| Pakistan Tobacco Co Ltd - 2004 |
================================================================================================ PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED DECEMBER 31, 2004 ================================================================================================ Notes 2004 2003 (Rs 000s) ================================================================================================ TURNOVER 25,452,634 22,572,247 Cost of sales 3 21,970,013 19,700,706 GROSS PROFIT 3,482,621 2,871,541 Marketing expenses 4 1,442,356 1,466,095 Administration expenses 5 595,637 395,178 2,037,993 1,861,273 OPERATING PROFIT 1,444,628 1,010,268 Other income 6 14,590 6,717 Other expenses 7 366,637 310,335 1,092,581 706,650 Financial charges 8 36,542 91,955 PROFIT BEFORE TAXATION 1,056,039 614,695 Provision for taxation 9 390,812 293,614 PROFIT AFTER TAXATION 665,227 321,081 Earnings per share (Rupees) 10 2.60 1.26 ================================================================================================ ================================================================================================ BALANCE SHEET AS AT DECEMBER 31, 2004 ================================================================================================ Notes 2004 2003 (Rs 000s) ================================================================================================ PROPERTY, PLANT AND EQUIPMENT 13 3,564,407 3,410,888 INVESTMENT IN SUBSIDIARY COMPANY 14 5,000 5,000 LONG TERM LOANS 15 16,324 16,481 LONG TERM DEPOSITS AND PREPAYMENTS 16 4,433 6,934 CURRENT ASSETS Stocks 17 3,074,052 3,227,503 Stores and spares 18 121,464 127,381 Trade debts 19 12,486 145,749 Loans and advances 20 32,273 62,826 Prepayments and other receivables 21 155,129 243,875 Income tax refundable - 4,050 Cash and bank balances 22 39,197 48,069 3,434,601 3,859,453 LESS: CURRENT LIABILITIES Creditors, accrued and other liabilities 23 2,061,339 2,284,001 Short term finances 24 996,579 1,335,539 Current portion of long term loans 26 - 200,000 Income tax payable 79,549 - 3,137,467 3,819,540 NET CURRENT ASSETS 297,134 39,913 3,887,298 3,479,216 FINANCED BY: SHARE CAPITAL Authorised capital 300,000,000 ordinary shares of Rs 10 each 3,000,000 3,000,000 Issued, subscribed and paid-up capital 25 2,554,938 2,554,938 UNAPPROPRIATED PROFIT 707,885 553,646 SHAREHOLDERS EQUITY 3,262,823 3,108,584 DEFERRED TAXATION 27 624,475 370,632 COMMITMENTS AND CONTINGENCIES 28 3,887,298 3,479,216 ================================================================================================ ================================================================================================
CASH FLOW STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2004
================================================================================================
2004 2003
(Rs 000s)
================================================================================================
CASH FLOW FROM OPERATING ACTIVITIES
Cash receipts from customers 25,585,897 22,519,584
Cash paid to Government for cigarette and
tobacco excise duty, sales tax and other levies (16,021,304) 14,309,453)
Cash paid to suppliers (6,450,403) (5,534,395)
Cash paid to employees and retirement funds (1,465,490) (1,266,329)
Income tax paid (53,370) (46,299)
Other cash receipts / (payments) 42,369 (28,693)
1,637,699 1,334,415
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of tangible fixed assets (597,702) (854,107)
Proceeds from sale of fixed assets 38,027 23,585
(559,675) (830,522)
CASH FLOW FROM FINANCING ACTIVITIES
Repayment of long term loans (200,000) (370,000)
Dividend paid (507,318) (203,960)
Financial charges paid (42,656) (120,863)
Long term loans, deposits and prepayments 2,658 1,479
Cash paid to subsidiary company (620) (539)
(747,936) (693,883)
NET INCREASE / (DECREASE) IN CASH
AND CASH EQUIVALENTS 330,088 (189,990)
CASH AND CASH EQUIVALENTS AT JANUARY 1 (1,287,470) (1,097,480)
CASH AND CASH EQUIVALENTS AT DECEMBER 31 (957,382) (1,287,470)
CASH AND CASH EQUIVALENTS COMPRISE:
Cash and bank balances 39,197 48,069
Short term finances (996,579) (1,335,539)
(957,382) (1,287,470)
================================================================================================
================================================================================================ STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED DECEMBER 31, 2004 ================================================================================================ (Rs 000s) Share Unappropriated Total Note capital profit ================================================================================================ BALANCE AT DECEMBER 31, 2002 2,554,938 232,565 2,787,503 Profit for the year 2003 - 321,081 321,081 Proposed dividend - (255,494) (255,494) BALANCE AT DECEMBER 31, 2003 AS PREVIOUSLY 2,554,938 298,152 2,853,090 STATED Change in accounting policy for dividend 2.1.2 - 255,494 255,494 BALANCE AT DECEMBER 31, 2003 AS RESTATED 2,554,938 553,646 3,108,584 Final dividend @ 10% (2002: nil) relating to the year ended December 31, 2003 - (255,494) (255,494) Profit for the year 2004 - 665,227 665,227 Interim dividend @ 10% (2003: nil) relating to the year ended December 31, 2004 - (255,494) (255,494) BALANCE AT DECEMBER 31, 2004 2,554,938 707,885 3,262,823 ================================================================================================NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2004 1. THE COMPANY AND ITS OPERATIONS Pakistan Tobacco Company Limited is incorporated in Pakistan and is listed on the three stock exchanges of Pakistan. It is engaged in the manufacture and sale of cigarettes. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 2.1. BASIS OF PREPARATION 2.1.1. These financial statements have been prepared under the historical cost convention and in accordance with approved accounting standards as applicable in Pakistan and the requirements of the Companies Ordinance, 1984. Approved accounting standards comprise such International Accounting Standards as notified under the provisions of the Companies Ordinance, 1984. Wherever, the requirements of the Companies Ordinance, 1984 or directives issued by the Securities and Exchange Commission of Pakistan differ with the requirements of these standards, the requirements of the Companies Ordinance, 1984 or the requirements of the said directives take precedence. 2.1.2. The SECP amended the Fourth Schedule to the Companies Ordinance, 1984 during the year. This has resulted in the change in accounting policy pertaining to the recognition of dividends proposed after the balance sheet date but before the financial statements are authorised for issue. Previously, such dividends were accounted for as a liability at the balance sheet date. From the current year, such dividend has not been recognised as a liability at the balance sheet date. The change in accounting policy has been accounted for retrospectively and the comparative figures have been restated. 2.2. TAXATION Provision for current taxation is based on taxable income on current rates of taxation after taking into account tax rebates and tax credits available or based on 0.5% of turnover less related excise duty and sales tax, whichever is higher. Deferred tax is accounted for using the balance sheet liability method in respect of all temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which the deductible temporary differences, unused tax losses and tax credits can be utilised. 2.3. PROVISIONS Provisions are recognised when the Company has a present obligation as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. 2.4. RETIREMENT BENEFITS The Company operates: i) approved funded Pension scheme for Management and certain grades of Business Support Officers and gratuity scheme for all employees. Actuarial valuation of these schemes is carried out each year and the latest valuation was carried out as at December 31, 2004. The details of the valuation are summarised in note 29. The actuarial gains / losses are fully recognised in the year in which they arise. ii) approved contributory Provident Fund for all employees for which contributions are charged to the income for the year. An amount of Rs 24.301 million (2003: 25.476 million) has been charged to the profit and loss account during the year in respect of this scheme. 2.5. PROPERTY, PLANT AND EQUIPMENT These are stated at cost less accumulated depreciation except freehold land, capital work-in-progress and items in transit which are stated at cost. Depreciation is charged to the profit and loss account using the straight line method at the following annual rates: Buildings on freehold and leasehold land and private railway sidings: 3% Plant and machinery: 7% Air conditioners included in plant and machinery: 25% Office and household machinery and equipment: 20% to 25% Furniture and fittings: 10% to 20% Vehicles: 25% Depreciation on additions and deletions during the year is charged on a pro rata basis from the month when asset is put into use or upto the month when asset is disposed / written off. Repairs and maintenance costs are charged to the profit and loss account in the year in which these are incurred. Major renewals and improvements are capitalised. Profits and losses on disposal of fixed assets are taken to the profit and loss account. 2.6. INVESTMENT IN SUBSIDIARY COMPANY This is stated at cost less impairment loss, if any. 2.7. STOCK These are stated at the lower of moving average cost and net realisable value. Items in transit are valued at cost comprising invoice values plus other charges paid thereon. Net realisable value signifies the estimated selling price in the ordinary course of business less cost of completion and costs necessarily to be incurred to make the sale. 2.8. STORES AND SPARES These are valued at moving average cost less allowance for obsolete and slow moving items. Items in transit are valued at cost comprising invoice value and other charges paid thereon. 2.9. REVENUE RECOGNITION Sales are recorded on despatch of goods to customers. 2.10. BORROWING COST All borrowing costs are expensed as incurred. 2.11. FOREIGN CURRENCY TRANSACTIONS Transactions in foreign currencies are recorded in the books at the rates of exchange prevailing on the date of the transaction. Assets and liabilities in foreign currencies are stated in rupees at the rates of exchange ruling on the balance sheet date. All exchange differences are included in the profit and loss account. 