| Engro Chemical (Pakistan) Ltd - 2004 |
================================================================================================ BALANCE SHEET AS AT DECEMBER 31, 2004 ================================================================================================ Notes 2004 2003 (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 1,529,400 Reserves - revenue 4,429,240 4,129,240 Unappropriated profit 627,244 540,189 5,056,484 4,669,429 6,585,884 6,198,829 NON CURRENT LIABILITIES Redeemable capital 4 2,575,000 2,661,500 Long term loan 5 - 574,000 Liability against asset subject to finance lease 6 4,515 - Deferred taxation 7 966,295 848,722 Retirement and other service benefits 8 68,514 187,889 3,614,324 4,272,111 CURRENT LIABILITIES Current portion of: - redeemable capital 4 1,086,500 587,500 - long term loans 5 594,500 - - liability against asset subject to finance lease 6 2,085 - - other service benefits 8 22,471 23,421 Short term borrowings 9 - 322,635 Trade and other payables 10 1,236,790 1,247,570 Taxation - 158,931 Dividends 11 42,803 54,000 2,985,149 2,394,057 CONTINGENCIES AND COMMITMENTS 12 13,185,357 12,864,997 FIXED ASSETS Property, plant and equipment 13 7,096,330 7,158,655 Intangible assets 14 9,938 16,926 7,106,268 7,175,581 LONG TERM INVESTMENTS 15 1,424,557 1,424,557 LONG TERM LOANS AND ADVANCES 16 51,928 75,223 CURRENT ASSETS Stores, spares and loose tools 17 587,288 566,922 Stock-in-trade 18 484,748 385,582 Trade debts 19 522,608 640,243 Loans, advances, deposits and prepayments 20 477,636 124,768 Other receivables 21 64,662 55,031 Taxation 160,291 Short term investments 22 864,223 766,022 Cash and bank balances 23 1,441,148 1,651,068 4,602,604 4,189,636 13,185,357 12,864,997 ================================================================================================ ================================================================================================ PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED DECEMBER 31, 2004 ================================================================================================ (AMOUNTS IN THOUSAND EXCEPT FOR EARNINGS PER SHARE) Notes 2004 2003 ================================================================================================ Net sales 24 12,797,662 11,884,302 Cost of sales 25 (9,528,215) (8,309,937) GROSS PROFIT 3,269,447 3,574,365 Selling and distribution expenses 26 (1,036,509) (1,040,027) 2,232,938 2,534,338 Other income 27 558,154 392,093 Other operating charges 28 (190,328) (231,370) Financial charges 29 (285,711) (371,810) (476,039) (603,180) PROFIT BEFORE TAXATION 2,315,053 2,323,251 Taxation 30 (704,478) (766,468) PROFIT AFTER TAXATION 1,610,575 1,556,783 Earnings per share - Basic and diluted 31 Rs. 10.53 Rs. 10.18 ================================================================================================Appropriations have been reflected in the statement of changes in equity. STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED DECEMBER 31, 2004 ======================================================================================================================
(AMOUNTS IN THOUSAND)
----------------------------------------------------------------------------------------------------------------------
Share Capital Reserve Revenue Reserve Total
Capital - Issue of General Unappro--
Bonus Shares priated Profit
(restated)
NOTES (Rupees)
======================================================================================================================
Balance as at January 1, 2003 1,390,364 139,036 3,794,240 6,636 5,330,276
as previously reported
Effect of change in accounting policy 11.1
Final Dividend for the year
ended December 31, 2002
declared subsequent to year end - - - 486,628 486,628
Balance as at January 1, 2003 (restated) 1,390,364 139,036 3,794,240 493,264 5,816,904
Final Dividend for the year ended
December 31, 2002 @ Rs 3.50 per share - (486,628) (486,628)
Bonus shares issued during the year 139,036 (139,036) - -
Profit for the year - - - 1,556,783 1,556,783
Interim dividends
1st @ Rs. 2.50 per share - - - (382,350) (382,350)
2nd @ Rs. 2.00 per share - - - (305,880) (305,880)
Transfer to general reserve - - 335,000 (335,000) -
Balance as at December 31, 2003 1,529,400 - 4,129,240 540,189 6,198,829
Balance as at January 1, 2004 1,529,400 - 4,129,240 4,899 5,663,539
as previously reported
Effect of change in accounting policy 11.1
Final Dividend for the year
ended December 31, 2003
declared subsequent to year end - - - 535,290 535,290
Balance as at January 1, 2004 (restated) 1,529,400 - 4,129,240 540,189 6,198,829
Final Dividend for the year ended
December 31, 2003 @ Rs 3.50 per share - - - (535,290) (535,290)
Profit for the year - - - 1,610,575 1,610,575
Interim dividends:
1st @ Rs. 2.50 per share - - - (382,350) (382,350)
2nd @ Rs. 2.00 per share - - - (305,880) 305,880)
Transfer to general reserve - - 300,000 (300,000) -
Balance as at December 31, 2004 1,529,400 - 4,429,240 627,244 6,585,884
