| Ravi Rayon Limited |
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| Annual Report 1999 |
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| CONTENTS |
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| Board of Directors |
|
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| Notice of Meeting |
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| Chief
Executive's Report |
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| Auditors' Report |
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| Balance Sheet |
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| Profit
& Loss Account |
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| Statement
of Changes in Financial Position |
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| (Cash
Flow Statement) |
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| Notes
to the Accounts |
|
| Pattern
of Share Holding |
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|
|
| BOARD
OF DIRECTORS |
|
|
| CHAIRMAN |
|
DR. MUHAMMAD AMJAD |
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| CHIEF EXECUTIVE |
|
DR. FAYYAZ A. MIAN |
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| DIRECTORS |
|
MR. NAVEED AHMAD |
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|
SYED MUKHTAR HAlDER SHAH |
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|
MR. MUHAMMAD SHAFI |
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|
MR. NISAR HUSSAIN NAQVI |
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|
DR. MASOOD FAIZULLAH |
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|
DR. ZAFARULLAH SHEIKH |
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| SECRETARY |
|
MR. LIAQAT ALl KHAN |
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| BANKERS |
|
UNITED BANK LIMITED |
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|
INDUSTRIAL DEVELOPMENT
BANK OF PAKISTAN |
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| AUDITORS |
|
FORD, RHODES, ROBSON,
MORROW |
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|
Chartered Accountants |
|
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| REGISTERED
OFFICE & WORKS |
KALA SHAH KAKU |
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|
District Sheikhupura |
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| NOTICE
OF ANNUAL GENERAL MEETING |
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| Notice
is hereby given that the 38th Annual General Meeting of the Shareholders of
the |
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| Company
will be held at 130-Allama Iqbal Road, Lahore, on Thursday, December 30, 1999
at |
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| 11.30
a.m. under the Chairmanship of the Chief Executive to transact the following
business. |
|
|
| 1.
To confirm the minutes of the last Annual General Meeting held on 26-01-1999. |
|
|
| 2.
To receive and adopt the accounts of the Company for the year ended June 3O,
1999 |
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| together
with the Auditors' and Directors' report thereon. |
|
|
| 3.
To appoint Auditors for the year 1999-2000 and to fix their remuneration. |
|
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| M/s.
Ford, Rhodes, Robson, Morrow, Chartered Accountants, the retiring Auditors, |
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| being
eligible offer themselves for re-appointment. |
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|
| 4.
To transact any other business of the Company that may be placed before the
meeting |
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| with
the permission of the Chairman. |
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| The
Share Transfer Books of the Company will remain closed from 29-12-1999 to
31-12-1999, |
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| (Both
days inclusive). |
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|
by Order of the Board |
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|
LIAQAT ALl KHAN |
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| Lahore · |
|
Secretary |
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| Dated · 4-12-1999 |
|
Corporate Affairs |
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| NOTES · |
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| 1.
A member entitled to attend and vote at this meeting may appoint another
member as |
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| his/her
proxy to attend the meeting and vote instead of him/her. Proxies in order to
be |
|
| effective
must be received by the Company not less than 48 hours before the meeting. |
|
|
| 2.
Shareholders are requested to promptly notify the Company of any change in
their |
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| addresses. |
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| CHIEF
EXECUTIVE'S REVIEW FOR THE SHAREHOLDERS |
|
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| I,
on behalf of the Board of Directors present the 38th Annual Report together
with audited |
|
| accounts
for the year ended 30th June, 1999. During the year under review Company
sustained a |
|
| loss
of Rs. 102.844 million. As already informed in last year's Annual Report,
production activities of |
|
| the
Company remained suspended. However, as per director from Government of
Pakistan |
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| through
Ministry of Industries & Production, Ravi Rayon Ltd. was asked to produce
acetic |
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| anhydride
to meet critical requirements of Defence. Government released a working
capital of |
|
| Rs.
