| Engro Chemical (Pakistan) Ltd - 2003 |
=================================================================================== BALANCE SHEET AS AT DECEMBER 31, 2003 ----------------------------------------------------------------------------------- (AMOUNTS IN THOUSAND) Note 2003 2002 (Rupees) =================================================================================== SHARE CAPITAL AND RESERVES Share Capital Authorised 200,000,000 Ordinary shares of Rs.10 each 2,000,000 2,000,000 Issued, subscribed and paid-up 3 1,529,400 1,390,364 Reserves - capital - 139,036 - revenue 4,129,240 3,794,240 4,129,240 3,933,276 Unappropriated profit 4,899 6,636 4,134,139 3,939,912 5,663,539 5,330,276 REDEEMABLE CAPITAL AND ACCRUED MARK-UP 4 2,661,500 2,816,667 LONG TERM LOANS 5 574,000 505,607 DEFERRED LIABILITIES Deferred taxation 6 848,722 861,659 Retirement and other service benefits 7 187,889 165,453 1,036,611 1,027,112 CURRENT LIABILITIES AND PROVISIONS Current portion of - redeemable capital and accrued mark-up 4 587,500 626,282 - long term loans 5 - 254,893 - other service benefits 7 23,421 18,954 Short term borrowings 8 322,635 1,121,330 Creditors, accrued and other liabilities 9 1,301,570 2,095,963 Taxation 158,931 - Proposed dividend 535,290 486,628 2,929,347 4,604,050 CONTINGENCIES AND COMMITMENTS 10 12,864,997 14,283,712 FIXED ASSETS Operating assets 11 6,568,377 6,726,745 Capital work-in-progress 12 527,343 467,832 7,095,720 7,194,577 LONG TERM INVESTMENTS 13 1,424,557 1,340,000 LONG TERM LOANS AND ADVANCES 14 75,223 107,308 DEFERRED EXPENDITURE 15 44,808 79,861 FOREIGN EXCHANGE RISK INSURANCE CONTRACT - 153,660 CURRENT ASSETS Stores, spares and loose tools 16 566,922 597,806 Stock-in-trade 17 385,582 771,055 Leasehold land held for sale - 4,608 Trade debts 18 640,243 526,124 Loans, advances, deposits and prepayments 19 159,821 248,278 Other receivables 20 55,031 106,948 Current portion of Foreign Exchange Risk Insurance Contract - 77,915 Taxation - 170,234 Short term investments 21 766,022 748,797 Cash and bank balances 22 1,651,068 2,156,541 4,224,689 5,408,306 12,864,997 14,283,712 =================================================================================== =================================================================================== PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED DECEMBER 31, 2003 (AMOUNTS IN THOUSAND EXCEPT FOR EARNINGS PER SHARE) ----------------------------------------------------------------------------------- (AMOUNTS IN THOUSAND) Note 2003 2002 (Rupees) =================================================================================== Sales 23 12,173,006 10,893,319 Less: Cost of goods sold 24 8,309,937 7,343,132 GROSS PROFIT 3,863,069 3,550,187 Less: Selling and distribution expenses 25 1,328,731 1,233,089 Other operating income - 10,000 PROFIT FROM OPERATION 2,534,338 2,327,098 Other income 26 392,093 231,398 2,926,431 2,558,496 Less: Financial charges 27 371,810 575,510 Other charges 28 231,370 147,261 603,180 722,771 PROFIT BEFORE TAXATION 2,323,251 1,835,725 Provision for taxation 29 766,468 702,562 PROFIT AFTER TAXATION 1,556,783 1,133,163 Earnings per share Basic and diluted 30 Rs. 10.18 Rs. 7.41 =================================================================================== =================================================================================== CASH FLOW STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2003 ----------------------------------------------------------------------------------- (AMOUNTS IN THOUSAND) Note 2003 2002 (Rupees) =================================================================================== CASH FLOW FROM OPERATING ACTIVITIES Cash generated from operations 32 2,757,823 2,744,319 Retirement and other service benefits paid (70,718) (74,184) Financial charges paid (480,693) (635,479) Taxes paid (450,239) (288,632) Long term loans and advances 32,085 44,680 Deferred costs 58,270 (34,031) Net cash inflow from operating activities 1,846,528 1,756,673 CASH FLOW FROM INVESTING ACTIVITIES Capital expenditure (428,410) (823,249) Sale proceeds on disposal of fixed assets 16,779 6,963 Income on deposits/bonds 44,857 32,815 Long term investments (84,557) - Dividends received 323,000 292,500 Net cash (outflow) from investing activities (128,331) (490,971) CASH FLOW FROM FINANCING ACTIVITIES Proceeds from redeemable capital 1,350,000 1,000,000 Repayment of redeemable capital (1,543,949) (352,232) Proceeds from long term loans 574,000 - Repayment of long term loans (528,926) (197,395) Dividends paid (1,258,875) (983,149) Net cash (outflow) from financing activities (1,407,750) (532,776) Net increase in cash and cash equivalents 310,447 732,926 Cash and cash equivalents at the beginning of the year 1,784,008 1,051,082 Cash and cash equivalents at the end of the year 33 2,094,455 1,784,008 ===================================================================================NOTES TO THE ACCOUNTS FOR THE YEAR ENDED DECEMBER 31, 2003 3. ISSUED, SUBSCRIBED AND PAID-UP CAPITAL ===================================================================================
(AMOUNTS IN THOUSAND)
2003 2002
(Rupees)
===================================================================================
40,352,000 Ordinary shares of Rs.10 each fully paid
in cash 403,520 403,520
112,588,079 Ordinary shares of Rs.10 each issued
as fully paid bonus shares
(2002 : 98,684,435) 1,125,880 986,844
152,940,079 1,529,400 1,390,364
===================================================================================4. REDEEMABLE CAPITAL AND ACCRUED MARK-UP===================================================================================
2003 2002
(Rupees)
===================================================================================
