| Rupali Polyester Limited |
|
|
|
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|
|
| Annual
Report 2001 |
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| Contents |
|
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| Financial
Highlights |
|
| Directors'
Report to the Shareholders |
|
| Notice
of Meeting |
|
| Auditors'
Report to the Members |
|
| Balance Sheet |
|
|
| Profit
and Loss Account |
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| Cash
Flow Statement |
|
| Statement
of Changes in Equity |
|
| Notes
to the Accounts |
|
| Pattern
of Shareholding |
|
|
|
| Corporate
Data |
|
|
| Board
of Directors |
|
| Jafferali
M. Feerasta |
|
| Chairman |
|
|
|
| Badruddin
J. Feerasta |
|
| Chief Executive |
|
|
| Muhammad
Rashid Zahir |
Amiruddin J. Feerasta |
|
| Nooruddin
B. Feerasta (Sr.) |
Amin A. Feerasta |
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|
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|
Abdul Hayee |
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|
Secretary |
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|
Fateh Mohammad Khera |
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Bankers |
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| ABN
AMRO Bank N.V. |
American Express Bank
Ltd. |
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| Citibank, N.A. |
|
Credit Agricole Indosuez |
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| Faysal
Bank Limited |
The Global French Bank |
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| Habib Bank Ltd. |
|
MashreqBank psc |
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|
Metropolitan Bank Ltd. |
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|
Muslim Commercial Bank Limited |
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|
Societe Generale The French and International Bank |
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|
Soneri Bank Limited |
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Standard Chartered Bank |
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Standard Chartered Grindlays Bank Limited |
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Union Bank Limited |
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Auditors |
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Qavi & Co. |
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|
Chartered Accountants |
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| Registered
Office |
Plant |
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| 4th
Floor, IEP Building |
30.2 Kilometer |
|
| 97-B/D-
1 Gulberg III |
Lahore-Sheikhpura Road |
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| Lahore-54660 |
|
Sheikhupura-39350 |
|
| PAKISTAN |
|
PAKISTAN |
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|
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| Profile |
|
|
| Rupali
Polyester Limited was incorporated at Karachi in |
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| May
1980 as a Public Limited Company. It owns and |
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| operates
composite facilities for manufacture of polyester |
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| fiber
and filament yam. The Company has the privilege of |
|
| possessing
the pioneer status in Pakistan for manufacturing |
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| of
staple fiber and filament yarn. Since its inception, the |
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| Company
has grown steadily through expansion and |
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| diversified
operation and the assets now employed have |
|
| increased
to over Rs. 2,532 million from the initial capital |
|
| outlay
of Rs. 150 million with which the Company installed |
|
| its
first plant at the inception stage. |
|
|
| The
Company has polyester filament yarn making capacity |
|
| of
30 M. tons per day, a polymerization unit with a |
|
|
|
| capacity
of 105 M. tons per day and polyester staple fiber |
|
|
| capacity
of 65 M. tons per day. The various products of |
|
|
| Rupali
are in fact import substitution as these were |
|
|
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| previously
imported from Japan, Indonesia, Taiwan and |
|
|
| Korea
but the Company through its in-house expertise and |
|
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| innovative
research had developed techniques for producing |
|
|
| them
indigenously. |
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|
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| Since
very first day, the philosophy of the Company's |
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| management
is to grow on the strength of quality and |
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| reliability.
With this prime objective it is maintaining a well |
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| equipped
and well established Research and Development |
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| Centre
for standard maintenance, innovative improvements |
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| in
its products and achieving economies in production |
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| techniques
without compromising on standard and quality of |
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| products.
