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CONTENTS
Vision and Mission Statements .............................................................................. 2
Company Information ........................................................................................... 3
Notice of Annual General Meeting ........................................................................ 4
Directors’ Report............................................................................................... 5-7
Key Operating and Financial Data ....................................................................... 8
Statement of Compliance with the Code of Corporate Governance ............... 9-10
Pattern of Share Holding...................................................................................... 11
Auditor's Review Report on Code of Corporate Governance................................ 12
Auditor’s Report to the Members......................................................................... 13
Balance Sheet................................................................................................. 14-15
Profit and Loss Account....................................................................................... 16
Statement of Comprehensive Income....................................................................17
Statement of Changes in Equity........................................................................... 18
Statement of Cash Flow...................................................................................... 19
Notes to the Financial Statements................................................................... 20-39
1
SHADMAN COTTON MILLS LIMITED
Vision Statement
2
Mission Statement
To be a dynamic, profitable and growth oriented organization through dedication, integrity and professionalism.
Our mission is to achieve higher levels of sustainable growth and profitability by:
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striving for excellence and sustaining position as a preferred supplier of yarns with a customer focused strategy.
providing diversified and value added textile products.
building a long term relationship with our customers, suppliers and other stake holders.
enhancing the profitability by employing latest technologies for achieving higher levels of efficiency, quality and productivity.
continuously responding to the changing needs of all our customers.
nurturing a work culture that generates creativity, enthusiasm, participation and professionalism.
developing, motivating and retaining people to achieve high team performance.
being a good corporate citizen by fulfilling our social responsibilities.
COMPANY INFORMATION
3
BOARD OF DIRECTORS : MR. ZAHID MAZHAR (Chief Executive / Chairman)
MR. OMER BIN ZAHID
MR. HASSAN BIN ZAHID
MRS. NAILA ZAHID
MR. SHAHID MAZHAR
MRS. GHAZALA SHAHID
MR. AHMED BIN SHAHID
MRS. NOUREEN REHAN
AUDITORS : M/S MUSHTAQ & CO.,
CHARTERED ACCOUNTANTS
LEGAL ADVISOR : MR. ABDUL GHANI KHAN (Advocate)
AUDIT COMMITTEE : MRS. NAILA ZAHID (Member / Chairperson)
MR. OMER BIN ZAHID (Member)
MR. HASSAN BIN ZAHID (Member)
H. R. AND REMUNERATION
COMMITTEE : MR. OMER BIN ZAHID (Chairman)MR. ZAHID MAZHAR (Member)MRS. NAILA ZAHID (Member)
CHIEF FINANCIAL OFFICER : MR. ABDUL AMIN
BANKERS : ASKARI BANK LIMITEDALLIED BANK LIMITEDSONERI BANK LIMITEDTHE BANK OF PUNJABUNITED BANK LIMITEDMCB LIMITEDBANK AL-FALAH LIMITEDHABIB BANK LIMITED
REGISTERED OFFICE : 201-202, COMMERCE CENTRE,HASRAT MOHANI ROAD,KARACHI - PAKISTAN.PHONE : (021) 32635807 - 32635809FAX : (92 -21) 32637896 - 32632712
HEAD OFFICE : 801-804, TOWER-A, 8th FLOOR LAKSON SQUARE BUILDING NO. 3SARWAR SHAHEED ROAD, KARACHI.PH NO. 021-35220481-88 FAX: 021-35220495-6
SHARE REGISTRAR : M/S. TECHNOLOGY TRADE (PVT.) LTD.
241-C, BLOCK-2, P.E.C.H.S., KARACHI.
MILLS : UNIT NO. 1: E-11 S.I.T.E., KOTRI, SINDHUNIT NO. 2 & 3 : KOT SHAH MOHAMMAD,WARBURTON ROAD, FEROZ WATOAN,TEHSIL : NANKANA SAHIB, DISTIRICT : SHEIKHUPURA.
URL : www.shadmangroup.com.pk
4
SHADMAN COTTON MILLS LIMITEDNOTICE OF ANNUAL GENERAL MEETING
rdNotice is hereby given that 33 Annual General Meeting of the Company will be held at Hotel Crown Inn, Plot No. 171,
ndOff 21 AM, Frere Road, Karachi, on Tuesday 22 January, 2013 at 9 : 00 a.m. to transact the following business.
nd th1. To confirm the Minutes of the 32 Annual General Meeting of the Company held on 30 November, 2011.
th2. To receive, consider, and adopt the audited accounts for the period ended 30 June, 2012 together with the
Directors’ and Auditors’ report thereon.
3. To appoint Auditors of the Company and fix their remuneration for the next term.
4. To transact any other ordinary business as may be placed before the meeting with the permission of the Chair.
1) The share transfer books of the Company will remain closed from 16-01-2013 to 22-01-2013 (Both days inclusive). Transfers received at M/s. Technology Trade (Pvt.) Ltd., 241-C, P.E.C.H.S., Karachi the Registrar and Share Transfer Office of the Company, at the close of the business on 15-01-2013 will be treated in time for the entitlement to attend the Annual General Meeting.
2) A member entitled to attend and vote at the General Meeting may appoint another member as his/her proxy to attend and vote instead of him/her. A Proxy must be a member of the Company.
3) The instrument appointing a proxy, in order to be valid must be received at the Head Office of the Company, at 801-804, 8th Floor, Lakson Square Building No.3, Block-A, Sarwar Shaheed Road, Karachi, not less than forty-eight (48) hours before the time fixed for the meeting.
4) Any individual beneficial owner of CDC, entitled to attend and vote at this meeting, must bring his/her participant ID number and account/sub account number along-with Computerized National Identity Card (CNIC) or original passport at the time of attending the meeting to prove his/her identity.
5) Members are requested to immediately inform of any change in their addresses to our Share Registrar M/S Technology Trade (Pvt.) Ltd., 241-C, P.E.C.H.S., Karachi.
Karachi:- BY ORDER OF THE BOARDndDated: 22 December, 2012 Secretary
Notes:
5
SHADMAN COTTON MILLS LIMITEDDIRECTORS' REPORT TO THE SHARE HOLDERS
FOR THE YEAR ENDED JUNE 30, 2012
Dear Shareholders,
SUMMARY OF FINANCIAL RESULTS
The Directors of your Company take this opportunity to present the 33rd Annual Report of the Company together with audited accounts and Auditor’s Report thereon for the year ended June 30, 2012.
Following is the brief highlights of the financial results of the Company for the year ended June 30, 2012.
BREAK-UP VALUE AND EARNING PER SHARE
The break-up value of the shares as on June 30, 2012 was Rs. 19.47 as compared to Rs. 38.46 as at June 30, 2011.
The earning per share for the year ended June 30, 2012 is Rs. (17.65) as per computation below:
OVERVIEWThe Company achieved a turnover of Rs. 4,281.83 million during the year under review (2011: Rs. 5,445.99 million). The gross profit during the year is recorded at Rs. 4.24 million as compared to Rs. 268.56 million of the last year. The Company achieved production of 18,687,000 million kgs of spun yarn after conversion into 20/s count as compared to 21,090,000 million kgs of previous year.
Finance costs for the current year decreased from Rs. 205 million to Rs. 181 million.
TEXTILE SECTOR AND ECONOMIC CHALLENGESThe textile industry is suffering due to the unfriendly policies of the government.
FUTURE OUTLOOKThe management of the Company has planned to put in concrete efforts and is aiming for better results. Pakistan’s economy is losing its share in the global market mainly because of epidemic corruption and poor governance. Weak economic policies have inflated the cost of doing business.
The Management of your Company would like to assure you that all efforts will be made to achieve good results in the coming year.
Sales
Gross profit
Profit / (Loss) before tax
Profit / (Loss) after tax
EPS (in Rupees)
2012
Rupees
in million
4,281.83
4.24
(269.15)
(311.29)
% of
Sales
(17.65)
100.00%
.099%
(6.28%)
(7.27)%
Profit / (Loss) after taxation
No. of ordinary shares
Earning per share
2012
Rupees
(311,287,553)
17,636,719
(17.65)
EXPANSION AND MODERNIZATIONThe company is optimising its available resources to continue its BMR policy in various departments to gradually improve its production and quality of yarn.
The BMR programme is to be continued in future according to the resources available.
Corporate Social ResponsibilityThe Company acknowledges its responsibility towards society and performs its duties in education, health and local community matters etc. Various social activities are supervised by your Company, specially the efforts made in the areas of education and health.
Safety, Health and Environment The Company is committed to achieve excellence in Safety, Health and Environmental protection. We always encourage the awareness in these areas among our stakeholders. The Company’s goal in respect of safety, health and environment is to minimize all adverse environmental impacts. The Company actively strives to provide a safe and healthy workplace for its employees and towards communities and environment in which it operates. Due to these controls and with the blessings of Almighty-Allah no major accidents or incidents took place in the mills.
DIVIDENDThe Board of Directors has not recommended any dividend due to requirement of funds for repayment of debts.
HUMAN RESOURCEThe Directors gives high priority to the training and development of human resources of the company. The management carefully selects the most suitable candidates and continuously upgrading its manpower through the induction of more qualified staff.
CODE OF CORPORATE GOVERNANCEThe Board of Directors hereby declares that for the period ended June 30, 2012:
The financial statements, together with the notes thereon have been drawn up in conformity with the Companies Ordinance 1984. These Statements present fairly the Company’s state of affairs, results of its operations, cash flow, comprehensive income and changes in equity.
The Company entered in arm length transactions with other members of the group. These transactions are in compliance with the directives issued by the Security & Exchange Commission of Pakistan (SECP) in this regard.
Proper books of accounts of the Company have been maintained.
Appropriate accounting policies have been consistently applied in preparation of financial statements and accounting estimates are based on reasonable and prudent judgement.
The International Accounting Standards, as applicable in Pakistan, have been followed in preparation of financial statements and any departure therefrom has been adequately disclosed.
The system of Internal Control is sound in design and has been effectively implemented and monitored.
There is no significant doubt upon the Company’s ability to continue as a going concern.
There has been no material departure from the best practices of corporate governance, as detailed in the listing regulations.
The key operating and financial data for the last six years in summarized form is annexed.
Information about taxes and levies is given in the notes to the accounts.
All the directors of the company are registered as tax-payer and none of the company’s directors is in default of payment of any dues to a banking company, DFI, NBFI or Stock Exchanges.
None of the directors of the company is serving on the Board of 7 or more listed companies. The company operates an unfunded gratuity covering all its employees who have completed their qualifying period. Provision is made annually to cover current obligation under the scheme. The company has adopted the revised IAS 19 and as a result thereof actuarial valuation has been carried out as at June 30, 2012.
x
6
7
Karachi:
Dated: December 22, 2012
Chief Executive
BOARD MEETINGS During the period under review, five meetings of the Board of Directors were held and following were in attendance:
Name of Directors No. of Meetings Attended1- Mr. Zahid Mazhar 5 2- Mr. Omer Bin Zahid 5 3- Mr. Hassan Bin Zahid 5 4- Mrs. Naila Zahid 5 5- Mr. Shahid Mazhar 4 6- Mr. Ahmed Bin Shahid 4 7- Mrs. Ghazala Shahid 3 8- Mrs. Noureen Rehan 4 Leave of absence was granted to Mrs. Ghazala Shahid, who could not attend the meeting on 11-05-2012.
