Contentsimperialsugars.com/Upload/Financial Reports/ANNUAL REPORT 2012.pdf · Contents Corporate ... Mr. Ahmed Haji Mussa Mr. Asad Ali Ms. Samina Gul ... Ms. Samina Gul Mr. Muhammad

01 | Annual Report 2012

Contents

Corporate Information...................................................................................................................02

Vision & Mission Statement.................................................................................................................03

Notice of the Annual General Meeting..................................................................................................04

Directors’ Report to the Members...........................................................................................05-07

Statement of Compliance with Code of Corporate Governance..................................................08-09

Review Report to the Members on Statement of Compliance

with Best Practices of Code of Corporate Governance............................................................................10

Auditors’ Report to the Members............................................................................................................................11

Balance Sheet........................................................................................................................................12-13

Profit and Loss Account........................................................................................................................14

Cash Flow Statement...........................................................................................................................................15

Statement of Changes in Equity....................................................................................................16

Notes to the Accounts............................................................................................................17-37

Financial Highlights...........................................................................................................................................38

Pattern of Shareholding......................................................................................................................39-41

Form of Proxy

Annual Report 2012 | 02

Board of Directors

Chief Financial Officer

Company Secretary

Audit Committee

HR & Remuneration Committee

Financial Institutions

Auditors

Legal Advisors

Registered Office

Shares Registrar

Production Facilities

Corporate InformationMr. Naveed M. SheikhMr. Waqar Ibn Zahoor BandeyMian Muhammad AliMr. Muhammad Asghar Mr. Ahmed Haji MussaMr. Asad AliMs. Samina Gul

Mr. Muhammad Khurshid

Mr. Abdul Mansoor Khan

Mr. Muhammad AsgharMian Muhammad AliMs. Samina Gul

Mr. Muhammad AsgharMr. Asad AliMs. Samina Gul

National Bank of PakistanFaysal Bank LimitedKASB Bank LimitedThe Bank of PunjabAl-Baraka Bank (Pakistan) LimitedPak Oman Investment Company Limited

Naveed Zafar Ashfaq Jaffery & Co.Chartered Accountants

Ms. Aniqua SheikhAdvocate

Ground Floor, Ismail Aiwan-e-ScienceBuilding, 205 Ferozepur Road Lahore-54600Ph # +92 (42) 3575-8970

+92 (42) 3575-1308Fax # +92 (42) 3576-3247

Drummonds (Pvt.) LimitedSuit # 204 - 206, 2nd Floor,Al Qadir Heights, 1-Babar Block,New Garden Town, LahorePh # +92 (42) 3584-6644/45

Phalia ProjectKarmanwala, Tehsil Phalia Distt. Mandi BahauddinPh # +92 (546) 541-151/54Fax # +92 (546) 541-162

- Chairman- Director/CEO- Director- Director- Director- Director- Director

- Chairman- Member- Member

- Chairman- Member- Member

Mian Chanu ProjectChak # 84/15L, 15 KM Vehari Road Kacha KhooTehsil Mian ChanuDistt. Khanewal Ph # +92 (0652) 553-182Fax # +92 (0652) 660-452


Vision StatementTo exploit our company's potential by diversifying into the entire range of industrial and consumer products that can be derived from Sugar Cane

Mission StatementTo exceed our customers' expectations in quality and delivery on one hand and maximize profit for

the stakeholders of our company on the other hand by continuous cost reduction through

identifying and deploying latest technologies in process and monitoring control systems


Notice of Annual General Meeting

NOTICE is hereby given that the 6th Annual General Meeting of the members of Colony Sugar Mills Limited will be held on Thursday, January 31, 2013, at 10:00 a.m. at the Registered Office at Ismail Aiwan-e-Science Building, 205 Ferozepur Road, Lahore to transact the following business:

1. To receive, consider and adopt the Audited Accounts of the Company for the year ended September 30, 2012 together with the Directors' and Auditors' Reports thereon.

2. To appoint Auditors for the year 2012-13 and to fix their remuneration.

3. Any other business with the permission of the Chair.

By Order of the Board

Company Secretary Lahore January 08, 2013

Notes:-

i. The Share Transfer Books of the Company will remain closed from January 25, 2013 to January 31, 2013 (both days inclusive).

ii. A member entitled to attend and vote at this meeting may appoint another member as his proxy to attend and vote on his/her behalf. The proxy, in order to be effective, must be received at the registered office of the Company duly signed not less than 48 hours before the meeting.

iii. The CDC Account holders/sub-account holders are requested to bring with them their National ID Cards along with the Participant(s) ID Number and their account numbers at the time of attending the Annual General Meeting for identification purpose.

iv. In case of Corporate entity, the Board of directors' resolution/power of attorney with specimen signatures of the nominee shall be produced (unless it has been provided earlier) at the time of the meeting. The nominee shall produce his original CNIC at the time of attending the meeting for identification purpose.

v. Members are requested to notify the change of address immediately, if any.


DIRECTORS’ REPORT TO THE MEMBERSDEAR MEMBERS

We take pleasure to present Company's Annual Report for the Financial Year ended on September 30, 2012 along with the Financial Statements and Auditor's Report thereon.

FINANCIAL PERFORMANCE

Turnover for the year under review raised by 8.33% from last year and reached to Rupees 5,940 Million (2011: Rupees 5,483 Million) whilst the cost of sales stood at Rupees 5,302 Million (2011: Rupees 4,822 Million) bringing gross profit to Rupees 639 Million (2011: Rupees 661 Million). Profit after taxation for the year is Rupees 160 Million (2011: profit Rupees 66 Million). Earnings per share is Rupees 1.61 per share as compared with Rupees 0.66 per share for the last year.

Sugar selling prices remained depressed during the entire year under review. The company's overall profitability is mainly attributed to better performance of our Distillery Operations clubbed with additional revenues from CO2 Operations. The financial costs and inflationary pressure have increased our inputs costs. The financial health will improve further as the company is retiring its long terms debts as per its agreed schedules.

OPERATIONAL PERFORMANCE

During the year under review, the company crushed 46% more sugarcane (2012: 1,073,316 M. Tons) as compared to last year crushing (2011: 732,910 M. Tons) and produced 101,147 M. Tons sugar as compared to 63,873 M. Tons of last year.

Distillery plant produced 35,739,986 liters of ENA, ENA Anhydrous and B-Grade as compared with 25,356,131 liters during the corresponding period of last year.

FUTURE OUTLOOK

The sugar production of your mills improved for the ongoing crushing season mainly attributed to better availability of sugarcane coupled with better recovery. Hence, the operational indicator for the future is satisfactory however financial performance will depend upon a number of external factors. The Management of your company is taking all appropriate measures to plan and manage the challenges foreseeing in the future.

DIVIDEND

Keeping in view current depressed economic scenario and long term debt obligations due in the current year, directors didn't recommend dividend for the year ended September 30, 2012.

STATEMENT OF ETHICS AND BUSINESS PRACTICES

Honesty, integrity and strong commitment to high standards of ethical, moral and lawful conducts are among the most important traditions of Colony Sugar Mills Ltd. This dedication is critical to meet our commitment to our shareholders, customers, suppliers and employees.

CORPORATE SOCIAL RESPONSIBILITY

We actively seek opportunities to contribute to the communities in which we do business, and to improve the environment that sustains us all. Our main CSR focuses are Education, health care and community building.

AUDIT COMMITTEE

The Board of Directors, in compliance with the Code of Corporate Governance, has established an Audit Committee. This step has ensured the strict compliance of internal controls so as to safeguard the interests of the company. The committee reviews the final and interim financial statements.


CORPORATE GOVERNANCE COMPLIANCE

The compliance with the best practices of Code of Corporate Governance provides comfort to the Board. Therefore, the management ensures that all requirements of the code of corporate governance are complied with. The statement of compliance with the best practices of Code of Corporate Governance is annexed.

STATEMENT ON CORPORATE AND FINANCIAL REPORTING FRAMEWORK

In compliance with the Code of Corporate Governance, we give below statements on Corporate and Financial Reporting Framework:

The financial statements prepared by the management of the company present fairly its state of affairs, the results of its operations, cash flows and changes in equity.

The company has maintained proper books of accounts as per statutory requirements.

Appropriate accounting policies have been consistently applied in preparation of financial statements and accounting estimates are based on reasonable and prudent judgment.

The Company has prepared a "Code of Conduct" and has ensured that appropriate steps have been taken to disseminate it throughout the company along with its supporting policies and procedures.

