TRITEX COTTON MILLS LIMITED
ANNUAL REPORT 2004
BOARD OF DIRECTORS
IQBALALI LAKHANI		Chairman
ZULFIQARALI LAKHANI
AMIN MOHAMMED LAKHANI		Chief Executive
TASLEEMUDDIN AHMED BATLAY
AZIZEBRAHIM
RAMZANALI HALANI
MUHAMMAD FAROOQ SHAKOOR
ADVISOR
SULTANALI LAKHANI
COMPANY SECRETARY
RAMZAN ALI HALANI
AUDIT COMMITTEE
IQBALALI LAKHANI		Chairman
ZULFIQARALI LAKHANI
AZIZEBRAHIM
AUDITORS
M.YOUSUF  ADILSALEEM & COMPANY
Chartered Accountants
REGISTERED OFFICE AND MILLS
KHASRA NO. 330/502
JUMBERKHURD,
BHAI PHERU.TEHSILCHUNIAN,
LAHORE - MULTAN ROAD, DISTRICT KASUR,
PUNJAB.
HEAD OFFICE AND CORPORATE OFFICE
LAKSON SQUARE, BUILDING NO. 2
SARWAR SHAHEED ROAD
KARACHI-74200
The Directors of your Company take pleasure in presenting 18th Annual Report and review of your
""Company's performance for the year ended September 30, 2004.
				2004	2003
				(Rupees in 000')
Profit before taxation				15,925	35,937
Taxation (Net of deferred tax credits)				-10,550	30,408
Profit after taxation				5,375	66,345
Accumulated loss brought forward				-104,558	-250,940
Appropriations:				-99,183	-184,595
Transferred from surplus on				14,856	80,037
revaluation of fixed assets				-84,327	-104,558
OPERATING RESULTS
The year under review was a challenging year as the new unit became available to us after its completion
at the end of the last year. With greater acceptance and a positive increase in the demand of yarn, we
concentrated our efforts to run both units at their highest capacity.
Sales for the year under review rose to Rs. 1 ,080 million (2003: 529 million) reveals a significant increase
of 104% over the last year, but the increase in volume could not be translated in the bottom line. The
gross profit for the year is Rs. 57 million (5.3%) as compared to Rs. 42 million (8%) for the last year.
Major reasons for the lower gross profit ratio for the year under review as compared to last year are
lowered selling prices, high depreciation charges on account of recent expansion of building, plant and
machinery and higher fixed cost on recently installed resources.
Despite the improved manufacturing efficiencies and control on other costs, the profit before tax decreased
to Rs. 15.925 million as compared to Rs. 35.937 million of last year.
FUTURE OUTLOOK
Pakistan is poised for fast track growth in the future. The fundamentals are bullish with increased public
sector spending, huge investment in textile sector and higher credit intake are all positive signs of a
rising economy.
We are fully geared for the new scenario and are confident to face likely competition by improving quality
of our product and services.
Good quality cotton crop of 2004 pushed the prices downwards. The management of your Company is
committed to create value by continuous efforts, to improve productivity, cost reduction measures,
growth in sales volume and overall achievement to remain competitive in the market.
Due to consistent government policies, economic activities in the country seem to be improving and we
are hopeful that such improvements will yield betterment of operating results of the Company in the year
to come.
CORPORATE GOVERNANCE
In accordance with the requirements of the Code of Corporate Governance issued by the Securities and
Exchange Commission of Pakistan, the Directors hereby confirm that:
•      The financial statements, prepared by the management of the Company, presents fairly its state of
affairs, the result of its operations, cash flows and changes in equity.
•      Proper books of accounts of the Company have been maintained.
•      Appropriate accounting policies have been applied consistently in preparation of financial statements
and accounting estimates are based on reasonable and prudent judgement.
•      International Accounting Standards, as applicable in Pakistan, are followed in preparation of all
financial statements.
•      The Company's system of internal controls is sound in design and has been effectively implemented
and continuously reviewed.
•      There are no significant doubts upon the Company's ability to continue as a going concern.
