Bhanero Textile Mills Limited- Annual Reports 2004

BHANERO TEXTLE MILLS LIMITED

ANNUAL REPORT 2004

BOARD OF DIRECTORS

Mr. Mohammad Salim

Chief Executive / Director

Mr. Mohammad Sharif

Director

COMPANY SECRETARY

Mr. Mohammad Shaheen

Director

Mr. Mohammad Shakeel

Director

CHIEF FINANCIAL OFFICER

Mr. KhUrrarn Safim

Director

AUDIT COMMITTEE

Mr Bilal Sharif

Director

Mr. Mohammad Amin

Director

AUDITORS

Bilal Sharif

Chairman

Khurram Salim

Member

Mohammad Shakeel

Member

LEGAL ADVISOR

Mr. Aisf Mahmood

M/s. Mushtaq & Company

Chartered Accountants

407, Commerce Centre

Hasrat Mohani Road

Karachi.

Mr. Shahfd Pervaiz Jami,

Advocate

BANKERS

ABN Amro Bank

Citi Bank, N.A.

Hong Kong and Shanghai Banking Corporation

Standard Chartered Bank

Muslim CommerciaKBank Limited

United Bank Limited

Faysal Bank Limited

REGISTERED OFFICE:

Umer Chambers,

10/2, Bilmoria Street,

Off. I.I. Chundrigar Road,

Karachi.

Tel: (021) 2635916-17

Fax:(021)263-7826

E-mail: khioff@umergroup.com

Website: www.umergroup.com

LIAISON / CORRESPONDENCE

6-K, Main Boulvard,

OFFICE:

Gulberg II, Lahore.

Tel: (042) 5770001-3(111-130-130)

Fax:(042)5770015

E-mail: lhroff@umergroup.com

Website: www.umergroup.com

MILLS AT:

Unit I, is situated

at Kotri, -

Dirstrict Dadu,

Ph: 0221-870013

Unit II is situated at

Feroz Watwan,

Sheikhupura; Punjab

Ph: 0496-731728

STATEMENT UNDER SECTION 160(1 )(b)

OF THE COMPANIES ORDINANCE, 1984

1. The Securities and Exchange Commission of Pakistan (SECP) vide circular No. 19 of 2004 has allowed the listed

companies to place the quarterly accounts on their websites instead of sending the same to reach the share-

holder by post.

Keeping in view of the above, following Special Resolution is proposed to be passed, if deem fit, with or without

modification;

"RESOLVED THAT the Company is hereby authorized to place its quarterly accounts

on its website in compliance of information to its members as allowed by the Securi-

ties and Exchange Commission of Pakistan (SECP) vide its circular No. 19 of 2004

dated April 14, 2004."

The directors of the company have no interest in the above resolution that would need a further disclosure.

2. The Chief Executive and a Director are getting gross salary of Rs. 23,500/= (per month) each. It's been proposed

by the Board of Directors to increase the directors' remuneration being full time working directors of the company.

The approval of the shareholders is being sought by passing special resolution in this regard.

The members are accordingly requested to pass with or without modification the following resolution, if deem fit.

The draft resolution is set out below.

"RESOLVED THAT the following gross monthly remuneration be paid to the following full time

working directors of the company as recommended by the Board of Directors mention below :-

Name

Designation

Remuneration

Mohammad Salim

Chief Executive

Rs. 80,000/=

Khurram Salim

Director

Rs. 80,000/=

DIRECTORS REPORT TO THE SHARE HOLDERS

I, on behalf of the Board of directors, welcome the members at the 25^th Annual General Meeting and pleased to present the

audited financial statements with the auditors report there on for the year ended September 30, 2004 for your consider-

ation and approval.

