| Allwin Engineering Industries Limited |
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| Annual
Report 1999 |
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| MISSION
STATEMENT |
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| To
be a dynamic, profitable and growth oriented |
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| company
with market leadership in auto parts, through |
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| excellence
in quality, advance technology, innovation |
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| and
continuous improvement: To create joy of producing |
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| and
selling, and joy for the customers to buy: To ensure |
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| attractive
return to business associates, share holders |
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| and
to reward employees according to their ability & |
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| performance:
And be a good corporate citizen in order |
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| to
fulfill social responsibility. |
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| CONTENTS |
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| Corporate Data |
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| Notice
of Meeting |
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| Chairman's
Review |
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| Directors'
Report |
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| Auditors'
Report |
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| Balance Sheet |
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| Profit
and Loss Account |
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| Statement
of Changes in Financial Positions |
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| Notes
to the Accounts |
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| Pattern
of Shareholding |
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| Atlas
Group Companies |
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| CORPORATE
DATA |
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| BOARD
OF DIRECTORS: |
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| CHAIRMAN |
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| Mr.
Yusuf H. Shirazi |
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| DIRECTORS |
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| Mr.
Aamir H. Shirazi |
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| Ms.
Farzana Munaf |
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| Mr.
Jawaid Iqbal Ahmed |
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| Mr.
Mohammad Habib-ur-Rehman |
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| Mr.
M. Mazharuddin |
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| Mr.
Shahid Anwar |
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| Company
Secretary |
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| Mr.
Mohammad Atta Karim |
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| GROUP
EXECUTIVE COMMITTEE: |
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| CHAIRMAN |
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| Mr.
Yusuf H. Shirazi |
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| MEMBERS |
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| Mr.
Jawaid Iqbal Ahmed |
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| Mr.
Frahim Ali Khan |
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| Mr.
Iftikhar H. Shirazi |
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| Mr.
Aamir H. Shirazi |
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| Mr.
Saqib H. Shirazi |
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| Secretary |
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| Mr.
Amjad Hussain |
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| GROUP
PERSONNEL COMMITTEE: |
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| CHAIRMAN |
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| Mr.
Yusuf H. Shirazi |
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| GROUP
AUDIT COMMITTEE: |
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| CHAIRMAN |
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| Mr.
Sanaullah Qureshi |
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| COMPANY
MANAGEMENT: |
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| CHIEF
EXECUTIVE OFFICER |
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| Mr.
S.V.H. Naqvi |
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| DIRECTOR
FINANCE |
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| Mr.
Mohammad Atta Karim |
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| GENERAL
MANAGER PLANT |
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| Syed
Muhammad Rizvi |
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| GENERAL
MANAGER MARKETING |
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| Mr.
Shameem Ahmad |
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| GENERAL
MANAGER PRODUCTION PLANNING |
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| Lt.
Col. (R) Sultan Ahmad (TIM) |
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| AUDITORS: |
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| Ford,
Rhodes, Robson, Morrow, |
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| Chartered
Accountants |
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| TAX ADVISER: |
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| Mahmood
Law Associates |
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| LEGAL
ADVISERS: |
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| Mohsin
Tayebaly & Co. |
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| Advocate
Incorporation |
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| BANKERS: |
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| ANZ
Grindlays Bank plc. |
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| Hong
Kong Shanghai Banking Corporation |
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| Habib
Bank Limited |
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| National
Bank of Pakistan |
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| United
Bank Limited |
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| REGISTERED
OFFICE (FACTORY): |
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| 15th Mile, |
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| National
Highway, Landhi, |
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| Karachi-75120 |
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| NOTICE
OF MEETING |
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| Notice
is hereby given that the 37th Annual General Meeting of Allwin Engineering
Industries Limited will |
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| be
held at Corporate Office at 8th Floor, Adamjee House, I. I. Chundrigar Road,
Karachi on 20th December, |
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| 1999
at 11.00 a.m. to transact the following business: |
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| ORDINARY
BUSINESS: |
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| 1.
