| AZAM TEXTILE MILLS LIMITED |
|
|
|
|
|
|
| ANNUAL
REPORT 2004 |
|
|
| BOARD
OF DIRECTORS |
|
|
Mr. M.
Naseem Saigol |
|
|
Mr. M. Azam Saigol |
Chairman / Chief
Executive |
|
|
Mr. Shahid Sethi |
|
|
Mr. Muhammad Athar Rafiq |
|
|
Mr. Muhammad Asif Bajwa |
|
|
Mr. Saeed Mian Ansari |
|
|
Mr. Muhammad
Imran Khalil |
(NIT Nominee) |
|
|
| AUDIT
COMMITTEE |
|
|
Mr. M.
Azam Saigol |
Chairman/Member |
|
|
|
Mr.
Shahid Sethi
|
Member |
|
|
|
Mr.
MuhammadAsif Bajwa |
Member |
|
|
| COMPANY
SECRETARY |
|
|
Mr. Sultan AH |
|
|
| CHIEF
FINANCIALOFFICER |
|
|
Mr. Muhammad Shamil, ACA |
|
| AUDITORS |
|
|
M/s Manzoor Hussain Mir
& Co. |
|
|
Chartered Accountants |
|
|
| BANKERS |
|
|
Askari Commercial Bank
Limited |
|
|
Bank Alfalah Limited |
|
|
Faysal Bank Limited |
|
|
Habib Bank Limited |
|
|
Muslim Commercial Bank |
|
|
National Bank of Pakistan |
|
|
Prime Commercial Bank
Limited |
|
|
Union Bank Limited |
|
|
United Bank Limited |
|
|
| REGISTERED
OFFICE |
|
|
17-Aziz Avenue, Canal
Bank |
|
|
Gulberg-V, Lahore |
|
|
Tel:
5717364-65&5718274-75 |
|
|
Fax: 5715105. E-mail:
shares(S>,saigols.com |
|
|
| MILLS |
|
|
51-KM.MultanRoad, |
|
|
Bhai Pheru, District
Kasur |
|
|
| KEY
OPERATING AND FINANCIAL DATA |
|
|
| Particulars |
|
2004 |
2003 |
2002 |
2001 |
2000 |
1999 |
|
|
(,000) |
(,000) |
(,000) |
(,000) |
(,000) |
(,000) |
|
| Sales - Net |
|
283,644 |
570,656 |
540,799 |
586,711 |
561,915 |
636,579 |
|
| Gross Profit |
|
17,398 |
5,364 |
38,688 |
36,356 |
115,772 |
45,098 |
|
| Profit/(Loss)
Before Tax |
-16,512 |
-51,816 |
-21,684 |
-38,806 |
35,991 |
-27,023 |
|
| Profit/(Loss)
After Tax |
-18,239 |
-55,599 |
-22,706 |
-28,057 |
33,136 |
-30,157 |
|
| Share Capital |
|
132,750 |
132,750 |
132,750 |
132,750 |
132,750 |
132,750 |
|
| Shareholders
Equity |
-93,241 |
-89,268 |
-92,275 |
-69,911 |
-41,854 |
-71,762 |
|
| Fixed
Assets - Net |
460,086 |
426,680 |
449,670 |
466,758 |
486,814 |
519,067 |
|
| Total Assets |
|
544,057 |
756,492 |
757,195 |
750,788 |
746,046 |
752,865 |
|
| Bank Borrowings |
|
219,733 |
219,521 |
238,056 |
232,271 |
210,628 |
315,081 |
|
| RATIOS |
|
|
| Profitability: |
|
|
| Gross
Profit Margin |
6.13 |
0.94 |
7.15 |
620 |
20.6 |
7.08 |
|
| Profit/(Loss)
After Tax |
-6.43 |
-9.74 |
(4-14) |
-4.78 |
5.9 |
-4.74 |
|
| (Loss)/Earning
Per Share - Rs. |
-1.37 |
-4.19 |
-1.71 |
-2.11 |
2.5 |
-2.27 |
|
| Activity: |
|
|
| Sales
to Fixed Assets - Times |
0.62 |
134 |
120 |
126 |
1.15 |
123 |
|
| Liquidity: |
|
|
| Current
Ratio - Times |
1.16 |
0.62 |
0.89 |
1.03 |
0.84 |
0.76 |
|
| Break
Up Value Per Share - Rs. |
-7.02 |
-6.72 |
-6.95 |
-5.27 |
-3.15 |
-5.41 |
|
|
| DIRECTORS'
REPORT |
|
| Your
Directors take pleasure of presenting before you the Annual Report along with
the Audited accounts of the |
|
| Company
for the year ended September 30,2004. |
|
|
| OVERVIEW
OF INDUSTRY |
|
| Visualizing
the increased role in quota free global market, textile industry has
witnessed substantial investment during |
|
| the
current and past few years but it will be hard to keep the momentum in the
wake of global recession. |
|
|
| Lint
Cotton Supply and rates remain volatile through out the year and cotton
prices in local market touched unprecedented |
|
| height
of Rs. 3,7007- per maund level and New York future touch $.84 level affecting
the textile industry very badly. |
|
|
| OPERATING
& FINANCIAL RESULTS |
|
| Inspite
of abnormal prices of raw cotton in local and international market your
company was able to achieve much better |
|
| results
as compared to last year. |
|
|
| The
turn over of the company has gone down to 283.644 million as compared to
570.656 million last year mainly due to |
|
| production
