| DEWAN TEXTILE MILLS LIMITED |
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|
|
|
|
|
|
| ANNUAL
REPORT 2004 |
|
|
| Board
of Directors |
|
|
|
Dewan Zia-ur-Rehman
Farooqui |
Chairman |
|
| Audit
Committee |
Dewan Ghulam Mustafa
Khalid |
Chief Executive /
Managing Director |
|
|
|
Dewan Muhammad Ayub
Khalid |
Resident Director |
|
|
Dewan Mohammad Yousuf
Farooqui |
|
|
Dewan Mohammad Hamza
Farooqui |
|
|
Dewan Abdul Rehman
Farooqui |
|
|
Mr. Iqbal Naeem Pasha |
|
|
| Auditors |
|
|
Dewan Mohammad Yousuf
Farooqui - Chairman |
|
|
Dewan Muhammad Ayub
Khalid - Member |
|
|
Dewan Abdul Rehman
Farooqui - Member |
|
|
| Chief
Financial Officer |
|
|
Mr. Mohammad Nadeem |
|
|
| Company
Secretary |
|
|
Syed Moonis Abdullah Alvi |
|
|
| Tax Advisors |
|
|
Messrs Faruq Ali &
Co. |
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|
Chartered Accountants |
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|
803, 8th Floor, Land Mark
Plaza, |
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|
I.I. Chundrigar Road, |
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|
Karachi. |
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|
Sharif & Company |
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|
Advocates |
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| Bankers |
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|
Muslim Commercial Bank
Limited |
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|
Citibank N.A. |
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|
Habib Bank Limited |
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|
Standard Chartered Bank |
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|
Union Bank Limited |
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|
Meezan Bank Limited |
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ABN Amro Bank |
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|
United Bank Limited |
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Bank Al Falah |
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| Registered
Office |
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|
Dewan Centre |
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|
3-A, Lalazar, |
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|
Beach Hotel Road, |
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|
Karachi-74000, |
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|
Pakistan. |
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| Factory Office |
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H/20&H/26, S.I.T.E., |
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|
Kotri, District Dadu, |
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|
Sind, Pakistan. |
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|
| DIRECTORS'
REPORT |
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| It
is my pleasure to welcome you to the Thirty Fifth Annual general Meeting of
the Company and place before you |
|
| the
audited accounts and auditors report thereon for the financial year ended on
September 30,2004. |
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| By
the grace of Almighty Allah, the performance of your company was satisfied
for the year under review and your |
|
| company
has earned profit before tax of Rs. 56.18 million as compared to last year's
profit before tax of Rs. 32.55 |
|
| million. |
|
|
| Your
directors are pleased to propose appropriation of profit for the year as
follows: |
|
|
|
(Rupees in Million) |
|
| Profit after Tax |
|
20.4 |
|
| Unappropriated
profit brought forward |
|
288.19 |
|
| Profit
Available for appropriation |
|
308.59 |
|
| Appropriation |
|
| Proposed
issue of bonus shares @ 10% |
10.15 |
|
| Unappropriated
profit carried forward |
|
298.44 |
|
|
| The
Board of Directors took the decision for appropriation of the profit keeping
in view the expectations of the share |
|
| holders
of Dewan Mushtaq Group, future profitability and present scenario of textile
industry. |
|
|
| The
Board also decided to appraise its valued shareholders with the current
status and future prevalent situation of |
|
| textile
industry in detail through this report. |
|
|
| Overview |
|
| Year
2003-2004 remained the most challenging year for textile industry. The
Problem initiated with low cotton |
|
| production
all over the world including Pakistan. Prices of raw cotton went up to record
Rs. 3,750 / - per maund. |
|
| Moreover,
some of the factors like post Iraq war, record high oil prices, imposition of
anti dumping duty from EU on |
|
| exports
of bed linen from Pakistan, increase in prices of polyester fiber, high quota
costs did generally effect sales & |
|
| profit margins. |
|
|
| Despite
these adverse factors, there were also some new opportunities to be benefited