20 million through supplementary grant and Sui Northern Gas Pipelines Ltd.
was asked to |
|
| restore
gas supplies to the Company for a limited period. Subsequent to receiving
these directives |
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| FCCCL
advised unit management to immediately take-up the assignment and produce the
desired |
|
| chemical
in shortest possible time.' The management with technical help, guidance and
financial |
|
| assistance
from FCCCL, prepared an action plan for this purpose and produced 286.508
M.Tons |
|
| acetic
anhydride within a period of few weeks after which the entire plant was once
again closed |
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| down. |
|
|
| In
February 1999 all the remaining senior executives except the Company
Secretary and the Chief |
|
| Executive,
were released under VSS. Necessary funds for this purpose were received from |
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| Privatization
Commission and FCCCL. However, a team of 28 officers and staff was rehired
with |
|
| approval
of the competent authority in order to ensure safety, security and
maintenance of |
|
| valuable
machinery of the Company. Entire requirement of funds for fixed overheads
such as |
|
| salaries
& wages, utility bills and other expenses, is being met through borrowing
from the holding |
|
| Corporation
M/s. Federal Chemical & Ceramics Corporation Limited. |
|
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| The
case filed by remaining 98 workers before the NIRC against their transfer
orders to FCCCL was |
|
| decided
in favour of the Company and their subsequent appeal before the Full Bench of
NIRC was |
|
| also
rejected. They have now filed a writ petition against the orders of the Full
Bench of NIRC |
|
| before
the Honourable Lahore High Court. |
|
|
| M/s.
United Bank Limited have also filed a civil suit against the Company for
recovery of Rs. 46.814 |
|
| million
before Lahore High Court, which is pending adjudication. |
|
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| ACKNOWLEDGMENT |
|
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| We
are grateful to Federal Chemical & Ceramics Corporation Limited, Ministry
of Industries & |
|
| Production,
and Privatization Commission, for providing necessary support and extending
every |
|
| help
in guiding the affairs of the Company. Their valuable guidance and financial
help gave us |
|
| support
in dealing with various difficulties. |
|
|
| AUDITORS |
|
|
| The
present Auditors M/s. Ford, Rhodes, Robson, Morrow, retire and being eligible
offer |
|
| themselves
for re-appointment as Auditors for the year 1999-2000. |
|
|
| PATTERN
OF SHARE HOLDING |
|
|
| The
pattern of share holding is annexed. |
|
|
|
For and on behalf of the Board of Directors |
|
|
|
DR. FAYYAZ A. MIAN |
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|
Chief Executive |
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|
|
| AUDITORS'
REPORT TO THE MEMBERS |
|
|
| We
have audited the annexed Balance Sheet of Ravi Rayon Limited as at June ,30,
1999 and the |
|
| related
Profit and Loss Account and Statement of Sources and Application of Funds,
together with |
|
| the
notes forming pad 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: |
|
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| (i)
the Balance Sheet and Profit and Loss Account together with the Notes thereon |
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| have
been drawn up in conformity with the Companies Ordinance 1984, and are in |
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| agreement
with the books of account and are further in accordance with |
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| accounting
policies consistently applied; |
|
|
| (ii)
the expenditure, incurred during the year was for the purpose of Company's |
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| business; and |
|
|
| (iii)
the business conducted, investments made and the expenditure incurred during |
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| the
year were in accordance with the objects of the Company; |
|
|
| (c)
(i) There is no concrete evidence available which suggests that the Company
would |
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| reactivate
its operation in the foreseeable future. Consequently, adjustment may |
|
| be
required to the recorded assets amounts and classification of liabilities.
