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Fauji Cement Company Limited
Annual Report 2001
Contents
Company Information at a Glance
Notice of the Ninth Annual General Meeting
Report of the Directors
Auditors' Report
Balance Sheet
Profit and Loss Account
Cash Flow Statement
Statement of Changes in Equity
Notes to the Accounts
Pattern of Shareholdings as on 30 June 2001
Company Information at a glance
* Board of Directors
Lt Gen (Retd) Muhammad Maqbool, HI(M), S Bt Chairman
Maj Gen (Retd) Sayeed U1 Hasan Zaidi, HI(M) Chief Executive/
Managing Director
Brig (Retd) Muhammad Saeed Baig, SI(M) Director
Brig (Retd) Ghulam Hussain, SI (M) Director
Mr. Qaiser Javed Director
Brig (Retd) Arshad Shah, SI (M) Director
Non Executive Directors
Mr. Riyaz H. Bokhari, IFU Director
Mr. Erling Frandsen, FL Smidth & Co Director
Mr. Shabbir Hashmi, CDC Director
* Company Secretary: Brig (Retd) Moien Ud Din Chughtai
* Registered Office: 61-Harley Street, Rawalpindi Cantt, Pakistan
Tel (051) 5515512, 5514474, 5514965
Fax: (051) 5517311
* Plant Site: Near Village Jhang, Tehsil Fateh Jhang
District Attock
Tel: 0596-538047-48
Fax: 0596 - 538025
* Marketing/Sales M-40-1, 1st Floor, Hotel Pakland,
Department Bank Road, Saddar
Rawalpindi - Pakistan
Tel: (051) 5528960-64
Fax: (051) 5528965-66
* Auditors: A.F. Ferguson & Go.
Chartered Accountants
* Legal Advisers: Orr, Dignam & Co. Advocates.
M/s Rizvi & Rizvi, Advocates
* Registration & Mr. Taqi Ahmad Khan
Shares Transfer Shares Manager
Office 345-A, Harely Street, Rawalpindi Cantt
Tel: (051) 5567496
Notice of the Ninth Annual General Meeting
All Shareholders of the Company.
M/s A.F. Ferguson & Co., Auditors of the Company.
Notice is hereby given that the Ninth Annual General Meeting of the Company will be held at
10:00 A.M. on Wednesday, 12 December 2001 at Hotel Pearl Continental, The Mall, Rawalpindi, to
transact the following business:-
1. To confirm the Minutes of Eighth Annual General Meeting.
2. To receive, consider and adopt the Audited Accounts of the Company for the year ended
30 June 2001.
3. To consider and approve the Directors' Report for the year ended 30 June 2001.
4. To appoint Auditors for the Financial Year ending 30 June 2002.
5. Any other business with the permission of the Chair.
By order of the Board
Place: Rawalpindi Brig (Retd) Moien Ud Din Chughtai
Date: 21 November 2001 Company Secretary
NOTES:
1. The Share Transfer Books of the Company will remain closed from 5 December 2001 to
15 December 2001 (both days inclusive). No transfer will be accepted for registration during
this period.
2. A member entitled to attend and vote at the Annual General Meeting may appoint a proxy to
attend and vote in place of the Member. Proxies, in order to be effective, must be received at
the Registered Office located at 61 Harely Street, Rawalpindi, duly stamped and signed, not less
than 48 hours before the Meeting. A member may not appoint more than one proxy. Proxy form
is attached.
3. Shareholders are requested to promptly notify any change in their address.
Report of the Directors
General
1. The Directors are pleased to present their Ninth Annual Report along with Company's audited
accounts for the financial year ended 30 June 2001 and Auditors' Report thereon.
Market Situation
2. Cement Industry continues to suffer from under utilization of installed capacity and stagnant
economic environments. The situation was further aggravated by imposition of Sales Tax in September
2000. Three neighbouring competitors of Fauji Cement Company were, however, exempt from Sales
Tax till 30June 2001. This disturbed the market, resulting in a Price War during this period. Nevertheless
Fauji Cement Company not only maintained its market share but also managed to increase its sales to
some extent. Our capacity utilization is 67.82% as against Industry's average of 58.17%. The Sales Tax
exemption has since been withdrawn w.e.f. 01 July 2001 and price has stabilized. We hope to achieve
much better results during the next year, but unless the national economy takes a quantum upsurge
through activation of mega construction works by the Government, the Cement Industry will continue
to suffer from under utilization of the installed capacity.
Production Aspects.
3. The performance of the Plant was quite satisfactory as the overall efficiency remained over 100
percent. Our efficiency in terms of fuel, power and raw material consumption ranked amongst the
best while our labour cost is the lowest in the Cement Industry.
4. In furtherance of the economy drive initiated last year the fuel cost is proposed to be curtailed
through partial conversion of the furnace oil Fired system to coal fired system. Total conversion to coal
requires major changes in Firing System which, in view of our financial constraints, is cost prohibitive.
We, therefore, have planned partial use of Coal in a graduated manner, and have successfully achieved
feeding of 50 to 60 tons of Coal per day, equivalent to approximately 10% of furnace oil consumption.
We are now endeavouring to enhance it to about 30 to 40% of furnace oil.