The International Accounting Standards, as applicable in Pakistan, have been followed in preparation of financial statements.

The system of internal control is sound in design and has been effectively implemented and monitored.

There are no significant doubts upon the company's ability to continue as a going concern.

There has been no departure from the best practices of corporate governance, as detailed in the listing regulations.

Key operating and financial data since incorporation is annexed in summarize form.

Directors have not recommended dividend in view of depressed economic and financial scenario.

Information about outstanding taxes and other government levies are given in related note(s) to the accounts.

The company operates a gratuity fund scheme for all employees. The net value of investment in their respective accounts is given in related note(s) to the accounts.

All material information, as described in clause (xx) of the Code is disseminated to the Stock Exchange and Securities and Exchange Commission of Pakistan in a timely fashion.

The company has complied with requirements as stipulated in clause 35 (x) relating to related party transactions.

The Directors are aware of their fiduciary responsibilities and orientations courses were arranged in the past in-house and will be arranged in future if so required.

The directors, CEO, CFO, Company Secretary and their spouses and minor children have made no trading in the company's share during the year. The number of shares, if any, held by them is annexed.


BOARD MEETINGS

During the year under review four (04) meetings of the Board of Directors were held. Participation of Directors is as follows: -

Names of Directors Attendance

Mr. Naveed M. Sheikh 2Mr. Waqar Ibn Zahoor Bandey 4Mr. Ahmed Haji Mussa 2Mr. Muhammad Asghar 4Mr. Asad Ali 4Mian Muhammad Ali 4Ms. Samina Gul 4

*The Board granted leave of absence to the directors who could not attend the Meeting.

Pursuant to Section 218 of the Companies Ordinance 1984, it is hereby notified that during the year under review, Board of Directors of the Company appointed Ms. Samina Gul as whole time director of the Company and approved her remuneration as disclosed in Note # 26 of the accounts and awarded other facilities like gratuity, leaves etc., as per company's policy. Mr. Naveed M. Sheikh is no more working as whole time director.

During the year under review five (05) meetings of the Audit Committee were held. Participation of Members is as follows: -

Names of Directors Attendance

Mr. Muhammad Asghar 5Mian Muhammad Ali 5Ms. Samina Gul 5

EXTERNAL AUDITOR

The retiring auditors M/s Naveed Zafar Ashfaq Jaffery & Co., Chartered Accountants, being eligible, offer themselves for re-appointment. The audit committee has recommended M/s Naveed Zafar Ashfaq Jaffery & Co., as auditors of the company for the ensuing financial year subject to fulfilment of CCG requirements.

The external auditors have been given satisfactory rating under the Quality Control Review Program of the Institute of Chartered Accountants of Pakistan (ICAP). They have further confirmed that their firm is in compliance with International Federation of Accountants' (IFAC) guidelines on the Code of Ethics as adopted by the ICAP. The external auditors have not been appointed to provide other services except in accordance with the listing regulations and they have confirmed that they have observed IFAC guidelines in this respect.

PATTERN OF SHAREHOLDING

The pattern of shareholding under section 236 (d) and information under clause XVI (j) of the Code of Corporate Governance as on September 30, 2012 are annexed.

ACKNOWLEDGEMENT

Board is thankful to the valuable Members, Banks and Government departments for their trust, persistent support and patronage and would like to place on record its gratitude to all the Growers and Employees of the company for their contribution, dedication and hard work.

For and on behalf of the Board

Lahore Waqar Ibn Zahoor BandeyJanuary 08, 2013 Director/CEO


The statement is being presented to comply with the Code of Corporate Governance contained in the Regulation # 35 of the listing regulation of Karachi Stock Exchange (Guarantee) Limited 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 company encourages representation of independent non-executive directors and directors representing minority interest on its Board of Directors. At present, the Board includes five 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 tax payers and non of them has defaulted in payment of any loan to a banking company, DFI, NBFI or, being a member of a stock exchange, has been declared as a defaulter by that stock exchange.

4. No casual vacancy occurred during the period under review.

5. The company has prepared a "Code of Conduct" and has ensured that appropriate steps have been taken to disseminate it throughout the company along with its supporting policies and procedures.

6. The Board has developed a vision/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 the employment of the CEO and other executive and non-executive directors, have been taken by the Board.

8. The meetings of the Board were presided over by the Chairman and, in his absence, by a director elected by the Board for this purpose and 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. The Directors are aware of their fiduciary responsibilities and orientations courses were arranged in the past in-house and will be arranged, in future if so required.

10. The Board has approved the appointment of CFO, Company Secretary and Head of Internal Auditor, including their remuneration and terms and conditions of the employment.

11. The directors' report for the year 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 CEO and CFO before approval of the board.

Statement of Compl iance with the Code ofCorporate Governance For The Year Ended September 30, 2012


13. The directors, CEO and executives don't hold any interest in the shares of the company other than that disclosed in the pattern of shareholding.

14. The company has complied with the corporate and financial reporting requirements of the code.

15. The Board has formed an audit committee. It comprises of three members, two of them are non-executive Directors and the Chairman is a non-executive director.

16. The meetings of the audit committee were held at least once every quarter prior to the approval of interim and final results of the company as required by the code. The term of reference of the committee have been formed and advised to the committee for compliance.

17. The Board has formed an HR and Remuneration Committee. It comprises of three members, two of them are non-executive directors.

18. The Board has set up an internal audit function and taking appropriate measures to make it effective.

19. The statutory auditors of the company have confirmed that they have been given a satisfactory rating under the Quality Control Review program 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 the 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(s).

22. Material/Price sensitive information has been disseminated among all market participants at once through stock exchange(s).

23. The company has complied with requirements as stipulated in Code relating to related party transactions.

24. We confirm that all other material principles contained in the code have been complied with.

For and on behalf of the Board

LahoreJanuary 08, 2013 Waqar Ibn Zahoor Bandey

Director/CEO


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 COLONY SUGAR MILLS LIMITED (”the Company”) for the year ended September 30, 2012 to comply with the Listing Regulations of Karachi Stock Exchange 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 systems sufficient to plan the audit and develop an effective audit approach. We are not required to consider whether the Board’s statement on internal control covers all risks and controls, or to form an opinion on the effectiveness of such internal controls, the Company’s corporate governance procedures and risks.

Further, Listing Regulations of The Karachi Stock Exchange Limited 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 or not.

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 respects, with the best practices contained in the Code of Corporate Governance, as applicable to the Company for the year ended September 30, 2012.

Lahore: NAVEED ZAFAR ASHFAQ JAFFERY & CO.January 08, 2013 Chartered Accountants

Engagement Partner: S. Zafar Shah

Review Report to the Members on Statement of Compliancewith Best Practices of Code of Corporate Governance


We have audited the annexed balance sheet of COLONY SUGAR MILLS LIMITED (”the Company”) as at September 30, 2012 and the related profit and loss account, 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 explanation which, to the best of our knowledge and belief, werenecessary for the purposes of our audit.

It is the responsibility of the Company’s management to establish and maintain a system of internalcontrol, and prepare and present the above said statements in conformity with the approved accountingstandards and the requirements of the Company’s Ordinance, 1984. Our responsibility is to express anopinion on these statements based on our audit.

We conducted our audit in accordance with the auditing standards as applicable in Pakistan. Thesestandards require that we plan and perform the audit to obtain reasonable assurance about whether theabove 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 includesassessing the accounting policies and significant estimates made by management, as well as, evaluatingthe overall presentation of the above said statements. We believe that our audit provides a reasonablebasis 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, investment 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, 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 September 30, 2012 and of the profit, its comprehensive income, its cash flows and changes in equity 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).

Lahore: NAVEED ZAFAR ASHFAQ JAFFERY & CO.January 08, 2013 Chartered Accountants

Engagement Partner: S. Zafar Shah

Auditors’ Report to the Members


Balance SheetAs at September 30, 2012

EQUITY AND LIABILITIES

SHARE CAPITAL AND RESERVES

Authorized Capital100,000,000 (2011: 100,000,000)

ordinary shares of Rupees 10/- each 1,000,000 1,000,000

Issued, subscribed and paid up capital 3 990,200 990,200Unappropriated profit 694,490 534,743

Total equity 1,684,690 1,524,943

NON-CURRENT LIABILITIES

Long term finances 4 729,613 1,097,528Staff retirement benefits 5 22,535 12,943Deferred income tax 6 - 5,000

752,148 1,115,471

CURRENT LIABILITIES

Trade and other payables 7 757,886 527,388Accrued finance cost 8 101,395 121,221Short term borrowings - secured 9 1,665,152 1,625,102Current portion of long term finances 270,763 137,500Provision for taxation 10 - 35,269

2,795,196 2,446,480

CONTINGENCIES AND COMMITMENTS 11 - -

5,232,034 5,086,894

The annexed notes from 1 to 32 form an integral part of these financial statements.

