| Shell Pakistan Ltd - 2006 |
===================================================================================== BALANCE SHEET AS AT JUNE 30, 2006 ===================================================================================== 2006 2005 Notes (Rupees in '000) ===================================================================================== NON-CURRENT ASSETS: Fixed assets 3 5,728,075 5,587,840 Long-term investments 4 1,877,001 1,877,001 Long-term loans and advances 5 139,640 84,879 Long-term deposits and prepayments 6 110,445 48,244 7,855,161 7,597,964 CURRENT ASSETS: Stores and spares 7 28,865 16,366 Stock-in-trade 8 9,979,886 6,608,167 Trade debts 9 5,235,840 3,738,128 Loans and advances 10 41,821 33,273 Trade deposits and short-term prepayments 11 167,317 144,451 Other receivables 12 3,881,795 1,690,655 Cash and bank balances 13 981,197 752,112 20,316,721 12,983,152 Total assets 28,171,882 20,581,116 CURRENT LIABILITIES: Current maturity of liabilities against 14 26,480 50,330 assets subject to finance lease Short-term running finances utilised 15 1,779,860 3,416,350 under mark-up arrangements Short-term loans 16 3,250,000 250,000 Creditors, accrued and other liabilities 17 11,938,370 7,739,836 Mark-up accrued 18 77,035 46,797 Taxation 830,632 705,767 17,902,377 12,209,080 NON-CURRENT LIABILITIES: Deferred taxation 19 50,059 20,747 Liabilities against assets subject to finance lease 14 7,019 16,270 Asset retirement obligation 20 98,320 31,946 155,398 68,963 Total liabilities 18,057,775 12,278,043 Net assets 10,114,107 8,303,073 FINANCED BY: Share capital 21 438,323 350,658 Reserves 2,233,026 2,233,026 Unappropriated profit 7,442,758 5,719,389 Shareholders' equity 10,114,107 8,303,073 Contingencies and commitments 22 ===================================================================================== ===================================================================================== PROFIT AND LOSS ACCOUNTS FOR THE YEAR ENDED JUNE 30, 2006 ===================================================================================== 2006 2005 Notes (Rupees in '000) ===================================================================================== Sales 23 132,840,460 111,495,036 NON-FUEL RETAIL: - Sales 124,935 118,504 - Others 19,542 25,189 Other revenue 24 413,517 300,759 133,398,454 111,939,488 Less: Sales tax 16,135,935 13,516,798 Net revenue 117,262,519 98,422,690 Cost of products sold 25 107,301,071 89,684,584 9,961,448 8,738,106 Administrative and marketing expenses 26 3,807,932 3,454,308 Distribution expenses 27 989,263 1,155,458 5,164,253 4,128,340 Other operating income 28 161,564 111,196 5,325,817 4,239,536 Workers' Profit Participation Fund 12.3 246,390 195,430 Workers' Welfare Fund 81,924 70,181 Operating profit 4,997,503 3,973,925 Financial charges 29 398,009 330,941 Profit before taxation 4,599,494 3,642,984 Taxation 30 1,491,025 1,191,914 Profit after taxation 3,108,469 2,451,070 Rupees Rupees Earnings per share - basic and diluted 31 70.92 55.92 ===================================================================================== ===================================================================================== CASH FLOW STATEMENT FOR THE YEAR ENDED JUNE 30, 2006 ===================================================================================== 2006 2005 Notes (Rupees in '000) ===================================================================================== CASH FLOW FROM OPERATING ACTIVITIES: Cash generated from operations 35 2,581,820 705,132 Mark-up on short-term finances (235,819) (85,741) and short-term loans paid Taxes paid (1,336,848) (599,548) Long-term loans and advances (net) (54,761) (6,365) Long-term deposits and prepayments (net) (62,201) 28,456 Mark-up received on short-term deposits 10,388 6,108 Net cash inflow from operating activities 902,579 48,042 CASH FLOW FROM INVESTING ACTIVITIES: Fixed capital expenditure (724,924) (816,319) Proceeds from sale of property, plant and equipment 43,700 29,674 Net cash used in investing activities (681,224) (786,645) CASH FLOW FROM FINANCING ACTIVITIES: Dividends paid (1,285,490) (1,271,990) Repayment of liability under finance lease (70,290) (74,060) Net cash used in financing activities (1,355,780) (1,346,050) Net decrease in cash and cash equivalents (1,134,425) (2,084,653) Cash and cash equivalents at July 1 (2,914,238) (829,585) Cash and cash equivalents at June 30 36 (4,048,663) (2,914,238) ===================================================================================== ===============================================================================================================
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED JUNE 30, 2006
===============================================================================================================
Issued, Reserve Capital General Unappro- Total
Subscribed for issue reserves- revenue priated
and paid-up of bonus share reserves profit
capital shares premium
(Rupees in '000)
===============================================================================================================
Balance as at June 30, 2004 350,658 - 2,026,024 207,002 4,548,220 7,131,904
Final dividend for the year ended
June 30, 2004 declared subsequent
to the year's end - - - - (999,375) (999,375)
Profit after taxation for the year
ended June 30, 2005 - - - - 2,451,070 2,451,070
Interim dividend declared for the
year ended June 30, 2005 - - - - (280,526) (280,526)
Balance as at June 30, 2005 350,658 - 2,026,024 207,002 5,719,389 8,303,073
Final dividend for the year ended
June 30, 2005 declared subsequent
to the year's end - - - - (946,777) (946,777)
Transfer to reserve for issue of bonus
shares in respect of stock dividend
for the year ended June 30, 2005
declared subsequent to the year's end - 87,665 - - (87,665) -
Issue of bonus shares 87,665 (87,665) - - - -
Profit after taxation for the year
ended June 30, 2006 - - - - 3,108,469 3,108,469
Interim dividend declared for the year
ended June 30, 2006 - - - - (350,658) (350,658)
Balance as at June 30, 2006 438,323 - 2,026,024 207,002 7,442,758 10,114,107
===============================================================================================================Appropriations made by the Directors subsequent to the year ended June 30, 2006 are disclosed in note 41 of these financial statements.NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2006 1. THE COMPANY AND ITS OPERATIONS The Company is a limited liability Company incorporated in Pakistan and is listed on the Karachi and Lahore Stock Exchanges. The address of its registered office is Shell House, 6, Ch. Khaliquzzaman Road, Karachi-75530, Pakistan. The company markets petroleum, petrochemical products and compressed natural gas. It also blends and markets various kinds of lubricating oils. The company has two non-trading subsidiaries, namely Shell Pakistan Provident Trust (Private) Limited and Shell Pakistan Pension Trust (Private) Limited. During the year, the management has decided to liquidate these subsidiary companies and the liquidation process is expected to be completed within the next twelve months. In view of this, the Company applied to the Securities and Exchange Commission of Pakistan (SECP) for exemption from preparation of the consolidated financial statements as required under Section 237 of the Companies Ordinance 1984. The exemption was granted by the SECP vide their letter No EMD/233/411/2002-11298 dated June 5, 2006. The audited financial statements of the subsidiaries will be annexed in the annual report of the Company. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Statement of compliance These financial statements have been prepared in accordance with the accounting standards as applicable in Pakistan and the requirements of the Companies Ordinance, 1984. Approved accounting standards comprise of such International Accounting Standards (IASs) as notified under the provisions of the Companies Ordinance, 1984. Wherever the requirements of the Companies Ordinance, 1984 or the directives issued by the Securities and Exchange Commission of Pakistan (SECP) differ with the requirements of these standards, the requirements of the Companies Ordinance, 1984 or the requirements of the said directives take precedence. (b) Basis of preparation These financial statements have been prepared under the historical cost convention except that obligations in respect of certain employee benefit schemes and asset retirement are measured at their present value. The preparation of financial statements in conformity with International Accounting Standards requires the use of certain accounting estimates. It also requires the management to exercise its judgement in the process of applying the Company's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 40 to these financial statements. (c) Standards, interpretations and amendments to published approved accounting standards that are not yet effective Amendments to the following existing standards have been published that are mandatory to the financial statements of the Company covering accounting periods beginning on or after January 1, 2006 or later periods: (i) IAS 1 Presentation of Financial Statements - Capital Disclosures effective from January 1, 2007 (ii) IAS 19 (Amendments) - Employee Benefits effective from January 1, 2006 (iii) IAS 39 Financial Instruments: Recognition and Measurements - Fair Value Option effective from January 1, 2006Adoption of the above amendments would only result in an impact on the extent of disclosures presented in the future financial statements of the Company. (d) Property, plant & equipment and depreciation Tangible Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment loss except freehold land and capital work-in-progress which are stated at cost less impairment loss. Depreciation is charged to income applying the straight-line method whereby the cost of an asset is written off over its estimated useful life. The residual values, useful lives and depreciation methods are reviewed and adjusted, if appropriate, at each balance sheet date. Depreciation on additions is charged from the month in which an asset is put to use while no depreciation is charged for the month in