ASSOCIATED COMPANIESFollowing is the list of associated companies:(a) Nadeem Textile Mills Limited.(b) Nadeem Power Generation (Pvt.) Ltd.(c) Nadeem International (Pvt.) Ltd.
AUDIT COMMITTEEThe company has established an audit committee as required by the Code of Corporate Governance, which comprises of three members as mentioned in the company information. The audit committee has established an internal audit function to monitor and review the adequacy and implementation of internal control at each level.
AUDITORSThe Auditors of the Company M/S Mushatq & CO., Chartered Accountants retire at the conclusion of the Annual General Meeting and being eligible, offer themselves for re-appointment as Auditors for the next term.
As suggested by the Audit Committee, The Board recommends their appointment as Auditors of the Company for the year ending June 30, 2013.
PATTERN OF SHARE HOLDING The pattern of share holding of the company as at June 30, 2012 is annexed.
ACKNOWLEDGEMENTThe Directors of the Company would like to take the opportunity to thank the shareholders, valued clients and bankers for the co-operation extended by them during the course of business activities. The Directors are also pleased to record their appreciation for the continued diligence and devotion of the staff members and workers of the Company.
On behalf of the Board of Directors
8
Year (in Million)
2007 2,389 2008 2,862 2009 3,215 2010 4,292 2011 5,445 2012 4,282
TURNOVER
Year (Kgs in ‘000)
2007 25,332 2008 25,153 2009 25,401 2010 25,574 2011 21,090 2012 18,687
PRODUCTION
Net Sales Revenue
Cost Of Goods Sold
Gross Profit
Operating Profit / (Loss)
Profit/(Loss) Before Tax
Profit/(Loss) After Tax
Paid Up Capital
Current Assets
Current Liabilities
PARTICULARSJuly - June2007 - 2008
4,292,240,669
3,812,795,807
479,444,862
326,821,651
135,119,724
93,878,058
176,367,190
1,012,624,675
1,477,676,850
July - June2009 - 2010
3,215,227,415
3,070,480,818
144,746,597
65,281,423
(188,110,461)
(137,069,549)
176,367,190
1,089,138,963
1,579,479,354
July - June2008 - 2009
2,389,606,290
2,247,221,388
142,384,902
80,082,317
(77,403,743)
(79,193,459)
176,367,190
886,683,631
1,200,479,922
July - June2006 - 2007
Key Operating & Financial Data For the Period from June 2007 to June 2012
July - June2010 - 2011
5,445,986,182
5,177,423,804
268,562,378
160,945,883
(32,322,315)
(76,839,955)
176,367,190
1,297,374,834
1,810,107,510
July - June2011 - 2012
4,281,832,449
4,277,593,476
4,238,973
( 97,094,112)
(269,152,707)
(311,287,553)
176,367,190
923,325,881
1,689,819,267
2,862,201,245
2,689,395,022
172,806,223
102,278,626
(59,483,264)
(74,034,620)
176,367,190
1,265,332,180
1,626,690,277
9
This statement is being presented to comply with the Code of Corporate Governance contained in the Regulation No. 37 of Listing Regulations of Karachi and Lahore Stock Exchanges for the purpose of establishing a framework of good governance, whereby a listed company is managed in compliance with the best practices of corporate governance.
The Company has applied the principles contained in the Code in the following manner:
1. The Board comprises eight directors, including the CEO. The Company encourages representation of independent non-executive directors on its Board including those representing minority interests. At present, the Board includes two non executive directors.
2. The Directors have confirmed that none of them is serving as a director in more than seven listed companies, including this Company.
3. All the resident Directors of the Company are registered as taxpayers and none of them has defaulted in payment of any loan to a banking company, a DFI or an NBFI or being a member of a stock exchange, has been declared as a defaulter by the stock exchange.
4. During the year, no casual vacancies occurred in the Board of Directors. 5. The Company has prepared a Statement of Ethics and Business Practices which has been signed by all the directors
and senior employees of the Company.
6. The Board has developed a vision and mission statement, overall corporate strategy and significant policies of the Company. A complete record of particulars of significant policies along with the dates on which they were approved or amended has been maintained.
7. All the powers of the Board have been duly exercised and decisions on material transactions, including appointment and determination of remuneration and terms and conditions of employment of the CEO have been taken by the Board.
8. The meetings of the Board were presided by the Chairman. The Board met at least once in every quarter. Written notices of the Board Meetings, along with agenda and working papers, were circulated at least seven days before the meetings. The minutes of the meetings were appropriately recorded and circulated.
9. Four of the directors met the criteria of exemption from taking orientation course under the condition of having 14 years of education and 15 years of experience on the Board of Directors of Listed Company.
10. No new appointment of CFO, Company Secretary and Head of Internal Audit has been made during the year.
11. The Directors' Report for this period has been prepared in compliance with the requirements of the Code and fully describes the salient matters required to be disclosed.
12. The financial statements of the Company were duly endorsed by the CEO and CFO before approval of the Board.
13. The Directors, CEO and executives do not hold any interest in the shares of the Company other than that disclosed in the pattern of shareholding.
14. The Company has complied with all the corporate and financial reporting requirements of the Code.
15. The Board has formed an Audit Committee. It comprises three members, two of which are non-executive Directors.
SHADMAN COTTON MILLS LIMITEDSTATEMENT OF COMPLIANCE
WITH THE CODE OF CORPORATE GOVERNANCEYEAR ENDED JUNE 30, 2012
10
Karachi:
Dated: December 22, 2012 Chief Executive
16. The Board has formed a Human Resource and Remuneration Committee. It comprises three members, two of which are non-executive Directors.
17. The meetings of the audit committee were held at least once every quarter prior to approval of interim and final results of the Company and as required by the Code.
The terms of reference of the committee have been formed and advised to the committee for compliance.
18. The Board has setup an effective internal audit function manned by suitable qualified and experienced personnel who are conversant with the policies and procedures of the Company. They are involved in the internal audit function on full time basis.
19. The statutory auditors of the Company have confirmed that they have been given a satisfactory rating under the quality control review programme of the Institute of Chartered Accountants of Pakistan, that they or any of the partners of the firm, their spouses and minor children do not hold shares of the Company and that the firm and all its partners are in compliance with International Federation of Accountants (IFAC) guidelines on Code of Ethics as adopted by the Institute of Chartered Accountants of Pakistan.
20. The statutory auditors or the persons associated with them have not been appointed to provide other services except in accordance with the Listing Regulations and the auditors have confirmed that they have observed IFAC guidelines in this regard.
21. The ‘closed period’ prior to the announcement of interim / final results and business decisions, which may materially affect the market price of company’s securities, was determined and intimated to directors, employees and stock exchange.
22. The company has complied with all the major corporate and financial reporting requirements to the code. All related parties transactions has been reviewed and approved by the Board and are carried out as per agreed terms.
23. We confirm that all other material principles contained in the Code have been complied with except for the requirements pertaining to change in composition of Board of Directors or some its committees.
On behalf of the Board of Directors
12
Karachi:
Dated: December 22, 2012
We have reviewed the statement of compliance with the best practices contained in the Code of Corporate Governance prepared by the Board of Directors of Shadman Cotton Mills Limited to comply with the Listing Regulation No. 35 (previously Regulation No. 37) of the Karachi Stock Exchange (Guarantee) Limited and Listing Regulations No. 35 of Lahore Stock Exchange (Guarantee) Limited, where the company is listed.
The responsibility for compliance with the Code of Corporate Governance is that of the Board of Directors of the company. Our responsibility is to review, to the extent where such compliance can be objectively verified, whether the statement of compliance reflects the status of the company’s compliance with the provisions of the Code of Corporate Governance and report if it does not. A review is limited primarily to inquiries of the company personnel and review of various documents prepared by the company to comply with the Code.
As part of our audit of financial statements we are required to obtain an understanding of the accounting and internal control system sufficient to plan the audit and develop an effective audit approach. We have not carried out any special review of the internal control system to enable us to express an opinion as to whether the Board’s statement on internal control covers all controls and the effectiveness of such internal controls.
Further, Sub- Regulation (xiii a) of Listing Regulation No. 35 (previously Regulation No. 37) notified by The Karachi Stock Exchange (Guarantee) Limited vide circular KSE/N-269 dated 19 January 2009 requires the Company to place before the Board of Directors for their consideration and approval related party transactions distinguishing between transactions carried out on terms equivalent to those that prevail in arm’s length transactions and transactions which are not executed at arm’s length price recording proper justification for using such alternate pricing mechanism. Further, all such transactions are also required to be separately placed before the audit committee. We are only required and have ensured compliance of requirement to the extent of approval of related party transactions by the Board of Directors and placement of such transactions before the audit committee. We have not carried out any procedures to determine whether the related party transactions were under taken at arm’s length price.
Based on our review, nothing has come to our attention which causes us to believe that the statement of compliance does not appropriately reflect the company’s compliance, in all material respect, with the best practices contained in the Code of Corporate Governance as applicable to the company for the year ended June 30, 2012.
REVIEW REPORT TO THE MEMBERS ON STATEMENT OF COMPLIANCE WITH BEST PRACTICES OF CODE OF THE CORPORATE GOVERNANCE
MUSHTAQ & CO.CHARTERED ACCOUNTANTS
407-Commerce CentreHasrat Mohani Road
Karachi-74200Tel : 2638521-4
Fax : 2639843
Branch Office:20-B, Block-G
Gulberg III, LahoreTel : 5884926, 5865618
Fax : 5843360
MUSHTAQ & COMPANY
CHARTERED ACCOUNTANTS
Engagement Partner
Shahabuddin A. Siddiqui - FCA
13
AUDITOR'S REPORT TO THE MEMBERS
We have audited the annexed balance sheet of Shadman Cotton Mills Limited as at June 30, 2012 and the related profit and loss account, statement of comprehensive income, cash flow statement and statement of changes in equity 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.
It is the responsibility of the company's management to establish and maintain a system of internal control, and prepare and present the above said statements in conformity with the approved accounting standards and the requirements of the Companies Ordinance, 1984. Our responsibility is to express an opinion on these statements based on our audit.
We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the above said statements are free of any material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the above said statements. An audit also includes assessing the accounting policies and significant estimates made by the management, as well as, evaluating the overall presentation of the above said statements. We believe that our audit provides a reasonable basis for our opinion and, after due verification, 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 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, statement of comprehensive income, cash flow statement and statement of changes in equity together with the notes forming part thereof conform with approved accounting standards as applicable in Pakistan, and, 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, 2012 and of the loss, total comprehensive loss, changes in equity and its cash flows for the year then ended; and
(d) in our opinion, no Zakat was deductible at source under the Zakat and Ushr Ordinance, 1980 (XVIII of 1980).