Products and services offered by the Company are |
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| acknowledged
by the customers to be of the highest quality |
|
| and
the Company is considered to be the most reliable and |
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| prestigious
one. That is why the products of Rupali are the |
|
| first
preference of the customers. |
|
|
| The
Company gives high priority to customers' satisfaction |
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| and
provides after sales service and continuous suppliability |
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| of the products. |
|
|
| AL
HAMDO LILLAH, the Company enjoys good prestige |
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| and
reputation among the industrial sector. It is quoted on all |
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| the
three Stock Exchanges of the country. It also stands |
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| amongst
major national exchequer contributors striving for |
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| stabilization
of national economy. |
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|
| Financial
Highlights |
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|
|
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|
|
|
(Rupees in million) |
|
|
|
1997 |
1998 |
1999 |
2000 |
1999 |
|
|
|
|
| Sales (Net) |
|
2,317.947 |
2,075.672 |
1,812.277 |
2,175.164 |
2,666.457 |
|
| Profit
before Tax |
206.705 |
128.750 |
135.307 |
257.777 |
556.918 |
|
| Profit after Tax |
|
135.170 |
92.001 |
67.243 |
140.409 |
407.475 |
|
| Income
Tax - Current |
71.535 |
36.749 |
45.644 |
90.616 |
128.220 |
|
| - Prior years |
-- |
-- |
-- |
4.380 |
0.612 |
|
| - Deferred |
-- |
-- |
22.420 |
22.372 |
20.611 |
|
| Sales Tax |
|
388.974 |
261.372 |
252.283 |
326.354 |
403.214 |
|
| Excise Duty |
|
46.694 |
18.194 |
17.539 |
19.943 |
20.161 |
|
| Gross
assets employed |
2,464.095 |
2,249.311 |
2,231.178 |
2,120.666 |
2,504.941 |
|
| (excluding
capital work-in-progress) |
|
|
| Shareholders
equity |
1,398.103 |
1,404.933 |
1,369.970 |
1,374.105 |
1,611.237 |
|
| Long term loan |
|
0 |
0 |
0 |
0 |
0 |
|
| Debt/Equity
ratio |
00:100 |
00:100 |
00:100 |
00:100 |
00:100 |
|
| Earning
per share before tax-Rs. |
6.07 |
3.78 |
3.97 |
7.57 |
16.35 |
|
| Dividend
(percentage) |
30 |
25 |
30 |
40 |
50 |
|
| Production
volume (M. tons) |
30,532 |
29,807 |
30,068 |
29,049 |
31,719 |
|
| Number
of employees |
1216 |
1185 |
1266 |
1281 |
1356 |
|
|
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|
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|
|
| Directors'
Report to the Shareholders |
|
|
|
| It
gives me immense pleasure to welcome you on behalf of the Board of Directors
to the twenty-first annual general meeting |
|
| and
present the Directors' report together with audited accounts of the Company
for the year ended30 June 2001. |
|
|
| Financial
Results: |
|
Rs. in '000 |
|
| Net
profit before taxation |
|
556,918 |
|
| Provision
for taxation |
|
149,443 |
|
|
|
|
------------------ |
|
| Profit
after taxation |
|
407,475 |
|
| Un-appropriated
profit brought forward |
|
1,930 |
|
|
|
|
------------------ |
|
| Profit
available for appropriation |
|
409,405 |
|
|
| Appropriations: |
|
|
| Proposed
final cash dividend @ 50% (2000: @ 40%) |
170,343 |
|
| Transfer
to general reserve |
|
235,000 |
|
|
|
|
|
------------------ |
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|
|
|
|
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|
405,343 |
|
|
|
------------------ |
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| Balance
carried forward |
|
4,062 |
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|
------------------ |
|
| Earning per
share after tax |
|
Rs.11.96 |
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|
========== |
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|
|
| Overview |
|
| During
the period under review, overall performance of your Company has improved.
This result was not the outcome of policy |
|
| measures
adopted by the Government to redress the problems, which the industry has
been facing for many years, but |
|
| devaluation
of Pak rupee has resulted in increase of sale prices in rupee term. There is
an increase in quantitative sales of |
|
| polyester
fiber and filament yarn but that does not constitute a very significant part
of profit increase. Due to downward trend in |
|
| international
market, the prices of imported raw material namely PTA remained stable
whereas the prices of MEG decreased. |
|
|
| An
old problem of illegal dumping of polyester filament yarn and fiber from
Far-Eastern countries at dumping prices |
|
| continues
to affect the Polyester industry in Pakistan adversely. It has been brought
to the attention of the |
|
| Government
on several occasions that massive dumping of imported polyester fiber and
filament yarn has crippling |
|
| effects
on local industry. If it is allowed to continue, the local manufacturers
would not be able to survive and ultimately |
|
| have
to close down their plants resulting in heavy losses to National Exchequer as
the local polyester industry is a |
|
| major
contributor of taxes to the Government. To our dismay, Government has not
made any sufficient |
|
| arrangement
to implement the anti-dumping law. Filament Yarn Manufacturers Association
has also made several |
|
| representations
at different forums including National Tariff Commission (NTC) for review of
government duty structure to |
|
| remove
the anomalies being faced by local industry due to cheap import of polyester. |
|
|
| The
operating results for the year ended 30 June 2001 reflect comparatively a
better position as compared to the previous year. |
|
| Sales
revenue amounted to Rs. 2,667 million in the year 2001 showing an increase of
23% over Rs. 2,175 million in |
|
| 2000.