Financial Restructuring
5. As reported in the Annual Report for the Year 2000, the process of Financial Re-structuring with
Local Lenders was completed last year. This year the negotiations with Foreign Lenders were pursued
most earnestly and concertedly. These efforts have been fruitful. An 'Agreement in Principle' has been
arrived at with Foreign Lenders; as part of which local refinancing of IFC Loans B & C (funded by
Marubeni Corporation of Japan) amounting to USD 17.5 million was successfully concluded on 15
October 2001. Remaining part of the Financial Re-structuring is being actively pursued.
6. With the completion of above re-structuring the Company, will turn viable and its Debt Equity and
Liquidity Ratios will improve on consistent basis, however, it will not be in a position to pay any dividend          ::~~
to its shareholders in the near future.
Pattern of Shareholdings
7. Pattern of Shareholdings as on 30 June 2001 is attached.
Relations With Personnel and Locals
8. Relationship between the management and the workers continues to be cordial and conducive
for efficient functioning of Company/Factory. FCCL continues to enjoy mutual trust and goodwill of
the locals of the area.
Directors
9. On resignation of Mr. Henrik Starup, IFU, Mr. Riyaz. H Bokhari of IFU has been appointed as (non-
executive) Director of the Company w.e.f 28 February 2001.
10. On resignation of Mr. Palle-O-Jorgensen, FLS, Mr. Erling Frandsen of FLS, has been appointed
as (non-executive) Director of the Company w.e.f 15 August 2001.
11. On resignation of Mr. David Vivian Johns, CDC, Mr. Shabbir Hashmi of CDC, has been appointed
as (non-executive) Director of the Company w.e.f 06 Jul 2001.
12. On resignation of Maj Gen (Retd) Khalid Aziz, HI(M), Brig (Retd) Arshad Shah, SI(M), has been
appointed as Director of the Company w.e.f 24 September 2001.
13. The Board places on record its appreciation for the valuable advice and services rendered by the
retired Directors and welcomes the new Directors on the Board.
Auditors
14. M/s A.F Ferguson & Co., Chartered Accountants, will retire at the conclusion of Ninth Annual
General Meeting and being eligible have offered themselves for re-appointment on the same terms
and conditions.
Acknowledgements
15. The Directors express their heartfelt appreciation for the unflinching support and encouragement
of Fauji Foundation and dedicated efforts of their staff in the process of Financial Re-structuring.
16. We also appreciate the role of Local and Foreign Lenders, Finance Sub Committee of FCCL, our
bankers, financial and legal advisers and Government agencies for their relentless efforts and assistance
in the Financial Re-structuring of the Company.
Conclusion
17. With Financial Re-structuring on the horizon, spirit of cooperation/burden sharing prevalent
amongst the key players, backed by efficient management of the Company, there is all the good reason
to be optimistic. Through these efforts the Company shall Insha Allah be able to tide over its financial
problems and emerge as a healthy Corporate entity. The Directors are specially thankful to the Share-
holders who continue to repose their trust in the Company.
For and on behalf of the Board
Rawalpindi Lt Gen Muhammad Maqbool, HI(M), S Bt
13 November 2001 Chairman
Auditors' Report to the Members
We have audited the annexed balance sheet of Fauji Cement Company Limited as at June 30, 2001 and the
related profit and loss account, cash flow statement and statement of changes in equity together with the notes
forming part thereof, for the year then ended and we state that we have obtained all the information and
explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit.
It is the responsibility of the Company's management to establish and maintain a system of internal control,
and prepare and present the above said statements in conformity with the approved accounting standards and
the requirements of the Companies Ordinance, 1984. Our responsibility is to express an opinion on these
statements based on our audit.
We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These standards
require that we plan and perform the audit to obtain reasonable assurance about whether the above said
statements are free of any material misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the above said statements. An audit also includes assessing the accounting
policies and significant estimates made by management, as well as, evaluating the overall presentation of the
above said statements. We believe that our audit provides a reasonable basis for our opinion and, after due
verification, we report that:
(a) in our opinion, proper books of account have been kept by the Company as required by the Companies
Ordinance, 1984.,
(b) in our opinion
(i) the balance sheet and profit and loss account together with the notes thereon have been drawn
up in conformity with the Companies Ordinance, 1984, and are in agreement with the books of
account and are further in accordance with accounting policies consistently applied'
(ii) the expenditure incurred during the year was for the purpose of the Company's business; and
(iii) the business conducted, investments made and 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 June 30,
2001 and of the loss, its cash flows and changes in equity for the year then ended; and
(d) in our opinion no Zakat was deductible at source under the Zakat and Ushr Ordinance, 1980.
Without qualifying our opinion we draw attention to contents of note 4.5 to the accounts related to the financial
restructuring proposal involving outstanding and overdue foreign currency loans.
Islamabad A.F. Ferguson & Co.
13 November 2001 Chartered Accountants
Balance Sheet as at June 30, 2001
2001 2000
Note Rupees Rupees
SHAREHOLDERS' EQUITY
Authorised capital
250,000,000 ordinary shares of Rs. 10 each 2,500,000,000 2,500,000,000
========== ==========
Issued, subscribed and paid-up capital
171,310,499 ordinary shares of Rs. 10 each 1,713,104,990 1,713,104,990
Advance against shares to be issued 3 443,144,000 443,144,000
Accumulated (loss) (1,927,575,188) (1,357,119,720)
------------------ ------------------
228,673,802 799,129,270
LONG TERM LOANS 4 1,658,349,583 1,713,183,138
PROVISION FOR STAFF GRATUITY 2,356,541 2,033,331
CURRENT LIABILITIES
Current portion of long term loans 4 2,929,678,828 2,339,174,810
Short term loan 5 40,000,000 40,000,000
Creditors, accrued and other
liabilities 6 769,139,974 659,538,651
------------------ ------------------
3,738,818,802 3,038,713,461
CONTINGENCIES AND COMMITMENTS 7
------------------ ------------------
5,628,198,728 5,553,059,200
========== ==========
The annexed notes form an integral part of these accounts.
