| FFC-Jordan Fertilizer Company Limited |
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| Annual
Report 1999 |
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| CONTENTS |
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| Company
Information |
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| Notice
of Annual General Meeting |
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| Report
of the Directors |
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| Auditors'
Report to the Members |
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| Balance Sheet |
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| Cash
Flow Statement |
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| Notes
to the Accounts |
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| Pattern
of Shareholding |
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| COMPANY
INFORMATION |
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| DIRECTORS |
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Lt Gen Muhammad Maqbool
(Retd), HI(M), S Bt |
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Chairman |
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Maj Gen Muhammad Salim
Arshad (Retd), HI(M), T Bt |
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Managing Director &
Chief Executive |
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Lt Gen Amjad Shuaib
(Retd), HI(M) |
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Brig Muhammad Saeed Baig
(Retd), SI(M) |
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Brig Ghulam Hussain
(Retd), SI(M) |
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Mr. Qaiser Javed |
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Mr. Hani Abdallah Dukhgan |
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Mr. Irfan Siddiqui |
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Mr. David Vivian Johns |
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| SECRETARY |
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Brig Khalid Yusuf (Retd) |
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| REGISTERED
OFFICE |
93-Harley Street,
Rawalpindi, Pakistan. |
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Tel: 562491-5 |
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Fax: 582851 & 567290 |
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| PLANTSITE |
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Port Qasim, Karachi,
Pakistan. |
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| AUDITORS |
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A.F. Ferguson & Co., |
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Chartered Accountants |
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PIA Building, 49 Blue
Area, |
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Islamabad. |
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| LEGAL
ADVISORS |
Orr Dignam & Co. |
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Advocates, |
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3-A, Street 32, Sector
F-8/1, |
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Islamabad. |
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| SHARE
DEPARTMENT |
Plot No. EZ/1/P-1 Eastern
Zone, Port Qasim, |
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Karachi-48. |
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| NOTICE
OF ANNUAL GENERAL MEETING |
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| Notice
is hereby given that the 6th Annual General Meeting of the Shareholders of
FFC-Jordan Fertilizer Company |
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| Limited
will be held at Pearl Continental Hotel, The Mall, Rawalpindi, on Thursday
June 22, 2000 at 1330 hours to |
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| transact
the following business: |
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| Ordinary
Business |
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| 1.
To confirm the minutes of the 5th Annual General Meeting held on June 24,
1999. |
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| 2.
To receive, consider and adopt the Audited Accounts of the Company together
with the Auditors' and the Directors' |
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| Reports
for the year ended December 31, 1999. |
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| 3.
To appoint Auditors for the year 2000 and to fix their remuneration. |
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| 4.
To transact any other business with the permission of the Chairman. |
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By Order of the Board |
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FFC-Jordan Fertilizer Company Limited |
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| Rawalpindi |
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Brig Khalid Yusuf (Retd) |
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| May 31,2000 |
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Company Secretary |
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| Notes |
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| 1.
The share transfer books of the Company will remain closed from 16th to 22nd
June, 2000 (both days inclusive). |
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| 2.
A member of the Company entitled to attend and vote at the Annual General
Meeting may appoint a person/ |
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| representative
as proxy to attend and vote in place of the member at the Meeting. Proxies in
order to be effective |
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| must
be received at the Company's Registered Office, 93 Harley Street, Rawalpindi
not later than 48 hours |
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| before
the time of holding the Meeting. |
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| 3.
The CDC account/sub account holders are requested to bring with them their
National Identity Cards alongwith |
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| the
Participant's ID number and their account numbers at the time of attending
the Annual General Meeting in |
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| order
to facilitate identification of the respective shareholders. |
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| 4.
In case of Corporate entity, the Board of Director's resolution/Power of
Attorney with specimen signatures shall |
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| be
produced at the time of meeting. |
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| REPORT
OF THE DIRECTORS |
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| For
the Year Ended December 31, 1999 |
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| 1.
The Directors take pleasure in presenting their 6th Annual Report together
with the Company's Financial |
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| Statements
for the year ended December 31, 1999 and the Auditors' Report thereon. |
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| 2.