General:

The principal activity of the company is manufacturing and sale of yarn with a production capacity of 45,504 spindles and

192 Rotors. The company has two production units, which are located at Kotri, Sindh and Sheikhupura, Punjab.

Financials and Appropriations:

By the grace of Allah the Almighty we have entered into 25^th year of our operations and achieved a considerable growth in

size of Balance Sheet Allahumdullilah, your company is maintaining the pace of regular improvement in all areas and by

the grace of Almighty Allah, your company continued to perform well and posted a profit after tax of Rs. 85.534 million

(2003: Rs.104.981 million). The consistent planning and proactive approach has led us to unprecedented growth. The

balance sheet as on September 30, 2004 indicates total assets of Rs. 1.354 billion with a growth of about 47.98 % over the

previous year. The allocation of profits for the year before tax is summarized as under:

Rupees

Profit before taxation

56,275,558

Taxation

Current year

14,680,337

Deferred

-35,989,130

Prior year

-7,949,735

-29,258,528

Profit after taxation

85,534,086

Un appropriated profit brought forward

75,043,645

Available«for appropriation

160,577,731

APPROPRIATIONS

Transferred to General Reserve

100,900,000

Unappropriated profit carried forward

59,677,731

Earnings per share

28.51

Human Resource

the management of your company believes that the organization cannot be successful in the absence of motivated and

professional human resources. Keeping in view, your company has embarked on a serious effort of upgrading its

manpower through induction of qualified staff.

Environment, Health and Safety.

The company remains committed to meet the environmental standards and achieving excellence in this area. Your

company assigns high priority to safety aspects in all area of operations. Up gradation of safety equipments is a continu-

ous process to meet international safety standards. Continuous efforts are being made for further improvement in safety

systems. The overall health, safety and environment performance at the plants was satisfactory throughout the year.

Economy

Since 2001, the economy of. the country is showing an upward trend in GOP and improvement in other key indicators.

There is an effective control on inflation, reduction in fiscal deficits and domestic & external debts, increase in foreign

remittances. The only negatives, which remain to be tackled as yet, are situation of law and order, unemployment and

poverty incidence, which in my view are real threats to the socio political stability of the country.

Related Party Transactions & Transfer pricing.

The company had adopted comparable uncontrolled price method for pricing of transitions with related parties. The Board

of directors has approved the transfer pricing policy for a related party transaction, which is uncontrolled price method for

pricing of transactions with related parties. The company has fully complied with the best practices on Transfer pricing as

contained in the listing regulation No. 38 of the Karachi Stock Exchange.

Change in Accounting Year.

The textile industry was restricted to follow the accounting year which ended at September 30 each year as a special year

through SR0134(R) / 68 dated^Jirty 31,1968 and the textile industry has to file its income tax return on next year September.

The annual budget announces in June for the year ahead and due to finafeation of accounts before the announcement of

budget, the strategic planning for tax and other matters was not possible.

In view of the above the matter was discussed in a meeting at All Pakistan textile MHte Association (APTMA) to approach

to the relevant authorities for change in accounting year. The Central Board of Revenue vide SRO 684(0/2004 dated August

10, 2004 has excluded textile industry from the preview of the SRO 134. It has been clarified by the CBR that the textile

industry shall prepare the first annual accounts after the change for nine months ending on June 30, 2005. The Securities

arid Exchange Commission of Pakistan has also clarified that consequent upon change of financial year from September

to June the first and second interim accounts ended on 31.12.2004 and 31.3.2005 shall be prepared and circulated in

routine. As regards to the interim accounts subsequent to the year 30.6.2005, the cycle will start from annual accounts

ending on 30.6.2005 and accordingly the companies shall have to prepare their first, second and third quarters accounts

for the period ended 30.9.2005, 31.12.2005 and 31.3.2006 respectively.

Advance given for purchase of office.

The auditors have emphasized without qualifying the opinion that the advance for purchase of office was presented in non

current assets in the second quarterly accounts ended on March 31, 2004. The company has given advance for purchase

of office and the developer had given assurance that the office will be handed over to .the company by September 30,2004

subsequently due to disagreement on some matters the,deal could not materialized and still under settlement. The

management feels that in case of disagreements continue, the company will cancel the deal and would preferred fcnr

refund of advance. In view of the above, the advance given for purchase of office is shown under current assets.

