| Fauji Cement Company Limited |
|
|
|
|
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|
|
| Annual
Report 2001 |
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|
| 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: |
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61-Harley Street,
Rawalpindi Cantt, Pakistan |
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|
|
Tel (051) 5515512,
5514474, 5514965 |
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Fax: (051) 5517311 |
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|
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| * Plant Site: |
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Near Village Jhang,
Tehsil Fateh Jhang |
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|
District Attock |
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Tel: 0596-538047-48 |
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|
Fax: 0596 - 538025 |
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|
|
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| *
Marketing/Sales |
|
M-40-1, 1st Floor, Hotel
Pakland, |
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| Department |
|
Bank Road, Saddar |
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|
Rawalpindi - Pakistan |
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Tel: (051) 5528960-64 |
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|
Fax: (051) 5528965-66 |
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|
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| * Auditors: |
|
A.F. Ferguson & Go. |
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|
|
Chartered Accountants |
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|
|
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| *
Legal Advisers: |
|
Orr, Dignam & Co.
Advocates. |
|
|
|
M/s Rizvi & Rizvi,
Advocates |
|
|
|
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| *
Registration & |
|
Mr. Taqi Ahmad Khan |
|
| Shares
Transfer |
|
Shares Manager |
|
| Office |
|
345-A, Harely Street,
Rawalpindi Cantt |
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|
|
Tel: (051) 5567496 |
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|
|
| 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 |
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| 10:00
A.M. on Wednesday, 12 December 2001 at Hotel Pearl Continental, The Mall,
Rawalpindi, to |
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| 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. |
|
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| 4.
To appoint Auditors for the Financial Year ending 30 June 2002. |
|
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| 5.
Any other business with the permission of the Chair. |
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|
|
By order of the Board |
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|
|
|
|
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| 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 |
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| 15
December 2001 (both days inclusive). No transfer will be accepted for
registration during |
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| this period. |
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|
|
|
|
| 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 |
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| than
48 hours before the Meeting. A member may not appoint more than one proxy.
Proxy form |
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| is attached. |
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|
|
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| 3.
Shareholders are requested to promptly notify any change in their address. |
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|
|
| 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 depre |