of Super Fine Count Yarn ranging from 52/1 to 80/1 Yarn during the year as
compared to production of course |
|
| yarn
during last year. Inspite of reduced turn over the Gross Profit Ratio has
registered an increase of 5.2% as compared |
|
| to
last year. The over all financial results are not so encouraging only due to
unfavourable cotton prices. |
|
|
| FUTURE
OUT LOOK |
|
| For
the revival of this unit we have devised an expansion plan for Rs.75.000
million consisting 18 Ring Frames to be |
|
| imported
from China, two Auto Cone Winders and major alteration/expansion in the
existing building. By this expansion |
|
| we
will be able to utilize our idle back process resulting from conversion of
our production line to Super Fine Count. After |
|
| this
proposed expansion we will be able to fully utilize our available resources
and coupled with good cotton prices |
|
| prevailing
in local as well international market. We hope that the coming year will be
Insha Allah very good for our |
|
| company. |
|
|
| To
finance proposed expansion plan and for improving liquidity position of the
Company, Director of your Company |
|
| have
provided interest free loan of Rs. 60.000 million to the Company during the
year and have applied to National Bank |
|
| of
Pakistan for new financing of Rs. 30.000 million. |
|
|
| We
are giving note wise comments on the observation recorded by the Auditors in
their report. |
|
|
| i)
Loans amounting to Rs.15.766 million be classified as long term because the
repayment period of these loans is |
|
| not
yet determined. |
|
|
| ii)
Accounting Policy for valuation for gratuity has been changed to comply with
the requirements of I AS 19 as |
|
| applicable
in Pakistan. |
|
|
| iii)
The Collector Sales Tax Multan vide its letter C.No.213/99/Text.Rec/ST/8724
dated 11-06-2004 has allowed |
|
| us
repayment of this liabilities in equal installments of Rs. 1.000 million each
starting from approximately Oct. 2005 |
|
| onward
on the basis of this repayment package we have shown this balances under the
head deferred liability. |
|
|
| iv) L/C Margin be grouped with current
assets and is shown accordingly. |
|
|
| STATEMENT
IN COMPLIANCE TO THE CODE OFCORPORATE GOVERNANCE |
|
| The
Directors state that: |
|
|
| The
financial statements, prepared by the management of the Company, present
fairly its state of affairs, the result |
|
| of
its operations, cash flows and changes in equity. |
|
|
| Proper
books of account of the Company have been maintained. |
|
|
| Appropriate
accounting policies have been consistently applied in preparation of
financial statements and |
|
| accounting
estimates are based on reasonable and prudent judgment. |
|
|
| International
Accounting Standards, as applicable in Pakistan, have been followed in
preparation of financial |
|
| statements. |
|
|
| The
system of internal control is sound in design and has been effectively
implemented and monitored. |
|
| There
are no significant doubts upon the Company's ability to continue as a going
concern. |
|
|
| There
has been no material departure from the best practices of corporate
governance, as detailed in the listing |
|
| regulations. |
|
|
| There
are no outstanding statutory payments on account of duties, levies and
charges. |
|
|
| Significant
deviation from last year in operating results of the Company and reasons
thereof have been explained. |
|
|
| The
Key operating and Financial Data of Last Six Years is attached to the Report. |
|
|
| There
are no significant plans for corporate restructuring and discontinuation of
operations except for improvement |
|
| in
the normal business activities to increase the business. |
|
|
| The
company operates an un-funded gratuity scheme covering all its permanent