- Secured (Non-participatory)
Long term finance utilised under mark-up arrangements:
- National Bank of Pakistan [NBP (1)] - 3,069
- Habib Bank Limited (HBL) - 450,000
- ABN Amro Bank (ABN) - syndicated - 490,000
- Muslim Commercial Bank Limited [MCB (1)] - 250,000
- United Bank Limited [UBL (1)] - syndicated - 349,000
- National Bank of Pakistan [NBP (2)] 400,000 400,000
- National Bank of Pakistan [NBP (3)] 350,000 -
- United Bank Limited [UBL (2)] 460,000 -
- Muslim Commercial Bank Limited [MCB (2)] 340,000 -
- Standard Chartered Bank (SCB) 200,000 -
Term Finance Certificates (TFCs)
- lst Tranche 499,600 499,800
- 2nd Tranche 999,400 999,800
1,499,000 1,499,600
3,249,000 3,441,669
Add: Accrued mark-up during grace period - 1,280
3,249,000 3,442,949
Less: Current portion shown under current liabilities 587,500 626,282
2,661,500 2,816,667
===================================================================================The particulars of the above long term finance and TFCs are given in notes 4.1 to 4.6 below:4.1. ======================================================================================
Lender Sale Purchase Installments
Price Price Number Commencing from
(Rupees)
======================================================================================
NBP (2) 400,000 544,477 2 half yearly December 15, 2006
NBP (3) 350,000 507,668 8 half yearly March 31, 2004
UBL (2) 920,000 1,655,748 5 half yearly September 30, 2006
MOB (2) 680,000 1,223,814 5 half yearly September 30, 2006
SCB 400,000 719,891 5 half yearly September 30, 2006
======================================================================================The above loans carry mark-up ranging between 1.0% - 1.05% over six months Government treasury bills.4.2. The TFCs have an embedded call option for early redemption exercisable by the Company after the third year with three months notice. The principal amount of TFCs is to be repaid in four equal semi-annual installments in arrears after a grace period of approximately thirty six months from the date of issue. ====================================================================================
Installment Repayment Rate of Profit
payable period
====================================================================================
TFC - 1st Tranche semi-annual 2001 -2006 1.15% over the base rate*
with floor of 13%
and cap of 17% p.a.
TFC - 2nd Tranche semi-annual 2002-2007 1% over the base rate*
with floor of 11%
and cap of 15% p.a.
====================================================================================* weighted average of last three cut off rates of 5 years Pakistan Investment Bonds.The Company intends to call these TFCs at the earliest call dates. The first tranche can be called in November 2004. 4.3. The above finances are secured by an equitable mortgage upon the immovable property of the Company and floating charge over current and future assets. 4.4. The NBP (2) loan was obtained to finance the NPK blending plant. 4.5. The NBP (3) loan was obtained to finance the prepayment of the International Finance Corporation and the Commonwealth Development Corporation long term foreign currency loans. 4.6. In view of the substance of the transactions, the sale and repurchase of assets referred to in note 4.1 above have not been recorded in these financial statements. 5. LONG TERM LOANS ===========================================================================================================
Limit in Outstanding
foreign in foreign
Currency currency currency
2003 2002 2003 2002
(Rupees)
-----------------------------------------------------------------------------------------------------------
Loans - Secured
International Finance
Corporation (IFC)
First Loan
First A Loan US$ 27,000 - 4,200 - 100,775
Second A Loan US$ 9,000 - 4,500 - 263,250
Second B Loan US$ 9,000 - 3,000 - 175,500
Commonwealth Development
Corporation (ODO)
Second Loan US$ 11,000 - 5,500 - 321,750
Citibank N.A. US$ 10,000 10,000 - 574,000 -
574,000 760,500
Less: Current portion shown under current liabilities - 254,893
574,000 505,607
===========================================================================================================The particulars of the above long term loans are given in notes 5.1 to 5.3 below:5.1. ==========================================================================================
Repayment
Loans Rate of interest per annum Currency Number of Due date
installments
Citibank N.A. 2% above six months LIBOR PKR Lump sum April 15, 2005
==========================================================================================5.2. The IFC - Second Loan and CDC - Second Loan were prepaid in full during the year. Foreign Exchange Risk Insurance contract (FERI) was also terminated at that time.5.3. Citibank loan is secured by lien over USD Bonds (US$ 10,000) and second ranking floating charge over current and future assets of the company. 6. DEFERRED TAXATION ===================================================================================
2003 2002
(Rupees)
===================================================================================
Credit/(debit) balances arising on account of:
Accelerated depreciation allowance 964,627 956,085
Provision for - retirement benefits (73,959) (64,543)
- slow moving stores and spares (34,045) (21,982)
- diminution in value of investments (1,750) (1,750)
- doubtful receivables (2,864) (2,864)
Others (3,287) (3,287)
848,722 861,659
===================================================================================7. RETIREMENT AND OTHER SERVICE BENEFITS===================================================================================
2003 2002
NOTE (Rupees)
===================================================================================
Retirement benefits:
Opening balance 143,691 124,651
Expense recognised 59,947 54,087
Amount allocated to capital work-in-progress 188 1,276
Contributions made (26,351) (36,323)
177,475 143,691
Less:
- Payable to Pension fund 9 26,442 24,250
- (Receivable from)/Payable to
Gratuity fund 9 & 20 7,259 (120)
33,701 24,130
Closing balance 143,774 119,561
Other service benefit plan 67,536 64,846
Less : Current portion shown under current liabilities 23,421 18,954
44,115 45,892
187,889 165,453
===================================================================================7.1. THE AMOUNTS RECOGNISED IN THE BALANCE SHEET ARE AS FOLLOWS:==================================================================================
Defined Defined Defined
Benefit Benefit Benefit
Pension Plan Gratuity Plans Separation
Gratuity Plan
(Rupees)
==================================================================================
Present value of funded obligations 703,869 116,097 -
Fair value of plan assets (542,545) (116,250) -
Deficit / (Surplus) 161,324 (153) -
Present value of unfunded
obligations - 48,550 23,565
Unrecognised actuarial gain/(loss) (65,478) 10,773 (1,106)
Net liability at the end of the year 95,846 59,170 22,459
==================================================================================7.2. MOVEMENTS IN NET LIABILITY RECOGNISED:==================================================================================
Defined Defined Defined
Benefit Benefit Benefit
Pension Plan Gratuity Plans Separation
Gratuity Plan
(Rupees)
==================================================================================
Net liability at the beginning
of the year 79,772 44,714 19,205
Expense recognised 40,192 16,517 3,238
Amount allocated to capital
work-in-progress 132 40 16
Contributions made (24,250) (2,101) -
Net liability at the end of the year 95,846 59,170 22,459
==================================================================================7.3. Actual returns on funded plan assets during 2002 were Rs, 86,833.7.4. Projected unit credit method, based on the following significant assumptions, was used for valuation of the schemes mentioned above: - discount rate at 6% p.a.; - expected rate of increase in salaries for employees at 6% p.a.; and - expected rate of return on investment at 6% p.a. 8. SHORT TERM BORROWINGS � SECURED ===================================================================================
2003 2002
NOTE (Rupees)
===================================================================================
Running finance utilised from banks 8.1 322,635 454,711
Finance obtained under FE. Circular No. 25
of SBP - 666,619
322,635 1,121,330
===================================================================================8.1. The facility for short term running finance available from various banks amounts to Rs. 2,237,500 (2002: Rs. 2,182,500), which represents the aggregate of sale price of all mark-up arrangements, between the Company and the banks with a corresponding purchase price of Rs. 2,722,047 (2002: Rs. 2,752,489). The purchase prices are payable on various dates by October 31, 2004.Under the agreements, the purchase price is subject to prompt payment rebates of Rs. 276,452 (2002: Rs. 315,588). The rates of mark-up net of prompt payment rebates range from Rs. 0.0273 to Rs. 0.2776 (2002: Rs. 0.2260 to Rs. 0.3288) per rupee one thousand per day. Finance upto Rs. 2,172,500 (2002: Rs. 1,087,500) is secured by a floating charge upon all current and future movable property of the Company upto an aggregate maximum amount of Rs. 2,673,000 (2002: Rs. 1,665,000) and the balance of Rs. 65,000 (2002: Rs. 674,000) is secured by lien over Special US Dollar Bonds of US$ 1,499 referred to in note 21.2. 9. CREDITORS, ACCRUED AND OTHER LIABILITIES ===================================================================================
2003 2002
NOTE (Rupees)
===================================================================================
Creditors 515,887 1,146,746
Accrued expenses 257,974 207,963
Payable to
- Pension fund 7 26,442 24,250
- Gratuity fund 7 7,259 -
33,701 24,250
Advances from customers 218,431 163,922
Financial charges accrued on secured
- redeemable capital and long term loans 35,634 121,011
- short term borrowings 4,996 26,465
Deposits from dealers refundable on
termination of dealership 8,884 7,862
Sales tax payable 134,718 224,046
Contractors� deposits and retentions 8,510 27,590
Workers� profits participation fund 9.1 4,607 8,090
Workers� welfare fund 24,228 -
Unclaimed dividends 42,724 128,817
Unpaid dividends 11,276 9,201
1,301,570 2,095,963
===================================================================================Deposits from dealers and contractors are non-interest bearing.9.1. WORKERS� PROFITS PARTICIPATION FUND ===================================================================================
2003 2002
NOTE (Rupees)
===================================================================================
Balance at the beginning of the year 8,090 14,060
Interest on funds utilised in the Company�s business 27 648 695
Allocation for the year 28 124,607 97,468
Less: Amount paid to the Trustees of the Fund 128,738 104,133
4,607 8,090
