Metropolitan Steel Corporation Limited - Annual Reports 2004

METROPOLITAN STEEL CORPORATION LIMITED
ANNUAL REPORT 2004

BOARD OF DIRETORS
CHAIRMAN		Mr. Mehmood Ali Mehkri
CHIEF EXECUTIVE &
MANAGING DIRECTOR		Engr. Syed Asghar Jamil Rizvi
DIRECTORS		Mr. Khawaja Maudood Ahmed
		Mr. Muhammad Shakir
		Col. (R) Muhammad Asif Khan
		Mr. Muhammad Jamal Dehdhi
		Mr. Tariq Adam Ghumra
		Mr. Muhammad Tauseef Ansari
AUDIT COMMITTEE
CHAIRMAN		Mr. Muhammad Tauseef Ansari
MEMBERS		Col. (R) Muhammad Asif Khan
		Mr. Tariq Adam Ghumra
COMPANY SECRETARY		Mr. Shariful Muzaffer
AUDITORS		A. F. Ferguson & Co.
*		Chartered Accountants
REGISTERED/		Plot No. HE-1, Landhi Industrial Area
HEAD OFFICE		Landhi, Karachi.

DIRECTORS'REPORT

Directors of your company feel pleasure in presenting the 49th annual report together with the
audited 'financial statements of the company for the year ended June 30, 2004

Operations:

By the grace of Almighty Allah the operations of the company, which started in the later part of
the first quarter of the year under report, increased considerably by the end of year and are
marching ahead towards greater capacity utilization capturing the lost market share of MSGL.
The sales in terms of volume have recorded a highest figure yielding a gross profit only for the
2nd time in the last decade and above.

Financial results:

The financial results are as under:- (Rs. In 000)

Profit for the year 42,436

Taxation 2,644

Profit for the year after taxation 39,792

Accumulated loss brought forward 1,723,022

Accumulated loss carried forward 1,519,123

Earning per share (Rupees) 1.28

Future outlook:

The encouragement being received from market and the increasing trend of the production activities
of all the plants poses a bright future of the company. Subsequent to year under report company
is executing various orders from various customers and expecting a minimum sales revenue over
Rupees one billion plus which will Insha Allah change the scenario of the company.

Despite the problems of frequent availability of raw material and higher prices in the international
market the company is in process of efficiently utilize its available resources as well as in process
of negotiating with international suppliers of raw material for the import for uninterrupted production
activities.

Further more the company is planning into the new era of its production activities and to resolve
permanently the shortage of billets by having a billet caster with a huge investment. This will bring
about a total change in the operations and profitability of the company.

AUDITORS:

The present auditors of the company M/s. A.F. Ferguson & Co., Chartered Accountants, retire.
In pursuance of the powers conferred by section 253(2) of the Companies Ordinance, 1984, a
member of the company issued notice for the change in auditors and has recommended the
appointment of Messrs. Anjum Asim Shahid Rahman, Chartered Accountants as auditors of the
company for the year ending June 30,2005

The Audit Committee of Board of Directors of the company recommended the Board regarding
the appointment of Messrs. Anjum Asim Shahid Rahman, Chartered Accountants as auditors of
the company for the year ending June 30,2005.

AUDITORS'REPORT:

The auditors report for the current year incorporates an adverse opinion due to various inherent
factors. The new management has made strenuous efforts in getting resolved some source of
the matters reported in last years audit report. The management shall endeavor make all the
possible efforts in future to resolve the matters reported in the auditor's report for the current year.

Audit Committe

The board of directors in compliance of the code of the Corporate Governance has established

and audit committee and the following non-executive directors are its members.

