one of the major reasons for losses in this division. |
|
|
| Prices
increase in local as well as imported raw materials and rising trend of
inflation also contributed in |
|
| increasing
the product cost. Due to the tough market competition the corresponding
increase in the selling |
|
| price
was not possible. |
|
|
| However,
the operating results of Insulator Division and Floor Tile Division have
shown improvement |
|
| which
is enumerated below: |
|
|
| *
The operating results of the Insulator Plant are very encouraging and showing
better performance |
|
| every
year. There has been Rs. 20.175 million (12%) increase in the net sales as
compared to last |
|
| year.
Average monthly production also increased during the year to 171 ton, from
145 ton last year |
|
| thus
increasing the profit from operation of this division from Rs. 8.286 million
to Rs. 14.694 |
|
| million
i.e. an increase of about 77%. Keeping in view the increase in orders from
WAPDA, upward |
|
| trend
in export business, good production & sales performance in the subsequent
period and |
|
| adequate
orders in hand, it is expected that this division will earn accounting profit
in the |
|
| year 2000-01. |
|
|
|
| *
The Floor Tile division has also shown improvement in its production and net
sales. The production |
|
| of
this division has gone up by 12% and net sales by 6%. Owing to increase in
production with |
|
| favourable
product mix, the profit from operation of this division has increased from
Rs. 16.142 |
|
| million
to Rs. 23.792 million i.e. an increase of 47%. EMCO has never suffered cash
losses in this |
|
| division
during last three years crises time and there is a potential to maximise
profit by increasing |
|
| production
with good quality mix in this division. |
|
|
|
| Despite
such huge losses the management is still committed with the Company and
trying its level best to |
|
| bring
it out of crises which is evident from the following:- |
|
|
| *
All the cash losses suffered during the period under view have been financed
by the Sponsors by |
|
| injecting
additional funds and without increasing bank borrowings of the company. |
|
|
|
|
| *
On request from your company the AMEX led consortium has agreed in principle
to reschedule the |
|
| Long
Term Loan of Rs. 172 million with appreciable reduction in the mark up rates.
This will result |
|
| in
substantial saving in the financial charges. All the terms & conditions
of the restructing have been |
|
| verbally
agreed and the consortium members are in the process of getting approvals
from their |
|
| respective
Head Offices. The legal documentation of this rescheduling is expected to be
completed |
|
| by
31st, January, 2001. |
|
|
| *
A working capital facility of Rs. 30 million was also restructed with
Emirates Bank International |
|
| according
to which this facility was converted into Long Term Loan for the period of
five years. The |
|
| monthly
installment of this loan is Rs. 500,000 per month. The payment of this loan
has already |
|
| started
since April 2000. Mark-up rate on this loan for the entire loan period has
been agreed at 9% |
|
| per annum. |
|
|
|
|
|
|
| *
Your company is also negotiating with four major leasing companies i.e. ORIX,
NDLC, ATLAS and |
|
| SAUDI
PAK to get extension in the lease period and reduction in the mark-up rates.
There has been |
|
| a
favourable response from these companies. We hope to finalize all terms and
conditions of the |
|
| rescheduling
by 31st, January, 2001. |
|
|
|
| *
The company has adequate 6rders in hand to achieve profitable results in the
Insulator division. The |
|
| production
performance of all the three divisions during the period from July to
November 2000 is |
|
| better
as compared to the correspondence period. In the presence of working capital
constraints a |
|
| production
strategy has been finalised based on which more emphasis will be given to the
production |
|
| of
Insulators and Floor Tile to generate more funds. In the Wall Tile Plant
production of only those |
|
| sizes
will be made which can give good product mix and better recoveries even if
plant operates at |
|
| below
rated capacity. We are hopeful to reduce accounting losses substantially in
the year 2000-01. |
|
|
| *
Some cost saving measures were also taken during the year by virtue of which
Marketing |
|
| Department
in Lahore was merged with Head Office. |
|
|
| SUBSEQUENT
EVENTS |
|
| No
material changes or commitments effecting financial position of the company
have taken place between |
|
| the
end of the financial year and the date of this report. |
|
|
| MILLENNIUM
BUG |
|
| No
computer operational problems relating to year 2000 were faced a compliance
certificate from the |
|
| Software
consultants was received well in time. |
|
|
| EMPLOYEES
RELATIONS |
|
| The
Management would like to place on record the positive attitude and
co-operation of the employees |
|
| during
the difficult phase, the Company is passing through. The Company has during
this period faced |
|
| acute
cash flow problems and the employees have shown their loyalty to the
organization by cutting costs |
|
| wherever
possible. |
|
|
| FUTURE LOOK |
|
| Keeping
in view the financial results of the Company, it appears that next two years
are going to be |
|
| difficult
during which Company is likely to tide over its cash flows to honour its
financial obligations. The |
|
| Insulator
and Floor Tile Divisions are doing well and it is expected that these
divisions will continue to |
|
| show
substantial improvement in financial results during year 2000-01. Efforts are
being made to minimize |
|
| the
losses of Wall Tile by producing different sizes of Wall Tile and improving
recoveries and product mix. |
|
|
| ACKNOWLEDGEMENT |
|
| I
take this opportunity to place on record the dedication of the employees and
staff during the difficult |
|
| period.
