| Nestle Milkpak Limited |
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| Annual
Report 2000 |
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| Contents |
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| Directors'
Report to the Shareholders |
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| Performance
at a Glance |
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| Notice
of Annual General Meeting |
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| General
Information |
Management |
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Organisation |
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Company Directory |
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Regional Sales Offices |
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| Group History |
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About Nestle S.A. |
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| Business
Review |
Milk Collection |
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Production |
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Marketing |
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Exports |
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| Auditors'
Report |
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| Balance Sheet |
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| Profit
& Loss Account |
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| Cash
Flow Statement |
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| Notes
to the Accounts |
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| Pattern
of Share-holding |
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| Directors'
Report to the Shareholders |
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| The
Directors are pleased to submit their Annual Report |
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| along
with the audited financial statements of the |
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| company
for the year ended December 31, 2000. |
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| OPERATING
RESULTS |
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| The
year 2000 offered no relief from the difficult economic |
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| environment
that had badly impacted the country in 1999. |
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| To
make matters worse, some major disruptions in the |
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| trade
affected our retailing activities over several months |
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| in
the form of strikes against the taxation policies of the |
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| government. |
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| However,
despite this difficult business climate, we can |
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| reasonably
consider the year 2000 as another successful |
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| year
for Nestle Milkpak Ltd. The company achieved a |
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| double-digit
(15.5%) real internal growth for the third |
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| consecutive
year, driven by a strong performance on |
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| our
milks category and by the successful development |
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| of
some more recently launched products: soluble |
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| coffees
and water. |
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| Total
sales for the year reached Rs.6.57 bio. showing a |
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| growth
of 14% over the previous year. After tax profit for the year was stable in
absolute. |
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| terms
at Rs.272.4 mio, owing to the difficulties faced in increasing our consumer
selling |
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| prices
and to a higher effective tax rate. |
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| MARKETING |
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| UHT
milk grew at a faster pace than the industry, mainly due to price stability
and |
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| aggressive
media and non-media activities. |
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| NESTLE
Plain Yogurt was launched on November 1, 2000 in the biggest branded |
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| yogurt
market - Lahore, supported by a fully integrated marketing campaign. The
product |
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| was
very well received by the consumers. |
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| We
continued to expand our water business. While NESTLE PURE LIFE retained its |
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| significant
market share in the retail sector, we launched the Jumbo Service (5-gallon |
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| bottles
for home and office consumption) in July 2000 in Lahore, thereby entering a |
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| very
promising market segment. The results are very positive and the market is |
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| developing fast. |
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| In
addition, significant progress was achieved across the broad range of our
business |
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| activities
such as Information systems, logistics, sales and distribution structure
where |
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| strong
distribution and effective merchandising made a major contribution in
achieving |
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| the
high rate of growth as mentioned above. |
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| MILK
COLLECTION |
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| As
regards fresh milk, the year under review saw excellent progression. The
quantity |
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| of
milk collected increased by over 12%, while the quality improved
considerably, thanks |
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| to
the substantial investments made in chilling lines over the last years. |
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| DIVIDEND |
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| Considering
these satisfactory results and the confidence that it places in the
continuous |
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| development
of this company, the Board of Directors has recommended to pay a final |
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| dividend
of 45% (Rs. 4.50 per share) in addition to the interim dividend of 20% (Rs.