The |
|
| financial
statements do not disclose this fact. |
|
|
| (ii)
Except for the omission of the information included in paragraph (c) (i)
above, 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 Sources and |
|
| Application
of Funds, 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 June 30, 1999 and of the loss and the changes in sources and |
|
| application
of funds for the year then ended; and |
|
|
| (d) in our opinion no Zakat was deductible at
source under the Zakat and Ushr Ordinance, |
|
| 1980 |
|
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| Lahore : |
|
FORD, RHODES, ROBSON,
MORROW |
|
| Date : 2-12-1999 |
|
Chartered Accountants |
|
|
|
| BALANCE
SHEET AS AT JUNE 30, 1999 |
|
|
|
Notes |
1999 |
1998 |
|
|
|
(Rupees in thousands) |
|
| SHARE
CAPITAL AND RESERVES |
|
| Share Capital |
|
| Authorised |
|
| 15,000,000
ordinary shares or Rs. 10 each |
|
150,000 |
150,000 |
|
|
========== |
========== |
|
|
3 |
93,576 |
93,576 |
|
| ACCUMULATED
LOSS |
|
|
(944,682) |
(841,838) |
|
|
|
---------- |
---------- |
|
|
|
(851,106) |
(748,262) |
|
| LONG
TERM LOANS |
|
4 |
144,674 |
144,674 |
|
| APPLICATION
MONEY FOR PARTICIPATION |
|
| TERM
CERTIFICATES |
|
5 |
23,368 |
23,368 |
|
|
|
|
| DEFERRED
LIABILITIES |
|
6 |
12,000 |
12,000 |
|
|
|
|
| CURRENT
LIABILITIES |
|
| Long Term Loans :- |
|
| Current maturity |
|
4 |
13,950 |
13,950 |
|
| Overdue |
|
4 |
13,950 |
13,950 |
|
| Short
term loans and running finances |
|
7 |
47,290 |
441732 |
|
| Creditors,
accruals and other liabilities |
|
8 |
827,425 |
704,869 |
|
| Provision
for Sales-tax |
|
29,364 |
30,504 |
|
|
---------- |
---------- |
|
|
918,029 |
794,055 |
|
| CONTINGENCIES
AND COMMITMENTS |
|
25 |
-- |
-- |
|
|
|
---------- |
---------- |
|
|
246,965 |
225,835 |
|
|
========== |
========== |
|
| FIXED
ASSETS- TANGIBLE |
|
|
|
|
|
|
| Operating assets |
|
9 |
81,943 |
91,019 |
|
|
|
|
|
| LONG
TERM INVESTMENTS |
|
10 |
465 |
465 |
|
| LONG
TERM LOANS AND ADVANCES |
|
11 |
63,793 |
63,793 |
|
| LONG
TERM DEPOSITS |
|
12 |
157 |
157 |
|
| CURRENT ASSETS |
|
|
|
|
| Stores,
spares and loose tools |
|
13 |
35,661 |
35,896 |
|
| Stock-in-trade |
|
14 |
42,280 |
11,173 |
|
| Trade debtors |
|
15 |
8,599 |
4,914 |
|
| Loans
and advances |
|
16 |
1,364 |
2,081 |
|
| Deposits
and prepayments |
|
17 |
379 |
527 |
|
| Income
tax refundable |
|
|
10,562 |
10,491 |
|
| Cash
and bank balances |
|
18 |
1,762 |
5,319 |
|
|
|
---------- |
---------- |
|
|
|
100,607 |
70,401 |
|
|
|
---------- |
---------- |
|
|
|
246,965 |
225,835 |
|
|
========== |
========== |
|
| The
attached notes form an integral part of these accounts. |
|
| Auditors'
.Report of even date is attached hereto. |
|
|
| Lahore: |
|
FORD, RHODES, ROBSON,
MORROW |
DR. FAYYAZ A. MIAN |
DR. ZAFARULLAH SHEIKH |
|
| Date : 2-12-1999 |
|
Chartered Accountants |
|
Chief Executive |
Director |
|
|
|
| PROFIT
AND LOSS ACCOUNT |
|
| FOR
THE YEAR ENDED JUNE 30, 1999 |
|
|
|
Notes |
1999 |
1998 |
|
|
(Rupees in
thousands) |
|
|
| NET SALES |
|
19 |
4,665 |
74,214 |
|
| COST OF SALES |
|
20 |
4,198 |
161,626 |
|
|
---------- |
---------- |
|
| GROSS PROFIT/(LOSS) |
, |
|
467 |
(87,412) |
