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MOHAMMAD FAROOQ TEXTILE MILLS LIMITED
ANNUAL REPORT 2004
CHAIRMAN & CHIEF EXECUTIVE			Mr. Mohammad Farooq Sumar
DIRECTORS			Mr. Mohammad Mukhtar Sumar
			Mr. Muhammad Abdul Samad		(Representing NIT)
			Ms. Sabiha Sumar
			Mr. Mohammad Iqbal Khan
			Mrs. Fahmida Rasheed
			Mr. Shahid Nazir Ahmed
			Mr. Agha Jamshed
CHIEF FINANCIAL OFFICERS			Mr. Mohammad Iqbal Khan		(Chairman)
			Mrs. Fahmida Rasheed		(Member)
			Mr. Shahid Nazir Ahmed		(Member)
COMPANY SECRETARY			Mr. Mohammad Farooq Sumar		(Chairman)
			Mr. Shehryar Sumar		(Member)
AUDIT COMMITTEE			Mr. Shahbaz Sumar		(Member)
			Mr. Agha Jamshed		(Member)
EXECUTIVE COMMITTEE			Mr. Mohammad Farooq Sumar		(Chairman)
BUSINESS STRATEGY COMMITTEE			Mr. Mohammad Iqbal Khan		(Member)
			Mr. Agha Jamshed		(Member)
			Mr. Burhanuddin Rajabali		(Member)
TEM & TECHNOLOGY COMMITTEE			Mr. Mohammad Iqbal Khan		(Chairman)
			Mr. Burhanuddin Rajabali		(Member)
			Mr. Intisar A. Tirmizi		(Member)
LEGAL ADVISERS			Mohsin Tayebali & Co.
EXTERNAL AUDITORS			A. F. Ferguson & Co.
			Chartered Accountants
INTERNAL AUDITORS			M. Yousuf Adil Saleem & Co.
			Chartered Accountants
BANKERS			Habib Bank Limited
			Muslim Commercial Bank Limited
			Union Bank Limited
			National Bank of Pakistan
REGISTERED OFFICE			First Floor, Finlay House,
			I.I. Chundrigar Road, Karachi-74000
HEAD OFFICE AND MILLS			PlotNos. 6&7, Sector 21,
			Korangi Industrial Area,
			Karachi-75180
Directors' Report to the Shareholders
1.     Your Directors have pleasure in presenting the Thirty-Ninth Annual Report and Audited Financial Statements for the year
ended September 30, 2004 as under:
			(Rupees in '000)
Profit before taxation			15,933
Provision for taxation - Current year			-6,942
- Deferred			7,094
			152
Profit after taxation			16,085
Accumulated loss brought forward			-107,267
			-91,182
Transfer from surplus on revaluation of fixed assets			5,419
Accumulated loss carried forward			-85,763
Earnings per share			Rs. 0.85
The accompanying Chairman's review deals with the year's activities and the Directors of the Company endorse the contents
of that Report.
The pattern of shareholding and key financial ratios are attached.
Statement in compliance of the Code of Corporate Governance:
The Board is committed to maintain the high standards of good corporate governance. The Company has been in
compliance with the provisions set out by the Securities & Exchange Commission of Pakistan and accordingly amended
listing rules of the Stock Exchanges.
There has been no material departure from the best practices of corporate governance, as detailed in the listing
regulations.
The financial statements, prepared by the management of the Company, fairly present its state of affairs, the results of
its operations, cash flows and changes in equity.
The Company has maintained proper books of account in accordance with the corporate requirement.
Appropriate accounting policies have been consistently applied in preparation of financial statement and accounting
estimates are based on reasonable and prudent judgement.
International Accounting Standards, as applicable in Pakistan, have been effectively implemented.
The system of internal control is sound in design and has been effectively implemented and monitored.
There is no doubt about the Company's ability to continue as a going concern.
Audit Committee was established to assist the Board in discharging its responsibilities for Corporate Governance,
Financial Reporting and Corporate Control. The committee consists of three members including the Chairman of the
committee, who is an Executive Director. The other two members are non-executive Directors.
