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TOYOTA (Indus Motor Company Limited)
Annual Report 1999
CONTENTS
Toyota's Guiding Principles
Company Information
Directors' Report
Chairman's Review
Auditors' Report
Balance Sheet
Profit and Loss Account
Statement of Changes in Financial Position
Notes to the Accounts
Pattern of Shareholding
Notice of Annual General Meeting
TOYOTA'S GUIDING PRINCIPLES
Honour the language and spirit of the law of every nation and undertake open and fair
corporate activities to be a good corporate citizen of the world.
Respect the culture and customs of every nation and contribute to economic and social
development through corporate activities in the communities.
Dedicate ourselves to providing clean and safe products and to enhancing the quality of
life everywhere through all our activities.
Create and develop advanced technologies and provide outstanding products and
services that fulfill the needs of customers worldwide.
Foster a corporate culture that enhances individual creativity and teamwork value, while
honouring mutual trust and respect between labour and management.
Pursue growth in harmony with the global community through innovative management.
Work with business partners in research and creation to achieve stable, long-term growth
and mutual benefits, while keeping ourselves open to new partnerships.
COMPANY INFORMATION
BOARD OF DIRECTORS
Mr. Ali S. Habib		Chairman
Mr. Yutaka Arae		Vice Chairman
Mr. Farhad Zulficar		Chief Executive Officer
Mr. Mohamedali R. Habib		Director
Mr. Tokuichi Uranishi		Director
Mr. Masaru Kato		Director
Mr. Kersi Kapadia		Director
COMPANY SECRETARY
Mr. Shahid Mahmood Khan
Bankers		Registrar
American Express		M/s. Noble Computer Services (Pvt) Ltd.
ANZ Grindlays Bank plc		1st Floor, AI-Manzoor Building,
Askari Commercial Bank		Dr. Ziauddin Ahmed Road, Karachi.
Bank of America
Bank of Tokyo-Mitsubishi, Ltd.		Registered Office
Credit Agricole Indosuez		14, Bangalore Town Housing Society,
Emirates Bank International Ltd.		Main Shahrah-e-Faisal, Karachi.
Faysal Bank Ltd.
Habib Bank AG Zurich		Regional Offices
Habib Bank Limited
Hong Kong & Shanghai Banking Corporation		Lahore
Metropolitan Bank Limited		8/1, Abid Majeed Road, Lahore Cantt.
Muslim Commercial Bank Ltd.
National Bank of Pakistan		Islamabad
Societe Generale		2A, Ataturk Avenue West, G-6/4.
Standard Chartered Bank
		Factory
Auditors		Plot no. NWZ/1/P-1,
M/s. Ford, Rhodes, Robson, Morrow		Port Qasim Industrial Estate,
Chartered Accountants		Bin Qasim, Karachi.
1st Floor, Finlay House,
I. I. Chundrigar Road, Karachi
Legal Advisors
· M/s A. K. Brohi & Co.
· M/s Mansoor Ahmed Khan & Co.
· M/s Mahmud & Co.
FIVE YEARS AT A GLANCE
	1999	1998	1997	1996	1995
			(Rupees in '000)
Vehicles sales (units)	11,249	9,295	8,100	8,125	6,802
Turnover-net	6,957,876	4,973,991	4,538,220	4,136,100	3,869,607
Profit before taxation	501,310	271,702	226,286	221,024	85,513
Taxation	250,021	124,538	76,082	33,789	33,792
Profit after taxation	251,289	147,164	150,204	187,235	51,721
Number of employees	625	611	598	546	509
Earnings per share	3.20	1.87	1.91	2.38	0.66
(in Rupees)
DIRECTORS' REPORT
The Directors of Indus Motor Company Limited take pleasure in presenting this Report, together with the
Accounts of the Company for the year ended June 30, 1999 and recommend the following appropriations:
			1999	1998
			(Rs. in '000)
OPERATING RESULTS
Profit before taxation			501,310	271,702
Taxation	-- Current		177,972	99,538
	-- Prior		11,138	--
	-- Deferred		60,911	25,000
			------------------	------------------
			250,021	124,538
			------------------	------------------
PROFIT AFTER TAXATION			251,289	147,164
Unappropriated profit brought forward			971	707
			------------------	------------------
			252,260	147,871
APPROPRIATIONS
Dividend - proposed @ 20% (1998:15%)			157,200	117,900
Transfer to revenue reserve			95,000	29,000
			------------------	------------------
			252,200	146,900
			------------------	------------------
Unappropriated profit carried forward			60	971
			===========	===========
Auditors
The auditors, Messrs. Ford, Rhodes, Robson, Morrow, retire at the conclusion of the 10th Annual General
Meeting and being eligible, offer themselves for re-appointment.