|
| OPERATING
EXPENSES |
|
| 'Administrative,
selling and general |
|
21 |
50,269 |
30,694 |
|
| Financial |
|
22 |
54,286 |
39,828 |
|
|
---------- |
---------- |
|
|
104,555 |
70,522 |
|
|
---------- |
---------- |
|
| OPERATING LOSS |
|
(104,088) |
(157,934) |
|
| OTHER
INCOME/CHARGES |
|
23 |
1,267 |
(48,931) |
|
|
|
---------- |
---------- |
|
| LOSS
BEFORE TAXATION |
|
(102,821) |
(206,865) |
|
|
| TAXATION |
|
24 |
(23) |
(371) |
|
|
|
---------- |
---------- |
|
| LOSS
AFTER TAXATION |
|
(102,844) |
(207,236) |
|
| ACCUMULATED
LOSS BROUGHT FORWARD |
|
(841,838) |
(634,602) |
|
|
---------- |
---------- |
|
| ACCUMULATED
LOSS CARRIED FORWARD |
|
(944,682) |
(841,838) |
|
|
========== |
========== |
|
| EARNING
PER SHARE |
|
29 Rs. |
(10.99) |
(22.15) |
|
|
========== |
========== |
|
| The
attached notes form an integral part of these accounts. |
|
|
| DR.
FAYYAZ A. MIAN |
|
DR. ZAFARULLAH SHEIKH |
|
| Chief Executive |
|
Director |
|
|
|
| STATEMENT
OF SOURCES AND APPLICATION OF FUNDS |
|
| (CASH FLOW) |
|
| FOR
THE YEAR ENDED JUNE 30, 1999 |
|
|
|
1999 |
1998 |
|
|
(Rupees in
thousands) |
|
| CASH
FLOW FROM OPERATING ACTIVITIES |
|
| Net
(Loss) after taxation |
|
(102,844) |
(207,236) |
|
| Adjustment for' |
|
|
|
| Depreciation |
|
8,907 |
9,941 |
|
| Profit
on sale of Fixed Assets |
|
(332) |
(248) |
|
| Provision
against expired work-in-process |
|
-- |
2,623 |
|
| Provision
against Spares in Transit |
|
-- |
28o |
|
| Provision
against Raw Material in Transit |
|
-- |
689 |
|
|
---------- |
---------- |
|
|
8,575 |
13,285 |
|
|
---------- |
---------- |
|
|
(94,269) |
(193,951) |
|
| (Increase)/Decrease
in Current Assets |
|
|
|
| Stores
Spares & Loose Tools |
|
235 |
741 |
|
| Stock in Trade |
|
(31,107) |
56,622 |
|
| Trade Debtors |
|
(3,685) |
22,488 |
|
| Loans
and Advances |
|
717 |
25,790 |
|
| Deposits
and Prepayments |
|
148 |
2,186 |
|
| Income
Tax Refundable |
|
(71) |
(595) |
|
|
---------- |
---------- |
|
|
(33,763) |
107,232 |
|
| Increase/(Decrease)
in Current Liabilities |
|
| Short Term Loans |
|
2,558 |
(2,787) |
|
| Creditors,
Accruals and other Liabilities |
|
122,557 |
74,630 |
|
| Provision for Taxes |
|
(1,140) |
(990) |
|
|
---------- |
---------- |
|
|
123,975 |
70,853 |
|
|
---------- |
---------- |
|
| NET
CASH FROM OPERATING ACTIVITIES |
|
(4,057) |
(15,866) |
|
|
| CASH
FLOW FROM INVESTING ACTIVITIES |
|
| Purchase
of Fixed Assets |
|
-- |
(18) |
|
| Sale
proceeds from disposal of Fixed Assets |
|
500 |
678 |
|
| Long
Term Loans and Advances |
|
-- |
-- |
|
| Long Term Deposits |
|
-- |
21,714 |
|
|
---------- |
---------- |
|
| NET
CASH FROM INVESTING ACTIVITIES |
|
500 |
22,374 |
|
|
| CASH
FLOW FROM FINANCING ACTIVITIES |
|
| Repayment
of obligation under Finance Lease |
|
-- |
(502) |
|
| NET
INCREASE/(DECREASE) IN CASH |
|
|
|
| AND
BANK BALANCE |
|
(3,557) |
6,006 |
|
|
| CASH
AND BANK BALANCES |
|
| AT
THE BEGINNING OF THE YEAR |
|
5,319 |
(687) |
|
| CASH
AND BANK BALANCE |
|
---------- |
---------- |
|
| AT
THE END OF THE YEAR |
|
1,762 |
5,319 |
|
|
========== |
========== |
|
|
|
|
|
| NOTES
TO THE ACCOUNTS |
|
| FOR
THE YEAR ENDED JUNE 30, 1999 |
|
|
| 1.