Note 2012 2011 (Rupees in thousand)

Chief Executive Officer


Balance SheetAs at September 30, 2012

PROPERTY AND ASSETS

NON-CURRENT ASSETS

Property, plant and equipment 12 3,380,898 3,515,925

CURRENT ASSETS

Stores, spares and loose tools 13 177,389 135,899Stocks in trade 14 1,226,290 896,981Trade debts 15 207,732 324,547Advances, deposits, prepayments and other receivables 16 227,952 196,583Cash and bank balances 17 11,773 16,959

1,851,136 1,570,969

5,232,034 5,086,894


Director


Profit and Loss AccountFor the year ended September 30, 2012

Sales - net 18 5,940,236 5,483,297Cost of sales 19 5,301,598 4,822,065

Gross profit 638,638 661,232

Administrative expenses 20 112,091 102,724Distribution and marketing expenses 21 36,088 30,240

148,179 132,964

Other operating income 22 10,765 5,336

Operating profit 501,224 533,604

Finance cost 23 367,700 406,960Worker's profit participation fund 6,676 6,332

374,376 413,292

Profit before taxation 126,848 120,312

Provision for taxation 24 32,899 (54,601)

Profit after taxation 159,747 65,711

OTHER COMPREHENSIVE INCOME

Other comprehensive income-net of tax - -

Total comprehensive income for the year 159,747 65,711

Earnings per share - basic & diluted - Rupees 25 1.61 0.66



Chief Executive Officer Director


Cash Flow StatementFor the year ended September 30, 2012

CASH FLOWS FROM OPERATING ACTIVITIES

Profit before taxation 126,848 120,312Adjustments for non-cash and other items:

Finance cost 367,700 406,960Depreciation of property, plant and equipment 164,986 161,828Provision for staff retirement benefits - gratuity 12,627 6,906Provision for contribution to workers' profit participation fund 6,676 6,332Other operating income (7,667) -Gain on sale of operating fixed assets (3,098) -Reversal of deferred income tax 348 -

541,572 582,026

Cash generated from operating activitiesbefore working capital changes 668,420 702,338Adjustments for working capital changes:(Increase)/decrease in current assets:

Stores, spares and loose tools (41,490) 15,320Stocks-in-trade (329,309) (69,492)Trade debts 116,815 (181,635)Advances, deposits, prepayments and other receivables 16,521 35,659

Increase/ (decrease) in current liabilities: Trade and other payables 237,822 (70,408)

Net working capital changes 359 (270,556)

Finance cost paid (387,526) (405,232)Staff retirement benefits - gratuity paid (3,035) (2,023)Workers' profit participation fund paid (6,332) (6,956)Income tax paid (55,607) (22,120)

(452,500) (436,331)

Net cash generated from / (used in) operating activities 216,279 (4,549)

CASH FLOWS FROM INVESTING ACTIVITIES

Fixed capital expenditure (35,716) (655,593)Capital work in progress - 321,484Sale proceeds from sale of operating fixed assets 8,855 -

Net cash used in investing activities (26,861) (334,109)

CASH FLOWS FROM FINANCING ACTIVITIES

Long term finances (234,654) (205,001)Short term borrowings 40,050 523,042

Net cash (used in) / generated financing activities (194,604) 318,041

NET DECREASE IN CASH AND CASH EQUIVALENTS (5,186) (20,617)CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR 16,959 37,576

CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 11,773 16,959





Statement of Changes in EquityFor the year ended September 30, 2012

Balance as on September 30, 2010 990,200 469,032 1,459,232

Total comprehensive income for the year - 65,711 65,711


Total comprehensive income for the year - 159,747 159,747



ParticularsShare

CapitalUnappropriated

profitTotal

equity

(Rupees in thousand)


1. LEGAL STATUS AND NATURE OF BUSINESS

1.1 Colony Sugar Mills Limited ("the Company") was incorporated in Pakistan on May 09, 2007 under the Companies Ordinance, 1984. The shares of the Company are quoted on Karachi Stock Exchange Limited. The Company's registered office is situated in Lahore and its manufacturing facilities are located at Tehsil Phalia, District Mandi Bahauddin and Tehsil Mian Channu, District Khanewal. The Company is engaged in manufacturing and sale of white refined sugar and ethanol and by products.

1.2 Seasonality of operation

The Company is inter-alia, engaged in manufacturing of sugar for which the season begins in November and ends in April. Therefore, majority of expenses are incurred and production activities are undertaken in first half of the company's financial year.

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies adopted in the preparation of these financial statements are set out hereunder. These policies have been consistently applied to year presented, unless otherwise stated.

2.1 BASIS OF PREPARATION

a) STATEMENT OF COMPLIANCE

These financial statements have been prepared in accordance with the requirements of the Companies Ordinance, 1984 (the Ordinance) and the directives issued by the Securities and Exchange Commission of Pakistan (SECP) and approved accounting standards as applicable in Pakistan. Approved accounting standards comprise of such International Accounting Standards (IASs) / International Financial Reporting Standards (IFRSs) as notified under the provisions of the Ordinance. Wherever, the requirements of the Ordinance or the directives issued by the SECP differ with the requirements of these standards, the requirements of the Ordinance or the requirements of the said directives take precedence.

b) Accounting convention

These financial statements have been prepared under the "historical cost convention" using, except for cash flow statement, accrual basis of accounting.

c) Critical accounting estimates and judgments

The preparation of financial statements in conformity with International Accounting Standards/ International Financial Reporting Standards requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about 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. Revisions to accounting estimates are recognized in the period in which the estimates are revised.

Significant areas requiring the use of management estimates in these financial statements relate to the useful life of depreciable assets, taxation, provision for doubtful receivables and slow moving inventory. However, assumptions and judgments made by management in the application of accounting policies that have significant effect on the financial statements are not expected


Notes to the Financial StatementsFor the year ended September 30, 2012


to result in material adjustment to the carrying amounts of assets and liabilities in the next year.

d) New and revised standards, amendments and interpretations to the published approved accounting standards

During the year, the following standards, amendments to standards and interpretations including amendments to interpretations became effective, however, the application of these amendments and interpretations did not have material impact on the financial statements of the Company.

IAS 1 Presentation of financial statements (Amendments) January 1, 2011IAS 12 Income taxes (Amendments) January 1, 2012IAS 24 Related party disclosures (Revised) January 1, 2011IAS 34 Interim Financial Reporting (Amendments) January 1, 2011IFRS 7 Financial instruments: Disclosures (Amendments) July 1, 2011

The management anticipates that adoption of above standards, amendments and interpretations will have no material impact on the Company's financial statements other than certain additional disclosures.

e) Standards, amendments and interpretations to the published approved accounting standards not yet effective

The following standards, amendments and interpretations are effective for accounting periods, beginning on or after the date mentioned against each of them. These standards, amendments and interpretations are either not relevant to the Company's operations or are not expected to have significant impact on the Company's financial statements other than certain additional disclosures.

IAS 1 Presentation of financial statements (Amendments) January 1, 2013IAS 19 Employee benefits ( Amendments) January 1, 2013IAS 27 Separate Financial statements (Revised) January 1, 2013IAS 28 Investments in Associated & Joint Venture (Revised) January 1, 2013IFRS 9 Financial instruments January 1, 2013IAS 16 Property, plant and equipment (Amendments) January 1, 2013IFRS 11 Joint arrangements January 1, 2013IFRS 12 Disclosure of interests in other entities January 1, 2013IFRS 13 Fair value measurement January 1, 2013

On 17 May 2012, IASB issued Annual Improvements to IFRSs: 2009-2011 Cycle, incorporating amendments to five IFRSs more specifically in IAS 1 'presentation of Financial Statements' and IAS 32 'Financial Instruments: Presentation, that are considered relevant to the Company's financial statements. These amendments are effective for annual periods beginning on or after 01 January 2013. These amendments are unlikely to have a significant impact on the Company financial statements and have therefore not been analyzed in detail.

f) Functional and presentation currency

The financial statements are presented in Pak Rupees, which is the Company's functional and presentation currency.