2.12. RELATED PARTY TRANSACTIONS All transactions with related parties are conducted on an arm's length basis using pricing methods, as admissible. The prices agreed between associated companies for sale of materials and manufactured goods are based on normal commercial practices which would obtain between independent businesses. Intra Group charges for sale and purchase of goods and services and royalties are also based on the principles of normal commercial practice between independent businesses. 2.13. FINANCIAL INSTRUMENTS Financial assets and liabilities are recognized when the Company becomes a party to the contractual provisions of the instrument. All financial assets and liabilities are initially recognised at cost, which is the fair value of the consideration given and received. These are subsequently measured at fair value, amortised cost or cost, as the case may be. 2.14. CASH AND CASH EQUIVALENTS Cash and cash equivalents comprise cash in hand, cash with banks and short term finances under mark-up arrangements with banks. 2.15. 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 future for goods and services received. 3. COST OF SALES ================================================================================================
2004 2003
NOTE (Rs 000s)
================================================================================================
Raw material consumed
Opening stock of raw materials and work in process 2,902,957 2,910,773
Raw material purchases and expenses 3.1 4,321,327 4,068,251
Closing stock of raw materials and work in process (2,678,084) (2,902,957)
4,546,200 4,076,067
Government taxes and levies
Cigarette and tobacco excise duty and sales tax 15,880,058 14,120,672
Customs duty and surcharges 206,289 201,177
Provincial and municipal taxes and other excise duties 71,342 74,736
16,157,689 14,396,585
20,703,889 18,472,652
Production overheads
Salaries, wages and benefits 648,493 608,578
Stores, spares and machine repairs 283,436 272,430
Fuel and power 100,054 93,846
Insurance 19,464 18,941
Repairs and maintenance 21,331 15,905
Postage, telephone and stationery 8,549 8,607
Depreciation 226,389 196,226
Sundries 29,830 29,299
1,337,546 1,243,832
Cost of goods manufactured 22,041,435 19,716,484
Cost of finished goods
Opening stock 324,546 308,768
Closing stock (395,968) (324,546)
(71,422) (15,778)
21,970,013 19,700,706
================================================================================================3.1. RAW MATERIAL PURCHASES AND EXPENSES================================================================================================
2004 2003
(Rs 000s)
================================================================================================
Materials 3,657,756 3,454,489
Royalty 219,827 208,964
Salaries, wages and benefits 192,740 165,536
Stores, spares and machine repairs 63,304 55,113
Fuel and power 53,153 53,353
Property and vehicle rentals 17,087 15,674
Insurance 7,745 7,217
Repairs and maintenance 4,675 4,297
Postage, telephone and stationery 4,428 4,177
Depreciation 83,941 78,362
Sundries 16,671 21,069
4,321,327 4,068,251
================================================================================================4. MARKETING EXPENSES================================================================================================
2004 2003
(Rs 000s)
================================================================================================
Salaries, wages and benefits 157,875 148,387
Selling expenses 1,038,358 1,091,225
Freight 96,991 85,021
Property and vehicle rentals 6,303 6,760
Insurance 9,434 12,046
Repairs and maintenance 48,683 42,321
Postage, telephone and stationery 9,684 10,583
Travelling 35,088 35,076
Depreciation 39,940 34,676
1,442,356 1,466,095
================================================================================================5. ADMINISTRATION EXPENSES================================================================================================
2004 2003
Notes (Rs 000s)
================================================================================================
Salaries, wages and benefits 270,614 201,862
Fuel and power 3,331 2,758
Property and vehicle rentals 16,399 14,544
Insurance 2,270 2,025
Repairs and maintenance 13,117 19,986
Postage, telephone, stationery and communication 11,432 12,157
Legal and professional charges 5,795 5,906
Provincial and municipal taxes 735 579
Donations 5.1 7,285 3,705
Information technology / SAP implementation 137,072 37,232
Travelling 26,877 23,064
Depreciation 39,940 34,676
Directors' fee 5.2 230 310
Sundries 56,539 32,566
Auditors' remuneration and expenses
Statutory audit 620 590
Special certifications, audit of consolidated accounts
and staff funds, review of halt yearly accounts 1,600 1,580
Tax compliance and advisory services 1,570 1,516
Out-of-pocket expenses 211 122
4,001 3,808
595,637 395,178
================================================================================================5.1. Recipients of donations do not include any body in whom a director or his spouse had any interest.5.2. Directors' fee of Rs 230 thousand (2003: Rs 310 thousand) is in respect of five (2003: five) non-executive directors for attending board meetings during the year. 6. OTHER INCOME ================================================================================================