407-Commerce CentreHasrat Mohani Road
Karachi-74200Tel : 2638521-4
Fax : 2639843
Branch Office:20-B, Block-G
Gulberg III, LahoreTel : 5884926, 5865618
Fax : 5843360
MUSHTAQ & CO.CHARTERED ACCOUNTANTS
Karachi:
Dated: December 22, 2012
MUSHTAQ & COMPANY
CHARTERED ACCOUNTANTS
Engagement Partner
Shahabuddin A. Siddiqui - FCA
14
Karachi:Dated: Dedember 22, 2012
SHADMAN COTTONBALANCE SHEET AS AT
30th, June 30th, JuneEQUITY AND LIABILITIES Note 2012 2011
PKR PKR
SHARE CAPITAL AND RESERVESAuthorized capital18,000,000 (2011: 18,000,000) Ordinary shares of Rs.10 each 180,000,000 180,000,000
Issued, subscribed and paid up capital 5 176,367,190 176,367,190Capital reserve 6 53,218,752 53,218,752Unappropriated (Loss) (364,421,443) (80,626,431)
(134,835,501) 148,959,511Surplus on revaluation of property, plant and equipment 7 478,106,811 529,381,601
Deferred Income 8 1,496,255 2,276,908
NON-CURRENT LIABILITIESLong term financings 9 177,308,390 143,860,000Liabilities against assets subject to finance lease 10 28,038,375 56,076,747Deferred liabilities 11 188,840,328 160,021,324
394,187,093 359,958,071
CURRENT LIABILITIESTrade and other payables 12 346,148,757 440,103,264Interest / mark-up on loans 13 224,935,300 121,480,567Short term borrowings 14 889,243,347 1,066,975,527Current portion of: Long term financings 9 44,391,140 55,187,932Overdue bank liabilities 9 115,879,002 64,164,905Liabilities against assets subject to finance lease 10 26,302,581 5,744,087 Provision for taxation 42,919,141 56,451,228
1,689,819,267 1,810,107,509
CONTINGENCIES AND COMMITMENTS 15
2,428,773,926 2,850,683,600
The annexed notes form an integral part of these financial statements.
Chief Executive
15
Director
MILLS LIMITED JUNE 30, 2012
30th, June 30th, JuneASSETS Note 2012 2011
PKR PKR
NON-CURRENT ASSETS
Property, plant and equipment 16 1,487,130,008 1,543,242,595
Capital work in progress 17 4,179,522 4,144,797
Long term deposits 18 14,138,515 5,921,374
CURRENT ASSETS
Stores, spares and loose tools 19 95,541,736 103,306,288
Stock in trade 20 458,360,663 630,559,400
Trade debts 21 180,586,836 404,535,217
Loans and advances 22 52,276,813 26,645,337
Trade deposits and short term prepayments 23 899,053 899,053
Other receivables 24 12,476,305 7,529,492
Tax refund due from Government 25 114,149,933 111,785,271
Other financial assets 26 782,250 594,000
Cash and bank balances 27 8,252,292 11,520,776
923,325,881 1,297,374,834
2,428,773,926 2,850,683,600
16
SHADMAN COTTON MILLS LIMITEDPROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED JUNE 30, 2012
Note
Sales 28 4,281,832,449 5,445,986,182Cost of sales 29 (4,277,593,476) (5,177,423,804)
Gross profit 4,238,973 268,562,378
Distribution cost 30 (33,610,809) (46,026,130)Administrative expenses 31 (67,722,276) (61,590,365)Other operating income 32 9,238,233 11,914,635Finance cost 33 (181,112,606) (204,795,866)Other operating expenses 34 (184,222) (386,967)
(273,391,680) (300,884,693)
(Loss) before taxation (269,152,707) (32,322,315)
Taxation 35 (42,134,846) (44,517,640)
(Loss) after taxation (311,287,553) (76,839,955)
(Loss) per share - Basic and diluted 36 (17.65) (4.36)
The annexed notes form an integral part of these financial statements.
30th, June2012PKR
30th, June2011PKR
Karachi:Dated: December 22, 2012
Chief Executive Director
17
SHADMAN COTTON MILLS LIMITEDSTATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED JUNE 30, 2012
(Loss) for the year after taxation (311,287,553) (76,839,955)
Other comprehensive income / (loss) - -
Total comprehensive (loss) for the year (311,287,553) (76,839,955)
The annexed notes form an integral part of these financial statements.
.... ....
30th, June2012PKR
30th, June2011PKR
Karachi:Dated: December 22 2012
Chief Executive Director
18
Balance as at July 01, 2010 176,367,190 53,218,752 (25,395,682) 27,823,070 204,190,260
Comprehensive (loss) for the
year - 2011 - - (76,839,955) (76,839,955) (76,839,955)
Dividend paid during the year - - (8,818,359) (8,818,359) (8,818,359)
Transfer from surplus on
revaluation of property, plant and
equipment - Disposed off - - 1,705,663 1,705,663 1,705,663
Transfer from surplus on revaluation
of property, plant and equipment -
Incremental depreciation - - 28,721,902 28,721,902 28,721,902
Balance as at June 30, 2011 176,367,190 53,218,752 (80,626,431) (27,407,679) 148,959,511
Comprehensive (loss) for the
year - 2012 - - (311,287,553) (311,287,553) (311,287,553)
Transfer from surplus on
revaluation of property, plant and
equipment - Disposed off - - 515,892 515,892 515,892
Transfer from surplus on
revaluation of property, plant and
equipment - Incremental depreciation - - 26,976,649 26,976,649 26,976,649
Balance as at June 30, 2012 176,367,190 53,218,752 (364,421,443) (311,202,691) (134,835,501)
The annexed notes form an integral part of these financial statements.
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.... ....
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SHADMAN COTTON MILLS LIMITEDSTATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED JUNE 30, 2012
RESERVES
Karachi:Dated: December 22, 2012
Chief Executive Director
SHARECAPITAL
UNAPPROPRIATEDPROFIT/(LOSS)
CAPITALRESERVE
PKR PKR PKR PKR
TOTAL EQUITY
SUB TOTAL
PKR
19
SHADMAN COTTON MILLS LIMITEDSTATEMENT OF CASH FLOW FOR THE YEAR ENDED JUNE 30, 2012
30th, June 30th, June2012 2011
Note PKR PKRCASH FLOW FROM OPERATING ACTIVITIES(Loss) before taxation (269,152,707) (32,322,315)Adjustments for: Depreciation of property, plant and equipment 79,219,865 78,474,378 Amortisation of deferred income 780,653 -Amortisation of deferred cost - 6,211,664
Provision for bad debts (1,627,268) (633,580) Provision for gratuity 20,083,774 19,200,729 ETO Charges payable (2,500,000) 3,662,564 Investment at fair value through profit and loss (188,250) 124,000 Gain on disposal of property, plant and equipment (151,454) (283,753) Finance cost 181,112,606 204,795,866
Cash flow before working capital changes 7,577,219 279,229,553 (Increase)/Decrease in current assets Stores, spares and loose tools 7,764,552 (3,175,811) Stock in trade 172,198,737 (164,075,604) Trade debts 223,948,381 (77,442,516) Loans and advances (25,631,476) (12,960,626) Trade deposits and short term prepayments - 81,314 Sale tax refundable (20,916,072) (23,961,204) Other receivables (4,946,813) (2,984,553)
352,417,309 (284,519,000)Increase/(Decrease) in current liabilities Trade and other payables (93,660,759) 141,250,050
Cash generated from operations 266,333,769 135,960,603
Finance cost paid (77,657,872) (158,377,019) Gratuity paid (12,547,019) (11,372,407) Taxes paid (37,115,523) (43,960,892) Dividend paid (293,748) (8,818,359)
(127,614,162) (222,528,677)
Net cash (used in)/ generated from operating activities 138,719,606 (86,568,074)CASH FLOW FROM INVESTING ACTIVITIES Proceeds from disposal of property, plant and equipment 850,700 61,437,458 Capital expenditure (23,775,286) (74,471,467) Long term deposit (8,217,141) (1,911,840)
Net cash used in investing activities (31,141,727) (14,945,849)CASH FLOW FROM FINANCING ACTIVITIES Proceeds of long term financing 74,365,695 2,982,254 Short term borrowings (177,732,180) 93,100,364 (Repayment) of liabilities against assets subject to finance lease - net (7,479,878) (13,217,957)
Net cash generated from / (used in) financing activities (110,846,363) 82,864,661
Net (decrease) in cash and cash equivalents (3,268,484) (18,649,262)Cash and cash equivalents at beginning of the year 11,520,776 30,170,038
Cash and cash equivalents at the end of year 27 8,252,292 11,520,776
The annexed notes form an integral part of these financial statements.
,,,. ,,,.
,,,.
Karachi:Dated: December 22, 2012
Chief Executive Director
20
1. THE COMPANY AND ITS OPERATIONThe Company was incorporated in Pakistan as a public limited company on November 24, 1979 under the Companies Act, 1913 (Now Companies Ordinance, 1984) and is quoted on Karachi and Lahore Stock Exchanges. The main business of company is manufacturing and sale of yarn. The registered office of the company is located at 201-202, 2nd Floor Commerce Centre, Hasrat Mohani Road, Karachi.
2. BASIS OF PREPARATION
2.1. Statement of complianceThese financial statements have been prepared in accordance with approved accounting standards as applicable in Pakistan. Approved accounting standards comprise of such International Financial Reporting Standards (IFRSs) issued by the International Accounting Standard Board as are notified under the Companies Ordinance, 1984, provision of and directives issued under the Companies Ordinance, 1984, In case requirement differ the provision or directives of the Companies Ordinance, 1984 shall prevail.
2.2 Basis of measurementThese financial statements have been prepared on historical cost convention except for certain financial instruments at fair value and employees retirement benefits at present value. In these financial statements, except for cash flow statements, all transaction have been accounted for on accrual basis.
2.3 Functional and presentation currencyThese financial statements are presented in Pakistan Rupees which is the company's functional and presentation currency. All financial information in Pakistan Rupees has been rounded to the nearest Rupee.
2.4 Use of estimates and judgmentsThe preparation of financial statements in conformity with approved accounting standards, as applicable in Pakistan, requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumption are based on historical experiences and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revision to accounting are recognized the period in which the estimates are revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Judgments made by the management in the application of approved accounting standards, as applicable in Pakistan, that have significant effect on the financial statements and estimates with a significant risk of material adjustment in the next year are discussed in note to these financial statements.
2.5 Standards, interpretations and amendments to published approved accounting standards2.5.1 Standards, interpretations and amendments to published approved accounting standards that are effective in the
current year
The following are new and revised approved accounting standards, interpretations and amendments thereto that are effective in the current year. However, these do not effect financial statements of the Company for current period or any period. The effect, if any, on future periods, is impracticable to determine.
SHADMAN COTTON MILLS LIMITEDNOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2012
Standards, interpretations and amendments
Amendment to IAS 1 - Presentation of Financial Statements
IAS 24 (as revised in 2009) - Related Party Disclosures
Amendment to IAS 34 - Interim Financial Reporting
Description
The amendments clarify that an entity may present the analysis of other comprehensive income for each component of equity, either in the statement of changes in equity or in the notes to the financial statements. The amendment is effective for annual periods beginning on or after January 01, 2011.