2.2 Staff retirement benefits

The Company operates an un-funded gratuity scheme for all employees with qualifying service period of two years. Provisions are made annually to cover the obligations under the scheme on the basis of an actuarial valuation. The most recent valuation was carried out as at 30th September 2012 usingthe "Projected unit credit method".

Effective date ( annual periods beginning on or after)

Effective date ( annual periods beginning on or after)


The amount recognized in balance sheet represents the present value of the defined benefit obligation as on 30th September, 2012 as adjusted for unrecognized actuarial gains and losses.

2.3 Taxation

CurrentProvision for taxation is based on taxable income for the year determined in accordance with the prevailing law for taxation of income. The charge for current tax is calculated using prevailing tax rates or tax rates expected to apply the profit for the year if enacted. The charge for the current tax also includes tax credits and tax rebates available, if any.

DeferredDeferred tax liability is accounted for using the balance sheet liability method in respect of all taxable temporary differences at the balance sheet date arising from difference between the carrying amount of the assets and liabilities in the financial statements and corresponding tax bases used in the computation of taxable profit. Deferred tax assets are generally recognized for all deductible temporary differences, unused tax losses and tax credits to that extent it is probable that taxable profit will be available in future against which the deductible temporary differences, unused tax losses and tax credits can be utilized.

Deferred tax is calculated at the rates that are expected to apply to the period when the differences reverse based on tax rates that have been enacted or substantively enacted by balance sheet date. Deferred tax is charged or credited in the income statement, except in the case of items credited or charged to equity in which case it is included in other comprehensive income.

2.4 Property, plant and equipment

Property, plant and equipment except freehold land are stated at cost less accumulated depreciation and impairment loss, if any. Freehold land is stated at cost.

Depreciation is charged by applying the reducing balance method over its estimated useful life at the rates specified in note 12.

Depreciation is charged on additions during the year from the month in which assets become available for use while no depreciation is charged from the month of deletion/disposal.

The assets residual value and useful lives are reviewed to ensure that the methods and period of depreciation charged during the year are consistent with the expected pattern of economic benefits from the assets. Appropriate adjustments are made if the impact of depreciation is significant.

Normal repairs are charged to income as and when incurred. Major overhauling, renovations, rehabilitation, renewals and improvements are capitalized and assets so replaced, if any, are retired.

Gains and losses on disposal of fixed assets are taken to profit and loss account.

2.5 Capital work in progress

Capital work in progress is stated at cost less any identified impairment loss. All expenditure connected with specific assets incurred during installation and construction period are carried under capital work in progress. These are transferred to specific assets as and when these assets are available for use.

2.6 Stores, spares and loose tools

These are valued at lower of cost and net realizable value. Cost is calculated using moving average method except for items in transit which are valued at cost comprising invoice value plus other charges paid thereon till the balance sheet date. Provision is made against obsolete items and slow moving stores and spares based on management's estimate.


2.7 Stocks-in-trade

Stock of raw materials, work-in-process and finished goods, except for those in transit are valued principally at the lower of weighted average cost and net realizable value. Cost of work-in-process and finished goods comprises cost of direct materials, labour and appropriate manufacturing overheads. Cost of own produced molasses, a by product, is determined on the basis of monthly average cost of molasses purchased from third parties.

Stock of raw material and finished goods purchased for sale/process are valued at weighted average cost.

Materials in transit are stated at cost comprising invoice values plus other charges paid thereon.

Net realizable value signifies the estimated selling price in the ordinary course of business less costs necessary to be incurred in order to make a sale. Provision is made in the financial statements for obsolete and slow moving stock in trade based on management's estimate.

2.8 Financial Instruments

All the financial assets and financial liabilities are recognized at the time when the Company becomes a party to the contractual provisions of the instruments and are remeasured at fair value. Any gain/loss on de-recognition and on remeasurement of such financial instruments other than investments available for sale, is included in the profit/loss for the period in which it arises.

a) Trade debts and other receivables

Trade debts and other receivables are carried at original invoice amount less an estimate made for doubtful debt balances based on review of all outstanding amounts at the year end. Bad debts are written off when identified.

b) Cash and cash equivalents

Cash and cash equivalents comprise of cash in hand and at banks on current, saving and deposit accounts and other short term highly liquid instruments that are readily convertible into known amount of cash and which are subject to insignificant risk of changes in values.

c) Borrowings

Loans and borrowings are recorded at the proceeds received. Financial cost is accounted for on the accrual basis and is reported under accrued finance cost to the extent of unpaid. Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. All other borrowing costs are charged to income in the period in which these are incurred.

d) Trade and other payables

Liabilities 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.

e) Provisions

Provisions are recognized when the Company has a legal and constructive obligation as a result of past events and it is probable that an outflow of resources will be required to settle these obligations and a reliable estimate of the amounts can be made.


2.9 Impairment

a) Financial assets

A financial asset is considered to be impaired if objective evidence indicate that one or more events had a negative effect on the estimated future cash flow of that asset.

An impairment loss in respect of a financial asset measured at amortized cost is calculated as a difference between its carrying amount and the present value of estimated future cash flows discounted at the original effective interest rate. An impairment loss in respect of available for sale financial asset is calculated by reference to its current fair value.

Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risks characteristics.

b) Non-Financial assets

The carrying amounts of the Company's assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If such indication exists, the recoverable amount of such asset is estimated. An impairment loss is recognized wherever the carrying amount of the asset exceeds its recoverable amount. Impairment losses are recognized in profit and loss account. A previously recognized impairment loss is reversed only if there has been a change in the estimates used to determine the asset's recoverable amount since the last impairment loss was recognized. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the assets in prior years. Such reversal is recognized in profit and loss account.

2.10 Off Setting of financial assets and financial liabilities

Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet, when there is a legally enforceable right to set off the recognized amounts and the Company intends to either settle on net basis or to realize the asset and settle the liability simultaneously. Corresponding income on assets and charge on liability is also offset.

2.11 Revenue recognition

Revenue from sales is recognized when significant risks and rewards of ownership have been transferred to the customer such as dispatch/delivery of goods at fair consideration received or receivable.

Return on deposits is accrued on a time proportion basis by reference to the principal outstanding and the applicable rate of return.

2.12 Related party transactions

Transactions between the Company and a related party are measured at arm’s length rates determined in accordance with the Comparable Uncontrolled Price Method.

2.13 Foreign currency translations

Transactions in foreign currency are accounted for in Pak rupees at the rates of exchange prevailing at the date of transaction. Monetary assets and liabilities in foreign currencies are translated at rates of exchange prevailing at the balance sheet date and in case of forward exchange contracts at the committed rates. Gains or losses on exchange are charged to income.

2.14 Segment reporting

Segment reporting is based on the operating (business) segments of the Company. An operating segment is a component of the Company that engages in business activities from which it may earn


2012 2011 (Rupees in thousand)

3 ISSUED, SUBSCRIBED AND PAID UP CAPITAL

64,020,000 (2011: 64,020,000) Ordinary sharesof Rupees 10 each fully paid in cash 640,200 640,200

35,000,000 (2011: 35,000,000) Ordinary sharesof Rupees 10 each issued as fully paidfor consideration other than cash 350,000 350,000

990,200 990,200

revenues and incur expenses, including revenues and expenses that relates to the transactions with any of the Company's other components. An operating segment's operating results are reviewed regularly by the Chief executive officer to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available.

Segment results that are directly attributable to a segment as well as those that can be allocated on a reasonable basis. Those income, expenses, assets, liabilities and other balances which can not be allocated to a particular segment on a reasonable basis are reported as unallocated.

The Company has two reportable business segments. Sugar (white refine sugar), ethanol and its by products.

Transaction among the business segments are recorded at arm's length prices using admissible valuation methods. Inter segment sales and purchases are eliminated from the total figures.

2.15 Contingencies

The Company has disclosed contingent liabilities for the pending litigation and claims against the company based on its judgment and the advice of the legal advisors for the estimated financial outcome. The actual outcome of these litigations and claims can have an effect on the carrying amounts of the liabilities recognized at the balance sheet date. However, based on the best judgment of the Company and its legal advisors, the likely outcome of these litigations and claims is remote and there is no need to recognize any liability at the balance sheet date.

2.16 Allocation of segment expenses

All identifiable expenses are directly attributed to the respective segments. The jointly incurred expenses of sugar and allied segments are allocated on the basis of segment revenues.