Project Completion |
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| By
the grace of Almighty Allah, the first DAP and granular Urea project in
Pakistan was completed on December |
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| 31,
1999 and commenced commercial operation on January 01,2000. Prior to
commercial operation, the year |
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| 1999
witnessed the successful completion of the performance tests of both DAP and
Urea Plants. During these |
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| tests
both plants were operated at over 100% of their design capacities. Most of
the technical problems on these |
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| two
Plants were identified and resolved. However, certain difficulties being
faced in the Ammonia Plant are being |
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| gradually
removed. Owing to capacity limitation of the old Heat Recovery Steam
Generator (HRSG), the DAP |
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| and
Urea Plants could not be operated at full capacity. The old HRSG has been
replaced by a new one in the |
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| planned
turnaround during January/February 2000. The Plant was unable to operate on
100% production capability |
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| owing
to inadequate supply of gas. However, this problem has been resolved recently
at the highest level and |
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| the
plant will be operating on full capacity soon. |
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| The
project delay, due to factors beyond our control, resulted in increased
Project cost. The project, till the |
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| announcement
of commercial operation, has been completed at a total estimated cost of US$
469 million against |
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| the
estimated total cost of US $ 370 million showing an over run of about US$ 99
million. With the completion of |
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| this
project of National importance, efforts are being made to steer the Company
through the difficult challenges |
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| ahead. |
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| 3. Production |
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| During
the year under review, FJFC trial production was 236,000 MT of DAP and
212,000 MT of Urea. |
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| Although
the quality of DAP and Urea was upto the laid down specifications and met the
approval of the farmers, |
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| the
out put could not come upto expectations due to low gas pressure at times
resulting in disruption of production. |
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| DAP
Plant could not be operated at full capacity due to bucket elevator problem
which was finally resolved. |
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| 4. Marketing |
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| FJFC
sold 228,000 MT of DAP and 154,000 MT of Urea during 1999. |
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| The
year 1999 has witnessed a significant downturn in the fertilizer business
scenario in Pakistan due to: |
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| ·
Unprecedented natural gas price increase for the fertilizer industry. |
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| ·
Imposition of sales tax on natural gas consumed for the fertilizer industry. |
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| ·
Falling international and local fertilizer prices. |
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| ·
Dumping of Urea |
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| ·
High international Phosphoric Acid prices |
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| ·
Non-implementation of GOP Fertilizer Policy. |
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| A
positive development towards the end of the year was the imposition of 10%
regulatory duty on imported Urea |
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| to
prevent dumping. |
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| Latest
technology has been used in manufacturing granulated Urea for the first time
in Pakistan and with the |
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| acceptance
of the farmers, it is hoped that in future it will not only provide a
competitive edge but could also be |
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| sold
at a premium due to its advantage in usage. |
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| As
supply of Urea has exceeded the demand, the Government has allowed export of
100,000 MT of Urea to the |
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| fertilizer
industry. Granular Urea has a comparative advantage in export compared to
prilled Urea. |
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| 5.
Implementation of Fertilizer Policy |
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| The
Government of Pakistan Fertilizer Policy 1989 is the backbone of FJFC Project
concept and implementation. |
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| In
addition to the time delay and increase in cost of the Project, the most
fundamental issue confronting FJFC at |
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| this
critical juncture is to obtain GOP's approval for the implementation of the
fertilizer policy. The GOP has |
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| already
approved the issue of increase in the supply of natural gas as per the
stipulated requirements. The |
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| remaining
two points in the following key areas, hopefully will also be resolved in the
near future:- |
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| *
Imposition of 15% GST on feedgas in violation of 10 years price freeze. |
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| *
US$ 250 per ton DAP floor price mechanism. |
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| As
soon as the Fertilizer Policy 1989 is fully implemented, the financial
position of the Company despite the cost |
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| overrun
will substantially stabilise. |
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| The
above issue have been taken up with the concerned agencies/ministries of
Government of Pakistan and |
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| strong
follow up is in progress. |
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| 6. Financing |
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| Due
to factors explained in the preceding paragraphs, the Company is facing an
acute liquidity crises. We shall |
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| continue
to lobby with the government to resolve the issues urgently so that the
Company is able to meet its |
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| obligations. |
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| The
foreign currency cost of the project was mainly financed through export
credit agency (ECA) loans from |
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| Banque
Nationale de Paris, France, Kreditanstalt fur Wiederaufbau, Germany, Export
Import Bank of the USA |
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| and
Export Development Corporation, Canada. Repayment of these loans is
guaranteed by a consortium of |
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| local
banks and financial institutions under the lead of Habib Bank Limited. |
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| As
explained in the last report of the Directors, the four foreign currency
lenders had agreed in principle to |
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| reschedule
the repayment of the loans. Initially, these loans were part of the Paris
Club rescheduling arrangements. |
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| However,
the Ministry of Finance has now excluded these four ECA loans from the Paris
Club Agreements. The |
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| matter
is being pursued with the concerned Ministry. |
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| Due
to fall in treasury bills rate and SBP discount rate, the local currency
lenders were requested to reduce the |
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| mark
up rates and also to reschedule the loans. Some of the lenders have agreed to
this while negotiations are |
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| going
on with the others. This would help the Company in reducing the financial
charges and thereby alleviate |
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| the
liquidity problem to some extent. |
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| In
view of the liquidity crises being faced by the Company, a financial
consultant has been hired to carry out a |
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| detailed
diagnostic and capital restructuring exercise. |
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| 7.