Profit before tax during the year under review recorded an increase to Rs.
557 million from Rs. 258 million in 2000. |
|
| Profit
after tax rose to Rs. 407 million from Rs. 140 million in the preceding year.
This included an amount of Rs. 199.50 million |
|
| (US$
3 50 million) received as out of court settlement with supplier of plant and
machinery. This settlement resulted in the increase in |
|
| pre-tax
profit as indicated above. |
|
|
| The
provision for deferred taxation is required to be made by 30 June 2003 under
International Accounting Standard |
|
| (IAS
Rev. 12) to account for the difference in income tax so far accumulated due
to timing difference. |
|
|
|
|
| Administration,
selling and general expenses increased to Rs. 136.03 million from Rs. 92.15
million in 2000. There is a |
|
| reduction
of 38% in financial charges to Rs. 24.34 million this year from Rs. 39.14
million in the previous year. Prudent management |
|
| of
borrowed funds and improved cash flow enabled the Company to achieve saving
in financial charges. |
|
|
| Board
of Directors |
|
| During
the year ended 30 June 2001, no change occurred in composition of the Board
and the Directors elected for the current |
|
| term
are continuing. |
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|
| Future Outlook |
|
| The
Polyester Fiber and Filament Yarn industry is badly affected by the aftermath
of the September 11 event. |
|
|
| The
above event has completely changed the scenario of the world economy. Textile
sector, major consumer of our products, |
|
| has
been affected drastically resulting into substantial decline of our sales to
this sector. After September 11, our monthly |
|
| sales
have gone down by over 20% and this trend is persisting. |
|
|
| Substantial
expansion in polyester fiber industry is coming in the year 2002 due to which
the demand/supply position of fiber |
|
| will
be affected, and as a result the sale prices of polyester staple fiber will
come under pressure. |
|
|
| Furthermore,
local polyester staple fiber and filament yarn prices will also fall due to
slowdown in the downstream textile |
|
| sector.
Consequently profitability is likely to remain under pressure owing to
fluctuation in raw material prices and reduction |
|
| in
demand in local market. |
|
|
| In
the Budget for the year 2001-2002, the import duty has been reduced on
polyester yarn from 35% to 20%, plus 5% |
|
| regulatory
duty. With this reduction of 10% the prices of 1ocal filament yam will be
depressed. |
|
|
| Countrywide
unrest has considerably affected our production efficiency. As a result, our
profit margin may shrink. |
|
|
| Dividend |
|
| Your
directors are pleased to propose a dividend @ 50% i.e. Rs. 5.00 per share of
Rs. 10/- each for the year ended 30 |
|
| June 2001. |
|
|
|
| Auditors |
|
| M/s
Qavi & Co. Chartered Accountants retire and being eligible offer
themselves for re-appointment. |
|
|
| Pattern
of Shareholding |
|
| A
statement showing the pattern of shareholding in the Company as at 30 June
2001 as required under Section 236 of the |
|
| Companies
Ordinance 1984 appears on page 30. |
|
|
| Change
of Registered Office from Karachi to Lahore. |
|
| As
resolved in the preceding Extra-ordinary General Meeting held on 30August
2001 and duly confirmed by |
|
| Securities
& Exchange Commission of Pakistan through Order dated 17 October 2001,
the registered office of the Company |
|
| has
been shifted from Karachi in the Province of Sindh to Lahore in the Province
of Punjab. |
|
|
| Labor
Management Relations |
|
| Cordial
relations were maintained between the management and labor during this year
and we wish to place on |
|
| record
our appreciation for the dedication and hard work demonstrated by employees
at every level for the progress and |
|
| growth
of the Company. |
|
|
| A
Note of Gratitude |
|
| The
Directors wish to place on record their appreciation for the co-operation
extended by the Ministries of |
|
| Finance,
Industries, Commerce and Communication. We also owe our thanks to the
Department of Customs, |
|
| Central
Excise and Government of the Punjab for their co-operation. We appreciate the
patronage and confidence placed |
|
| in
the Company by the development financial institutions and commercial banks.