which an asset is disposed off. Maintenance and normal repairs are charged to income as and when incurred. Major renewals and improvements are capitalised and the assets so replaced, if any, are retired. Profit and loss arising on disposal of properly, plant and equipment is included in income in the year of disposal. Provision for asset retirement obligation is based on current requirements, technology and price levels and is stated at fair value. The associated asset retirement costs are capitalised as part of the carrying amount of the related property, plant and equipment. The effects of changes resulting from revisions to the timing or the amount of the original estimate of the liability are incorporated on a prospective basis. Intangible Costs that are clearly associated with an identifiable asset, which has a probable economic benefit beyond one year, are recognised as intangible assets. Associated costs include staff costs of the development team and an appropriate portion of relevant overheads. Expenditure that enhances and extends the benefits of computer software programmes beyond their original specifications and useful lives is recognised as a capital improvement and added to the original cost of the software. Intangible assets are amortised using the straight-line method over their estimated useful lives. (e) Investments Investments in associated companies, subsidiaries and non listed equity securities classified as available for sale are stated at cost less provision for diminution in value. In arriving at the provision in respect of any diminution in their long-term investments, consideration is given only if there is a permanent impairment in the value of the investment. (f) Stores and spares Stores are valued at the lower of average cost and net realisable value whereas spares are valued at the lower of cost worked out on a first-in first-out basis and net realisable value. Items in transit are stated at cost incurred to date. Net realisable value signifies the estimated selling price in the ordinary course of business less costs necessarily to be incurred to make the sale. Provision is made in the financial statements for obsolete and slow moving stores and spares based on management estimate. (g) Stock-in-trade Stock-in-trade is valued at the lower of cost, calculated on a first-in first-out basis, and net realisable value. Charges such as excise and customs duties and similar levies on unsold stock of products are added to the value of the stock and carried forward. Net realisable value signifies the estimated selling price in the ordinary course of business less costs necessarily to be incurred to make the sale. Provision is made in the financial statements for obsolete and slow moving stock-in-trade based on management estimate. (h) Trade debts Trade debts are carried at original invoice amount less provision for impairment. Provision for impairment is based on a review of outstanding amounts at the balance sheet date. Bad debts are written off to the profit and loss account when identified. (i) Provisions Provisions are recognised when the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate of the amount can be made. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. (j) Trade and other payables Short-term liabilities for trade and other payables are carried at amortised cost. (k) Taxation Current Provision for current taxation is based on taxable income at the current rates of taxation after taking into account tax credits and rebates available, if any. Deferred Deferred taxation is recognised on all major temporary differences between the carrying amounts for financial reporting purposes and the amounts used for taxation purposes. A net deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. (i) Liabilities against assets subject to finance lease Liabilities against assets subject to finance lease are accounted for at the net present value of minimum payments under the lease arrangements. Finance charges under lease arrangements are allocated to periods during the lease term so as to produce a constant periodic rate of financial cost on the remaining balance of principal liability for each period. (m) Revenue recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be measured reliably. Revenue is measured at the fair value of consideration received or receivable on the following basis: -- Sales are recorded on despatch of goods to customers. -- Dividend income is recognised when the company's right to receive the dividend is established. -- Non-fuel retail income and other revenue (including franchise fee) is recognised on an accrual basis. (n) Dividend distribution Dividend distribution to the Company's shareholders is recognised as a liability in the financial statements in the period in which the dividends are declared by the Company. (o) Operating leases Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the profit and loss account on a straight line basis over the period of the lease. (p) Staff retirement benefits Except for certain expatriates for whom benefits are provided by membership of their respective Shell Pension Funds, staff retirement benefits include: (i) approved funded gratuity schemes for management and unionised staff and contributory pension scheme for management and non-contributory pension scheme for unionised staff. Contributions are made to these schemes on the basis of actuarial recommendations. The actuarial valuations are carried out using the Projected Unit Credit Method. Actuarial gains and losses are amortised over the expected future service of the current members; (ii) approved contributory provident funds for all employees; and (iii) un-funded post retirement medical benefits for all management staff. Annual provision is made in the financial statements for this scheme based on actuarial recommendation. Actuarial gains and losses are amortised over the expected future service of the current employees. Retirement benefits are payable to staff on completion of prescribed qualifying periods of service under these schemes. (q) Foreign currencies Transactions in foreign currencies are accounted for in Pakistan Rupees at the rates prevailing on the date of transaction. Monetary assets and liabilities in foreign currencies are translated into Rupees at the rates of exchange which approximate those prevailing at the balance sheet date. Exchange differences are taken to the profit and loss account. (r) Cash and cash equivalents Cash and cash equivalents are carried in the balance sheet at cost. For the purpose of the cash flow statement, cash and cash equivalents include cash in hand, balances with banks in current accounts and short-term finances. (s) Financial instruments Financial instruments carried on the balance sheet include investments, loans and advances, deposits, trade debts, other receivables, cash and bank balances, liabilities against assets subject to finance lease, short-term running finances utilised under mark-up arrangements, short-term loans, creditors, accrued and other liabilities and mark-up accrued. At the time of initial recognition, all the financial assets and liabilities are measured at cost, which is the fair value of consideration given or received for it. The carrying amount of the assets is reviewed at each balance sheet date to determine whether there is any indication of impairment of any asset or a group of assets. If such indication exists, the recoverable amount of such assets is estimated and the impairment loss is recognised in the profit and loss account. (t) Offsetting Financial assets and liabilities are offset when the Company has a legally enforceable right to offset and intends to settle either on a net basis or to realise the asset or settle the liability simultaneously. (u) Functional and presentation currency Items included in the financial statements are measured using the currency of the primary economic environment in which the Company operates. The financial statements are presented in Pakistani Rupees, which is the Company's functional and presentation currency. 3. FIXED ASSETS =====================================================================================
2006 2005
Notes (Rupees in '000)
=====================================================================================
Operating assets 3.1 5,008,463 4,904,929
Capital work-in-progress 3.5 681,723 656,480
Property, plant and equipment 5,690,186 5,561,409
Intangible assets 3.1 37,889 26,431
5,728,075 5,587,840
=====================================================================================3.1. THE FOLLOWING IS A STATEMENT OF OPERATING FIXED ASSETS========================================================================================================================================================================================================================================
Year ended June 30, 2006
Owned assets Leased assets Intangib
Freehold Leasehold Buildings Buildings on Tanks and Plant and Airconditi Lifts Dispensing Rolling Eledrical, Furniture. Computers Main Plant arid Vehicles Total Computer
land land on freehold leasehold pipelines machinery oning pumps stock and mechanical office auxiliaries frame Machinery operating software
land land plant vehicles and fire equipment assets
fighting and other
equipment assets
(Rupees in '000)
========================================================================================================================================================================================================================================
AT JULY 1,2005:
Cost 98,125 62,538 106,218 2,625,218 1,458,948 222,288 39,393 8,181 1,186,587 217,774 1,235,506 1,075,060 324,995 69,206 151,278 289,005 9,170,320 267,597
Accumulated depreciation - 30,391 49,133 738,831 678,087 181,631 28,457 3,960 631,124 191,506 522,050 604,012 297,380 68,709 33,858 206,262 4,265,391 241,166
Net book value 98,125 32,147 57,085 1,886,387 780,861 40,657 10,936 4,221 555,463 26,268 713,456 471,048 27,615 497 117,420 82,743 4,904,929 26,431
YEAR ENDED JUNE 30, 2006:
Opening net book value 98,125 32,147 57,085 1,886,387 780,861 40,657 10,936 4,221 555,463 26,268 713,456 471,048 27,615 497 117,420 82,743 4,904,929 26,431
