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Fauji Fertilizer Company Limited
Annual Report 2000
CONTENTS
Ten Years at a Glance
Company Information
Notice of Meeting
Report of the Directors
Auditors' Report to the Members
Balance Sheet
Profit And Loss Account
Cash Flow Statement
Statement of Changes in Equity
Notes to the Accounts
Pattern of Shareholding
COMPANY INFORMATION
Board of Directors Lt Gen Muhammad Maqbool (Retd), HI(M), SBt
Chairman
Lt Gen Amjad Shuaib (Retd), HI(M)
Chief Executive & Managing Director
Dr Haldor Topsoe
Mr. Qaiser Javed
Brig Muhammad Saeed Baig (Retd)
Brig Ghulam Hussain (Retd)
Brig Ashfaq Ahmad (Retd)
Brig Muhammad Akram Ali Khan (Retd)
Mr. Istaqbal Mehdi
Dr Amjad Waheed
Mr. Abdul Hafeez Chaudhry
Mr. Badr-Ud-Din Khan
Mr. Zaigham Mahmood Rizvi
Secretary Brig Muhammad Akram Khan (Retd)
Registered Office 93-Harley Street, Rawalpindi Cantt.
Plantsite Goth Machhi, Sadikabad,
Rahim Yar Khan.
Marketing Division Lahore Trade Centre,
11 Shahrah-e-Aiwan-e-Tijarat,
Lahore.
Karachi Office D-143, Block-4, KDA Scheme - 5,
Kehkashan Clifton,
Karachi.
Auditors A.F. Ferguson & Co.,
Chartered Accountants
NOTICE OF MEETING
Notice is hereby given that the 23rd Annual General Meeting of the Shareholders of Fauji Fertilizer Company Limited will
be held at Pearl Continental Hotel, The Mall, Rawalpindi, on Tuesday June 19, 2001 at 1100 hours to transact the following
business:-
Ordinary Business
1. To confirm the minutes of the 22nd Annual General Meeting held on June 22, 2000.
2. To receive, consider and adopt the Audited Accounts of the Company together with the Auditors' and the Directors'
  Reports for the year ended December 31, 2000.
3. To appoint Auditors for the year 2001 and to fix their remuneration.
4. To approve payment of Final Dividend for the year ended December 31,2000 as recommended by the Board of
Directors.
5. To transact any other business with the permission of the Chairman.
By Order of the Board,
Rawalpindi Brig Muhammad Akram Khan (Retd)
May 29, 2001 Company Secretary
NOTES:
1. The share transfer books of the Company will remain closed from June 05 to June 19, 2001 (both days inclusive).
2. A member of the Company entitled to attend and vote at the Annual General Meeting may appoint a person/
representative as proxy to attend and vote in place of the member at the Meeting. Proxies in order to be effective
must be received at the Company's Registered Office, 93-Harley Street, Rawalpindi not later than 48 hours before
the time of holding the Meeting.
REPORT OF THE DIRECTORS FOR THE YEAR ENDED DECEMBER 31, 2000
* Your directors are pleased to report the audited financial results of Fauji Fertilizer Company Limited for the year 2000,
its 23rd year in business.
* One year ago you were informed about the state of affairs of the Company in the midst of change in the gas pricing
mechanism and it was emphasized that profitability of the Company in the year 2000 may not be as in the past due
to increase in gas prices, inflationary trends and substantial reduction in mark-up rates.
* A comprehensive strategic plan was implemented to deal with the crisis situation and in the course of the ensuing
year, though the profitability has declined compared to last year but we are pleased to report that with the untiring
efforts of the Company employees and implementation of cost control measures, results attained are Alhamadullilah
48% higher than the planned targets. The Company attained 4th position in the Karachi Stock Exchange list of top
25 companies based on 1999 results.
* We have come a long way in developing a strategic vision for FFC as an entity. The Board has focused the Company's
energies on a single goal - to remain the market leader - and deliver value to its customers and farming community
every day through a variety of services and the two group retail products SONA UREA (prilled and granular) and
SONA DAP have emerged as premium brand names in the market.
* The industry struggled with lower sales, higher inventory levels and intense price competition against low cost urea
imports during the first half of the year 2000. Although the situation has considerably improved, the water crisis and
drought conditions are expected to have a negative impact on the overall industry off-take during 2001. High rate of
inflation, poor purchasing power of the growers and insufficient credit facilities coupled with weak agri product prices
are also some of the factors which may affect the growth in fertilizer sales in the coming days. However, based on
the stable supply demand we do not expect much decline in the industry off-take and the situation is expected to
remain stable.
PRODUCTION AND MARKETING
* "Sona" production stood at 1,426 thousand tonnes in 2000 as opposed to 1,461 thousand tonnes in 1999, a drop of
2% due to maintenance turnaround of Expansion Unit. Sales of "Sona" this year were, however, up by 2% and stood
at 1,459 thousand tonnes in 2000 against 1,428 thousand tonnes sold last year. Thus the Company was able to sell
102% of its production in 2000, as opposed to 98% last year.
* The import of urea at a lower price during 1999 and liquidity crunch in agriculture sector had significant impact on the
locally produced Urea fertilizer sales. Despite this, FFC was able to maintain its leadership position with 44% urea market
participation including marketing of FJFC granular urea, which shows an increase of 5% over the last year. During the
year 2000 the Company marketed 2,188 thousand tonnes including 690 thousand tonnes of FJFC products. This was
15% higher than quantity marketed in 1999 and also the highest ever.
* In order to promote balanced fertilizer usage and to impart the latest agriculture technology to the farming community,
field days, farmer meetings and group discussions were undertaken. In addition, FFC continued to provide soil and
water testing facilities through laboratories; 11,800 soil and water samples were analyzed during the year.
* Safety, production, training, environmental protection and total quality management were given top priority as usual.
The Company achieved 14.06 million man-hours of safe operation on December 31,2000 without lost work injury. In
2000, insurance audit was carried out by a leading insurance company of Pakistan and exemplary standards in safety
were recognized.
* Three years certification of our IS0-9002 Quality Management System, through Bureau Varitas Quality International
were completed on November 19, 2000. One surveillance and one internal audit of our Quality Management Systems
were completed successfully during year 2000.
* Technical Training Centre conducted skill improvement courses for staff as usual. Besides these, internship training
of 4-9 weeks was also conducted for engineering students from NUST Rawalpindi, UET Lahore, UET Peshawar and
NFC Multan.
FINANCIAL RESULTS
* The Company earned net profit after tax of Rs. 2,644 million in 2000 as against Rs. 3,087 million for the same period
of 1999 resulting in decline in EPS to Rs.10.31 per participating share as against Rs.12.04 last year. Contribution
to the national ex-chequer in the form of taxes and levies however increased by 11% and the Company contributed
an amount of Rs. 5.2 billion in Government revenues this year which is almost twice the amount of net profit of the
Company and is an all time record.
* The decline in net margins despite higher sales volumes is mainly attributed to increase in gas tariffs and a 15% GST
on all gas used in the manufacturing process. FFC's profitability on account of its more efficient plants, which use
much less fuel as a percentage of total gas consumed, was however less affected as compared to its competitors.
Other Income, a major source of profitability, was maintained at Rs 1 billion level despite reduction in mark-up rates,
which contributed 28% to profit after tax or Rs. 4.3 per share in 2000, on an equity basis, as opposed to 24% earned
last year. The Company follows a strategy of earning through less risky high yielding term deposits and foreign
currency deposits to cushion the blow on profitability, and arrest the declining margins due to incremental production
costs, to some extent.
The important thing to note is that GST has also been levied on fertilizer at the retail level effective April 01,2001. As
the Country's agriculture is suffering from drought conditions the fertilizer industry has committed with the Government
to absorb the incremental effect of GST for the time being so as not to overburden the farming community. As a
consequence, the Company's profit margin next year is estimated to reduce further.
