| National Foods Limited |
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| Annual
Report 2001 |
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| CONTENTS |
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| Board
of Directors |
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| Chairman's
Review |
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| Chief
Executive's Report |
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| Notice
of Meeting |
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| Financial
Ratios & Graphs |
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| Auditors'
Report to the Members |
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| Balance Sheet |
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|
| Profit
& Loss Account |
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| Cash
Flow Statement |
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| Statement
of Changes in Equity |
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| Notes
to the Accounts |
|
| Pattern
of Share Holding |
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|
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| BOARD
OF DIRECTORS |
|
|
| MR.
A. MAJEED |
Chairman |
|
|
| MR.
ABRAR HASAN |
Managing Director / Chief
Executive |
|
| MR.
WAQAR HASAN |
Director |
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|
| MR.
KHAWAR M. BUTT |
Director |
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| MR.
ZAHID MAJEED |
Director |
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| MR.
EBRAHIM QASSIM |
Director |
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| MS.
JAMILA WAQAR |
Director |
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| MR.
FIRASAT ALI |
Director (N.I.T. Nominee) |
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| MR.
HABIB A. ISMAIL KHAIRANI |
Company Secretary |
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| REGISTERED
OFFICE |
12/CL-6, Claremont Road,
Civil Lines, Karachi-75530. |
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|
P.O. Box No. 15509 |
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Phones: 5662687, 5670540,
5670585, 5670646, 5670793, |
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& 5672268 Fax No:
5684870 & 5671225 |
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| AUDITORS |
|
RIAZ AHMAD, SAQIB, GOHAR
& COMPANY, |
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|
Chartered Accountants, |
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5-Nasim Co-operative
Housing Society Ltd., |
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|
Major Nazir Bhatti Road, |
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|
Off Shaheed-e-Millat
Road, Karachi. |
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|
Phones: 4945427- 4946112
Fax: 4932629 |
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14-Banglore Town Housing
Society, |
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|
Sharea-e-Faisal,
Karachi-75350. |
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Phones: 4546978-4520121
Fax: (92-21) 4314962 |
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| BANKERS |
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BANK AL-HABIB LIMITED |
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|
Mackinnons Building, I.
I, Chundrigar Road, Karachi |
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Phones: 2412986 (10
lines) Fax: 2419752 |
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S.I.T.E. Branch. |
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Plot: # B/76 S.S.
Chambers S.I.T.E., Karachi. |
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Phones: 2571710-11
(92-21) 2571522 |
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Garden Town Branch |
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Lahore City, |
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Phones: 5869366-8 |
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CITI BANK NA, |
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State Life Building No.
1, I. I. Chundrigar Road, Karachi. |
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Phones: 2412641-50 Fax:
2426773 |
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MUSLIM COMMERCIAL BANK
LIMITED, |
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Clifton Corporate Branch,
Kulsom Court, Clifton, Karachi. |
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Phones: 5872286- 5831835
Fax: 5872058 |
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Wahdat Road Branch,
Lahore. |
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Phone: 5865149 |
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HABIB BANK LIMITED |
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Hub River Road Branch,
Karachi. |
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Phone: 2572197 |
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| CHAIRMAN'S
REVIEW |
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| The
year in review has been excellent on many accounts, following are the few |
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| highlights: |
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| 1. Local Sales |
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|
1,059,358,411 |
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| Increase
over last year |
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|
16.76% |
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| The
Company broke the barrier of ONE BILLION rupees in Local Sales which is a
record. |
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|
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| This
increase market share depicts increasing confidence in Company's products. |
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| My
congratulations to the entire team and our business partners (dealers &
shop keepers) |
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| throughout
Pakistan. |
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|
| 2. Export Sales |
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|
151,955,108 |
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| Increase
over last year |
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|
26.93% |
|
|
| Although
the figures seem satisfactory yet looking at the potential, we have a long
way to |
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| go.
To accelerate the pace in Export Sales, a research study is underway which
will help the |
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| Company
to modify its strategic policies and set up a futuristic organization to deal
with the |
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| potential
markets. |
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| 3.