We are thankful to our valued customers |
|
| and
expect more pleasant business relationship with them. To our shareholders we
are grateful for their faith in the Company. |
|
| We
greatly value their trust. |
|
|
|
|
On behalf of the Board |
|
|
|
|
|
|
| Lahore |
|
|
Jafferali M. Feerasta |
|
| 22
November 2001 |
|
Chairman |
|
|
|
| Statement
of Changes in Equity |
|
| for
the year ended 30 June 2001 |
|
|
|
|
Amount in Rs. '000 |
|
|
|
Ordinary |
|
|
|
Share |
Capital |
Revenue |
Accumulated |
|
|
|
Capital |
Reserve |
Reserve |
Profit |
Total |
|
|
|
|
| Balance
as on 30 June 1999 |
340,685 |
71,490 |
953,000 |
4,795 |
1,369,970 |
|
| Net
Profit for the year ended 30 June 2000 |
-- |
-- |
-- |
140,409 |
140,409 |
|
| Final
Dividend @ 40% |
-- |
-- |
-- |
(136,274) |
(136,274) |
|
| Transferred
to Revenue Reserve |
-- |
-- |
7,000 |
(7,000) |
-- |
|
|
|
------------------ |
------------------ |
------------------ |
------------------ |
------------------ |
|
| Balance
as on 30 June 2000 |
340,685 |
71,490 |
960,000 |
1,930 |
1,374,105 |
|
| Net
Profit for the year ended 30 June 2001 |
-- |
-- |
-- |
407,475 |
407,475 |
|
| Proposed
Final Dividend @ 50% |
-- |
-- |
-- |
(170,343) |
(170,343) |
|
| Transferred
to Revenue Reserve |
-- |
-- |
235,000 |
(235,000) |
-- |
|
|
|
------------------ |
------------------ |
------------------ |
------------------ |
------------------ |
|
| Balance
as on 30 June 2001 |
340,685 |
71,490 |
1,195,000 |
4,062 |
1,611,237 |
|
|
|
========== |
========== |
========== |
========== |
========== |
|
|
|
Badruddin J. Feerasta |
|
Nooruddin B. Feerasta (Sr.) |
|
|
Chief Executive |
|
Director |
|
|
|
| Notes
To The Accounts |
|
| for
the year ended 30 June 2001 |
|
|
| 1.
The Company and its Operations |
|
|
| 1.1
The Rupali Polyester Limited was registered in Pakistan on 24 May 1980 as a
Public Limited Company and is |
|
| listed on the Karachi, Lahore and Islamabad
Stock Exchanges. |
|
|
| 1.2
The Company is engaged in the manufacture and sale of Polyester Products. |
|
|
| 2.
Summary of Significant Accounting Policies |
|
|
|
|
| 2.1
Accounting Convention |
|
| These
accounts have been prepared under the historical cost convention. The Company
has not adopted any |
|
| procedure
to determine the impact on the accounts of specific price changes in the
general level of prices. |
|
|
| 2.2
Staff Retirement Benefits |
|
|
|
| The
staff retirement benefits schemes are partly funded and partly unfunded. |
|
|
|
|
| The
Company has an Approved Provident Fund Scheme administered by its trustees. |
|
|
|
|
| An
unfunded Gratuity Scheme For the Company employees is also in operation.