Additions - - - 253,187 41,416 8,686 - - 104,871 18,191 207,006 82,290 11,386 15,496 1,093 36,096 779,718 23,526
DISPOSALS:
Cost - - 7 17,453 151] - - - - 37,755 902 882 365 - - 37,840 95,348 -
Depreciation - - 7,037 93 - - - - - 35,944 534 436 365 - - 30,492 74,901 -
- - - 10,416 58 - - - - 1,811 368 446 - - - 7,348 20,447 -
Depreciation / amortisation
charge for the year - 3,051 3,470 136,600 61,433 6,580 1,910 425 78,288 12,459 99,621 180,233 21,980 3,586 14,810 31,291 655,737 12,068
Closing net book value 98,125 29,096 53,615 1,992,558 760,786 42,763 9,026 3,796 582,046 30,189 820,473 372,659 17,021 12,407 103,703 80,200 5,008,463 37,889
AT JUNE 30, 2006:
Cost 98,125 62,538 106,218 2,860,952 1,500,213 230,974 39,393 8,181 1,291,458 198,210 1,441,610 1,156,468 336,016 84,702 152,371 287,261 9,854,690 291,123
Accumulated
depreciation / - 33,442 52,603 868,394 739,427 188,211 30,367 4,385 709,412 168,021 621,137 783,809 318,995 72,295 48,668 207,061 4,846,227 253,234
Net book value 98,125 29,096 53,615 1,992,558 760,786 42,763 9,026 3,796 582,046 30,189 820,473 372,659 17,021 12,407 103,703 80,200 5,008,463 37,889
Depreciation rate
% per annum - 5 2.50 5 4 5 6.67 6.67 6.67 5 to 20 5 to 10 5 to 20 33.33 25 5 20 20
========================================================================================================================================================================================================================================
========================================================================================================================================================================================================================================
Year ended June 30, 2005
Owned assets Leased assets Intangib
Freehold Leasehold Buildings Buildings on Tanks and Plant and Airconditi Lifts Dispensing Rolling Eledrical, Furniture. Computers Main Plant arid Vehicles Total Computer
land land on freehold leasehold pipelines machinery oning pumps stock and mechanical office auxiliaries frame Machinery operating software
land land plant vehicles and fire equipment assets
fighting and other
equipment assets
(Rupees in '000)
========================================================================================================================================================================================================================================
AT JULY 1, 2004:
Cost 98,125 62,538 106,218 2,376,040 1,411,444 222,288 38,753 4,767 1,065,319 235,945 1,080,750 968,487 314,337 69,206 137,955 272,792 8,464,964 243,088
Accumulated depreciation - 27,309 43,909 609,720 614,921 169,171 25,666 4,082 541,829 200,605 413,164 466,541 238,182 67,848 19,040 186,207 3,628,194 224,641
Net book value 98,125 35,229 62,309 1,766,320 796,523 53,117 13,087 685 523,490 35,340 667,586 501,946 76,155 1,358 118,915 86,585 4,836,770 18,447
YEAR ENDED JUNE 30, 2005:
Opening net book value 98,125 35,229 62,309 1,766,320 796,523 53,117 13,087 685 523,490 35,340 667,586 501,946 76,155 1,358 118,915 86,585 4,836,770 18,447
Additions - - - 250,950 47,558 - 640 4,160 122,409 13,103 155,290 106,573 10,658 - 13,323 26,278 750,942 24,509
DISPOSALS:
Cost - - - 1,772 54 - - 746 1,141 31,274 5341 - - - - 10,065 45,586 -
Depreciation - - - 546 36 - - 572 873 26,145 330 - - - - 8,477 36,979 -
- - - 1226 18 - - 174 268 5,129 204 - - - - 1,588 8,607 -
DEPRECIATION / AMORTISATION:
Charge for the year - 3,082 5,224 129,657 63,202 12,460 2,791 450 90,168 17,046 109,216 137,471 59,198 861 14,818 28,532 674,176 16,525
Closing net book value 98,125 32,147 57,085 1,886,387 780,861 40,657 10,936 4,221 555,463 26,268 713,456 471,048 27,615 497 117,420 82,743 4,904,929 26,431
AT JUNE 30, 2005:
Cost 98,125 62,538 106,218 2,625,218 1,458,948 222,288 39,393 8,181 1,186,587 217,774 1,235,506 1,075,060 324,995 69,206 151,278 289,005 9,170,320 267,597
Accumulated
depreciation mortisation - 30,391 49,133 738,831 678,087 181,631 28,457 3,960 631,124 191 ,506 522,050 604,012 297,380 68.709 33,858 206,262 4,265,391 241,166
Net book value 98,125 32,147 57,085 1,886,387 780,861 40,657 10,936 4,221 555,463 26,268 713,456 471,048 27,615 497 117,420 82,743 4,904,929 26,431
Depreciation rate
% per annum - 5 5 5 5 10 10 10 10 5 to 25 10 15 33.33 25 10 20 33.33
========================================================================================================================================================================================================================================3.2. With effect from January 1, 2006, the management has revised the depreciation and amortisation rates per annum of operating assets and computer software as follows:=====================================================================================
Revised Old
Class %
=====================================================================================
Buildings on freehold land 2.50 5.00
Tanks and pipelines 4.00 5.00
Plant and machinery 5.00 1 0.00
Air conditioning plant 6.67 1 0.00
Lifts 6.67 10.00
Dispensing pumps 6.67 1 0.00
Rolling stock and vehicles 5 to 20 5 to 25
Electrical, mechanical and fire fighting equipment 5 to 10 10.00
Furniture, office equipment and other assets 5 to 20 1 5.00
Leased assets - Plant and machinery 5.00 1 0.00
Computer software 20.00 33.33
=====================================================================================In the opinion of the management the revision would result in a more accurate reflection of the depreciation charge over the useful lives of the related assets.The above change has been accounted for as a change in accounting estimate in accordance with International Accounting Standard (IAS) 8, "Accounting Policies, changes in Accounting Estimate and Error" and the effect of the change has been recognised in the profit and loss account of the current year. Had there been no change in accounting estimate the profit before taxation for the year would have been lower by Rs 31.769 million. 3.3. THE DEPRECIATION AND AMORTISATION CHARGE FOR THE YEAR HAS BEEN ALLOCATED AS FOLLOWS =====================================================================================
2006 2005
Notes (Rupees in '000)
=====================================================================================
Cost of products sold 16,605 17,803
ADMINISTRATIVE AND MARKETING EXPENSES:
- Depreciation - Tangible assets 26 639,132 656,373
- Amortisation - Intangible assets 26 12,068 16,525
651,200 672,898
667,805 690,701
=====================================================================================3.4. The following assets with book value exceeding Rs 50,000 were disposed off during the year:===============================================================================================================================================
Cost Accumulated Book Sales Mode of Particulars of Buyers
Depreciation Value Proceeds Disposal
(Rupees 000)
===============================================================================================================================================
Tanks and pipelines 151 93 58 531 Tender Attock Petroleum Limited (Rawalpindi)
Rolling stock and vehicles 210 - 210 325 Company Policy Iftikhar-uddin (Employee)
167 44 123 510 Company Policy Zulfiqar Shaikh (Employee)
201 56 145 485 Press Advertisement Abdul Rehman (Karachi)
277 - 277 388 Company Policy Asif Sindhu (Employee)
210 - 210 286 Company Policy Maheen Fatima (Employee)
663 535 128 225 Press Advertisement Apex Marketing Services (Karachi)
354 286 68 100 Press Advertisement Apex Marketing Services (Karachi)
1,198 586 612 758 Company Policy Iqtidar Siddiqui (Employee)
Assets held under finance lease
Vehicles 574 - 574 693 Company Policy Sabah-uz-zaman (Employee)
210 - 210 286 Company Policy Muneeza Kassim (Employee)
210 - 210 286 Company Policy Gulzar Khoja (Employee)
278 - 278 370 Company Policy Mukhtar A. Khan (Employee)
277 - 277 370 Company Policy Irfan Ali Haider (Employee)
277 - 277 370 Company Policy Rashid Ahmed (Employee)
210 3 207 286 Company Policy Badruddin Hilal (Employee)
221 - 221 286 Company Policy Omar Motiwala (Employee)
638 298 340 350 Press Advertisement Pioneer Distribution Services (Hyderabad)
638 298 340 340 Press Advertisement Vertex Distribution Services (Karachi)
638 298 340 225 Press Advertisement Apex Marketing Services (Karachi)
1,273 1,01 9 254 350 Press Advertisement Pioneer Distribution Services (Hyderabad)
390 - 390 442 Company Policy Murtaza Gondalwala (Employee)
269 - 269 606 Tender Mohd. Ali Abbasi (Hyderabad)
331 - 331 454 Company Policy S.A.Salahuddin (Employee)
4,257 1,703 2,554 1,577 Tender Nisar Ahmed Luqman (Karachi)
282 6 276 730 Tender Agha Abid Majeed (Karachi)
===============================================================================================================================================3.5. CAPITAL WORK-IN-PROGRESS=====================================================================================
2006 2005
(Rupees in '000)
=====================================================================================
Buildings on leasehold land 130,458 84,359
Tanks and pipelines 74,462 26,983
Plant and machinery 1,646 10,255
Air-conditioning plant 162 162
Dispensing pumps 5,485 13,110
Rolling stock and vehicles 64,050 44,836
Electrical, mechanical and fire fighting equipment 244,321 196,480
Furniture, office equipment and other assets 37,959 55,542
Computer auxiliaries 1,847 18,022
Computer software and consultancy costs 8,462 52,898
Capital stores and spares 112,871 153,833
681,723 656,480
=====================================================================================4. LONG TERM INVESTMENTS===================================================================================================
2006 2005
Percentage Amount Percentage Amount
Notes Holding (Rupees '000) Holding (Rupees '000)
===================================================================================================
SUBSIDIARIES AND ASSOCIATES
AT COST:
Pak Arab Pipeline Company 4.1 26 1,872,000 26 1,872,000
Limited (PAPCO) 18,720,000
(2005: 18,720,000) ordinary shares
of Rs 100 each.
Non-trading subsidiaries 4.2 100 1 100 1
OTHERS - HELD AS AVAILABLE FOR SALE:
Arabian Sea Country Club Limited - 5,000 - 5,000
500,000 (2005: 500,000)
ordinary shares of Rs 10 each.