Chairman
FIXED CAPITAL EXPENDITURE
Operating assets 8 5,125,765,990 5,050,126,970
Capital work in progress -- 1,953,045
Stores held for capital expenditure 84,240,919 87,659,692
------------------ ------------------
5,210,006,909 5,139,739,707
LONG TERM DEPOSIT 9 21,600,000 21,600,000
CURRENT ASSETS
Stores, spares and loose tools 10 113,228,381 99,259,291
Stock in trade 11 55,336,127 74,257,232
Trade debtors 12 65,221,848 25,070,811
Advances, deposits, prepayments
and other receivables 13 60,248,361 76,146,380
Cash and bank balances 14 102,557,102 116,985,779
------------------ ------------------
396,591,819 391,719,493
------------------ ------------------
5,628,198,728 5,553,059,200
========== ==========
Chief Executive Director
Profit and Loss Account
for the year ended June 30, 2001
2001 2000
Note Rupees Rupees
SALES 2,566,318,180 2,574,546,962
Government Levies 990,714,222 877,966,264
------------------ ------------------
NET SALES 1,575,603,958 1,696,580,698
Cost of sales 15 1,268,401,475 1,173,693,427
------------------ ------------------
GROSS PROFIT 307,202,483 522,887,271
------------------ ------------------
General and administration expenses 16 22,231,696 27,781,087
Selling and distribution expenses 17 47,293,553 13,025,529
------------------ ------------------
69,525,249 40,806,616
------------------ ------------------
OPERATING PROFIT 237,677,234 482,080,655
Other income 18 7,722,963 7,851,156
------------------ ------------------
245,400,197 489,931,811
Financial charges 19 807,855,665 763,905,578
------------------ ------------------
(LOSS) BEFORE TAXATION (562,455,468) (273,973,767)
Provision for taxation 8,000,000 9,000,000
------------------ ------------------
(LOSS) AFTER TAXATION (570,455,468) (282,973,767)
Accumulated (Loss) brought forward (1,357,119,720) (1,074,145,953)
------------------ ------------------
ACCUMULATED (LOSS) CARRIED FORWARD (1,927,575,188) (1,357,119,720)
========== ==========
(Loss) per share 20 (3.33) (1.65)
The annexed notes form an integral part of these accounts.
Chairman Chief Executive Director
Cash Flow Statement
for the year ended June 30, 2001
2001 2000
Rupees Rupees
CASH FLOWS FROM OPERATING ACTIVITIES
(Loss) before taxation (562,455,468) (273,973,767)
Adjustment for non cash charges and other items:
Depreciation 235,014,723 240,243,542
Amortisation of deferred cost -- 6,150,486
Financial charges 807,855,665 763,905,578
Income on bank deposits (6,899,080) (7,035,607)
Profit on disposal of Fixed assets (133,462) (99,999)
(Increase) /decrease in stores and stocks 8,370,788 (3,096,175)
(Increase) / decrease in receivables (17,917,524) (23,640,068)
Increase / (decrease) in payables 34,505,574 (893,721)
Taxes paid (14,233,273) (6,609,375)
------------------ ------------------
484,107,943 694,950,894
CASH FLOWS FROM INVESTING ACTIVITIES
Fixed capital expenditure (11,405,258) (21,018,056)
Sales proceeds of fixed assets 447,663 100,000
Income received on bank deposits 6,796,859 8,314,469
------------------ ------------------
(4,160,736) (12,603,587)
CASH FLOWS FROM FINANCING ACTIVITIES
Long term loan repaid (82,263,913) (19,500,000)
Financial charges paid (412,111,971) (618,745,383)
------------------ ------------------
(494,375,884) (638,245,383)
------------------ ------------------
Increase/(decrease) in cash and bank balances (14,428,677) 44,101,924
Cash and bank balances at the beginning of the year 116,985,779 72,883,855
------------------ ------------------
Cash and bank balances at the end of the year 102,557,102 116,985,779
========== ==========
Chairman Chief Executive Director
Statement of Changes in Equity
for the year ended June 30, 2001
Share Advance Accumulated Total
capital against (loss)
shares to be
issued
Rupees Rupees Rupees Rupees
Balance at June 30, 1999  1,713,104,990 443,144,000 (1,074,145,953) 1,082,103,037
(Loss) for the year -- -- (282,973,767) (282,973,767)
------------------ ------------------ ------------------ ------------------
Balance at June 30, 2000 1,713,104,990 443,144,000 (1,357,119,720) 799,129,270
(Loss) for the year -- -- (570,455,468) (570,455,468)
------------------ ------------------ ------------------ ------------------
Balance at June 30, 2001 1,713,104,990 443,144,000 (1,927,575,188) 228,673,802
========== ========== ========== ==========
The annexed notes form an integral part of these accounts.