from and Dewan Textile Mills |
|
| Limited,
spearhead and lived up to its reputation of the most innovative and
aggressive textile concern of Pakistan, |
|
| thus
bringing new opportunities for itself and for the region. |
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|
| Complete
results of the company for the year are fully disclosed in the statements
accompanying this report, |
|
| however
silent features of the results for the year are as follows: |
|
|
|
|
2004 |
2003 |
|
|
|
(Rupees in million) |
|
| Gross Sales |
|
2,859.95 |
2,827.59 |
|
| Sales Tax |
|
222.44 |
206.58 |
|
| Gross profit |
|
245.8 |
307.48 |
|
| Operating profit |
|
151.5 |
208.12 |
|
| Financial Charges |
|
98.52 |
173.64 |
|
| Net
Profit before Tax |
56.18 |
32.54 |
|
| Net
Profit after Tax |
20.4 |
19.44 |
|
|
| the
proxy form as per the above requirements. |
|
|
| ii) Two persons whose names, addresses
and NIC numbers shall be mentioned on the form shall |
|
|
| witness
the proxy. |
|
|
| iii) Attested copies of NIC or passport
of the beneficial owners and proxy shall be furnished with the |
|
| proxy form. |
|
|
| iv) The proxy shall produce his/her
original NIC or original passport at the time of the meeting. |
|
|
| v) In case of corporate entity, the
Board of Directors' resolution/power of attorney with the specimen |
|
|
| signature
of the nominee shall be produced (unless it has been provided earlier) along
with the |
|
| proxy
form to the Company. |
|
|
| 2. Members are requested to
immediately notify the change in their addresses, if any. |
|
|
| 3. The Share Transfer Books of the
Company will remain closed from 31s1 January 2005 to 7Ih February 2005 |
|
| (both
days inclusive) |
|
|
| "Statement
under section 160of the Companies Ordinance, 1984 is attached along with the
Annual Report |
|
|
| circulated
to the members of the Company". |
|
|
| g) There has been no material departure
from the best practices of corporate governance, as detailed in the |
|
|
| Listing
Regulations. |
|
|
| h) We have an Audit Committee from amongst
the members of the Board of Directors, |
|
| i) We have prepared and circulated a
Statement of Ethics and Business Strategy among directors and employees. |
|
|
| j) The Board of Directors has adopted a
Mission Statement and a Statement of Overall Corporate Strategy, |
|
| k) As required by the Code of Corporate
Governance, we have included the following information in this report: |
|
|
| i. Statement of pattern of Share holding. |
|
|
| ii. Statement of shares held by associated
undertaking and related persons. |
|
|
| iii. Statement of the Board meetings held
during the year and attendance by each director. |
|
|
| iv. Key operating and financial statistics
for the six years. |
|
|
| Pattern
of Share Holding: |
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| The
pattern of shareholdings of the company is attached to this report. |
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|
| Auditors: |
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| The
present auditors M/s Faruq Ali & Co., Chartered Accountants, Karachi,
retire and being eligible, offer |
|
| themselves
for re-appointment under the terms of the Code of Corporate Governance, they
have been recommended |
|
| by
Audit Committee for the re-appointment as auditors until the conclusion of
the next Annual General Meeting. |
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|
| Acknowledgements: |
|
| Your
directors record their appreciation of the efforts of the Company's officers,
technicians, staff and workers and |
|
| the
support and cooperation extended by its customers, bankers and the Government
agencies during the year. |
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|
| Conclusion |
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| In
conclusion, we bow, beg and pray to Almighty Allah, Rahman-o-Rahim, in the
name of our beloved |
|
| prophet,
Muhammad, may Allah peace be upon him, for continued showering of His
Blessings, |
|
| Guidance,
Strength, Health and Prosperity on us, our Company, Country and Nation: and
also pray to |
|
| Almighty
Allah to bestow peace, harmony, brotherhood and unity in true Islamic spirit
to the whole of |
|
| Muslim
Ummah, Ameen, Summa-Ameen |
|
| In
this regard following resolution is proposed to be passed, with or without
modification, as a |
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|
| 'SPECIAL
RESOLUTION' |
|
| "Resolved
that the Board of Directors of the Company be and is hereby |
|
| authorized
to make temporary short term loans/advances to the Dewan Salman |
|
| Fibre
Limited, the associated company, up to maximum limit of Rs. 200 (Two |
|
| Hundred)
million at the mark up rate ofl % above the rate on which the Company |
|
| has
obtained the borrowing. |