employees who attained the |
|
| minimum
qualification period. Provision is being made to comply with the requirements
of IAS-19 as applicable in |
|
| Pakistan |
|
|
| Directors
meeting of the Board of Directors of the Company during the year under review
were Four (4), held or |
|
| January
09,2004, January 29,2004, May 29,2004 and July 31,2004 Following was the
attendance of the Directors:- |
|
|
| NAME
OF DIRECTOR |
NO. OF MEETING ATTENDED |
|
| Mr.
M. Naseem Saigol |
4 |
|
| Mr.
M. Azam Saigol |
4 |
|
| Mr. Shahid Sethi |
|
4 |
|
| Mr.
Muhammad Ilyas Bajwa |
2 |
|
| Mr.
MuhammadAsif Bajwa |
3 |
|
| Mr.
Saeed Mian Ansari |
2 |
|
| Mr.
Muhammad Athar Rafiq |
1 |
|
| Mr.
Muhammad Imran Khalil |
1 |
|
|
| Since
the last General Meeting Mr. Muhammad Ilyas Bajwa resigned and in his place
Mr. Muhammad Athar Rafiq |
|
| appointed
as Director for the remaining of the term of office of outgoing director. We
wish to place on record our |
|
| appreciation
for the valuable contribution made by Mr. Muhammad Ilyas Bajwa during the
tenure of his |
|
| directorship. |
|
|
| The
Company has not declared any dividend due to heavy losses. |
|
|
| The
Chief Executive Officer, Directors, Chief Financial Officer, Company
Secretary and their spouse and minor |
|
| children
have made no sale/purchase of Company's shares during the year. |
|
|
| PATTERN
OFSHARE HOLDING |
|
| A
statement showing Pattern of Share Holding as on 30.09.2004 is Annexed. |
|
|
| CHANGE
OF FINANCIAL YEAR |
|
| The
Securities and Exchange Commission of Pakistan (SECP) has, vide its Circular
No. 29 of 2004 dated November 05, |
|
| 2004,
referred to SRO No. 684(1)72004 dated August 10,2004 issued by the Central
Board of Revenue (CBR) directing a |
|
| change
in the close of accounting year of cotton textile industry from September to
June. A clarification in this regard has |
|
| also
been issued by CBR which states that the first annual accounts after the
change shall be prepared by the cotton |
|
| textile
industry for nine months ending on June 30,2005. |
|
|
| The
above-referred circular also states that no further approval of SECP shall be
required by the companies for change |
|
| in
the accounting year. In order to comply with the requirements, your Company
has also changed the close of its |
|
| accounting
year from September to June. Therefore, the next annual accounts shall be
prepared for nine months ending |
|
| on
June 30,2005. The first and second interim accounts for the periods ending on
December 31,2004 and March 31,2005, |
|
| respectively,
shall also be prepared and circulated in routine. |
|
|
| RECOGNITION |
|
| The
directors take this opportunity to thank all the Share Holders and the
Bankers of the company for their continued |
|
| support
during the year. Your directors also place on record their appreciation of
the contribution made by the staff at all |
|
| levels,
for their commendable team work, dedicated and enthusiastic efforts made
during the year for the smooth and |
|
| satisfactory
running of the company. |
|
|
| STATEMENT
OF COMPLIANCE WITH THE |
|
| CODE
OF CORPORATE GOVERNANCE |
|
| This
statement is being presented to comply with the Code of Corporate Governance
contained in Regulation No. 37,43 |
|
| and
36 of listing regulations of the Karachi, Lahore and Islamabad Stock
Exchanges for the purpose of establishing a |
|
| framework
of good governance, whereby a listed company is managed in compliance with
the best practices of corporate |
|
| governance. |
|
|
| The
Company has applied the principles contained in the Code in the following
manners: |
|
|
| 1. The Board of the Company comprises of