Pattern of Shareholding |
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| As
of December 31, 1999 there were 24962 individual shareholders besides
numerous institutions including 15 |
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| foreign
investors as shown in the annexed pattern of shareholding. |
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| 8. Directors |
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| On
retirement of Mr. Iltifat Rasul Khan, Mr. Qaiser Javed has been appointed as
Director of the Company. |
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| On
vacation of office by Brig All Jawahar Khan (Retd), Brig Khalid Yusuf (Retd)
has been appointed as new |
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| Secretary
of the Company. |
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| 9. Auditors |
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| The
present Auditors, M/s A.F. Ferguson & Co., Chartered Accountants, retire
and being eligible have offered |
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| themselves
for re-appointment as Auditors of the Company. |
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| 10.
Acknowledgments |
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| The
Directors also express their appreciation for the continued support and
guidance of the shareholders, |
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| employees,
foreign and local lenders, suppliers and the Government and its agencies
during the year. |
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For and on behalf of the Board |
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| Rawalpindi |
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Lt. Gen Muhammad Maqbool (Retd), HI(M), S Bt |
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| May 16, 2000 |
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Chairman |
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| AUDITORS'
REPORT TO THE MEMBERS |
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| We
have audited the annexed balance sheet of FFC-Jordan Fertilizer Company
Limited as at December 31, 1999 and |
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| cash
flow statement for the year then ended together with the notes forming part
thereof, and we state that we have |
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| obtained
all the information and explanations which to the best of our knowledge and
belief were necessary for the |
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| purposes
of our audit and, after due verification thereof, we report that: |
|
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| (a)
in our opinion, proper books of account have been kept by the Company as
required by the Companies |
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| Ordinance, 1984; |
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| (b)
in our opinion |
|
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| (i)
the balance sheet together with the notes thereon has been drawn up in
conformity with the |
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| Companies
Ordinance, 1984, and is in agreement with the books of account and is further
in |
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| accordance
with accounting policies consistently applied; |
|
|
| (ii)
the expenditure incurred during the year was for the purpose of the Company's
business; and |
|
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| (iii)
the business conducted, investments made and the expenditure incurred during
the year were in |
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| 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 |
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| balance
sheet and the cash flow statement, together with the notes forming part
thereof give the information |
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| required
by the Companies Ordinance, 1984, in the manner so required and give a true
and fair view of |
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| the
state of the Company's affairs as at December 31, 1999 and of the cash flows
for the year then |
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| ended; and |
|
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| (d)
in our opinion no Zakat was deductible at source under the Zakat and Ushr
Ordinance, 1980. |
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| Without
qualifying our opinion we draw attention to contents of note 18 to the
accounts which states that the Company |
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| is
evaluating options for financial restructuring, which include rescheduling of
loans to improve liquidity. |