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| These
temporary loans/advances shall be adjusted as and when required by |
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| the
Company and shall not exceed 12 months period." |
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|
| STATEMENT
OF COMPLIANCE WITH THE CODE OF CORPORATE GOVERNANCE |
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| FOR
THE YEAR ENDED SEPTEMBER 30, 2004 |
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| This
statement is being presented to comply with the code of Corporate Governance
contained in listing |
|
| regulations
of Karachi, Lahore and Islamabad Stock Exchange for the purpose of
establishing the |
|
| framework
of good governance, whereby a listed company is managed in compliance with
the best |
|
| practices
of corporate governance. |
|
|
| The
company has applied the principals contained in the Code in the following
manner: |
|
|
| 1. The company encourages representation
of Independent non-executive directors. At present, the |
|
| Board
includes four non-executive directors. |
|
|
| 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 |
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| in
payment of any loan to a banking company, a DFI or an NBFI or, being a member
of stock |
|
| exchange,
has been declared as a defaulter by that Stock Exchange. |
|
|
| 4. The Company has prepared a 'Statement
of Ethics and Business Practices', which has been signed |
|
| by
all the directors and employees of the company. |
|
|
| 5. The board has developed a 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. |
|
|
| 6. All the powers of the Board have been
duly exercised and decision on material transactions, |
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| including appointment
and determination of remuneration and
terms and conditions
of |
|
| employment
of the CEO and other executive directors, have been taken by the Board. |
|
|
| 7. The meetings of the board were
presided over by the Chairman, if he is available, and the Board met |
|
| 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. |
|
|
| 8. The Board arranged an orientation
course for its directors during the year to appraise them of their |
|
| duties
and responsibilities. |
|
|
| 9. The Board has approved appointment of CFO and Company
Secretary including their |
|
| remuneration
and terms and conditions of employment as determined by the CEO. |
|
|
| 10. 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. |
|
|
| 11. The Financial Statement of the Company
were duly endorsed by CEO and CFO before approval of |
|
| the Board. |
|
|
| 12. The directors, CEO and executives do not
hold any interest in the shares of the Company other than |
|
| that
has already been disclosed in the pattern of shareholder. |
|
|
| The
company has earned profit before tax of Rs. 56.18 million in the current year
as compared to Rs. 32.54 million in |
|
| the
previous year resulting in a net increase of 72.56 %. Gross Sales during the
period under review increased by |
|
| 32.6
million from 2,828 million to 2,860 million which is an increase of 1.15%.
Gross profit margin has been |
|
| reduced
from 11.94 % to 9.46 %. This decrease was mainly due to increase in raw
material cost which is the major |
|
| cost
component. However the management made hectic efforts to restrict increase in
other cost components through |
|
| strict
cost control policies. Financial expenses of the company has been reduced by
43.26 % (2004: Rs 98.52 |
|
| million,
2003: Rs 173.64 million) whereas other costs are also shown little variance. |
|
|
| Earning
Per Share: |
|
| Earning
per share during the year under report worked out to Rs.2.01 (2003: Rs 1.92 ) |
|
|
| Dividend: |
|
| The
board of Directors have pleasure in recommending bonus shares @ 10 % for the
year under review. |
|
|
| Future Outlook: |
|
| The
availability of cotton at reasonable prices augurs well for the textile
industry. Cotton being the major portion of |
|
| cost
of production, the industry should be assured of a reasonable profitability
in the next year, notwithstanding the |
|
| rise
in utilities and other components of cost of production. |
|
|
| If
all goes well with the export market from January onwards, we look forward to
a favourable operating |
|
| environment
which will enable your company to produce better financial results in 2005. |
|
|
| Change
in Financial year End: |
|
| The
Central Board of revenue has changed the financial year of Cotton Textile
Industry from September to June. |
|
| Therefore,
your company has also changed its closing date of financial year from 30lh
September to 30th June. Hence, |
|
| the
next annual audited Accounts will be for nine months ended June 30,2005.