The improvement in related areas due to better performance in Local &
Export Sales can be |
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| gauged
from the following figures: |
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| a)
Unappropriated Profit |
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|
56,495,027 |
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| Increase
over last year |
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|
34.45% |
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|
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| b) G.P. |
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|
239,910,193 |
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| Increase
over last year |
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|
28.15% |
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| c)
Pre-Tax Profit |
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|
35,686,668 |
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| Increase
over last year |
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|
39.52% |
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|
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| d)
Break up Value of share |
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|
24.73 |
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| Improvement
over last year |
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|
1597% |
|
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| e)
Inventory Control |
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|
88.98 days |
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| Improvement
over last year |
|
|
11.12 days |
|
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| f)
Fund Utilization |
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|
16,405,820 |
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| Improvement
over last year |
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|
0.07% |
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| The
above results evidently point towards systematic and coordinated performance
of al |
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| Management
Pillars i.e. Procurement - Inventory - Production - Marketing and Finance. |
|
|
| RESEARCH
& DEVELOPMENT ACTIVITIES: |
|
| The
objectives set for the year in review were to develop items as extension of
the present |
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| product
ranges for local market. The results are about one dozen products some of
them have |
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| already
become part of Existing Range and others will be added in the near future. |
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| On
Export side, modified products ranges suitable to the specific needs of
various Export Markets |
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| have
been developed which will open new avenues in Export. |
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|
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| The
pressure on R & D has brought the Company closer to many out side sources
in order to |
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| supplement
our efforts. The Management is being guided by Experts through Gap and Need |
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| Analysis. |
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| MAIN TASK: |
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| The
Key Task in front of the Corporate Management is to analyze the main factors
which can pull |
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| the
Company towards a prosperous future on long term basis. Three factors have
been identified: |
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|
| a)
Investment in new Technology |
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|
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| b)
Investment in Human & Social Capital |
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| c)
Investment in Communication & Database Equipment. |
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| Our
share holders may be pleased to know that a New Plot of 10 acres at Port
Qasim has been |
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| acquired.
This will facilitate in housing the future modern equipment thus bringing the
Modern |
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| technology
to the Company in order to compete in the future environment. First phase of
New |
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| Paste
Plant is near finalization. We are determined to bridge the technology gap as
quickly as |
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| possible. |
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| The
new technology brings new culture and new man power requirements. We are
aware of the |
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| needs
of dedicated, educated work force. Our Human Resource Department is
constantly |
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| running
internal and external courses to update the skills of our work force. |
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| A
special Adult Literacy program has been launched during this year with the
aim to make your |
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| Company
100% literate. This year the Literacy has been increased from 88% to 92%.
During the |
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| second
phase i.e. 2001 to 2002 it will be Insha Allah raised to 100%. |
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| Raising
the Human Capital without Social Capital will be lopsided. The purpose of
raising Social |
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| Capital
is to create sufficient trust in the minds of employees towards the
organization so that they |
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| can
share skills with each other and pull together forward thus increasing
productivity, lowering |
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| wastages,
minimizing defects on the floor level. |
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| They
should share the benefits of their efforts as well. |
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| Your
Company is offering the following Direct and Indirect Rewards to our work
force. |
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| REWARDS
AND COMPENSATION: |
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| Performance
Bonus |
|
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| *