Annual provision is made in |
|
| the
accounts to cover obligation under the scheme For staff and workers whereas
for executive employees, |
|
| provision
is made on completion of the qualifying period under the scheme. |
|
|
|
|
| 2.3
Fixed Capital Expenditure and Depreciation |
|
|
| Operating
fixed assets except freehold land are stated at cost less accumulated
depreciation. Freehold land |
|
| and
capital work-in-progress are stated at cost. |
|
|
|
| Depreciation
on operating fixed assets is calculated on reducing balance method. |
|
|
|
|
| Depreciation
on additions during the year is charged for the Full year irrespective of the
date of addition. |
|
| No
depreciation is charged on disposals during the year. |
|
|
|
|
| Maintenance
and normal repairs are charged to income as and when incurred. Major renewals
and |
|
| improvements
are capitalized. |
|
|
|
|
|
|
| Gains
and losses, if any, on disposal of assets are taken to profit and loss
account. |
|
|
|
|
| 2.4
Stores, Spares and Loose Tools |
|
|
| Stores,
spares and loose tools are valued at moving average cost. |
|
|
|
|
| Goods-in-transit
are valued at cost comprising invoice value and other charges paid thereon. |
|
|
|
|
| 2.5
Stock-in-Trade |
|
|
|
| Raw
and packing materials are valued at moving average cost. Work-in-process is
valued at average cost |
|
| whereas
finished goods are valued at lower of average cost and net realizable value.
Cost includes prime cost |
|
| and
appropriate portion of production overheads. |
|
|
|
|
|
| Goods-in-transit
are valued at cost comprising invoice value and other charges paid thereon. |
|
|
| 2.6
Rate of Exchange |
|
| Transactions
in foreign currencies are recorded using the rate of exchange ruling at the
date of transaction. |
|
| Monetary
assets and monetary liabilities denominated in foreign currencies are
established using the rate |
|
| of
exchange ruling at the balance sheet date except for liabilities covered
under forward exchange |
|
| contracts
which are translated at the contractual rate. Gain or loss in translation at
the year end has been |
|
| taken to income. |
|
|
|
|
| 2.7 Taxation |
|
|
|
|
|
|
| Current |
|
|
|
| Provision
for current taxation is based on current rates of tax after taking into
account tax credit available |
|
| under
the Income Tax Ordinance, 1979. |
|
|
|
|
|
|
| Deferred |
|
|
|
| Provision
for deferred taxation is based on apportionment over 5 years commencing from |
|
| 30
June 1999 to 30 June 2003. The extent of deferred taxation provided is
disclosed in Note 22. |
|
|
| 2.8
Revenue Recognition |
|
| Revenue
from sales is recognized on despatch of goods to customers. |
|
|
| 2.9
Presentation |
|
|
| a)
Figures in these accounts have been rounded off to the nearest thousand
rupees. |
|
|
|
|
| b)
Figures of the previous year have been re-arranged, wherever necessary, for
the purpose of |
|
| comparison. |
|
|
|
|
|
|
|
Amount in
Rs. '000 |
|
|
|
2001 |
2000 |
|
|
|
|
| 3.
Issued, Subscribed and Paid Up Capital |
|
|
| No. of Shares |
|
|
| 9,690,900 |
Ordinary Shares of Rs. 10
each fully paid in |
|
|
cash |
|
|
96,909 |
96,909 |
|
|
|
|
| 19,933,895 |
Ordinary Shares of Rs. 10
each issued against |
|
|
non-repatriable
investment |
|
199,339 |
199,339 |
|
|
| 4,443,719 |
Ordinary Shares of Rs. 10
each issued as Bonus |
|
|
Shares |
|
44,437 |
44,437 |
|
| ------------------ |
|
|
------------------ |
------------------ |
|
| 34,068,514 |
|
|
340,685 |
340,685 |
|
| ========== |
|
|
========== |
========== |
|
|
|
|
|
|
|
Amount in
Rs.'000 |
|
|
|
|
2001 |
2000 |
|
| 4. Reserves |
|
| Capital Reserve: |
|
|
| -
Premium on Ordinary Share Capital |
|
71,490 |
71,490 |
|
| Revenue
Reserve: |
|
|
| -
General Reserve |
|
1,195,000 |
960,000 |
|
|
|
------------------ |
------------------ |
|
|
|
1,266,490 |
1,031,490 |
|
|
|
========== |
========== |
|
|
|
|
| 5.