To confirm the Minutes of the Extra Ordinary General Meeting held on 15th
May, 1999. |
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| 2.
To receive, consider and adopt the Audited Accounts of the Company together
with Directors' and |
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| Auditors'
Reports thereon for the year ended 30th June, 1999. |
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| 3.
To appoint Auditor's for the year 1999-2000 and to fix their remuneration. |
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| 4.
To transact any other business with the permission of the chair. |
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| SPECIAL
BUSINESS: |
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| 5.
To approve the remuneration of the Chief Executive Officer. |
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| A
statement under section 160 of the Companies Ordinance, 1984 pertaining to
the Special |
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| Business
referred to above is annexed to this Notice of Meeting. |
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By order of the Board |
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| Karachi:
2nd November, 1999 |
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Company Secretary |
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| NOTES: |
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| 1.
The Shares Transfer Books of the Company will remain closed from 14th
December, 1999 to 20th, |
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| December,
1999 (both days inclusive). |
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| 2.
A member entitled to attend and vote at the meeting may appoint another
member as his/her proxy to |
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| attend
and vote on his/her behalf. The instrument appointing a proxy must be
received at the Company's |
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| Registered
Office not less than 48 hours before the time of holding of the meeting. |
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| STATEMENT
UNDER SECTION 160 OF THE COMPANIES ORDINANCE, 1984. |
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| Approval
is being sought for fixing the remuneration of the Chief Executive Officer
working with the |
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| Company.
The Chief Executive Officer is interested only in the remuneration payable to
him. |
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| CHAIRMAN'S
REVIEW |
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| It
is my privilege to welcome you to the 37th |
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| Annual
General Meeting of the Company and present |
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| you
the review on the performance of your company |
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| for
the year ended June 30, 1999. |
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| THE
ECONOMY |
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| The
adverse backlash of the nuclear explosions |
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| of
last year was quite marked as the economy |
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| witnessed
a continuous slump during the year |
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| under
review: The first half was completely dominated |
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| by
the effects of the sanctions imposed by |
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| G-7
with respect to inflow of foreign loans and |
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| aid
packages. The foreign currency reserves hit |
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| rock
bottom as the country slipped into a worst |
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| ever
economic crisis with almost no investment |
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| taking
place in the country. The economy was |
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| also
affected by the slow down of the global |
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| economic
activity particularly in South East Asia. |
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| During
the second half of the year under review, |
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| things
however began to look better with the easing |
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| of
sanctions and the successful negotiation of |
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| the
Government with the foreign donors and lending |
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| agencies
which resulted in rescheduling of ,existing |
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| debts
and the resumption of fresh funds inflow. |
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| The
Government also embarked on the path of |
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| adjustment
and reforms and a series of wide |
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| ranging
measures were taken; these included |
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| rolling
back of several measures taken after the |
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| economic
sanctions. However, before the economy |
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| could
actually get back on the track to recovery, |
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| the
momentum was hampered by the worsening |
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| of
the indo-pak relationship due to the Kargil conflict. |
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| The
GDP registered a meager growth of 3.1% |
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| during
the year as against 4.3 % of last year. |
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| Exports
were 11.7 % lower than last year. Value |
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| addition
in the manufacturing sector was also |
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| below
expectations at 4.7% during the year against |
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| an
impressive 7.9% last year. The economic |
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| sanctions,
discouragement of imports, uncertain |
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| economic
environment and lower demand for exports |
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| due
to global economic recession adversely affected |
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| the
growth in this sector. The agricultural sector |
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| also
suffered a set back due to unfavourable |
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| weather
conditions. It registered a meager growth |
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| of
0.35% as against 3.8% of the previous year. |
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| National
savings declined to 11.1% of GNP as |
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| compared
with 14.2% last year. Only the service |
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| sector
showed improvement: it recorded a growth |
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| of
4.1% compared to a growth of 3.2% during |
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| the
previous year. Net foreign private investment |
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| inflows
stood at US$ 300.7 million during July- |
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| March,
1998-99 as against US$ 639.9 million |
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| in
the comparable period last year, a sizeable |
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| decline indeed. |
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| THE
ENGINEERING INDUSTRY |
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| The
Pakistan Engineering Industry in general and |