1,877,001 1,877,001
===================================================================================================4.1. PAPCO commenced its commercial operations in March 2005.The company's share of the post-tax profit as per the unaudited financial statements of PAPCO for the year ended June 30, 2006 amounted to Rs 51.531 million (2005: Rs 9.791 million). The company's share of the net assets of PAPCO, based on the unaudited balance sheet as at June 30, 2006, was Rs 1,930.438 million (2005: Rs 1,881.791 million). 4.2. Investments in non-trading subsidiaries consist of: -- Shell Pakistan Provident Trust (Private) Limited - 2 (2005: 2) fully paid ordinary shares of Rs 100 each. Shell Pakistan Pensions Trust (Private) Limited - 2 (2005: 2) fully paid ordinary shares of Rs 100 each. The subsidiaries have not commenced operations to date and the Company intends to wind them in the next twelve months (refer note 1). 5. LONG TERM LOANS AND ADVANCES =====================================================================================
2006 2005
Notes (Rupees in '000)
=====================================================================================
Considered good - -
Due from Chief Executive - -
Less: Receivable within one year 10 - -
Due from Directors - 199
Less: Receivable within one year 10 - (199)
Due from Executives 59,776 32,317
Less: Receivable within one year 10 (126,511) (14,504)
33,265 17,813
Due from Employees 43,826 54,256
Less: Receivable within one year 10 (14,659) (17,873)
29,167 36,383
Advances to contractors 5.2 77,208 30,683
139,640 84,879
===================================================================================== Reconciliation of loans and advances (Long-term and Short-term)=====================================================================================
2006 2005
Chief Directors Executives Chief Directors Executives
Executive Executive
(Rupees '000)
=====================================================================================
Opening balance - 199 32,317 416 624 22,186
Disbursements - - 58,081 - - 35,586
Repayments - 199 30,622 416 425 25,455
Closing balance - - 59,776 - 199 32,317
=====================================================================================5.1. Loans to staff are unsecured and are given for housing, purchase of motor cars/motorcycles and for general purpose in accordance with the Company's policy and are repayable over a period of two to five years.Loans for housing and purchase of motor cars are charged interest at 1 % per annum. The maximum aggregate amounts due from the Chief Executive, Directors and Executives at the end of any month during the year were Rs nil, Rs 0.166 million and Rs 59.776 million respectively (2005: Chief Executive Rs 0.333 million, Directors Rs 0.565 million and Executives Rs 54.105 million). 5.2. These represent advances in respect of various Company operated outlets which are primarily given in the form of petroleum products for meeting the working capital requirements of these sites. 6. LONG TERM DEPOSITS AND PREPAYMENTS =====================================================================================
2006 2005
(Rupees in '000)
=====================================================================================
Deposits 28,466 22,802
Prepayments 81,979 25,442
110,445 48,244
=====================================================================================7. STORES AND SPARES=====================================================================================
2006 2005
(Rupees in '000)
=====================================================================================
Stores 31,480 18,776
Spares 3,263 3,468
Less: Provision for obsolete stores (5,878) (5,878)
28,865 16,366
=====================================================================================8. STOCK-IN-TRADE=====================================================================================
2006 2005
Note (Rupees in '000)
=====================================================================================
Raw and packing materials 552,963 495,827
FINISHED GOODS:
In hand and in pipeline system 4,113,043 3,877,975
In White Oil Pipeline 8.1 15,313,880 2,234,365
9,426,923 6,112,340
9,979,886 6,608,167
=====================================================================================8.1. Stock in White Oil Pipeline includes 65,167 MT (2005: 65,167 MT) in respect of initial fill.9. TRADE DEBTS =====================================================================================
2006 2005
Notes (Rupees in '000)
=====================================================================================
CONSIDERED GOOD:
- Secured 213,807 162,427
-Unsecured 9.1 5,022,033 3,575,701
5,235,840 3,738,128
Considered doubtful 234,784 76,874
5,470,624 3,815,002
Less: Provision for impairment 9.2 (234,784) (76,874)
5,235,840 3,738,128
=====================================================================================9.1. This includes amounts due from related parties at the year-end amounting to Rs 1,190.193 million (2005: Rs 1,370.991 million).Particulars of the amounts due from related parties are as follows: =====================================================================================
2006 2005
(Rupees in '000)
=====================================================================================
Shell Aviation Limited (SAL) 1,187,893 1,369,875
Pakistan Refinery Limited 2,300 1,116
1,190,193 1,370,991
=====================================================================================9.2. PROVISION FOR IMPAIRMENT=====================================================================================
2006 2005
Notes (Rupees in '000)
=====================================================================================
Balance at July 1 76,874 107,672
Provision made during the year 26 171,026 16,171
Amount written off - (14,490)
Amount reversed during the year 28 (13,116) (32,479)
Balance at June 30 234,784 76,874
=====================================================================================10. LOANS AND ADVANCES - CONSIDERED GOOD=====================================================================================
2006 2005
Notes (Rupees in '000)
=====================================================================================
LOANS DUE FROM:
- Chief Executive 5 - -
- Directors 5 - 199
- Executives 5 26,511 14,504
- Employees 5 14,659 17,873
41,170 32,576
ADVANCES TO:
- Executives 451 99
- Employees 200 598
651 697
41,821 33,273
=====================================================================================The maximum aggregate amount of advances due from the Chief Executive, Directors and Executives at the end of any month during the year were Rs 900 thousand, Rs nil and Rs 451 thousand respectively (2005: Chief Executive Rs 20 thousand, Directors Rs 25 thousand and Executives Rs 166 thousand).11. TRADE DEPOSITS AND SHORT-TERM PREPAYMENTS =====================================================================================
2006 2005
(Rupees in '000)
=====================================================================================
BALANCES WITH STATUTORY AUTHORITIES:
- Customs duty 71,946 65,102
- Excise duty 5,447 4,571
- Petroleum development levy 21,913 23,275
99,306 92,948
Short-term prepayments 68,011 51,503
167,317 144,451
=====================================================================================12. OTHER RECEIVABLES=====================================================================================
2006 2005
Notes (Rupees in '000)
=====================================================================================
Excise and customs duties 158,538 84,805
Price differential on imported purchases 12.1 295,733 259,565
Price differential claim 12.2 2,465,627 727,314
Due from related parties 79,076 114,321
Advances to suppliers 25,030 11,706
Inland freight equalisation mechanism 98,463 --
Staff retirement benefit funds 32 113,133 105,992
Mark-up receivable on short-term deposits 390 56
Sales tax 641,297 309,570
Workers' Profit Participation Fund 12.3 532 21,492
Others 17,172 69,030
3,894,991 1,703,851
Less: Provision for impairment (13,196) (13,196)
3,881,795 1,690,655
=====================================================================================12.1. This represents amount receivable on account of price differential on imports and the ex-refinery price on direct and retail sales, during the period 1990-2002.12.2. This represents claims for price differential receivable from the Government of Pakistan (GoP). From time to time the GoP agrees to subsidise the petroleum prices by restricting the increase in prices of various petroleum products in order to reduce the burden of rising oil prices on the end consumers. The company, together with other oil marketing companies, is actively pursuing the matter with the concerned ministries for early settlement of the above claims. 12.3. WORKERS' PROFIT PARTICIPATION FUND =====================================================================================
2006 2005
(Rupees in '000)
=====================================================================================
Balance at July 1 21,492 (2,771)
Allocation for the year (246,390) (195,430)
(224,898) (198,201)
Add: Amount received (24,570) -
Add: Interest on the funds utilised - (307)
in the company's business
Less: Amount paid 250,000 220,000
Balance at June 30 532 21,492
=====================================================================================13. CASH AND BANK BALANCES=====================================================================================
2006 2005
(Rupees in '000)
=====================================================================================
With banks on interest bearing current accounts 940,472 712,850
Cash in hand 40,725 39,262
981,197 752,112
=====================================================================================Current accounts with banks carry interest ranging from 0.7 % to 5 % per annum (2005: 0.7 % to 2 % per annum).14. LIABILITIES AGAINST ASSETS SUBJECT TO FINANCE LEASE The company has entered into lease agreements with various leasing companies for the lease of motor vehicles, including tank lorries, fork lift trucks, mobile training units, transport vans and Compressed Natural Gas (CNG) equipment. The liabilities under these agreements are payable by the year 2009 and are subject to finance charge at rates ranging from 5.50 % to 15.03 % per annum (2005: 5.50 % to 17.27 % per annum). An additional charge of 8 % is also leviable on overdue rentals. The company intends to exercise its option to purchase the leased assets for Rs 0.422 million (2005: Rs 8.284 million) upon completion of the lease periods. The amount of future payments for the finance lease and the period in which these payments will become due are as follows: =====================================================================================