The Audit Committee is responsible for reviewing reports of the Company's financial results, internal audit, and
adherence to standards of the system of management control. The committee reviews the procedures for ensuring their
independence with respect to the services performed for the Company and makes recommendations to the Board of
Directors.
The Executive Committee acts at the operating level in an advisory capacity to the CEO, providing recommendation
relating to the business and other corporate affairs. The Committee has responsibility for reviewing and forwarding
long-term plans, capital and revenue expense budget development and stewardship of business plans.
Two committees were established, viz, Business Strategy Committee and System & Technology Committee to assist the
management of the Company in discharging its responsibilities in the relevant areas.
As a leading textile manufacturing company which is already certified as 150-9001:2000, reputation for high ethical
standards is central to business success. Under the foregoing guideline, a Code of Business Principles has been developed,
communicated and acknowledged by the Directors who are residing in Karachi and employees of the Company.
Communication with the shareholders is given a high priority. Annual, half yearly and quarterly reports are distributed
to them within the time specified in the Companies Ordinance, 1984. The Company also has a web site
(www.mohammadfarooq.com), which contains up to date information on group activities. There is also an opportunity
for individual shareholders to attend and ask questions at the Annual General Meeting.
The shares of the Company are traded through CDC, which gives them the opportunity of obtaining online transfers
and balances positions.
During the year, 4 meetings of the Board of Directors were held, attendance by each Director is as under:
		Number of meetings attended
Mr. Mohammad Farooq Sumar		4
Mrs. Fahmida Rasheed		3
Mr. Mohammad Iqbal Khan		4
Mr. Mohammad Ahsan Hafeez		3
Mr. Behram Hasan		2
The Directors do not recommend distribution of Dividend in view of non-availability of profit and inadequancy
of cash flow.
5.    As required by the Code of Corporate Governance, the Audit Committee of the Board has suggested the name of
M/s. M. Yousuf Adil Saleem & Co., Chartered Accountants, who retire and being eligible, offer themselves for reappointment.
6.    Pursuant to CBR's SRO No. 684(1)72004 dated 10/08/2004 the Financial Year end has been changed from 30th September
to 30th June effective from 2005. As a consequence next Accounting period will be of 9 months from 01/10/2004 to
30/06/2005.
SUMMARIZED FINANCIAL DATA PROFIT & LOSS FOR THE YEAR ENDED SEPTEMBER 30
		Rupees in 000
		1999	2000	2001              2002	2003	2004
Turnover		848,082	890,698	1,025,434      1,074,469	1,067,346	990,337
Gross profit		133,871	173,664	200,819         177,762	183,477	171,584
Operating profit		77,535	108,854	119,412           91,961	85,517	57,093
Profit / (loss) after tax		-20,646	17,519	34,735              6,629	45,341	16,085
BALANCE SHEET AS AT SEPTEMBER 30
Shareholders fund		188,892	188,892	188,892         188,892	188,892	188,892
Reserves (including surplus on revaluation)		33,767	51,286	81,067           87,696	113,081	447,647
Property, plant and equipments		552,402	530,575	532,585         543,511	509,643	943,441
Intangible assets & long term
security deposit		1,311	15,868	16,950            12,642	10,068	3,276
Net current assets / liabilities		637	52,721	65,364                210	-17,711	-62,344
