| Pakistan Engineering Company Limited |
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| Annual
Report 2001 |
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| CONTENTS |
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| Company
Information |
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| Notice
of Meeting |
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| Chairman's
Review |
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| Directors'
Report |
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| Auditors'
Report to the Shareholders |
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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 |
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| Pattern
of Share Holding |
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| Ten
Years Summary |
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| COMPANY
INFORMATION |
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| BOARD
OF DIRECTORS |
Mian Suhail Aslam
(Chairman) |
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|
Mr. M. Imtiaz-ur-Raheem
(Chief Executive) |
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|
Mr. Yasin Tahir |
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|
Mr. Jawaid Iqbal Mufti |
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|
Mr. Mohammad Shabbir Alam |
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|
Mr. S. Zubair Ahmad |
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|
Syed Aijaz Ali Abbasi |
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|
Mr. Liaqat Mohammad |
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|
Mr. Mohammad Shabir Malik |
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|
Sheikh Asif Salam |
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| COMPANY
SECRETARY |
Mr. Muhammad Aslam Javaid |
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| BANKERS |
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National Bank of Pakistan |
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United Bank Limited |
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Habib Bank Limited |
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American Express Bank
Limited |
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Emirates Bank
International Limited |
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| AUDITORS |
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S.M. Masood & Company |
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Chartered Accountants |
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| REGISTERED
OFFICE |
6-Ganga Ram Trust
Building, |
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Shahrah-e-Quaid-e-Azam, |
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Lahore. |
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| BRANCHES |
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Karachi |
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Islamabad |
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Peshawar |
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Quetta |
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| PLANT |
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Kot Lakhpat, Lahore. |
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| NOTICE
OF ANNUAL GENERAL MEETING |
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| Notice
is hereby given that the 52nd Annual General Meeting of Pakistan Engineering
Company |
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| Limited
will be held at Hotel Ambassador, 7 - Davis Road, Lahore, on Saturday,
December 22, |
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| 2001
at 10.30 a.m. to transact the following business:- |
|
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| 1.
To confirm the minutes of 51st Annual General Meeting held on December 23,
2000. |
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| 2.
To receive, consider and adopt the Audited Accounts of the company for the
year ended June |
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| 30,
2001 together with the Auditors' and Directors' reports thereon. |
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| 3.
To appoint Auditors for the year ending June 30, 2002 and fix their
remuneration. The |
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| present
Auditors M/s. S.M. Masood & Company, Chartered Accountants, being
eligible for |
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| reappointment
have offered themselves for reappointment. |
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| 4.
To transact any other business with the permission of the Chair. |
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|
BY ORDER OF THE BOARD |
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| November
17, 2001 |
|
(Muhammad Aslam Javaid) |
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| Lahore |
|
Company Secretary |
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| NOTES: |
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| 1.
The Share Transfer Books of the company shall remain closed from December 10,
2001 to |
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| December
22, 2001 (Both days inclusive). |
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| 2.
A member entitled to attend and vote at this meeting is entitled to appoint
any person as a |
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| proxy
and vote on his / her behalf. Proxies in order to be effective must be
received at the |
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| Registered
Office of the Company not less than 48 hours before the time of the meeting. |
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| 3.
Any individual Beneficial Owner of CDC, entitled to attend and vote at this |
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| Meeting,
must bring his/her NIC or passport to prove his/her identity and in case of
Proxy |
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| must
enclose an attested copy of his/her NIC or Passport. Representatives of
corporate |
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| members
should bring the usual documents required for such purpose. |
|
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| 4.
The shareholders are requested to notify the change of address, if any,
immediately. |
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| CHAIRMAN'S
REVIEW |
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| It
is great pleasure for me to welcome you, on behalf of the Board of Directors
to the 52nd Annual |
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| General
Meeting of the company and present to you its Audited Accounts for the year
ended June |
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| 30,
2001 along-with Auditors' Report. |
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|
| OVERVIEW |
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| Before
discussing the operating results, I would like to give the overall view of
the situation in which |
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| your
company operated. The company participated in two WAPDA International Tenders
of 500 KV |
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| Electricity
Transmission Towers for transmitting electricity generation from Ghazi -
Brotha power |
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| house.
The transmission lines Brotha-Rewat & Rewat-Lahore were tendered in July
2000 and April |
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| 2001
financed by Islamic Development Bank (IDB) and Kuwait Fund respectively.