APPROPRIATION OF PROFIT
The net profit for the year is recommended to be appropriated as follows:
Rupees "000"
Net profit after taxation 2,643,913
Un-appropriated profit brought forward 337,805
------------------
Total available for appropriation 2,981,718
Appropriations
Transfer to general reserve 700,000
Dividends on ordinary shares
First interim @ 20% 512,992
Second interim @ 20% 512,992
Third interim @ 20% 512,992
Proposed final @ 20% 512,992
------------------
2,051,968
------------------
2,751,968
------------------
Un-appropriated profit carried forward 229,750
==========
FUTURE PROSPECTS
* Your Company is well positioned to meet the needs of its valued customers and to face competition by offering a
variety of new services and creating customer friendly environment so that it continues to be the industry leader.
Financial and technical strength gives us considerable flexibility and enormous endurance.
* Fertilizer policy remains a key issue; major question being the finalization of pricing mechanism in respect of gas used
as feed stock for production of fertilizer, which is more than 70-75% of total gas used in the manufacturing process.
Immediate gas price escalation as contemplated by the Government may discourage fresh investment which otherwise
is needed to fulfill the expected gap of 2.5 million tonnes between the demand and supply of urea by 2010.
*We are hopeful that the new fertilizer policy would contain guidelines and incentives that encourage fresh investment
in the sector which is badly needed to further expand capacity and fulfill the growing fertilizer demand in the country.
*In view of gas pressure depletion at Mari Gas fields, which has a direct bearing on the plant production, a pilot project
was commissioned in collaboration with other fertilizer companies who are sharing the gas supply from the same
source. Three gas-engine driven small reciprocating compressors were installed to avert and boost pressure loss in
gas transportation to ensure sustained plant load for running at optimum level. Further decision/course of action
regarding Main Compression Project would be taken after reviewing the results of the pilot project which are under
constant observation and data is being collected which will form a basis for the formulation of future strategy.
* To enhance production capacity, feasibility study report of Ammonia and Urea plants revamping (Debottlenecking
Project Phase III of Base Unit) is under review. Final report from Snamprogetti is expected soon.
* The Company is also reviewing opportunities to acquire promising projects which include acquisition of Pak Saudi
Fertilizer Limited through Privatization Commission. In order to meet the future expansion project fundings, Rs. 700
million is being proposed to be transferred to the general reserve this year.
FFC-JORDAN FERTILIZER COMPANY LIMITED (FJFC)
* Un-precedented natural gas price increase, imposition of sales tax on gas, falling international and local fertilizer
prices, dumping of urea in early months of 2000, higher international phosphoric acid prices and non-implementation
of GOP fertilizer policy eroded the profitability of FJFC project.
* The Government has now indicated adherence to its commitment to supply natural gas as per stipulated requirement
and we are hopeful that compensation package in respect of US$ 250 floor price per tonne DAP, as committed under
1989 Fertilizer Policy would also soon be approved.
* The sponsors of FJFC namely Fauji Fertilizer Company Limited, Fauji Foundation and Jordan Phosphate Mines
Company Limited have given an undertaking to a Lender of FJFC through an agreement to provide funding in the
form of loan or additional equity to the extent of deficiency notified by the lender. This provision has so far not been
invoked.
In line with the requirements of International Accounting Standards the accounting policy for valuation of investment
in associated company has been revised from cost method to fair value method. The change in accounting policy has
resulted in decrease in the carrying value of investment in FJFC by Rs. 286 million, with the corresponding decrease
in equity of the Company.
EMPLOYEES' RELATIONS AND SOCIAL WELFARE
* During 2000, employees' relationship with management were conducive. Due to excellent relations between employees
and management, the Company achieved better results and agreements with Employees Union and Workers Union
for further two years have been amicably concluded.
* The Company is extending full medical facilities to its employees and their families at all locations. At Plant, polio days
were observed and 861 doses were given to the children.
* Schooling facilities are being extended to the children of all employees working at Plantsite. Scholarship scheme for
children studying in higher classes is also available. The Company continued to financially support the Government
school adjacent to the plant for the children of surrounding localities.
PATTERN OF SHAREHOLDING
As of December 31, 2000 there were 4,365 shareholders including individuals and numerous institutions, as described
in the appended pattern of shareholding.
AUDITORS
The present auditors Messrs. A.F. Ferguson & Co., Chartered Accountants retire at the conclusion of the 23rd Annual General
Meeting and being eligible, have offered themselves for reappointment.
CONCLUSION
* The Board places on record, its appreciation for the advice and valuable services rendered by Mian Mumtaz Abdullah,
Mr. Waseem Mehdi Syed and Mr. Adnan Ahmad Ali, each of whom has contributed significantly to the fortunes of the
Company. We are profoundly grateful for their contributions. The Board also takes the opportunity to welcome Mr.
Zaigham Mahmood Rizvi and Mr. Badr-uddin-Khan who replaced the retiring directors.
* On behalf of the Board, I would like to express our thanks and appreciation for the efforts put in by the management
and staff employees of the Company in maintaining the high standards of performance. We are fully aware of their
hard work and dedication and equally confident that, in the new century, their value will be rewarded.
We thank our business partners and our suppliers who have continued to work closely with the Company, a critical
element of success. And finally, to our shareholders and customers, thank you for your continued support. My colleagues
and I believe that with difficult decisions behind us, the Board is in full control and Fauji Fertilizer Company is poised
to surge ahead into the next century.
For and on behalf of the Board
CHAIRMAN
Rawalpindi Lt. Gen. (Retd.)
May 16, 2001 Muhammad Maqbool
AUDITORS' REPORT TO THE MEMBERS
We have audited the annexed balance sheet of Fauji Fertilizer Company Limited as at December 31, 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 except for the change as stated in note
2.5 with which we concur;
(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 December 31, 2000 and of the profit,
its cash flows and changes in equity for the year then ended; and
(d) in our opinion Zakat deductible at source under the Zakat and Ushr Ordinance, 1980 (XVIII of 1980), was
deducted by the Company and deposited in the Central Zakat Fund established under section 7 of that
Ordinance.
Islamabad A.F. Ferguson & Co.
May 16, 2001 Chartered Accountants
BALANCE SHEET AS AT DECEMBER 31, 2000
Note 2000 1999
(Rupees '000)
SHARE CAPITAL AND RESERVES
Share capital
Authorised 3 3,000,000 3,000,000
========== ==========
Issued, subscribed and fully paid 3 2,564,959 2,564,959
Capital reserve 4 160,000 160,000
Revenue reserves 5 6,144,086 5,837,805
------------------ ------------------
8,869,045 8,562,764
LONG TERM LOANS 6 744,199 1,304,676
DEFERRED TAXATION 7 299,000 474,000
CURRENT LIABILITIES AND PROVISIONS
Current maturity of long term loans 6 536,123 544,960
Short term finances 8 1,650,000 --
Creditors, accrued and other liabilities 9 1,846,740 1,320,310
Taxation - net 511,858 509,906
Dividend payable 512,992 --
Proposed dividend 512,992 1,025,984
------------------ ------------------
5,570,705 3,401,160
CONTINGENT LIABILITIES AND COMMITMENTS 10
------------------ ------------------
15,482,949 13,742,600
========== ==========
The annexed notes form an integral part of these accounts.