===================================================================================10. CONTINGENCIES AND COMMITMENTSCONTINGENCIES 10.1. Claims, including pending lawsuits, against the Company not acknowledged as debts amounted to Rs. 57,202 (2002: Rs. 82,575). 10.2. Corporate guarantee of Rs. 305,418 has been issued to a bank in favour of Engro Eximp (Private) Limited, (a subsidiary company). 10.3. The Company is contesting the penalty of Rs. 99,936 paid and expensed in 1997, imposed by the State Bank of Pakistan (SBP) for alleged late payment of forward exchange risk cover fee on long term loans and has filed a suit in the High Court of Sindh. A partial refund of Rs. 62,618 was, however, recovered in 1999 from SBP and the recovery of the balance amount is dependent on Court�s decision. 10.4. The Company had commenced two separate arbitration proceedings against the Government of Pakistan for non-payment of marketing incidentals relating to the years 1983-84 and 1985-86 respectively. The sole arbitrator in the second case has awarded the Company Rs. 47,800 and it is hoped that the award for the earlier years will be announced shortly. The award for the second arbitration has not been recognised due to inherent uncertainties arising from its challenge in the High Court. COMMITMENTS 10.5. CAPITAL COMMITMENTS OUTSTANDING ===================================================================================
2003 2002
(Rupees)
===================================================================================
Plant and machinery 217,319 78,211
===================================================================================11. OPERATING ASSETS11.1. STATEMENT OF OPERATING ASSETS =====================================================================================================================================
Cost Additions/ Cost Accumulated Depreciation Accumulated Net book Annual
Jan. 1, (disposals) Dec. 31, depreciation for the depreciation value rate of
2003 *transfers 2003 Jan. 1, year/ Dec. 31, Dec. 31, depreciation
2003 (disposals) 2003 2003 %
*transfers
(Rupees)
=====================================================================================================================================
Tangible assets
Freehold land 12,820 - 12,820 - - - 12,820 -
Leasehold land 187,396 - 187,396 29,710 3,550 33,652 153,744 2 to 3.33
**392
Building on
- freehold land 168,705 3,960 172,665 36,383 4,920 41,424 131,241 2.5
**121
- leasehold land 270,889 - 270,889 11,361 6,846 18,207 252,682 2.5
Housing Colony 205,329 9,257 214,152 113,904 13,439 126,983 87,169 8 to 15
(434) (360)
Railway siding 1,119 - 1,119 1,119 - 1,119 - 4
Roads, fences and 105,039 1,076 106,115 27,990 3,915 31,905 74,210 4 to 10
airstrip
Plant and 8,645,730 283,926 8,929,656 2,879,370 **427,994 3,307,374 5,622,282 3.85 to 5
machinery 10
Furniture, fixtures 302,689 44,393 327,068 160,226 26,545 167,263 159,805 5 to 20
and equipment (20,014) (19,565)
**57
Vehicles 147,779 16,594 151,952 80,651 24,321 94,454 57,498 5 to 20
(12,421) (10,518)
10,047,495 359,206 10,373,832 3,340,714 511,530 3,822,381 6,551,451
(32,869) (30,443)
**580
Intangible assets
Software 56,521 5,692 62,213 36,557 8,730 45,287 16,926 20
10,104,016 364,898 10,436,045 3,377,271 520,260 3,867,668 6,568,377
(32,869) (30,443)
**580
2002 9,486,380 636,878 10,104,016 2,901,657 487,674 3,377,271 6,726,745
(14,242) (11,668)
(5,000) (392)
=====================================================================================================================================11.2. The Collector of Customs had disallowed exemption from custom duty and sales tax amounting to Rs. 48,236 in prior years in respect of first catalyst and other items being part and parcel of the expansion plant on the contention that these items do not fall under the definition of �plant and machinery� which is exempt under the relevant SRO.The Company challenged the Department�s contention through a constitutional petition in the High Court of Sindh which stayed the recovery of the amount claimed and in December 1994 decided the petition in favour of the Company. The Department filed a petition for leave to appeal in the Supreme Court which was granted on October 26, 1996. The case is now being fixed for regular hearing of the main appeal. The Company�s management is of the view that the Supreme Court will uphold the decision of the High Court and as such has not made any provision of the aforesaid amount in the accounts. Payments, without prejudice and under protest, totalling Rs. 22,207 made in 1994 to the Department during the tendency of the petition in the High Court on their contention, interalia, that the stay order had expired have been shown as receivable (note 20). 11.3. PARTICULARS OF DISPOSAL OF FIXED ASSETS: ===================================================================================================================
Description and Sold to Cost Accumulated Net book Sale
method of disposal depreciation value proceeds
(Rupees)
-------------------------------------------------------------------------------------------------------------------
Leasehold land*
By Negotiation Master Motor Corporation, 5,000 417 4,583 11,500
Karachi
Vehicles
By Company policy Mr. Asad Umar 520 520 - 141
to existing/separating Mr. Muhammad Ali Khadim 433 304 129 149
executives Dr. Muzaffar A. Khan 351 351 - 53
Mr. Mian Muhammad Akber 352 352 - 53
Dr. Bin Yamin Khalid 379 379 - 57
Mr. Salim Azhar 935 935 - 140
Mr. Shoaib Salim 520 303 217 300
Mr. Zaffar A. Khan 949 949 - 142
Mr. R. B. Balouch 352 352 - 53
Mr. Habib Pervaiz 444 348 96 138
Ms.Anjum Tahir Alvi 436 371 65 112
Mr. Javed Khan 735 159 576 643
Mr. S.H.R. Bukhari 595 595 - 89
Mr. Najeeb Rizvi 352 352 - 53
Mr. Andalib Alvi 769 397 372 440
By insurance claim New Hampshire Insurance 555 231 324 475
Company, Karachi 436 312 124 375
3,308 3,308 - 1,800
12,421 10,518 1,903 5,213
Furniture, fixtures and equipment
By Company policy to Mr. Habib Pervaiz 88 46 42 44
separating executives Ms. Anjum Tahir Alvi 89 74 15 17
Mr. Javed Khan 56 50 6 5
Written off 1,571 1,149 422 -
Items having book value upto Rs. 5 18,644 18,606 38 -
20,448 19,925 523 66
37,869 30,860 7,009 16,779
===================================================================================================================* Current asset - leasehold land held for sale.12. CAPITAL WORK-IN-PROGRESS ===================================================================================