2.17 Dividends and other appropriations

Dividend distribution to the Company's shareholders is recognized in the company's financial statements in the period in which the dividends are declared and other appropriations are recognized in the period in which these are approved by the Board of Directors.

4 LONG TERM FINANCES

Long term finance from commercial banks - SecuredThe Bank of Punjab 4.1 287,500 383,333Faysal Bank Limited 4.2 87,500 137,500KASB Bank Limited - DF I & II 4.3 159,930 223,749Pak Oman Investment Company Limited 4.4 68,750 93,750The Bank of Punjab 4.5 106,971 -

710,651 838,332Loan from related parties - SecuredMusharika-I - 87,626Musharika-II 4.6 139,725 309,070

139,725 396,696Others - unsecured 4.7 150,000 -

1,000,376 1,235,028

Less: Current portion shown under current liabilities- Long term finances - secured (270,763) (137,500)

729,613 1,097,528



4.1 This represents term finance facility obtained from the Bank of Punjab, as of 30 September 2012 only six semi annual installments remained outstanding. It carries mark up at the rate of average 3 month KIBOR plus 195 bps (2011: 3 month KIBOR plus 195 bps) per annum, with 11% floor and no cap. It is secured by way of 1st exclusive charge over present and future current and fixed assets of the Company with 25% margin and personal guarantee of a sponsor director.

4.2 This represents term finance facility of Rupees 250 Million obtained from Faysal Bank Limited , as of 30 September 2012 only 3.5 semi annual installments remained outstanding. It carries mark up at the rate of 6 month average KIBOR plus 300 bps (2011: 6 month average KIBOR plus 300 bps) per annum. It is secured by way of 1st pari passu charge on all present and future fixed assets of the Company and personal guarantee of a sponsor director.

4.3 This represents demand finance facility (DF-I) of Rupees 80 million obtained from KASB Bank Limited , as of 30 September 2012 only seven monthly installments remained outstanding. It carries mark up at the rate of 6 month KIBOR plus 2.5% (2011: 6 month KIBOR plus 2.5%) per annum. It is secured by way of ranking charge over fixed assets of the Company and personal guarantee of a sponsor director.

This represents demand finance facility (DF-II) of Rupees 210 million obtained from KASB Bank Limited, as of 30 September 2012 only eleven quarterly installments remained outstanding. It carries mark up at the rate of 6 month KIBOR plus 2.5% (2011: 6 month plus 2.5%) per annum. It is secured by way of ranking charge over fixed assets of the Company and personal guarantee of a sponsor director.

4.4 This represents term finance facility of Rupees 100 Million obtained from PAK Oman Investment Company Limited, as of 30 September 2012 only eleven quarterly installments remained outstanding. It carries mark up at the rate of 3 months average KIBOR plus 3.25% (2011: 3 month average KIBOR plus 3.25%) per annum. It is secured by way of personal guarantee and property located at Mouza Theter, Lahore of a sponsor director.

4.5 This represents the partial disbursement of fresh loan of Rupees 247 million extended by Bank of Punjab. It carries mark up at the rate of average 3 month Kibor plus 300 bps per annum. The loan will be used to repay the musharika finance stated in note 4.6. It is secured against existing charges as stated in note 4.1.

4.6 This represents a long term musharika based loan extended by Colony Industries (Private) Limited (CIL), as of 30 September 2012 outstanding balance will be repaid by obtainting disbursement of fresh loan as of equivalent amount and rate of markup stated in note 4.5.

4.7 This represents the loan extended from a commercial bank to a sponsor director and he re-lent to the company at same mark up rate of 3 month Kibor plus 1.5 % per annum charged by the lending bank. It will be paid in lumsum in the month of November 2014 to the bank.



5 STAFF RETIREMENT BENEFITS - Gratuity

Staff gratuity payable 5.1 22,535 12,943

22,535 12,943

5.1 Reconciliation of payable to defined benefit plan:

The amounts recognized in the balance sheetare as follows:Present value of defined benefitobligation (PVDBO) 5.2 28,738 15,175Add: Unrecognized net actuarial gains (4,575) 210Less: Unrecognized Transitional Liability 5.5 (1,628) (2,442)

22,535 12,943

5.2 Movement in Present value of defined benefit obligation:

Opening balance of PVDBO as at October 01, 15,175 11,106Add:Service cost recognized during the year 9,916 4,704Interest cost for the year 1,897 1,388

26,988 17,198

Less:Benefits paid during the year (3,035) (2,023)Actuarial loss on PVDBO 4,785 -

1,750 (2,023)

Closing balance of PVDBO as at September 30, 28,738 15,175

5.3 The principal assumption used in the actuarial valuation are as follows:

Discount rate per annum 11.5% 12.5%Expected rate of eligible salary increase per annum 10.5% 11.5%Expected average remaining working life of employees 11 Years 11 Years

5.4 Charge to Profit & Loss Account for the year is as follows:

Current service cost 9,916 4,704Interest cost 1,897 1,388Liability charged due to amortizationof transitional liability 5.5 814 814

12,627 6,906

5.5 Amortization of Transitional Liability is made up as follows:

Transitional Liability under IAS-19 2,442 3,256Liability reflected as per Previous Accounting Policy - -

Addition in Liability under IAS-19 2,442 3,256Less: Amortization for the period 5.4 (814) (814)

1,628 2,442

As per provisions of IAS-19, the additional liability resulting from the application of IAS-19 i.e. 4.070 million can be recognized immediately or amortized over the maximum period of 5 years. The Company has adopted to amortize this additional liability over the period of 5 years.

6 DEFERRED INCOME TAX

Deferred income tax comprises of the following temporary differences:Deferred tax liability on taxable temporarydifference in respect of:

Accelerated tax depreciation 314,051 221,281Deferred tax on deductible temporarydifference in respect of:Available tax losses (729,149) (213,864)Provision for gratuity (5,839) (2,417)

(420,937) 5,000Less:Deferred tax asset not recognized 420,937 -

- 5,000

Deferred tax asset has not been recognized as a matter of prudence as its recoverability is not expected in near future with reasonable certainty.

7 TRADE AND OTHER PAYABLES

Creditors 306,024 369,992Advances from customers 397,161 101,515Accrued liabilities 30,821 40,128Withholding tax payable 427 2,104Sales tax payable 16,359 6,011Security deposits 334 235Worker's profit participation fund 7.1 6,676 6,332Other payables 84 1,071

757,886 527,388




7.1 Worker's profit participation fund (WPPF)

Balance as on October 01, 6,332 6,956Allocation for the year 6,676 6,332

13,008 13,288

Amount paid during the year (6,332) (6,956)

Balance as on September 30, 6,676 6,332

8 ACCRUED FINANCE COST

Accrued finance cost on:- Long term finances 47,459 63,116- Short term borrowings 53,936 58,105

101,395 121,221

9 SHORT TERM BORROWINGS - SECURED

From Commercial Banks 1,665,152 1,625,102

These represent cash finance, running finance, export refinance, murabaha/bi-salam obtained from various banking companies and are subject to mark up ranging from 11 % to 16.73 % per annum (2011: 9 % to 17.30 %). These are secured against pledge/hypothecation of stock-in-trade, charge on current assets, demand promisory note, Company's performance guarantee and personal guarantee of a sponsor director.

The aggregated amount of unavailed credit limits as at September 30, 2012 is Rupees 109.848 million (2011: Rupees 374.889 million).

10 PROVISION FOR TAXATION

Opening Balance 35,269 2,788Add:Provision for Taxation-current 15,425 54,601Reversal of prior year income tax (42,976) -

7,718 57,389Less: Adjusted against Advance Tax 16.2 (7,718) (22,120)

- 35,269

11 CONTINGENCIES AND COMMITMENTS

11.1 Commitments

Nil (2011: Nil)

11.2 Contingencies

Guarantees given to sui northern gas pipelines limited by bank on behalf of the company outstanding as at September 30, 2012 were for Rupees 46.4 million ( 2011: Rupees 46.4 million).