FIXED CAPITAL EXPENDITURE
Fixed assets 11 2,307,489 3,072,825
Capital work in progress 12 12,207 4,919
------------------ ------------------
2,319,696 3,077,744
LONG TERM INVESTMENTS 13 3,406,301 3,211,774
LONG TERM LOANS AND ADVANCES 14 34,038 27,094
LONG TERM DEPOSITS, PREPAYMENTS
AND DEFERRED COSTS 15 161,530 159,224
CURRENT ASSETS
Stores and spares 16 1,242,718 1,144,874
Stock in trade 17 67,916 140,823
Trade debts 18 769,120 704,869
Loans, advances, deposits, prepayments
and other receivables 19 989,997 520,063
Short term investments 20 4,825,040 3,485,376
Cash and bank balances 21 1,666,593 1,270,759
------------------ ------------------
9,561,384 7,266,764
------------------ ------------------
15,482,949 13,742,600
========== ==========
Chairman Chief Executive Director
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED DECEMBER 31, 2000
Note 2000 1999
(Rupees '000)
Sales 22 10,201,319 10,463,079
Less: Cost of goods sold 23 5,600,997 5,182,155
------------------ ------------------
GROSS PROFIT 4,600,322 5,280,924
Less: Selling and distribution expenses 24 843,231 878,247
Financial charges 25 333,124 438,836
------------------ ------------------
1,176,355 1,317,083
------------------ ------------------
3,423,967 3,963,841
Other income 26 1,089,623 1,094,823
------------------ ------------------
4,513,590 5,058,664
Other charges 27 323,677 359,388
------------------ ------------------
NET PROFIT BEFORE TAXATION 4,189,913 4,699,276
Provision for taxation 28 1,546,000 1,612,000
------------------ ------------------
NET PROFIT AFTER TAXATION 2,643,913 3,087,276
Unappropriated profit brought forward 337,005 302,497
------------------ ------------------
Profit available for appropriation 2,981,718 3,389,773
APPROPRIATIONS:
Transfer to general reserve 700,000 1,000,000
Dividends:
First interim @ 20% (1999: 20%) 512,992 512,992
Second interim @ 20% (1999: 20%) 512,992 512,992
Third interim @ 20% (1999: Nil) 512,992 --
Proposed final @ 20% (1999: 40%) 512,992 1,025,984
------------------ ------------------
2,051,968 2,051,968
------------------ ------------------
2,751,968 3,051,968
------------------ ------------------
UNAPPROPRIATED PROFIT CARRIED FORWARD 229,750 337,805
========== ==========
(Rupees)
Earnings per share 29 10.31 12.04
========== ==========
The annexed notes form an integral part of these accounts.
Chairman Chief Executive Director
CASH FLOW STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2000
Note 2000 1999
(Rupees '000)
CASH FLOWS FROM OPERATING ACTIVITIES
Cash generated from operations 32 4,823,938 3,714,788
Payments for:
Financial charges (349,248) (622,548)
Income tax (1,719,048) (2,084,121)
------------------ ------------------
Net cash provided by operating activities 2,755,642 1,008,119
CASH FLOWS FROM INVESTING ACTIVITIES
Fixed capital expenditure (135,508) (159,356)
Sale proceeds of fixed assets 10,267 10,813
Income received on loans, deposits and investments 913,731 905,607
(including mark up received from an associated company)
(Increase)/decrease in investments (1,698,181) 1,540,433
Revolving credit facility to an associated company (700,000) --
Decrease/(increase) in balance due from associated company 210,266 (52,047)
------------------ ------------------
Net cash (used in)/from investing activities (1,399,425 2,245,450
CASH FLOWS FROM FINANCING ACTIVITIES
Short term finances 1,650,000 --
Repayment of long term loans (546,028) (808,755)
Dividends paid 2,067,313) (2,321,100
------------------ ------------------
Net cash used in financing activities (963,341) (3,129,855)
------------------ ------------------
Net increase in cash and cash equivalents 392,876 123,714
Cash and cash equivalents at beginning of the year 1,270,759 1,147,235
Effect of exchange rate changes 2,958 (190)
Cash and cash equivalents at close of the year, representing ------------------ ------------------
cash and bank balances 21 1,666,593 1,270,759
========== ==========
The annexed notes form an integral part of these accounts.
Chairman Chief Executive Director
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED DECEMBER 31, 2000
Share Capital General Fair value Unappropriated Total
capital reserve reserve adjustment profit
(Rupees '000)
Balance at December 31, 1998 2,564,959 160,000 4,500,000 -- 302,497 7,527,456
Net profit for the year ended December 31, 1999 -- -- -- -- 3,087,276 3,087,276
Transfer to general reserve -- -- 1,000,000 -- (1,000,000) --
Dividends -- -- -- -- (2,051,968) (2,051,968)
------------------ ------------------ ------------------ ------------------ ------------------ ------------------
Balance at December 31, 1999 2,564,959 160,000 5,500,000 -- 337,805 8,562,764
Net profit for the year ended December 31, 2000 -- -- -- -- 2,643,913 2,643,913
Adjustment arising from remeasurement to fair
value of investment in associated company -- -- -- (285,664) -- (285,664)
Transfer to general reserve -- -- 700,000 -- (700,000) --
Dividends -- -- -- -- (2,051,968) (2,051,968)
------------------ ------------------ ------------------ ------------------ ------------------ ------------------
Balance at December 31, 2000 2,564,959 160,000 6,200,000 (285,664) 229,750 8,869,045
========== ========== ========== ========== ========== ==========
The annexed notes form an integral part of these accounts.
Chairman Chief Executive Director
NOTES TO THE ACCOUNTS FOR THE YEAR ENDED DECEMBER 31, 2000
1. STATUS AND NATURE OF BUSINESS
The Company is a public company incorporated in Pakistan under the Companies Act, 1913, (now Companies
Ordinance, 1984) and its shares are quoted on the stock exchanges in Pakistan. The principal activity of the Company
is manufacturing, purchasing and marketing of fertilizers, including investment in other fertilizer manufacturing operations.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.1 Basis of preparation
These accounts have been prepared under the historical cost convention and in accordance with Companies
Ordinance, 1984 and International Accounting Standards as applicable in Pakistan.
2.2 Retirement benefits
The Company has the following plans for its employees:
a) Defined benefit funded gratuity for all employees who complete qualifying period of service and age.
b) Defined contributory provident fund for all employees for which contributions are charged to income.
c) Defined benefit funded pension for management employees who complete qualifying period of service and age.
These funds are administered by trustees. Annual contributions to the gratuity and management staff pension
funds are based on actuarial valuation using a projected unit credit method, related details of which are given
in note 31 to the accounts. All contributions are charged to income for the year.
The Company has the policy to encash accumulated compensated absences of its employees in accordance
with respective entitlement on cessation of service; related expected cost thereof has been included in the
accounts.
2.3 Taxation
Provision for current taxation is based on taxable income at the current rates of taxation after taking into account
tax credits and tax rebates, if any.
The Company accounts for deferred tax in respect of all major inter-period timing differences using the liability
method at the current rates of taxation.
2.4 Fixed capital expenditure
Fixed assets, except freehold land, are stated at cost less accumulated depreciation. Freehold land and capital
work in progress are stated at cost.
Depreciation is provided on the straight-line method to write off the cost of an asset over its estimated useful
life without taking into account any residual value. Full year's depreciation is charged on normal additions, while
no depreciation is charged on items deleted during the year.
Maintenance and repairs are charged to income as and when incurred. Major renewals and improvements are
capitalised and the assets so replaced, if any, are retired. Gains and losses on disposal of assets, if any, are
included in income currently.
2.5 Investments
From the current year, the Company has changed its accounting policy for valuation of investment in associated
company from cost method to fair value method in accordance with requirements of International Accounting
Standards. Under the fair value method such investments are initially recognised at cost and carried at their
fair value at the balance sheet date. Fair value in relation to quoted investment is determined on the basis of
its market value at the balance sheet date. Adjustment arising from remeasurement of investment to fair value
Js reflected through the statement of changes in equity and will be taken to the profit and loss account on disposal
of investment or when the investment is determined to be impaired.