2.00 |
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| per
share) paid in August, 2000. |
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| APPROPRIATIONS |
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Rupees Mio. |
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| Net
profit for the year |
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272.4 |
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| Un-appropriated
profit brought forward |
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160.3 |
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432.7 |
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| Appropriations |
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| Interim
dividend Rs. 2.00 per share (20%) |
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90.5 |
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| Final
dividend Rs. 4.50 per share (45%) |
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203.7 |
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294.2 |
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| Un-appropriated
profit carried forward |
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138.5 |
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| PERSONNEL |
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| Relationship
with the staff (total staff as at 31.12.2000: 1.149 as against 1.097 at the |
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| end
of 1999) specially the workers, remained cordial. All achievements made
during the |
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| period
under report were only possible due to a great deal of dedicated efforts and
team |
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| work
by the company's staff. The directors take this opportunity to thank all of
them for |
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| their
hard work and commitment. |
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| FUTURE
OUTLOOK |
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| We
feel that economic difficulties currently faced by the country are likely to
continue in |
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| the
year 2001 and that much of the un-certainty will remain. In-spite of this
difficult |
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| business
environment, we are confident to maintain our growth momentum and perform |
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| satisfactorily
in the coming year. We shall continue
to focus on a long-term view of the |
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| business,
quality consciousness and operational efficiency through innovation and |
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| renovation. |
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FOR AND BEHALF OF THE |
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BOARD OF DIRECTORS |
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FRIEDRICH G. MAHLER |
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| Lahore:
March 15, 2001 |
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Chief Executive |
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| NOTICE
OF ANNUAL GENERAL MEETING |
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| Notice
is hereby given that the 23rd Annual General Meeting of Nestle Milkpak Ltd., |
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| will
be held at 10.00 a.m. on Monday, April 30, 2001 at the Company Office, at
304- |
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| Upper
Mall, Lahore to transact the following business: |
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| ORDINARY
BUSINESS |
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| 1.
To confirm the minutes of the Annual General Meeting held on April 17, 2000. |
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| 2.
To receive, consider and approve the Audited Accounts of the Company for the |
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| year
ended December 31, 2000 together with the Directors' report thereon. |
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| 3.
To appoint Auditors of the Company and fix their remuneration. |
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| 4.
To approve dividend. The Directors have recommended final dividend of 45% |
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| i.e.
Rs. 4.50 per share. |
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| 5.
To elect seven Directors of the Company for a period of three years
commencing |
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| from
June 27, 2001 in accordance with the provision of Section 178 of the |
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| Companies
Ordinance 1984 in place of the following retiring Directors. |
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| I.
Mr. M.W.O. Garrett |
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| II.
Mr. Marcel Fischli |
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| III.
Mr. D. Dupont |
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| IV.
Mr. Friedrich G. Mahler |
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| V.
Syed Baber Ali |
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| VI.
Syed Yawar Ali |
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| VII.
Syed Hyder Ali |
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| SPECIAL
BUSINESS |
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| 6.
To pass the following resolutions as a special resolution: |
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| RESOLVED
THAT the consent of the shareholders be and is hereby accorded: |
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| (i)
to approve the investment made in purchasing/acquiring 80% fully paid |
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| ordinary
shares of Rs. 10/- each at a value of Rs. 44.76 million of Universal |
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| Aqua
(Pvt.) Limited. |
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| (ii)
to approve the loan of Rs. 27.1 million granted to Universal Aqua (Pvt.) |
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| Limited. |
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| 7.
To transact any other business with permission of the Chair. |
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BY ORDER OF THE BOARD |
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(PHILIPPE BLONDIAUX) |
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| Lahore:
09th April 2001 |
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Company Secretary |
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| NOTES: |
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| 1.
Share Transfer Books of the Company will remain closed from 23/04/2001 to
03/04/2001 |
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| (both
days inclusive) for the purpose of Annual General Meeting and to determine |
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| entitlement
for dividend. |
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| 2.
A member entitled to attend and vote at the General Meeting is entitled to
appoint another |
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| member
as proxy to attend and vote instead of him/her. |
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| 3.
The instrument appointing a proxy must be
received at the Registered Office of the |
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| Company
at 308-Upper Mall, Lahore, not later than forty-eight (48) hours before the |
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| Meeting. |
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| 4.
Shareholders are requested to notify the change of address, if any,
immediately. |
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| STATEMENT
UNDER SECTION 160 (b) OF THE COMPANIES ORDINANCE, 1984 |
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| The
following information is tendered to the shareholders in this behalf. |
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| (a)
Equity Investment: |
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| i.
Universal Aqua (Pvt.) Limited is otherwise an unrelated company (i.e. not |
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| an
associated company) and no director or shareholder of Nestle Milkpak |
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| Limited
has any interest in it. |
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| ii.
Nestle Milkpak Limited has acquired 80% fully paid ordinary shares (360,240 |
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| shares)
of face value Rs.10/- each, at the price of Rs. 124.25 per share. |
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| iii.
The breakup value of the shares as at June 30,2000 is Rs.-9.70, and the |
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| earning
per share is Rs.-4.80 (1999: Rs.-14.90). |
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| iv.