Performance Related Pay Increments (PRPI) |
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| *
Excellence Service Award |
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| *
Worker of the year Award |
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| *
Marriage Compensation |
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| *
Medical Compensation |
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| *
Haj & Umrah Scheme |
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| *
Monthly Hygiene & Sanitation Award |
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| *
Transport Facility |
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| *
Gratuity & Provident Fund |
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| *
Uniforms & dry cleaning facility |
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| *
Motor vehicle loans facility. |
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| Apart
from the above benefits and rewards, Company also provide the following
insurance |
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| Coverage: |
|
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| *
Group Insurance |
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| *
Medical Insurance (including critical illness) |
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| *
Personal Accident Insurance |
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| *
Group Provident Fund Insurance |
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|
A. MAJEED |
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|
Chairman |
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|
|
| CHIEF
EXECUTIVE'S ANNUAL REPORT |
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| TO
THE SHAREHOLDERS 2000-2001 |
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| SUMMARY
OF PERFORMANCE |
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| A
good year for National Foods Limited, showing a steady growth, in line with
last years |
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| stated
objective of consolidation. |
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| The
purpose of building financial strength in the company for meeting future
growth |
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| objectives
has now been met through sustained operations and increased |
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| profitability. |
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| I
take pleasure in presenting to you a summary of operational results,
performance indicators |
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| and
analysis in line with corporate objectives of the company. |
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| FINANCIAL
REVIEW |
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| The
company finished the year with a top line growth of |
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| 19.52%
(Net Sales) and a bottom line growth of 39.52% |
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| (Profit
before Tax). |
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| The
local sales grew by 18.50% and the export |
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| registered
a growth of 25.69%. Another milestone for |
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| the
company last year was the achievement of domestic |
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| sale
of Rs. One billion. |
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| With
these operational results, I am very happy to |
|
|
| purpose
the following appropriation: |
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|
2001 |
2000 |
|
|
Rupees |
Rupees |
|
|
|
| APPROPRIATION |
|
|
|
| Profit
after taxation |
|
27,227,848 |
18,503,157 |
|
| Add:
Unappropriated profit brought forward |
|
42,018,793 |
32,654,293 |
|
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|
------------------ |
------------------ |
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| Profit
available for appropriation |
|
69,246,641 |
51,157,450 |
|
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| Interim
dividend Nil (2000: 10%) |
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|
-- |
4,250,538 |
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| Proposed
final dividend @ 30% (2000: 11.5%) |
|
12,751,614 |
4,888,119 |
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|
------------------ |
------------------ |
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|
12,751,614 |
9,138,657 |
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|
------------------ |
------------------ |
|
| Unappropriated
profit carried forward |
|
56,495,027 |
42,018,793 |
|
|
|
|
========== |
========== |
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| As
per above appropriation, the company's performance in terms of Return on
Equity (ROE) is |
|
| 27.82%
which has resulted in increased Earnings per Share (EPS) of 6.41. |
|
|
| OPERATIONAL
REVIEW |
|
|
| The
sales growth is less compared to last year due to continued GST problems at |
|
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| the
retail level. The extra burden of GST for the unregistered distributors has |
|
|
| caused
the retail margins to be squeezed. This has led to a marginal decrease in
sales level. |
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|
|
|
| The
company has done well in containing costs at all levels this year. The
selling and |
|
|
| distribution
has increased, but this was provided for in the budget to combat |
|
|
| competition
and trade level through aggressive promotions and discounts. Also |
|
|
| establishment
of strategic warehouses in key metro areas has resulted in |
|
|
| substantial
gains. |
|
|
|
|
| Overall
inventory levels have been reduced due to better storage and planned |
|
|
| procurement
of materials. This was further aided by the fact of improved GP of 1.77% |
|
|
| a
growth of 28.15% over last year. Financial costs have also decreased due to
better |
|
|
| inventory
utilization. |
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|
|
|
| QUALITY
ASSURANCE |
|
|
| The
Company has last year worked extensively to restructure its Quality Assurance |
|
|
| program.
This was done with the help of Pakistan Institute of Quality Control (PIQC).
The |
|
|
| major
work done was Process Control, Inspection and Sampling Techniques. These |
|
|
| practices
were brought in line with international practices. The organizational |
|
|
| structure
was revamped accordingly and new Quality Assurance setup has been |
|
|
| promulgated.