THE COMPANY AND ITS OPERATIONS |
|
|
|
| The
Company is a public limited company quoted on the stock exchanges. The
majority o[ its |
|
| share
capital is held by the Federal Government through Federal Chemical and
Ceramics |
|
| Corporation
Limited (FCCCL) and certain financial institutions owned by the Government. |
|
|
| The
Company is engaged in manufacture of Acetate Rayon Yarn. Major intermediate |
|
| products
are Alcohol, Acetic Acid, Acetone, Acetic Arthydride, Bleached Linters and
Yeast. |
|
| Due
to heavy losses the management of the company, on the instructions of
Government of |
|
| Pakistan,
had shut down its manufacturing operations in July 1997. During the year, the |
|
| Company
manufactured intermediate product, namely Acetic Arthydrate, in limited
quantity |
|
| on
the instruction of Govt. of Pakistan to meet critical requirement of the
Ministry of Defence. |
|
| A
Golden Handshake Scheme fully funded by Government of Pakistan, was announced
to all |
|
| the
employees who opted and were paid except 98 workers and 2 officers of the
Company. |
|
|
| 2.
ACCOUNTING POLICIES |
|
|
| (i)
Revenue recognition - |
|
| Sales
are recorded upon delivery of goods to the carrier. |
|
|
| (ii) Fixed assets - |
|
| Company
owned fixed assets |
|
|
| Fixed
assets are stated at historical cost less accumulated depreciation, except
freehold |
|
| land
and capital work-in-progress which are stated at cost. Depreciation is
calculated at |
|
| rates
mentioned in Note-11 according to the reducing balance method. Acquisitions |
|
| during
the year are depreciated for a full year irrespective of the date of purchase
and |
|
| no
depreciation is charged on assets in the year of their disposal. |
|
|
| All
repairs and maintenance expenditure is charged to income currently and
material |
|
| betterments
are capitalised. |
|
|
| Profits
or losses on disposal of fixed assets are recognized as income or expenses |
|
| respectively
in the year of occurrence. |
|
|
| Leased assets |
|
|
| Leased
assets held under finance lease are stated at cost less depreciation at the
rates |
|
| and
basis applicable to company owned assets. The outstanding obligations under
the |
|
| lease
less finance charges allocated to future periods are shown as a liability.
The |
|
| financial
charges are calculated at the interest rates implicit in the lease and are |
|
| charged
to the profit and loss account. |
|
|
| (iii) Investments |
|
| Investments
are stated at cost. Provision for diminution in value of investments is |
|
| deducted
from cost wherever applicable. |
|
|
| (iv).