12 PROPERTY, PLANT AND EQUIPMENT

Operating fixed assets 12.1 3,380,898 3,515,925

3,380,898 3,515,925


At October 01, 2010Cost 310,514 1,462,126 1,624,675 30,000 39,941 3,467,256 Accumulated depreciation - 200,376 222,221 6,247 16,252 445,096

Net book value 310,514 1,261,750 1,402,454 23,753 23,689 3,022,160

Year ended September 30, 2011Opening net book value 310,514 1,261,750 1,402,454 23,753 23,689 3,022,160 Additions - 6,340 645,215 3,908 130 655,593 Disposals: Cost - - - - - - Accumulated depreciation - - - - - -

- - - - - - Depreciation charge - 63,246 91,310 2,530 4,742 161,828

Closing net book value 310,514 1,204,844 1,956,359 25,131 19,077 3,515,925

At September 30, 2011Cost 310,514 1,468,466 2,269,891 33,907 40,072 4,122,850 Accumulated depreciation - 263,622 313,532 8,776 20,995 606,925

Net book value 310,514 1,204,844 1,956,359 25,131 19,077 3,515,925

Year ended September 30, 2012Opening net book value 310,514 1,204,844 1,956,359 25,131 19,077 3,515,925 Additions 26,712 - 328 135 8,541 35,716 Disposals: Cost - - - - 10,197 10,197 Accumulated depreciation - - - - 4,440 4,440

- - - - 5,757 5,757

Depreciation charge - 60,242 97,845 2,525 4,374 164,986

Closing net book value 337,226 1,144,602 1,858,842 22,741 17,487 3,380,898

At September 30, 2012Cost 337,226 1,468,466 2,270,219 34,042 38,416 4,148,369 Accumulated depreciation - 323,864 411,377 11,301 20,929 767,471

Net book value 337,226 1,144,602 1,858,842 22,741 17,487 3,380,898

Annual rate of depreciation (%) - 5 5 10 20

12.1 Operating Fixed Assets


Freeholdland

Building onFreehold land

Plant andmachinery

Furniture,fixture andequipment

Vehicles Totaloperating

assetsParticulars


12.1.1 The depreciation charge for the yearhas been allocated as follows:

Cost of sales 158,088 154,556 Administration expenses 6,898 7,272

164,986 161,828


Land cruiser 6,243 3,655 2,588 6,000 3,412 Negotiation Mr. Abdul Hafeez, Cantt, Lahore

Honda Civic 2,134 37 2,097 1,675 (422) Negotiation Mr. Abdul Hafeez, Cantt, Lahore

Prime mover 1,820 748 1,072 1,180 108 Negotiation Mr. Abdul Hafeez, Cantt, Lahore

2012 10,197 4,440 5,757 8,855 3,098

2011 - - - - -



12.2 The following assets were disposed of during the year:

Particulars Cost Accumulateddepreciation

Writtendown value

Saleprice

Gain/(Loss)

Disposalmode

Particularsof buyer

13 STORE, SPARES AND LOOSE TOOLS

Stores 107,743 80,520Spares 60,327 47,530Loose tools 9,319 7,849

177,389 135,899

13.1 The Company does not hold any stores for specific capitalization.

13.2 There are no stores, spares and loose tools in transit as at September 30, 2012 (2011: Nil).

14 STOCKS IN TRADE

Raw materials - molasses 5,097 90,318Work in process-Sugar 1,957 4,081-Molasses - 11,331

1,957 15,412Finished goods-Sugar 641,667 666,245 -Ethanol 577,569 125,006

1,219,236 791,251

1,226,290 896,981

14.1 Stocks amounting to Rupees 1,226 million (2011: Rupees 896.981 million) are pledged with lenders as security against short term borrowings as referred to in note 9.

15 TRADE DEBTS comprise of the followings:

UnsecuredLocal- Considered good 2,851 167,247SecuredForeign-letter of credits 204,881 157,300

207,732 324,547

16 ADVANCES, DEPOSITS, PREPAYMENTSAND OTHER RECEIVABLES

Advances - considered good 16.1 149,609 173,600Advance income tax 16.2 47,889 -Security deposits 2,818 12,986Guarantee margin 4,644 753Other receivables 16.3 22,992 9,244

227,952 196,583

16.1 It includes advances given to sugarcane growers of Rupees 6.225 million (2011: Rupees 13.650 million) which are recoverable from growers against supplies to be made in the subsequent period and to suppliers and contractors of Rupees 23.621 million (2011: Rupees 33.541 million). It also includes Rupees 100 million paid for purchase of property after obtaining courts' consent decree which is presently under execution with the same court. The property shall be disposed off after it is taken over.

These also include advances to foreign suppliers of machinery and spare parts of Rupees 3.046 million (2011: Rupees 6.853 million).

16.2 Advance Income Tax is made up as follows:

Opening balance - -Add: Deducted and deposited 55,607 22,120

55,607 22,120Less: Adjusted 10 (7,718) (22,120)

47,889 -

16.3 These include special excise duty of Rupees 18.304 million refundable from tax authorities. The Company has applied for refund of the amount deposited in excess of actual payable.

17 CASH AND BANK BALANCES

Cash in hand 205 -

Cash with banks:in current accounts 11,551 16,950in saving accounts 17 9

11,568 16,959

11,773 16,959




Gross SalesLocal 4,318,004 406,713 4,724,717 3,972,642 58,152 4,030,794Export - 1,542,533 1,542,533 - 1,696,372 1,696,372Inter-segment 786,207 - - 307,383 - -

5,104,211 1,949,246 6,267,250 4,280,025 1,754,524 5,727,166

Less: Sales tax and special excise duty 267,102 56,074 323,176 192,953 8,752 201,705Commission to selling agents 3,838 - 3,838 2,481 39,683 42,164

270,940 56,074 327,014 195,434 48,435 243,869

Net Sales 4,833,271 1,893,172 5,940,236 4,084,591 1,706,089 5,483,297

Sugar Ethanol Total(Rupees in thousand)

For the year ended September 30, 2012Sugar Ethanol Total


For the year ended September 30, 201118 SALES-net

19 COST OF SALES

Raw Material consumed 19.1 4,415,953 637,214 5,053,167 3,652,090 643,263 4,295,353Inter-segment transfers - 786,207 - - 307,383 -

4,415,953 1,423,421 5,053,167 3,652,090 950,646 4,295,353

Salaries, wages and other benefits 19.2 104,532 34,997 139,529 99,939 15,129 115,068Fuel and power 11,869 106,609 118,478 14,418 156,909 171,327Chemicals consumed 21,773 40,781 62,554 6,252 22,760 29,012Packing material consumed 38,474 - 38,474 22,771 - 22,771Oil and Lubricants 15,136 10,669 25,805 12,524 1,470 13,994Stores and spares consumed 47,137 50,567 97,704 16,138 10,454 26,592Repair and maintenance 9,054 1,819 10,873 2,385 2,982 5,367Insurance 2,227 1,023 3,250 6,721 2,072 8,793Vehicle, running and maintenance 4,811 2,789 7,600 3,335 1,199 4,534Other manufacturing expenses 606 - 606 611 - 611Depreciation 12.1.1 110,328 47,760 158,088 108,776 45,780 154,556

4,781,900 1,720,435 5,716,128 3,945,960 1,209,401 4,847,978Work In Process

Opening Stock 4,081 11,331 15,412 4,849 - 4,849Closing Stock (1,957) - (1,957) (4,081) (11,331) (15,412)

2,124 11,331 13,455 768 (11,331) (10,563)

Cost of goods produced 4,784,024 1,731,766 5,729,583 3,946,728 1,198,070 4,837,415Finished Goods

Opening Stock 666,245 125,006 791,251 427,500 348,401 775,901Closing stock (641,667) (577,569) (1,219,236) (666,245) (125,006) (791,251)

24,578 (452,563) (427,985) (238,745) 223,395 (15,350)

4,808,602 1,279,203 5,301,598 3,707,983 1,421,465 4,822,065




For the year ended September 30, 2011Note

18.1 Intersegment sales have been eliminated from the total figures.



19.1 Raw material consumed


For the year ended September 30, 2012



Opening stock - 90,318 90,318 - 46,739 46,739Purchases (Included procurementand other costs) 4,415,953 551,993 4,967,946 3,652,090 686,842 4,338,932Less: Closing stock (5,097) (5,097) (90,318) (90,318)

4,415,953 637,214 5,053,167 3,652,090 643,263 4,295,353

19.1.1 Inter-segment purchases have been eliminated from the total figures.

19.2 These include Rupees 6.941 million (2011: Rupees 4.834 million) in respect of employees' retirement benefits - gratuity.