2003 2002
(Rupees)
===================================================================================
Plant and machinery 442,113 445,061
Building and civil works 48,993 7,544
Furniture, fixtures and equipment 15,467 8,994
Advances to suppliers 20,770 6,233
527,343 467,832
===================================================================================13. LONG TERM INVESTMENTS===================================================================================
2003 2002
NOTE (Rupees)
===================================================================================
Unquoted
Subsidiary companies - at cost 13.1 84,557 -
Joint venture companies - at cost 13.2 1,340,000 1,340,000
Other associated company
Arabian Sea Country Club Limited 13.5
500,000 Ordinary shares of Rs. 10 each 5,000 5,000
Less: Provision for diminution in value of investment 5,000 5,000
- -
1,424,557 1,340,000
===================================================================================13.1. SUBSIDIARY COMPANIES=============================================================================================
Investment at cost -
Name of Company Equity December 31, Chief
and description of interest % held 2003 Executive
---------------------------------------------------------------------------------------------
Engro Eximp (Private) Limited
100,000 Ordinary
shares of Rs. 10 each 100 100 Mr. Khalid Mir
Engro Management Services
(Private) Limited
250,000 Ordinary
shares of Rs. 10 each 100 2,500 Mr. Asad Umar
Innovative Automation & Engineering
(Private) Limited
1,020,000 Ordinary
shares of Rs. 10 each 51 81,957 Mr. Bakhtiar Wain
84,557
=============================================================================================13.2. JOINT VENTURE COMPANIES=============================================================================================
Investment at cost -
Name of Company Equity December 31, Chief
and description of interest % held 2003 Executive
---------------------------------------------------------------------------------------------
Engro Vopak Terminal Limited
45,000,000 Ordinary
shares of Rs. 10 each 50 450,000 Mr. Javed Akbar
Engro Asahi Polymer &
Chemicals Limited
89,000,000 Ordinary
shares of Rs. 10 each 50 890,000 Mr. Asif Qadir
1,340,000
=============================================================================================13.3. Value of the above investments, based on the net assets of the investee companies as at December 31, 2003 was as follows:===================================================================================
2003 2002
(Rupees)
===================================================================================
Engro Eximp (Private) Limited 14,615 -
Engro Management Services (Private) Limited 2,500 -
Innovative Automation & Engineering (Private) Limited 58,536 -
Engro Vopak Terminal Limited 564,870 628,194
Engro Asahi Polymer & Chemicals Limited 797,870 716,299
Arabian Sea Country Club Limited 2,971 3,128
===================================================================================13.4. The Company has agreed to extend financial support, if required, to EAPOL upto US$ 2,500. This support is by way of either further share subscriptions or provision of subordinated loans.13.5. The Chief Executive of Arabian Sea Country Club Limited is Mr. Javed Burki. 14. LONG TERM LOANS AND ADVANCES - CONSIDERED GOOD ===================================================================================
2003 2002
NOTE (Rupees)
===================================================================================
Executives 92,670 114,677
Other employees 19,970 39,487
112,640 154,164
Less: Installments recoverable within twelve months 19 37,417 46,856
75,223 107,308
===================================================================================No amount was outstanding for a period exceeding three years.This includes services incentive loans to executives of Rs. 41,054 (2002: Rs. 38,188) repayable in equal monthly installments over a three years period or in one lump sum at the end of such period and loans given to workers of Rs. 712 (2002: Rs. 7,826) pursuant to Collective Labour Agreement. It also includes advances of Rs. 69,593 (2002: Rs. 105,355) to employees for the purchase of Company�s shares and these advances are repayable by 2006. The maximum amount outstanding at the end of any month from the executives aggregated Rs. 108,930 (2002: Rs. 125,992). 15. DEFERRED EXPENDITURE ===================================================================================
2003 2002
NOTE (Rupees)
===================================================================================
Catalyst cost 79,861 138,131
Less: Current portion 19 35,053 58,270
44,808 79,861
===================================================================================16. STORES, SPARES AND LOOSE TOOLS===================================================================================
2003 2002
(Rupees)
===================================================================================
Consumable stores 119,415 122,149
Spares 541,478 534,179
Loose tools 3,302 4,284
664,195 660,612
Less: Provision for surplus and slow moving items 97,273 62,806
566,922 597,806
===================================================================================17. STOCK-IN-TRADE===================================================================================
2003 2002
(Rupees)
===================================================================================
Raw materials 192,886 172,262
Work-in-process 9,668 18,498
Finished goods - own manufactured product 156,342 230,465
- purchased product 26,686 349,830
183,028 580,295