Stores, spares and stock-in-trade |
|
|
| These
are valued at lower of cost and net realizable value. The cost is determined
as |
|
| follows: |
|
|
| Stores,
tools and engineering stores |
|
at moving average cost. |
|
| Raw materials |
|
at moving average cost. |
|
| Work-in-process |
|
at annual average cost of
manufacture. |
|
| Finished goods |
|
at annual average cost of
manufacture. |
|
| Stores
and raw material in transit |
|
at cost. |
|
| Other inventories |
|
at moving average cost. |
|
|
| Cost
of manufacture denotes 'factory cost of production without addition of |
|
| administrative
and other overheads. |
|
|
| (v)
Employees severance benefits- |
|
| All
the employees of the Company are members of the contributory provident fund. |
|
| The
Company also maintains a funded gratuity scheme approved by tax authorities
for |
|
| all
its employees based on length of service. |
|
|
| (vi) Taxation- |
|
| The
charge for taxation is based on income as adjusted for tax purposes and after |
|
| taking
into account all tax credits and rebates. |
|
|
| The
Company accounts for deferred taxes arising on all major timing differences |
|
| according
to the liability method. |
|
|
| (vii)
Overall valuation policy- |
|
| The
accounts are stated at historical cost without any effect for the changes in |
|
| purchasing
power of money. |
|
|
| (viii)
Associated companies- |
|
| Companies
under the common control of Federal Chemical and Ceramics Corporation |
|
| Limited
have been treated as associated companies. |
|
|
| (ix)
Development expenditure- |
|
| Development
expenditure on new products or processes is deferred and amortized |
|
| over
the period of expected benefit. |
|
|
| Other
accounting policies are disclosed wherever relevant in the following notes. |
|
|
|
1999 |
1998 |
|
| 3.
SHARE CAPITAL |
|
(Rupees in
thousands) |
|
| Authorised - |
|
| 15,000,000
ordinary shares of Rs. 10/- each |
|
150,000 |
150,000 |
|
| Issued,
subscribed and paid up - |
|
========== |
========== |
|
| 8,408,850
ordinary shares of Rs. 10/- each |
|
| issued for cash |
|
84,089 |
84,089 |
|
| 948,710
ordinary shares of Rs. 10/- each |
|
| issued
for consideration other than cash |
|
9,487 |
9,487 |
|
|
----------- |
----------- |
|
|
93,576 |
93,576 |
|
|
========== |
========== |
|
| 3.1
Federal Chemical & Ceramics Corporation Ltd. FCCCL held 3,776,894 (1998:
3,776,894) |
|
| ordinary
shares of Rs. 10/- each as at June 30, 1999. |
|
|
|
1999 |
1998 |
|
|
(Rupees in
thousands) |
|
| 4.
LONG TERM LOANS |
|
|
| United Bank Limited |
|
(Note: 4.1) |
13,950 |
13,950 |
|
| Government
of Pakistan |
|
(Note: 4.2) |
144,674 |
144,674 |
|
|
----------- |
----------- |
|
|
158,624 |
158,624 |
|
| Less: Overdue |
|
13,950 |
13,950 |
|
|
----------- |
----------- |
|
|
144,674 |
144,674 |
|
|
========== |
========== |
|
| 4.1
There is an agreement to create a second charge on the fixed assets of the
Company to |
|
| secure
loans from U.B.L. which carry interest at rates from 10% to 12% and are |
|
| repayable
in 10 years ending in July, 1994. |
|
|
| 4.2
The Government of Pakistan had issued bonds of Rs. (thousands) 144,674 to
Industrial |
|
| Development
Bank of Pakistan during the year 1995-96 in order to settle the company's |
|
| loan
and the amount of interest outstanding in pursuance of the guarantee issued
in |
|
| 1963.
This loan is free of interest. |
|
|
| 5.
APPLICATION MONEY FOR PARTICIPATION TERM CERTIFICATES |
|
|
| In
a financial restructuring ordered by the Government of Pakistan the loan of
National |
|
| Development
Finance Corporation and part of the loan from United Bank Limited, would be |
|
| converted
into Participation Term Certificates. The PTCs would be issued on the
following |
|
| terms :- |
|
|
| (i)
they will not share in profit until after senior loan creditors, i.e. IDBP
and UBL have been |
|