Chairman Chief Executive Director
Notes to the Accounts
for the year ended June 30, 2001
1. LEGAL STATUS AND OPERATIONS
The Company is incorporated in Pakistan as a public limited company and its shares are quoted
on the stock exchanges in Pakistan. The Company is engaged in manufacturing and marketing
of cement.
2. SIGNIFICANT ACCOUNTING POLICIES
2.1 Accounting convention
The accounts have been prepared under the historical cost convention.
2.2 Staff retirement benefits
The company operates:
a) approved gratuity scheme for all employees. Liability for gratuity in respect of all
eligible employees is provided in the accounts by a charge to income for the year.
b) approved contributory provident fund for all employees. Contributions are charged
to the profit and loss account.
Retirement benefits are payable to staff on completion of prescribed qualifying period
of service under these schemes.
2.3 Taxation
Provision for current taxation is based on taxable income at current rates of taxation or
based on half percent of turnover less excise duty and sales tax, whichever is higher.
The Company accounts for deferred taxation on all major timing differences, using the
liability method.
2.4 Fixed capital expenditure
Operating assets except freehold land are stated at cost less accumulated depreciation.
Freehold land, capital work in progress and stores held for capital expenditure are stated
at cost. Cost of operating assets includes capitalised borrowing cost during construction
phase of the project and exchange differences related to foreign currency loans obtained
for financing of the project.
Depreciation is charged to income on straight line method to write off the cost of an asset
over its estimated useful life at the rates specified in note 8. Capitalised exchange differences
are depreciated in annual installments so as to write them off over the remaining estimated
useful life of the asset.
Maintenance and repairs are charged to income as and when incurred. Major renewals
and improvements are capitalized and assets so replaced, if any are retired. Gains and
losses on disposal of assets, if any, are included in income currently.
2.5 Deferred cost
Deferred cost related to Company's incorporation and issue of shares is amortised in
equal installments over three years after commencement of commercial production.
2.6 Foreign currency transactions
Transactions in foreign currencies are converted into rupees at the rates of exchange
ruling on the date of the transaction. All assets and liabilities in foreign currencies are
translated at exchange rates prevailing at the balance sheet date, or at rates of exchange
fixed under contractual arrangements, as applicable. Exchange differences are accounted
for as follows:
(a) Exchange differences on translation and repayment of foreign currency loans utilised
for acquisition of fixed assets are capitalised and incorporated in the cost of asset.
(b) All other exchange differences are dealt with through the profit and loss account.
2.7 Stores, spares and loose tools
These are stated at moving average cost. Items in transit are valued at cost comprising
invoice value and other charges paid thereon.
2.8 Stock in trade
Stocks are valued at lower of cost and net realisable value. Cost in relation to raw materials
and packing materials is determined on first-in-first-out basis and in relation to work in
process and finished goods it represents average cost comprising direct material, labour
and appropriate manufacturing overheads. Net realisable value represents the selling
price less costs necessarily to be incurred for sale.
2.9 Revenue recognition
Sales are recorded on despatch of goods to customers.
2.10 Borrowing cost
Borrowing cost incurred upto the date of commencement of commercial production is
capitalised. All other borrowing cost is expensed as incurred.
3. ADVANCE AGAINST SHARES TO BE ISSUED
This represents equity contribution received from an associated undertaking. Legal formalities
for issue of shares are yet to be completed.
4. LONG TERM LOANS-SECURED
Balance outstanding Repayment terms
2001 2000 Interest/net Exchange risk Half yearly Repayment
Rupees Rupees mark up rate cover fee installments Period
per annum % outstanding
%
(Note 4.2) (Note 4.3)
Foreign
1. Commonwealth Development
Corporation- (CDC)
(Pound Sterling 13,250,000; 2000: 13,250,000) 908,903,159 800,800,807 11 5.9 12 December 23, 1998 - June 23, 2004
2. Nederlandse Financierings-
Maatschappijvoor Ontwikkelingslanden N.V. (FMO)
(Netherland Guilders 14,000,000: 2000: 14,000,000) 303,466,300 283,826,300 11.30 14 14 April 15,1998 - April 15, 2005
3. International Finance Corporation (Loan A)
(US Dollars 22,400,000; 2000: 22,400,000) 1,122,621,440 966,396,800 8.9375 14 14 April 15, 1998- April 15, 2005
4. International Finance Corporation (Loan B)
(US Dollars 8,750,000; 2000: 8,750,000) 531,599,750 409,549,250 LIBOR+2.50 8.26 7 April 15,1998 - October 15, 2001
5. International Finance Corporation (Loan C)
(US Dollars 8,750,000; 2000: 8,750,000) 523,445,750 385,087,250 LIBOR+3.00 9.38 7 April 15, 1998- October 15, 2001
6. Deutsche Investitions-und
Entwicklungsgesellschaft mbH (DEG)
(DEM 15,000,000; 2000: 15,000,000) 384,846,337 366,197,541 11.75 8.24 12 November 30, 1998- May 30, 2004
------------------ ------------------
3,774,882,736* 3,211,857,948*
Local
7. Al Faysal Investment Bank Limited 118,715,187 130,000,000 17 -- 13 December 21, 2000- December 21, 2007
8. Standard Chartered Grindlays Limited 112,860,000 135,000,000 16 -- 11 November 30, 2000- November 30, 2006
9. The Bank of Punjab 245,534,400 280,500,000 16 -- 10 June 20, 2000-June 20, 2005
10. Askari Commercial Bank Limited 96,000,000 100,000,000 16 -- 13 June 30, 2001 - December 31, 2007
11. Faysal Bank Limited 67,200,000 70,000,000 16 -- 14 April 27, 2001 -April 27, 2008
12. Saudi Pak industrial and Agriculture
Investment Company (Private) Limited 42,300,000 45,000,000 16 -- 12 March 31, 2001 - March 31, 2007
13. Pak Kuwait Investment Company (Pvt) Ltd 75,626,500 80,000,000 16 -- 13 January 1, 2001 - July 1, 2007
------------------ ------------------
758,236,087 840,500,000
Deferred mark up (note 4.4) 54,909,588 -- June 30, 2005- October 27, 2009
------------------ ------------------
813,145,675 840,500,000
------------------ ------------------
4,588,028,411 4,052,357,948
Less: Amount payable within twelve months
shown as current liability
Overdue installments of foreign currency
loans (note 4.5) 2,421,764,816 1,518,072,964
Installments due within next where months 507,914,012 821,101,846
------------------ ------------------
2,929,678,828 2,339,174,810
------------------ ------------------
1,658,349,583 1,713,183,138
========== ==========
* This includes exchange differential on overdue loan installments amounting to Rs 594,317,468 (2000: Rs
328,902,321) recoverable under exchange risk cover.