|
|
| Islamabad |
|
A.F. Ferguson & Co. |
|
| May 16, 2000 |
|
Chartered Accountants |
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|
|
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|
| BALANCE
SHEET AS AT DECEMBER 31, 1999 |
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|
NOTE |
1999 |
1998 |
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|
(Rupees
'000) |
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|
| SHARE
CAPITAL AND RESERVES |
|
| Share capital |
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| Authorised |
|
3 |
4,000,000 |
4,000,000 |
|
|
|
========== |
========== |
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| Issued,
subscribed and fully paid |
|
3 |
3,341,100 |
3,341,100 |
|
| Capital reserve |
|
| Share premium |
|
228,350 |
228,350 |
|
|
------------------ |
------------------ |
|
|
3,569,450 |
3,569,450 |
|
| LONG
TERM LOANS |
|
4 |
8,483,218 |
9,655,162 |
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|
|
|
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|
| CURRENT
LIABILITIES |
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| Current
maturity of long term loans |
|
4 |
2,274,892 |
1,091,137 |
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| Short
term finance |
|
5 |
1,920,565 |
469,517 |
|
| Creditors,
accrued and other liabilities |
|
6 |
4,989,995 |
2,455,806 |
|
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|
------------------ |
------------------ |
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|
9,185,452 |
4,016,460 |
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| CONTINGENCIES
AND COMMITMENTS |
|
7 |
|
|
------------------ |
------------------ |
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|
21,238,120 |
17,241,072 |
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|
========== |
========== |
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| FIXED
CAPITAL EXPENDITURE |
|
| Fixed assets |
|
8 |
229,864 |
225,539 |
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| Capital
work in progress |
|
9 |
19,086,648 |
15,410,966 |
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|
------------------ |
------------------ |
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|
19,316,512 |
15,636,505 |
|
|
| LONG
TERM INVESTMENT |
|
10 |
3,000 |
3,000 |
|
| LONG
TERM LOANS AND ADVANCES |
|
11 |
1,404 |
1,902 |
|
| LONG
TERM DEPOSITS, PREPAYMENTS |
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| AND
DEFERRED COSTS |
|
12 |
277,508 |
263,988 |
|
|
|
| CURRENT
ASSETS |
|
| Stores |
|
|
44,296 |
43,368 |
|
| Stock in trade |
|
13 |
793,062 |
576,187 |
|
| Trade debts |
|
14 |
275,601 |
-- |
|
| Advances,
deposits, prepayments and other receivables |
15 |
306,929 |
282,700 |
|
| Cash
and bank balances |
|
16 |
219,808 |
433,422 |
|
|
|
------------------ |
------------------ |
|
|
1,639,696 |
1,335,677 |
|
|
------------------ |
------------------ |
|
|
21,238,120 |
17,241,072 |
|
|
|
========== |
========== |
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| The
annexed notes form an integral part of these accounts. |
|
|
|
Chairman |
|
Chief Executive |
|
Director |
|
|
|
|
| CASH
FLOW STATEMENT |
|
| For
the Year Ended December 31, 1999 |
|
|
|
1999 |
1998 |
|
|
(Rupees
'000) |
|
|
| CASH
FLOWS FROM INVESTING ACTIVITIES |
|
|
| Fixed
capital expenditure (inclusive of related |
|
| advances/payables
on this account) |
|
(1,189,593) |
(3,075,929) |
|
|
|
|
| Long
term loans and advances |
|
498 |
(656) |
|
| Long
term deposits, prepayments and deferred costs |
|
(13,520) |
-- |
|
| Stores |
|
(928) |
(43,368) |
|
| Stock in trade |
|
(216,875) |
(576,187) |
|
| Trade debts |
|
(275,601) |
-- |
|
| Shod
term investment |
|
-- |
3,000 |
|
| Income
on bank deposits |
|
18,866 |
38,722 |
|
| Proceeds
from disposal of fixed assets |
|
680 |
1,635 |
|
|
------------------ |
------------------ |
|
| Net
cash used in investing activities |
|
(1,676,473) |
(3,652,783) |
|
|
| CASH
FLOWS FROM FINANCING ACTIVITIES |
|
| Long term loans |
|
11,811 |
2,983,156 |
|
| Shod
term finance |
|
1,451,048 |
469,517 |
|
|
------------------ |
------------------ |
|
| Net
cash provided by financing activities |
|
1,462,859 |
3,452,673 |
|
|
------------------ |
------------------ |
|
| Net
decrease in cash and cash equivalents |
|
(213,614) |
(200,110) |
|
| Cash
and cash equivalents at the beginning of the year |
|
433,422 |
633,532 |
|
|
------------------ |
------------------ |
|
| Cash
and cash equivalents at end of the year, representing |
|
| cash
and bank balances |
|
------------------ |
------------------ |
|
|
219,808 |
433,422 |
|
|
========== |
========== |
|
|
|
Chairman |
|
Chief Executive |
|
Director |
|
|
|
| NOTES
TO THE ACCOUNTS |
|
| For
the Year Ended December 31, 1999 |
|
|
| 1.