The revised standard amends the definition of related party and modifies certain related party disclosure requirements for government-related entities. The standard is effective for annual periods beginning on or after January 01, 2011.
The amendments provide clarification about significant events and transactions to be disclosed in interim financial reports. The amendment is effective for annual periods beginning on or after January 01, 2011.
21
Approved accounting standards, interpretations and amendments thereto issued but not effective as at the reporting date
The following standards, interpretations and amendments are in issue which are not effective as at the reporting date.
Amendment to IFRS 7 –Disclosures – Transfer of Financial Assets
Amendment to IFRIC 13 - Customer Loyalty Programmes
Amendment to IFRIC 14 - Prepayments of a Minimum Funding Requirement
The amendments emphasize the interaction between quantitative and qualitative disclosures about the nature and extent of risks associated with financial instruments. The amendment is effective for annual periods beginning on or after January 01, 2011.
The amendments clarify the meaning of 'fair value' in the context of measuring award credits under customer loyalty programmes. The amendment is effective for annual periods beginning on or after January 01, 2011.
The amendments remove unintended consequences arising from the treatment of prepayments where there is a minimum funding requirement and result in prepayments of contributions being recognized as an asset rather than an expense. The amendment is effective for annual periods beginning on or after January 01, 2011.
Standards, interpretations and amendments
IFRS 9 - Financial Instruments: Classification and Measurement
IFRS 10 - Consolidated Financial Statements
IFRS 11 - Joint Arrangements
IFRS 12 - Disclosure of Interests in Other Entities
IFRS 13 - Fair Value Measurement
IAS 12 - Income Taxes
The standard introduces new requirements for the classification and measurement of financial instruments and replaces relevant requirements in IAS 39 - Financial Instruments: Recognition and Measurement. The standard is effective for annual periods beginning on or after January 01, 2013.
The standard replaces those parts of IAS 27 - Consolidated and Separate Financial Statements, that address when and how an investor should prepare consolidated financial statements and supersedes SIC 12 - Consolidation: Special Purpose Entities. The standard is effective for annual periods beginning on or after January 01, 2013.
The standard supersedes IAS 31 - Interest in Joint Ventures and SIC 13 - Jointly Controlled Entities: Non-monetary Contributions by Venturers. The standard is effective for annual periods beginning on or after January 01, 2013.
The standard introduces disclosure requirements relating to interests in subsidiaries, joint arrangements, associates and unconsolidated structured entities. The standard is effective for annual periods beginning on or after January 01, 2013.
The standard establishes a single framework for measuring fair value where that is required by other standards. The standard is effective for annual periods beginning on or after January 01, 2013.
The amendments provide exception to the general principal of IAS 12 for investment property measured using the fair value model and introduces a rebuttable presumption that the carrying amount of such an asset will recovered entirely through sale. The amendment is effective for annual periods beginning on or after January 01, 2012.
22
3. THE SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 3.1 Borrowings
Mark up bearing borrowing are recognized initially at cost, less attributable transaction cost. Subsequent to initial transaction, mark-up bearing borrowings are stated at amortized cost with any difference between cost and redemption value being recognized in the income statement over the period of the borrowings on an effective interest basis.
3.2 Employees benefitsDefined benefit planThe company operates an unfunded gratuity for all of its permanent employees, who attain the minimum qualification period for entitlement to gratuity. Provision is made on the basis of actuarial valuation. The most recent actuarial valuation was carried out on June 30, 2012 using the Projected Unit Credit Method.
Actuarial gain or loss is recognized in the period in which it occurs.
3.3 TaxationIncome tax expenses comprises current tax and deferred tax, income tax expenses is recognized in profit or loss except to the extend that it relates to items recognized directly in equity, in which case it is recognized in equity.
CurrentThe charge for current taxation is based on taxable income at the current rate of taxation after taking into account applicable tax credits, rebates and exemption available if any or minimum taxation at rate of 0.5% of the turnover whichever is higher. However, for income covered under final tax regime, taxation is based on applicable tax rates under such regime.
Deferred Deferred tax is accounted for using the balance sheet liability method providing temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes. In this regard, the effects on deferred taxation of the portion of the income that is subject to final tax regime is also considered in accordance with the requirements of "Technical Release - 27" of the Institute of Chartered Accountants of Pakistan. Deferred Tax is measured at rates that are expected to be applied to the temporary differences when they reverse, based on laws that have been enacted or substatively enacted by the reporting date. A deferred tax liability is recognized for all taxable temporary differences. A deferred tax assets is recognized for deductible temporary differences to the extend that future taxable profits will be available against which temporary differences can be utitlized. Deferred tax assets are reviewed at each reporting date and are reduced the extend that it is no longer probable that the related tax benefit will be realized.
Deferred tax is not recognized for timing differences that are not expected to reverse and for the temporary differences arising from the initial recognition of goodwill and initial recognition of assets and liabilities in transaction that is not a business combination and that at the time of transaction affects neither the accounting nor the taxable profit.
A provision is recognized in the balance sheet when the Company has a legal or constructive obligation as a result of past event, and it is probable that an outflow of resource embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of obligation.
3.5 Trade and other payablesLiabilities for trade and other amounts payable are carried at cost which is the fair value of the consideration to be paid in the future for goods and services received, whether or not billed to the Company.
3.6 DividendDividend is recognized as a liability in the period in which it is approved by shareholders
3.7 Property, plant and equipment and depreciationOwned assetsProperty, plant and equipment, except freehold land and capital work in progress are stated at cost/revalued amount less accumulated depreciation and impairment losses, if any. Freehold land and capital work in progress are stated at cost.
3.4 Provisions
IFRIC 20 - Striping costs in the production phase of a surface mine.
"IFRIC 20 considers when and how to account separately fortwo benefits arising from the stripping activity, as well as how to measure these benefits both initially and subsequently. IFRIC 20 only deals with waste removal costs that are incurred in surface mining activity during the production phase of the mine ('production stripping costs'). The amendment is effective for annual periods beginning on or after January 01, 2012."
23
Subsequent costThe cost of replacing part of an item of property, plant and equipment is recognized in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the company and its cost can be measured reliably. The carrying amount of the replaced part is derecognized. The cost of the day-to-day servicing of property, plant and equipment are recognized in profit and loss as incurred.
DepreciationDepreciation on all items of property, plant and equipment except for freehold land is charged to income applying the reducing balance method at the rates specified in the note to fixed assets.
Depreciation on additions during the year is charged on pro-rata basis when the asset is available for use. Similarly the depreciation on deletion is charged on pro-rata basis up to the period when the asset is derecognized.
Expenditure incurred subsequent to the initial recognition of asset is capitalized only when it increases the future economic lives embodied in the items of above assets. All other expenditure is recognized in the profit and loss account as an expense.The assets' residual values and useful lives are reviewed at each financial year end and adjusted if impact on depreciation is material.
Gain or loss on disposal of property, plant and equipment are charged to income during the year in which they are incurred.
Impair\mentWhere the carrying amount of assets exceeds its estimated recoverable amount it is written down immediately to its recoverable amount.
Assets held under finance leases are recognized as assets of the company at their fair value at the date of acquisition or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lesser is included in the balance sheet as a finance lease obligation.
Financial charges are allocated to accounting periods in a manner so as to provide a constant periodic rate of charge on the outstanding liability.
Depreciation is charged at rates used for similar owned assets, so as to depreciate the assets over their estimated useful lives in view of certainty of ownership of the assets at the end of the lease term.
Income arising from sale and lease back transactions, if any, is deferred and amortized equally over the lease period.
Lease rentals payable on assets held under operating leases are charged to income in arriving at operating profits.
3.8 Capital work in progressCapital work in progress is stated at cost and represents expenditure on fixed assets in the course of construction and installation. Transfers are made to relevant fixed assets category as and when assets are available for use.
3.9 Stores and spares These are valued at lower of cost and NRV. Cost is determined by the moving average method. Items considered obsolete is carried at nil value. Items in transits are valued at cost comprising invoice value plus other charges paid there on.
3.10 Stock-in-tradeThese are valued at lower of cost and net realizable value applying the following basis.
Raw material At average cost except those in transit which are stated at actual costWork in process and finished goods Cost of direct material and a proportion of manufacturing overhead based
on normal capacityWaste At net realized value
Net realizable value signifies the estimated selling price in the ordinary course of business less costs necessarily incurred in order to 1make the sale.
3.11 Trade debts and other receivable Trade debts originated by the Company are recognized and carried at original invoice amount less an allowance for any uncollectible amounts. An estimated provision for doubtful debt is made when collection of the full amount is no longer probable. Bad debts are written off as incurred.
3.12 Cash and cash equivalentsCash in hand, cash at bank and short-term deposits, which are held to maturity, are carried at cost. For the purpose of cash flow statements, cash equivalent are short term highly liquid instrument that are readily convertible to known amounts of cash and which are subject to insignificant risk of changes in values.
Lease assets
24
3.13 Revenue recognitionRevenue from sales is recognized when significant risks and rewards of ownership are transferred to buyer.
Interest income is recognized on the basis of constant periodic rate of return
Dividend income is recognized when the right to receive dividend is established i.e. the book closure date of investee company declaring dividend.
3.14 Borrowing costAll mark up, interest and other charges are charged to current income on an accrual basis.
3.15 ImpairmentAll company's assets are reviewed at each balance sheet date to determine whether there is objective evidence of impairment. If any such indication exist, the asset's recoverable amount is estimated. Impairment losses are recognized in the profit and loss account currently.
3.16 Foreign currency transactionTransactions in foreign currency are converted into rupees at the rates of exchange prevailing on the date of transaction. Monetary assets and liabilities in foreign currency are translated into rupees at the balance sheet date.
Exchange gains and losses, if any, are recognized in profit and loss account.
3.17 Offsetting of financial assets and liabilitiesA financial asset and financial liability is offset and the net amount is reported in the balance sheet if the company has a legal enforceable right to set off the recognized amounts and intends either to settle on net basis or to realize the assets and settle the liabilities simultaneously.
3.18 Related party transactionsTransactions with related parties are priced at comparable uncontrollable market price. All transactions involving related parties arising in normal course business are conducted at arm's length using valuation modes, as admissible. Parties are said to be related when they meet the definition as provided in the Companies Ordinance, 1984.
4. CAPITAL MANAGEMENTThe company's policy is to maintain a strong capital base so as to maintain investor, creditors and market confidence and to sustain future development of the business. The board of directors monitors the return on capital and level of dividends to ordinary shareholders. The company seeks to keep a balance between the higher return that might be possible with higher level of borrowings and the advantages and security afforded by a sound capital position. There were no changes in the company's approach to capital management during the year. Further the company is not subject to externally imposed capital requirement.
Ordinary shares of Rs. 10 each
116,273,440 116,273,440 6,009,375 6,009,375 Ordinary shares of Rs. 10 each
17,636,719 17,636,719 176,367,190 176,367,190
5.1 There was no movement during the reporting year.
5.2 The shareholders' are entitled to receive all distributions to them in the form of bonus and right shares as and when declared by the Company. All shares carry "one vote" per share without restriction.