The change in accounting policy has resulted in decrease in the carrying value of investment in associated
company by Rs 285,664 thousand, with a corresponding decrease in equity of the Company.
All other investments are stated at cost.
2.6 Deferred costs
Initial fill of the catalysts in the ammonia plant is capitalised with plant and machinery whereas costs of subsequent
replacement of such catalysts are deferred and amortised in equal installments over their estimated useful lives.
2.7 Stores and spares
These are valued at weighted average cost except for items in transit which are valued at invoice price and
related expenses incurred upto the balance sheet date. For items which are slow moving and/or identified as
surplus to the Company's requirement, a provision is made for excess of book value over estimated realisable
value.
2.8 Stock in trade
Stocks are valued at the lower of cost and net realisable value except for stock in transit which is valued at
invoice price and related expenses incurred upto the balance sheet date.
Cost is determined as follows:
Raw materials at weighted average cost
Work in process at weighted average cost of purchases and
Finished goods applicable manufacturing expenses
2.9 Rates of exchange
Transactions in foreign currencies are recorded in the books at the rates of exchange ruling on the date of the
transaction. Assets and liabilities in foreign currencies at the year end are translated into rupees at the rates
prevailing on the balance sheet date or at the contracted rate where exchange risk cover has been obtained.
Exchange differences are included in the income for the year.
2.10 Revenue recognition
Sales revenue is recognised at the time of despatch of goods to customers.
3. SHARE CAPITAL
AUTHORISED
This represents 300,000,000 (1999: 300,000,000) ordinary shares of Rs 10 each.
ISSUED, SUBSCRIBED AND FULLY PAID IN CASH
This represents 256,495,902 (1999: 256,495,902) ordinary shares of Rs 10 each.
4. CAPITAL RESERVE
2000 1999
(Rupees '000)
Share premium - note 4.1 40,000 40,000
Capital redemption reserve - note 4.2 120,000 120,000
------------------ ------------------
160,000 160,000
========== ==========
4.1 Share premium
This represents premium of Rs 5 per share received on public issue of 8,000,000 ordinary shares in 1991.
4.2 Capital redemption reserve
This represents reserve setup on redemption of preference shares of Rs 120,000 thousand in 1996.
5. REVENUE RESERVES
General reserve 6,200,000 5,500,000
Adjustment arising from remeasurement to fair value of
investment in associated company - note 2.5 (285,664) --
Unappropriated profit 229,750 337,805
------------------ ------------------
6,144,086 5,837,805
========== ==========
6. LONG TERM LOANS - SECURED
Balance outstanding Annual interest Half-yearly equal Date of final
2000 1999 % installments repayment
(Rupees '000) outstanding
Government of Pakistan loan - note 6.1
5th Danish credit 8,703 10,444 8.75 10 October 1, 2005
Loans for plant expansion unit - note 6.2
a) Asian Development Bank
1003-PAK(PS) 193,054 301,765 ADB rate + 1.30 5 January 15, 2003
b) Asian Finance and Investment Corporation
12-PAK(C) 73,240 122,037 LIBOR + 1.25 3 January 15, 2002
c) Commonwealth Development Corporation
L -282801 79,356 119,034 10 4 October 25, 2002
d) American Express Bank Limited
Buyers' credit 925.97 1,296,356 8.30 5 March 28, 2003
------------------ ------------------
1,271,619 1,839,192
------------------ ------------------
1,280,322 1,849,636
Less: Amount payable within twelve
months shown as current maturity 536,123 544,960
------------------ ------------------
744,199 1,304,676
========== ==========
6.1 Government of Pakistan loan
This loan represents the onlent proceeds of credit obtained by the Government of Pakistan from an international
agency.
This loan was disbursed in foreign currency and is repayable in local currency, Disbursements have been
determined for repayment in Rupees by translation at the rates of exchange prevailing on the respective dates
of disbursement. Interest on loan also includes the Government's exchange risk commission. The Loan is
to be secured by a mortgage in favour of the Government of Pakistan over the Company's fixed assets.
6.2 Loans for plant expansion unit
All the loans have been disbursed in foreign currency and have been valued at contracted rates at which
exchange risk cover has been obtained. In case of loan (a) the loan balance includes the adjustment under the
exchange rate pooling system of Asian Development Bank.
Loans (a) to (c) are secured by a first equitable mortgage created on all immovable assets and by way of
hypothecation on assets including plant, machinery, tools and spares and all other movable properties including
stocks and book debts but subject to any prior charge on stocks and book debts in favour of commercial banks
to secure short term debts.
Loan (d) is secured by a bank guarantee which is secured by a first charge by way of equitable mortgage on
all fixed assets of the Company.
7. DEFERRED TAXATION
The net balance for deferred taxation at current tax rate is in respect of following major timing differences:
2000 1999
(Rupees '000)
Accelerated depreciation allowance 341,000 496,000
Provision for slow moving/surplus spares, doubtful debts, other receivables
and short term investments (42,000) (22,000)
------------------ ------------------
299,000 474,000
========== ==========
8. SHORT TERM FINANCES - SECURED
Short term running finance facilities available from various banks under mark-up arrangements amounted to
Rs 2,350,000 thousand (1999: Rs 670,000 thousand) which represented the aggregate of sale prices of all mark-up
agreements between the Company and the banks with a corresponding purchase price, as determined by the banks
subject to prompt payment rebate payable on various maturity dates, last of which falls on June 20, 2001.
These facilities are secured by hypothecation of current assets of the Company and against a lien on Government of
Pakistan Special US Dollar Bonds. The rates of mark-up, net of prompt payment rebates, range from Re 0.284 to Re
0.375 (1999: Re 0.384 to Re 0.450) per Rs 1,000 per day.
9. CREDITORS, ACCRUED AND OTHER LIABILITIES
Creditors 166,410 173,584
Bills payable 53,755 40,263
Accrued liabilities 269,028 241,928
Payable to retirement benefits funds - note 9.1 -- 23,182
Consignment account with an associated company 91,138 84,448
Other liabilities 16,188 14,510
Interest and related charges accrued on secured loans 57,187 63,025
Deposits 38,225 35,283
Retention money 7,256 4,663
Advances from customers 705,376 204,763
Workers' profit participation fund - note 9.2 225,565 252,790
Workers' welfare fund 179,036 128,950
Unclaimed dividend 37,576 52,921
------------------ ------------------
1,846,740 1,320,310
========== ==========
9.1 Payable to retirement benefits funds
Balance at the beginning of the year 23,182 2,989
Expense for the year 52,884 51,020
Payment to Funds during the year (76,066) (30,827)
------------------ ------------------
-- 23,182
========== ==========
9.2 Workers' profit participation fund
Balance at the beginning of the year 252,790 305,478
Interest on funds utilised in Company's business 376 2,376
Allocation for the year 225,565 252,790
Payment to the Fund during the year (253,166) (307,854)
------------------ ------------------
225,565 252,790
========== ==========
10. CONTINGENT LIABILITIES AND COMMITMENTS
(a) Contingent liabilities
(i) Guarantees issued by banks on behalf of the Company 49,212 67,870
(ii) Local currency term deposits and deposit accounts under lien 1,656,000 --
of financial institution and banks against short term finance
facilities availed by an associated company
(iii) Claims against the Company not acknowledged as debt 80,026 79,156
(iv) The Customs authorities had raised demands aggregating
Rs 179 million on import of duty-free first charge catalysts for
the expansion unit. The Company filed a petition on which
the High Court of Sindh gave its decision in favour of the
Company. Consequently no provision for custom duty
demand has been incorporated in the accounts. The Customs
authorities have since filed an appeal with the Supreme Court.