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| Automotive
Industry in particular, is small, vulnerable |
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| to
unstable Government policies, and generally |
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| a
neglected sector of the economy. The fiscal |
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| measures
taken from time to time since 1995 |
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| onward,
particularly the establishment of Engineering |
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| Development
Board, with focused term of reference |
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| in
regard to the development of Engineering Industry, |
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| showed
positive results. Formulation of Industry |
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| Specific
Deletion Programs for the automotive |
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| sector
was an achievement of the EDB, which |
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| encouraged
the vending Industry to gear up activities |
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| and
play its role. The Deletion Programs have |
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| been
prepared upto the year 2003. |
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| The
automotive parts deletion programme has |
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| made
a significant contribution to the development |
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| of
engineering industry. It has saved valuable |
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| foreign
exchange of $ 909 million through import |
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| substitution,
created jobs, contributed to export |
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| of
value added components, and paid a fair share |
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| of
taxes (Rs.12.265 billion). We can not afford |
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| to
let Engineering Industry go down. It is hoped |
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| that
the new set up of the Government will take |
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| up
the issue more seriously and provide maximum |
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| support
by calling for a review of Agreement on |
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| Trade
Related Investment Measures (TRIMs). |
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| However,
the gradual disappearance of trade |
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| preferences
and special treatment, and the drying |
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| up
of concessional aid flows are now inevitable. |
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| This
implies evolving strategy of increasing supply |
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| capacity
of high quality exports, enhancing human |
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| skill,
institutional and physical infrastructure, |
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| developing
an entrepreneurial culture and creating |
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| an
environment conductive to investments etc. |
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| I
am confident, the Engineering Industry will rise |
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| to
the occasion and face the challenges in the |
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| short
and long term. Consistent and friendly |
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| government
policies will play major role in the |
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| development
of engineering industry which is |
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| inevitable
for the development and progress of |
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| the country. |
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| OPERATIONAL
RESULTS |
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| Despite
the unfavorable economic environment |
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| as
stated above, your company succeeded in |
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| showing
an overall improved performance during |
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| the
year under review. The company has made |
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| a
turn around and the result for the year shows |
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| a
profit before tax of Rs. 44,000, though meager, |
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| against
loss of Rs. 41.46 million last year. |
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| The
Company paid taxes of Rs. 177.33 million |
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| on
account of custom duty, sales tax and income |
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| tax
during the year. |
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| The
quality of the products improved contributing |
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| to
greater market acceptability and significant |
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| reduction
in market claims. The production was |
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| streamlined
and the supply position improved. |
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| Sales
revenue increased from Rs. 301.47 million |
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| in
the previous year to Rs. 375.33 million during |
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| this
year, up 24.5%. The higher sales revenue |
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| increase
was due to increase in volume. The cost |
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| of
sales increased by 10.95% as compared to |
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| sales
revenue increase of 24.5%. The cost of |
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| sales
was lower as a result of volume, cost control |
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| and
stable raw material prices. Gross profit for |
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| the
year was Rs. 62.65 million, against Rs. 19.66 |
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| million
of the last year. Gross profit to sales |
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| ratio
improved to 16.69% during the year from |
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| 6.52%
of the previous year. |
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| Administrative
expenses declined to Rs. 14.78 |
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| million
from Rs. 19.22 million of the previous year. |
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| Selling
and distribution expenses went down to |
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| Rs.11.99
million this year from Rs. 13.17 million |
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| of
the previous year. This was possible mainly |
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| due
to cost control and better claims management. |
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| Financial
expenses however, increased from Rs. |
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| 28.74
million in 1998 to Rs. 37.63 million in 1999. |
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| This
increase was due to higher borrowings during |
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| the
year and charge of mark-up on long term loan |
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| and
leases obtained in previous year to finance |
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| capital
expenditures and were capitalized in these |
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| years.