Accordingly, the Is' and 2" dinterim |
|
| accounts
ended on 31.12.2004 and 31.03.2005 will be prepared in routine. Interim
accounts subsequent to the year |
|
| 30.06.2005
will be prepared as first, second and third quarterly accounts for the period
ended 30.09.2005, |
|
| 31.12.2005
and 31.03.2006, respectively. |
|
|
| Code
of Corporate Governance: |
|
| The
directors of your company are aware of their responsibilities under the Code
of Corporate Governance, |
|
| incorporated
in the Listing Regulations of the Stock Exchanges in the country under
instructions from Security & |
|
| Exchange
Commission of Pakistan. We are taking all necessary steps to ensure Good
Corporate Governance in your |
|
| company
as required by the code. |
|
|
| As
a Part of the compliance of the code, we confirm the
following: |
|
| a) The financial statements, prepared by
the management of the company, present fairly its state of affairs, the |
|
| results
of its operations, cash flows and changes in equity. |
|
|
| b) Proper book of account of the Company
have been maintained. |
|
|
| c) Appropriate accounting policies have
been consistently applied in preparation of financial statements and |
|
| accounting
estimates are based on reasonable and prudent judgment. |
|
|
| d) International accounting standards, as
applicable in Pakistan, have been followed in preparation of |
|
| financial
statements and any departure there from has been adequately disclosed. |
|
|
| e) The system of internal control is
sound in design and is being effectively implemented and monitored. |
|
|
| f) The company has a very sound balance
sheet with excellent debt:equity ratio and therefore there is no |
|
| doubt
at all about company's ability to continue as a going concern. |
|
|
| 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 Dewan Textile Mills Limited
to |
|
| comply
with the Listing Regulation No.37 and 40 of the Karachi and Lahore Stock
Exchanges |
|
| respectively
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. A review 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, 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 for the |
|
| year
ended September 30,2004. |
|
|
| FINANCIAL
HIGHLIGHTS |
|
|
(Rupees in Million) |
|
|
1997 |
1998 |
1999 |
2000 |
2001 |
2002 |
2003 |
2004 |
| Sales (Net) |
|
1691 |
1.884 |
1.88 |
2.278 |
2.567 |
2.183 |
2.574 |
2.599 |
| Gross Profit |
|
231 |
248 |
312 |
413 |
440 |
367 |
307 |
246 |
| Profit before Tax |
|
53 |
55 |
65 |
154 |
45 |
29 |
33 |
56 |
| Profit After Tax |
|
36 |
33 |
43 |
122 |
22 |
13 |
19 |
20 |
| Assets Employed |
|
1.056 |
1.601 |
2.535 |
2.525 |
2.656 |
2.807 |
2.759 |
3.749 |
| Return on Equity |
|
6.39% |
5.49% |
7.02% |
17.75% |
3.14% |
1.84% |
2.69% |
2.75% |
| Current Assets |
|
611 |
1.065 |
1.799 |
1.528 |
1.458 |
1.461 |
1.498 |
2.442 |
| Shareholder's
Equity |
571 |
604 |
614 |
685 |
695 |
707 |
723 |
743 |
| Long Terms & |
|
|
| Deferred
Liabilities |
97 |
132 |
276 |
365 |
395 |
342 |
423 |
326 |
| Current Liabilities |
|
388 |
865 |
1.645 |
1.475 |
1.566 |
1.758 |
1.614 |
2.68 |
| Gross Profit Ratio |
|
13.67% |
13.18% |
16.62% |
18.11% |
17.15% |
16.81% |
12% |
10% |
| Net Profit Ratio |
|
2.16% |
1.76% |
2.29% |
5.34% |
0.85% |
0.60% |
0.75% |
0.78% |
| Debts/Equity
Ratio |
24.94% |
51.44% |
62.45% |
54.36% |
54.57% |
48.37% |
49.37% |
34.81% |
| Current Ratio |
|
1.62 |
1.26 |
11.13 |
1.09 |
1 |
0.9 |
1.04 |
0.97 |
| Earning per Share |
|
5.26 |
4.78 |
5.66 |
14.51 |
2.6 |
1.53 |
2.11 |
2.01 |