======================================================================================================================CASH FLOW STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2004================================================================================================
(AMOUNTS IN THOUSAND)
================================================================================================
Notes 2004 2003
================================================================================================
Cash generated from operations 33 2,422,235 2,757,823
Retirement and other
service benefits paid (256,926) (70,718)
Financial charges paid (283,883) (480,693)
Taxes paid (906,127) (450,239)
Long term loans and advances 23,295 32,085
Net cash inflow from
operating activities 998,594 1,788,258
Capital expenditure (520,106) (370,140)
Sale proceeds on disposal
of fixed assets 19,751 16,779
Income on deposits/bonds 42,372 44,857
Long term Investments - (84,557)
Dividends received 485,921 323,000
Net cash inflow/(outflow)
from investing activities 27,938 (70,061)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from redeemable capital 1,000,000 1,350,000
Repayment of redeemable capital (587,500) (1,543,949)
Asset subject to finance lease 6,600 -
Proceeds from long term loans - 574,000
Repayment of long term loans - (528,926)
Dividends paid (1,234,716) (1,258,875)
Net cash (outflow) from
financing activities (815,616) (1,407,750)
Net increase in cash and
cash equivalents 210,916 310,447
Cash and cash equivalents
at the beginning of the year 2,094,455 1,784,008
Cash and cash equivalents
at the end of the year 34 2,305,371 2,094,455
================================================================================================NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 20041. STATUS AND NATURE OF BUSINESS The Company is a public listed company incorporated in Pakistan. The principal activity of the Company is manufacturing, purchasing and marketing of fertilizers. The Company is also involved in the production and marketing of seeds and has invested in joint ventures engaged in chemical related activities. As part of its diversification strategy, controlling interest was acquired in a company offering industrial solutions in automation and control. 2. SIGNIFICANT ACCOUNTING POLICIES 2.1. STATEMENT OF COMPLIANCE 2.1.1. These financial statements have been prepared in accordance with the requirements of the Companies Ordinance, 1984 (the Ordinance) and approved accounting standards as applicable in Pakistan. Approved accounting standards comprise of such International Accounting Standards (IASs) as notified under the provisions of the Ordinance. Wherever, the requirements of the Companies Ordinance, or directives issued by the Securities and Exchange Commission of Pakistan (SECP) differ with the requirements of these standards, the requirements of the Ordinance or the requirements of the said directives take precedence. 2.1.2. During the year, the SECP substituted Fourth Schedule to the Ordinance which is effective from financial year ending on or after July 5, 2004. This has resulted in the change in accounting policy pertaining to recognition of dividends proposed subsequent to the year end (note 11.1) and certain reclassifications of previous year figures (note 41). 2.2. ACCOUNTING CONVENTION These financial statements have been prepared under the historical cost convention, except for available for sale investments, which have been recognized at fair value and recognition of certain staff retirement benefits at present value. 2.3. TAXATION CURRENT TAXATION Provision for current taxation is based on the taxable income for the year determined in accordance with the prevailing law for taxation on income. The charge for current tax also includes adjustments, where considered necessary, to provision for tax made in previous years, arising from assessments framed during the year, for such years. DEFERRED TAXATION Deferred tax has been provided using the liability method on all major temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. 2.4. RETIREMENT AND OTHER SERVICE BENEFITS DEFINED CONTRIBUTION PLAN The Company operates a defined contribution provident fund for its employees. Monthly contributions are made both by the Company and the employees to the fund at the rate o 10% of basic salary. DEFINED BENEFIT PLANS AND OTHER SERVICE BENEFITS -- The Company operates: -- defined benefit funded pension scheme for its management employees, and; -- defined benefit funded gratuity schemes for its management and non-management employees. The pension scheme provides lifetime pension to retired employees or to their spouses Contributions are made annually to these funds on the basis of actuarial recommendations. -- The Company also operates unfunded schemes for resignation gratuity of certain management employees and for retirement of other employees. Provisions are made cover the obligations on the basis of actuarial recommendations. -- The Company recognizes actuarial gains / losses over the expected future services of current members, using the recommended approach under IAS 19, Employee Benefits. -- Actuarial valuations of the schemes are undertaken at appropriate regular intervals and the latest valuation was carried out at December 31, 2003. -- Provision is also made under a service incentive plan for certain category of experienced employees to continue in the Company's employment. 