five non-executive and two executive directors. At present there is no |
|
| representation
of independent non-executive director and director representing minority
shareholders on the |
|
| Board
of the Company. We shall encourage their representation in the forthcoming
elections. |
|
|
| 2. The directors have confirmed that
none of them is serving as a director in more than ten listed companies, |
|
| including
this Company. |
|
|
| 3. All the resident directors of the
Company are registered as taxpayers and none of them has defaulted in payment |
|
| of
any loan to a banking company, a DPI or an NBFI or, being a member of a stock
exchange, has been declared as |
|
| a
defaulter by that stock exchange. |
|
|
| 4. The casual vacancies occurred in the
Board on July 31,2004 was filled up on the same day. |
|
|
| 5. The Company has prepared a 'Statement
of Ethics and Business Practices' which has been signed by all the |
|
| directors
and employees of the Company. |
|
|
| 6. The Board has developed a
vision/mission statement, overall corporate strategy and significant policies
of the |
|
| Company.
A complete record of particulars of significant policies along with the dates
on which they were |
|
| approved
or amended has been maintained. |
|
|
| 7. All the powers of the Board have been
duly exercised and decisions on material transactions, including appointment |
|
| and
determination of remuneration and terms and conditions of employment of the
Chief Executive Officer and |
|
| other
executive directors, have been taken by the Board. |
|
|
| 8. The meeting of the Board were
presided over by the Chairman and, in his absence, by a director elected by
the |
|
| Board
for this purpose and the Board met at least once in every quarter. Written
notices of the Board meetings, |
|
| along
with agenda and working papers were circulated at least seven days before the
meetings. The minutes of |
|
| the
meetings were appropriately recorded and circulated. |
|
|
| 9. The Board arranged an orientation
course for its directors during the year to apprise them of their duties and |
|
| responsibilities. |
|
|
| 10. The Board has approved appointment of
Chief Financial Officer, Company Secretary and Head of Internal Audit, |
|
|
| including
their remuneration and terms and conditions of employment, as determined by
the Chief Executive |
|
| Officer. |
|
|
| 11. The directors' report for this year
has been prepared in compliance with the requirements of the Code and fully |
|
| describes
the salient matters required to be disclosed. |
|
|
| 12. The financial statements of the
Company were duly endorsed by Chief Executive and Chief Financial Officer |
|
| before
approval of the Board. |
|
|
| 13. The directors, Chief Executive Officer
and executive do not hold any interest in the shares of the Company other |
|
| than
that disclosed in the pattern of shareholding. |
|
|
| 14. The Company has complied with all the
corporate and financial reporting requirements of the Code. |
|
|
| 15. The Board has formed an audit
committee. It comprises three members, of whom two are non-executive
directors. |
|
| An
executive director is the Chairman of the committee. |
|
|
| 16. The meetings of the audit committee
were held at least once every quarter prior to approval of interim and final |
|
| results
of the Company and as required by the Code. The terms of reference of the
committee have been formed |
|
| and
advised to the committee for compliance. |
|
|
| 17. The Board has set-up an effective
internal audit function, members of which are considered suitably qualified
and |
|
| experienced
for the purpose and are conversant with the policies and procedures of the
Company and they are |
|
| involved