•      There has been no material departure from the best practices of corporate governance, as detailed
in the listing regulations.
•      Key operating and financial data of last six years is annexed to these financial statements.
•      Information about taxes and levies is given in the notes to the accounts.
•      The values of investments of staff retirement benefits (i.e. the Provident Fund) according to their
respective audited accounts are as follows:
BOARD OF DIRECTORS
I would like to place on record my appreciation and gratitude to the Board of Directors for guidance and
support to the management. There has been no change in the constitution of the Board of Directors since
the annual report of 2003.
During the year, the Board of Directors held five meetings to cover its complete cycle of activities. The
attendance record of Directors is as follows:
Name of Directors				No. of Meetings attended
Mr. Iqbal AN Lakhani				4
Mr. Zulfiqar AN Lakhani				3
Mr. Amin Mohammed Lakhani				4
Mr. Tasleemuddin Ahmed Batlay				4
Mr. Aziz Ebrahim				4
Mr. Ramzan AN Halani				5
Mr. Muhammad Farooq Shakoor				5
AUDIT COMMITTEE The Audit Committee operates according to theTerms of Reference agreed by the Board of Directors of
the Company. The Terms of Reference clearly set out the role and responsibilities in accordance with the
requirements of the Code of Corporate Governance issued by the Securities and Exchange Commission
of Pakistan.
The Audit Committee is comprised of three members, all of them are non-executive directors. The Audit
Committee held four meetings during the year.
TheTerms of Reference also provide guidelines for establishing, maintaining and reviewing internal controls
in the Company. The Committee periodically reviews the financials of the Company and their compliance
with the statutory and regulatory requirements. The Committee also reviews related public announcements
before being approved by the Board. The Audit Committee is also responsible for   selecting and
recommending external auditors to the Board and reviews procedures for ensuring that the selected
auditors are independent with regard to the services performed by them.
PATTERN OF SHAREHOLDING
The pattern of shareholding as on September 30, 2004 is enclosed in the prescribed form as required
under Code of Corporate Governance. The Directors, Chief Executive Officers, Chief Financial Officers,
Company Secretary, their spouses and minor children did not carry out any transaction in the shares of
the Company during the year, except for one Director who purchased 1 4-.000 shares in his own name.
AUDITORS
The Auditors M/s. M. Yousuf Adil Saleem & Co., Chartered Accountants, retire and offer themselves for
re-appointment.
ACKNOWLEDGEMENTS
Your Directors place on record their recognition and appreciation for the valuable contribution made by all
employees in the progress and development of the Company. We are also thankful to our suppliers,
shareholders, banks and financial institutions for their continued support and confidence in our enterprise
This statement is being presented to comply with the Code of Corporate Governance contained in
the listing regulations of Karachi and Lahore Stock Exchanges 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 and
directors representing minority interests on its Board of Directors. However, at present
the Board includes no 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 the current 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 and a mission statement, overall corporate strategy
and significant policies of the Company. A complete record of particulars of significant
policies alongwith 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 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, by
a director elected by the Board for this purpose. 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 arranged an orientation course for its directors during the year to apprise
them of their duties and responsibilities.
10.The Chief Financial Officer and the Company Secretary were appointed prior to the
implementation of the Code of Corporate Governance. Remuneration, terms and
conditions in case of future appointments on these positions will be approved by the
Board. However, the appointment of head of internal audit and terms and conditions of
his employment have been approved by the Board.
The directors' report has been prepared in compliance with the requirements of the
Code and fully describes the salient matters required to be disclosed.
The financial statements of the Company were duly endorsed by CEO and 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.
The Board has formed an audit committee. It comprises three members, all of them are
non-executive directors.
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.
The Board has set-up an effective internal audit function and personnel involved are
considered suitably qualified and experienced for the purpose and are conversant with
the policies and procedures of the Company and they are involved in the internal audit
function on a full time basis.
The statutory auditors of the Company have confirmed that they have been given a
satisfactory rating under the quality control review programme of the 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.
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.