Long term /deferred liabilities		331,691	358,986	344,940         279,775	207,780	201,188
COST STRUCTURE
		(Figures in thousand)
		1998-1999		1 999-2000		2000-2001		2001-2002		2002-2003		2003-2004
		Amount	%	Amount	%	Amount	%	Amount	%	Amount	%	Amount	%
Raw Materials		413,523	47.51	332,617	40.56	484,296	47.57	568,006	49.73	515,641	48.18	527,819	48.8
Raw Cotton & Fibre		179,232	20.59	121,027	14.76	176,132	17.3	150,714	13.2	159,785	14.93	208,909	19.31
(Quantity in Kgs)			-2,661		-2,574		-2,607		-2,609		-2,702		-2,419
Other Raw Material		234,291	26.92	211,590	25.8	308,164	30.27	417,292	36.53	355,856	33.25	318,910	29.49
Conversion Cost		425,056	48.83	449,801	54.86	485,050	47.64	521,802	45.69	497,483	46.48	484,802	44.82
Wages & Salaries		103,795	11.92	110,267	13.45	122,835	12.07	135,092	11.83	138,810	12.97	146,232	13.52
Store Consumption		43,793	5.03	50,352	6.14	54,814	5.38	55,794	4.88	54,144	5.06	52,731	4.88
Depreciation		44,426	5.1	42,084	5.13	40,188	3.95	39,249	3.44	39,960	3.73	37,025	3.42
Fuel & Power		98,450	11.31	116,369	14.19	135,408	13.3	151,630	13.28	137,960	12.89	134,112	12.4
Other Manufacturing Expenses		14,708	1.69	16,453	2.01	17,850	1.75	23,692	2.07	23,770	2.22	25,760	2.38
Financial Expenses		94,875	10.9	85,513	10.43	78,901	7.75	81,898	7.17	59,932	5.6	41,704	3.85
Administration Expenses		24,509	2.82	27,214	3.32	32,590	3.2	33,417	2.93	40,822	3.81	45,517	4.21
Other Charges		500	0.06	1,549	0.19	2,464	0.24	1,030	0.09	2,085	0.2	1,721	0.16
Selling/Distribution Expenses		31,827	3.66	37,596	4.58	48,817	4.79	52,384	4.58	57,138	5.34	68,974	6.38
(a) Freight		7,910	0.91	8,218	1	10,061	0.99	8,272	0.72	7,826	0.73	4,959	0.46
(b) Others		23,917	2.75	29,378	3.58	38,756	3.8	44,112	3.86	49,312	4.61	64,015	5.92
Total		870,406	100	820,014	100	1,018,163	100	1,142,192	100	1,070,262	100	1,081,595	100
Pattern of Shareholding
as at September 30, 2004
D. of Shareholders	Shareholding			Total Shares
90S	1	to	100	26126
563	101	to	500	155661
222	501	to	1000	165122
301	1001	to	5000	716013
55	5001	to	10000	385712
14	10001	to	15000	168505
13	15001	to	20000	245735
5	20001	to	25000	1 18749
6	25001	to	30000	160019
2	30001	to	35000	63500
1	35001	to	40000	39000
1	40001	to	45000	41000
5	45001	to	50000	242259
1	50001	to	55000	53000
1	550O1	to	60000	57682
	60001	to	65000	_
1	65001	to	7OOOO	66656
-	70001	to	75000	_
1	75001	to	80000	75630
	8O001	to	85000
2	85001	to	90000	172175
2	90001	to	95000	189429
	95001	to	100000	_
2	100001	to	105000	205908
	105001	to	1 1 0000
1	1 10001	to	1 1 5000	112894
1	1 150O1	to	120000	1 17229
2	120001	to	125000	245500
2	125001	to	130000	253695
-	130001	to	135000	-
1	135001	to	140000	135500
	140001	to	195000	_
1	195001	to	200000	200000
-	200001	to	220000
1	220001	to	225000	223960
	225001	to	260000	_
1	260001	to	265000	262121
-	265001	to	360000
1	360001	to	365000	364000
	365001	to	375000	_
1	375001	to	380000	375452
	380001	to	815000
1	815001	to	820000	819105
	820001	to	920000	_
1	920O01	to	925000	921376
-	925001	to	970000	_
1	970O01	to	975000	970967
-	975001	to	3775000	_
1	3775001	to	3780000	3776617
-	3780001	to	6760000
1	6760001	to	6765000	6762948
2123				18889245
Categories of Shareholders		Number	Shares Held	Percentage
Individuals		2,073	6,482,700	34.32
Joint Stock Companies		33	6,909,480	36.58
Banks & Financial Institutions		7	4,046,257	21.42
Modarabas Companies		2	49,245	0.26
Investment Company		1	204	0
Insurance Companies		2	1,195,256	6.33
Foreign Investors (Non-Resident)		2	183	0
Others:
Corporate Law Authority		1	1	0
Trusts		2	205.919	1 09
		2,123	18,889,245	100