385,582 771,055
===================================================================================18. TRADE DEBTS===================================================================================
2003 2002
(Rupees)
===================================================================================
Considered good - Secured 568,731 424,533
- Unsecured 71,512 101,591
640,243 526,124
Considered doubtful - Unsecured 7,839 7,839
648,082 533,963
Less: Provision for doubtful debts 7,839 7,839
640,243 526,124
===================================================================================19. LOANS, ADVANCES, DEPOSITS AND PREPAYMENTS===================================================================================
2003 2002
NOTE (Rupees)
===================================================================================
Loans and advances to employees recoverable within
twelve months, considered good 14
- executives 30,103 30,877
- other employees 7,314 15,979
37,417 46,856
Advances and deposits with
- statutory authorities 304 304
- others 22,316 55,272
Margins against letters of credit 6,738 5,609
Prepayments 57,993 81,967
Deferred expenditure - current portion 15 35,053 58,270
159,821 248,278
===================================================================================20. OTHER RECEIVABLES===================================================================================
2003 2002
NOTE (Rupees)
===================================================================================
Receivable from Government for:
- customs duty and sales tax 11.2 22,207 22,207
- development surcharge 5,915 5,915
- subsidy on purchased product 13,560 13,560
41,682 41,682
Accrued income on deposits/bonds 7,309 12,088
Receivable from Gratuity fund 7 - 120
Due from:
- Innovative Automation & Engineering (Pvt.) Ltd. 867 -
- Engro Asahi Polymer & Chemicals Limited - 69
- Engro Vopak Terminal Limited - 376
Workers� welfare fund - 3,190
Claims on foreign suppliers 4,406 27,616
Less: Provision for doubtful receivables 295 295
4,111 27,321
Others 1,111 22,151
Less: Provision for doubtful receivables 49 49
1,062 22,102
55,031 106,948
===================================================================================The maximum amounts due from joint venture / subsidiary companies at the end of any month during the year aggregated as follows:===================================================================================
2003 2002
(Rupees)
===================================================================================
- Engro Eximp (Private) Limited 367,319 -
- Engro Management Services (Private) Limited 81 -
- Innovative Automation & Engineering (Private) Limited 867 -
- Engro Asahi Polymer & Chemicals Limited 3,271 1,015
- Engro Vopak Terminal Limited 842 1,360
===================================================================================21. SHORT TERM INVESTMENTS===================================================================================
2003 2002
NOTE (Rupees)
===================================================================================
Held-to-Maturity
Certificates of Investments 21.1 50,000 75,000
Available-for-Sale
Government of Pakistan Special
US Dollar Bonds 21.2 662,860 673,797
WAPDA Bonds 21.2 53,162 -
766,022 748,797
===================================================================================21.1. These represent investments amounting to Rs. 25,000 each in Crescent Leasing Corporation Limited and Dawood Leasing Company Limited. These investments will mature by March 18, 2004 and carry a return of 3.75% and 4.5% per annum.21.2. The Government of Pakistan Special US Dollar Bonds held by the Company are due to mature on April 21, 2004, while the WAPDA bonds will mature on April 29, 2008. However, the Company intends to avail any appropriate opportunity in utilising these before maturity. Profit is payable on US Dollar Bonds at a rate 2% above six months LIBOR and on WAPDA Bonds at 7.25% per annum. US Dollar Bonds of US$ 11,499 are held under lien by certain banks referred in notes 5.3 and 8.1. 22. CASH AND BANK BALANCES ===================================================================================
2003 2002
(Rupees)
===================================================================================
With banks
- on deposit accounts
local currency 1,055,801 900
- on current accounts 47,953 943,807
- on special account related to dealers and
suppliers deposits 9,095 7,800
- on saving accounts
local currency 267,364 769,527
foreign currency - US$ 197 (2002: US$ 132) 11,312 7,704
278,676 777,231
In hand
- cheques 255,518 422,853
- cash 4,025 3,950
1,651,068 2,156,541
===================================================================================23. SALES===================================================================================
2003 2002
NOTE (Rupees)
===================================================================================
Own manufactured product 8,969,270 7,770,677
Less: Sales tax 23.1 1,066,441 903,344
7,902,829 6,867,333
Purchased product 4,872,623 4,610,552
Less: Sales tax 602,446 584,566
4,270,177 4,025,986
Net Sales 12,173,006 10,893,319
===================================================================================23.1. Includes Rs. 928,606 (2002: Rs. 804,854) levied by the Government on the Company in respect of own manufactured urea.24. COST OF GOODS SOLD ===================================================================================
2003 2002
NOTE (Rupees)
===================================================================================
Raw materials consumed 1,395,271 1,167,785
Salaries, wages and staff welfare 24.1 503,927 451 955
Fuel and power 1,330,344 1,269,000
Repairs and maintenance 269,327 219,514
Depreciation 498,113 509,810