53,218,752 53,218,752
53,218,752 53,218,752
The company has issued 3,527,344 ordinary shares at a premium of Rs. 8 per share in the year 2002 and 2,500,000 ordinary shares at premium of Rs.10 per share in the year 1992.
5. ISSUED, SUBSCRIBED AND PAID UP CAPITAL
2012 2011No. of shares No. of shares11,627,344 11,627,344
allotted for consideration paid in cash
allotted as bonus shares 60,093,750 60,093,750
6. CAPITAL RESERVEShare premium
30th, June2012PKR
30th, June2011PKR
7. SURPLUS ON REVALUATION OF PROPERTY, PLANT AND EQUIPMENTThe land & building and plant & machinery of the company was revalued by M/s Sadruddin & Associates, Karachi, an approved valuer on March 01, 2009 on the basis of depreciated replacement value. The resulting surplus on revaluation of Rs.707,335,349 has been credited to surplus on revaluation account.
Opening balance 169,446,515 468,535,551 637,982,066 668,409,631
Less: Surplus on revaluation of property, plant and equipment disposed during the year (515,892) - (515,892) (1,705,663)
168,930,623 468,535,551 637,466,174 666,703,968Less: Incremental depreciation for the year (7,557,507) (19,419,142) (26,976,649) (28,721,902)
161,373,116 449,116,409 610,489,525 637,982,066Less: Related deferred tax liability (35,075,477) (97,307,237) (132,382,714) (108,600,465)
Closing balance 126,297,639 351,809,172 478,106,811 529,381,601
8. DEFERRED INCOMEDeferred gain on sale & lease back - 2,276,908 2,276,908 2,341,962Less: Amortised during the year - (780,653) (780,653) (65,054)
- 1,496,255 1,496,255 2,276,908
8.1 This represents excess of sale proceeds over carrying amount in sale and lease back of asset. This amount is being amortised over the lease term in equal proportion. This amount is amortised over the 3 years.
9. LONG TERM FINANCINGS
- 34,869,530 -
-
-
-
-
108,189,180 - 108,189,180 92,694,180
- (115,879,002) (115,879,002) (64,164,905)
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....
....
....
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From financial institutions - Secured
9.1 Askari Commercial Bank Limited - Term Finance 34,869,530
9.2 Allied Bank Limited - Demand Finance 54,375,958 54,375,958 54,375,958
9.3 The Bank of Punjab - Demand finance-1-LTF (Note 9.8) 17,863,256 17,863,256 17,863,256
9.4 The Bank of Punjab - Demand finance - 2 (Note 9.8) 80,000,000 80,000,000 80,000,000
9.5 Habib Bank Limited - Term finance (Note 9.8) 8,105,608 8,105,608 11,579,443
From related party-Unsecured
9.6 Associated company
9.7 Directors 22,700,000 11,475,000 34,175,000 6,700,000
165,758,710 171,819,822 337,578,532 263,212,837
Less: Current maturity shown under current liabilities (19,925,320) (24,465,820) (44,391,140) (55,187,932)
Less: Overdue installments
145,833,390 31,475,000 177,308,390 143,860,000
25
30th, June2012PKR
30th, June2011PKR
PunjabJune-2012
PKR
SindhJune-2012
PKR
26
9.1 Askari Bank Limited - Term FinanceThe running finance of Rs. 40Million was converted to term finance loan and secured by way of Ist pari passu charge over the fixed assets, stock and receivables of the company to the extent of Rs. 57Million. The loan is payable in two years in 08 quarterly installments commencing from June 2012. It carries mark-up rate at 3Months KIBOR plus 2% P.A payable quarterly.
9.2 Allied Bank Limited - Demand FinanceThe demand finance of Rs. 200 million was obtained and was secured by way of pari passu charge over the fixed assets of the company to the extent of Rs. 296 million. The loan was obtained for five years and payable in 10 half yearly installments commencing from June 2006. It carries mark-up 6Months KIBOR plus 1.5% P.A. payable quarterly.
This demand finance facility is Rs. 45 Million and is secured against first Pari Passu charge of Rs. 70 Million over the fixed assets of the company. The loan was obtained for five years repayable in half yearly installments, and the same was swapped under the LTF scheme launched by the SBP and carries mark-up 7% P.A. payable quarterly.
9.4 The Bank of Punjab - Demand Finance - 2This demand finance facility of Rs. 100 Million was obtained and is secured against first Pari Passu charge over the fixed assets of the company. The loan was obtained for five years repayable in 10 half yearly installments with no grace period, it carries mark-up 3 Months KIBOR plus 2% payable quarterly.
9.5 Habib Bank Limited Term FinanceTerm loan has been obtained for Rs. 20.84 Million at first equitable and hypothecation charge over all the fixed assets i.e. plant, machinery, equipment of what so ever nature ranking pari passu with the charge of ABL and BOP.
9.7 Loan from directors is interest free and unsecured . Period of payment is beyond one year.
9.8 The balances remain unconfirmed . Confirmation was sent.
10. LIABILITIES AGAINST ASSETS SUBJECT TO FINANCE LEASE Future minimum lease payments under finance lease together with the present value of the net minimum lease payments are as follows.
This represents finances obtained under the sale and lease back arrangement for plant and machinery the total minimum lease payment are payable in (20) twenty equal quarterly installments . This is secured by charge on leased assets and security deposit. The internal rate of return is 6 month KIBOR + 1.75% (June 30,2011: 6 months KIBOR+ 1.75% )p.a. is used as discounting factor. Taxes , repairs and insurance cost are to be borne by lessee. The lessee can exercise purchase option at the end of the lease term by adjusting the deposit amount. Current portion includes over due installments of Rs. 26,302,581 (June 30, 2011: 5,744,087).
9.3 The Bank of Punjab - Demand Finance - 1 - LTF
9.6 Payable to associated undertaking M/s. Nadeem Power Generation (Pvt.) Ltd. This is unsecured & interest free and payment period is beyond one year.
Gross minimum lease payments
Not later than one year 42,439,009 5,744,087Later than one year but not later than five years 30,769,061 74,943,861
73,208,070 80,687,948
Finance charges allocated to future periodNot later than one year 16,136,428 -Later than one year but not later than five years 2,730,686 18,867,114
18,867,114 18,867,114Present value of minimum lease paymentsNot later than one year 26,302,581 5,744,087Later than one year but not later than five years 28,038,375 56,076,747
54,340,956 61,820,834Current portion (26,302,581) (5,744,087)
28,038,375 56,076,747
....
30th, June2012PKR
30th, June2011PKR
27
Deferred tax (Note 11.1) 37,463,285 94,366,005 131,829,290 108,047,041ETO Charges Payable (Note 11.2) 3,911,444 18,316,926 22,228,370 24,728,370
Gratuity (Note 11.2 to 11.4) 14,308,949 20,473,719 34,782,668 27,245,913
11.1 DEFERRED TAXThe liability for deferred taxation comprises of temporary differences relating to:
Accelerated tax depreciation allowance 37,502,154 67,840,884 105,343,038 105,343,038
Related deferred tax liability on revaluation 35,075,477 97,307,237 132,382,714 108,600,465
Deductible temporary differences:Tax losses (28,983,662) (58,520,750) (87,504,412) (87,504,412) Provision for bad debts (1,090,365) (2,180,729) (3,271,094) (3,271,094)Lease rentals (3,498,463) (6,996,926) (10,495,389) (10,495,389)Deferred debit arising in respect of provision for gratuity (1,541,856) (3,083,711) (4,625,567) (4,625,567)
11. DEFERRED LIABILITIES
55,683,678 133,156,650 188,840,328 160,021,324
(35,114,346) (70,782,116) (105,896,462) (105,896,462)
37,463,285 94,366,005 131,829,290 108,047,041
11.1.1 Deferred tax asset amounting to Rs. 54.481 million has not been recognized as it is not probable that in future taxable profit will be available against which unused tax losses and unused tax credits can be utilized.
11.2 This represents amount payable to Excise and Taxation Department, Government of Sindh in respect of infrastructure fee levied through fifth version of law (i.e. Sindh Finance (Amendment) Ordinance 2006). The Supreme Court in his judgment dated 17th May 2011 has decided that fifth version of law (i.e. Sindh Finance (Amendment) Ordinance 2006) is valid and hence the levy imposed and collected from the effective date of the fifth version i.e. 28th December 2006 is valid and all imposition and collection before 28th December 2006 are declared to be invalid. The company has now filed petition in Sindh High Court, challenging fifth version of law (i.e. Sindh Finance (Amendment) Ordinance 2006 regarding levy of infrastructure fee from the 28th December 2006. During the pendency of decision on fifth version of law, Sindh High Court has directed on 31st May 2011 to pay 50% of liability to Excise and Taxation Department, Government of Sindh, and provide bank guarantee of the remaining amount as calculated in accordance with the decision of Supreme Court of Pakistan. Subsequent imports of the company be released against 50% payment infrastructure fee to Excise and Taxation Department, Government of Sindh and furnishing bank guarantee of balance 50% amount. The company has provided bank guarantees amounting to PKR 34.411 Million (June 30, 2011: PKR 31.768 Million) in respect of unpaid infrastructure fee. The company has accrued unpaid infrastructure fee.
11.2 Movement in the net liability recognized in the balance sheet
Opening liability 16,052,084 11,193,829 27,245,913 19,417,591Expense for the year (Note: 11.3) 5,467,064 14,616,710 20,083,774 19,200,729
21,519,148 25,810,539 47,329,687 38,618,320Contribution paid (7,210,199) (5,336,820) (12,547,019) (11,372,407)
14,308,949 20,473,719 34,782,668 27,245,913
11.3 Expense recognized in the profit and loss accountCurrent service cost 9,387,406 8,332,340Interest cost 2,921,579 2,159,589Net actuarial loss recognized in the year 7,774,789 8,708,800
20,083,774 19,200,729
30th, June2012PKR
30th, June2011PKR
PunjabJune-2012
PKR
SindhJune-2012
PKR
28
11.4 General descriptionThe scheme provides for terminal benefits for all of its permanent employees who attain the minimum qualifying period. Annual charge is made using the actuarial technique of Projected Unit Credit Method.
11.5 Principle actuarial assumptionFollowing are a few important actuarial assumptions used in the valuation.
% %
Discount rate 13 12Expected rate of increase in salary 10 9
12. TRADE AND OTHER PAYABLESCreditors (Note:12.1) 21,665,163 151,322,608 172,987,771 225,013,755Accrued expenses ( Note: 12.2) 41,963,537 63,300,030 105,263,567 81,043,926 Advance from customers 2,451,354 33,640,159 36,091,513 22,793,081Other liabilities 47,002 26,114,989 26,161,991 101,430,467Sales tax 31,055 - 31,055 26,950Worker's welfare fund payable - - - - Worker's profit participation fund payable (Note: 12.3) 4,131,225 - 4,131,225 8,019,702Unclaimed dividend 1,481,635 - 1,481,635 1,775,383
71,770,971 274,377,786 346,148,757 440,103,264
12.1
4,442,884 8,019,702 6,891,106- - - -
457,609 1,012,016 1,128,596
4,131,225
Paid during the year - -
Balance at the end of the year 4,131,225 - 4,131,225 8,019,702
13. INTEREST / MARKUP ON LOANSBanking companies Long term finance - Non banking companies Finance lease -
14. SHORT TERM BORROWINGSFrom banking companies-Secured (Note 14.1 & 14.1.1) 206,432,592 682,284,230 888,716,822 1,062,615,901Book overdraft (Note 14.2)
206,448,615
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.... ....
