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International Industries Limited
Annual Report 1999
Contents
Company Information
Milestones
Notice of Meeting
Chairman's Review
Ten Years at a Glance
Report of the Directors
Auditors' Report
Balance Sheet
Profit & Loss Account
Statement of Changes in Financial Position
Notes to the Accounts
Pattern of Shareholdings
Company Information
Chairman		J.R. Rahim
Directors		K.M.M. Shah
		Mustapha A. Chinoy
		Kamal A. Chinoy
		Zaka U. Khan
		M. Ateequllah
		Adnan Meraj		Nominee
				Director of NIT
		Afzalullah Siddiqui		Nominee
				Director of NIT
		M. Sibghatullah		Nominee
				Director of NIT
		Samir Ahmed		Nominee
				Director of NIT
Managing Director &
Chief Executive		Towfiq H. Chinoy
Secretary		Mohamed H. Walli
Auditors		Ford, Rhodes, Robson, Morrow
Bankers		Standard Chartered Bank
		ANZ Grindlays Bank Limited
		American Express Bank Ltd.
		Hongkong & Shanghai Banking Corporation
		The Bank of Tokyo-Mitsubishi, Ltd.
		Muslim Commercial Bank Ltd.
		Bank A1-Habib Ltd.
		A1-Towfeek Investment Bank Ltd.
		A1-Baraka Islamic Investment Bank B.S.C. (E.C.)
		Soneri Bank Ltd.
		Societe Generale
		Oman International Bank S.A.O.G.
		Credit Agricole Indosuez
Legal Advisors		J.H. Rahimtoola & Company
Registered		Hakimsons Building, 19 West Wharf Road
Office		P.O. Box 4775, Karachi-74000
		Telephone Nos. 2313508-14 Fax: 2314260
		E-mail: inquiries@iil.com.pk
Branch		Salam Chambers, Link Mcleod Road
Office		Lahore-54000
		Telephone Nos: 7229752-55 Fax: 7220384
		E-mail: lahore@iil.com.pk
Factory		LX 15-16, Landhi Industrial Area
		Karachi- 75160
		Telephone Nos: 7738868-70 Fax: 7738573
		E-mail: factory@iil.com.pk
Milestones
The Company through the Years
Development and Growth
1948	Established as Sultan Chinoy and Company
1949	Incorporated as International Industries Limited
	Sponsored Pak Chemicals Limited, Pakistan.
1953	Sponsored Pakistan Cables Limited, Karachi as a Joint
	Venture with BICC, UK
1965	Ventured into manufacturing of high quality Electric
	Resistance Welded Steel Pipe
1983	Launched Galvanized Pipe. "ILL GI PIPE" is born
1984	Converted to a Public Limited Company
1990	Set up the country's first Cold Rolling Mill in the
	private sector
1992	Became a "BILLION" rupee company
1995	Entered the international market with export of
	Galvanized Pipes
1997	Certification under ISO 9001
1998	Commemorated 50 years and awarded international
	credit rating by Duff & Phelps
1999	Achieved a turnover of Rs. 2.0 billion
Notice of Meeting
Notice is hereby given to the Members that the 51st Annual General Meeting of
the Company will be held on Thursday 18th November, 1999 at 11.00 a.m. at the
"Raffia Choudri Memorial Centre", Sidco Avenue Centre, 264-R. A. Lines, Karachi
to transact the following business:
Ordinary Business
1. To receive, consider and adopt the Audited Accounts of the
Company for the year ended 30th June, 1999 and the Reports
of the Directors and Auditors thereon.
2. To consider and approve payment of 20% Final Cash Divided
making a total of 35% for the financial year ended 30th June,
1999 as recommended by the Board of Directors.
3. To appoint Auditors for the year 1999-2000 and fix their
remuneration.
4. To transact with the permission of the Chair any other business which
may be transacted at an Annual General Meeting.
Special Business
5. To approve the remuneration of the Executive Directors, including
the Chief Executive.
A Statement under Section 160 of the Companies Ordinance 1984, pertaining to
the Special Business, is being sent to the Members with this Notice.
					By Order of the Board
Karachi: 27th October, 1999					Mohamed H. Walli
					Company Secretary
Notice of Meeting
Notes:
1. The Share Transfer Books of the Company remained closed from October 20, 1999 to
October 26, 1999 (both days inclusive). Transfers received in order at the Registered
Office of the Company by close of business on October 19, 1999 were treated in time
for the purpose of issuing the Notice of the Annual General Meeting and to determine
the entitlement of dividend recommended by the Board of Directors.