LEGAL STATUS AND OPERATIONS |
|
| The
Company is a public company incorporated in Pakistan under the Companies
Ordinance, 1984, and its |
|
| shares
are quoted on the stock exchanges in Pakistan. The principal objective of the
Company is manufacturing, |
|
| purchasing
and marketing of fertilizers. |
|
|
| 2.
SIGNIFICANT ACCOUNTING POLICIES |
|
|
| 2.1
Accounting convention |
|
| These
accounts have been prepared under the historical cost convention. |
|
|
| 2.2
Retirement benefits |
|
| The
Company operates a defined contributory provident fund for all employees.
Monthly contributions are |
|
| made
both by the Company and employees at the rate of 10% of basic pay. The
Company's contribution is |
|
| charged
to unallocated expenses reflected under capital work in progress. |
|
|
| 2.3
Fixed capital expenditure |
|
| Fixed
assets are stated at cost less accumulated depreciation. Depreciation is
provided on the straight- |
|
| line
method to write off the cost of an asset over its estimated useful life
without taking into account any |
|
| residual
value. Full year's depreciation is charged on normal additions, while no
depreciation is charged |
|
| on
items deleted during the year. Gains and losses on disposal of assets, if
any, are charged to unallocated |
|
| expenses
reflected under capital work in progress. |
|
|
| Capital
work in progress is stated at cost. |
|
|
| 2.4 Investment |
|
| Investment
is stated at cost. |
|
|
| 2.5
Deferred cost |
|
| Initial
fill of the catalysts in the plant is capitalised with plant and machinery
whereas costs of subsequent |
|
| replacement
of such catalysts are deferred and amortised in equal installments over their
estimated |
|
| useful lives. |
|
|
| Costs
related to the Company's incorporation and issue of shares have been deferred
to be amortised in |
|
| equal
installments over five years after commencement of commercial production. |
|
|
| 2.6 Stores |
|
| These
are valued at weighted average cost. |
|
|
| 2.7
Stock in trade |
|
| These
are valued at the lower of weighted average cost and net realisable value. |
|
|
| 2.8
Revenue recognition |
|
| Sales
revenue is recognized at the time of despatch of goods to customers. |
|
|
| 2.9
Foreign currency transactions |
|
| Transactions
in foreign currencies are converted into rupees at the rates of exchange
ruling on the date |
|
| of
the transaction except where exchange risk cover has been obtained or where
such funds are committed |
|
| for
a specified purpose, in which case these transactions are converted at the
contracted rate or at the |
|
| rate
applicable to funds committed for such transactions. All assets and
liabilities denominated in foreign |
|
| currencies
at the year end are translated at exchange rate prevailing at the balance
sheet date or at the |
|
| contracted
rate where exchange risk cover has been obtained or at the rate applicable to
funds so |
|
| committed. |
|
|
| 3.
SHARE CAPITAL |
|
|
| AUTHORISED |
|
| This
represents 400,000,000 (1998: 400,000,000) ordinary shares of Rs. 10 each |
|
|
| ISSUED,
SUBSCRIBED AND FULLY PAID IN CASH |
|
| This
represents 334,110,000 (1998: 334,110,000) ordinary shares of Rs. 10 each |
|
|
| 4.