Higher borrowing was necessitated to meet |
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| working
fund requirements due to increase in sales |
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| and
pending recoveries from some of our customers |
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| dependent
on recoveries from the Government |
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| for
some of our products. |
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| The
company was setup in 1963 with a paidup |
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| capital
of Rs. 2.0 million, which has grown to |
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| Rs.
49.35 million. During this period your company |
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| made
Right issue at par of Rs. 5.20 million in |
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| 1976
and Rs. 4.71 million in 1980. It has paid |
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| cash
dividend of Rs. 27.65 million and Bonus |
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| at
Rs. 30.13 million against the shareholders |
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| investment
of Rs. 11.91 million. |
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| WORLD
REGULATORY ORGANIZATIONS |
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| Any
business activity is directly related to the |
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| national
business environment. Engineering industry |
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| plays
a critical role in the development of the |
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| economy.
Being a signatory to the World Trade |
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| Organization,
Pakistan, in this respect, is obliged |
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| to
make certain changes in the laws relating to |
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| Trade
Policy, custom valuation and other trade |
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| related
matters which are affecting country's local |
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| trade,
finance and industry. These changes basically |
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| aim
at further liberalization of trade and are to |
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| be
implemented from the year 2000. These will |
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| have
a great bearing on the Engineering Sector |
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| too.
The Ministry of Commerce, Government of |
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| Pakistan,
is of the view that a major change is |
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| expected
in the concessionary regime replacing |
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| it
with the tariff incentives driven regime which |
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| may
affect local trade and industry - as it is!: |
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| (It
so happens when friends turn unfriendly!) |
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| This
agreement was signed by the Ministry of |
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| Commerce
on behalf of the Government of Pakistan. |
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| Obviously,
neither any debate was carried out, |
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| nor
any consultation made which is the norm in |
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| such
major decisions. In most countries of the |
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| world,
private sector is associated with such decision |
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| making
of great importance. No such due diligence |
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| was
made at any quarters. The private sector |
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| did
not even know that such an agreement was |
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| signed
- in 1995!. On the contrary, the private |
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| sector
was, at the same time, being encouraged |
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| to
invest and, in fact, coerced with compulsory |
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| localization
programs involving huge investment |
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| in
automotive industry having serious repercussions |
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| without
a concessionary regime. |
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| However,
the Ministry of Industries, Government |
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| of
Pakistan, duly supported by an expert view |
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| on
WTO, believe on continuing with the existing |
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| policy.
The Ministry has thus approached the WTO |
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| in
this respect. The Ministry's approach, if |
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| implemented,
will have a far-reaching effect on |
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| the
trade and other related industries as a whole. |
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| Some
countries have recently obtained such |
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| extensions
and exceptions. Whatever the case, |
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| there
is a need to protect the huge investment |
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| made
in this behalf in the industry, the local trade |
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| and
services as well as other related initiatives, |
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| in
the larger interest of the country. |
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| It
is generally felt by the automotive sector and |
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| various
trade bodies also that Pakistan like other |
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| developing
countries should take up such matters |
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| that
hurt its industry, trade and services at the |
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| next
round of WTO multilateral trade negotiations |
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| particularly
as according to Andy Rowel, a well |
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| known
economic writer "WTO represents 1% of |
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| 1
(0.01%) of the richest corporations and individuals |
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| in
the world ....... and last decade saw increase |
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| of
wealth 70 to 85% in the richest 20 countries |
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| as
against 2% decline in the 20 poorest countries |
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| of
the world". The World Bank Chief, James |
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| Wolfensohn,
further reinforces to say "....... the |
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| searing
image of desperation, hopelessness and |
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| decline
- of people who once had hope, but will |
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| have
it no more .... "if the present globalization |
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| of
economy- though IMF and WTO imperatives |
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| -
persists in its present form ! |
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| Further,
The Wall Street Journal of November 12- |
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|
| 13,1999
in its editorial wrote:"..... Michel Camdessus |
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| ......
has given us all something serious to talk |
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| about...
