| NAKSHBANDI INDUSTRIES LIMITED |
|
|
|
|
|
|
| ANNUAL
REPORT 2004 |
|
|
|
| BOARD OF
DIRECTORS |
|
|
|
A. RAZAK HAJI SATTAR
(Chairman) |
|
|
|
HAMID HAJI LATIF |
|
|
|
AMBREENA. RAZAK |
|
|
|
JUNAID HAJI LATIF |
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|
|
MUSTAFA A. RAZAK |
|
|
|
MURTAZAA. RAZAK |
|
|
|
MUHAMMAD ASIF A. GHAFFAR
(Chief Executive) |
|
| CHIEF FINANCIAL OFFICER
(CFO) |
MUHAMMAD HANIF |
|
|
|
| COMPANY
SECRETARY |
RAUF DAWOOD |
|
|
|
| AUDIT
COMMITTEE |
A. RAZAK HAJI SATTAR -
Chairman |
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|
|
HAMID HAJI LATIF - Member |
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|
JUNAID HAJI LATIF - Member |
|
|
|
| REGISTERED
OFFICE |
H-23/4-ALANDHI, KARACHI. |
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|
| MILLS |
H-23/4-ALANDHI, KARACHI. |
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| SHARES
DEPARTMENT |
177-A, S.M.C.H.S.,
KARACHI. |
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| BANKERS |
HABIB BANK LIMITED |
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|
BANK ALHABIB LIMITED |
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|
ASKARI COMMERCIAL BANK
LIMITED |
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|
CITI BANK N. A. |
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|
UNION BANK LIMITED |
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|
HABIB BANK AG ZURICH |
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|
BANK ALFALAH LIMITED |
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| AUDITORS |
KHALIDMAJID RAHMAN
SARFARAZ |
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|
RAHIMIQBALRAFIQ |
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|
Chartered Accountants |
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|
180-A.S.M.C.H.S. |
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|
KARACHI. |
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|
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| LEGAL
ADVISOR |
M. ADAM PATEL & CO. |
|
|
| DIRECTORS'
REPORT |
|
| Your
directors are presenting the 32nd Annual Report together with the audited
financial statements |
|
| of
the Company for the year ended September 30, 2004. |
|
|
| OPERATING
RESULTS |
|
| Operating
results are as follows: |
|
|
|
| Profit
before taxation |
|
Rupees |
|
| (after
charging depreciation of Rs. 1 1 8,633,61 6) |
|
|
| Provision
for taxation |
|
26,223,290 |
|
| (after
adjustment of deferred taxation) |
|
-15,534,386 |
|
| Profit
after taxation |
|
10,688,904 |
|
| Unappropriated
profit brought forward |
|
354,270 |
|
| Profit
available of appropriation |
|
11,043,174 |
|
| Appropriations: |
|
|
|
| Transfer
to General Reserve |
|
-10,000,000 |
|
| Unappropriated
profit carried forward |
|
1,043,174 |
|
|
| By
the Grace of Almighty Allah, we have been able to make a big turnaround in
sales since |
|
| September
2003. The financial charges have been substantially reduced and the capacity |
|
| utilization
targets have been achieved due to volume business; and, as such, we have been
able to |
|
| earn
pre-tax profit of Rs. 26 million. |
|
|
| DIVIDEND |
|
| Your
directors have recommended cash dividend @ 5%, i.e., Re. 0.50 per share.
However, the |
|
| directors
and sponsors have waived dividend on their shareholding. Thus, the dividend
is being |
|
| paid
to benefit the minority shareholders. |
|
|
| ECONOMIC
OUTLOOK |
|
| The
country's economy continued to strengthen and by the Blessings of Allah; the
country has a |
|
| very
good quality bumper cotton crop this year. However, the international
scenario remained |
|
| depressed
due to rise in oil prices and the after-effects of Iraq war. As such, due to
unfavourable |
|
| global
economic conditions, the textile industry also remained under pressure. The
production |
|
| capacities
are being enhanced worldwide irrespective of the market size in order to
cater the future |
|
| needs
of the WTO regime commencing January 2005. Although Pakistan has been placed
at an |
|
| advantage
in the post quota liberalization, it is the dire need of the hour to
diversify the exports in |
|
| non-traditional
sectors. Even within textile sector, we need to further diversify the product
base. |
|
|
| STATEMENT
OF COMPLIANCE WITH THE BEST PRACTICES 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 (Guarantee) Limited
for the |
|
| purpose
of establishing a framework of good governance, whereby a listed company is
managed in |
|
| compliance
with the best practice 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 and directors |
|
| representing
minority interest on its Board of Directors. At present the Board includes at
least 3 |
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| independent
non-executive directors representing minority shareholders. |
|
|
| 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. No casual vacancy occurred in the
Board during he year. |
|
|
| 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 Board has taken decisions on |
|
| material
transactions, 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. |
|
|
| 8. The meetings of the Board were
presided over by the Chairman and, in his absence, 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 meeting were
appropriately |
|
| recorded
and circulated. |
|
|
| 9. The Board arranged one orientation
course for its directors during the year to apprise them of |
|
| their
duties and responsibilities. |
|
|
| 10. The Board has approved appointment of
CFO, Company Secretary and Head of Internal |
|
| Audit,
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. |
|
|
| BOARD
OF DIRECTORS |
|
| The
last elections of the Board of Directors were held on March 27, 2002. As
such, the next elections |
|
| are
due in March 2005. |
|
|
| During
the year, four meetings of Board of Directors were held. Attendance by the
directors is as follows: |
|
|
| DIRECTORS |
|
ATTENDANCE |
|
|
| Mr.