4.1 The above loans are secured by mortgage and floating charge ranking pari passu on all present and
future assets of the Company.
4.2 Loans 2 to 6 carry penal interest @ 2% per annum on late payment of each repayment installment for
the period of delay.
4.3 Exchange risk cover has been obtained in respect of foreign currency loans 1 to 6 above. Exchange risk
cover is applicable from the date of disbursement of loan upto the due date of each repayment installment
in accordance with repayment schedule registered with the banks. Penalty @ 16.6% per annum is payable on late payment 
of exchange risk cover fee for the period of delay.
4.4 All local currency loans were rescheduled during the year. Under the revised terms of agreement with local
lenders, 50% mark up will be deferred and paid after full repayment of principal amount of loan.
4.5 Subsequent to the year end, the foreign lenders, Fauji Foundation and the Company have agreed in
principle for financial restructuring of the Company subject to approval of their respective Managements and Boards. 
The restructuring proposal includes refinancing of the outstanding and overdue foreign currency
loans by local currency loans guaranteed by the foreign lenders, fresh equity injection and waiver of
outstanding penal interest on foreign currency loans.
5. SHORT TERM LOAN
This represents loan from an associated undertaking carrying mark up @ 17% per annum.
6. CREDITORS, ACCRUED AND OTHER LIABILITIES
2001 2000
Rupees Rupees
Trade Creditors 23,406,834 17,320,761
Retention money 6,696,193 6,184,113
Accrued fees and charges on long term loans 2,780,162 1,128,178
Accrued interest/mark up on loans 354,439,196 241,905,396
Accrued exchange risk cover fee on foreign currency 265,060,885 303,827,710
loans (Net of exchange rate differential recoverable
under exchange risk cover
Rs. 844,799,166; 2000: Rs. 574,595,834
Amount due to an associated undertaking 3,011,858 3,011,858
Security deposits 16,672,020 15,507,020
Advance payment from customers 33,960,752 21,078,311
Insurance premium payable 20,733,386 18,097,733
Sales tax payable 20,597,265 --
Other payables and accrued liabilities 21,781,423 31,477,571
------------------ ------------------
769,139,974 659,538,651
========== ==========
7. CONTINGENCIES AND COMMITMENTS
7.1 Contingencies
* The customs authorities allowed release of plant and machinery imported by the
Company at concessionary rates of duty in terms of SRO 484(1)/92 dated May 14,
1992 against an undertaking provided by the Company. Subsequent to the release
of plant and machinery the customs authorities have raised a custom duty and sales
tax demand of Rs. 808 million (2000: Rs. 808 million) in respect of items which are
considered by the Central Board of Revenue (CBR) as not qualifying for the
concessionary rate of duty. The Company had filed a writ petition in Sindh High
Court which was decided in favour of the Company. The Custom authorities have
since filed an appeal with the Supreme Court which is currently pending for hearing.
* Claim for sales tax on consumption of raw materials not accepted by the Company
and currently under appeal Rs. 18.5 million (2000: Rs. 18.5 million).
* Income tax demands not accepted by the Company and currently under appeal
Rs. 48.2 million (2000: Rs. 45.6 million).