Nestle Milkpak Limited has used its own funds to make the acquisition. |
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| v.
The investment has been made on long term basis and is expected to be |
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| beneficial
in respect of the water business. |
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| vi.
No director or any relative of a director is interested in the investment. |
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| (b) Loan |
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| i.
A loan of Rs. 27.1 million has been given as part of the transaction to |
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| acquire
shares. This loan replaces the loan given by the sponsors from |
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| whom
shares have been acquired. |
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| ii.
Apart from this loan, Universal Aqua (Pvt.) Ltd. has not availed any other |
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| financing. |
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| iii.
No collateral is being obtained as Nestle Milkpak Limited is the only
creditor |
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| and
also 80% shareholder of the company. |
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| iv.
The mark-up rate being charged is floating rate of SBP discount + 1% p.a. |
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| v.
Nestle Milkpak Limited has used its own funds to make the loan. |
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| vi.
The loan is expected to be repaid over a period of 2 years. |
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| vii.
The loan has been extended as part of the transaction for acquisition of |
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| shares
for the future benefit of Nestle Milkpak Limited and the shareholders. |
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| Management |
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| Board
of Directors |
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| Syed Yawar Ali |
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Chairman |
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| Friedrich
G. Mahler |
Managing Director |
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| Syed Babar Ali |
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| M.W.O. Garrett |
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| Marcel Fischli |
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| D. Dupont |
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| Syed Hyder Ali |
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| Company
Secretary |
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| Philippe
Blondiaux |
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| The
Management Team |
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| Friedrich
G. Mahler |
Managing Director |
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| Philippe
Blondiaux |
Finance & Control
Manager |
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| Olivier
Desponds |
Marketing Manager |
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| Nimal
Koswanage |
Factory Manager |
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| Organisation |
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| Head Office |
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| Factories |
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| Regional
Sales Offices |
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| Milk
Collection Centres |
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| Company
Directory |
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| Registered & |
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308 - Upper Mall, Lahore |
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| Corporate |
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PABX: 5757082-95 |
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| Office |
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Fax: 5711820 |
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| Factories |
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Sheikhupura |
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29th Kilometer, Lahore -
Sheikhupura Road |
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Sheikhupura, Punjab,
Pakistan |
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Phone: (042) 6369321 - 26
& 7228300 |
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Fax: (042) 6368710 |
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Kabirwala |
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Khanewal- Kabirwala Road,
Kabirwala |
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District Khanewal,
Punjab, Pakistan |
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Phone: (0692) 53168 &
(06512) 411433 |
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Fax: (0692) 53169 &
(06512) 411432 |
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| Auditors |
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A.F. Ferguson & Co.
(Chartered Accountants) |
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| Legal Advisors |
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Cheema & Ibrahim
(Advocates) |
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| Bankers |
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ABN Amro Bank |
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Standard Chartered
Grindlays Bank Ltd. |
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Bank of Tokyo-Mitsubishi,
Ltd. |
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Citibank N.A. |
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Credit Agricole Indosuez |
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Deutsche Bank A.G. |
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Habib Bank Ltd. |
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Muslim Commercial Bank
Ltd. |
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Standard Chartered Bank |
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| Regional
Sales Offices |
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| Karachi |
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F - 77/1, Block 7, |
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Clifton, KDA Scheme 5, |
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Karachi, Sind, Pakistan. |
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Phone: (021) 5833935-6 |
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Fax: (021) 5833937 |
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| Hyderabad |
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178, Block C, Unit 2 |
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Latifabad, Hyderabad,
Sind, Pakistan |
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Phone: (0221) 860403 |
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Fax: (0221) 863202 |
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| Lahore |
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29-B, Main Gulberg, |
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Lahore, Punjab, Pakistan |
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Phone: (042) 5754335-6,
5752583 |
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Fax: (042) 5761491 |
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| Multan |