20 ADMINISTRATIVE EXPENSES

Salaries, wages and other benefits 20.1 73,528 63,831Fee and subscription 1,157 1,993 Vehicle running 8,366 7,769 Legal and professional 2,218 1,772 Rent, rates and taxes 1,408 1,391 Travelling and conveyance 5,163 6,891 Postage, telephone and telegrams 3,149 2,695 Utilities expenses 2,429 3,254 Entertainment 1,498 1,322 Insurance 1,473 1,050 Repair and maintenance 1,412 1,396 Printing and stationery 722 6 3 7 Charity and donations 46 7 3 Newspapers and periodicals 9 1 1 Advertisement and publicity - 1 7 Auditors' remuneration 20.2 400 3 7 5 Other expenses 2,215 9 7 5 Depreciation 12.1.1 6,898 7,272

112,091 102,724

20.1 These include Rupees 3.789 million (2011: Rupees 2.072 million) in respect of employees' retirement benefits - gratuity.

20.2 Auditors' remuneration

Statutory audit 275 250Half yearly review 100 100Out of pocket expenses 25 25

400 375

21 DISTRIBUTION AND MARKETING EXPENSES

Salaries and other benefits 2,194 1,953Stock handling charges 20,516 25,719Insurance 713 1,417 Other expenses 12,665 1,151

36,088 30,240

22 OTHER OPERATING INCOME

Gain on sale of operating fixed assets 3,098 -Other income 7,667 5,336

10,765 5,336

23 FINANCE COST

Financial charges on:- Long term finances 167,523 218,050- Short term borrowings 197,606 186,309 Bank charges, commission and excise duty 2,571 2,601

367,700 406,960

24 PROVISION FOR TAXATION

Provision for taxation comprises of:Current Tax:- Current year 24.1 15,425 54,949- Prior year (42,976) -

(27,551) 54,949Deferred tax:- Current year - -- Prior year 24.2 (5,348) (348)

(32,899) 54,601

24.1 Current year's provision of Income tax has been made undersection 154 of the income tax ordiance 2001 on export sales.

24.2 The excess provision made in provious year was revised on working of gross profit/losses after apportionment of expenses/direct cost between local sale and export sale to determine the income tax liabilty/ provision required under income tax ordiance 2001.

24.3 The company's assesment have been completed (deemed assessed) under section 120 of the income tax ordiance 2001 upto the tax year 2011.

24.4 No numeric tax rate reconciliation is given in these financial statements as provisions made during the current and preceding years respectively represent final tax on export sales under section 154 of the income tax ordiance 2001.

25 EARNINGS PER SHARE

25.1 Basic earnings per share

Profit after taxation Rupees 159,747 65,711

Weighted average number of ordinary shares Numbers 99,020 99,020

Earning per share - Basic Rupees 1.61 0.66

25.2 Diluted earning per share

There is no dilution effect on the basic earning per share as the Company has no such commitments.




27.1 Inter-segment sales and purchases

Inter-segment sales and purchases have been eliminated from total figures.

26 REMUNERATION OF CHIEF EXECUTIVE OFFICER , DIRECTORS AND EXECUTIVES

Managerial remuneration 1,702 1,761 587 640 413 4,485 9,588Rent and utilities - - 235 256 281 2,723 3,495Medical 122 126 59 64 41 448 860

1,824 1,887 881 960 735 7,656 13,943

Number of Persons 1 1 1 1 1 6 11

ChiefExecutive

OfficerDirector

ChiefFinancialOfficer

CompanySecretary

InternalAuditor

OtherExecutives Total


Particulars


Managerial remuneration 1,404 2,728 450 613 356 5,591 11,142Rent and utilities - - 180 246 142 2,854 3,422Medical 108 272 45 61 36 559 1,081

1,512 3,000 675 920 534 9,004 15,645

Number of Persons 1 1 1 1 1 8 13

ChiefExecutive

OfficerDirector

ChiefFinancialOfficer

CompanySecretary

InternalAuditor

OtherExecutives Total


Particulars


26.1 In addition to the above, some of the executives are provided with free use of company maintained cars.

27 BUSINESS SEGMENT INFORMATION

RevenueLocal and export 18 4,047,064 1,893,172 5,940,236 3,777,208 1,706,089 5,483,297Inter-segment 18 786,207 - - 307,383 - -

4,833,271 1,893,172 5,940,236 4,084,591 1,706,089 5,483,297

Segment expensesCost of sales - Intersegment 19 - 786,207 - - 307,383 -

- External 19 4,808,602 492,996 5,301,598 3,707,983 1,114,082 4,822,065

4,808,602 1,279,203 5,301,598 3,707,983 1,421,465 4,822,065

Gross profit 24,669 613,969 638,638 376,608 284,624 661,232Administrative expenses 20 (99,075) (13,016) (112,091) (93,672) (9,052) (102,724)Distribution and marketing expenses 21 (10,906) (25,182) (36,088) (7,373) (22,867) (30,240)Other operating income - 10,765 10,765 5,336 5,336

Operating profit (85,312) 586,536 501,224 275,563 258,041 533,604




For the year ended September 30, 2011Note

27.2 Reconciliation of reportable segment assets and liabilites

Segment assets 3,855,911 1,376,123 5,232,034 3,871,050 1,215,843 5,086,893

Segment liabilities 2,587,922 959,422 3,547,344 2,606,989 949,962 3,556,951

Capital expenditures 35,716 - 35,716 65,787 589,806 655,593Depreciation on property,plant and equipment 115,201 49,785 164,986 113,972 47,856 161,828


September 30, 2012Sugar Ethanol Total


September 30, 2011


28 FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES

28.1 Financial risk factors

The Company's activities expose it to a variety of financial risks: market risk, (including currency risk, other price risk and interest rate risk), credit risk and liquidity risk. The Company's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the financial performance.

Risk Management is carried out by the Board of Directors (the Board). The Board provides principles for overall risk management, as well as policies covering specific areas such as currency risk, other price risk credit risk and liquidity risk.

(a) Market risk

(i) Currency risk

Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of the changes in foreign exchange rates. Currency risk arises mainly from future commercial transactions or receivables and payables that exist due to transactions in foreign currencies.

The Company is exposed to currency risk arising from various currency exposures, primarily with respect to the United States Dollar (USD). The company's foreign exchange risk exposure is restricted to the amounts receivable/payable from/to foreign entities. However, there is no exposure to currency risk at the year end.

(ii) Other price risk

Other price risk represents the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instruments or its issuer, or factors affecting all similar financial instruments traded in the market. The Company is not exposed to commodity price risk.

(iii) Interest rate risk

This represents the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

The Company has no significant long-term interest bearing assets. The Company's interest rate risk arises from long term financing, musharika finance, short term borrowings and other finances. Borrowings obtained at variable rates expose the Company to cash flow interest rate risk. Borrowings obtained at fixed rate expose the Company to fair value interest rate risk.

At the balance sheet date the interest rate profile of the Company's interest bearing financial instruments was:

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 or loss. Therefore, a change in interest rate at the balance sheet date would not affect profit or loss of the Company.

Floating rate financial instrumentsFinancial assetsBank balances-saving accounts 17 9Financial liabilitiesLong term financing 1,000,376 1,235,028Short term borrowings 1,665,152 1,625,102


(b) Credit risk

Credit risk represents the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was as follows:

Trade debts 207,732 324,547Advances, deposits and other receivables 90,416 61,350Bank balances 11,568 16,959

Sensitivity analysis

The Company's credit risk is low. The trade debtors of the Company comprises of foreign debtors which are secured through letter of credits where as credit sale to local customers are only made to trusted dealers/parties. Major portion of sale to customers is based on advance receipt mechanism i.e. funds are received in advance.

(c) Liquidity risk

Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities.

The Company manages liquidity risk by maintaining sufficient cash and the availability of funds through an adequate amount of committed credit facilities. At 30th September 2012 the company has availed the entire borrowing limits from various financial institutions of Rupees 1,665 million and Rupees 11.773 million as cash and bank balances. As, the Company is in a negative working capital position at the year end, management believes the liquidity risk is minimal. Following are the contractual maturities of financial liabilities including interest payments. The amounts disclosed in the table are undiscounted cash flows.