2. A Member entitled to attend, speak and vote at the General Meeting is entitled to
appoint another member as his/her proxy to attend, speak and vote on his/her behalf.
3. Instrument appointing proxy and the power of attorney or other authority under which
it is signed or a notarially certified copy of the power or authority must be deposited at
the registered office of the Company at least 48 hours before the time of the meeting.
Form of proxy is enclosed.
4. Members are requested to submit declaration for zakat on the required format and to
advise change in address, if any.
Statement U/S 160 of the companies ordinance 1984
This statement sets out the material facts concerning item 5 of the "Special Business"
to be transacted at the Fifty-First Annual General Meeting of the Company to be held
on 18th November, 1999
The approval of the Shareholders of the Company will be sought for:
Item 5
The approval of remuneration of the Chief Executive and the Executive Directors in the
draft resolution set out below is necessitated on account of Government of Pakistan SRO
No. 572(1)82 of 16th June, 1982 and includes approval to the holding of their respective
office of profit in the Company, the said Directors are thus personally interested to the
extent of remuneration payable to them and the office of profit held by them.
The members are accordingly requested to pass with or without modification, the following
resolution as an ORDINARY RESOLUTION:
"RESOLVED THAT a sum not exceeding Rs. 15 million per annum be and is hereby
authorized for payment towards remuneration of the Directors in executive or management
service of the Company including the Chief Executive commencing 1st July, 1999 and
the Board is authorized to determine the terms and conditions of their appointment and
within limit aforesaid to pay remuneration to them but so that period of appointment
shall not exceed three years per appointment.
Shareholders are informed that Directors in executive or management service and Chief
Executive are interested in their respective appointment and in the remuneration
respectively payable to them and save as such no other Director is directly or indirectly
interested in their contracts or benefits under them."
Chairman's Review
It gives me great pleasure to present before you on behalf of the Board the 51st Annual Report
for the year ended 30th June, 1999.
DIRECTORS
Eight of the Directors who retired after completing their tenure were re-elected for a period
of 3 years at the 50th Annual General Meeting. Mr. R.E. Bankwalla, Mr. S.M. Khalid and
Mr. Abdul Latif Uqaili retired from the Board and in their place Mr. M. Sibghatullah,
Mr. M. Afzalullah Siddiqui and Mr. Adnan Meraj were elected Directors for a period of 3 years.
Since then, Mr. Razi-ur-Rahman Khan has resigned and has been replaced by Mr. Samir
Ahmed.
Your Board acknowledges with appreciation the contribution made by Mr. R.E. Bankwalla,
Mr. S.M. Khalid, Mr. Abdul Latif Uqaili and Mr. Razi-ur-Rahman Khan and welcomes
Mr. M. Sibghatullah, Mr. M. Afzalullah Siddiqui, Mr. Adnan Meraj and Mr. Samir Ahmed.
SALES
The domestic sales have registered a growth of about 9% mainly because of your Company's
policy of supplying quality product at competitive prices, enabling it to wrest market share
from its competitors. Exports, however were 38% lower than last year because of stiff competition
from ASEAN Countries and Turkey. Your Company had to lower its prices to retain its place
in the International Market. In total, the current year's sales were only 3% higher than the
previous year.
OPERATIONS
All the plants have operated satisfactorily during the year. Some plants have undergone major
repairs in the year under review and the pickling line and one galvanizing plant will be
refurbished next year. This exercise will enable your Company to improve the efficiency of the
plants. During the year under review, the pipe production was 10% higher and the Cold Rolling
Mill production was 17% higher than the preceding year.
FINANCIAL RESULTS
The turnover crossed the Rs.2.0 Billion mark for the first time. Gross margins of Rs.309 million
is 12% higher than the previous year. The selling expenses are higher than the previous year
mainly due to the need to provide for doubtful debts, the cumulative result of the operations
of previous years accentuated by prevailing economic conditions. The operating profit at
Rs.180 million is 12% higher than the previous year's figure of Rs. 161 million. Although the
other income is considerably lower than the previous year, a saving in financial expenses more
than off-sets the impact, leaving a profit before tax of Rs.116 million which is 23% more than
the last year. The provision for taxation includes a deferred tax liability of Rs.20 million which
your Company has started to make from this year in anticipation of this provision becoming
mandatory by our fiscal year 2002. There is also a prior year liability of Rs.8.3 million which
has arisen because the tax authorities have disallowed freight on export as export income has
been under the presumptive tax regime. This move is unfair and will serve as a disincentive
for exporters. The after tax profits are therefore lower than last year.