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Surij Miani Road, Chungi
No.1, |
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Multan, Punjab, Pakistan |
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Phone: (061) 515061 |
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Fax: (061) 515057 |
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| Faisalabad |
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House No. 24-Y-103 Madina
Town, |
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Faisalabad, Punjab,
Pakistan |
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Phone: (041) 546993,
734538 |
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Fax: (041) 543538 |
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| Gujranwala |
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23. D.C. Road. |
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Gujranwala, Punjab,
Pakistan. |
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Phone: (0431) 256320 |
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Fax: (0431) 256320 |
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| Peshawar |
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201,2nd Floor, City
Tower, Jamrud Road, B Block, |
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Peshawar, N.W.F.P.,
Pakistan |
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Phone: (091) 840859,
842415 |
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Fax: (091) 45516 |
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| Quetta |
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63 B - D, Chaman Housing
Scheme, |
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Opposite Askari Park |
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Quetta, Baluchistan,
Pakistan. |
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Phone: (081) 834887 |
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Fax: (081) 822297 |
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| Islamabad |
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74-W, Yaseen Plaza, 1st
Floor, Blue Area, |
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Islamabad, Pakistan |
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Phone: (051) 2271874-5,
2824328 |
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Fax: (051) 2821899 |
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| Group
History |
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| The
Nestle Story |
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| Nestle
S.A., the present Switzerland based international food group, |
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| originally
consisted of two companies and two products: Henri |
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| Nestle
and his baby food in Vevey, and the Anglo-Swiss Condensed |
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| Milk
Company and its condensed milk in Cham, both in Switzerland. |
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| In
1866 the Page Brothers from the United States set up a new industry |
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| in
Cham, making condensed milk from a raw material that was |
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| available
in abundance in the region. In 1867 Henri Nestle, a chemist in |
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| Vevey,
created a milk and cereal based food which promptly saved |
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| the
life of a baby which its mother could not feed. The companies |
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| competed
vigorously until 1905, when they merged and became the |
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| starting
point of the present food group. |
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| Dynamic
Expansion |
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| The
history of Nestle includes the development of many different |
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| products
as well as acquisitions, mergers and the purchasing of |
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| shares
in companies, mainly abroad. Over the course of the years, this |
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| enabled
it to broaden its range of products and diversify its operations, |
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| while
at the same time strengthening the economic foundations of the |
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| company.
Amongst the most important acquisitions were |
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| Carnation
in Los Angeles (milk, culinary products and pet foods) and |
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| more
recently Rowntree Mackintosh in York (chocolate and |
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| confectionery),
Buitoni in Perugia (pasta) as well as Perrier in France |
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| (mineral water). |
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| Nestle,
which does 98% of its business outside Switzerland, also has |
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| interests
in non-food sectors, in cosmetics (a large share holding in |
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| L'Oreal)
and ophthalmic products (acquisition of Alcon Laboratories |
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| Inc.)
while continuing to give priority to food products. |
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|
| Nestle
Today |
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| Nestle
is now the world's largest food company. It is present on all |
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| five
continents, has an annual turnover of 74.7 billion Swiss francs, |
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| runs
509 factories in 83 countries and employs about 231,000 people |
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| the world over. |
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| The
Company owes its current status to the pioneering spirit inherited |
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| from
its founders which continues to inspire it, to its concern with qual- |
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| ity
and to its constant search for new ways of satisfying man's nutritional
needs. |
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| Wherever
possible, it sets up factories locally, employs personnel |
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| from
the country concerned and relies on indigenous raw materials. |
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| Its
agricultural services provide assistance to improve the quality |
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| and
yield of the raw materials it uses. Much attention is devoted to |
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| professional
training and to the integration of the Company in its |
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| economic
and social environment. |
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| Research
& Development |
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| Nestle,
the world's biggest food Group, is also the global leader in |
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| the