2.5. TRADE AND OTHER PAYABLES Liabilities for trade and other amounts payable are carried at cost. 2.6. PROPERTY, PLANT AND EQUIPMENT -- Operating assets are stated at cost less accumulated depreciation whereas capital work-in-progress is stated at cost. Borrowing and other related costs specific to a project during its construction period are capitalized. -- Depreciation is charged to income using the straight-line method whereby the cost of an operating asset is written off over its estimated useful life. Depreciation on additions is charged from the month in which the asset is put to use and on disposals up to the month the asset is in use. -- Maintenance and repairs are charged to income as and when incurred. Major renewals and betterments are capitalized and the assets so replaced, if any, other than those kept as standby items are retired. Gains and losses on disposal of assets are included in income currently. 2.7. FINANCE LEASES Leases of property, plant and equipment where the company has substantially all the risks and rewards of ownership, are classified as finance lease. Assets subject to finance lease are stated at the lower of present value of minimum lease payments under the lease agreement and the fair value of the assets acquired on lease. Outstanding obligations under the lease less finance charges allocated to future periods are shown as a liability. Value of leased assets is depreciated over the useful life of the asset using the straight line method. Depreciation on leased assets is charged to income. Finance charges under lease agreements are allocated to the 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. 2.8. INTANGIBLE ASSETS Costs that are directly associated with identifiable software products controlled by the Company and have probable economic benefit beyond one year are recognised as intangible assets. Intangible assets are stated at cost less accumulated amortisation and impairment losses, if any. Intangible assets are amortised on a straight line basis over their estimated useful lives. 2.9. INVESTMENTS Subsidiary and joint venture companies Investments in subsidiary and joint venture companies are stated at cost or net of provision for impairment, if any. HELD-TO-MATURITY INVESTMENTS Investments with a fixed maturity that the Company has the intent and ability to hold to maturity are classified as held-to-maturity investments. Held-to-maturity investments are carried at amortized cost using the effective interest rate method. AVAILABLE-FOR-SALE INVESTMENTS Investments, which may be sold in response to needs for liquidity or changes in interest rates, are classified as available-for-sale investments. Available for sale carried at fair value. Surplus / deficit arising from re-measurement is account. Investments are treated as current assets where the intention is twelve months from the balance sheet date. Otherwise investment assets. 2.10. STORES, SPARES AND LOOSE TOOLS Stores, spares and loose tools are valued at weighted average cost except for items in transit which are stated at cost. A provision is made for any excess book value over estimated realizable value of items identified as surplus to the Company's requirements. Adequate provision is also made for slow moving items. 2.11. STOCK-IN-TRADE Stock in trade is valued at the lower of cost and net realizable value. Cost is determined by the weighted average method. Cost includes applicable purchase cost and manufacturing expenses. The cost of work-in-process includes material and proportionate conversion costs. Net realizable value is the estimated selling price in the ordinary course of business less the costs of completion and selling expenses. 2.12. TRADE DEBTS AND OTHER RECEIVABLES Trade debts are recognized and carried at original invoice amount less provision for doubtful debts. Other receivables and receivables from related parties are recognized and carried at cost. 2.13. CASH AND CASH EQUIVALENTS Cash and cash equivalents are carried in the balance sheet at cost. For the purposes of cash flow statements, cash and cash equivalents comprise cash in hand, balances with banks and short term placements readily convertible to known amounts of cash and subject to insignificant risk of changes in value. Cash and cash equivalents also include bank overdrafts / short term borrowings that are repayable on demand and form an integral part of the Company's cash management. 