KEY FINANCIAL RATIOS AT SEPTEMBER 30
			1999	2000	2001	2002	2003	2004
Cost of sales as %age of sales		%	84.21	80.5	80.42	83.46	82.81	82.67
Gross Profit as %age of sales		%	15.79	19.5	19.58	16.54	17.19	17.33
Operating Profit as %age of sales		%	9.15	12.22	11.64	8.56	8.02	5.77
Net pre tax Profit / (loss) as %		%	1.93	2.47	3.99	1.21	2.32	1.61
Net pre tax Profit / (loss) as %a	ge of
Capital employed		%	2.96	3.67	6.66	2.33	4.85	1.8
Current Ratio			50:50	53:47	53:47	50:50	49:51	48:52
Stock as %age of sales		%	33.57	25.82	26.71	33.37	34.86	48:96
Debtors as %age of sales		%	10.58	14.49	12.59	11.82	15.14	15.12
Gearing Ratio (Debt Equity Ratio)			60:40	60:40	56:44	50:50	41:59	24:76
Total Debt Assets Ratio			40:60	43:57	43:57	39:61	36:64	23:77
Total Assets Turnover Ratio		Times	0.81	0.86	0.94	0.92	0.9	0.58
Price earning Ratio		Times	6.4	5.66	1.36	11.54	3.02	8.71
Interest cover Ratio		Times	0.78	1.2	1.44	1.08	1.76	1.39
Market value per share		Rs.	7	5.25	2.5	4.05	7.25	7.4
Break up value of shares		Rs.	11.79	12.72	14.29	14.64	15.99	33.7
PROFIT & LOSS ACCOUNT COMPARISON AS PERCENTAGE OF SALES
			1 998-99	1999-00	2000-01	2001-02	2002-03	2003-04
Net sales (Rupees in thousand)			848,082	890,698	1,025,434	1,074,469	1,067,346	990.337
(in terms of percentage)			100	100	100	100	100	100
Cost of sales		%	84.21	80.5	80.42	83.46	82.81	82.67
GROSS PROFIT		%	15.79	19.5	19.58	16.54	17.19	17.33
Administration Expenses		%	2.89	3.06	3.18	3.11	3.82	4.6
Selling Expenses		%	3.75	4.22	4.76	4.87	5.35	6.96
			6.64	7.28	7.94	7.98	9.17	11.56
OPERATING PROFIT		%	9.15	12.22	11.64	8.56	8.02	5.77
Other Income		%	0.17	0.02	0.28	0.37	0.12	0.23
Other Charges		%	(0.06)	(0.17)	(0.24)	(0.10)	(0.20)	(0.18)
			0.11	(0.15)	0.04	0.27	(0.08)	0.05
			9.26	12.07	11.68	8.83	7.94	5.82
Financial Charges		%	11.19	9.6	7.69	7.62	5.62	4.21
NET PRE TAX PROFIT /(LOSS)		%	(1.93)	2.47	3.99	1.21	2.32	1.61
TAXATION		%	(0.50)	(0.50)	(0.60)	(0.59)	1.93	0.02
PROFIT /(LOSS) AFTERTAX		%	(2.43)	1.97	3.39	0.62	4.25	1.63
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 of listing
regulations of Karachi Stock Exchange and Chapter XIII of the listing regulations of Lahore Stock Exchange 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 manner:
1.      The Company encourages representation of independent non-executive directors on its Board of Directors. At present the
Board includes five 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 in payment of any loan
to a banking company, a DPI or an NBFI.
4.      The casual vacancy arising in the Board of Directors during the year was duly filled within the time allowed by the Code of
Corporate Governance.
5.     The Company has prepared a 'Statement of Ethics and Business Practices', which has been signed by all the directors who are
residing in Karachi 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 C EO and other executive directors, have been
taken by the Board.
8.      The meetings of the Board were presided over by the Chairman 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 arranges orientation courses for its directors to apprise them of their duties and responsibilities.
10.    The Board has approved appointment of CFO and, Company Secretary and including their remuneration and terms and
conditions of employment, as determined by the CEO.
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 CEO and CFO before approval of the Board.
13.   The directors, CEO and executives 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.
Review Report to the Members on Statement of Compliance