LONG TERM LOANS- SECURED |
|
|
|
|
Half yearly |
|
|
|
Amount
sanctioned |
Balance
outstanding |
FERI |
Annual |
equal |
Date of |
|
Currency |
Amount |
1999 |
1998 |
fee per |
interest/ |
installments |
final |
|
|
('000) |
(Rupees
'000) |
annum |
markup |
outstanding |
repayment |
|
|
% |
% |
|
|
| (a)
Banque Nationale de Paris, France |
FRF |
266,696 |
1,884,220 |
1,879,271 |
8.60 |
7.35 |
20 |
August 2008 |
| (b)
Export Development Corporation, Canada |
CADS |
30,675 |
887,585 |
887,585 |
9.38 |
7.35 |
20 |
June 2009 |
| (c)
Export Import Bank of the USA |
|
US$ |
37,513 |
1,524,820 |
1,524,820 |
9.36 |
7.35 |
20 |
May2008 |
| (d)
Kreditanstalt fur Wiederaufbau, Germany |
DM |
78,520 |
1,893,836 |
1,869,586 |
8.83 |
7.35 |
20 |
June 2008 |
| (e)
CDC Holdings Sendirian Berhad, Malaysia |
UK Sterling |
20,000 |
1,191,497 |
1,191,497 |
8.15 |
11.00 |
14 |
November 2005 |
| (f)
ABN Amro Bank N.V., Denmark |
DM |
6,750 |
153,652 |
185,890 |
-- |
5.99 |
10 |
January 2004 |
| (g)
Habib Bank Limited (Loan-l) |
|
RS |
700,000 |
700,000 |
700,000 |
-- |
19.71 |
20 |
March 2010 |
| (h)
Habib Bank Limited (Loan-2) |
|
RS |
300,000 |
300.00 |
287,250 |
-- |
TB rate+3% |
14 |
July 2007 |
| (i)
ANZ Grindlays Bank Limited |
|
RS |
300,000 |
262,500 |
300,000 |
-- |
TB rate+3% * |
8 |
April 2003 |
| (j)
Muslim Commercial Bank Limited |
RS |
800,000 |
800,000 |
760,400 |
-- |
TB rate+3% * |
12 |
March 2005 |
| (k)
Pak Kuwait Investment Company (Pvt) Ltd. |
RS |
320,000 |
320,000 |
320,000 |
-- |
19.70 |
16 |
March 2008 |
| (l)
Askari Commercial Bank Limited |
RS |
200,000 |
200,000 |
200,000 |
-- |
TB rate+3% * |
10 |
June 2005 |
| (m)
AI-Faysal Investment Bank Limited |
RS |
300,000 |
300,000 |
300,000 |
-- |
SBP discount |
10 |
December 2004 |
|
|
|
|
rate+ 1% ** |
|
| (n)
Standard Chartered Bank |
|
RS |
260,000 |
260,000 |
260,000 |
-- |
TB rate+3% * |
7 |
March 2003 |
| (o)
Saudi Pak Industrial and Agricultural |
|
|
| Investment
Company (Pvt) Limited |
RS |
80,000 |
80,000 |
80,000 |
-- |
18.90 |
10 |
July 2004 |
|
|
|
------------------ |
------------------ |
|
|
|
|
|
10,758,110 |
10,746,299 |
|
| Less:
Amount payable within twelve months |
|
| shown
as current maturity |
|
2,274,892 |
1,091,137 |
|
|
------------------ |
------------------ |
|
|
8,483,218 |
9,655,162 |
|
|
========== |
========== |
|
|
| Loans
(a) to (d) represent buyer's credit facilities, secured by a guarantee issued
by a bank on behalf of a syndicate of banks and financial institutions. The
bank |
|
| guarantee
is secured by first equitable mortgage created on all immovable properties of
the company and by way of hypothecation of movable properties of the |
|
| Company.
The charge ranks pari passu with the charges to be created in favour of other
foreign and local lenders. |
|
|
| Loans
(e) and (g) to (o) are secured by first equitable mortgage created on all
immovable properties of the Company and by way of hypothecation on movable |
|
| properties
of the Company. The charge ranks pari passu with the charges already created
or to be created in favour of other foreign and local lenders. |
|
|
| Loan
(f) is secured by way of guarantee from Fauji Foundation |
|
|
| In
respect of loans (a) to (e) Foreign Exchange Risk Insurance (FERI) cover has
been arranged from National Bank of Pakistan. |
|
|
| *
Subject to minimum markup @ 18% per annum |
|
| **
Subject to minimum markup @ 18.25% per annum |
|
|
| 5.
SHORT TERM FINANCE |
|
| The
Company has arranged short term finance facilities from three banks on mark
up basis aggregating |
|
| Rs.
2,400 million (1998: Rs 1,400 million). These facilities carry mark up at the
rate of 14.00% per annum and |
|
| are
secured by hypothecation of stocks and current assets. |
|
|
| 6.
CREDITORS, ACCRUED AND OTHER LIABILITIES |
|
|
|
1999 |
1998 |
|
|
(Rupees
'000) |
|
|
|
|
| Creditors |
|
1,042,215 |
407,400 |
|
| Accrued
liabilities |
|
2,733,980 |
1,405,889 |
|
| Interest accrued |