7.2 Commitments outstanding
* Rentals due under operating lease agreements in respect of vehicles are:
2001 2000
Rupees Rupees
Year ending:
June 30, 2001 -- 1,763,623
June 30,2002 305,288 305,288
8. OPERATING ASSETS
8.1 The following is a statement of operating assets:
COST DEPRECIATION
At Additions At At Charge for the year At Written down Annual rate of
July 1, 2000 (deletions) June 30, 2001 July 1, 2000 on deletions) June 30, value at depreciation
2001 June 30, 2001 %
Freehold land 141,286,104 -- 141,246,104 -- -- -- 141,246,104 --
(40,000)
Factory building on freehold land 1,401,179,835 -- 1,401,179,835 196,632,465 51,801,551 248,434,016 1,152,745,819 4
Plant and machinery 4,230,535,436 301,606,192 4,532,141,628 587,113,482 168,174,256 755,287,738 3,776,853,890 4
Office equipment 5,210,838 583,959 5,738,512 2,314,061 804,820 3,103,084 2,635,428 15
(56,285) (15,797)
Electrical installation 30,652,778 -- 30,652,778 11,907,552 4,597,917 16,505,469 14,147,309 15
Electrical equipment 17,642,170 1,408,299 18,933,039 7,819,317 2,772,696 10,545,209 8,387,830 15
(117,430) (46,804)
Furniture and fixtures 5,330,715 79,498 5,273,372 2,817,565 783,586 3,540,721 1,732,651 15
(136,841) (60,430)
Motor vehicles 18,514,232 4,259,142 20,854,894 15,112,478 2,616,447 15,897,121 4,957,773 25
(1,918,480) (1,831,804)
Elevators 3,613,420 -- 3,613,420 722,684 361,342 1,084,026 2,529,394 10
Quarry road and development 27,854,507 -- 27,854,507 7,303,223 2,785,451 10,088,674 17,765,833 10
Fire fighting instrument 90,480 -- 90,480 40,718 13,572 54,290 36,190 15
Tubewells -- 3,030,854 3,030,854 -- 303,085 303,085 2,727,769 10
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------
Total Rupees 5,881,910,515 310,967,944* 6,190,609,423 831,783,545 235,014,723 1,064,843,433 5,125,765,990
(2,269,036) (1,954,835)
========== ========== ========== ========== ========== ========== ==========
2000 Rupees 5,876,141,097 19,065,011 5,881,910,515 592,239,702 240,243,542 831,783,545 5,050,126,970
(13,295,593)* (699,699)
========== ========== ========== ========== ========== ========== ==========
* Includes exchange loss capitalised Rs. 297.610 million (2000: Exchange gain Rs. 12.596 million).
10.2 The depreciation charge for the year has been allocated as follows:
2001 2000
Rupees Rupees
Cost of sales 233,316,872 237,573,216
General and administration expenses 1,213,465 2,025,270
Selling and distribution expenses 484,386 645,056
------------------ ------------------
235,014,723 240,243,542
========== ==========
8.3 Details of operating assets disposed off during the year are as follows:
Original cost Book value Sale proceeds Mode of Purchaser
Rupees Rupees Rupees disposal
Freehold land 40,000 40,000 40,000 Tender Mr. Mazhar Ali Khan,
Rawalpindi
Office equipment 56,285 40,488 200 Tender Star Distributors, Lahore
Electrical equipment 117,430 70,626 12,750 Tender Star Distributors, Lahore
Furniture and fixtures  136,841 76,411 27,050 Tender Star Distributors, Lahore
Motor vehicles 752,757 1 50,000 Company Brig (R) Bashir Hussain
policy Tareen (ex-employee)
-do- 394,987 49,373 82,514 Company Lt Col (R) M. Irshad
policy Malik (ex-employee)
-do- 366,718 1 50,000 Company Mr. Arifullah Khan
policy (employee)
-do- 366,718 1 50,000 Company Mr. Muhammad Saddiq
policy Khan (employee)
-do- 37,300 37,300 135,149 Company Lt Col (R) Fazal Hussain
policy Bhatti (ex-employee)
------------------ ------------------ ------------------
2,269,036 314,201 447,663
========== ========== ==========
9. LONG TERM DEPOSIT
This represents security deposit of Rs 21,600,000 with WAPDA against supply of power for the
cement plant.
10. STORES, SPARES AND LOOSE TOOLS
2001 2000
Rupees Rupees
Stores and spares 108,704,968 94,539,386
(including items in transit
Rs. 0.75 million; 2000: Rs 0.63 million)
Loose tools 4,523,413 4,719,905
------------------ ------------------
113,228,381 99,259,291
========== ==========
11. STOCK IN TRADE
Raw and packing material 11,840,989 9,293,741
Work in process 28,749,625 30,522,857
Finished goods 14,745,513 34,440,634
------------------ ------------------
55,336,127 74,257,232
========== ==========
12. TRADE DEBTORS
These are unsecured and considered good and are net of provision for doubtful debts of
Rs 34,247,128.
13. ADVANCES, DEPOSITS, PREPAYMENTS AND OTHER RECEIVABLES
Advances to suppliers and contractors- unsecured
and considered good 18,114,135 36,543,413
Deposits 1,486,142 1,982,294
Prepayments 4,996,551 9,838,203
Income tax refundable 29,585,383 23,352,110
Octroi refundable 106,657 78,661
Income on bank deposits receivable 310,006 207,785
Other receivable 5,649,487 4,143,914
------------------ ------------------
60,248,361 76,146,380
========== ==========
14. CASH AND BANK BALANCES
Cash in hand 717,838 234,072
Balance with banks:
Deposit accounts 95,292,964 114,372,487
Collection accounts 6,546,300 2,379,220
------------------ ------------------
102,557,102 116,985,779
========== ==========
(i) Balance with banks include Rs 16.672 million (2000: Rs 15.507 million ) in respect of
security deposits received.
(ii) Deposits of Rs 7.522 million (2000: Rs 7.868 million) with banks are under lien to secure
guarantees and letter of credit facilities.