2004 2003
(Rs 000s)
================================================================================================
Insurance commission 6,752 3,577
Miscellaneous 7,838 3,140
14,590 6,717
================================================================================================7. OTHER EXPENSES================================================================================================
2004 2003
(Rs 000s)
================================================================================================
Workers' profit participation fund / WWF / other 64,127 32,352
Loss on fixed assets sold / written off 15,946 88,906
Staff separation cost 286,564 189,077
366,637 310,335
================================================================================================8. FINANCIAL CHARGES================================================================================================
2004 2003
(Rs 000s)
================================================================================================
On short term finances 20,057 76,943
Bank charges and fees 15,277 13,589
interest on workers' profit participation fund 1,208 1,423
36,542 91,955
================================================================================================9. PROVISION FOR TAXATION================================================================================================
2004 2003
(Rs 000s)
================================================================================================
Current - for the year 136,969 43,614
Deferred - for the year 253,019 243,183
- for prior years 824 6,817
253,843 250,000
390,812 293,614
================================================================================================9.1. RECONCILIATION OF TAX CHARGE FOR THE YEAR================================================================================================
2004 2003
% %
================================================================================================
Applicable tax rate 35.00 35.00
Add: Tax impact of minimum tax payable @ 0.5% of net
turnover due to tax losses - 7.10
Tax effect of amounts that are not deductible
for tax purposes 1.92 4.56
Tax impact of provision for prior years 0.08 1.10
Average effective tax rate charged to income 37.00 47.76
================================================================================================10. EARNINGS PER SHARE================================================================================================
2004 2003
(Rs 000s)
================================================================================================
Profit after tax 665,227 321,081
Number of ordinary shares (in thousands) 255,494 255,494
Earnings per share (Rupees) 2.60 1.26
================================================================================================11. DIVIDENDFinal dividend in respect of the year ended December 31, 2004 of Rs 1.2 per share (2003: Rs 1 per share) amounting to a total dividend of Rs 306.593 million (2003: Rs 255.494 million) has been proposed out of the unappropriated profit at the Board of Directors meeting on March 1, 2005. These financial statements do not reflect this dividend payable. 12. REMUNERATION OF CHIEF EXECUTIVE, DIRECTORS AND EXECUTIVES ==============================================================================================
(Rs 000s)
Chief Executive Directors Executives Total
2004 2003 2004 2003 2004 2003 2004 2003
==============================================================================================
Managerial
Remuneration 47,888 14,622 66,100 45,896 257,430 180,858 371,418 241,376
Leave fare assistance 1,285 1,308 1,186 1,563 2,202 3,567 4,673 6,438
Retirement benefits - - 4,281 4,839 40,326 38,894 44,607 43,733
Housing and utilities 4,574 3,792 7,039 8,278 60,062 59,959 71,675 72,029
Medical expenses 134 84 415 347 11,898 10,046 12,447 10,477
53,881 19,806 79,021 60,923 371,918 293,324 504,820 374,053
* Number of persons 1 1 6 8 131 130 138 139
============================================================================================== * These represent employees who were on payroll of the Company during the year.12.1. The Company, in certain cases, also provides individuals with the use of Company accommodation, cars and household items, in accordance with their entitlements. 12.2. The definition of executive under the Companies Ordinance, 1984 was revised during the year with respect to the minimum basic salary requirement from Rs 100,000 to Rs 500,000 in a financial year. The 2003 figures have been restated for the purpose of comparison. 13. PROPERTY, PLANT AND EQUIPMENT ================================================================================================
2004 2003
Notes (Rs 000s)
================================================================================================
Operating fixed assets 13.1 3,328,454 3,037,571
Capital work in progress 13.2 235,953 373,317
3,564,407 3,410,888
================================================================================================13.1. OPERATING FIXED ASSETS===========================================================================================================================================
(Rs 000s)
Cost Depreciation Cost less
deprec-
iation