Short Term Finances |
|
| Running
Finance Utilized Under Mark-up |
|
| Arrangements
- Secured |
|
99,916 |
92,757 |
|
|
|
|
| Term
Finance Utilized Under Mark-up |
|
|
| Arrangements
- Secured |
|
200,000 |
142,000 |
|
|
|
------------------ |
------------------ |
|
|
|
299,916 |
234,757 |
|
|
|
|
========== |
========== |
|
|
| 5.1
The facilities for running finance and term finance available from various
commercial banks under |
|
| mark-up
arrangements amount to Rs. 970 million (2000: Rs. 950 million) with mark-up
rate up to |
|
| 13.75%
for running finance and for term finance, the mark-up was ranging between
9.40% to 13.25%. |
|
| These
are secured by way of hypothecation charge over current assets to the extent
of Rs. 1,345.533 |
|
| million
and promissory notes valuing Rs. 1,662.497 million. |
|
|
|
|
|
| 5.2
The aggregate facility available for opening letters of credit from various
commercial banks amount to |
|
| Rs.
1,815 million (2000: Rs. 1,335 million) of which Rs. 252.615 million were
utilize at 30 June 2001 |
|
| (2000:
Rs. 132.742 million). |
|
|
|
|
| 6.
Advances, Deposits, Retentions and Other Payables |
|
| Advances
from Customers |
|
853 |
2,694 |
|
| Payable
to Foreign Contractors |
|
-- |
37,263 |
|
| Deposits |
|
619 |
686 |
|
| Retentions |
|
180 |
228 |
|
| Collector
of Customs |
|
5,373 |
5,373 |
|
| Other Payables |
|
70,073 |
97,380 |
|
|
|
------------------ |
------------------ |
|
|
|
77,098 |
143,624 |
|
|
|
========== |
========== |
|
|
| 7.
Creditors And Accrued Expenses |
|
| Creditors |
|
|
22,315 |
26,379 |
|
| Accrued
Expenses |
|
|
21,408 |
21,530 |
|
| Mark-up
Accrued on Secured Short Term Finances |
|
11,397 |
7,315 |
|
| Income
Tax Deducted at Source |
|
|
165 |
260 |
|
| Sales
Tax Payable |
|
|
645 |
7,938 |
|
| Workers'
Profit Participation Fund |
7.1 |
30,422 |
14,455 |
|
| Workers'
Welfare Fund |
|
|
11,018 |
4,767 |
|
| Unclaimed
Dividend |
|
|
482 |
368 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
97,852 |
83,012 |
|
|
========== |
========== |
|
|
| 7.1
Workers Profit Participation Fund |
|
| Balance
Brought Forward |
|
14,455 |
7,703 |
|
| Allocation
for the year |
|
29,939 |
13,993 |
|
|
|
------------------ |
------------------ |
|
|
|
44,394 |
21,696 |
|
|
| Less:
Amount paid to the trustees of the fund |
|
2,712 |
2,715 |
|
| Deposited
with the Government |
|
|
11,260 |
4,526 |
|
|
|
------------------ |
------------------ |
|
|
|
13,972 |
7,241 |
|
|
|
------------------ |
------------------ |
|
|
|
30,422 |
14,455 |
|
|
|
========== |
========== |
|
|
| 8.
Contingencies and Commitments |
|
|
|
|
|
|
| 8.1
Counter guarantees issued to different organizations in the normal course of
business amounted to |
|
| Rs.
4.038 million (2000: Rs. 3.788 million). |
|
|
|
|
| 8.2
Commitments in respect of capital expenditure contracted but not incurred
amounted to |
|
| Rs.
Nil (2000: Rs. 0.775 million). |
|
|
| 8.3
Commitments against foreign irrevocable letters of credit are Rs. 252.615
million |
|
| (2000:
Rs. 132.742 million). |
|
|
|
|
| 9.
Operating Fixed Assets |
|
|
|
|
|
|
|
|
Amount in Rs. '000 |
|
|
|
|
|
|
|
|
|
|
COST |
|
DEPRECIATION |