(a) Commitments in respect of:
(i) Capital expenditure 73,823 56,164
(ii) Purchase of fertilizer, stores, spares and other revenue items 399,493 132,912
(iii) Undertakings to a lender to an associated company, FFC-
Jordan Fertilizer Company Limited (FJFC) through an agreement
to provide funding equal to the deficiency notified by the lender,
in the form of sub ordinated long term loan or by subscription
to additional equity. No deficiency has been notified upto the
balance sheet date. -- --
Year
(iv) Leased premises 2001 16,690 5,004
2002 3,893 419
2003 677 --
11. FIXED ASSETS
11.1 The following is a statement of operating assets
WRITTEN
COST DEPRECIATION DOWN VALUE
As at Additions/ As at As at For the year/ As at As at Annual rate of
January 1, (disposals) December 31, January 1, (on disposals) December 31, December 31, depreciation
2000 2000 2000 2000 2000 % on cost
(Rupees '000)
Freehold land 45,603 59 45,662 -- -- -- 45,662 --
Buildings and
structures on
freehold land 1,030,877 17,727 1,048,604 707,843 61,528 769,371 279,233 5 to 10
Buildings and
structures on
leasehold land 40,000 -- 40,000 36,000 2,000 38,000 2,000 5
Railway siding 26,517 -- 26,517 23,142 1,326 24,468 2,049 5
Plant and machinery 9,836,547 47,389 9,883,733 7,302,838 759,970 8,062,605 1,821,128 10 to 15
(203) (203)
Furniture, fixtures,
office and electrical
equipment 135,205 17,078 146,172 94,006 13,235 101,747 44,425 10 to 15
(6,111) (5,494)
Vehicles 163,923 28,278 176,100 104,039 27,256 118,492 57,608 20
(16,101) (12,803)
Maintenance and
other equipment    369,917 17,258 384,786 308,412 23,904 329,927 54,859 15 to 33 1/3
(2,389) (2,389)
Library books 3,796 431 4,227 3,280 422 3,702 525 30
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------
11,652,385 128,220 11,755,801 8,579,560 889,641 9,448,312 2,307,489
(24,804) (20,889)
========== ========== ========== ========== ========== ========== ========== ==========
1999 11,437,699 241,594 11,652,385 7,703,865 897,281 8,579,560 3,072,825
(26,908) (21,586)
========== ========== ========== ========== ========== ========== ========== ==========
Cost of fixed assets has been shown net of Government grant of Rs 68,164 thousand (1999: Rs 68,164 thousand).
11.2 DETAILS OF FIXED ASSETS SOLD
Book Sale
Description Cost value proceeds
(Rupees'000)
VEHICLES
By Company policy to executives
Mr. Aamir Mahmood Mirza 671 537 539
Mr. Abdul Ghafoor Malik 595 357 407
Mr. Abdul Rehman 684 547 550
Syed Ali Iqtidar 600 360 397
Kazi Ayaz Ahmed 404 -- 159
Mr. Faisal Ahmed Naseem 597 358 393
Dr Mrs. Farzana Khan 465 93 203
Mr. Gulam Qadir Soomro 428 -- 166
Mr. Kazim Raza Jafri 804 322 386
Mr. M. Afzaal Mughal 347 -- 128
Mr. M. Iftikhar Hussain 467 93 197
Mr. Masood Ali 405 -- 161
Brig. (Retd) Mohammad Ajmal 446 88 103
Mr. Muhammad Raza Baig 345 -- 128
Mr. Munawar H. Jafri 543 217 259
Mr. Munir Ahmed Bhutto 492 98 211
Mr. Riaz Ahmed 501 200 260
Mr. Sajid Nazir 214 -- 191
Mr. Saleem Adil Janjua 641 -- 168
Mr. Shahid Hameed 590 -- 123
Mr. Siraj Ahmed 641 -- 168
Mr. Vaseem Khan 344 -- 113
Lt. Gen. (Retd) Ziaullah Khan 849 -- 201
By tender to outsiders
Malik Fateh Khan 390 -- 354
Mr. Mohammad Irfan 190 -- 163
Mr. Muhammad Jamil 618 -- 401
Mr. Muhammad Nasir 590 -- 298
Mr. Muhammad Nasir Khan 369 -- 233
Mr. Muhammad Zahoor 754 -- 763
Mr. Naeem Shahzad 235 -- 196
Mr. Nazar Kiani 190 -- 178
Mr. Raja Yousaf 366 -- 221
Syed Riaz Ahmed 136 27 282
M.Raja Yousaf 190 -- 119
FURNITURE, FIXTURES, OFFICE
AND ELECTRICAL EQUIPMENT
By Company policy to executives
Mr. Abid Maqbool 41 10 13
Mr. Kazim Raza Jafri 185 92 94
Brig. (Retd) Mohammad Ajmal 167 62 69
Mr. S.M. Iqbal Bokhari 25 6 8
Syed Sadiq Ali 37 9 12
Mr. Shaharyar Ahmed 44 37 37
Mr. Shahid Hameed 6 6 6
Mr. Siraj Ahmed 41 16 16
Mr. Tauqeer Hassan 34 9 11
Mr. Vaseem Khan 41 27 28
Mr. Zahid Hussain Butt 42 42 42
Lt. Gen. (Retd) Ziaullah Khan 455 270 261
By tender to Company employees
Mr. Iftikhar Hussain 38 9 4
12. CAPITAL WORK IN PROGRESS
Civil works 2,492 2,146
Plant, machinery and equipment 9,715 2,773
------------------ ------------------
12,207 4,919
========== ==========
13. LONG TERM INVESTMENTS
Associated company
FFC - Jordan Fertilizer Company Limited (FJFC) - at cost 1,002,330 1,002,330
Adjustment arising from remeasurement to fair value (285,664) --
------------------ ------------------
716,666 1,002,330
Others
Term deposits 542,000 1,180,000
Government of Pakistan Special US Dollar Bonds 1,150,812 529,444
Pakistan Investment Bonds 200,000 --
National Savings Certificates 1,000,000 500,000
WAPDA Bearer Bonds -- 300,000
------------------ ------------------
3,609,478 3,511,774
Less: Maturing within twelve months shown
under current assets - note 20
Government of Pakistan Special US Dollar Bonds 203,177 --
WAPDA Bearer Bonds -- 300,000
------------------ ------------------
203,177 300,000
------------------ ------------------
3,406,301 3,211,774
========== ==========
Investment in the associated company represents 100,233,000 (1999: 100,233,000) fully paid ordinary shares
of Rs 10 each representing 30% of FJFC share capital as at December 31,2000. The market value of the Company's
investment as at December 31,2000 was Rs 716,666 thousand (1999: Rs 1,323,076 thousand) and value based on
net assets as per audited accounts as at December 31,2000 was Rs 40,589 thousand (1999: Rs 1,070,835 thousand).
These shares shall not be disinvested or pledged/mortgaged pending repayment of loan to the lender to FJFC referred
to in note 10(b)(iii). However, the Company may pledge upto 50% of it's investment for the purpose of obtaining short
term financing.
Term deposits are with banks and financial institutions for periods ranging from three to five years.
Government of Pakistan Special US Dollar Bonds have been issued for three years. Profit is payable on these bonds
at a rate of 2% above six months LIBOR.
Pakistan Investment Bonds have been issued for 5 to 10 years. Half yearly profit is payable on these bonds at the rates
ranging from 13% to 14% per annum.
National Savings Certificates have been issued for 5 years. Monthly profit is payable on these certificates at the rates
ranging from 14% to 16% per annum.