FUTURE PROSPECTS
The Export market in the pipe industry is very competitive and the margins are thin. Growth
and consolidation is possible only if support in the form of incentives from the government
agencies is forthcoming. Steps such as disallowance of freight on exports will render this
business unprofitable. Your Company has been trying to impress upon the authorities to
review the laws which create hurdles in promotion of exports. Hopefully if our
recommendations are accepted, exports of engineering goods will grow.
The Government's resolve to bring the tax evaders to book and expand the tax net is meeting
stern resistance from the quarters which are going to be affected. Efforts however continue
to be made. The Government should also address the issue of removing the weaknesses in
the revenue collection agencies; a step which would encourage traders and small industries
to pay honestly to the exchequer. A level playing field would benefit your Company which
has always been an honest tax-payer.
The mandatory revision of import tariffs under the World Trade Order is now just round the
corner but the country and particularly the steel industry does not seem to be prepared for
the competition which is imminent. Cognizance must be taken of the difficulties likely to
be created by free inflow of imports.
A brief mention was made in the half yearly review that the management of your Company
was considering acquisition of additional facilities to enable it to produce a larger range of
pipes. I am pleased to inform you that your Company has embarked upon a major capital
expenditure programme which will enable it to substantially increase the capacity and the
range of its products. Additional land measuring about 10 acres has already been bought
adjacent to the existing factory premises and the new tube mill and its components will
Inshallah be shipped to arrive in Pakistan during the early half of the year 2000. Work on
the project is by God's grace progressing satisfactorily.
When the new tube mill comes on line, Inshallah in the last quarter of fiscal 2000 it will
enable the Company to increase exports as well as domestic sales in an expanded range.
DIVIDEND
Your Board is pleased to recommend a final dividend of 20% making a total for the year of
35%.
STAFF
The Company's relationship with all its employees is cordial. Negotiations with the Employees'
Union will be held this year and the Management is confident that the negotiations will
be completed satisfactorily. The Company is proud of its zealous and dedicated employees.
We are grateful to our Bankers for their continued support and to our customers for their
loyalty and assure them of our continued determination to provide them with quality products
and serve them according to needs of the market place.
					J.R. RAHIM
Ten Years at a Glance
		1999	1998	1997	1996	1995	1994	1993	1992	1991	1990
						(Rs. 000)
Assets Employed
Fixed Assets (Owned & leased)		300,379	302,659	309,390	234,304	245,894	257,842	268,421	260,205	281,343	298,284
Capital Work in Progress		2926	2,045	2,567	8,618	1,929	7,373	3,388	9,410	3,573	2,962
Long term deposits		2,300	2,073	1,940	3,003	3,586	3,320	4,252	4,480	4,459	4,559
Net Current Assets/(Liabilities)		17,866	14,475	41,716	66,145	22,583	33,900	16,660	(7,613)	(35,582)	144
		------------------	------------------	------------------	------------------	------------------	------------------	------------------	------------------	------------------	------------------
Total Assets Employed		323,471	321,252	355,613	312,070	273,992	302,435	292,721	266,482	253,793	305,949
		==========	==========	==========	==========	==========	==========	==========	==========	==========	==========
Financed by
Shareholders' Equity (includes
revaluation of land)		303,471	303,752	281,547	216,270	208,432	197,778	151,999	133,070	120,388	124,236
Long term & deferred liabilities		20,000	17,500	74,066	95,800	65,560	104,657	140,722	133,412	133,405	181,713
		------------------	------------------	------------------	------------------	------------------	------------------	------------------	------------------	------------------	------------------
		323,471	321,252	355,613	312,070	273,992	302,435	292,721	266,482	253,793	305,949
		==========	==========	==========	==========	==========	==========	==========	==========	==========	==========
Sales & Profits
Sales-Net		1,906,957	1,773,157	1,613,998	1,702,917	1,286,339	1,328,018	1,098,387	919,449	821,935	734,148
Gross Profit		309,674	275,646	274,278	253,799	168,943	155,709	150,341	121,274	77,316	47,743