Current maturities of financial liabilities as at 30th September, 2012

Non derivate financial liabilitiesLong term finances 1,000,376 1,126,578 236,328 890,250 -Short term borrowings 1,665,152 1,877,275 1,877,275 - -Trade and other payables 360,725 360,725 360,725 - -Accrued mark up 101,395 101,395 101,395 - -

3,127,648 3,465,973 2,575,723 890,250 -

Current maturities of financial liabilities as at 30th September, 2011

Non derivate financialliabilitiesLong term finances 1,235,028 1,298,144 200,616 1,097,528 -Short term borrowings 1,625,102 1,683,207 1,683,207 - -Trade and other payables 425,898 425,898 425,898 - -Accrued mark up 121,221 121,221 121,221 - -

3,407,249 3,528,470 2,430,942 1,097,528 -

The contractual cash flows relating to the above financial liabilities have been determined on the basis of interest rates/mark up rates effective as at 30th September. The rates of interest /markup have been disclosed in Note-4 and Note-9 to these financial statements.

CarryingAmount

ContractualValues

Less than One Year

One toFive Years

More thanFive Years

CarryingAmount

ContractualValues

Less than One Year

One toFive Years

More thanFive Years


-----------------------(Rupees in thousand)-----------------------

-----------------------(Rupees in thousand)-----------------------


28.2 Fair values of financial assets and liabilities

The carrying values of all financial assets and liabilities reflected in financial statements approximate their fair values. Fair value is determined on the basis of objective evidence at each reporting date.

28.3 Financial instruments by categories

As at September 30

Assets as per balance sheetTrade debts 207,732 324,547Advances, deposits and other receivables 90,416 61,350Cash and bank balances 11,773 16,959

Liabilities as per balance sheetLong term financing 1,000,376 1,235,028Staff retirement benefits 22,535 12,943Short term borrowings 1,665,152 1,625,102Trade and other payables 360,725 425,898Accrued mark up 101,395 121,221

28.4 Capital risk management

The Company's objectives when managing capital are to safeguard the Company's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain in optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders through repurchase of shares, issue new shares or sell assets to reduce debt. Consistent with others in industry and the requirements of the lenders, the Company monitors the capital structure on the basis of gearing ratio. This ratio is calculated as borrowing divided by total capital employed. Borrowings represent long-term financing, Musharika financing and short-term borrowings obtained by the Company as referred in Note-4 and Note-9 respectively. Total capital employed includes 'total equity' as shown in the balance sheet plus 'borrowings'. The gearing ratio as at year ended 30th September 2012 and 30th September 2011 is as follows:

Borrowings 2,665,528 2,860,130Total equity 1,684,690 1,524,943Total capital employed 4,350,218 4,385,073 Gearing ratio 61% 65%

Loans and Advances 2012 2011


Financial liabilities at amortised cost 2012 2011



29 CAPACITY AND PRODUCTION

SugarPlant capacity on the basis of operating days M. Tons 1,470,000 1,426,500(Phalia 817,500 M.Tons (2011: 877,500 M.Tons)and Mian Channu 652,500 M.Tons(2011:549,000 M.Tons)

Actual Crushing M. Tons 1,073,317 732,910Actual Production M. Tons 101,147 63,873

Ethanol Rated capacity on the basis of operatingworking days (E.N.A. & B-Grade) Liters 37,250,000 26,750,000Actual production (E.N.A., E.N.A.Anhydrous & B-Grade) Liters 35,739,986 25,356,131

The low production was due to limited availability of raw material.

30 DATE OF AUTHORIZATION OF ISSUE

These financial statements were authorized for issue on January 08, 2013 by the Board of Directors of the Company.

31 GENERAL

Figures have been rounded off to the nearest thousand unless otherwise stated.

32 CORRESPONDING FIGURES

Previous year's figures have been rearranged, wherever necessary for the purpose of comparison. However, no significant re-arrangement has been made in these financial statements.


2012 2011


Financial Highlights

Share capital

Unappropriated profit

Non current liabilites

Current liabilities

Non current assets

Current assets

Turnover

Gross profit

Operating profit

Profit before taxation

Profit after taxation

Production Data

Cane crushed (M.Tons)

Sugar Produced (M.Tons)

Ethanol produced (Litres)

(Rupees in Thousand)

990,200

694,490

752,148

2,795,196

3,380,898

1,851,136

5,940,236

638,638

501,224

126,848

159,747

1,073,317

101,147

35,739,986

990,200

534,743

1,115,471

2,446,480

3,515,925

1,570,969

5,483,297

661,232

528,268

120,312

65,711

732,910

63,873

25,356,131

990,200

469,032

1,225,243

2,050,349

3,343,051

1,391,773

4,749,066

653,905

547,011

132,172

118,051

640,547

55,269

23,646,464

990,200

350,981

1,510,347

1,983,804

3,344,118

1,491,214

4,009,320

1,086,249

945,159

353,575

309,105

688,030

64,736

13,522,468

990,200

41,876

2,153,643

2,231,573

3,262,442

2,154,850

2,106,567

671,070

508,675

52,409

41,876

1,122,467

96,694

37,361,663

200

-

1,657,224

36,793

2,213,254

116,963

-

-

-

-

-

-

-

-

2012 2011 2010 2009 2008 2007


36757423432774157

106553511111111111121111111122211131111

1,670

Pattern of ShareholdingAs at September 30, 2012

1 101 501

1001 5001

10001 15001 20001 25001 30001 35001 40001 50001 60001 65001 75001 80001 85001 90001 95001

100001 150001 160001 170001 180001 205001 255001 335001 345001 370001 460001 795001

1155001 1295001 1850001 3010001 3805001 3810001 4830001 4895001 4900001 8555001 92150019890001

15860001

100 500

1000 5000

10000 15000 20000 25000 30000 35000 40000 45000 55000 65000 70000 80000 85000 90000 95000

100000 105000 155000 165000 175000 185000 210000 260000 340000 350000 375000 465000 800000

1160000 1300000 1855000 3015000 3810000 3815000 4835000 4900000 4905000 8560000 92200009895000

15865000

14,796 151,308 178,810 725,421 586,724 178,044 124,017 228,469 162,132 159,395 190,675 132,326 264,679

64,585 65,861 77,000 85,000 90,000 95,000

100,000 100,214 151,000 165,000 174,500 181,491 415,203 257,912 335,682 350,000 374,807 461,154 800,000

1,159,011 1,300,000 3,707,704 6,020,826 7,620,000 3,810,413 4,830,363 4,900,000

14,702,717 8,555,085 9,219,617 9,890,098

15,862,961

99,020,000

Number ofShareholders From To

Shareholdings Total Shares held


INDIVIDUAL

FINANCIAL INSTITUTIONS

INSURANCE COMPANIES

JOINT STOCK COMPANIES

MUTUAL FUND

OTHERS

TOTAL

Categorial Pattern of ShareholdingAs at September 30, 2012

1,617

7

7

33

1

5

1,670

78,466,412

1,581,641

461,333

18,169,350

335,682

5,582

99,020,000

79.24

1.60

0.47

18.35

0.34

0.01

100.00

Categories ofShareholders

Number ofShares Held Percentage

Number ofShareholders


Pattern of Shareholding (Additional Information)Under Code of Corporate Governance as at September 30, 2012

Directors, CEO, and their spouses and minor children:

Mr. Naveed M. SheikhMr. Waqar Ibn Zahoor BandeyMs. Samina GulMr. Muhammad AsgharMr. Mohammad AliMr. Ahmed Haji MussaMr. Asad AliMrs. Aasiya N. SheikhIzza Naveed SheikhIbrahim Naveed Sheikh

Executives

Associated Compaines, Undertakings & related parties

Mutual FundsNational Bank of Pakistan - Trustee Wing

Public Sector Companies & Corporation

Banks, finance institutions, Insurance companies,Modarabas and Pension Funds etc

Others

Public

Total:

Shareholding 5% and More

M/s Colony Mills LimitedMr. Mashal Kamran KhanMs. Eesha Naveed SheikhMs. Noreen M. Sheikh

65,861 10,252

1,000 1,000 1,000 1,000 1,000

3,810,413 3,010,413 3,010,413

--

--

335,682

1,023

2,378,989

34,037,893

52,354,061

99,020,000

15,862,961 9,219,617 8,555,0859,890,098

0.07 0.01 0.00 0.00 0.00 0.00 0.00 3.85 3.04 3.04

--

--

0.34

0.00

2.40

34.37

52.87

100 .00

16.029.31

8.64 9.99

Shareholding Percentage

There has been no trading of shares by CEO, Directors, CFO and Company Secretary, their spouse andminor children.


Documents

Contentsimperialsugars.com/Upload/Financial Reports/ANNUAL REPORT 2012.pdf · Contents Corporate ... Mr. Ahmed Haji Mussa Mr. Asad Ali Ms. Samina Gul ... Ms. Samina Gul Mr. Muhammad