Number of |
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| participating
countries increased, resulting in very tough competition. Due to some
factors, the final |
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| decision
was delayed by the financing agencies particularly IDB. Although your company
was |
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| recommended
by WAPDA for awarding both these contracts, however only
Rewat-Lahore section |
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| contract
valuing Rs.380 million has been awarded very recently to your company. |
|
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| In
addition to this as mentioned in previous year report under "Future
Outlook", WAPDA has now |
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| finalized
and issued LOI to Central China Power Group (CCPG), for 500 KV
Muzzafargarh-Gatti |
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| line
(bidder's financing) with whom your company entered into MOU in September,
2000, for supply |
|
| of
towers against this contract. Therefore, we expect a business of approximately Rs.350 million |
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| from
CCPG, China. |
|
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| In
order to make your company a viable organization, and improve its
profitability company |
|
| management
submitted an operational plan in June 2000, with closing down of loss
contributing |
|
| products,
and pay off the employees of those shops as well as reduce employees of
proposed shops to |
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| be
operated. The loss contributing shops were closed under Government decision,
however, |
|
| necessary
funds to pay off employees were not provided, which adversely affected the
loss position. |
|
|
| Pak
Rupee devalued by 23% during the year under review. It resulted in imported
material, local |
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| material,
and energy cost increase. |
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| OPERATING
RESULTS |
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| In
spite of the above, your company could have made higher sales during the year
under review than |
|
| last
year, but could not achieve desired results due to following reasons |
|
|
| (a)
Orders valuing Rs.200 million could not be executed due to shortage of
working capital, as |
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| salaries
to closed shops had to be paid without work, and NBP refused to increase of
Rs. 100 |
|
| million
in working capital limit. |
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|
|
|
|
| (b)
Abnormal delay in finalization and award of 500 KV Transmission Towers order
against which |
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| export
financing could have been available, and helped in over-coming working
capital |
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| shortage
to a large extent. |
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|
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| (c)
Credit purchases with mark-up and carrying cost of stocks due to delay in
successful testing of |
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| Double
Circuit towers in China, being installed first time in your country. |
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|
|
| (d)
Increase in cost of materials due to devaluation of local currency, and
energy rates increase. |
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| The
sales, therefore, declined by Rs. 122 million 24% over last year. The company
suffered gross |
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| loss,
and net loss for the year increased to Rs. 168 million as against Rs. 110
million last year. |
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| FUTURE
OUTLOOK: |
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| Two
packages of 220 KV lines financed by JBIC, on turn-key basis were tendered
during the years |
|
| 1999
& 2000. Package-I deal has been finalized by WAPDA with M/s. Sichuan
Electric Company, |
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| China.
Your company had quoted price of towers to Chinese firm for this Package, and |
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| understanding
was reached with them during last year visit. The value of towers in this
contract shall |
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| be
approximately Rs.450 million. Package-II was re-tendered and opened in
November, 2001. M/s. |
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| ICC,
Lahore are lowest, and your company has already made a consortium with them
for supply of |
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| 220
KV towers valuing approximately Rs. 120 million |
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| There
is lot of business of Pumps during the year under review and next year
particularly in |
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| Baluchistan
and Sind provinces, to overcome shortage of water supply. The schemes are
being |
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| financed
by foreign lending agencies. |
|
|
| The
Privatization Commission is presently actively working to sell Badami Bagh
land, proceeds of |
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| which
shall be utilized to pay SBP Bonds and other Government Departments
liabilities. The |
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| financial
position shown in the Balance Sheet, shall greatly improve after the
adjustment of these |
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| liabilities. |
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| ACKNOWLEDGEMENT: |
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| Relations
between the management and the employees continued to be cordial. I
acknowledge the |
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| hard
work and dedication put in by the management and employees for yet another
turbulent year of |
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| operation.
I am thankful to you, the shareholders, for your continued confidence in us. |
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|
|
|
MIAN SUHAIL ASLAM |
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|
CHAIRMAN |
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|
|
| DIRECTORS'
REPORT |
|
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| The
Directors have pleasure in presenting the 52nd Annual Report with the Audited
Accounts and |
|
| the
Auditors' Report thereon for the year ended June 30, 2001. |
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|
| Financial
results are as follows: |
|
|
|
(RS IN
THOUSAND) |
|
|
|
Year ended |
Year ended |
|
|
|
30.06. 2001 |
30.06.2000 |
|
|
| Loss
before taxation |
|
|
200,857 |
109,026 |
|
| Taxation
(Turnover Tax) |
|
|
2,085 |
2,557 |
|
| Loss
after taxation |
|
|
202,942 |
111,583 |
|
| Loss
Brought Forward |
|
|
1,208,321 |
1,096,738 |
|
| Accumulated
Losses |
|
|
1,411,263 |
1,208,321 |
|
| Earning/(Loss)
Per Share (Rs.) |
|
|
(35.66) |
(19.61) |
|
|
| Closed Shops |
|
| During
the year Machine Tool & Power Loom shops were closed down as per decision
of the Board |
|
| of
Directors. Bicycle shop was operated to consume the available inventories.