A. Razak Haji Sattar (Chairman) |
4 |
|
| Mr.
Hamid Haji Latif |
3 |
|
| Ms.
Ambreen A. Razak |
4 |
|
| Mr.
Junaid Haji Latif |
4 |
|
| Mr.
Mustafa A. Razak |
4 |
|
| Mr.
MurtazaA. Razak |
3 |
|
| Mr.
Muhammad Asif A. Ghaffar (Chief Executive) |
4 |
|
|
| CHANGE
OF ACCOUNTING YEAR |
|
| In
compliance with the requirements of SRO684(I)/2004 dated August 10, 2004 of
the Central Board |
|
| of
Revenue, Government of Pakistan and Circular No. 29 dated November 05, 2004
of the Securities |
|
| and
Exchange Commission of Pakistan regarding the change of accounting year of
textile industry |
|
| from
October-September to July-June, the Company's Accounting Year will now
onwards end on |
|
| June
30 instead of September 30. |
|
|
| Consequent
upon the change of the accounting year, the next accounting year will end on
June 30, |
|
| 2005
and will comprise of nine months from October 2004 to June 2005. |
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|
| AUDITORS |
|
| The
present auditors, M/s Khalid Majid Rahman Sarfaraz Rahim Iqbal Rafiq,
Chartered Accountants, |
|
| retire
at the forthcoming Annual General Meeting of the Company and offer themselves
for |
|
| reappointment. |
|
|
| PATTERN
OF SHAREHOLDING |
|
| The
pattern of shareholding as on September 30, 2004 is annexed to this report. |
|
| ACKNOWLEDGEMENT |
|
|
| The
directors place on record their appreciation for executives, staff members
and workers for |
|
| their
committed efforts for the growth 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 NAKSHBANDI INDUSTRIES
LIMITED |
|
| to
comply with the Listing Regulation No. 37 of the Karachi 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. 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 the 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 Boards 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 as
applicable to the Company |
|
| for
the year ended September 30, 2004. |
|
|
| YEAR
WISE STATISTICAL SUMMARY |
|
| Year
Ended September 30, |
2004 |
2003 |
2002 |
2001 |
2000 |
1999 |
|
| TOWEL
PRODUCTION SUMMARY |
|
|
| Towel (Kgs, 000) |
|
4,979.00 |
2,894.00 |
1,695.00 |
1,487.00 |
1,477.00 |
1,416.00 |
|
| CLOTH
PRODUCTION SUMMARY |
|
|
| Cloth
(Sq.mtr, 000) |
— |
— |
1,381.00 |
3,834.00 |
6,530.00 |
6,259.00 |
|
| ASSETS
EMPLOYED |
|
( Rs. in million) |
|
|
| Fixed Assets |
|
1,091.77 |
1,037.16 |
1,052.54 |
687.38 |
544.37 |
514.68 |
|
| Investments,
Long term |
|
|
| Advances
and Deposits |
0.38 |
0.45 |
0.27 |
0.27 |
0.27 |
0.27 |
|
| Current Assets |
|
1,287.79 |
1,091.53 |
798.8 |
659.93 |
532.86 |
468.13 |
|
| Total
Assets Employed |
2,379.94 |
2,129.14 |
1,851.61 |
1,347.58 |
1,077.50 |
983.08 |
|
| FINANCED BY |
|
|
|
| Shareholders'
Equity |
478.7 |
377.49 |
429.41 |
429.71 |
262.59 |
246.28 |
|
| Long
Term Liabilities |
580.01 |
500.5 |
510 |
167.38 |
145.55 |
116.33 |
|
| Obligation
under Finance Lease |
2.52 |
13.09 |
25.39 |
30.41 |
0 |
0 |
|
| Deferred Liablities |
|
33.11 |
32.88 |
36.74 |
36.86 |
34.96 |
29.72 |
|
| Current Liabilities |
|
1,285.60 |
1,205.18 |
850.07 |
683.21 |
634.42 |
590.75 |
|
| Total
Funds Invested |
2,379.94 |
2,129.14 |
1,851.61 |
1,347.57 |
1,077.52 |
983.08 |
|
| TURNOVER
& PROFIT |
|
|
| Turnover (Net) |
|
1,991.87 |