2006 2005
(Rupees in '000)
=====================================================================================
YEAR:
2005 - 2006 - 53,688
2006 - 2007 31,059 10,439
2007 - 2008 7,075 7,014
2008 - 2009 2,489 -
2009 - 2010 167 -
40,790 71,141
Less: Finance charge not due (7,291) (4,541)
Present value of minimum lease payments 33,499 66,600
Less: Current maturity shown under current liabilities (26,480) (50,330)
7,019 16,270
=====================================================================================15. SHORT-TERM RUNNING FINANCES UTILISED UNDER MARK-UP ARRANGEMENTS - SECURED=====================================================================================
2006 2005
(Rupees in '000)
=====================================================================================
Short-term running finances utilised
under mark-up arrangements 1,779,860 3,416,350
=====================================================================================The facilities for short-term running finances available from various banks aggregate to Rs 7,395 million (2005: Rs 6,615 million).The rates of mark-up on these facilities range from Re 0.2550 to Re 0.2858 per Rs 1,000 per day (2005: Re 0.0594 to Re 0.2314 per Rs 1,000 per day). The purchase prices are payable on various dates by June 30, 2007. These arrangements are secured by hypothecation of the Company's stock-in-trade, trade debts and other receivables. 16. SHORT-TERM LOANS - SECURED =====================================================================================
2006 2005
(Rupees in '000)
=====================================================================================
3,250,000 250,000
=====================================================================================The above loans have been obtained from various banks and carry mark-up at varying rates ranging from 9.06 % to 9.37 % per annum (2005: 7.72 % per annum) and the loan amounts are payable on various dates by July 29, 2006.These loans are secured by hypothecation of the company's stock-in-trade, trade debts and other receivables. 17. CREDITORS, ACCRUED AND OTHER LIABILITIES =====================================================================================
2006 2005
Notes (Rupees in '000)
=====================================================================================
Creditors 4,852,902 3,631,984
Bills payable 4,134,093 1,640,074
Oil marketing companies 293,135 258,021
Inland freight equalisation mechanism - 122,190
Accrued liabilities 1,265,343 1,083,751
Excise and customs duties 715,408 413,344
and development surcharge
Dealers' and cartage contractors' 17.1 190,460 175,350
security deposits
Provision for post retirement medical benefit 32.2 24,025 23,283
Workers' welfare fund 105,370 84,991
Unclaimed dividends 55,806 43,861
Payable to the Earthquake Relief Fund 45,553 --
Other liabilities 17.2 256,275 262,987
11,938,370 7,739,836
=====================================================================================Amounts due to related parties at the year-end aggregated to Rs 5,841.454 million (2005: Rs 2,919.850 million).17.1. The security deposits are non-interest bearing and are refundable on termination of contracts. 17.2. This includes Rs 78.164 million (2005: Rs 78.164 million) payable to the Government of Pakistan in respect of the initial fill of the Pak Arab Refinery Company Limited pipeline. Refer to note 22.1.2 for details in respect of a related contingent liability. 18. MARK-UP ACCRUED =====================================================================================
2006 2005
(Rupees in '000)
=====================================================================================
MARK-UP ACCRUED ON:
short-term running finances
utilised under mark-up arrangements 30,271 45,618
Short-term loans 46,764 1,179
77,035 46,797
=====================================================================================19. DEFERRED TAXATION=====================================================================================
2006 2005
(Rupees in '000)
=====================================================================================
THIS IS COMPOSED OF THE FOLLOWING:
Deferred tax liability arising in respect of
tax depreciation allowances 246,566 155,845
Deferred tax asset in respect of short-term provisions (119,159) (57,750)
Deferred fax asset in respect of add backs to taxable
income expected to be reversed in future periods (77,348) (77,348)
50,059 20,747
=====================================================================================20. ASSET RETIREMENT OBLIGATION=====================================================================================
2006 2005
(Rupees in '000)
=====================================================================================
Balance as at July 1 31,946 24,300
Liabilities incurred 62,194 6,215
Liabilities settled - - -
Accretion expense 4,180 1,431
Balance as at June 30 98,320 31,946
=====================================================================================21. SHARE CAPITAL=====================================================================================
2006 2005 2006 2005
(Number of shares) (Rupees in '000)
=====================================================================================
AUTHORISED CAPITAL
50,000,000 50,000,000 Ordinary shares of Rs 10 each 500,000 500,000
Issued, subscribed and paid-up capital
Ordinary shares of Rs 10 each fully
23,481,000 23,481,000 paid in cash 234,810 234,810
Ordinary shares of Rs 10 each issued
20,351,250 11,584,800 as fully paid bonus 203,513 115,848
43,832,250 35,065,800 438,323 350,658
=====================================================================================The Shell Petroleum Company Limited, United Kingdom, a subsidiary of Royal Dutch Shell Plc., held 33,359,341 (2005: 26,687,473) ordinary shares of Rs 10 each at June 30, 2006.22. CONTINGENCIES AND COMMITMENTS 22.1. CONTINGENCIES 22.1.1. INFRASTRUCTURE FEE Through the Sindh Finance Act 1994, the Government of Sindh imposed a fee, for services rendered in respect of development and maintenance of infrastructure, on goods entering or leaving the Province from or for outside the Country through sea or air. The company (SPL) and several others challenged the levy of the said infrastructure fee in constitutional petitions before the High Court of Sindh. However, certain amendments were made to the impugned legislation on three occasions during the pendency of the petitions. In 2001 the said "fee" was changed to a "cess". Consequently the petitions filed by SPI and others were dismissed by the High Court as having become infructuous. Subsequently, SPL and others filed civil suits in the High Court of Sindh challenging the amending Ordinance. These suits were dismissed by a single Judge in October 2003. Being aggrieved, SPL and others filed intra-court appeals against the said Judgement on, inter alia, the ground that the import, export, custom duty and highways are exclusive Federal Subjects and therefore levy of the infrastructure tax/fee/cess by the Government of Sindh is ultra vires the Constitution. These appeals are currently pending adjudication. The accumulated levy up to June 30, 2006 comes to Rs 578.892 million (2005: Rs 358.114 million). No provision has been made in these financial statements against the levy as SPL management expects a favourable outcome. 22.1.2. PARCO PIPELINE FILL The Ministry of Petroleum and Natural Resources (MOPNR) has made a claim relating to the loan arranged by the Government of Pakistan (GoP) to the Company to finance the initial fill of the PARCO Pipeline. MOPNR has calculated the Company's liability by applying the price prevailing on August 11, 2000 to the quantity of fuel for the initial fill at the time that if was supplied. The company maintains that its liability is limited only to the extent of Rs 78.164 million (2005: Rs 78.164 million) which is payable at the time that the agreement is terminated. Consequently the amount of Rs 78.164 million has been recognised as the liability in this respect as disclosed in note 17.2. The claim if calculated on the August 11, 2000 price as indicated by MOPNR would amount to Rs 294 million. Based on legal advice obtained, the management is confident that its exposure in this respect would not exceed the recognised amount of Rs 78.164 million and consequently no provision has been made for the additional amount demanded by MOPNR. 22.1.3. OTHERS The aggregate amount of other claims against the Company not acknowledged as debt as at June 30, 2006 were approximately Rs 521.312 million (2005: Rs 649.211 million). 22.2. COMMITMENTS (a) Capital expenditure contracted for but not incurred as at June 30, 2006 amounted to approximately Rs 515.738 million (2005: Rs 431.775 million). (b) Commitments for rentals of assets under operating lease agreements as at June 30, 2006 amounted to Rs 1.153 million (2005: Rs 5.019 million) payable as follows: =====================================================================================
2006 2005
Year (Rupees in '000)
=====================================================================================
2005 - 2006 - 3,864
2006 - 2007 1,153 1,155
1,153 5,019
===================================================================================== (c) Post-dated cheques have been deposited with the Collector of Customs Port Qasim in accordance with the Customs' Act 1969 as an indemnity to adequately discharge the liability for the duties and taxes leviable on imports, as required under the Finance Bill 2005.As at June 30, 2006, the value of these cheques amounts to Rs 4,666.26 1 million (2005: Rs nil). The maturity dates of these cheques extend to December 19, 2006. 23. SALES =====================================================================================
2006 2005
(Rupees in '000)
=====================================================================================
Gross sales 133,636,584 112,083,409
Less: Trade discounts 796,124 588,373
132,840,460 111,495,036
=====================================================================================24. OTHER REVENUE=====================================================================================
2006 2005
(Rupees in '000)
=====================================================================================
License/franchise fee charged to dealers 413,517 300,759