14. LONG TERM LOANS AND ADVANCES
Loans and advances, considered good, to:
Chief executive 450 --
Executives 38,430 28,054
Other employee 7,505 8,514
FFC-FJFC Employees Trust -- 40,735
------------------ ------------------
46,385 77,303
Less: Amount due within twelve months, shown under current
assets - note 19 12,347 50,209
------------------ ------------------
34,038 27,094
========== ==========
These represent secured loans for house building, house rent advances and advances pursuant to agreement with
workers which are repayable within one to ten years. Loans amounting to Rs 12,808 thousand (1999: 11,004 thousand)
were outstanding for more than three years.
Advance to the chief executive is in respect of house rent advance paid on his behalf and the maximum amount
outstanding at the end of any month during the year was Rs 690 thousand (1999: Rs 158 thousand).
The maximum amount of advances to executives outstanding at the end of any month during the year was Rs
38,430 thousand (1999: Rs 34,477 thousand).
15. LONG TERM DEPOSITS, PREPAYMENTS AND
DEFERRED COSTS
Deposits 1,608 1,623
Prepayments 1,301 --
Deferred costs:
Catalysts 227,141 212,213
Less: amortisation 68,520 54,612
------------------ ------------------
158,621 157,601
------------------ ------------------
161,530 159,224
========== ==========
16. STORES AND SPARES
Stores 64,910 68,037
Spares 1,187,818 1,006,531
Provision for slow moving and surplus items (98,577) (57,641)
------------------ ------------------
1,089,241 948,890
Loose tools 110 116
Items in transit 88,457 127,831
------------------ ------------------
1,242,718 1,144,874
========== ==========
17. STOCK IN TRADE
Raw materials 36,594 29,913
Work in process 9,053 8,010
Finished goods:
Manufactured urea 7,782 102,900
Purchased fertilizers 14,487 --
------------------ ------------------
67,916 140,823
========== ==========
18. TRADE DEBTS
Considered good - secured 740,294 702,099
- unsecured - note 18.1 28,826 2,170
Considered doubtful 2,188 2,188
------------------ ------------------
771,308 707,057
Provision for doubtful debts (2,188) (2,188)
------------------ ------------------
769,120 704,869
========== ==========
18.1 This includes Rs 26,154 thousand (1999: Rs256 thousand) due from Fauji Foundation, an associated
undertaking. The maximum amount outstanding at the end of any month during the year was Rs 26,154 thousand
(1999: Rs 11,040 thousand).
19. LOANS, ADVANCES, DEPOSITS, PREPAYMENTS
AND OTHER RECEIVABLES
Current portion of long term loans and advances 12,347 50,209
Advances to suppliers, considered good 30,723 35,177
Revolving credit facility to an associated company 700,000 --
Due from associated company 2,401 212,667
Margin on letters of credit 14,059 2,788
Deposits 151 162
Prepayments 8,050 13,085
Accrued income on investments and bank deposits 206,592 196,122
Other receivables (net of provision for doubtful receivables of
Rs 6,442 thousand; 1999: Rs 6,442 thousand) 15,674 9,853
------------------ ------------------
989,997 520,063
========== ==========
The Company approved revolving credit facility of an amount not exceeding Rs one billion to an associated company.
The facility is repayable within one year by way of adjustment against sale proceeds of the associated company's
stocks sold by the Company. The facility carries mark up at the rate of return/mark-up payable by the Company for
similar ordinary commercial loans. The maximum amount outstanding at the end of any month during the year was
Rs 800,000 thousand (1999: Nil).
Due from associated company is in respect of expenditure incurred on its behalf carrying mark-up at the rate of 14%
per annum. The maximum amount outstanding at the end of any month during the year was Rs 229,735 thousand
(1999: Rs 700,052 thousand)
20. SHORT TERM INVESTMENTS
Term deposits with banks and financial institutions
Local currency 4,466,000 3,123,430
(net of provision for doubtful recovery Rs 13,000 thousand;
1999: Nil)
Foreign currency 155,863 61,946
Government of Pakistan Special US Dollar Bonds 203,177 --
WAPDA Bearer Bonds -- 300,000
------------------ ------------------
4,825,040 3,485,376
========== ==========
Local currency term deposits include Rs 400,000 thousand (1999: Nil) under lien of a financial institution against
short term finance facility availed by an associated company.
21. CASH AND BANK BALANCES
At banks:
Deposit accounts
Local currency 1,583,287 935,908
Foreign currency 13,829 31,691
Current accounts
Local currency 13,431 70,726
(includes drafts under collection)
Foreign currency 34 1,001
------------------ ------------------
1,610,581 1,039,326
Drafts in hand and in transit 54,862 230,271
Cash in hand 1,150 1,162
------------------ ------------------
1,666,593 1,270,759
========== ==========
Balances with banks include Rs 38,225 thousand (1999: Rs 35,283 thousand) in respect of security deposits received.
Local currency deposit accounts include Rs 1,256,000 thousand (1999: Nil) under lien of banks against short term
finance facilities availed by an associated company.
22. SALES
Sales include Rs 462,478 thousand (1999: Rs 1,003,665 thousand) in respect of sale of purchased fertilizers and are
exclusive of commission and trade allowances of Rs 74,884 thousand and Rs 400,842 thousand respectively (1999:
Rs 75,862 thousand and Rs 598,390 thousand).
23. COST OF GOODS SOLD
Raw materials consumed 1,783,807 1,358,752
Fuel and power 1,327,504 1,101,013
Chemicals and supplies 67,356 78,248
Salaries, wages and benefits 508,869 473,467
Rent, rates and taxes 4,107 4,239
Insurance 19,303 21,357
Technical services 11,425 10,529
Travel and conveyance 23,462 20,556
Repairs and maintenance (includes stores and spares
consumed Rs 208,783 thousand; 1999: Rs 208,852 thousand) 267,677 251,068
Amortisation of deferred costs 68,520 54,612
Depreciation 867,652 874,876
Communication, establishment and other expenses 118,006 108,175
Provision for slow moving and surplus spares 40,936 --
Opening stock - work in process 8,010 3,017
Closing stock - work in process (9,053) (8,010)
------------------ ------------------
Cost of goods manufactured 5,107,581 4,351,899
Opening stock - manufactured urea 102,900 5,187
- purchased fertilizers -- 4,448
Purchase of fertilizers for resale 412,785 923,521
------------------ ------------------
5,623,266 5,285,055
Closing stock - manufactured urea (7,782) (102,900)
                         - purchased fertilizers (14,487) --
------------------ ------------------
5,600,997 5,182,155
========== ==========
24. SELLING AND DISTRIBUTION EXPENSES
Product transportation 533,110 513,191
Salaries, wages and benefits 148,240 166,278
Rent, rates and taxes 26,945 28,192
Insurance 604 1,011
Technical services to farmers 1,345 1,491
Travel and conveyance 17,291 21,229
Sale promotion and advertising 21,588 27,298
Communication, establishment and other expenses 21,210 24,286
Warehousing expenses 57,946 77,374
Depreciation
(net of Rs 7,037 thousand charged to an associated company;
1999: Rs 4,508 thousand) 14,952 17,897
------------------ ------------------
843,231 878,247
========== ==========
25. FINANCIAL CHARGES
Interest and related charges on long term loans 201,586 333,618
Interest on workers' profit participation fund 376 2,376
Mark up on short term finances 140,646 75,855
Exchange (gain)/loss on long term loans (23,286) 25,778
Provision against short term investments 13,000 --
Bank charges 802 1,209
------------------ ------------------
333,124 438,836
========== ==========
26. OTHER INCOME
Income on loans, deposits and investments 728,208 812,136
Income on tax-exempt investments 116,114 114,658
Mark up on revolving credit facility to an associated company 28,338 --
Mark up charged to an associated company on inter company
current account 51,541 26,971
Commission on sale of associated company's products 13,810 7,644
Gain on sale of fixed assets 6,352 5,491
Sale of scrap and sundry income 4,732 9,557
Exchange gain on foreign currency deposits 137,632 117,897
Old liabilities written back 2,896 469
------------------ ------------------
1,089,623 1,094,823
========== ==========
27. OTHER CHARGES
Workers' profit participation fund 225,565 252,790
Workers' welfare fund 95,830 103,727
Auditors' remuneration
Audit fee 900 800
Fee for tax and other advisory services, audit of funds and certifications
for Government and related agencies 1,282 1,971
Out of pocket expenses 100 100
------------------ ------------------
323,677 359,388
========== ==========
28. PROVISION FOR TAXATION
Current - for the year 1,677,000 1,727,000
                - for prior years 44,000 --
------------------ ------------------
1,721,000 1,727,000
Deferred - for the year (225,000) (174,000)
                 - for prior years 50,000 59,000
------------------ ------------------
(175,000) (115,000)
------------------ ------------------
1,546,000 1,612,000
========== ==========
29. EARNINGS PER SHARE
Net profit after tax 2,643,913 3,087,276
========== ==========
(Number in thousand)
Weighted average number of shares in issue during the year. 256,496 256,496
========== ==========
(Rupees)
Basic earnings per share 10.31 12.04
========== ==========
There is no dilutive effect on the basic earnings per share of the Company.