Consumable stores 81,098 81,019
Staff recruitment, training, safety and other expenses 23,823 22,172
Purchased services 91,757 64,175
Travel 18,404 18,589
Communication, stationery and other office expenses 28,015 26,117
Insurance 69,459 63,091
Rent, rates and taxes 4,472 4,166
Other expenses 27,342 29,535
Manufacturing cost 4,341,352 3,926,928
Add: Opening stock of work-in-progress 18,498 29,579
Less: Closing stock of work-in-progress 9,668 18,498
8,830 11,081
Cost of goods manufactured 4,350,182 3,938,009
Add: Opening stock of finished goods manufactured 230,465 147,876
Less: Closing stock of finished goods manufactured 156,342 230,465
74,123 (82,589)
Cost of goods sold - own manufactured product 4,424,305 3,855,420
- purchased product 3,885,632 3,487,712
8,309,937 7,343,132
===================================================================================24.1. SALARIES, WAGES AND STAFF WELFARE INCLUDE:===================================================================================
2003 2002
(Rupees)
===================================================================================
Current service cost 22,597 15,012
Interest cost 26,277 39,318
Expected return on plan assets (20,409) (30,184)
Transitional obligation recognized 11,248 10,303
Net actuarial gains recognized in current year (444) -
39,269 34,449
Defined contribution plan 18,029 14,059
Other service benefit plan 12,198 13,144
69,496 61,652
===================================================================================25. SELLING AND DISTRIBUTION EXPENSES===================================================================================
2003 2002
NOTE (Rupees)
===================================================================================
Salaries, wages and staff welfare 25.1 205,807 180,548
Staff recruitment, training, safety and other expenses 15,776 14,461
Product transportation and handling 609,780 553,650
Marketing allowance 288,704 272,552
Repairs and maintenance 9,664 10,579
Advertising and sales promotion 63,789 65,269
Rent, rates and taxes 27,550 27,979
Communication, stationery and other office expenses 26,332 25,778
Travel 19,188 18,471
Depreciation 22,147 21,148
Purchased services 11,836 14,640
Provision against doubtful trade debts - 5,700
Other expenses 28,158 22,314
1,328,731 1,233,089
===================================================================================25.1. SALARIES, WAGES AND STAFF WELFARE INCLUDE:===================================================================================
2003 2002
(Rupees)
===================================================================================
Current service cost 11,898 7,938
Interest cost 13,838 20,790
Expected return on plan assets (10,748) (15,959)
Transitional obligation recognized 5,924 6,869
Net actuarial gains recognized in current year (234) -
20,678 19,638
Defined contribution plan 9,416 8,940
Other service benefit plan 7,484 8,640
37,578 37,218
===================================================================================26. OTHER INCOME===================================================================================
2003 2002
NOTE (Rupees)
===================================================================================
Dividend income 26.1 323,000 180,000
Income on deposits/bonds 40,944 37,025
Service charges 17,206 2,989
Profit on disposal of fixed assets 9,770 4,389
Sundries 1,173 6,995
392,093 231,398
===================================================================================26.1. DIVIDEND INCOME===================================================================================
2003 2002
(Rupees)
===================================================================================
Engro Vopak Terminal Limited 225,000 180,000
Engro Eximp (Private) Limited 98,000 -
323,000 180,000
===================================================================================27. FINANCIAL CHARGES===================================================================================
2003 2002
NOTE (Rupees)
===================================================================================
Interest on - workers� profits participation fund 9.1 648 695
Mark-up/interest on - redeemable capital and
long term loans 312,365 420,280
- short term borrowings 15,159 81,064
Loss on remeasurement of Foreign Exchange
Risk Insurance Contract - 136,546
Gain on remeasurement of Long Term Loans - (136,546)
- -
Exchange risk fee, administrative fee and others 35,127 58,731
Foreign exchange loss, net 8,511 14,740
371,810 575,510
===================================================================================28. OTHER CHARGES===================================================================================
2003 2002
NOTE (Rupees)
===================================================================================
Workers� profits participation fund 9.1 124,607 97,468
Workers� welfare fund 43,642 15,482
Research and development including salaries
and wages 61,778 31,810
Auditors� remuneration
- statutory audit 1,000 975
- fee for tax and other advisory services 353 1,312
- reimbursement of expenses 150 214
1,503 2,501
Less: Shown under capital work-in-progress 260 -
1,243 2,501
Professional tax 100 -
231,370 147,261
===================================================================================29. PROVISION FOR TAXATION===================================================================================
2003 2002
(Rupees)
===================================================================================
Current - for the year 779,405 465,934
- for prior years - 151,924
779,405 617,858
Deferred- for the year (12,937) 84,704
766,468 702,562