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This includes Rs. Nil (2011: 49,185,152) due to associated undertaking Nadeem Textile Mills Limited against cotton purchases and is unsecured.
12.2 This includes Rs. 17,254,136 (2011: 10,632,800) Due to Associated Undertaking Nadeem Power Generation (Pvt) Ltd. Against electric bill and is unsecured.
12.3 Worker's profit participation fundBalance at the beginning of the year 3,576,818Allocation / expenses for the year Interest on fund utilized in the company's business 554,407
4,900,493 9,031,718 8,019,702
(4,900,493) (4,900,493)
38,369,187 38,369,187 18,292,365
Short term borrowings 8,896,853 152,624,201 161,521,054 99,975,973
25,045,059 25,045,059 3,212,229
8,896,853 216,038,447 224,935,300 121,480,567
16,023 510,502 526,525 4,359,626
682,794,732 889,243,347 1,066,975,527
30th, June2012PKR
30th, June2011PKR
PunjabJune-2012
PKR
SindhJune-2012
PKR
29
The finance facilities are available from various banks amounting to Rs. 900 million (2011 Rs. 1.25 billion). These carry mark up at the rate ranging from one month Kibor to six months average Kibor plus 0.5 percent to 2 percent per annum. (2011: mark up at the rate ranging from one month Kibor to six months average Kibor plus 0.5 percent to 2 percent per annum). These are secured by way of pledge of cotton, yarn and pari passu charge over stocks & book debts. The bank balance includes overdue balance (PAD) of Rs. 89.855M (2011: 89.855M).
166,712 154,496,100 154,662,812 32,343,565
14.1
14.1.1 An amount of Rs. 360, 728, 274 remain unconfirmed. Confirmation was sent.
14.2 This represents cheques issued in excess of bank balances.
15. CONTINGENCIES AND COMMITMENTSContingencies
15.1 The company has filed a suit C.O.S No. 26/2012 against The bank of Punjab before the Honorable Lahore High court, Lahore. The outcome of the case is not ascertainable as at June 30, 2012. Legal advisor of the company is very much optimistic that the outcome of the case will be declared in company's favor.
ETO Guarantees issued to custom department 3,911,444 30,500,000 34,411,444 31,767,900Bank guarantee issued to Sui Gas Department - 27,767,900 27,767,900 -
Commitments
Letter of credit - For raw material
.... ....
30th, June2012PKR
30th, June2011PKR
PunjabJune-2012
PKR
SindhJune-2012
PKR
30
16. PROPERTY, PLANT AND EQUIPMENT
OwnedLand (freehold) 113,404,839 - - - 113,404,839 - - - - 113,404,839Land (leasehold) 29,595,161 - - - 29,595,161 - - - - 29,595,161Factory building 339,776,138 - - - 339,776,138 5 116,404,241 - 11,168,595 127,572,836 212,203,302Non-factory building 138,826,621 - - - 138,826,621 5 43,398,397 - 4,771,411 48,169,808 90,656,813
- -(660,000) -
Office equipment 7,658,787 1,593,428 - - 9,204,315 10 4,238,938 (18,248) 388,115 4,608,805 4,595,510(47,900)
Furniture and Fixture 5,331,633 198,085 - - 5,529,718 10 3,273,958 - 219,001 3,492,959 2,036,759Vehicle 49,125,140 2,496,626 - - 49,760,910 20 25,423,116 (1,440,199) 4,918,275 28,901,192 20,859,714
(1,860,856)
2,569,757,315 21,237,772 - - 2,590,995,087 1,123,806,298 (1,869,510) 69,490,707 1,191,427,495 1,399,567,588LeasedPlant and machinery 148,576,747 - - - 148,576,747 10 51,285,169 - 9,729,158 61,014,327 87,562,420
2012 - PKR 2,718,334,062 21,237,772 - - 2,739,571,834 1,175,091,467 (1,869,510) 79,219,865 1,252,441,822 1,487,130,008
16.1 Depreciation for the year has been allocated as follows:
Note
Cost of sales 29.1 69,283,920 67,452,297 Administrative expenses 31 9,935,946 11,022,081
79,219,866 78,474,378
OwnedLand (freehold) 113,404,839 - - - 113,404,839 - - - - - 113,404,839Land (leasehold) 29,595,161 - - - 29,595,161 - - - - - 29,595,161Factory building 338,019,318 1,756,820 - - 339,776,138 5 104,647,827 - 11,756,415 116,404,242 223,371,896Non-factory building 136,667,836 2,158,785 - - 138,826,621 5 38,436,666 - 4,961,730 43,398,396 95,428,225Plant and machinery 1,882,623,339 76,913,658 - (60,224,531) 1,886,038,996 5 894,937,123 (6,509,746) 50,597,228 931,067,648 954,971,348
(13,273,470) - - - - (7,956,957) - - Office equipment 6,707,011 951,776 - - 7,658,787 10 3,904,674 - 334,264 4,238,938 3,419,849Furniture and Fixture 5,331,633 - - - 5,331,633 10 3,045,327 - 228,631 3,273,958 2,057,675
- -(4,709,377)
2,558,734,866 71,246,980 - (60,224,531) 2,569,757,315 - 1,067,896,919 (17,466,345) 73,375,724 1,123,806,298 1,445,951,017LeasedPlant and machinery 92,500,000 - - 56,076,747 148,576,747 10 46,186,515 - 5,098,654 51,285,169 97,291,578
2011 - PKR 2,651,234,866 71,246,980 - (4,147,784) 2,718,334,062 - 1,114,083,434 (17,466,345) 78,474,378 1,175,091,467 1,543,242,595
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Plant and machinery 1,886,038,996 19,518,389 1,904,897,385 5 931,067,648 (411,063) 48,025,310 978,681,895 926,215,490
Vehicle 46,385,729 7,448,788 49,125,140 20 22,925,302 (2,999,642) 5,497,456 25,423,116 23,702,024
PARTICULARS AS AT JULY 01,
2011
ADDITIONS&
(DELETION)
TRANSFERIN/(OUT)
AS AT JUNE 30,
2012
COST/REVALUATION ACCUMULATED DEPRECIATION
AS AT JULY 01,
2011
DISPOSAL&/
TRANSFER
FOR THEYEAR
AS AT JUNE 30,
2012
RATE%
REVALUATIONDOWN VALUE
AS AT2012
June 30, 2011
PARTICULARS As AT JULY 01,
2010
ADDITIONS&
(DISPOSAL)
TRANSFERIN/(OUT)
AS AT JUNE 30,
2011
COST/REVALUATION ACCUMULATED DEPRECIATION
AS AT JULY 01,
2010
DISPOSAL &
TRANSFER
FOR THEYEAR
AS AT JUNE 30,
2011
RATE%
REVALUATION
30th, June 2011PKR
WRITTEN
PKR PKR
DOWN VALUEAS AT2011
WRITTEN
PKR PKR
30th, June 2012PKR
June 30, 2012
31
16.2 DISPOSAL OF FIXED ASSETS
1 Carding Machine 496,000 255,730 240,270 80,000 (160,270) Negotiation Mr. Imran Zaffar, Islamabad.
2 Scutcher 164,000 155,333 8,667 15,000 6,333 Negotiation Mr. Ghulam Mustafa, Faisalabad.
3 Office Equipment 12,900 6,679 6,221 2,700 (3,521) Negotiation New Digital System Karachi.
4 Vehicle AJJ-332 1,248,150 981,195 266,955 450,000 183,045 Negotiation Mr. Muhammad Intezar, Karachi.
5 Fax Machine 35,000 11,569 23,431 3,000 (20,431) Negotiation M/s. Image Engineering, Lahore.
6 Vehicle LZA-2233 612,706 459,004 153,702 300,000 146,298 Negotiation M/s. Feroze Air Control System, Lahore.
June 30, 2012 2,568,756 1,869,510 699,246 850,700 151,454
June 30, 2011 17,982,847 10,976,599 7,006,248 7,290,000 283,752
17. CAPITAL WORK IN PROGRESSBuilding, other civil works and plant and machinery Opening balance 4,144,797 - 4,144,797 18,968,211 Add: Additions during the year 34,725 - 34,725 1,257,191
4,179,522 - 4,179,522 20,225,402Less: transferred during the year to operating assets - - - (16,080,605)
4,179,522 - 4,179,522 4,144,797
18. LONG TERM DEPOSITS
Security deposits 949,600 13,188,915 14,138,515 5,921,374
949,600 13,188,915 14,138,515 5,921,374
19. STORES, SPARES AND LOOSE TOOLSStores 6,595,001 48,930,679 55,525,680 65,075,290Spares 11,239,665 24,077,001 35,316,666 33,730,279Loose tools 39,325 4,660,065 4,699,390 4,500,719
17,873,991 77,667,745 95,541,736 103,306,288
20. STOCK IN TRADERaw material 63,326,952 129,662,121 192,989,073 245,312,689Work in process 10,848,929 39,543,906 50,392,835 38,419,769Finished goods 31,328,513 175,769,626 207,098,139 341,398,501Waste 1,398,054 6,482,562 7,880,616 5,428,441