21.4. FINANCIAL ASSETS AND LIABILITIES All financial assets and liabilities are initially measured at cost, which is the fair value of the consideration given and received respectively. These financial assets and liabilities are subsequently measured at lair value, amortized cost or cost, as the case may be. 2.15. PROVISIONS Provisions are recognized in the balance sheet when the Company has a legal or constructive obligation as a result of past events and it is probable that outflow of economic benefits will be required to settle the obligation and a reliable estimate of the amount can be made. However, provisions are reviewed at each balance sheet date and adjusted to reflect current best estimate. 2.16. FOREIGN CURRENCY TRANSLATION Transactions in foreign currencies are accounted for in Pak Rupees at exchange rates prevailing at the date of the transactions. Assets and liabilities in foreign currencies are translated into Pak Rupees at rates of exchange prevailing at the balance sheet date. Exchange gains and losses are included in income currently. 2.17. REVENUE RECOGNITION -- Sales are recognized when product is despatched to customers. -- Income on deposits / bonds is recognized on accrual basis. -- Dividend income is recognized when the Company's right to receive the payment has been established. 2.18. DERIVATIVE FINANCIAL INSTRUMENTS Derivative financial instruments are recognised in the balance sheet at fair value. All derivative financial instruments are carried as assets when fair value is positive and liabilities when fair value is negative. 2.19. TRANSACTIONS WITH RELATED PARTIES Sales, purchases and other transactions with related parties are carried out on commercial terms and conditions. 2.20. IMPAIRMENT LOSSES The carrying amount of the Company's assets are reviewed at each balance sheet date to determine whether there is any indication of impairment loss. If any such indication exists, the asset's recoverable amount is estimated in order to determine the extent of the impairment loss, if any. Impairment losses are recognized as expense in the profit and loss account. 2.21. RESEARCH AND DEVELOPMENT COSTS Research and development costs are charged to income as and when incurred. 3. ISSUED, SUBSCRIBED AND PAID-UP CAPITAL ===========================================================================
2004 2003 2004 2003
(Numbers) (Rupees)
===========================================================================
40,352,000 40,352,000 Ordinary shares of
Rs.10 each fully paid
in cash 403,520 403,520
112,588,079 112,588,079 Ordinary shares of
Rs.10 each issued
as fully paid bonus
shares 1,125,880 1,125,880
152,940,079 152,940,079 1,529,400 1,529,400
===========================================================================4. REDEEMABLE CAPITALSecured (Non-participatory) Long term finance utilised under mark-up arrangements =======================================================================================================
Installments 2004 2003
Number Commencing from (Rupees)
=======================================================================================================
- National Bank of Pakistan (1) 2 half yearly December 15, 2006 400,000 400,000
- National Bank of Pakistan (2) 8 half yearly June 17, 2004 262,500 350,000
- United Bank Limited 5 half yearly September 30, 2006 920,000 460,000
- Muslim Commercial Bank Limited 5 half yearly September 30, 2006 680,000 340,000
- Standard Chartered Bank 5 half yearly September 30, 2006 400,000 200,000
Term Finance Certificates (TFCs)
- lst Tranche - 499,600
- 2nd Tranche 999,000 999,400
999,000 1,499,000
3,661,500 3,249,000
Less: Current portion shown under current liabilities 1,086,500 587,500
2,575,000 2,661,500
=======================================================================================================4.1. The long term finance carry mark-up ranging between 1.0% - 1.05% (2003:1.0% - 1.05%) six months Government Treasury Bills.4.2. The TFCs have an embedded call option for early redemption exercisable by the Group the third year with three months notice. The principal amount of TFCs is to be repaid in equal semi-annual installments in arrears after a grace period of approximately 36 months from the date of issue. =================================================================================
Installment Repayment Rate of Profit
Payable period
=================================================================================