=====================================================================================25. COST OF PRODUCTS SOLD=====================================================================================
2006 2005
Notes (Rupees in '000)
=====================================================================================
Opening stock of raw and packing materials 495,827 158,878
Raw and packing materials purchased 3,267,297 2,684,416
Less: Closing stock of raw and packing materials 8 (552,963) (495,827)
Raw and packing materials consumed 3,210,161 2,347,467
Add: Manufacturing expenses 94,868 67,125
Cost of products manufactured 3,305,029 2,414,592
Non-fuel retail purchases 113,339 100,522
Opening stock of finished products 6,112,340 4,378,087
Finished products purchased 92,181,578 77,590,822
Duties and levies 25.1 15,015,708 11,312,901
Less: Closing stock of finished products 8 (9,426,923) (6,112,340)
107,301,071 89,684,584
=====================================================================================25.1. DUTIES AND LEVIES=====================================================================================
2006 2005
(Rupees in '000)
=====================================================================================
Petroleum development levy 5,555,733 1,714,514
Customs and excise duty 5,120,196 4,411,889
Inland freight equalisation margin 4,301,528 5,138,022
Wharfage 38,251 48,476
15,015,708 11,312,901
=====================================================================================26. ADMINISTRATIVE AND MARKETING EXPENSES=====================================================================================
2006 2005
Notes (Rupees in '000)
=====================================================================================
Salaries, wages and benefits 26.1 792,882 794,015
Staff training 11,534 12,181
Stores and materials 28,871 17,925
Fuel and power 87,381 69,238
Rent, taxes and utilities 222,210 181,132
Lease rentals and charges 3,452 7,922
Repairs and maintenance 168,875 207,057
Insurance 60,683 56,318
Travelling 157,835 149,468
Advertising and publicity 328,647 373,614
Technical service fee 34 452,904 430,942
Trade marks and manifestations licence fee 34 245,257 127,046
Legal and professional charges 51,055 25,495
Communication and stationery 140,756 123,446
Computer expenses 85,361 94,375
Depreciation - tangible assets 3.3 639,132 656,373
Amortisation - intangible assets 3.3 12,068 16,525
Bad debts written off 26,601 -
Provision for impairment of trade debts 9.2 171,026 16,171
Handling and storage charges 66,776 77,716
Others 61,646 47,481
3,814,952 3,484,440
LESS: COSTS RECOVERED UNDER SERVICE LEVEL:
Agreement from related parties (5,490) (14,4581]
Less: Handling and storage charges recovered (51,321) (41,821)
3,758,141 3,428,161
OTHER CHARGES:
Auditors' remuneration 26.2 7,190 5,276
Donations 26.3 - 20,871
49,791 26,147
3,807,932 3,454,308
=====================================================================================26.1. Salaries, wages and benefits include Rs 50.702 million) in respect of staff retirement benefits.26.2. AUDITORS' REMUNERATION =====================================================================================
2006 2005
(Rupees in '000)
=====================================================================================
Audit fee 1,600 1,400
Fee for substantiating inland freight 762 460
equalisation margin
Audit of provident, pension, gratuity and
workers' profit participation funds 125 125
Tax services 3,025 2,662
Special certifications, HSSE
assurance audits and sundry advisory services 1,277 314
Out of pocket expenses 401 315
7,190 5,276
=====================================================================================26.3. INTEREST OF THE DIRECTORS OR THEIR SPOUSES IN THE DONATIONS MADE DURING THE YEAR IS AS FOLLOWS======================================================================================================================
2006 2005
Name of Donee and address Names of interested Directors and (Rupees '000)
nature of interest
======================================================================================================================
Shell LiveWIRE Trust Mr Farooq Rahmatullah - Chairman Board of Trustees 2,075 1,300
(Shell House Mr Asif Sindhu - Trustee
6-Ch. Khaliquzzaman Road Mr Hasnain Moochhala - Trustee
Karachi) (2005: Mr Farooq Rahmatullah - Chairman Board of Trustees
Mr Soleemuddin Ahmed - Trustee
Ms Fawzia Kazmi - Trustee
Mr Hasnain Moochhala - Trustee)
The Layton Rahmatulla Benevolent Mr Farooq Rahmatullah - Trustee 3,000 3,000
Trust Mr Farrokh K. Captain - Trustee
(37-C, Phase II, Sunset Lane (2005: Mr Farooq Rahmatullah - Trustee
No 4, DHA, Karachi) Mr Farrokh K. Captain - Trustee)
The Kidney Centre Post Mr Farooq Rahmatullah - Member, 4,800 3,020
Graduate Training Institute Board of Governors
(172/R, Rafiqui Shaheed Road, (2005: Mr Farooq Rahmatullah - Member,
Karachi) Board of Governors)
The Ago Khan University Hospital Mr Farooq Rahmatullah - Member 1 ,600 1,700
(Stadium Rood, Karachi) The Resource Development Committee
(2005: Mr Farooq Rahmatullah - Member
The Resource Development Committee)
Himalayan Wildlife Foundation Mr Farooq Rahmatullah - Director L700 - -
(01, Park Road, F-8/1, lslamabad)
Mohatta Palace Gallery Trust Mr Farooq Rahmatullah - Trustee 1,075 --
(Room No 402, Tughlaq House, Karachi)
Society for Sustainable Development Mr Fotehali W. Vellani - Member Executive 750 - -
(Mansebra Road, Nathiagali) Committee
SOS Children's Villages of Pakistan (2005: Mr Manzoor H. Noon - Vice President) - 1,000
(Ferozepur Road Lahore)
======================================================================================================================27. DISTRIBUTION EXPENSES=====================================================================================
2006 2005
(Rupees in '000)
=====================================================================================
Gross expenditure 3,925,220 4,039,359
Less: Recoverable against inland (2,935,957) (2,883,901)
freight equalisation mechanism 989,263 1,155,458
=====================================================================================28. OTHER OPERATING INCOME=====================================================================================
2006 2005
Note (Rupees in '000)
=====================================================================================
Liabilities no longer payable written back 77,286 35,937
Dividend income from associate (PAPCO) and
Arabian Sea Country Club 3,134 -
Insurance commission 2,074 -
Reversal of provision for 9.2 13,116 32,479
impairment of trade debts
Scrap sales 17,150 2,361
Profit on disposal of property, plant and equipment 23,253 21,067
Mark-up on short-term deposits 10,722 5,226
Mark-up on delayed payments 826 2,044
Sundries 14,003 12,082
161,564 111,196
=====================================================================================29. FINANCIAL CHARGES=====================================================================================
2006 2005
Note (Rupees in '000)
=====================================================================================
Bank charges 71,453 63,950
Interest on Workers' Profit Participation Fun 12.3 - 307
Interest paid to credit customers for early payments 8,804 8,652
Mark-up on short-term running finances 266,057 128,940
and short-term loans
Finance charge on liabilities against 4,699 8,369
assets subject to finance lease
Exchange loss 46,996 120,723
398,009 330,941
=====================================================================================30. TAXATION=====================================================================================
2006 2005
(Rupees in '000)
=====================================================================================
CURRENT:
- for the year 1,461,713 1,281,385
- for prior periods - 16,200
Deferred 29,312 (105,671)
1,491,025 1,191,914
=====================================================================================30.1. RELATIONSHIP BETWEEN TAX EXPENSE AND ACCOUNTING PROFIT=====================================================================================
2006 2005
(Rupees in '000)
=====================================================================================
Accounting profit before taxation 4,599,494 3,642,984
Tax rate 35% 35%
Tax on accounting profit 1,609,823 1,275,044
TAX EFFECT OF DIFFERENCES RELATING TO:
- excess perquisites 11,105 7,000
- depreciation charged in the financial A564 - 449
statements on leasehold land
Net tax charge on turnover arising in Azad Kashmir 3,050 5,850
Effect of applicability of lower (138,425) (84,061)
tax rates on certain income
Current tax charged in respect of prior years - 16,200
Others 5,472 (28,568)
Tax expense for the current year 1,491,025 1,191,914
=====================================================================================31. EARNINGS PER SHAREThere is no dilutive effect on the basic earnings per share of the company, which is based on: =====================================================================================
2006 2005
=====================================================================================
Profit after taxation 3,108,469 2,451,070
Average number of ordinary shares in issue during the year 43,832,250 43,832,250
Earnings per share (Rupees) 70.92 55.92
=====================================================================================32. STAFF RETIREMENT BENEFIT SCHEMES32.1. PENSION & GRATUITY As mentioned in note 2(p), the company operates funded gratuity and contributory pension schemes for all its employees. Contributions are made to these schemes on the basis of actuarial recommendations. Actuarial valuation of the schemes are carried out annually. The amounts recognised in the balance sheet are based on a valuation carried out as at the balance sheet date and are as follows: ===============================================================================================================================
2006 2005
Management Non-Management Management Non-Management
Pension Gratuity Pension Gratuity Pension Gratuity Pension Gratuity
(Rupees in '000) (Rupees in '000)
===============================================================================================================================
Fair value of plan assets 1,089,853 89,789 6,520 59,173 969,288 68,622 6,624 54,532
Less: Present value of defined
benefit obligation (1,030,062) (139,141) (4) (27,971) (908,938) (112,582) (4) (28,513)
Surplus/(deficit) 59,791 (49,352) 6,516 31,202 60,350 (43,960) 6,620 26,019
Actuarial losses / (gains) to be
recognised in future periods in