106,902,448 351,458,215 458,360,663 630,559,400
20.1 The carrying value of stock pledged is Rs. 408 million (2011: Rs. 600 million).
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S.No.Buyer Name
Particulars CostAccumulatedDepreciation
BookValue
SalesProceeds
Gain/(Loss)
PKR
Mode ofDisposal
30th, June2012PKR
30th, June2011PKR
PunjabJune-2012
PKR
SindhJune-2012
PKR
32
21. TRADE DEBTSSecured 14,924,427 37,563,210 52,487,637 -Unsecured 52,743,591 92,996,015 145,739,606 423,802,892Provision for doubtful debts (8,219,790) (9,420,617) (17,640,407) (19,267,675)
59,448,228 121,138,608 180,586,836 404,535,217
22. LOAN AND ADVANCES Due from employees - Considered good 566,292 1,452,098 2,018,390 1,289,898 Advance to suppliers 1,338,257 14,738,524 16,076,781 17,388,851 Letters of credit margin 149,005 29,547,237 29,696,242 981,188 Bank Guarantee margin - 4,485,400 4,485,400 6,985,400
2,053,554 50,223,259 52,276,813 26,645,337
23. TRADE DEPOSITS AND SHORT TERM PREPAYMENTS Deposits 899,053 - 899,053 899,053 899,053 - 899,053 899,053
24. OTHER RECEIVABLE Unsecured-considered goodSpecial excise duty 950,380 - 950,380 950,270Insurance claim receivables - 8,122,112 8,122,112 -Others 21,119 3,382,694 3,403,813 6,579,222
971,499 11,504,806 12,476,305 7,529,492
25. TAX REFUND DUE FROM GOVERNMENT
Sales Tax 26,673,258 47,289,953 73,963,211 53,047,139Advance income tax 6,669,603 33,517,119 40,186,722 58,738,132
33,342,861 80,807,072 114,149,933 111,785,271
26. OTHER FINANCIAL ASSETSInvestment at fair value
27. CASH AND BANK BALANCES
Cash at bank in current account 1,627,892 1,622,772 3,250,664 10,961,500 in saving account 4,626,373 21,500 4,647,873 -
6,254,265 1,644,272 7,898,537 10,961,500Cash in hand 315,182 38,573 353,755 559,276
6,569,447 1,682,845 8,252,292 11,520,776
28. SALES - NETLocal 1,405,845,143 1,097,881,946 2,503,727,089 2,481,220,717Export - Direct 241,527,498 1,438,190,454 1,679,717,952 1,616,899,721Export - In Direct - - - 1,260,349,787 Waste 13,045,770 49,416,384 62,462,154 84,837,792Processing 5,436,850 - 5,436,850 9,805,443Raw material 15,463,710 77,593,930 93,057,640 74,391,891
1,681,318,971 2,663,082,714 4,344,401,685 5,527,505,351
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Fair Value
AdjustmentName of Securities No. of Shares Cost Fair Value
Pakistan Reinsurance Limited NIB Bank Limited
25,000
50,000
50,000
JS Bank Limited
2011 - PKR 125,000
2012 - PKR 125,000
30,250
24,000
134,000
(124,000)
188,250
427,750
99,500
255,000
594,000
782,250
397,500
121,000
75,500
718,000
594,000
30th, June2012PKR
30th, June2011PKR
PunjabJune-2012
PKR
SindhJune-2012
PKR
33
Less: Ocean freight 1,034,988 14,160,977 15,195,965 18,824,357 Commission on export 2,859,366 21,798,943 24,658,309 44,913,892 Export development surcharge 567,013 3,527,670 4,094,683 4,300,870 Export trailer charges 862,038 14,312,575 15,174,613 9,933,082 Miscellaneous export expenses 579,398 2,866,268 3,445,666 3,546,968
5,902,803 56,666,433 62,569,236 81,519,169
1,675,416,168 2,606,416,281 4,281,832,449 5,445,986,182
29. COST OF SALESCost of goods manufactured (Note: 29.1) 1,568,874,320 2,419,095,931 3,987,970,251 5,222,813,763Cost of raw material sold 12,876,710 72,775,893 85,652,603 58,436,753Finished goods Opening 106,266,032 240,560,910 346,826,942 243,000,230 Yarn purchased 13,190,350 58,932,085 72,122,435 - Closing (32,726,567) (182,252,188) (214,978,755) (346,826,942)
86,729,815 117,240,807 203,970,622 (103,826,712)
1,668,480,845 2,609,112,631 4,277,593,476 5,177,423,804
29.1 COST OF GOODS MANUFACTUREDRaw material consumed (Note: 29.1.1) 1,248,821,483 1,816,595,511 3,065,416,994 4,301,886,481Store consumed 18,072,804 45,580,152 63,652,956 58,668,510Packing material consumed 28,760,697 39,164,791 67,925,488 60,089,170Salaries wages and other benefits (Note: 29.1.2) 99,547,584 184,258,403 283,805,987 264,585,997Repair and maintenance 3,061,268 4,559,154 7,620,422 18,885,043Insurance 3,160,650 3,327,649 6,488,299 6,564,279Fuel and power 146,349,004 281,342,475 427,691,479 423,529,551Depreciation (Note:16.1) 16,545,566 52,738,354 69,283,920 67,452,299Others 2,354,874 5,702,898 8,057,772 21,454,998
1,566,673,930 2,433,269,387 3,999,943,317 5,223,116,328Work in process Opening 13,049,319 25,370,450 38,419,769 38,117,204 Closing (10,848,929) (39,543,906) (50,392,835) (38,419,769)
2,200,390 (14,173,456) (11,973,066) (302,565)
Cost of goods manufactured 1,568,874,320 2,419,095,931 3,987,970,251 5,222,813,763
29.1.1 RAW MATERIAL CONSUMEDOpening stock 44,742,696 200,569,993 245,312,689 185,366,362Purchases 1,280,282,449 1,818,463,532 3,098,745,981 4,420,269,561
1,325,025,145 2,019,033,525 3,344,058,670 4,605,635,923Raw material sold (12,876,710) (72,775,893) (85,652,603) (58,436,753)Less: Closing stock (63,326,952) (129,662,121) (192,989,073) (245,312,689)
1,248,821,483 1,816,595,511 3,065,416,994 4,301,886,481
29.1.2 This includes Rs. 19,736,618 (2011: Rs. 17,594,862) in respect of staff retirement benefits.
30. DISTRIBUTION COSTLocal freight and handling 5,954,497 3,542,078 9,496,575 7,732,748 Commission- local 7,669,437 7,504,188 15,173,625 27,929,790 Export bank charges 220,001 2,362,665 2,582,666 4,048,075 Stamp Duty 462,998 - 462,998 284,490 Forwarding charges 53,511 3,528,162 3,581,673 1,432,568 Others 985,544 1,327,728 2,313,272 4,598,459
15,345,988 18,264,821 33,610,809 46,026,130
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30th, June2012PKR
30th, June2011PKR
PunjabJune-2012
PKR
SindhJune-2012
PKR
34
31. ADMINISTRATIVE EXPENSESDirectors’ remuneration 600,000 1,296,000 1,896,000 1,896,000Staff salaries and other benefits (Note: 31.1) 8,035,688 16,186,538 24,222,226 21,170,831Traveling and conveyance 902,048 4,283,230 5,185,278 3,703,503Legal and professional 3,258,073 4,488,702 7,746,775 7,131,043
Fees and subscription 411,588 460,417 872,005 1,098,708Rent rates and taxes 449,725 24,756 474,481 431,577Electricity, gas and water 860,824 2,207,367 3,068,191 3,120,507Repair and maintenance 344,726 1,695,631 2,040,357 1,438,001Postage, telephone, telegraph and facsimile 1,270,613 1,742,882 3,013,495 2,685,193Printing and stationery 1,183,869 247,740 1,431,609 1,201,522Motor vehicle expenses 2,106,543 - 2,106,543 2,606,947Advertisement expenses 178,280 21,980 200,260 175,161Entertainment expenses 590,259 879,074 1,469,333 1,223,707Charity and donation (Note:31.2) 233,000 - 233,000 58,000Auditors remuneration (Note:31.3) 302,434 619,366 921,800 875,455Bad debts - Provision - - - 164,835Bad debts written off 45,000 - 45,000 -Miscellaneous expenses 101,438 2,667,216 2,768,654 1,518,482Watch and ward 57,000 - 57,000 37,735Newspaper and periodicals 23,182 11,141 34,323 31,075Depreciation (Note: 16.1) 2,978,537 6,957,409 9,935,946 11,022,083
23,932,827 43,789,449 67,722,276 61,590,365
31.1 This includes Rs. 347,156 ( 2011 : Rs.1,605,764) in respect of staff retirement benefits.31.2 No directors or their spouse has any interest in the donees' fund.
31.3 AUDITORS REMUNERATIONAudit fee 250,000 500,000 750,000 750,000Half Yearly review 37,934 75,866 113,800 103,455Review of Code of CorporateGovernance 9,000 27,000 36,000 -Out of pocket 5,500 16,500 22,000 22,000
302,434 619,366 921,800 875,455
32. OTHER OPERATING INCOMEGain on sale of property, plant and equipment 189,378 146,298 335,676 283,753Exchange gain 1,767,490 1,165,036 2,932,526 -Dividend Income - 75,000 75,000 -Gain on forward booking - 1,197,000 1,197,000 8,464,129Payables written off - 1,202,497 1,202,497 2,792,129Scrap sales - - - 100,223Bad debts recovered 1,469,200 - 1,469,200 200,000Gain on sale & lease back - 780,653 780,653 65,054Mark-up received on PLS account 456,775 600,656 1,057,431 8,372Gain on measurement of investmentat fair value - 188,250 188,250 975
3,882,843 5,355,390 9,238,233 11,914,635
33. FINANCE COST/’Banking companies Long term finance - 21,721,754 21,721,754 20,051,040 Short term finance 38,775,590 100,285,311 139,060,901 160,961,515Finance lease obligation - 8,738,202 8,738,202 1,718,765L/C discount charges 2,288,093 5,167,195 7,455,288 11,441,429Interest on WPPF 554,407 457,609 1,012,016 1,128,596Bank charges and commission 1,266,795 1,857,650 3,124,445 9,494,521
42,884,885 138,227,721 181,112,606 204,795,866
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30th, June2012PKR
30th, June2011PKR
PunjabJune-2012
PKR
SindhJune-2012
PKR
35
34. OTHER OPERATING EXPENSESLoss on re-measurement of investment at fair value - - - 124,000 Loss on sale of property, plant and equipment 163,791 20,431 184,222 -Exchange loss on supplier's credit - - - 262,967Worker's welfare fund (Note No. 34.1) - - - -
163,791 20,431 184,222 386,967
34.1 High Court in writ petition bearing number W.P. No. 8763/2011 has decided that the amendments made in the Workers' Welfare Fund Ordinance through Finance Act 2006 and 2008 is unconstitutional and unlawful. Therefore, no provision for workers' welfare fund has been made in the financial statements. There is no taxable income under normal tax regime.
35. TAXATIONCurrent (16,663,946) (26,255,195) (42,919,141) (56,451,228)Prior 51,170 733,125 784,295 (1,929,289)Deferred (Note No. 35.1) - - - 13,862,877
(16,612,776) (25,522,070) (42,134,846) (44,517,640)
35.1 Deferred tax asset amounting to Rs. 54.481 million has not been recognized during the year 2012 as it is not probable that in future taxable profit will be available against which unused tax losses and unused tax credits can be utilized.
36. (LOSS) PER SHARE - BASIC(Loss) after taxation in rupees (311,287,553) (76,839,955)Weighted average number of ordinary shares 17,636,719 17,636,719(Loss) per share in rupees (17.65) (4.36)
There is no diluted effect on loss per share.
37. DETAIL OF TRANSACTIONS WITH ASSOCIATED UNDERTAKINGS The related parties comprise of associated companies, directors and key management personnel. The company in the normal course of business carries out sale and purchase of goods and services transactions with related parties. Nature and description of related party transactions along with monetary value are as follows:-
Nadeem Textile Mills Limited Associate
Purchase of yarn 13,190,350 -Reprocessing income 5,436,850 5,898,668Sale of yarn 4,309,500 25,545,000Purchase of raw material 477,628,629 73,655,478
Nadeem Power Generation (Pvt) Limited Associate
Electricity purchase 167,533,155 152,345,519Loan received 108,189,180 24,152,000
Nadeem International (Pvt) Limited Associate
Reprocessing income - 3,782,247
The related party status of outstanding balances as at June 30, 2012 are included in note 9.6, 12.1 and 12.2.