Profit before interest & taxation		170,579	160,468	180,496	174,707	115,770	110,374	109,950	89,374	44,905	19,577
Profit/(Loss) before taxation		115,644	94,384	105,386	90,498	29,983	18,397	18,929	9,167	(21,897)	(30,624)
Profit/(Loss) after taxation		44,820	64,084	78,886	36,831	29,983	18,397	18,929	12,682	(26,096)	(30,739)
Cash Dividend		45,101	41,879	48,322	28,993	19,329	12,886	--	--	--	--
Retained Earnings/(Loss)		(281)	22,205	30,564	7,838	10,654	5,511	18,929	12,682	(26,096)	(30,739)
Financial Ratios
Gross Profit as a percentage of sales		16.2	15.5	17.0	14.9	13.1	11.7	13.7	13.2	9.4	6.5
Net profit/(Loss) before tax as
a percentage of sales (excluding
contract income)		6.1	5.3	6.5	5.3	2.3	1.4	1.7	1.0	(2.6)	(4.2)
Current ratio		1.02	1.02	1.06	1.12	1.04	1.08	1.03	0.98	0.89	1.0
Long term debt: equity		6:94	5:95	21:79	31:69	24:76	35:65	48:52	50:50	53:47	59:41
Earning/(Loss) per share		3.48	4.97	6.12	2.86	2.33	1.43	2.35	1.69	(3.48)	(5.42)
Cash Dividend(%)		35	32.5	37.5	22.5	15	10	--	--	--	--
Bonus Shares(%)		--	--	--	--	--	--	10	7.5	--	--
Right Shares(%)		--	--	--	--	--	--	50	--	32	20
Report of the Directors
The Directors have pleasure in submitting their Report and Audited Accounts for
the year ended 30th June, 1999.
					(Rs. 000's)
The profit for the year amounts to					44,820
Amount of unappropriated profit
brought forward from previous year					312
					------------------
					45,132
The Directors recommend:
Interim dividend already paid at the rate of
Rs. 1.50 per share (15%)					19,329
Final dividend at the rate of
Rs. 2.00 per share (20%)					25,772
					------------------
					45,101
Leaving an unappropriated profit					------------------
carried forward to next year					31
					==========
The Chairman's review on pages 6 & 7 covers significant activities of your Company
during the year.
The Management of the Company has taken cognizance of the possible effects of
the millennium bug and steps have been taken to ensure smooth operation at the
change of the millennium. Non listed associated companies are not likely to be
affected. Our major suppliers and debtors have been requested to take measures to
avoid complications arising out of the millennium bug.
The pattern of shareholdings is provided on page 33.
The present auditors, M/s. Ford, Rhodes, Robson, Morrow retire and offer themselves
for re-appointment.
					On behalf of the Board
					Towfiq H. Chinoy
Karachi: 27th September, 1999					Managing Director & Chief Executive
Auditors' Report to the Members
We have audited the annexed balance sheet of International Industries
Limited as at 30th June, 1999 and the related profit and loss account and
statement of changes in financial position, (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 and, after due verification thereof, 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, investments made and the
expenditure incurred during the year were in accordance with
the objects of the company.
(iii) the business conducted, investments made and 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 and loss account
and the statement of changes in financial position, (cash flow
statement), together with the notes forming part thereof, give the
information required by the 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 30th June, 1999 and of the profit
and the changes in financial position (cash flows) for the year then
ended: and
(d) in our opinion Zakat deductible at source under the Zakat and
Ushr Ordinance, 1980, was deducted by the company and deposited
in the Central Zakat Fund established under section 7 of that
Ordinance.
					Ford, Rhodes, Robson, Morrow
Karachi: 27th September, 1999					Chartered Accountants
Balance Sheet as at 30th June, 1999
				Note	1999	1998
					(Rs. 000's)	(Rs. 000's)
Tangible Fixed Assets				3	303,305	304,704
Investments				4	--	380
Long-Term Deposits					2,300	2,073
Current Assets
Stores and spares				5	61,788	46,336
Stock-in-trade				6	349,540	358,142
Contract work-in-progress				7	--	4,588
Trade debtors				8	272,463	191,894
Contract debtors				9	3,770	424
Advances, deposits, prepayments and
other receivables				10	120,371	45,978
Cash and bank balances				11	143	14,685
					------------------	------------------
					808,075	662,047
					------------------	------------------
					1,113,680	969,204
					==========	==========
Share Capital and Reserves
Authorised capital
15,000,000 (1998:15,000,000) ordinary
shares of Rs. 10/- each					150,000	150,000
					==========	==========
Issued, subscribed and paid up capital				12	128,859	128,859
Reserves				13	124,885	125,166
					------------------	------------------
					253,744	254,025