1 -Mr. MuhammadTauseef Ansari (Chairman)

2- Mr. Tariq Adam Ghumra (Member)

3- Col. (R) Muhammad Asif Khan (Member)

Directors' Statement:

The directors state that:

a. The financial statements of the Company prepared by the management present fairly the
state of affairs, the results of its operations, cash flow and changes in equity.

b. Proper books of accounts have been maintained

c. Appropriate accounting policies have been consistently applied in preparation of the financial
statements except for the changes as stated in notes 2.12.1 and 2.12.2 to the financial
statment and accounting estimate are based on resonable and prudent judgments .

d. International Accounting Standards, as applicable in Pakistan, have been followed in the
preparation of financial statements and any departure there from has been adequately
disclosed.

e. The system of internal control is in the process of being re - designed and will be effectively
implemented and monitored in coming year.

f. There are no significant doubts upon the Company's ability to continue as a going concern
as the company is in the process of restructuring its loans.

g. There has been no material departure from me best practices of corporate governance,
as detailed in the listing regulations of the stock Exchange.

h. For taxes, and statutory payments, please refer to the notes to the financial statement,
i. Outstanding Statutory payments are Nil except as stated in notes to the financial statement,

j. No trading in the shares of the company was carried out by the directors, CEO, CFO,

Company Secretary and their spouses and minor children,
k. Statement concerning value of investments in Gratuity Fund and provident fund based on

un-audited accounts.

a. Provident Fund: Rs. 7,300,000

b. Gratuity Fund: Rs. Nil

I. During the year under review, four meetings of the Board of Directors were held

Directors Nos. of Meetings attended

1. Mr. Mehmood Ali Mehkri 4

2. Syed Asghar Jamil Rizvi 2

3. Mr. Muhammad Shakir 4

4. Mr. Khawaja Maudood Ahmed 4

5. Mr. Muhammad Tauseef Ansari 4

6. Mr. Tariq Adam Ghumra 2

7. Col. Rtd. Muhammad Asif Khan 2

8. Mr. Muhammad Jamal Dehdhi 2

m The pattern of share holding is annexed to the financial statements for the period.

n The company is making efforts to accelerate production activities,
which requires working capital. As such directors have not considered declaring any
dividend at this moment. Hopefully, your company will be in a position to declare a
dividend next year onwards.

Key financial and operating Data is appearing on Page No.6

	Jun -2004	Jun -2003	Jun-2002	Oun-2001	Jun-2000	(Rs. in 000) Jun-1999
Sales Revenue	489,741	23,035	134,988	161,750	383,769	237,966
Cost of Sales	484,817	69,235	194,200	224,552	364,160.00	256,199
Gross Profit/(Loss)	4,924	-46,200	-59,212	-62,802	19,609	-18,233
Other Income	59,994	226,932	15,585	10,475	177,155	49,207a
Total	64,918	180,732	-43,627	-52,327	196,764	30,974
Operating Expenses	-19,975	-12,103	-11,515	-16,270	-19,855	-16,412
Operating Profit/(Loss)	44,943	168,629	-55,142	-68,597	176,909	14,562
Financial Expenses	-932	-92,616	-129,113	-100,034	-106,553	-85,440
Total	44,011	76,013	-184,255	-168,631	70,356	-70,878
Other charges	-1,575	-6,957	-4,624	66,305	-107,980	.
Profit/ Loss before taxation	42,436	69,056	-188,879	-234,936	-37,624	-70.878
Dividend	-	-	-	.	.	.
Taxation	-2644	387	-675	-1,520	-1,920	-2,012
Net profit/Loss for the year after tax	39,792	69,443	-189,554	-236,456	-39,544	-72,890
Accumulated losses brought forward	-1,723,022	-1,792,465	-1,602,911	-1,366,455	-1,326,911	-1,254,021
Adjustments	164,107	-		-	-	-
Accumulated losses carried forward	-1,519,123	-1,723.02	-1,792,465	-1,602,911	-1,366,455	-1,326,911

	Jun -2003	Jun -2003	Jun-2002	Jun-2001	Jun-2000	Jun-1999
Share Capital	309,776	309,776	309,776	309,776	309,776	309,776
Reserves	80,500	80,500	80,500	80,500	80,500	80,500
Unappropriated profit/Loss	-1,519,123	-1,723,022	-1,792,465	-1,602,911	-1,366,455	-1,326,911
Surplus on Revaluation of Fixed As	589,178	499,201	499,201	499,201	499,648	239,181
Shareholders Equity	-539,669	-833,545	-902,988	-713,434	-476,531	-697,454
Long Term Loans	1,253,571	1,299,564	620,047	673,804	685,972	1,062,300
Long term liability	5,830	-	261,503	261,503	189,012	116,449
Deferred Liability	9,385	10,175	9,400	8,893	7,572	5,687
Long term & deferred liability	1,268,786	1,309,739	890,950	944,200	882,556	1,184,436
Total Equity & Liability	729,117	476,194	-12,038	230,766	406,025	486,982
REPRESENTED BY
Fixed assets	730,330	489,963	507,440	525,964	545,742	287,928
Current Assets	220,814	115,794	150,085	182,867	567,697	768,773
Current liabilities	-223,680	-134,904	-671,299	-479,801	-709,212	-571,517
Other non-current assets	1,653	5,341	1,736	1,736	1,798	1,798
Total Assets	729,117	476,194	-12,038	230,766	406,025	486,982