Current Maturity of the l,.ong Term Finances

The auditors have also emphasized without qualifying the opinion that the current maturity of the long-term loans has-not

been appropriately classified. The management is of the view that the next accounts of tie company will close on 'June 30,

2005 (after the amendment in SRO 134(R)/68 dated* July 31, 1968) and change of accounting year as discussed herein

above, the current maturity of long term loan would be calculated on the basis of next financial year i.e. till June 30, 2005

on which the accounts of the next year will close.

Corporate & Financial Reporting Framework:

Your directors support and endorse .the 'imptemention of Code of Corporate Governess for the listed companies and

believe that this will further strength the corporate sector of the country in line wfth the Global trends. Your company is

always committed to the standards of corporate governance and continually seeking improvements in the existing sys-

tem. However, we are pleased to report that your company has taken necessary steps to comply with the provisions of

Code of Corporate Governance as incorporated in the listing rules of the Stock Exchanges.

We give below our statement on Corporate and Financial Reporting Framework:

a) The financial statements, presented by the management of the company, present fairly its state of affairs, the result of

its operations and cash flow & changes in equity.

b) Proper books of accounts of the Company have been maintained.

c) Appropriate accounting policies have been consistently applied in preparation of financial statements and the ac-

counting estimates are based on reasonable and prudent judgment.

d) International accounting standards, as applicable in Pakistan have been followed in preparation of financial state-

ments: and departure there from, if any, has been adequately disclosed.

e) The system of internal control is sound in design and has been effectively implemented and monitored. The process

of review is ongoing and any emerging weaknesses in control will be addressed effectively.

f) There are no significant doubts upon the company's ability to continue as a going concern.

g) There, has been no material departure from the best practices of corporate governance, as detailed in the listing

regulations of Stock Exchanges.

h) The key operating and financial data of last six years has been provided in the summarized form.

i) The information about statutory payments on account of taxes, duties and levies is given in the notes to the accounts.

j) All the directors of the company are registered as taxpayer and none of the company's directors are in default of

payment of any dues to. a banking company, DFI, NBFI or Stock Exchanges.

k) None of the "directors of the company are serving on the Board of 10 or more listed companies.

YEAR WISE OPERATING DATA

2004

2003

2002

2001

2000

1999

Spindles Installed

45,504

40.08

40,080

39,360

Spindles Worked

45,504

40,080

36,360

39,360

No. Of Shifts worked per

3

day.

Installed Capacity after

15,537,833

15,319,544

13,103,594

12,828,900

12,828,900.00

conversion into 20/s Count.

(Kgs.) .

Actual Production after

14.958.487

[14,528,675

12,711,407

12,502,799

12,576,599

'12.224.807

conversion into 20/s Count

(Kgs.)

.

YEAR WISE FINANCIAL DAT

2004

2003

2002

2001

2000

1999

Rupees In

Thousands

Fixed Assets

719,949,

500,829

472,431

426,982

341,804

330,809

Investments, Long Term

Loans & Deposits

29,279.00

10,542

14,501

14,497

10,905

6,185

Current Assets

604.783

404,468

408,613

335,049

519,464

595,664

Share Holders Equity

563,677

478,143

403,163

371167

325.041

234,826

Redeemable Capital

-

8,818

16,240

Long Term Liabilities

208,436

113,436

76.056

82.019

52.081

82,188

Deferred Liabilities

45.085

82,753

81,098

64,071

44,096.00

16,688

Current Liabilities

536,811

241,517

335.234

259,271

442.137

582,719

Turnover (Net)

1.530.174

1.426,008

1,285,217

1,439,058

1,308,310

1,226,323

Gross Profit

138,606

221,702

201.73

199.948

370.133

180,069

Operating Profit

88.353

159,552

128,756

134,606

300,039

128,780

Financial Charges

31,250

31,808

52.355'

71.253

64.147

52,849

Profit Before Taxation

56.275

136,614

72,677

83,140

224,111

64.744

Profit After Taxation

85,534

104,981

46.996

61.126

165.215

48,925

Cash Dividend

-

30,000

15,000

75,000

24

Transfer To Reserves

100,900

-

32

46.1

90.2

24,900

Profit C/F

59,678

74,995

63

67

40

26

Change in the Board.