At At At Charge for At At
01.01.2004 Additions Deletions 31.12.2004 01.01.2004 the year On deletions 31.12.2004 31.12.2004
===========================================================================================================================================
Freehold land 6,834 - - 6,834 - - - - 6,834
Buildings on freehold land 314,644 20,494 (1,102) 334,036 76,550 9,147 (284) 85,413 248,623
Buildings on leasehold land 22,643 674 - 23,317 11,822 846 - 12,668 10,649
Private railway sidings 349 - - 349 321 2 - 323 26
Plant and machinery 3,680,201 530,553 (88,432) 4,122,322 1,204,312 263,621 (55,455) 1,412,478 2,709,844
Office and house-hold
machinery and equipment 246,339 53,532 (20,566) 279,305 126,047 38,813 (17,782) 147,078 132,227
Furniture and fittings 60,075 1,353 - 61,428 27,825 7,013 - 34,838 26,590
Vehicles 345,785 128,459 (60,112) 414,132 192,422 70,768 (42,718) 220,472 193,660
Total 4,676,870 735,065 (170,212) 5,241,723 1,639,299 390,210 (116,239) 1,913,270 3,328,454
2003 4,386,497 568,431 (278,058) 4,676,870 1,460,926 343,940 (165,567) 1,639,299 3,037,571
===========================================================================================================================================13.2. CAPITAL WORK IN PROGRESS================================================================================================
2004 2003
(Rs 000s)
================================================================================================
Civil works and buildings - 4,979
Plant and machinery 195,965 225,494
Advances to suppliers 37,412 135,878
Machinery and fixtures in transit/ storage 2,576 6,966
235,953 373,317
================================================================================================13.3. SALE OF TANGIBLE FIXED ASSETSDetails of disposal of fixed assets other than regular auction are as follows: =====================================================================================================================
(Rs 000s)
Original Accumulated Book Sale Particulars of buyers Mode of Disposal
Cost Depreciation Value Proceeds
=====================================================================================================================
Computer
equipment 317 232 85 147 IGI Insurance Company Insurance claim
85 17 68 56 IGI Insurance Company Insurance claim
Vehicles 629 566 63 619 Malik Zulfiqar Ali - Islamabad Negotiation
2,435 2,192 243 1,633 Javed Liaqat - Rawalpindi Negotiation
599 539 60 60 Pakistan Cricket Board - Lahore Negotiation
1,367 1,231 136 864 Raja Muhammad Faiyaz - Rawalpindi Negotiation
1,368 1,231 137 760 Raja Muhammad Faiyaz - Rawalpindi Negotiation
682 614 68 489 Waheed Akhtar - Rawalpindi Negotiation
769 692 77 77 Pakistan Cricket Board - Lahore Negotiation
660 594 66 609 Nadeem Shahzad Ch. - Islamabad Negotiation
660 594 66 571 Ch. Muhammad Saleem - Rawalpindi Negotiation
611 549 62 561 lftikharAhmed - Rawalpindi Negotiation
677 609 68 638 Ch. Muhammad Saleem - Rawalpindi Negotiation
989 890 99 770 Jamshed Alam Khan - Rawalpindi Negotiation
699 583 116 595 lftikhar Ahmed - Rawalpindi Negotiation
705 543 162 639 Dr. Junaid Alam Khan - Rawalpindi Negotiation
991 723 268 893 Atta Ur Rahman - Distt Dir Negotiation
1,345 813 532 964 Ch. Muhammad Waseem - Rawalpindi Negotiation
3,800 2,612 1,188 2,573 Habib Ahmed - Islamabad Negotiation
660 594 66 615 AIG New Hampshire Insurance Co. Insurance claim
585 527 58 540 AIG New Hampshire Insurance Co. Insurance claim
4,456 2,042 2,414 3,500 AIG New Hampshire Insurance Co. Insurance claim
83 29 54 75 AIG New Hampshire Insurance Co. Insurance claim
367 206 161 270 AIG New Hampshire Insurance Co. Insurance claim
376 157 219 285 AIG New Hampshire Insurance Co. Insurance claim
774 226 548 690 AID New Hampshire Insurance Co. Insurance claim
1,176 343 833 1,166 AIG New Hampshire Insurance Co. Insurance claim
396 74 322 386 AIG New Hampshire Insurance Co. Insurance claim
694 625 69 116 Rashid M. Khan - Ex-Employee As per Company Policy
1,024 469 555 716 Abdul Shakoor - Ex-Employee As per Company Policy
633 570 63 204 Amjad Saeed - Ex-Employee As per Company Policy
750 31 719 667 Umair Ashraf - Ex-Employee As per Company Policy
991 892 99 366 Feroza Shera - Ex-Employee As per Company Policy
1,309 954 355 573 Najmus Saquib Hameed - Ex-Chairman As per Company Policy
1,189 817 372 637 Aslam Khaliq - Ex-Employee As per Company Policy
1,245 752 493 602 Najmus Saquib Hameed - Ex-Chairman As per Company Policy
3,950 1,481 2,469 1,216 Aslam Khaliq - Ex-Employee As per Company Policy
1,169 414 755 451 Aslam Khaliq - Ex-Employee As per Company Policy
750 328 422 534 Haseeb A. Wali - Ex-Employee As per Company Policy
709 638 71 275 Tajamal Shah - Employee As per Company Policy
1,024 448 576 591 Kashif Aziz Khawala - Employee As per Company Policy
750 375 375 514 Amjad Ali - Employee As per Company Policy
705 529 176 308 Shahab Shams - Employee As per Company Policy
991 892 99 337 Mustanser Ali Khan - Employee As per Company Policy
952 853 99 427 Ahmed Nawaz - Employee As per Company Policy
705 602 103 373 Saad Fazal Ur Rehman - Employee As per Company Policy