30. REMUNERATION OF CHIEF EXECUTIVE, DIRECTORS AND EXECUTIVES
The aggregate amounts charged in the accounts for the year for remuneration including benefits applicable to the chief
executive, directors and executives of the Company are given below:
2000 1999
Chief Executives Chief Executives
Executive Executive
(Rupees '000) (Rupees '000)
Managerial remuneration 1,702 330,186 1,572 298,082
Retirement benefits 88 43,289 101 43,093
Utilities and upkeep 320 19,087 175 17,546
Travel assistance 156 23,938 130 20,992
Others -- 16,579 -- 10,820
------------------ ------------------ ------------------ ------------------
Total 2,246 433,079 1,978 390,533
========== ========== ========== ==========
No. of persons 1 511 1 491
========== ========== ========== ==========
The above were provided with medical facilities; the chief executive and certain executives were also provided with
use of Company's vehicle and household equipment in accordance with the Company's policy. Leave encashment
of Rs 443 thousand (1999: Nil) to the chief executive and Rs 3,452 thousand (1999: Rs 2,118 thousand) were paid
to executives on separation, in accordance with the Company's policy.
In addition, 12 (1999: 14) directors were paid aggregate fee of Rs 42 thousand (1999: Rs 76 thousand).
31. RETIREMENT BENEFIT COSTS
31.1 "Salaries, wages and benefits" expense stated in notes 23 and 24 include retirement benefits amounts
of Rs 52,884 thousand (1999: Rs 51,020 thousand) in respect of gratuity, provident fund and pension plans.
31.2 Latest actuarial valuation of the gratuity fund was carried out as at December 31, 1999. The fair value of
the fund's assets and liabilities at the latest valuation date were Rs 159,914 thousand and Rs 169,909
thousand respectively. Funding deficit of Rs 9,995 thousand at the valuation date was recognised in the
accounts and paid to the fund. The actuarial valuation was determined assuming expected rate of return
of 14% per annum and expected rate of increase in salary of 12.5% per annum for management and 12%
per annum for non-management employees.
31.3 Latest actuarial valuation of the management staff pension fund was carried out as of January 1, 2000.
The fair value of the fund's assets and liabilities at the latest valuation date were Rs 178,518 thousand
and Rs 179,762 thousand respectively. Transitional obligation on adoption of revised IAS-19 of Rs 1,244
thousand at the valuation date is being recognised in the accounts over a period of three years commencing
from January 1, 1999. The actuarial valuation was determined assuming expected rate of return of 12 %
per annum and expected rate of increase in salary of 12 % per annum.
32. CASH GENERATED FROM OPERATIONS
Profit before taxation 4,189,913 4,699,276
Adjustments for non cash charges and other items
Depreciation
(net of Rs 7,037 thousand charged to an associated company;
1999: Rs 4,508 thousand) 882,604 892,773
Amortisation of deferred costs 68,520 54,612
Provision for slow moving and surplus spares 40,936
Financial charges 333,124 438,836
Income on loans, deposits and investments (924,201) (953,765)
(including mark up charged to an associated company)
Gain on sale of fixed assets (6,352) (5,491)
Exchange gain on foreign currency deposits (137,632) (117,897)
Old liabilities written back (2,896) (469)
------------------ ------------------
254,103 308,599
------------------ ------------------
4,444,016 5,007,875
Changes in working capital
(Increase)/decrease in current assets:
Stores and spares (138,780) (325,638)
Stock in trade 72,907 (103,713)
Trade debts (64,251) (268,056)
Loans, advances, deposits, prepayments
and other receivables 30,270 59,777
Increase/(decrease) in current liabilities:
Creditors, accrued and other liabilities
(excluding accrual of financial charges) 557,546 (657,545)
457,692 (1,295,175)
------------------ ------------------
Changes in long term loans and advances (6,944) 681
Changes in long term deposits, prepayments and deferred costs (70,826) 1,407
------------------ ------------------
4,823,938 3,714,788
========== ==========
33. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES
33.1 Financial assets and liabilities
Interest/Mark-up bearing Non-Interest/Mark-up bearing
Maturity Maturity Maturity Maturity
upto after upto after 2000 1999
one year one year Sub-total one year one year Sub-total Total Total
(Rupees'000)
Financial assets
Investments
- Local currency 4,466,000 1,742,000 6,208,000 -- -- -- 6,208,000 4,603,430
- Foreign currency 359,040 947,635 1,306,675 -- -- -- 1,306,675 1,091,390
Loans and advances 4,198 99,219 97,410 8,149 826 8,975 46,385 77,303
Trade debts -- -- -- 769,120 -- 769,120 769,120 704,869
Deposits -- -- -- 151 1,608 1,759 1,759 1,785
Accrued income on
investments and deposits -- -- -- 206,592 -- 206,592 206,592 196,122
Due from associated
company 2,401 -- 2,401 -- -- -- 2,401 212,667
Revolving credit facility to
an associated company  700,000 -- 700,000 -- -- -- 700,000 --
Other receivables -- -- -- 3,251 -- 3,251 3,251 6,698
Cash and bank balances
- Local currency 1,583,287 -- 1,583,287 69,443 -- 69,443 1,652,730 1,238,067
- Foreign currency 13,829 -- 13,829 34 -- 34 13,863 32,692
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------
7,128,755 2,722,847 9,851,602 1,056,740 2,434 1,059,174 10,910,776 8,165,023
========== ========== ========== ========== ========== ========== ========== ==========
Financial liabilities
Recognised
Long term loans 536,123 744,199 1,280,322 -- -- -- 1,280,322 1,849,636
Short term finances 1,650,000 -- 1,650,000 -- -- -- 1,650,000 --
Creditors, accrued
and other liabilities -- -- -- 722,742 -- 722,742 722,742 720,823
Dividend payable -- -- -- 512,992 -- 512,992 512,992 --
Proposed dividend -- -- -- 512,992 -- 512,992 512,992 1,025,984
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------
2,186,123 744,199 2,930,322 1,748,726 -- 1,748,726 4,679,048 3,596,443
========== ========== ========== ========== ========== ========== ========== ==========
Unrecognised
Guarantees -- -- -- 49,212 -- 49,212 49,212 67,870
Term deposits and deposit
accounts under lien -- -- -- 1,656,000 -- 1,656,000 1,656,000 --
Letters of credit -- -- -- 399,493 -- 399,493 399,493 132,912
Commitments -- -- -- 90,513 4,570 95,083 95,083 87,672
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------
-- -- -- 2,195,218 4,570 2,199,788 2,199,788 288,454
========== ========== ========== ========== ========== ========== ========== ==========
2,186,123 744,199 2,930,322 3,943,944 4,570 3,948,514 6,878,836 3,884,897
========== ========== ========== ========== ========== ========== ========== ==========
33.2 Risk management
(a) Concentration of credit risk
Credit risk represents the accounting loss that would be recognised at the reporting date if counter parties
failed completely to perform as contracted. All the financial assets except cash in hand, are subject to
credit risk. The Company believes that it is not exposed to major concentration of credit risk. To manage
exposure to credit risk, the Company applies credit limits to its customers besides obtaining guarantees
and by dealing with variety of major banks and financial institutions.