The company at present is upgrading its ISO 9000 certification to comply with
the |
|
|
| new
ISO 9000:2000 standards. |
|
|
|
| HUMAN
RESOURCE DEVELOPMENT |
|
| As
outlined in Chairman's Report, and as part of his initiative, the Adult
Literacy Program (ALP) |
|
| was
started in the company. This program aims at creating literacy at the lowest
level of workers |
|
| in
a very short time, thus enabling them to basic functions of simple reading
and writing. The |
|
| ultimate
aim of the company is to improve quality of products through participative |
|
| management
of workers at lower level. This would ultimately lead to interactive Quality
Circles. |
|
|
| INVESTMENTS |
|
| The
company has procured 10 acres of land in the Port Qasim Industrial Area. This
land will serve |
|
| as
the expansion ground for all Modern Food Technology projects. The company is
currently |
|
| looking
at expansion in the area of a new Sauce Manufacturing Plant. |
|
|
| This
year the company has also separated the Sales and Marketing offices for both
local and |
|
| international
division to a new location. This was done to cater to the future growth
requirements. |
|
|
| In
line with the growth requirements, the company has invested appropriately in
the |
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| Management
Information Systems. An ERP package has been finalized along with a Group |
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| Collaboration
Software. These systems would help in managing dynamic growth of the company |
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| across
multiple physical locations. |
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|
| FUTURE
PROSPECTS |
|
| The
company will undergo expansion in a new plant and centralized warehousing in
the Port |
|
| Qassim
area. This should further consolidate and reduce the overall manufacturing
costs. |
|
| GST
problems continue to haunt the retail system. The company has reduced trade
prices to |
|
| maintain
the margins for the retailers. The market continues to be under pressure due
to the |
|
| current
economic situation. Purchase power has been appropriately affected. |
|
|
| Export
infrastructure is being rebuilt through a massive export research project.
This data would |
|
| help
us in setting up a dynamic organization to cater for the future opportunities
in international |
|
| markets. |
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|
| AUDITORS |
|
| The
present Auditors Messrs, Riaz Ahmad, Saqib, Gohar & Company, Chartered
Accountants, retire, |
|
| being
eligible, have offered themselves, for re-appointment as auditors for the
year 2001-2002. |
|
|
| PATTERN
OF SHARE HOLDING |
|
| The
Pattern of Share Holding as referred by Section 236 of Companies Ordinance
1984 is |
|
| enclosed. |
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|
|
| MANAGEMENT |
|
| As
always the management and executives of the company have not disappointed the |
|
| shareholders.
Their performance has been exemplary and proactive in terms of combating the |
|
| current
economic situation. Their efforts have been truly reflected in the results of
the company. |
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| I
am very proud to manage such a team as indeed they are the most valuable
asset of the |
|
| company. |
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|
|
|
ABRAR HASAN |
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|
|
Chief Executive |
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|
|
| NOTICE
OF MEETING |
|
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| Notice
is hereby given that the 30th annual general meeting of National Foods
Limited will be |
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| held
at the registered office situated at 12/CL-6, Claremont Road, Civil Lines
Karachi, on Saturday |
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| the
10th November 2001, at 10.00 a.m., to transact the following business: |
|
|
| Ordinary
Business: |
|
|
| 1.
To confirm the minutes of the 29th annual general meeting held on 25th
November 2000. |
|
|
| 2.
To receive, consider and approve the audited accounts for the year ended 30th
June 2001, |
|
|
| 3.
To approve payment of cash dividend @ 30% (Rs. 3,00 per share of Rs. 10 each)
as |
|
| recommended
by the directors. |
|
|
| 4.
To appoint auditors for the year 2001-2002 and to fix their remuneration. The
retiring auditors |
|
| Messrs,
Riaz Ahmad, Saqib, Gohar & Company, Chartered Accountants being eligible,
have |
|
| offered
themselves for re-appointment as auditors, |
|
|
| 5.
To transact any other business with the permission of the Chairman. |
|
|
| Special
Business: |
|
|
| To
increase the meeting attendance fee payable to the directors from Rs. 500/-
to Rs. 1,000/- per |
|
| meeting
and to amend accordingly the Articles of Association of the Company by
passing the |
|
| following
resolution as a special resolution, with or without modification. |
|
|
| "RESOLVED
THAT the meeting attendance fee for the directors be and is hereby increased
from |
|
| Rs.
500/- to Rs, 1,000/- for attending every meeting and accordingly the figure
of Rs, 500 |
|
| appearing
in Article 62 of the existing Articles of Association of the company be and
is hereby |
|
| amended
to read as Rs. 1,000/- with immediate effect." |
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|
|
|
By order of the Chairman |
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|
|
|
|
|
|
|
(HABIB A. ISMAIL KHAIRANI) |
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| Karachi:
19th October, 2001. |
|
Company Secretary |
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|
| NOTES: |
|
|
| 1.