=====================================================================================================================14. INVESTMENT IN SUBSIDIARY COMPANYThis represents 500,001 (2003: 500,001) fully paid ordinary shares of Rs 10 each in Phoenix (Private) Limited. The break up value of shares calculated by reference to net assets worked out to be Rs 10 per share based on audited accounts for the year ended December 31, 2004 (2003: Rs 10 per share). This is a wholly owned subsidiary of Pakistan Tobacco Company Limited which has not yet commenced commercial production. 15. LONG TERM LOANS ================================================================================================
2004 2003
(Rs 000s)
================================================================================================
Considered good
Loans due from directors and executives 22,101 21,668
Less: Receivable within one year 5,777 5,187
16,324 16,481
================================================================================================15.1. RECONCILIATION OF LOANS DUE FROM DIRECTORS AND EXECUTIVES================================================================================================
2004 2003
(Rs 000s)
================================================================================================
Opening balance 21,668 12,595
Add: Disbursements during the year 11,850 16,384
Less: Repayments during the year (11,417) (7,311)
Closing balance 22,101 21,668
================================================================================================15.2. The above comprises interest free loans amounting to Rs 0.189 million (2003: Rs 0.308 million) and Rs 21.912 million (2003: Rs 21 .360 million) given to the directors and executives respectively for purchase of household furniture, appliances, cars and motorcycles, repayable over 5 to 10 years in equal installments. Loans amounting to Rs 12.963 million (2003: Rs 1.662 million) were outstanding for more than three years.15.3. The maximum amounts due from the directors and executives at the end of any month during the year were Rs 0.201 million (2003: Rs 0.362 million) and Rs 22.042 million (2003: Rs 21.360 million) respectively. 16. LONG TERM DEPOSITS AND PREPAYMENTS ================================================================================================
2004 2003
(Rs 000s)
================================================================================================
Security deposits 1,972 1,817
Prepayments 2,461 5,117
4,433 6,934
================================================================================================17. STOCKS================================================================================================
2004 2003
(Rs 000s)
================================================================================================
Raw materials 2,552,527 2,850,554
Raw materials in transit 106,246 34,045
Work in process 19,311 18,358
Finished goods 395,968 324,546
3,074,052 3,227,503
================================================================================================18. STORES AND SPARES================================================================================================
2004 2003
(Rs 000s)
================================================================================================
Stores 1,918 3,516
Machine spares - Cigarette production 116,795 121,427
- Printing and leaf redrying 2,751 2,438
121,464 127,381
================================================================================================19. TRADE DEBTSThese are unsecured, considered good and are net of provision for doubtful amounts of Rs 2.322 million (2003: Rs 2.322 million). These include amounts due from associated companies BAT Germany Rs nil (2003: Rs 119.854 million) and BAT Singapore Rs nil (2003: Rs 18.964 million). 20. LOANS AND ADVANCES ================================================================================================
2004 2003
Notes (Rs 000s)
================================================================================================
Considered good
Loans due from directors and executives 15 5,777 5,187
Advances due from employees 20.1 5,195 8,559
Advances due from others 21,301 49,080
32,273 62,826
================================================================================================20.1. The above includes Rs 4.693 million (2003: Rs 7.607 million) due from executives of the Company.20.2. The maximum amount due from executives of the Company at the end of any month during the year was Rs 23.475 million (2003: Rs 23.795 million). 21. PREPAYMENTS AND OTHER RECEIVABLES ================================================================================================
2004 2003
Note (Rs 000s)
================================================================================================
Prepayments 36,003 41,970
Margin against guarantees 6,318 23,175
Due from subsidiary company 23,286 22,666
Due from associated companies 21.1 25,655 11,919
Claims 14,765 13,400
Employees provident fund 30,764 14,621
Management provident fund - 23,486
Payments on behalf of Employees gratuity and pension fund - 77,110
Others 18,338 15,528
155,129 243,875
================================================================================================21.1. THE AMOUNT DUE FROM ASSOCIATED COMPANIES COMPRISES================================================================================================
2004 2003
(Rs 000s)