I would also like to thank our customers and dealers, who have reposed
confidence in the products |
|
| supplied
to them and would like to re-affirm the Company's pledge to continue "To
Provide Quality |
|
| Products
and Services to the Satisfaction of Customers". I also thank bankers and
leasing companies for |
|
| their
co-operation and standing behind us in this difficult time and hope they will
continue their support in |
|
| coming years. |
|
|
|
|
|
S. A. MANNAN |
|
| Lahore:
December 2, 2000. |
|
(Chairman) |
|
|
|
| Auditors'
Report to the Members |
|
|
| We
have audited the annexed Balance Sheet of EMCO Industries
Limited as at June 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 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 statements. 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 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 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 the Statement of
Changes in |
|
| equity
together with the notes forming part thereof conform with approved accounting
standard 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
June 30, 2000 and of the loss, its cash flows 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. |
|
|
|
|
|
S. A. SALAM & CO., |
|
| Lahore:
December 02, 2000 |
|
Chartered Accountants. |
|
|
|
| BALANCE
SHEET AS AT JUNE 30, 2000 |
|
|
|
|
Note |
June 30, |
June 30, |
|
|
|
|
2000 |
1999 |
|
|
|
|
Rupees |
Rupees |
|
| SHARE
CAPITAL AND RESERVES |
|
|
| Authorised
capital |
|
| 25,000,000
ordinary shares of Rs. 10 each. |
|
250,000,000 |
250,000,000 |
|
|
|
|
|
========== |
========== |
|
|
|
|
|
|
|
|
| Issued,
subscribed and paid up capital |
3 |
153,333,330 |
153,333,330 |
|
|
| Reserves
and unappropriated loss |
4 |
(221,367,723) |
(74,716,993) |
|
|
|
|
|
------------------ |
------------------ |
|
|
|
|
|
(68,034,393) |
78,616,337 |
|
|
|
| SURPLUS
ON REVALUATION OF LAND |
5 |
18,830,530 |
18,830,530 |
|
| SUBORDINATED
LOAN |
|
6 |
127,388,660 |
63,400,000 |
|
|
|
|
|
| LONG
TERM AND DEFERRED LIABILITIES |
|
| Long term loans |
|
7 |
166,040,117 |
194,437,500 |
|
| Liabilities
against assets subject to finance lease |
8 |
42,115,370 |
62,523,056 |
|
| Deferred
liabilities |
|
9 |
6,713,348 |
13,730,524 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
214,868,835 |
270,691,080 |
|
|
|
| CURRENT
LIABILITIES |
|
| Short
term finances - Secured |
|
10 |
310,165,142 |
342,476,290 |
|
| Loan
from associated company - Unsecured |
|
-- |
3,200,000 |
|
| Current
maturity of long term loans |
7 |
75,351,540 |
35,319,347 |
|
| Current
maturity of liabilities against |
|
|
|
| assets
subject to finance lease |
|
8 |
33,295,424 |
21,420,407 |
|
| Current
maturity of deferred import levies |
9 |
2,392,469 |
2,392,469 |
|
| Creditors,
accrued and other liabilities |
11 |
177,631,556 |
125,092,025 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
598,836,131 |
529,900,538 |
|
| CONTINGENCIES
& COMMITMENTS |
12 |
-- |
-- |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
891,889,763 |
961,438,485 |
|
|
========== |
========== |
|
|
| Auditors'
report to the members of even date annexed hereto. |
|
|
| Lahore:
December 02, 2000. |
|
|
| TANGIBLE
FIXED ASSETS |
|
| Operating
assets |
|
13 |
361,840,110 |
397,648,869 |
|
| Assets
subject to finance lease |
|
14 |
63,422,250 |
74,720,073 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
425,262,360 |
472,368,942 |
|
| DEFERRED
EXPENSES |
|
15 |
65,986,102 |
87,610,671 |
|
| LONG
TERM LOANS AND DEPOSITS |
16 |
1,067,422 |
933,653 |
|
|
|
|
|
|
| CURRENT
ASSETS |
|
|
|
| Stores,
spares and loose tools |
|
17 |
41,815,370 |
47,188,816 |
|
| Stock-in-trade |
|
18 |
195,337,480 |
182,546,935 |
|
| Trade debts |
|
19 |
98,227,884 |
106,368,829 |
|
| Advances,
deposits, prepayments |
|
|
| and
other receivables |
|
20 |
59,253,105 |
63,561,853 |
|
| Cash
and bank balances |
|
21 |
4,940,040 |
858,786 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
399,573,879 |
400,525,219 |
|
|
------------------ |
------------------ |
|
|
|
891,889,763 |
961,438,485 |
|
|
========== |
========== |
|
|
| The
annexed notes form an integral part of these accounts. |
|