15. COST OF SALES
Raw and packing material consumed:
Opening stock 9,293,741 16,057,486
Purchases (including royalty of Rs 12.13 million;
2000: Rs 11.68 million) 201,197,357 215,191,263
Closing stock (11,840,989) (9,293,741)
------------------ ------------------
198,650,109 221,955,008
Stores and spares consumed 3,146,697 2,502,721
Salaries, wages and benefits 46,838,954 41,190,790
(including retirement benefits of Rs 2,261,684;
2000: Rs 2,277,541)
Rent, rates and taxes 263,359 300,757
Machinery hiring charges 2,844,266 1,054,320
Insurance 10,447,264 18,497,007
Fuel and power 726,919,563 625,257,315
Repairs and maintenance 20,445,430 23,792,846
Printing and stationery 432,986 459,136
Travelling and entertainment 2,277,029 2,008,267
Communication 534,680 730,147
Lease rentals 287,032 656,447
Depreciation 233,316,872 237,573,216
Miscellaneous expenses 528,881 538,560
------------------ ------------------
1,246,933,122 1,176,516,537
Work in process:
Opening stock 30,522,857 26,966,260
Closing stock (28,749,625) (30,522,857)
------------------ ------------------
1,773,232 (3,556,597)
------------------ ------------------
COST OF GOODS MANUFACTURED 1,248,706,354 1,172,959,940
Finished goods:
Opening stock 34,440,634 35,174,121
Closing stock (14,745,513) (34,440,634)
------------------ ------------------
19,695,121 733,487
------------------ ------------------
COST OF SALES 1,268,401,475 1,173,693,427
========== ==========
16. GENERAL AND ADMINISTRATION EXPENSES
Salaries, wages and benefits 10,939,101 8,608,992
(including retirement benefits of Rs 613,414; 2000: Rs 113,993)
Rent, rates and taxes 658,387 580,162
Insurance 361,827 508,225
Repairs and maintenance 1,036,766 833,374
Printing and stationery 616,516 780,998
Travelling and entertainment 2,282,405 2,045,614
Lease rentals 481,626 824,184
Communication 403,991 486,106
Auditor's remuneration:
Statutory audit 325,000 325,000
Tax representation and advisory services 1,451,441 1,101,140
Out of pocket expenses 50,000 105,925
------------------ ------------------
1,826,441 1,532,065
Legal and professional charges 1,377,853 2,462,651
Amortisation of deferred cost -- 6,150,486
Depreciation 1,213,465 2,025,270
Miscellaneous expenses 1,003,318 932,960
Donations* 30,000 10,000
------------------ ------------------
22,231,696 27,781,087
========== ==========
17. SELLING AND DISTRIBUTION EXPENSES
Salaries, wages and benefits 6,544,550 6,601,958
(including retirement benefits of Rs 404,515; 2000: Rs 489,139)
Rent, rates and taxes 517,295 548,036
Repairs and maintenance 389,420 358,089
Insurance 226,619 257,669
Printing and stationery 415,675 347,444
Travelling and entertainment 723,900 825,451
Lease rentals 1,035,097 1,088,950
Communication 571,170 589,296
Advertisement and sales promotion expenses 868,138 1,319,821
Depreciation 484,386 645,056
Provision for doubtful debts 34,247,128 --
Miscellaneous expenses 590,312 423,759
Donations* 679,863 20,000
------------------ ------------------
47,293,553 13,025,529
========== ==========
* No director or his spouse had any interest in the donee institution.
18. OTHER INCOME
Income on bank deposits 6,899,080 7,035,607
Profit on disposal of fixed assets 133,462 99,999
Other 690,421 715,550
------------------ ------------------
7,722,963 7,851,156
========== ==========
19. FINANCIAL CHARGES
Fees and charges related to long term loans 3,054,013 2,641,034
Interest/mark up related to long term loans 618,765,145 596,429,509
Mark up on short term loan from an associated
undertaking 6,800,000 6,818,630
Exchange risk cover fee on foreign currency loans 178,389,921 157,279,762
Bank charges and commission 846,586 736,643
------------------ ------------------
807,855,665 763,905,578
========== ==========
20. (Loss) PER SHARE
(Loss) after taxation (570,455,468) (282,973,767)
Number of ordinary shares 171,310,499 171,310,499
(Loss) per share (Rs.) (3.33) (1.65)
21. REMUNERATION OF DIRECTORS AND EXECUTIVES
The aggregate amounts charged in the accounts of the year for remuneration, including benefits
and perquisites, were as follows:
Managing Director Executives
2001 2000 2001 2000
Rupees Rupees Rupees Rupees
Managerial remuneration 1,378,032 955,138 8,162,709 6,391,137
Gratuity/contribution to provident fund 65,825 49,033 828,330 408,332
Utilities and upkeep 283,241 203,662 994,027 845,807
------------------ ------------------ ------------------ ------------------
1,727,098 1,207,833 9,985,066 7,645,276
========== ========== ========== ==========
No of persons 1 1 19 16
========== ========== ========== ==========
In addition, the above were provided with free medical facilities. The managing director and
certain executives were also provided with use of the Company's car and household equipment
in accordance with the Company policy.
No remuneration was paid to other directors of the Company (2000: Nil).
22. FINANCIAL INSTRUMENTS
22.1 FINANCIAL ASSETS AND LIABILITIES
Interest/mark-up bearing Non-interest/mark-up bearing Total
Maturity upto Maturity after Sub-total Maturity upto Maturity after Sub-total
one year one year one year one year one year
Rs. Rs. Rs. Rs. Rs. Rs. Rs.