================================================================================================
The amount due from associated companies comprises:
BAT - Bangladesh 11,349 9,275
BAT - Regional Office Hong Kong 4,019 -
BAT - Singapore 2,718 -
BAT-UK 2,369 -
BAT - Nigeria 2,322 673
Ceylon Tobacco Company - Sri Lanka 1,185 719
BAT - Australia 629 -
BAT - New Zealand 226 -
BAT-Indonesia 223 106
BAT - Benin 220 -
BAT - Dubai 209 787
BAT-South Korea 138 138
BAT - Uzbekistan 48 -
BAT - Uganda - 221
25,655 11,919
================================================================================================22. CASH AND BANK BALANCES================================================================================================
2004 2003
(Rs 000s)
================================================================================================
On hand 892 1,381
In transit 1,405 4,018
At banks on current accounts 29,654 34,005
31,951 39,404
Security deposits - held in special account 7,246 8,665
39,197 48,069
================================================================================================23. CREDITORS, ACCRUED AND OTHER LIABILITIES================================================================================================
2004 2003
Note (Rs 000s)
================================================================================================
Creditors 674,261 957,129
Excise duties / Provincial Taxes 809,450 720,220
Sales tax 266,723 219,568
Accrued liabilities 230,904 255,302
Mark-up on short term finances 5,041 11,155
Security deposits 7,246 8,665
Workers profit participation fund 23.1 55,989 32,352
Staff pension fund 1,605 13,780
Employees' gratuity fund 2,512 61,906
Management provident fund 14 -
Unclaimed dividend 7,594 3,924
2,061,339 2,284,001
================================================================================================23.1. WORKERS PROFIT PARTICIPATION FUND================================================================================================
2004 2003
(Rs 000s)
================================================================================================
Balance at January 1 32,352 38,418
Allocation for the year 55,989 32,352
Interest on funds utilised in Company's business 1,208 1,423
Payment to the fund during the year (33,560) (39,841)
Balance at December 31 55,989 32,352
================================================================================================23.2. Creditors include Rs 194.378 million (2003: Rs 208.437 million) and Rs 75.112 million (2003: Rs 52.070 million) payable to the holding company and associated companies respectively.24. SHORT TERM FINANCES - SECURED Short term finances are under mark-up arrangements with banks and are secured by hypothecation of stocks of raw materials and finished goods. The mark-up ranges between 1.75% to 6.45% (2003: 2.15% to 4.25%) per annum and is payable quarterly. Total facility available under mark-up arrangements amounts to Rs 2,380 million (2003: Rs 2,382 million) out of which the amount unavailed at the year end was Rs 1,383 million (2003: Rs 1,046 million). The facilities are renewable annually. 25. ISSUED, SUBSCRIBED AND PAID-UP CAPITAL ================================================================================================
2004 2003
(Rs 000s)
================================================================================================
255,493,792 ordinary shares of Rs 10 each including
25,136,724 bonus shares 2,554,938 2,554,938
================================================================================================British American Tobacco (Investments) Limited (BAT) held 241,045,141 ordinary shares of Rs 10 each at December 31, 2004 (2003: 241,045,141 shares).26. LONG TERM LOANS - SECURED ================================================================================================
2004 2003
Note (Rs 000s)
================================================================================================
Term finance from banks 26.1 - 200,000
Less: shown under current liabilities - 200,000
- -
================================================================================================26.1. Term finance facility of Rs 200 million has been paid back in June 2004.27. DEFERRED TAXATION The deferred tax liability of Rs 624.475 million (2003: Rs 370.632 million) represents tax liability of Rs 624.475 million (2003: Rs 572.968 million) related to timing differences between accounting and tax depreciation and potential tax benefit of Rs nil (2003: Rs 202.336 million) related to unused Tax losses. 28. COMMITMENTS AND CONTINGENCIES 28.1. Capital expenditure commitments outstanding at December 31, 2004 amounted to Rs nil (2003: Rs 118.990 million). 28.2. Letters of credit outstanding at December 31, 2004 amounted to Rs 447.679 million (2003: Rs 325.332 million). 28.3. Claims not acknowledged as debt amounted to Rs 69.168 million (2003: Rs 123.767 million). 28.4. Guarantees issued by banks on behalf of the Company amounted to Rs 60.543 million (2003: Rs 50.393 million). 29. EMPLOYEES' DEFINED BENEFIT FUNDED PENSION AND GRATUITY SCHEMES The details of actuarial valuation carried out as at December 31, 2004 arid December 31, 2003 are as follows: ==========================================================================