===================================================================================29.1. The income tax assessments of the Company have been finalised upto and including the income year ended December 31, 1999.However, the assessment orders for 1998 and 1999 have been set aside by the appellate authority. For the income years from 1995 to 1997, the tax authorities have raised an additional demand of Rs. 211,155 net of necessary rectifications, appeals against which have been filed by the Company with the appellate authorities. This demand primarily relates to the pro-ration of allocable expenses between manufacturing and trading businesses, on which there is inconsistency in the assessment orders passed by the tax authorities for different income years. The Company�s management is confident that the issue will be ultimately resolved without any additional liability and therefore, no additional tax charge relating to prior years has been recognised in the current year. 29.2. RELATIONSHIP BETWEEN TAX EXPENSE AND ACCOUNTING PROFIT The tax on the Company�s profit before tax differs from the theoretical amount that would arise using the Company�s applicable tax rate as follows: ===================================================================================
2003 2002
(Rupees)
===================================================================================
Profit before tax 2,323,251 1,835,725
Tax calculated at the rate of 35% 813,138 642,503
Depreciation on exempt assets not deductible
for tax purposes 34,534 34,800
Effect of applicability of lower tax rate/exemption
on certain income and other tax credits/debits (96,004) (54,319)
Additional prior years tax charge under
presumptive basis - 151,924
Effect of tax under presumptive tax regime including
adjustment of tax losses net 14,800 (72,346)
Tax charge for the year 766,468 702,562
===================================================================================30. EARNINGS PER SHAREThere is no dilutive effect on the basic earnings per share of the Company, which is based on: ===================================================================================
2003 2002
===================================================================================
Profit after taxation (Rupees) 1,556,783 1,133,163
Weighted average number of Ordinary shares (in thousand) 152,940 152,940
===================================================================================31. REMUNERATION OF CHIEF EXECUTIVE, DIRECTORS AND EXECUTIVESThe aggregate amounts charged in the accounts for remuneration, including all benefits, to chief executive, directors and executives of the Company are given below: ===================================================================================================
2003 2002
Directors Directors
Chief Others Executives Chief Others Executives
Executive Executive
(Rupees)
===================================================================================================
Fees - 18 - - 14 -
Managerial remuneration 8,908 9,323 320,941 8,126 11,152 296,425
Retirement benefits 722 799 24,020 648 891 22,617
Other benefits 1,935 1,819 18,944 1,709 2,791 16,396
Total 11,565 11,959 363,905 10,483 14,848 335,438
Number of persons,
including those who
worked part of the year 1 9 280 1 10 299
===================================================================================================31.1. The Company also makes contributions based on actuarial calculations to pension and gratuity funds and provides certain household items for use of some employees. Cars are also provided for use of some employees and directors.Employees based at plant site, Daharki, are also provided with schooling and subsidised club facilities. Monetary values of these facilities relating to the above employees are not readily available. 31.2. Technical advisory fees paid during the year to two non-executive directors (2002: three) during the year amounted to Rs. 980 (2002: Rs. 835). 32. CASH GENERATED FROM OPERATIONS ===================================================================================
2003 2002
NOTE (Rupees)
===================================================================================
Profit before taxation 2,323,251 1,835,725
Adjustment for non-cash charges and other items:
Depreciation 520,260 487,674
Profit on disposal of fixed assets (9,770) (4,389)
Provision for retirement and other service benefits 107,072 98,870
Income on deposits/bonds (40,944) (37,025)
Dividend income (323,000) (180,000)
Financial charges 371,810 575,510
Working capital changes 32.1 (190,856) (32,046)
2,757,823 2,744,319
===================================================================================32.1. WORKING CAPITAL CHANGES===================================================================================
2003 2002
(Rupees)
===================================================================================
(Increase)/Decrease in current assets
Stores, spares and loose tools 30,884 (7,727)
Stock-in-trade 385,473 (346,185)
Leasehold land held for sale 4,608 (4,608)
Trade debts (114,119) (102,079)
Loans, advances, deposits and prepayments 65,240 (55,298)
Other receivables (net) 48,266 44,414
420,352 (471,483)
Increase/(Decrease) in current liabilities
Creditors, accrued and other liabilities
including other service benefits (net) (611,208) 439,437
(190,856) (32,046)
===================================================================================33. CASH AND CASH EQUIVALENTS===================================================================================
2003 2002
(Rupees)
===================================================================================
Cash and bank balances 1,651,068 2,156,541
Short term investments 766,022 746,797
Short term borrowings (322,635) (1,121,330)
2,094,455 1,784,008
=================================================================================== |