1,147.10 |
1,094.98 |
1,185.62 |
1,067.19 |
968.61 |
|
| Gross Profit |
|
242.51 |
145.87 |
196.45 |
200.91 |
172.33 |
141.45 |
|
| Operating Profit |
|
79.21 |
40.68 |
102.41 |
107.25 |
96.7 |
79.03 |
|
| Profit
(Loss) Before Taxation |
26.22 |
-49.77 |
19.22 |
36.54 |
35.73 |
11.2 |
|
| Profit
(Loss)After Taxation |
10.69 |
-51.67 |
8.77 |
26.44 |
27.63 |
6.45 |
|
| Dividend |
|
0.25 |
0.25 |
9.08 |
13.62 |
11.35 |
6.35 |
|
| Transfer
to Reserves |
10 |
-51 |
0 |
12 |
16 |
0 |
|
| Profit C/F |
|
0.79 |
0.35 |
1.28 |
1.58 |
0.76 |
0.47 |
|
| Financial Charges |
|
52.03 |
90.46 |
83.31 |
68.71 |
58.75 |
67.19 |
|
| Earning per share |
|
0.44 |
-2.85 |
0.48 |
1.46 |
3.04 |
0.71 |
|
| Breakup
value of shares |
(Amount in Rupees) |
|
|
| No. of Shares |
|
24,207,040 |
18,155,280 |
18,155,280 |
18,155,280 |
9,077,640 |
9,077,640 |
|
| Capital
+ Rev.Reserves |
478,949,594 |
377,484,290 |
429,408,133 |
429,711,631 |
262,568,416 |
246,284,574 |
|
| Breakup Value |
|
19.79 |
20.79 |
23.65 |
23.67 |
28.92 |
27.13 |
|
|
| BALANCE
SHEET AS AT |
|
|
NOTE |
2004 |
2003 |
|
|
|
|
Rupees |
Rupees |
|
|
|
|
|
| CAPITAL
AND RESERVES |
|
|
|
| Authorised
Capital |
|
|
300,000,000 |
300,000,000 |
|
| 30,000,000
Ordinary Shares of Rs. 1 0/- each |
3 |
242,070,400 |
181,552,800 |
|
| Issued,
Subscribed and Paid - up Capital |
4 |
235,836,020 |
195,577,220 |
|
| Reserves |
|
|
1,043,174 |
354,270 |
|
| Unappropriated
Profit |
|
|
478,949,594 |
377,484,290 |
|
|
|
5 |
580,010,000 |
500,500,000 |
|
| LONG
TERM LOANS - SECURED |
|
6 |
2,516,588 |
13,090,350 |
|
| OBLIGATIONS
UNDER FINANCE LEASE |
7 |
33,111,171 |
32,878,079 |
|
| DEFERRED
LIABILITIES |
|
|
|
| CURRENT
LIABILITIES |
|
8 |
844,293,539 |
887,005,508 |
|
| Short
Term Borrowing |
|
9 |
149,587,438 |
114,093,380 |
|
| Current
Portion of Long Term Liabilities |
10 |
275,318,840 |
191,932,792 |
|
| Creditors,
Accrued and Other Liabilities |
|
16,150,000 |
11,900,000 |
|
| Taxation |
|
|
— |
250,858 |
|
| Dividend Payable |
|
|
1,285,349,817 |
1,205,182,538 |
|
|
|
11 |
— |
— |
|
| CONTINGENCIES
AND COMMITMENTS |
|
2,379,937,170 |
2,129,135,257 |
|
|
|
|
| 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 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 3 members, of whom 2 are nonexecutive |
|
| directors. |
|
|
| 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. |
|
|
| 18. The statutory of the Company have
confirmed that they have been given a satisfactory rating |
|
| under
the quality control review programme of Institute 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 Institute of |
|
| Chartered
Accountants of Pakistan. |
|
|
| 19. The statutory auditors or the persons
associated with them have not been appointed to provide |
|
| others
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 all other material
principles contained in the Code have been complied with. |
|
|
| PROFIT
AND LOSS ACCOUNT |
|
| FOR
THE YEAR ENDED SEPTEMBER 30, 2004 |
|
|
|
|
|
|
NOTE |
2004 |
2003 |
|
| Sales |
|
|
Rupees |
Rupees |
|
| Cost of 'sales |
|
19 |
1 ,991 ,866,089 |
1,147,104,684 |
|
| Gross profit |
|
20 |
-1,749,351,129 |
(1 ,001 ,234,595) |
|
| Operating
expenses |
|
|
242,514,960 |
145,870,089 |
|
| Administrative
expenses |
|
|
|
| Selling expenses |