accordance with the Company's
accounting policy 5,986 69,375 - (17,888) 5,549 74,611 - (16,120)
Asset in respect of staff
retirement benefits 65,777 20,023 6,516 13,314 65,899 30,651 6,620 9,899
THE FOLLOWING AMOUNTS HAVE BEEN CHARGED
TO THE PROFIT AND LOSS ACCOUNT DURING
THE CURRENT YEAR IN RESPECT OF THESE SCHEMES:
Current service cost 56,178 12,130 - 1,486 46,633 10,090 - 986
Interest cost 103,800 12,092 - 3,189 62,529 6,615 - 1,462
Expected return on plan assets (113,475) (7,540) (772) (6,257) (76,165) (7,218) (579) (4,152)
Actuarial loss / (gain) recognised
during the year 297 3,990 876 (1,185) (5,536) 1,562 1,199 (1,983)
Employee contributions (5,850) - - - (6,059) - - -
Expense / (reversal) for the year 40,950 20,672 104 (2,767) 21,402 11,049 620 (3,687)
MOVEMENT IN THE ASSET/(LIABILITY)
RECOGNISED IN THE BALANCE SHEET:
Balance at July 1 65,899 30,651 6,620 9,899 41,492 31,990 7,240 5,193
Net (charge) / reversal for the year (40,950) (20,672) (104) 2,767 (21,402) (11,049) (620) 3,625
Contributions by the Company 40,828 10,044 - 648 45,809 9,710 - 1,081
Transfers between funds - - - - - - - -
Asset in respect of staff
retirement benefits 65,777 20,023 6,516 13,314 65,899 30,651 6,620 9,899
Current account balance with funds 34,096 (3,895) 1,628 2,422 18,866 (8,944) 1,628 500
Balance in respect of seconded staff (25,634) (6,204) - - (18,057) (3,629) - -
74,239 9,924 8,144 15,736 66,708 18,078 8,248 10,399
===============================================================================================================================
=====================================================================================
2006 2005
(Rupees in '000)
=====================================================================================
Total balance receivable in respect 108,043 103,433
of defined benefit schemes
Total balance receivable in respect 5,090 2,559
of defined contribution schemes 113,133 105,992
===================================================================================== The following significant assumptions were used in the valuation of these schemes:=====================================================================================
2006 2005
% per annum
=====================================================================================
- Expected long-term rate 8.66 9.52
of increase in salary level
- Discount rate 10.78 11.65
- Expected long-term rate of interest 5.50 6.33
=====================================================================================The balances due from / payable to the funds are interest free and repayable on demand.32.2. POST RETIREMENT MEDICAL BENEFITS The company also provides post retirement medical benefits to its management staff. Actuarial valuation of the scheme is carried out annually. The amount recognised in the balance sheet is based on a valuation carried out as at the balance sheet date and is as follows: =====================================================================================
2006 2005
(Rupees in '000)
=====================================================================================
Present value of defined benefit obligation 36,209 26,530
Less: Fair value of plan assets - -
36,209 26,530
Actuarial losses to be recognised
in future periods in accordance
with the company's accounting policy 12,184 3,247
Liability recognised at June 30 24,025 23,283
=====================================================================================The following amounts have been charged to the profit and loss account during the current year in respect of this scheme:=====================================================================================
2006 2005
(Rupees in '000)
=====================================================================================
Current service cost 703 841
Interest cost 2,918 2,586
Recognition of transitional liability - - -
Actuarial loss recognised during the year 163 599
3,784 4,026
===================================================================================== Movement in the liability recognised in the balance sheet:=====================================================================================
2006 2005
(Rupees in '000)
=====================================================================================
Balance at July 1 23,283 21,512
Add: Charge for the year 3,784 4,026
Less: Payments during the year (3,042) (2,255)
Balance at June 30 24,025 23,283
===================================================================================== The following significant assumptions were used in the valuation of this scheme:=====================================================================================
2006 2005
% per annum
=====================================================================================
- Discount rate 10.78 11 .65
- Expected long-term rate of increase in medical cost 5.50 6.33
=====================================================================================32.3. The value of investments made by the staff retirement funds operated by the Company as per their audited financial statements are as follows:=====================================================================================
Dec 31, 2005 Dec 31, 2004
(Rupees '000)
=====================================================================================
Shell Pakistan Management Staff Provident Fund 322,807 251,895
Shell Pakistan Staff Provident Fund 11,865 10,052
Shell Pakistan Labour Provident Fund 60,305 50,926
Shell Pakistan Management Staff Gratuity Fund 67,191 50,534
Shell Pakistan Labour and Clerical Staff Gratuity Fund 76,376 65,397
Shell Pakistan Management Staff Pension Fund 967,546 802,078
Shell Pakistan Staff Pension Fund 6,075 2,404
=====================================================================================32.4. AGGREGATE AMOUNT CHARGED IN THESE FINANCIAL STATEMENTS IN RESPECT OF THE COMPANY'S CONTRIBUTION TOWARDS THE FUNDS ARE AS FOLLOWS=====================================================================================
2006 2005
(Rupees in '000)
=====================================================================================
- in respect of pension and gratuity schemes 58,959 29,384
- in respect of provident funds 18,973 17,292
- in respect of post retirement medical benefit schemes 3,784 4,026
81,716 50,702
=====================================================================================33. REMUNERATION OF CHIEF EXECUTIVE, DIRECTORS AND EXECUTIVES===============================================================================================================
2006 2005
Chief Directors Executives Chief Directors Executives
Executive Executive
(Rupees '000)
===============================================================================================================
Managerial remuneration
(including bonus) 12,012 19,385 367,523 10,464 20,727 236,552
Company's contribution
to pension, gratuity
and provident fund 210 2,520 50,789 465 3,428 34,014 -
HOUSING:
- Rent 1,207 1,083 - 1,260 840 -
- Utilities 2,148 1,120 20,901 1,839 1,168 14,351
- Other items 233 216 4,113 1,607 440 14,351
Leave passage - - - - - -
Medical expenses 1,329 141 8,047 62 195 5,661
17,139 24,465 451,373 15,697 26,798 290,578
Number of persons at year's end 1 4 218 1 4 163
===============================================================================================================During the year Mr Farooq Rahmatullah retired as Chief Executive Officer of the Company with effect from May 1, 2006 and was succeeded by Mr Quentin D'Silva who took office from the same date.Aggregate amount charged in the financial statements for the year for fee to 6 Directors was Rs 125,000 (2005: 6 Directors Rs 100,000). In addition, the Chief Executive, 4 Directors and some of the Executives were also provided with free use of Company cars. 34. RELATED PARTY TRANSACTIONS =============================================================================================
Parent company Other related parties
2006 2005 2006 2005
(Rupees '000)
=============================================================================================
(i) Purchases - - 52,453,978 42,016,660
(ii) Sales - - 1,963,607 5,375,712
(iii) Other items
- Technical service fee charged 452,904 250,000 - 180,942
- Trade marks and manifestations
license fee charged - 67,341 245,257 59,705
- Computer expenses charged (Global
Infrastructure Desktop charges) - - 53,160 75,730
- Expenses recovered from related part 73,721 - 78,199 85,655
- Other expenses charged by related pa - - 62,336 24,795
=============================================================================================In addition to this, the Company also paid pipeline transportation expenses amounting to Rs 948.161 million (2005: Rs 375.695 million) to PAPCO which is an associate company.Purchases from / sales to related parties are made on commercially agreed terms negotiated by the Company. Technical services include advice and assistance on the implementation of strategies and in the Company's operations. The costs for these services and the fees have been determined on the basis of agreements between the Company and related Shell Group companies based on an agreed methodology. Trade marks and manifestations licence fee and Global Infrastructure Desktop charges are based on the agreements entered into by the Company. Expenses recovered from / charged by related parties are based on actuals. In addition to the above, the Company also has related party relationships with the Chief Executive and Directors as key management personnel. Particulars of transactions entered with key management personnel are as per the terms of their employment and are disclosed in note 33 of these financial statements. 35. CASH GENERATED FROM OPERATIONS =====================================================================================
2006 2005
Notes (Rupees in '000)
=====================================================================================
Profit before taxation 4,599,494 3,642,984
ADJUSTMENT FOR NON-CASH CHARGES AND OTHER ITEMS:
Depreciation / amortisation expense charged to the
profit and loss account 3.3 667,805 690,701
Provision for impairment of trade debts 26 171,026 16,171
Bad debts written off 26 26,601 -
Reversal of provision for impairment of trade 28 (13,116) (32,479)
Profit on disposal of property,
plant and equipment 28 (23,253) (21,067)
Mark-up on short-term deposits 28 (10,722) (5,226)
Mark-up on short-term running finances and
short-term loans 29 266,057 128,940
Working capital changes 35.1 (3,102,072) (3,714,892)
2,581,820 705,132