The year ended June 30, 2004
STATEMENT OF COMPLIANCE WITH THE CODE OF CORPORATE GOVERNANCE

This statement is being presented to comply with the Code of Corporate Governance contained
in the Listing Regulation No. 37 of the Karachi 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 Directors have confirmed that none of them is serving as a director in more than ten
listed companies, including this company. At present the board includes five non-executive
direction.

2. All the resident Directors of the company are registered as tax payers and none of them
has defaulted in payment of any loan to a banking company, a Development Financial
Institution or a Non - Banking Financial Institution. None of the resident Directors are a
member of any of the stock exchanges.

3. No casual vacancy occurred in this board of directors during the year.

4. The company has prepared a "Statement of Ethics and Business Practices", which has
been signed by all the directors and management employees of the company.

5. The board has developed a vision/ mission statement. The company is in the process of
developing an overall corporate strategy and a complete record of particulars of significant
policies.

6. 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 and other directors have been taken by the board.

7. The meetings 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 except for the first quarter of the year. Written notices of the board meetings,
alongwith agenda and working papers, were circulated at least seven days before the
meetings except for the meeting held to approve the final results. The minutes of the
meetings were appropriately recorded and circulated.

8. An orientation course will be arranged for directors next year to apprise them of their duties
and responsibilities. Study material and other relevant papers will be provided to them for
their review and Understanding.

9. The board has approved the appointment of CFO and company secretary including its
remuneration and terms, and conditions of employment, as recommended by CEO.

10. The directors' report for this year has been prepared in compliance with the requirements
of the Code and it fully describes the salient matters required to be disclosed.

The financial statements of the company were duly endorsed by the CEO and the CFO,
before approval of the board

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.

The company has complied with all the corporate and financial reporting requirements of
the Code.

14. The board has formed an audit committee. It comprises of three members, all of
whom are non-executive directors including the chairman of the committee. Terms and
references of the committee in the process of being formalised.

The meetings of the audit committee were held for the approval of third quarterly and final
results of the company.

The board is in the process of appointment of the head of internal audit and also re-
vitalizing and re-structuring the internal audit function and taking appropriate measures to
make it effective.

The statutory auditors of the company have confirmed that they have been given a
satisfactory rating under the quality control review programme of the Institue of Chartered
Accountants of Pakistan, that they or any of 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 the Institue of Chartered Accountants of Pakistan.

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.

We confirm that all other material principles contained in the Code have been complied
with except that Secretarial Compliance Certificate was not filed alongwith the annual
return of the company.

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 Metropolitan Steel
Corporation Limited to comply with the Listing Regulation No. 37 of the Karachi Stock
Exchange 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 a 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.

We report that the directors of the company in their report have stated that the financial
statements of the company give a true and fair view of the company's affairs. However, our
audit report to the members of the company contain an adverse opinion due to the significance
of matters stated in paragraph 1 and also due to matters reported in paragraphs 2 to 11 of
that report.

Based on our review and except for the matter noted in the preceding paragraph, nothing
has come to our attention which causes us to believe that the Statement of Compliance does
not appropriately reflect the status of the company's compliance, in all material respects,
with the best practices contained in the Code of Corporate Governance as applicable to the
company for the year ended June 30,2004.

AUDITORS'REPORT TO THE MEMBERS

We have audited the annexed balance sheet of Metropolitan Steel Corporation Limited as at
June 30, 2004 and the related profit and loss account, statement of changes in equity and cash
flow statement, 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 except for the matters