During the year under review the Mr. Iqbal Mehboob resigned from the Board on May 27,2004, which was accepted in the board meeting,

held on the above date. The board appointed Mr. Mohammad Amin in place of retiring director to fill the casual vacancy till the remaining

term.

Election of directors

The present term of the Board is going to expire on March 29, 2005 whereas the Annual General Meeting is schedule to be held on

December 31, 2004. The election of directors for the next term is now schedule to be held in the forthcoming Annual General Meeting,

hence the next term of the board shall commence from December 31, 2004.

The Board compliments the teamwork of all the Board members, which has contributed to the success of the company immensely. The

Board has fixed the number of director to be elected for the next term at eight.

The current members of the Board are listed on Page No. 2. Five Board meetings were held during the year. The attendance by each

director is appended hereunder:

Name of directors

No. of meetings attended

Mr. Mohammad Safim

4

Mr. Mohammad Sharif

4

Mr. Mohammad Shaheen

5

Mr. Mohammad Shakeel

5

Mr. Khurram Salim

4

Mr. BSal Sharif

3

Mr. Iqbal Mehboob (resigned on 27-05-2004)

2

Mr. Mohammad Amin (appointed on 27-05-2004)

2

Audit Committee

The company has already established an audit committee as required by the Code of Corporate Governance, which comprise of three

members as mentioned in the corporate information. The meetings of audit committee were held in accordance with the requirement of

code of corporate governance. The financial statements (quarterly / annual) were reviewed by the audit committee before issue.

Shareholding Pattern

A statement reflecting the distribution / pattern of shareholding as required by the Code of Corporate Governance is attached with this

report.

Auditors:

In terms of paragraph Xii of the Code of Corporate Governance and the listing Regulations of Stock Exchanges the existing auditors M/s

Mushtaq & Company Chartered Accountants have completed the period of five years as prescribed in the Code of Corporate Governance,

thus stand retired and are ineligible for re appointment as auditors of the company for the year ending June 2005. Accordingly, the board

of directors on the recommandation of audit committee has proposed the name of M. Yousuf Adil Saleem & Company, Chartered

Accountants for consideration and appointment as auditors of the company for the next term.

Thanks & Gratitude

Your directors are pleased to put on record their appreciation and gratitude to the executives, officers, staff members and workers of the

company in performance of their duties. Your directors would also like to put on record their profound and sincere gratitude to valued

customers, regulators, external auditors, bankers and our shareholders. The success of the company is owned to them all.

STATEMENT OF COMPLIANCE WITH THE BEST PRACTICE OF CORPORATE

GOVERNANCE YEAR ENDED 30™ SEPTEMBER 2004

This statement is being presented to comply with the Code of Corporate Governance contained in Listing Regulation No.

37 of the Karachi Stock Exchange. Chapter XIII of the Listing Regulation of the Lahore Stock Exchange and Chapter XI of

the Listing Regulation of the Islamabad Stock Exchange for the purpose of establishing a framework of good corporate

governance. Whereby a listed company is managed in compliance With the best practices of corporate governance.

The company applies the principles contained in the Code in the following manner;

1. The company encourages representation of independent non-executive directors and directors representing

minority interests on its Board. The Board of directors of the Company has always supported implementation of

the highest standards of Corporate Governance at all times.

2. The directors have confirmed that none of the directors of the company are serving as a director in ten or more

listed companies.

3. The company has prepared a mission statement, statement of ethics and business practices and overall

corporate strategy. The significant policies are in process of finalization.

4. The board is mindful of its responsibilities to the shareholders for the performance of theirs as directors.

5. The directors filled up one casual vacancy occurring in the Board in May 2004 within 30 days thereof.

6. The Board of Directors and the Audit Committee have normally met four times in the year and notices of the

meetings, agendas and related papers are normally circulated at least seven clays before the meeting except in

case where an emergent meeting is to be held. The Chairman of the Board is normally present and always

presides over the meeting of the Board, and in his absence by a director elected by the Board for this purpose.

7. The minutes of the meeting were appropriately recorded and circulated as required by the Code of Corporate