FINANCIAL ASSETS
Long term deposit -- -- -- -- 21,600,000 21,600,000 21,600,000
Trade debts -- -- -- 65,221,848 -- 65,221,848 65,221,848
Advances, deposits and
other receivables -- -- -- 7,552,292 -- 7,552,292 7,552,292
Cash and bank balances 95,292,964 -- 95,292,964 7,264,138 -- 7,264,138 102,557,102
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------
95,292,964 -- 95,292,964 80,038,278 21,600,000 101,638,278 196,931,242
========== ========== ========== ========== ========== ========== ==========
FINANCIAL LIABILITIES
Long term loans (note 4) 2,929,678,828 1,603,439,995 4,533,118,823 -- 54,909,588 54,909,588 4,588,028,411
Short term loan (note 5) 40,000,000 -- 40,000,000 -- -- 40,000,000
Creditors, accrued and
other liabilities -- -- -- 735,179,222 -- 735,179,222 735,179,222
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------
2,969,678,828 1,603,439,995 4,573,118,823 735,179,222 54,909,588 790,088,810 5,363,207,633
========== ========== ========== ========== ========== ========== ==========
22.2 Credit risk
Since major part of the company's sales is against advance payment, the credit risk is
minimal.
22.3 Interest rate risk
Financial liabilities include Rs 3,478 million which were subject to fixed interest rate and
Rs 1,055 million which were subject to floating interest rate.
22.4 Foreign exchange risk
Foreign currency liabilities amounted to Rs 3,775 million, of which Rs 3,429 million were
hedged by exchange risk coverage.
22.5 Fair value of financial assets and liabilities
The carrying value of financial assets and liabilities approximate their fair value.
23. GENERAL
23.1 Transactions with associated undertakings
Aggregate transactions with associated undertakings during the year were as follows:
2001 2000
Rupees Rupees
Sale of goods 2,229,800 3,137,750
Interest on short term loan 6,800,000 6,818,630
23.2 Plant capacity and actual production
Metric tons Metric tons
Installed capacity 945,000 945,000
Actual production of cement 628,509 624,910
The shortfall in actual production against the installed capacity was due to the current
gap between demand and supply in the market.
23.3 Number of employees
Total number of employees at the end of the year were 460 (2000: 434).
23.4 Corresponding figures
Previous year's figures, wherever necessary, have been rearranged for the purpose of
comparison.
Chairman Chief Executive Director
Pattern of Share-holdings
as on 30 June, 2001
No of Shareholding Total Shares held
Shareholders From To Ordinary Shares of
Rs. 10/Each
10 1 100 406
592 101 500 280,200
335 501 1,000 314,700
674 1,001 5,000 2,028,000
166 5,001 10,000 1,319,800
67 10,001 15,000 898,500
31 15,001 20,000 594,500
27 20,001 25,000 614,000
26 25,001 30,000 751,500
7 30,001 35,000 239,500
6 35,001 40,000 235,000
10 40,001 45,000 436,000
19 45,001 50,000 936,000
4 50,001 55,000 210,000
2 55,001 60,000 112,500
4 60,001 65,000 261,000
4 65,001 70,000 273,000
1 70,001 75,000 70,500
1 75,001 80,000 80,000
3 80,001 85,000 248,500
1 90,001 95,000 91,000
5 95,001 100,000 498,500
1 100,001 105,000 103,500
3 105,001 110,000 324,500
3 120,001 125,000 370,500
3 125,001 130,000 379,500
1 130,001 135,000 133,500
2 135,001 140,000 277,500
2 145,001 150,000 300,000
2 150,001 155,000 309,500
2 155,001 160,000 315,500
3 165,001 170,000 501,500
1 195,001 200,000 199,000
1 205,001 210,000 210,000
1 210,001 215,000 214,100
1 235,001 240,000 237,500
1 280,001 285,000 284,500
1 330,001 335,000 334,100
1 385,001 390,000 390,000
1 405,001 410,000 408,500
1 525,001 530,000 529,500
1 610,001 615,000 614,500
1 925,001 930,000 929,000
1 1,155,001 1,160,000 1,159,000
1 1,245,001 1,250,000 1,247,000
1 1,485,001 1,490,000 1,486,200
1 2,095,001 2,100,000 2,100,000
1 2,665,001 2,670,000 2,670,000
1 4,715,001 4,720,000 4,715,500
1 9,345,001 9,350,000 9,350,000
2 15,285,001 15,290,000 30,579,400
1 15,300,001 15,305,000 15,302,099
1 84,840,001 84,845,000 84,841,994
------------------ ------------------
2,041 171,310,499
========== ==========
CATEGORIES OF NUMBER OF SHARES PERCENTAGE
SHAREHOLDERS SHARE HELD
HOLDERS
INDMDUAL 1,948 11,166,606 6.52
INTESTMENT COMPANIES 8 2,136,700 1.25
INSURANCE COMPANIES 3 127,000 0.07
JOINT STOCK COMPANIES 60 5,505,900 3.22
FINANCIAL INSTITUTIONS 9 7,119,700 4.15
MODARBA COMPANIES 6 411,100 0.23
FAUJI FOUNDATION 1 84,841,994 49.53
FCCL EMPLOYEES TRUST 1 2,100,000 1.23
FOREIGN INVESTORS 5 57,901,499 33.80
------------------ ------------------ ------------------
2,041 171,310,499 100%
========== ========== ==========
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