TFC - 2nd Tranche half yearly 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 was called during the year and the second tranche can be called in July 2005. 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 of the Company. 4.4. In view of the substance of the transactions, the sale and repurchase of assets under long finance have not been recorded in these financial statements. 4.5. The Company has entered into an interest rate swap agreement with the Citibank Pakistan for a notional amount of Rs 1 billion, amortizing up to September 2008. Under swap arrangement, the Company would receive average of last three cut-off yields of six months Government treasury bills from Citibank on notional amount and pay six months US $ LIBOR plus 1.47% which will be settled semi-annually. The Company has the option of unwinding whole or part of the swap transaction at any semi-annual settlement date with prior notice to the bank. 5. LONG TERM LOANS ====================================================================================================
Limit in Outstanding in foreign currency
Currency foreign 2004 2003 2004 2003
currency
(Rupees)
====================================================================================================
Loan - secured
Citibank N.A. US$ 10,000 10,000 10000 594500 574,000
594,500 574,000
Less: Current portion
shown under current
liabilities 594,500 -
- 574,000
====================================================================================================The details of the above loan are given in notes 5.1 to 5.2 below:5.1. ==============================================================================================
Repayment
Loans Rate of interest per annum Currency Number of Due date
installments
==============================================================================================
Citibank N.A. 1% to 2% above six months PKR Lump sum April 15, 2005
LIBOR
==============================================================================================5.2. 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. LIABILITY AGAINST ASSETS SUBJECT TO FINANCE LEASE 6.1. During the year, the Company entered into a lease agreement with a financial institution for lease of a vehicle. The liability under this agreement is payable by the year 2007 and is subject to finance charges @ 6% per annum used as the discount factor. The Company intends to exercise its option to purchase the leased vehicle for Rs. 50 upon completion of the lease period. 6.2. The amount of future payments for the finance leases and the periods in which these payments will become due are as follows: ===============================================================
Year 2004
(Rupees)
===============================================================
2005 2,417
2006 2,400
2007 2,400
7,217
Less: Finance
charges not due 617
6,600
Less: Current portion shown under
current liabilities 2,085
4,515
===============================================================7. DEFERRED TAXATION================================================================================================
2004 2003
(Rupees)
================================================================================================
Credit/(debit) balances
arising on account of:
Accelerated depreciation allowance 1,026,353 964,627
Provision for - retirement benefits (31,845) (73,959)
- slow moving stores and spares/
doubtful receivables (23,176) (36,909)
Others (5,037) (5,037)
966,295 848,722
================================================================================================8. RETIREMENT AND OTHER SERVICE BENEFITS================================================================================================
2004 2003
Notes (Rupees)
================================================================================================
Retirement benefits:
Opening balance 177,475 143,691
Expense recognised 52,762 59,947
Amount allocated
to capital work-in-progress - 188
Contributions made (210,277) (26,351)
19,960 177,475
Less:
- Payable to Pension fund 10 - 26,442
- (Receivable
from)/Payable to Gratuity funds
10 & 21 (5,520) 7,259
(5,520) 33,701
Closing balance 25,480 143,774
Other service benefit plan 65,505 67,536
Less : Current portion
shown under current liabilities 22,471 23,421
43,034 44,115
68,514 187,889
================================================================================================8.1. 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 777,572 184,533 -
Fair value of plan assets (726,601) (190,053) -
Deficit / (Surplus) 50,971 (5,520) -
Present value of unfunded
obligations - - 24,504
Unrecognized actuarial gainl(loss) (50,971) - 976
Net liability at the end of the year - (5,520) 25,480
====================================================================================8.2. 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 95,846 59,170 22,459
Expense recognised 36,276 13,540 2,946
Contributions made (132,122) (78,230) 75
Net liability at the end of the year - (5,520) 25,480
====================================================================================8.3. The following amounts have been charged in the profit and loss account in respect retirement benefit schemes.================================================================================================
2004 2003
(Rupees)
================================================================================================
Defined benefit plans