in the internal audit function on a full time basis. |
|
|
| 18. The statutory auditors of the Company
have confirmed that they have been given a satisfactory rating under the |
|
| Quality
Control Review program of the Institute of Chartered Accountants of Pakistan,
that they or any or the |
|
| partners
of the firm, their spouses and minor children do not hold shares of the
Company and that the firm and all |
|
| its
partners are in compliance with International Federation of Accountants
(IFAC) guidelines on code of ethics |
|
| as
adopted by Institute of Chartered Accountants of Pakistan. |
|
|
| 19. The statutory auditors or the persons
associated with them have not been appointed to provide other services |
|
| except
in accordance with the listing regulations and the auditors have confirmed
that they have observed IFAC |
|
| guidelines
in this regard. |
|
|
| 20. We confirm that 11 other material
principles contained in the Code have been complied with. |
|
|
| REVIEW
REPORT TO THE MEMBERS ON STATEMENT OF COMPLIANCE |
|
| WITH
BEST PRACTICES OF CODE OF CORPORATE GOVERNANCE |
|
| We
have reviewed the Statement of Compliance with the best practices contained
in the Code of Corporate Governance |
|
| prepared
by the Board of Directors of AZAM TEXTILE MILLS LIMITED to comply with the
Listing Regulation No. 37 |
|
| of
the Karachi Stock Exchange (Guarantee) Limited, Listing Regulation's Chapter
No. XIII of the Lahore Stock Exchange |
|
| (Guarantee)
Limited and Listing Regulations No. 36 of the Islamabad Stock Exchange
(Guarantee) Limited where the |
|
| Company
is listed. |
|
|
| The
responsibility for compliance with the Code of Corporate Governance is that
of the Board of Directors of the |
|
| Company.
Our responsibility is to review, to the extent where such compliance can be
objectively verified, whether the |
|
| Statement
of Compliance reflects the status of the Company's compliance with the
provisions of the Code of Corporate |
|
| Governance
and report if it does not. Areview is limited primarily to inquiries of the
Company personnel and review of |
|
| various
documents prepared by the Company to comply with the Code. |
|
|
| As
part of our audit of financial statements we are required to obtain an
understanding of the accounting and internal |
|
| control
systems sufficient to plan the audit and develop an effective audit approach.
We have not carried out any special |
|
| review
of the internal control system to enable us to express an opinion as to
whether the Board's statement on internal |
|
| control
covers all controls and the effectiveness of such internal controls. |
|
|
| Based
on our review, except for observations expressed in our audit report if any
affecting the compliance with Code of |
|
| Corporate
Governance, nothing has come to our attention, which causes us to believe
that the Statement of Compliance |
|
| does
not appropriately reflect the Company's compliance, in all material respects,
with the best practices contained in the |
|
| Code
of Corporate Governance. |
|
|
| AUDITORS'
REPORT TO THE MEMBERS |
|
| We
have audited the annexed balance sheet of AZAM TEXTILE MILLS LIMITED as at
30* September, 2004 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
the 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
accounts 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 except for
change in accounting |
|
| policy
as stated in Note No. 7.1 with which we concur; |
|
|
| (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, except for incorrect classification of short term loans Rs. 15.766
Million, as long term loans at Note |
|
| No.
5.3 sales tax liability Rs. 60.476 Million as deferred liability at Note No.