Electric Motor shop |
|
| operations
were curtailed to produce motors to be coupled with pumps only. |
|
|
| Assets
Held For Sale |
|
| Surplus
machinery lying un-installed at Kot Lakhpat Works and machinery of closed
down Power |
|
| Loom
& Machine Tool shops have been shifted from operating fixed assets to
assets held for sale at |
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| their
Written Down Value as on 30.06.2000. |
|
|
| Valuation
of Kot Lakhpat Works Land |
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| Valuation
of Kot Lakhpat Works land was up dated during the year and incremental impact |
|
| incorporated
in the books and audited accounts. |
|
|
| Sale
of Badami Bagh Land |
|
| A
piece of 6.105 kanals was sold during the year leaving a balance of 260.495
kanals. The proceeds |
|
| were
paid to CBR against their outstanding custom duty dues. |
|
|
| Chairman's
Review |
|
| The
accompanying Chairman's review deals with the performance of the company
during the year |
|
| and
future outlook. The Directors of the company endorse the contents of the
review. |
|
|
| Board
of Directors |
|
| During
the year under review Mian Suhail Aslam replaced Mr. Hussain Ahmad Siddiqui
as |
|
| Chairman
of the Board and Mr. Yasin Tahir of Ministry of Industries & Production
& Mr. S. Zubair |
|
| Ahmad,
nominee of NIT replaced Prince Abbas Khan and Mr. S. Hashim Ishaque
respectively as |
|
| Directors. |
|
|
| ISO 9001 |
|
| During
the year your company has also obtained ISO 9001 certification for design and |
|
| manufacturing
of all types of Electric Motors. |
|
|
| Auditors |
|
| The
present Auditors M/s S.M. Masood & Company, Chartered Accountants, being
eligible, offer |
|
| themselves
for re-appointment. |
|
|
| Pattern
of Shareholding |
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| The
pattern of shareholding as on June 30, 2001 is annexed. |
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|
|
|
On behalf of the Board |
|
|
|
|
|
| November 17, 2001 |
|
(Mian Suhail Aslam) |
|
| Lahore. |
|
Chairman |
|
|
|
|
|
| AUDITORS'
REPORT TO THE MEMBERS |
|
|
| We
have audited the annexed balance sheet of Pakistan Engineering Company
Limited as at |
|
| June
30, 2001 and 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 purpose 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 material misstatements. An
audit |
|
| includes
examining, on 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)
The company during the year has suffered the after tax loss of Rs. 202.942
million |
|
| resulting
in an accumulated loss of Rs. 1,411.263 million as at June 30, 2001. The |
|
| company
is under heavy debt burden and its long term and short term liability to the |
|
| government
and its institutions is of Rs. 1,565.372 million in shape of principal and |
|
| outstanding
interest. These factors raise doubt as to the "Going Concern
Assumption", |
|
| the
basis on which financial statements have been prepared. |
|
|
|
|
| (b)
The outstanding principal amount of Rs. 86.984 million on account of customs
and |
|
| other
import duties (see Note No. 23.2) is subject to interest @ 14 % per annum
which |
|
| comes
to Rs. 70.820 million, for the current and prior years, has not been
accounted for. |
|
| The
management is of the view that the interest on such loan is to be paid by the |
|
| Privatization
Commission out of sale proceeds of the assets of the company. But the |
|
| confirmation