Chairman's Review
The Directors of the Company endorse the contents of the Chairman's Review dealing with the Company
activities which is included in the Annual Report and forms an integral part of the Directors' Report.
Year 2000 Compliance
The Company has taken appropriate measures and is Y2K compliant.
Earnings Per Share (EPS)
The Earnings Per Share is Rs. 3.20.
Pattern of Shareholding
The Pattern of Shareholding of the Company as at June 30, 1999 is given on page 40.
Karachi
September 10, 1999.
FARHAD ZULFICAR			YUTAKA ARAE
Chief Executive Officer and Director			Vice Chairman and Director
CHAIRMAN'S REVIEW
	AS SAALAM O ALAIKUM
It is with great pleasure that I welcome you to
the 10th Annual General Meeting of the
Company and present to you the report on the
performance of the Company for the year
ended 30th June, 1999.
The Company's operations for the year
resulted in a Gross Profit of Rs. 735.799 million
and Net Profit after tax of Rs. 251.289 million,
after providing for substantially higher current
and deferred taxation of Rs. 189.110 million
and Rs. 60.911 million, respectively. Sales
revenues increased from Rs. 4.974 billion to
Rs. 6.958 billion, representing a growth of
39.89%. The Gross Profit percentage
increased from 8.97% to 10.57%, while
Administrative, Financial and Selling expenses
increased marginally.
The exceptional performance of your Company
during the current year was the result of higher
capacity utilisation, and also due to the timely
booking of foreign exchange when the
Japanese Yen was posted at lower rates.
Together, these factors contributed towards
reducing costs and improving profitability.
The Directors are, therefore, pleased to
recommend a Cash Dividend of 20% for the
year to the Company's shareholders,
apportioning a part of the profit to reserves for
future capital commitments.
OPERATIONS FOR THE YEAR 1998-99
By the grace of Allah, sales and production of
the locally produced Corolla and Hilux vehicles
during the year were the highest in the Company's history. The threshold sales
barrier of 10,000 CKD units was crossed during the year, thus achieving 100%
capacity utilisation in a single shift.
Even though the twin pressures exerted by the strength of the Yen against the US
Dollar, and Rupee depreciation, continued to affect costs, prices were gradually
increased over the year. This was a marketing step in order to retain market share
and increase volumes that would better capacity utilisation. It was in this highly
competitive environment that your Company's market share rose from 46% to
57% in the 1.3cc and above segment. This accomplishment was the result of
product diversification, aggressive sales promotion and of course, the patronage
and support of Toyota customers. Maintaining the tempo and rising to the needs
of the customers, in October 1998 the Diesel Corolla's 'Special Edition' was
introduced, and in February 1999, the Corolla 1.6GLi 'Special Edition' was
launched. Both have elicited very favourable responses from the market.
Well into its sixth year of production, the exceptional traits of outstanding quality,
low maintenance costs, and high resale value, have ensured that our locally
produced Corolla remained popular and in demand. Concerning change of model,
the market is aware that the Corollas being produced in Pakistan are
technologically the same as those produced in Japan and other parts of the world.
Minor changes are introduced in models to suit the unique conditions and specific
requirements of individual areas, and these differ from country to country. Most of
these changes are of a cosmetic nature and are limited to features altering the
vehicle's outward appearance or interiors. Such a change was also brought about
here in Pakistan in July this year when crystal lights, a new radiator grill and rear
garnish were fitted, giving the model a new and fresh look. Our customers
welcomed these embellishments. A change of model of the Toyota Hilux in Japan
last year, led to the Hilux manufactured in Pakistan being upgraded, and the new
model is to be launched in October this year.
MARKETING OPERATIONS
Dealership Network
The role played by the Company's seventeen 3S dealership network spread
throughout the country has been exemplary. The dealerships have extended
excellent support by providing sales and after sales service to Toyota customers
in Pakistan. During the year the network serviced and provided maintenance
facilities for more than 100,000 vehicles.