Not least is just what is the proper role |
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| of
the International Monetary Fund ..... in the |
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| past
year, individuals calling for the abolition of |
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| the
IMF have included George Shultz, William |
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| Simon
and Walter Wriston.........their utter seriousness |
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| about
maintaining a sound system of global finance |
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| and
trade ...... the truth is that the IMF, in its |
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| current
exalted incarnation, deserves a sober |
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|
| reassessment
from its primary funding members |
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| of
its ability to perform that function ...... The |
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| IMF
also needs to get rid of its bias toward devaluation, |
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| which
is supposed to "revive" exports even as |
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| the
inevitable, resulting inflation quickly diminishes |
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| the
resident population's incomes and assets. |
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| Impoverishing
people in this way is morally |
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| indefensible
and politically unsustainable ..........." |
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| All
this needs a thoughtful consideration in the |
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| interest
of the world economy, itself. |
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| YEAR
2000 COMPLIANCE |
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| The
management of your company being fully |
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| aware
of the Y2K problem, has restructured all |
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| hardware
and software packages accordingly to |
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| go
beyond 31 December, 1999. Most of the packages |
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| have
completed their test run phase whereas others |
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| are
under observation. |
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| HUMAN
RESOURCE |
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| The
Group Personnel Committee headed by the |
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| Chairman
is continuously working to make personnel |
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| policies,
which will carry forward to the new millennium. |
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| The
Group, of which your company is a constituent |
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| member
believes that it is through motivated |
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| employees
that the company can sustain growth |
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| and
good governance. |
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| The
Group further believes in that it is the intellectual |
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| capital,
which leads to the sustained growth. Human |
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| Resource
development has been the hallmark of |
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| the
Group. The Group has thus engaged Hay's |
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| management
consultants for job evaluations to |
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| enable
the Group to restructure, among others, |
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| compensation
to employees according to their |
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| contribution
in meeting the company's objectives. |
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| Performance
bonus has been introduced as also |
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| Group
Medical Scheme for self and families. |
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| The
employee's management relations remained |
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| cordial
throughout the year. I am pleased to report |
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| that
the management amicably concluded a two |
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| years
agreement effective December 01, 1998 |
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| with
the CBA. The agreement provides a better |
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| pay
package for the workmen and better plant |
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| productivity
for the company. |
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| Our
future relies on a motivated, devoted, well |
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| trained
and well educated team of people all striving |
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| hard
for excellence. |
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|
|
|
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| 149
personnel were entitled for the long service awards. |
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| FUTURE
OUTLOOK |
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| Globalization
of the economy, as it is, is being |
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| widely
questioned. It thus needs harmonization |
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| in
the interest of the world economy as a whole. |
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| The
next WTO meeting being held in USA must |
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| address
this issue and I hope developing countries |
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| generally
and Pakistan particularly will be given |
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|
| a
thoughtful consideration. |
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| The
Government has encouraged a team of |
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| representatives
of the Private Sector to join their |
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|
| discussion
with their official delegation of the |
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|
| deliberations
on WTO at the WTO meeting at |
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|
| Seattle., USA. |
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| Internally,
recession is expected to persist and |
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|
| further
growth will be adversely affected. There |
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|
|
| will
be fierce competition and all existing players |
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| will
make all efforts to retain or improve their |
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| market
share. All this will create greater pressure |
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|