=====================================================================================35.1. WORKING CAPITAL CHANGES=====================================================================================
2006 2005
(Rupees in '000)
=====================================================================================
(INCREASE)/DECREASE IN CURRENT ASSETS:
Stores and spares (12,499) 5,818
Stock-in-trade (3,371,719) (2,071,202)
Trade debts (1,682,223) (998,229)
Loans and advances (net) (8,548) 250
Trade deposits and short-term prepayments (net) (22,866) (66,373)
Other receivables (net) (2,190,806) (1,481,862)
(7,288,661) (4,611,598)
INCREASE IN CURRENT LIABILITIES:
Creditors, accrued and other liabilities
(excluding unclaimed dividends) 4,186,589 896,706
(3,102,072) (3,714,892)
=====================================================================================36. CASH AND CASH EQUIVALENTS=====================================================================================
2006 2005
Notes (Rupees in '000)
=====================================================================================
Cash and bank balances 13 981,197 752,112
Short-term running finances utilised under mark-up
arrangements 15 (1,779,860) (3,416,350)
Short-term loans 16 (3,250,000) (250,000)
(4,048,663) (2,914,238)
=====================================================================================37. FINANCIAL ASSETS AND LIABILITIES37.1. THE COMPANY'S EXPOSURE TO INTEREST RATE RISK ON ITS FINANCIAL ASSETS AND LIABILITIES AS THE BALANCE SHEET DATE ARE SUMMARISED AS FOLLOWS ===========================================================================================================================
2006
Interest / Mark-up bearing Non Interest / Mark.up bearing
Maturity Maturity Maturity Maturity
up to one after one Sub total upto one after one Sub total Total
year year year year
(Rupees in '000)
===========================================================================================================================
FINANCIAL ASSETS:
Investments - - - - 1,877,001 1,877,001 1,877,001
Loans and advances 35,337 66,349 101,686 6,484 73,291 79,775 181,461
Deposits - - - 28,466 - 28,466 28,466
Trade debts - - - 5,235,840 - 5,235,840 5,235,840
Other receivables - - - 2,943,265 - 2,943,265 2,943,265
Cash and bank balances 940,472 - 940,472 40,725 - 40,725 981,197
975,809 66,349 1,042,158 8,254,780 1,950;292 10,205,072 11,247,230
FINANCIAL LIABILITIES:
Liabilities against assets subject to
finance lease 26,480 7,019 33,499 - - - 33,499
Short-term running finance utilised
under mark.up arrangements 1,779,860 - 1,779,860 - - - 1,779,860
Short-term loan 3,250,000 - 3,250,000 - - - 3,250,000
Creditors, accrued
and other liabilities - - - 11,018,771 - 11,018 771 11,018,771
Mark-up accrued - - - 77,035 - 77,035 77,035
5,056,340 7,019 5,063,359 11,095,806 11,095,806 16,159,165
On balance sheet gap (a) (4,080,531) 59,330 (4,021,201) (2,841,026) 1,950,292 (890,734) (4,911,935)
=========================================================================================================================== (a) The on balance sheet gap represents the net amounts of on-balance sheet items.===========================================================================================================================
2005
Interest / Mark-up bearing Non Interest / Mark.up bearing
Maturity Maturity Maturity Maturity
upto one after one Sub total upto one after one Sub total Total
year year year year
(Rupees in '000)
===========================================================================================================================
FINANCIAL ASSETS:
Investments - - - - 1,877,001 1,877,001 1,877,001
Loans and advances 31,839 53,230 85,069 1,434 31,649 33,083 118,152
Deposits - - - 22,802 - 22,802 22,802
Trade debts - - - 3,738,128 - 3,738,128 3,738,128
Other receivables - - - 1,157,090 - 1,157,090 1,157,090
Cash and bank balances 712,850 - 712,850 39,262 - 39,262 752,112
744,689 53,230 797,919 4,958,716 1,908,650 6,867,366 7,665,285
FINANCIAL LIABILITIES
Liabilities against assets subject to
finance lease 50,330 16,270 66,600 - - - 66,600
Short-term running finance utilised
under mark-up arrangements 3,416,350 - 3,416,350 - - - 3,416,350
Short-term loan 250,000 - 250,000 - - - 250,000
Creditors, accrued
and other liabilities - - - 7,143,908 - 7,143,908 7,143,908
Mark-up accrued - - - 46,797 - 46,797 46,797
3,716,680 16,270 3,732,950 7,190,705 - 7,190,705 10,923,655
On balance sheet gap (a) (12,971,991) 36,960 (2,935,031) (2,231,989) 1,908,650 (323,339) 13,258,370)
=========================================================================================================================== (a) The on balance sheet gap represents the net amounts of on-balance sheet items.The effective interest / mark-up rates for the monetary financial assets and liabilities are mentioned in respective notes to the financial statements. 37.2. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES The company finances its operations through equity, borrowings and management of working capital with a view to maintaining an appropriate mix between various sources of finance to minimise risk. Taken as a whole, the Company's risk arising from financial instruments is limited as there is no significant exposure to price and cash flow risk in respect of such instruments. 37.2.1. CREDIT RISK Credit risk represents the accounting loss that would be recognised at the reporting date if counter parties failed completely to perform as contracted. The company's credit risk is primarily attributable to its receivables. Out of the financial assets aggregating Rs 11,235.101 million (2005: Rs 7,665.285 million) the financial assets subject to credit risk amount to Rs 11,194.376 million (2005: Rs 7,626.023 million). The company manages credit risk of receivables through the monitoring of credit exposures, limiting transactions with customers and continuing assessment of the credit worthiness of customers. Credit risk for balances at bank is limited by dealing with various banks with reasonably high credit rating. Significant receivable balances relate to the balances due from the Government of Pakistan (including its related agencies) and balances due from related parties. The company believes that it is not exposed to any specific credit risk in respect of these balances. 37.2.2. CURRENCY RISK Foreign currency risk arises mainly where payables exist due to imports of goods and transactions with foreign related parties as well as trade receivables from foreign related parties. The company obtains forward exchange cover, where necessary and permissible, to hedge foreign currency exposure. 37.2.3. LIQUIDITY RISK Liquidity risk is the risk that an enterprise will encounter difficulties in raising funds to meet commitments associated with financial instruments. Through its treasury function, the Company continually monitors its liquidity position and ensures availability of funds by maintaining flexibility in funding by keeping committed credit lines available. 37.3. FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying value of financial instruments reflected in the financial statements approximate their fair values. 38. NUMBER OF EMPLOYEES =====================================================================================
2006 2005
=====================================================================================
Total number of employees at June 30 536 520
=====================================================================================39. CORRESPONDING FIGURESCorresponding figures have been rearranged and reclassified, wherever necessary, for the purpose of comparison. Significant re-classifications for better presentation and consistency with the requirements of the Companies Ordinance 1984, include: -- Other receivables have been re-classified by a net amount of Rs 427.554 million, with Rs 685.575 million being shown under trade debts and Rs 258.021 million being classified under Creditors, Accrued and other liabilities. -- Other income amounting to Rs 7.270 million in 2005 was shown below operating profit in the comparative period. This head has been re-classified to other operating income. -- Operating income items amounting to Rs 103.926 million in 2005 were shown as other revenue in the comparative period. This amount has been re-classified in other operating income. 40. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS The preparation of financial statements in conformity with approved accounting standards requires the use of certain critical accounting estimates. It also requires the management to exercise its judgement in the process of applying the company's accounting policies. Estimates and judgements are continually evaluated and are based on historical experience, including expectations of future events that are believed to be reasonable under the circumstances. The areas where various assumptions and estimates are significant to the Company's financial statements or where judgement was exercised in application of accounting policies are as follows: (i) Provision for impairment of trade debts and other receivables (notes 9.2 and 12) (ii) Provision for obsolete inventory and stores and spares (notes 7 and 8) (iii) Estimates of receivables and payables in respect of staff retirement benefit schemes (note 32) (iv) Taxation (note 30); and (v) Asset retirement obligations (note 20) 41. DIVIDENDS In their meeting held on August 7, 2006, the Board of Directors of the Company have proposed a final cash dividend for the year ended June 30, 2006 of Rs 22.00 per share (220 %). This is in addition to the interim dividend of Rs 8.00 per share resulting in a total cash dividend for the year of Rs 30.00 per share (2005: Rs 35.00 per share) amounting to Rs 1,314.968 million (2005: Rs 1,227.303 million). The Directors have also recommended a stock dividend through the issue of bonus shares in the proportion of 1 share for every 4 shares held - 25% (2005: 25%). The bonus shares, so issued shall not be eligible for the final cash dividend declared for the year ended June 30, 2006. The approval of the members for the final cash dividend and the proposed bonus issue will be obtained in the Annual General Meeting to be held on October 5, 2006. The Financial statements for the year ended June 30, 2006 do not include the effect of the final dividend which will be accounted for in the financial statements for the year ending June 30, 2007. 42. GENERAL Figures have been rounded off to the nearest thousand. 43. DATE OF AUTHORISATION These financial statements were authorised for issue on August 7, 2006 by the Board of Directors of the Company. |