To meet with the requirements of catering to Daihatsu Cuore vehicles, and to
remain up to date with Toyota vehicles, your Company has increased training
courses for technical, sales and service staff. To pre-empt customer
requirements, and to meet Toyota's and Daihatsu's goal
of customer satisfaction, new dealerships are being
established and the existing network is undergoing
modernisation and expansion.
Spare parts
The recent reduction to 35% in custom duty has helped
restrict smuggling of spares and has led to an increase in
parts sales through the dealership network. The modern
parts warehouse has been expanded, brought up to date
and streamlined to meet future requirements of
distribution and sales of Daihatsu parts in the country.
These measures will enable the Spare Parts Department
to increase sales in the spare parts market.
In keeping with our commitment to improve after sales
maintenance of Toyota engines, sale of Toyota Genuine
Motor Oil has also commenced.
HUMAN RESOURCES
A very vital arm of the Company, the Human Resource
Department is constantly looking towards increasing the
number of programs offered, and making them available
to more and more personnel. During the year, a large
number of training courses were added, focusing on
Multi-Skills Team-Work, Staff Motivation, Planning and
Leadership. Relevant personnel were also sent overseas
for additional training to equip them to meet future
challenges. As a result, the number of hours of training
per person increased from 20.45 to 33.06 hours, and the
total training hours in your Company increased
substantially to 22,662 hrs.
The development of the Daihatsu project has created
different needs in your Company, and the Human
Resource Department has risen to meet these and
expanded its training programs at the local level, and
also at Toyota and Daihatsu plants overseas.
Training is then an essential part of the Indus culture
encompassing team members, production and quality
control staff as well as management personnel.
PRODUCT DEVELOPMENT
AND QUALITY ASSURANCE
The development of local component parts proceeded
smoothly as per schedule, meeting both the Engineering
Development Board's targeted time frame, and also
Toyota's requirement of high quality standards. Toyota,
Daihatsu, and Indus engineers have worked together
actively with our vendors to improve production and
quality through improvements in production techniques
and manpower training. Within the plant the basic Toyota
philosophy of Kaizen and Teamwork was continuously
practised. Kaizen activities have become an inherent
part of the Indus culture and have been instrumental in
reducing costs, increasing production and maintaining
quality. At the annual Kaizen Convention a number of
measures were proposed by team members. Many of
these were subsequently introduced and this has further
helped in the smooth running of operations. The
Company has benefited as this has led to a further
reduction in costs and improvement in production and
quality.
The Vendor and Supplier Convention held in 1999 was
attended by the vendors of Indus Motor Company and
the representatives of Toyota Motor Corporation and
Toyota Tsusho Corporation of Japan. The Convention
was addressed by Mr. Ahsan Iqbal, Chairman of the
Engineering Development Board, who commended
Indus Motor Company for its contribution towards
transfer of technology to Pakistan. He complimented the
vendors on the high quality of manufactured
components, and those deserving merit were
acknowledged for their adherence to Toyota quality and
production systems and for timely development of parts.
By the grace of Allah, in June this year your Company
achieved Y2K compliance and in the same period
obtained the ISO 9002 Certification through Lloyds of
London. This further affirms the superior quality
standards of Toyota vehicles produced in Pakistan.
DAIHATSU PROJECT
As reported in the six monthly report, the project for the
manufacture of Daihatsu Cuore was initiated in
November 1998. Since then there has been substantial
progress towards its implementation and production.
Sales will commence early next year and the new
product will bear the hallmarks of high quality standards,
which are now synonymous with the name of Indus
Motor Company.
The combined distributorship and manufacture of Toyota and Daihatsu vehicles will have
multifaceted benefits for your Company. In addition to increasing capacity utilisation of the plant it
will give your Company a wide range of vehicles to market. Adding to the strength of the Company,
and to that of its dealers and vendors, it will also serve to cement the engineering base of the
country.
CHANGE IN DIRECTORSHIP
During the year Mr. H.Otaka, nominee director of Toyota Motor Corporation,
Japan was replaced by Mr. T. Uranishi. We take this opportunity to
gratefully acknowledge the valuable contribution Mr. H. Otaka made to the
Company and welcome to the Board, Mr. T. Uranishi, who has a very vast
experience in the automobile industry.
In addition to the above change, Mr. Azhar Wali Mohammad who had been associated with the
company since its inception was replaced by Mr. Kersi Kapadia. We take this opportunity to
gratefully acknowledge the valuable contribution of Mr. Azhar Wali Mohammad to the Company
and welcome to the Board, Mr. Kersi Kapadia, who has an extensive financial experience.