2004 2003
Pension Gratuity Pension Gratuity
(Rs 000s) (Rs 000s)
==========================================================================
Expense
Service cost 20,381 14,987 29,686 13,083
Interest cost 51,290 12,108 61,901 17,430
Expected return on assets (50,487) (8,502) (60,930) (15,894)
Actuarial (gains) / losses 6,277 6,095 (2,044) 5,973
Settlement loss - - 14,413 74,059
Members' contribution - - (9,335) -
27,461 24,688 33,691 94,651
Liability
Balance at January 1 13,780 61,906 11,279 17,832
Charge for the year 27,461 24,688 33,691 94,651
Amount paid during the year (39,636) (23,905) (31,190) (50,577)
Special payment - (60,177) - -
Balance at December 31 1,605 2,512 13,780 61,906
Reconciliation
Present value of defined
benefit obligations 965,451 215,533 868,626 205,825
Less: fair value of plan assets 963,846 213,021 854,846 143,919
Liability recognised
in the accounts 1,605 2,512 13,780 61,906
Actual return on plan assets 120,766 24,196 123,357 22,334
==========================================================================The Projected Unit Credit Method using the following significant assumptions was used for the valuation of these schemes:===========================================================
2004 2003
===========================================================
- Discount rate 8% 6%
- Expected rate of increase in salary level 8% 6%
- Expected yearly increase
in post retirement pension 3% 2%
- Expected rate of return on plan assets 8% 6%
===========================================================30. FINANCIAL INSTRUMENTS30.1. FINANCIAL ASSETS AND LIABILITIES =======================================================================================================
(Rs 000s)
2004 2003
Exposed to Not exposed Total Exposed to Not exposed Total
interest rate to interest interest rate to interest
risk rate risk risk rate risk
=======================================================================================================
Financial Assets
Maturity upto one year:
Trade debts - 12,486 12,486 - 145,749 145,749
Loans, deposits and
other receivables - 151,399 151,399 - 264,731 264,731
Cash and bank balances 7,246 31,951 39,197 8,665 39,404 48,069
Maturity after one year:
Investment in
subsidiary company - 5,000 5,000 - 5,000 5,000
Loans, deposits and
other receivables - 18,296 18,296 - 18,298 18,298
Total 7,246 219,132 226,378 8,665 473,182 481,847
Financial Liabilities
Maturity upto one year:
Term loans - - - 200,000 - 200,000
Short term finances 996,579 - 996,579 1,335,539 - 1,335,539
Creditors, accrued
and other liabilities - 2,061,339 2,061,339 - 2,284,001 2,284,001
Total 996,579 2,061,339 3,057,918 1,535,539 2,284,001 3,819,540
Off Balance Sheet items
Letters of credit - 447,679 447,679 - 325,332 325,332
Other commitments - - - - 118,990 118,990
Bank guarantees - 60,543 60,543 - 50,393 50,393
Total - 508,222 508,222 - 494,715 494,715
=======================================================================================================30.2. CREDIT RISKSince major part of sales of the Company is against advance payment, the credit risk is minimal. 30.3. INTEREST RATE RISK Financial liabilities include Rs 997 million, which are subject to floating interest ranging between 1.75% to 6.45% (2003: 2.15% to 4.25%) per annum. 30.4. FOREIGN EXCHANGE RISK Financial assets of equivalent Rs 48.679 million (2003: Rs 162.570 million) and financial liabilities of equivalent Rs 223.056 million (2003: 299.703 million) were in foreign currency which were exposed to foreign currency risk. Forward foreign currency contracts are used to manage foreign currency risk related to payments for import of goods and equipment, wherever considered appropriate. 30.5. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES The carrying values of financial assets and liabilities approximate their fair values except investment in subsidiary company which is stated at cost. 31. TRANSACTIONS WITH RELATED PARTIES Aggregate transactions with related parties during the year were as follows: ================================================================================================
2004 2003
(Rs 000s)
================================================================================================
Sale of goods
Holding company 33,391 25,996
Associated companies 3,328,472 3,080,282
Purchase of goods and services
Holding company 203,523 85,097
Associated companies 394,140 424,265
Royalty expense
Holding company 219,827 208,964
Payments on behalf of subsidiary company 620 539
================================================================================================32. GENERAL32.1. CAPACITY AND PRODUCTION Against an estimated manufacturing capacity of 28,174 (2003: 27,942) million cigarettes, actual production was 27,001 (2003: 24,639) million cigarettes. There was no production through any outside manufacturing source as actual production was sufficient to meet market demand. 32.2. NUMBER OF EMPLOYEES Total number of employees at the end of the year was 1,745 (2003: 2,071). 32.3. CORRESPONDING FIGURES Corresponding figures have been rearranged, where necessary, for the purpose of comparison. 32.4. DATE OF AUTHORISATION These financial statements have been authorised for issue by the Board of Directors of the Company on March 01, 2005. |