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30th, June2012PKR
30th, June2011PKR
PunjabJune-2012
PKR
SindhJune-2012
PKR
36
38. PLANT CAPACITY AND ACTUAL PRODUCTIONTotal number of spindle installed 79,656 79,656 Spindles under re-erection/major overhauling 1,368 912 Average numbers of spindle worked 71,918 73,254 Number of shifts worked per day 3 3 Installed capacity of conversion into 20/1 count (kg) 27,091,193 27,091,193 Actual production after conversion into 20/1 count (kg) 18,687,453 21,631,063
40. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURE
The company has exposure to the following risks from its use of financial instruments.(i) Credit risk
(ii) Liquidity risk
(iii) Market risk
The board of directors has overall responsibility for the establishment and oversight of company's risk management framework. The board is also responsible for developing and monitoring the company's risk management policies.
40.1 Credit risk40.1.1 Exposure to credit risk
Credit risk is the risk of financial loss to the company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the trade debts, loans and advances, trade deposits and short term prepayments.
Long term loans and advancesLong term deposits 14,138,515 5,921,374 Trade debts 180,586,836 404,535,217 Loans and advances 2,018,390 1,289,898 Trade deposits and short term prepayments 899,053 899,053 Cash and bank balances 8,252,292 11,520,776
205,895,086 424,166,318
40.1.2 The maximum exposure to credit risk for trade debts at the balance sheet date by geographical region is as follows:-
Domestic 128,099,199 404,535,217 Export 52,487,637 -
180,586,836 404,535,217
The majority of export debtors of the company are situated in Asia.
39. CHIEF EXECUTIVE, DIRECTORS AND EXECUTIVE REMUNERATION
Managerial remuneration 400,000 400,000 864,000 864,000 1,264,000 1,264,000
Remuneration allowances 200,000 200,000 432,000 432,000 632,000 632,000
Retirement benefits - - - - - -
600,000 600,000 1,296,000 1,296,000 1,896,000 1,896,000
Number of persons 1 1 3 3 4 4
The chief executive and two directors are provided with cars maintained by the company and telephone at their residence. The directors have waived their meeting fees.
....
30th, June2012PKR
30th, June2011PKR
CHIEF EXECUTIVE
June 30, 2012
DIRECTORS TOTAL
June 30, 2011 June 30, 2012 June 30, 2011 June 30, 2012 June 30, 2011
37
40.1.3 The maximum exposure to credit risk for trade debts at the balance sheet date by type of the customers is as follows:
Yarn 173,562,365 397,510,746 Waste 6,628,148 6,628,148 Others 396,323 396,323
180,586,836 404,535,217
Not past due 109,094,859 275,230,574 0 - 30 days past due 17,860,114 67,862,990 31 - 90 days past due 10,353,157 20,736,521 90 - 1 year past due 5,665,231 3,007,196 Over one year 55,253,882 56,965,611
198,227,243 423,802,892 Impairment (17,640,407) (19,267,675)
180,586,836 404,535,217
40.1.5 Based on the past experience, sales volume, consideration of financial position, past track records and recoveries, economic conditions of particularly the textile sectors and generally the industry, the company believes that it is prudent to provide trade.
40.1.6 Liquidity riskLiquidity risk is the risk that the company will not be able to meet its financial obligations as they fall due. The company's approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities.
Non - derivativeFinancial liabilities:
Long term financing 187,524,530 376,683,702 61,258,367 (16,867,227) 332,292,562 -
Long term loans from directors 34,175,000 34,175,000 - - 34,175,500 - Finance lease 54,340,956 73,208,070 23,643,846 2,658,735 46,905,489 -
Trade and other payables 340,504,842 340,504,842 340,504,842 - - -
Accrued mark up and interest 224,935,300 224,935,300 224,935,300 - - - Short term borrowings 889,243,347 1,024,129,849 512,064,925 512,064,925 - -
` 1,730,723,975 2,073,636,763 1,162,407,280 497,856,433 413,373,051 -
Non - derivativeFinancial liabilities:Long term financing 192,347,932 375,097,274 61,258,367 (6,070,435) 319,909,342 - Long term loans from directors 6,700,000 6,700,000 - - 6,700,000 -
Finance lease 61,820,834 80,687,948 3,085,352 2,658,735 74,943,861 - Trade and other payables 430,281,229 430,281,229 430,281,229 - - -
Accrued mark up and interest 121,480,567 121,480,567 121,480,567 - - -
Short term borrowings 1,066,975,527 1,206,036,429 603,807,671 602,228,759 - -
` 1,879,606,089 2,220,283,447 1,219,913,186 598,817,059 401,553,203 -
40.1.4 The aging of trade debtors at the close of the balance sheet date is as follows:-
30th, June2012PKR
30th, June2011PKR
June 30, 2012
CarryingAmount
ContractualCash flows
Six monthsor less
Six to twelvemonths
Two to fiveyears
More thanfive years
PKR
June 30, 2011
CarryingAmount
ContractualCash flows
Six monthsor less
Six to twelvemonths
Two to fiveyears
More thanfive years
PKR
38
40.2.1 The contractual cash flows relating to the above financial liabilities have been determined on the basis of mark up rates effective as at June 30. The rates of mark up have been disclosed in relevant notes to these financial statements.
40.2.2 Market risk is the risk that the value of the financial instrument may fluctuate as a result of changes in market interest rates or the market price due to a change in credit rating of the issuer or the instruments, changes in market sentiments, speculative.
40.3.1 Currency riskExposure to currency riskThe company is exposed to currency risk on trade debts, borrowing and import of raw material and stores that are denominated in a currency other than the respective functional currency of the company, primarily in US Dollar and Euro.
US Dollar Euro Others PKR
Trade debts 2012 583,520 - - 52,487,637
Trade debts 2011 - - - -
The following significant exchange rates applied during the year
Average Rates Reporting date Rates
2012 2011 2012 2011
US Dollar 89.95 84.91 94.2 85.9
Euro 122.55 104.33 118.5 104.33
The sensitivity analysis prepared is not necessarily indicative of the effects on profit for the year and liabilities of the company.
40.3.2 Interest rate risk is the risk that the fair value or future cash flows of a financial instruments will fluctuate because of changes in market interest rates. Majority of the interest rate arises from short and long term borrowings from bank.
Fixed rate instruments
Financial assets - -
Financial liabilities 399,399,366 325,033,671
Variable rate instruments
Financial assets 4,647,873 -
Financial liabilities 889,243,347 1,066,975,527
Fair value sensitivity analysis for fixed rate instruments The company does not account for any fixed rate financial assets and liabilities at fair value through profit and
loss. Therefore, a change in interest rates at the reporting date would not affect profit and loss account.
Cash flow sensitivity analysis for variable rate instrumentsA change of 100 basis points in interest rates at the reporting date would have increased / (decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant.
39
Profit and loss Equity
100 bp 100 bp 100 bp 100 bpincrease decrease increase decrease
Cash sensitivity analysis
variable rate instruments 2012 8,892,433 (8,892,433) - -
Cash sensitivity - analysis
variable rate instruments 2011 10,669,755 (10,669,755) - -
40.3.3 Fair value of financial assets and liabilities
The carrying value of all financial instruments reflected in the financial statements approximate to their fair values. Fair value is determined on the basis of objective evidence at each reporting date.
40.3.4 Off balance sheet itemsBank guarantee issued for SNGP 27,767,000 27,767,000 Bank guarantees issued in ordinary course of business 34,411,444 31,767,900 Letters of credit for raw material 154,662,812 32,343,565
The effective rate of interest / mark up for the monetary financial assets and liabilities are mentioned in respective notes to the financial statements.
41. RECLASSIFICATIONCorresponding figures have been rearranged and reclassified to reflect more appropriate presentation of events and transactions of the purposes of comparison. Significant reclassifications made is as following:
42. DATE OF AUTHORIZATION FOR ISSUEThese financial statements were authorized for issue on December 22, 2012 by the Board of Directors of the Company.
43. GENERALThe figure have been rounded off to the nearest Rupees.
PKR
Karachi:Dated: December 22, 2012
Chief Executive Director
11
PATTERN OF SHAREHOLDING AS AT JUNE 30, 2012 (FORM-34)
649248170127
14445121112111121111111111
1101501
10015001
10001150012000125001500016500170001
100001105001185001295001315001335001510001730001855001860001865001
101000111850011310001143500124100013435001
100500
10005000
1000015000200002500030000550007000075000
105000110000190000300000320000340000515000735000860000865000870000
101500011900001315000144000024150003440000
17,49055,820
119,917250,737
85,07654,23870,961
103,49929,121
102,48467,38674,016
104,969212,423185,872297,453318,597339,547
1,029,006731,344858,652860,652869,500
1,014,1101,185,5431,311,3981,437,1482,413,1583,436,512
1,245
PATTERN OF SHAREHOLDING AS AT JUNE 30, 2012ADDITIONAL INFORMATION
BANKS DEVELOPMENT FINANCIAL INSTITUTIONS, NON BANKING FINANCIAL INSTITUTIONS
SUB TOTAL: INSURANCE COMPANIESSTATE LIFE INSURANCE CORP OF PAKISTAN
SUB TOTAL: DIRECTORS, CHIEF EXECUTIVE OFFICER, AND THEIR SPOUSE AND MINOR CHILDREN.
MR. ZAHID MAZHARMR. OMER BIN ZAHIDMR. HASSAN BIN ZAHIDMRS. NAILA ZAHIDMR. SHAHID MAZHARMR. AHMED BIN SHAHIDMRS. GHAZALA SHAHIDMRS. NAUREEN REHAN
SUB TOTAL:
MUDARBAS AND MUTUAL FUNDS SUB TOTAL:
NIT AND ICP
IDBP (ICP[ UNIT)M/S. INVESTMENT CORPORATIONM/S. NATIONAL BANK OF PAKISTAN
SUB TOTAL:
FOREIGN INVESTORS
M/S. COUVILLE TRADING LIMITED.MOHAMED HAFEEDH FAIROOZUDDIN WADHWA SANDM/S. COLOMBY TRADING LIMITED.
SUB TOTAL:
OTHERS128 SECURITIES (PVT) LTD.ZHV. SECURITIES (PVT) LIMITED.MUHAMMAD AHMED NADEEM SECURITIES (SMC-PV)AWJ SECURITIES (SMC-PRIVATE) LIMITED.CAPITAL VISION SECURITIES (PVT) LTD.EXCEL SECURITIES (PVT.) LTDNH SECURITIES (PVT) LTMITED.NH HOLDINGS (PVT) LTDY.S. SECURITIES & SERVICES (PVT) LTD.FIRST CAPITAL EQUITIES LIMITED
SUB TOTAL: INDIVIDUALLOCAL - INDIVIDUALS
SUB TOTAL:
0
23,252 23,252
3,436,512858,652860,652
1,311,3983,850,3061,290,512
402,866519,793
12,530,691
0
600479
2,500
3,579
300
7,473100
7,873
6639
273,3861,361
315120
1,07778
345
6,814
5,064,510
5,064,510
0.00
0.13
71.05
0.00
0.02
0.04
0.04
28.72
Percentage%
Category of Shareholders
G-Total 17,636,719 100.00