GOVERNMENT POLICY
Engineering industry achieved marked gains during the year in spite of the prevalent uncertainty
in the economic environment. These benefits were largely the result of consistency and stability in
the long-term policies of the Engineering Development Board and the Ministry of Industries. Their
positive support has led to marked benefits for the industry. In addition to bettering capacity
utilisation and increasing the process of indigenisation, this policy has benefited the engineering
industry as a whole and vendors in particular. In addition to other gains, production volumes and
turnover increased compared to the previous years.
FUTURE OUTLOOK
The auto industry in Pakistan has the maximum potential to expand and can increase its
contribution to the development of the economy of the country. This is due to the low vehicle per
person ratio in Pakistan as compared to that in other countries of the world.
On January 1st, 2000, certain provisions of Agreements signed between the Government and the
WTO will require modifications to the existing and highly successful Iocalisation program. Whereas
we are assured by the Government and the Engineering Development Board of their support for
the industry and its Iocalisation program, a long-term policy is yet to emerge. This uncertainty can
lead to a slow down of investment and Iocalisation and will seriously hamper long-term planning
which is essential for the industry. However, this can also be an opportunity to forge an industry-
wide consensus with the Government and implement a far sighted and balanced long-term vision
for the sector which could lead to an environment that could be vastly improved in relation to the
current status. We hope that the stake-holders will play a responsible and objective role in
formulating such a policy at the earliest.
Competition is expected to become more intense in the near future when new entrants in the auto
industry introduce their products. In addition, the Company is faced with the challenge of meeting
customer requirements in a growing market base that is being catered to by the different products
of Indus Motor Company-the Corolla, Hilux and Daihatsu. With the support of its customers, the
commitment of its employees, the backing of the dealer and vendor families and bolstered with the
confidence of high quality of Toyota and Daihatsu products, your Company will, Inshallah, succeed
in dealing with all such challenges.
We thank the Ministry of Commerce and Industries and the Engineering Development Board for
their sustained support. We are grateful to our shareholders, staff, dealers and vendors for their
dedication and commitment to our common goal. We are particularly appreciative of our
customers and thank them for their continued loyalty to Toyota vehicles.
We pray to Allah for guidance and success.
Ali S. Habib
Chairman
	Financial Statements as on June 30, 1999
AUDITORS' REPORT TO THE MEMBERS
We have audited the annexed balance sheet of INDUS MOTOR COMPANY LIMITED as at
June 30, 1999 and the related profit and loss account and the statement of changes in financial
position, 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 accounts have been kept by the company as required by
the Companies Ordinance, 1984;
(b) in our opinion:
(i) the balance sheet and the 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 accounts and are further in accordance with
accounting policies consistently applied except for the change as stated in note 3
with which we concur;
(ii) the expenditure incurred during the year was for the purpose of the company's
business; and
(iii) the business conducted, investments made and the expenditure incurred during
the year were in accordance with the objects of the company;
(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, 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 profit and the
changes in financial position 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.
Karachi		Ford, Rhodes, Robson, Morrow
Dated: September 10, 1999		Chartered Accountants
BALANCE SHEET AS AT JUNE 30, 1999
			Note	1999	1998
				(Rs. in '000)
CAPITAL AND RESERVES
Share Capital
Authorised
100,000,000 (1998:100,000,000) ordinary
shares of Rs. 10/- each				1,000,000	1,000,000
				==========	==========
Issued, subscribed and paid-up
78,600,000 ordinary shares of Rs. 10/-
each fully paid in cash				786,000	786,000
Reserves			4	710,060	615,971
				------------------	------------------
				1,496,060	1,401,971
LONG TERM LOANS			5	324,683	55,152
DEFERRED TAXATION				110,911	50,000
CURRENT LIABILITIES
Current maturities of long term loans			6	14,268	61,531
Short term running finances			7	406,343	5,630
Creditors, accrued and other liabilities			8	594,906	1,138,326
Proposed dividend				157,200	117,900
				------------------	------------------
				1,172,717	1,323,387
CONTINGENCIES AND COMMITMENTS			9
				------------------	------------------
Total shareholders' equity and liabilities				3,104,371	2,830,510
				===========	===========
TANGIBLE FIXED ASSETS