of management's view from Privatization Commission is not available. |
|
| Therefore,
it becomes liability of the company. |
|
|
|
| (c)
Company has violated the provisions of section 227 of the Companies
Ordinance, 1984 |
|
| by
making default in payments of provident fund contributions to PECO Employees |
|
| Provident
Fund Trust. Total outstanding principal amounts to Rs. 48.631 million and |
|
| markup
on outstanding balance of principal amounts to Rs. 46.399 million. |
|
|
| (d)
in our opinion, proper books of accounts have been kept by the company as
required by |
|
| the
Companies Ordinance, 1984; |
|
|
|
| (e)
in our opinion, |
|
|
| (i)
the balance sheet and profit and loss account together with the notes thereon
have been |
|
| drawn
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; |
|
|
| (f)
in our opinion, except for the matter referred to in paragraph (a) to (c)
above and to the |
|
| extent
to which it effects the result of the Company, 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 the 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/loss, its cash flow and changes in equity
for the year |
|
| then ended; and |
|
|
|
|
| (g)
in our opinion, no Zakat was deductible at source under the Zakat and Ushr
Ordinance, 1980. |
|
|
| Dated:
November 17,2001 |
|
S.M. MASOOD & CO. |
|
| Place: Lahore |
|
|
Chartered Accountants |
|
|
|
| BALANCE
SHEET AS AT JUNE 30, 2001 |
|
|
|
Note |
2001 |
2000 |
|
|
|
(Rupees in
Thousand) |
|
|
|
|
| TANGIBLE
FIXED ASSETS |
|
3 |
1,501,121 |
916,531 |
|
| ASSETS
SUBJECT TO FINANCE LEASE |
4 |
2,349 |
2,936 |
|
| LAND
HELD FOR SALE |
|
5 |
314,724 |
322,100 |
|
| CAPITAL
WORK IN PROGRESS |
6 |
351 |
351 |
|
|
|
|
|
------------------ |
------------------ |
|
|
|
|
|
1,818,545 |
1,241,918 |
|
| STATE
ENGINEERING CORPORATION PENSION FUND |
7 |
9,420 |
5,944 |
|
| LONG
TERM SECURITY DEPOSITS |
|
2,106 |
2,106 |
|
| LONG
TERM INVESTMENTS |
|
8 |
201 |
191 |
|
| DEFERRED
COST |
|
9 |
849 |
2,822 |
|
|
|
|
|
------------------ |
------------------ |
|
|
|
1,831,121 |
1,252,981 |
|
|
|
|
|
|
| CURRENT
ASSETS |
|
|
|
| Loose Tools |
|
|
|
25,274 |
25,741 |
|
| Stores & Spares |
|
10 |
102,996 |
113,584 |
|
| Assets
held for Sale |
|
11 |
52,229 |
28,393 |
|
| Stock in Trade |
|
12 |
225,638 |
290,897 |
|
| Trade Debtors |
|
13 |
208,221 |
232,972 |
|
| Loans
& Advances to Employees |
|
14 |
7,640 |
8,127 |
|
| Advances
to Others |
|
15 |
26,411 |
17,568 |
|
| Trade
Deposits, Prepayments & Other Receivables |
16 |
29,843 |
36,581 |
|
| Cash
& Bank Balances |
|
17 |
1,615 |
3,075 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
679,867 |
756,938 |
|
|
|
|
|
| CURRENT
LIABILITIES |
|
|
|
| Short
Term Loans |
|
18 |
263,984 |
326,455 |
|
| Current
Maturity Against Finance Lease |
26 |
755 |
614 |
|
| Deposits
& Advance Payments |
|
19 |
40,152 |
24,562 |
|
| Trade Creditors |
|
20 |
94,377 |
110,873 |
|
| Accrued
Liabilities / Mark-up |
|
21 |
112,105 |
30,658 |
|
| Provision
for Taxation |
|
|
2,096 |
3,776 |
|
| Unclaimed
Dividend |
|
|
1,903 |
1,903 |
|
| Other Liabilities |
|
22 |
143,989 |
68,886 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
659,361 |
567,727 |
|
|
|
|
------------------ |
------------------ |
|
| CURRENT
ASSETS LESS CURRENT LIABILITIES |
20,506 |
189,211 |
|
|
|
|
------------------ |
------------------ |
|
| TOTAL
ASSETS LESS CURRENT LIABILITIES |
|
1,851,627 |
1,442,192 |
|
| CONTINGENCIES
& COMMITMENTS |
23 |
0 |
0 |
|
|
|
|
|
|
|
| LONG