7.2 and classification of L/C advance |
|
| for
import of machinery as current assets at Note 15.5 instead a part of capital
asset and extent to which the notes |
|
| referred
to may affect, 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 30th September, 2004 and of the loss, its cash flows and |
|
| changes
in equity for the year then ended; and |
|
|
| Attention
is also invited to Note No. 2.6(b), 7.1 (i) & (iv), 9.2 and 15.2. |
|
|
| (d) in our opinion no Zakat was deductible
at source under the Zakat and Ushr Ordinance, 1980 |
|
|
| BALANCE
SHEET |
|
| AS
AT 30 SEPTEMBER, 2004 |
|
|
|
Note |
2004 |
2003 |
|
| SHARE CAPITAL |
|
|
Rupees |
Rupees |
|
| Authorised:
15,000,000 ordinary shares of Rs. 10/- each |
|
150,000,000 |
150,000,000 |
|
| Issued,
subscribed and paid-up |
|
3 |
132,750,000 |
132,750,000 |
|
| Accumulated
Loss |
|
|
-225,990,845 |
-222,018,169 |
|
|
|
-93,240,845 |
-89,268,169 |
|
| SURPLUS
ON REVALUATION OFFTXED ASSETS |
4 |
277,863,651 |
255,132,835 |
|
| LONG
TERM FINANCES |
|
5 |
101,489,000 |
94,985,000 |
|
| LONG
TERM LOANS |
|
6 |
101,329,697 |
41,329,697 |
|
| DEFERREDLIABILITY |
|
7 |
65,794,434 |
5,089,322 |
|
| CURRENT
LIABILITIES Current portion of long |
|
|
| term finances |
|
5 |
30,150,000 |
37,919,002 |
|
| Short
term finances |
|
8 |
88,093,502 |
78,055,747 |
|
| Creditors,
accruals and other liabilities |
9 |
49,865,886 |
135,091,532 |
|
| Unclaimed
dividend |
|
|
102,700 |
102,700 |
|
|
|
168,212,088 |
251,168,981 |
|
| CONTINGENCIES
AND COMMITMENTS |
10 |
- |
- |
|
|
|
|
621,448,025 |
558,437,666 |
|
|
|
|
Note |
2004 |
2003 |
|
|
|
|
Rupees |
Rupees |
|
| OPERATING |
|
|
|
| FIXED ASSETS |
|
11 |
460,085,956 |
426,679,900 |
|
| SECURITY
DEPOSITS |
|
|
537,210 |
317,060 |
|
| CURRENT
ASSETS Stores, spares and |
|
|
| loose tools |
|
12 |
4,963,376 |
5,421,791 |
|
| Stock-in-trade |
|
13 |
117,545,981 |
70,578,000 |
|
| Trade debtors |
|
14 |
399,530 |
10,300,341 |
|
| Advances,
deposits, prepayments and other receivables |
15 |
37,356,264 |
44,106,627 |
|
| Cash
and bank balances |
|
16 |
559,708 |
1,033,947 |
|
|
|
|
160,824,859 |
131,440,706 |
|
|
|
|
621,448,025 |
558,437,666 |
|
|
| PROFIT
AND LOSS ACCOUNT |
|
| FOR
THE YEAR ENDED 30 SEPTEMBER, 2004 |
|
|
|
|
|
Note |
2004 |
2003 |
|
|
|
|
Rupees |
Rupees |
|
| SALES -Net |
|
17 |
283,644,232 |
570,655,891 |
|
| COST OF SALES |
|
18 |
266,246,101 |
565,292,353 |
|
| GROSS PROFIT |
|
|
17,398,131 |
5,363,538 |
|
| ADMINISTRATIVE
AND SELLING EXPENSES |
19 |
17,007,232 |
26,597,012 |
|
| OPERATING(LOSS)/PROFIT |
|
|
390,899 |
-21,233,474 |
|
| OTHER INCOME |
|
20 |
565,139 |
2,125,240 |
|
|
|
|
956,038 |
-19,108,234 |
|
| FINANCIAL
CHARGES |
|
21 |
17,455,633 |