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 TRITEX COTTON MILLS LIMITED to
comply with the relevant Listing Regulation of all the Stock Exchanges 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 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 repects,
with the best practices contained in the Code of Corporate Governance as applicable to the Company
for the year ended September 30, 2004.
We have audited the annexed balance sheet of TRITEX COTTON MILLS LIMITED as at September 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.
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, 1 984. 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 acccounting 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, 1 984, and are in agreement with the
books of account and are further in accordance with accounting policies consistently applied,
except for the change stated to in note 2.5 with which we concur;
ii.       the expenditure incurred during the year was for the purpose of the Company's business;
and iii.the business conducted, investments made and the expenditure incurred during the year
were in accordance with the objects of the Company;
			Note	2004	2003
				(Rupees in '000')
SHARE CAPITAL AUTHORISED
24,000,000 Ordinary shares of Rs. 10/- each				240,000	240,000
ISSUED, SUBSCRIBED AND PAID-UP
1 2,000,000 Ordinary shares of Rs. 1 01- each fully paid in cash				120,000	120,000
Accumulated loss				-84,327	-104,558
SURPLUS ON REVALUATION OF PROPERTY, PLANT AND EQUIPMENT			3	93,251	102,907
NON CURRENT LIABILITIES
Long term loans			4	369,419	469,419
Liabilities against assets subject to finance lease			5	88,951	51,916
Deferred liabilities			6	24,720	21,891
CURRENT LIABILITIES
Short term bank borrowings			7	328,048	167,039
Current portion of long term liabilities			8	128,793	40,570
Trade and other payables			9	60,664	30,781
Mark-up payable			10	5,160	5,079
Taxation				8,115	5,077
				530,780	248,546
CONTINGENCY AND COMMITMENTS			11
				1,142,794	910,121
TANGIBLE FIXED ASSETS
Property, plant & equipment			12	712,840	259,597
Capital work in progress			13	98,587	450,202
				811,427	709,799
LONGTERM DEPOSITS			14	13,399	8,435
CURRENT ASSETS
Stores and spare parts			15	12,835	1 1 ,793
Stock in trade			16	275,565	150,392
Trade debtors				-	127
Advances, deposits, prepayments and other receivables			17	28,414	27,310
Cash and bank balances			18	1,154	2,265
				317,968	191,887
				1,142,794	910,121
FORTHEYEAR ENDED SEPTEMBER 30, 2004 2004			Note		2003
				(Rupees in '000')
Sales			19	1,079,987	529,095
Cost of goods sold			20	-1,022,820	-486,554
Gross profit				57,167	42,541
Operating expenses
Administration			21	2,605	1,433
Selling			22	6,537	4,860
				-9,142	-6,293
Operating profit				48,025	36,248
Other income
Gain on disposal of property, plant & equipment				119	192
Other				1,101	1,232
				1,220	1,424
				49,245	37,672
Other charges
Financial			23	32,480	10,363
Workers' profit participation fund				840	1,366
				-33,320	-11,729
Profit before taxation				15,925	25,943
Difference on settlement of long term loan				-	9,994
Taxation			24	15,925	35,937
Current				-5,430	-2,682
Prior years				130	-626
Deferred				-5,250	33,716
				-10,550	30,408
Net profit for the year				5,375	66,345
				(Rupees)
Earnings per share			25	0.45	5.53
FOR THE YEAR ENDED SEPTEMBER 30, 2004
				2004	2003
				(Rupees in '000')
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before taxation				15,925	35,937
Adjustments for: Depreciation				61,234	17,201
Gain on disposal of fixed assets				-119	-192
Provision of gratuity Financial charges Difference on settlement of long term loan				32,480	1,800
Operating cash flow before changes in
working capital				113,220	55,115
Changes in working capital
(lncrease)/decrease in current assets
Stores and spares				-1,042	-257
Stock in trade Trade debtors				(125,173) 127	(42,775) 1,648
Advances, deposits, prepayments and other receivables				653	-6,955
Long term deposits				-4,783	-7,455
lncrease/(decrease) in current liabilities
Trade and other payables				29,883	1 1 ,936
				-