TERM & DEFERRED LIABILITIES |
|
|
| Government
Loans |
|
24 |
548,146 |
566,846 |
|
| Federal
Government Bonds |
|
25 |
787,442 |
787,442 |
|
| Liabilities
Against Assets Subject to Finance Lease |
26 |
2,229 |
2,984 |
|
| Deferred
Liabilities |
|
|
60,498 |
61,196 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
1,398,315 |
1,418,468 |
|
|
|
|
------------------ |
------------------ |
|
| NET
TOTAL ASSETS |
|
|
453,312 |
23,724 |
|
|
|
|
========== |
========== |
|
|
|
|
|
|
|
| REPRESENTED
BY |
|
|
|
| Share Capital |
|
27 |
56,902 |
56,902 |
|
| Revenue
Reserve-General |
|
|
10,000 |
10,000 |
|
| Accumulated
Loss |
|
|
(1,411,263) |
(1,208,321) |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
(1,344,361) |
(1,141,419) |
|
| Revaluation
Surplus |
|
28 |
1,797,673 |
1,165,143 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
453,312 |
23,724 |
|
|
========== |
========== |
|
|
| The
annexed notes from 1 to 46 form an integral part of these accounts. |
|
|
|
M. IMTIAZ-UR-RAHEEM |
|
SYED AIJAZ ALI ABBASI |
|
MOHAMMAD SHABIR MALIK |
|
|
(Chief Executive) |
|
(Director) |
|
(Director) |
|
|
|
| PROFITAND
LOSS ACCOUNT |
|
| FOR
THE YEAR ENDED JUNE 30, 2001 |
|
|
|
Note |
2001 |
2000 |
|
|
|
(Rupees in
Thousand) |
|
|
|
|
|
| SALES |
|
29 |
388,901 |
511,501 |
|
| COST
OF GOODS SOLD |
|
30 |
449,264 |
505,407 |
|
|
|
|
------------------ |
------------------ |
|
| GROSS
PROFIT/(LOSS) |
|
|
(60,363) |
6,094 |
|
|
|
|
|
|
| OPERATING
EXPENSES |
|
|
|
|
| General
& Administrative |
|
31 |
52,884 |
49,040 |
|
| Selling
& Distribution |
|
32 |
16,976 |
15,778 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
69,860 |
64,818 |
|
|
|
|
------------------ |
------------------ |
|
| OPERATING
LOSS |
|
|
(130,223) |
(58,724) |
|
|
|
|
|
|
| FINANCIAL
CHARGES |
|
33 |
63,211 |
47,014 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
(193,434) |
(105,738) |
|
|
|
|
|
|
| OTHER
INCOME / (CHARGES) |
|
34 |
25,775 |
(4,175) |
|
|
------------------ |
------------------ |
|
| PRIOR
YEAR ADJUSTMENTS |
|
35 |
(33,198) |
887 |
|
|
|
|
|
------------------ |
------------------ |
|
| LOSS
BEFORE TAXATION |
|
|
(200,857) |
(109,026) |
|
| TAXATION |
|
|
36 |
2,085 |
2,557 |
|
|
|
|
|
------------------ |
------------------ |
|
| LOSS
AFTER TAXATION |
|
|
(202,942) |
(111,583) |
|
| LOSS
BROUGHT FORWARD |
|
|
(1,208,321) |
(1,096,738) |
|
|
|
|
------------------ |
------------------ |
|
| ACCUMULATED
(LOSS) |
|
(1,411,263) |
(1,208,321) |
|
|
========== |
========== |
|
|
|
Rupees |
Rupees |
|
|
|
|
|
| LOSS
PER SHARE |
|
37 |
(35.66) |
(19.61) |
|
|
|
|
========== |
========== |
|
|
| The
annexed notes from 1 to 46 form an integral part of these accounts. |
|
|
|
M. IMTIAZ-UR-RAHEEM |
|
SYED AIJAZ ALI ABBASI |
|
MOHAMMAD SHABIR MALIK |
|
|
(Chief Executive) |
|
(Director) |
|
(Director) |
|
|
|
| CASH
FLOW STATEMENT |
|
| FOR
THE YEAR ENDED JUNE 30, 2001 |
|
|
|
Note |
2001 |
2000 |
|
|
|
(Rupees in
Thousand) |
|
|
| Net
Profit/(loss) before taxation |
|
(200,857) |
(109,026) |
|
| Adjustments
for: |
|
|
|
| Depreciation |
|
|
13,832 |
17,025 |
|
| Amortization
of leased assets |
|
587 |
734 |
|
| Financial
charges |
|
63,211 |
47,014 |
|
| Provision
for bad debts |
|
21 |
819 |
|
| Provision
for gratuity and pension |
|
37,761 |
13,205 |
|
| Provision
for diminution in value of investments |
|
0 |
124 |
|
| Deferred
cost amortized |
|
1,973 |
5,753 |
|
| (Profit)
on sale of tangible fixed assets |
|
(13,399) |
(2,456) |
|