| Dividend (%) |
|
|
| cash |
|
15% |
0% |
43% |
60% |
15% |
5% |
- |
- |
| stock |
|
0% |
10% |
10% |
0% |
0% |
10% |
10% |
10% |
| Production |
|
|
| Actual Production |
|
|
| at
Actual Avg. Count |
17,441,389 |
16,731,089 |
19,280,434 |
21,342,532 |
24,472,220 |
23,261,893 |
23,973,752 22, |
,511,725 |
| Actual Production |
|
|
| converted
to 20 count |
11,538,896 |
11,989,663 |
13,199,661 |
15,147,840 |
17,171,324 |
17,685,962 |
18,127,186 14, |
,363,989 |
| Average Count |
|
15.03 |
15.63 |
15.52 |
15.97 |
13.68 |
14.09 |
14.02 |
14.28 |
|
| BALANCE
SHEET |
|
| AS
ON SEPTEMBER 30, 2004 |
|
|
|
|
|
Note |
2004 |
2003 |
|
|
|
|
Rupees |
Rupees |
|
| EQUITY
AND LIABILITIES |
|
|
|
| SHARE
CAPITAL AND RESERVES |
|
|
|
| Authorised
Capital 30,000,000 Ordinary Shares of Rs.10/- each |
300,000,000 |
300,000,000 |
|
| Issued,
Subscribed and Paid-up Capital |
3 |
101,462,130 |
92,238,300 |
|
| Reserves
and Surplus |
|
4 |
641,586,997 |
630,410,512 |
|
|
|
|
743,049,127 |
722,648,812 |
|
| NON-CURRENT
LIABILITIES |
|
|
|
| Redeemable
Capital - secured (non - participatory) |
5 |
175,000,000 |
275,000,000 |
|
| Long
term loan - secured |
|
6 |
66,000,000 |
— |
|
| Liabilities
against Assets Subject to Finance Lease |
7 |
17,675,017 |
82,061,681 |
|
| Deferred
Liability for staff gratuity |
|
8 |
24,859,324 |
39,734,566 |
|
| Deffered taxation |
|
9 |
42,003,787 |
26,252,244 |
|
| CURRENT
LIABILITIES |
|
|
|
| Current
Portion of redeemable Capital |
5 |
100,000,000 |
100,000,000 |
|
| Current
Portion of Lease Liabilities |
|
7 |
66,084,420 |
74,384,172 |
|
| Short
term borrowings - secured |
|
10 |
1,629,718,582 |
802,994,504 |
|
| Creditors,
Accrued and Other Liabilities |
11 |
641,087,008 |
413,037.280 |
|
| Dividend |
|
12 |
256.052 |
256.052 |
|
| Provisions
for Taxation |
|
|
243,034,655 |
223,011,010 |
|
|
|
|
2,680,180,717 |
1,613,683,018 |
|
| CONTINGENCIES
AND COMMITMENTS |
13 |
„ |
|
|
|
|
|
3,748,767,972 |
2,759,380,321 |
|
| ASSETS |
|
|
|
| NON-CURRENT
ASSETS |
|
|
|
| Tangible
Fixed Assets |
|
|
876,906,823 |
808,515,000 |
|
| Operating
Fixed Assets - At Cost Less Accumulated Depreciation
14 |
15 |
204,183,324 |
226,860,407 |
|
| Capital
Work-in-Progress - At Cost |
|
16 |
210,000,000 |
210,000,000 |
|
| Long
Term Investment - At Cost |
|
17 |
15,953,298 |
15,953,298 |
|
| Long
Term Deposits |
|
|
|
| CURRENT
ASSETS |
|
18 |
28,231,831 |
23,516,524 |
|
| Stores
and Spares |
|
19 |
1,694,624,288 |
730,415,739 |
|
| Stock-in-Trade |
|
20 |
317,420,351 |
366,611,259 |
|
| Trade
Debtors - Considered Good |
|
21 |
394,614,956 |
370,731,248 |
|
| Advances,
Deposits and Other Receivables |
22 |
6,833,101 |
6,776,846 |
|
| Cash
and Bank Balances |
|
|
2,441,724,527 |
1,498,051,616 |
|
|
|
|
3,748,767,972 |
2,759,380,321 |
|
|
|
|
| AUDITOR'S
REPORT TO THE MEMBERS |
|
| We
have audited the annexed balance sheet of Dewan Textile Mills Limited, as at
September 30, |
|
| 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 |
|
| purpose
of our audit. The financial statements for the year ended September 30, 2003
were audited by |
|
| another
firm of chartered accountants who expressed an unqualified opinion thereon. |
|
|
| 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
conduct 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 statement. An audit
also include |
|
| assessing
the accounting policies and significant estimates made by management, as well
as, evaluating |
|
| the
overall presentation of 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: |
|