industry with regard to Research and Development (R&D), No other |
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| food
company matches the R&D presence of Nestle, with a |
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| worldwide
network of centres in 17 locations on four continents. No |
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| other
food company dedicates so many human and financial |
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| resources
to R&D: an international staff of 3500 engaged in the search |
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| for
innovative new products and the renovation of existing ones. Year |
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| after
year, Nestle invests some 800 million Swiss francs into R&D as a |
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| major
driving force of its double strategy: to strengthen the |
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| Company's
brands worldwide and to continue to support future long- |
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| term
growth and competitiveness through innovation and renovation. |
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| At
the threshold of this new millennium, Nestle's objective is to |
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| consolidate
and strengthen its leading position at the cutting edge |
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| of
innovation in the food area, in order to meet the needs and desires |
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| of
consumers around the world, for pleasure, convenience, health and |
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| well being. |
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| Business
Review |
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| Milk Collection |
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| The
core raw material of Nestle Milkpak is milk. Over the last twelve |
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| years,
the Company's prime concern has been to improve the quality and |
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| volume
of milk for UHT processing and for other milk based products. |
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| Driven
by its commitment to quality and having realized that only self col- |
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| lection
could eliminate its dependence on poor quality milk available |
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| from
outside sources, the Company successfully established its own col- |
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| lection
system and expanded its operations over a very large milk shed |
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| area
in Punjab. Owing to this tremendous growth in the volume of an ex- |
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| tremely
high quality raw milk, Nestle Milkpak now produces a superior |
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| quality
and better tasting UHT milk, with longer shelf life. |
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| Today,
Nestle Milkpak can boast of the largest milk collection network in |
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| the
country, unmatched in size, productivity and efficiency. Milk is col- |
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| lected
through a vast network of village milk centers (VMCs), sub-cen- |
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| ters
and centers. At these centers, chillers have been installed to lower |
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| milk
temperature to 4°C for preventing bacteria development during |
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| long
hauls to the factories, which are undertaken by a large fleet of |
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| specially
insulated tankers. |
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| In
terms of quality, the milk collected by Nestle Milkpak is low in sodium, |
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| high
in fat and solid-non-fats (SNF) and very low in Total Plate Count |
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| (TPC)
which, stated simply, means the bacteria count. This was |
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| achieved
through a comprehensive strategy and sustained efforts to |
|
| overhaul
the milk collection process, intensive education program for the |
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| farmers
and the milk collection staff, upgradation of milk loading and |
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| transportation
system, increase in the chilling capacity and above all, |
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| adherence
to the highest acceptance standards at all milk collection |
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| points,
including the factories. |
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| As
a service to farmers, Nestle Milkpak has established an Exten- |
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| sion
Service, staffed by qualified veterinary doctors, who assist them in |
|
| vaccination
and treatment of livestock, improved breeding, good ani- |
|
| mal
husbandry practices, provision of high yield fodder seed etc. By tak- |
|
| ing
professional help and guidance to their doorsteps, which they other- |
|
| wise
find difficult to access, coupled with incentives and a good and |
|
| prompt
return for their milk, Nestle Milkpak has created a mutually ben- |
|
| eficial
relationship with the farmers, which translates into opportunities of |
|
| economic
uplift for the rural population. |
|
|
|
|
|
|
|
| To
promote milk production, Nestle Milkpak is successfully promoting |
|
| the
use of molasses to enrich the fodder and has arranged its |
|
| distribution
to farmers at cost. |
|
|
|
|
|
| Production |
|
|
| As
a consequence of joint venture arrangement between Nestle S.A. of Switzerland |
|
| and
Milkpak Ltd. in 1988, the existing production facility of Milkpak in
Sheikhupura |
|
| became
a part of Nestle Milkpak. |
|
|
| The
Milkpak Sheikhupura factory commenced operations in 1981 as a producer of |
|
| UHT
milk. By 1988, it had expanded its operation and was also producing butter,
cream, |
|
| desi
ghee - all under the brand name of MILKPAK and juice drinks under the brand |
|
| name FROST. |
|
|
| To
meet the demands of the large food market that Pakistan offered, Nestle
Milkpak |
|
| reorganized
and reinforced the production of existing brands and gave shape to new |
|
| production
lines. The first to come was a milk powder plant, which not only began |
|
| producing
NIDO in 1990 but was also critical to the production of several milk-based |
|
| products
in the future. With the installation of the roller dryer in 1990, the first
such |
|
| product
to come was CERELAC - an internationally recognized brand of infant cereal. |
|
| This
was followed by LACTOGEN 1 & 2 in 1991. |
|
|
| The
year 1992 saw the introduction of tea whitener EVERYDAY and milk |
|
| powder
in bulk packing named GLORIA. MILO and NESLAC came |
|
|
| under
production in 1994 and MILO RTD in 1995. Local packing of |
|
|
| imported
coffee under the name of NESCAFE 3 in 1 commenced the |
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