|
21 |
(41 ,900,253) |
-37,432,658 |
|
|
|
22 |
-121,406,339 |
-67,701,106 |
|
| Operating profit |
|
|
-163,306,592 |
-105,133,764 |
|
| Other
income / (loss) |
|
|
79,208,368 |
40,736,325 |
|
| Financial charges |
|
23 |
422,750 |
(51 ,825) |
|
| Workers'
profit participation fund |
|
24 |
-52,027,655 |
-90,457,485 |
|
|
|
|
-1,380,173 |
— |
|
| Profit
/ (loss) before taxation |
|
|
-52,985,078 |
-90,509,310 |
|
| Provision
for taxation |
|
|
26,223,290 |
-49,772,985 |
|
| - Current year's |
|
25 |
-16,150,000 |
(1 1 ,000,000) |
|
| - Prior year's |
|
|
— |
-900,000 |
|
| -
Adjustment deferred taxation |
|
|
615,614 |
10,000,000 |
|
|
|
|
-15,534,386 |
(1 ,900,000) |
|
| Profit
/ (loss) after taxation |
|
|
10,688,904 |
(51 ,672,985) |
|
| Earning
Per Share |
|
26 |
0.45 |
-2.85 |
|
|
| AUDITORS'
REPORT TO THE MEMBERS |
|
| We
have audited the annexed Balance Sheet of Nakshbandi Industries Limited as at |
|
| September
30, 2004 and the related Profit & 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
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 account
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; |
|
|
| (ii)
the expenditure incurred during the year was for the purpose of the company's
business; |
|
| and |
|
|
| (iii)
the business conducted, investment 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 & Loss Account, Cash Flow Statement and
Statement of Changes |
|
| in
Equity together with the notes forming part thereof conform with approved
accounting |
|
| standards
as applicable in Pakistan, and, give the information required by 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 September 30, 2004 and of the Profit, its cash
flows and |
|
| changes
in equity for the year then ended; and |
|
|
| (d) in our opinion, Zakat deductible at source
under the Zakat and Ushr Ordinance, 1980, (XVII |
|
| of
1980), was deducted by the company and deposited in the Central Zakat Fund
established |
|
| under
section 7 of that Ordinance. |
|
|
|
|
2004 |
2003 |
|
|
|
Rupees |
Rupees |
|
| CASH
FLOW FROM FINANCING ACTIVITIES |
|
|
|
| Right
Issue of shares at Premium |
|
90,776,400 |
— |
|
| Long
Term Loans Disbursements |
|
219,010,000 |
233,000,000 |
|
| Obligation
Under Finance Lease |
|
— |
1 ,859,000 |
|
| Repayment
of Long Term Loans |
|
-100,000,000 |
-181,466,057 |
|
| Repayment
of Finance Lease |
|
-14,093,380 |
-12,133,535 |
|
| Net
Cash from financing Activities |
|
195,693,020 |
41 ,259,408 |
|
| Net
lncrease/(Decrease) in Cash and Cash Equivalent |
|
38,615,829 |
-322,028,897 |
|
| Cash
and cash equivalent at the beginning |
|
-875,885,327 |
-553,856,430 |
|
| Cash
and cash equivalent at the end |
|
-837,269,498 |
-875,885,327 |
|
| CASH
AND CASH EQUIVALENTS |
|
|
|
| Cash
and bank balance |
|
7,024,041 |
11,120,182 |
|
| Short
Term Finance |
|
-844,293,539 |
-887,005,509 |
|
|
|
-837,269,498 |
-875,885,327 |
|
|
| 30TH
SEPTEMBER, 2004 |
|
NOTE |
2004 |
2003 |
|
|
|
|
Rupees |
Rupees |
|
|
|
|
|
| FIXED
CAPITAL EXPENDITURE |
|
12 |
1 ,082,296,372 |
1 ,032,098,576 |
|
| Operating
Fixed Assets - Tangible |
|
13 |
9,471,210 |
5,060,127 |
|
| Capital
Work-in-Progress. |
|
|
1,091,767,582 |
1,037,158,703 |
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