The share transfer books of the Company will remain closed from November
1,2001 to |
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| November
10, 2001 (Both days inclusive). |
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|
|
|
|
| 2.
All members are entitled to attend and vote at the meeting |
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|
|
|
| 3.
A member entitled to attend and vote at the meeting may appoint a proxy to
attend, |
|
| speak
and vote for him/her. A proxy must be a member of the Company, |
|
|
| 4,
In order to be valid, an instrument of proxy and the power of attorney or
other authority |
|
| under
which it is signed, or a notarially certified copy of such power of
authority, must |
|
| be
deposited at the registered office of the Company not less than 48 hours
before the |
|
| time
of the meeting. |
|
|
| 5.
Shareholders are requested to notify immediately any change in their
registered |
|
| address. |
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|
|
|
|
|
| FINANCIAL
RATIOS |
|
|
|
|
1997 |
1998 |
1999 |
2000 |
2001 |
|
|
|
|
|
|
| LIQUIDITY
RATIOS |
|
|
|
| Current Ratio |
|
101 |
1.04 |
1.06 |
1.08 |
1.04 |
|
|
| Acid Test Ratio |
|
0.28 |
0.26 |
0.22 |
0.19 |
0.29 |
|
|
| Defensive
Interval Ratio |
28.38 |
24.31 |
22.00 |
19.75 |
24.67 |
|
|
|
|
|
| ACTIVITY
RATIOS |
|
| Receivable
Turnover |
23.79 |
27.02 |
34.13 |
35.29 |
32.26 |
|
|
| Inventory
Turnover |
4.16 |
4.65 |
4.38 |
3.65 |
4.10 |
|
|
| Asset Turnover |
|
2.37 |
2.70 |
281 |
2.73 |
2.93 |
|
|
|
|
|
| PROFITABILITY
RATIOS |
|
|
|
|
|
| Profit Margin |
|
2.14% |
1.89% |
1.78% |
2.42% |
2.98% |
|
|
| Return
on Assets |
5.08% |
5.09% |
4.99% |
6.60% |
8.72% |
|
|
| Return
on Equity |
13.64% |
13.38% |
14.57% |
21.53% |
27.82% |
|
|
| Earnings
Per Share |
2.58 |
2.57 |
2.69 |
4.35 |
6.41 |
|
|
| Dividend
Per Share |
1.25 |
1.50 |
1.40 |
2.15 |
3.00 |
|
|
|
|
|
|
| COVERAGE
RATIOS |
|
|
|
|
| Debt
/ Equity Ratio |
4.61% |
7.91% |
9.33% |
15.68% |
13.14% |
|
|
| Interest Cover |
|
2.28 |
2.94 |
2.14 |
3.03 |
3.52 |
|
|
|
|
| AUDITORS'
REPORT TO THE MEMBERS |
|
|
| We
have audited the annexed balance sheet of National Foods
Limited as at June 30, 2001 and |
|
| the
related profit & 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 bet 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 state 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 & 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 profit, its cash flows and changes in equity for the year then
ended; and |
|
|
| (d)
in our opinion zakat deductible at source under the Zakat and Ushr Ordinance,
1980 |
|
| (XVIII
of 1980), was deducted by the company and deposited in the Central Zakat Fund |
|
| established
under Section 7 of that Ordinance. |
|
|
|
|
RIAZ AHMAD, SAQIB, GOHAR & CO. |
|
| Karachi:
October 13, 2001. |
|
Chartered Accountants |
|
|
|
| BALANCE
SHEET AS AT 30 JUNE, 2001 |
|
|
|
|
|
2001 |
2000 |
|
|
|
Note |
Rupees |
Rupees |
|
|
| CAPITAL
AND RESERVES |
|
|
|
| Capital |
|
| Authorized
Capital 5,000,000 |
|
| (2000:
5,000,000) ordinary |
|
| Shares
of Rs. 10 each |
|
50,000,000 |
50,000,000 |
|
|
|
|
========== |
========== |
|
| Issued,
subscribed & paid-up capital |