(b) Foreign exchange risk management
Foreign currency risk arises mainly where receivables and payables exist due to transaction with foreign
undertakings. Long term loans exposed to foreign currency risks are covered through foreign exchange
risk cover as stated in note 6.2.
(c) Interest rate risk
Financial assets include balances of Rs 9,851,602 thousand (1999: Rs 6,891,894 thousand) which are
subject to interest rate risk. Applicable interest rates for financial liabilities have been indicated in note 6
and 8.
33.3 Fair value of financial assets and liabilities
The carrying values of all financial assets and liabilities reflected in the financial statements approximate
their fair values.
34. GENERAL 2000 1999
(Tonnes '000)
34.1 Production capacity
Design capacity 1,330 1,330
========== ==========
Production 1,426 1,461
========== ==========
34.2 Number of employees
Number of employees at year end 1,547 1,578
========== ==========
34.3 Facilities of letters of guarantee and letters of credit
Facilities of letters of guarantee and letters of credit amounting to Rs 56,320 thousand and Rs 1,126,600
thousand (1999: Rs 36,000 thousand and Rs 470,000 thousand) respectively are available to the Company
under a lien against investments and first charge by way of equitable mortgage on all fixed assets of the
Company.
34.4 Transactions with associated undertakings and related parties
The Company purchased from and sold to associated undertakings and related parties goods, materials and
services in the aggregate sum of Rs 2,985,098 thousand (1999: Rs 2,306,765 thousand) and Rs 250,833
thousand (1999: Rs 168,053 thousand) respectively and charged mark-up of Rs 79,879 thousand (1999: Rs
37,280 thousand).
34.5 Donations
Donations aggregating Rs 235 thousand (1999: Rs 609 thousand), included under cost of goods sold do not
include any amount paid to any person or organisation in which the chief executive, directors or their spouses
had any interest.
34.6 Corresponding figures have been rearranged, where necessary, for the purpose of comparison.
Chairman Chief Executive Director
PATTERN OF SHAREHOLDING AS AT 31 DECEMBER 2000
Number of Shareholding Total Number
Shareholders From To of Shares
207 1 100 20,299
1,863 101 500 860,390
631 501 1,000 605,601
990 1,001 5,000 2,738,200
260 5,001 10,000 2,046,750
93 10,001 15,000 1,231,400
40 15,001 20,000 751,000
27 20,001 25,000 635,400
26 25,001 30,000 738,900
12 30,001 35,000 405,900
19 35,001 40,000 733,400
11 40,001 45,000 470,600
19 45,001 50,000 932,000
5 50,001 55,000 268,300
5 55,001 60,000 288,552
6 60,001 65,000 369,400
4 65,001 70,000 280,000
8 70,001 75,000 598,800
4 75,001 80,000 319,900
3 80,001 85,000 248,100
6 85,001 90,000 533,000
3 90,001 95,000 276,700
10 95,001 100,000 988,600
5 100,001 105,000 515,700
6 105,001 110,000 650,000
3 110,001 115,000 336,600
3 115,001 120,000 356,000
2 120,001 125,000 250,000
2 130,001 135,000 264,700
4 135,001 140,000 551,100
2 140,001 145,000 281,500
4 145,001 150,000 600,000
2 155,001 160,000 320,000
2 165,001 170,000 336,000
2 175,001 180,000 359,000
2 180,001 185,000 367,000
2 195,001 200,000 400,000
3 210,001 215,000 641,200
1 215,001 220,000 220,000
1 220,001 225,000 225,000
1 225,001 230,000 227,850
1 235,001 240,000 238,100
2 250,001 255,000 506,200
1 255,001 260,000 259,700
1 260,001 265,000 263,800
1 270,001 275,000 271,900
1 280,001 285,000 280,600
1 285,001 290,000 288,900
3 290,001 295,000 882,200
1 295,001 300,000 300,000
1 300,001 305,000 301,800
2 330,001 335,000 665,400
1 355,001 360,000 357,500
2 370,001 375,000 745,300
1 375,001 380,000 380,000
3 395,001 400,000 1,200,000
1 420,001 425,000 425,000
1 425,001 430,000 427,000
1 495,001 500,000 496,300
1 530,001 535,000 535,000
1 575,001 580,000 575,700
2 585,001 590,000 1,175,800
1 590,001 595,000 591,000
1 610,001 615,000 614,400
1 625,001 630,000 626,900
1 685,001 690,000 689,200
1 695,001 700,000 700,000
2 710,001 715,000 1,423,200
1 765,001 770,000 770,000
1 800,001 805,000 803,100
1 910,001 915,000 914,600
1 965,001 970,000 965,808
1 995,001 1,000,000 998,600
1 1,015,001 1,020,000 1,016,136
1 1,275,001 1,280,000 1,277,000
2 1,475,001 1,480,000 2,954,900
1 1,505,001 1,510,000 1,507,200
1 1,575,001 1,580,000 1,579,600
2 1,665,001 1,670,000 3,334,208
1 1,800,001 1,805,000 1,803,587
1 2,040,001 2,045,000 2,043,200
1 2,320,001 2,325,000 2,325,000
1 2,425,001 2,430,000 2,428,800
1 2,490,001 2,495,000 2,491,000
1 2,660,001 2,665,000 2,661,200
1 2,770,001 2,775,000 2,770,100
1 3,365,001 3,370,000 3,368,900
1 4,160,001 4,165,000 4,160,500
1 4,815,001 4,820,000 4,820,000
1 5,145,001 5,150,000 5,148,000
1 5,400,001 5,405,000 5,403,900
1 5,910,001 5,915,000 5,914,300
1 6,680,001 6,685,000 6,683,413
1 12,945,001 12,950,000 12,948,999
1 25,785,001 25,790,000 25,788,309
1 111,150,001 111,155,000 111,151,800
------------------ ------------------
4,365 256,495,902
========== ==========
Categories of Shareholders Nos. Ordinary
Shares of %
Rs. 10/Each
1. Charitable Trust:
Fauji Foundation 1
111,151,800 43.33
2. Investment Companies 54
National Investment Trust
Pakistan Kuwait Investment Company (Pvt) Ltd 25,997,809 10.14
Industrialization Fund For Developing Countries (IFU) 17,109,499 6.67
Denmark 7,191,200 2.80
Investment Corporation of Pakistan
Other Investment Companies 7,833,400 3.05
5,872,400 2.30
3. Financial Institutions: 37
Bankers Equity Limited 1,164 --
National Development Finance Corporation 7,053,713 2.75
Pakistan Industrial Development Corporation 1,016,136 0.40
Other Financial Institutions 24,376,693 9.50
4. Foreign Investors: 28 10,909,152 4.25
5. Individuals 4,070 15,195,801 5.92
6. Government of Pakistan 1 1,803,587 0.70
7. Insurance Companies 25 6,980,100 2.72
8. Modaraba Companies 24 1,647,400 0.64
9. Joint Stock Companies 79 7,234,848 2.82
10. Leasing Companies 9 1,093,600 0.44
11. Others 37 4,027,600 1.57
------------------ ------------------ ------------------
Total 4,365 256,495,902 100
========== ========== ==========
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