Current service cost 38,146 34,495
Interest cost 52,649 40,115
Expected return on plan assets (38,237) (31,157)
Transitional obligation recognised - 17,172
Net actuarial gain
recognised in current year 204 (678)
52,762 59,947
Defined contribution plan 26,551 27,445
================================================================================================8.4. Actual returns on funded plan assets during 2003 were Rs 127,027.8.5. PRINCIPAL ACTUARIAL ASSUMPTIONS Projected unit credit method, based on the following significant assumptions, was used for valuation of the schemes mentioned above: -- discount rate at 8% p.a., -- expected long term rate of increase in salaries for employees at 8% pa.; and -- expected long term rate of return on investment at 8% p.a. 8.6. During the year, gratuity scheme for non management employees, hitherto an unfunded plan, was converted into funded status. 9. SHORT TERM BORROWINGS - SECURED ================================================================================================
2004 2003
Note (Rupees)
================================================================================================
Running finance
utilised from banks 9.1 - 322,635
- 322,635
================================================================================================9.1. The facility for short term running finance available from various banks amounts Rs. 2,400,000 (2003: Rs. 2,237,500).The rates of mark-up range from 1.4% to 9.5% (2003: 1.6% to 12%) and the facilities secured by floating charge upon all current and future moveable property of the Comp and lien over Special US Dollar Bonds of US $ 1,499 referred to in note 22.1. 10. TRADE AND OTHER PAYABLES ================================================================================================
2004 2003
Notes (Rupees)
================================================================================================
Creditors 296,915 515,887
Accrued liabilities 281,531 257,974
Payable to:
- Pension fund 8 - 26,442
- Gratuity fund 8 - 7,259
- 33,701
Advances from customers
Financial charges accrued on secured 582,654 218,431
- redeemable capital
and long term loans 40,363 35,634
- short term borrowings 2,095 4,996
Deposits from dealers refundable on
termination of dealership 6,957 8,884
Sales tax payable
- 134,718
Contractors' deposits and retentions 8,560 8,510
Workers' profits
participation fund 10.1 1,594 4,607
Workers' welfare fund 16,121 24,228
1,236,790 1,247,570
================================================================================================10.1. WORKERS' PROFITS PARTICIPATION FUND================================================================================================
2004 2003
Notes (Rupees)
================================================================================================
Balance at the beginning of the year 4,607 8,090
Interest on funds
utilised in the Company's business
29 30 648
Allocation for the year 28 123,565 124,607
Less: Amount paid to
the Trustees of the Fund 126,608 128,738
1,594 4,607
================================================================================================11. DIVIDENDS================================================================================================
(AMOUNTS IN THOUSAND)
Notes 2004 2003
================================================================================================
Unclaimed 42,803 54,000
Proposed final 11.1 & 11.2 - -
42,803 54,000
================================================================================================11.1. The Company, effective from current year, has not recognised the final dividend, proposed subsequent to the year end, as a liability to comply with the substituted Fourth Schedule to the Ordinance, as referred to in note 2.1.1.Such a change in policy has been accounted for retrospectively and comparative financial statements have been restated in accordance with the recommended benchmark treatment of IAS 8. Had there been no change, the unappropriated profit and the current liabilities for the year ended December 31, 2004 would have been lower and higher respectively by Rs.611,760 (2003: Rs. 535,290). 11.2. The Board of Directors have proposed a final dividend for the year ended December 31, 2004 of Rs. 4 per share, amounting to Rs. 611,760 at their meeting held on February 10, 2005, for approval of the members at the Annual General Meeting to be held on March 31, 2005. These financial statements do not reflect this dividend payable, as explained in note 11.1. 12. CONTINGENCIES AND COMMITMENTS CONTINGENCIES 12.1. Claims, including pending lawsuits, against the Company not acknowledged as debt amounted to Rs. 45,412 (2003: Rs. 57,202). 12.2. Corporate guarantee of Rs. 143,682 (2003: Rs. 305,418) have been issued to banks in favour of subsidiary companies. 12.3. 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 foreign 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. 12.4. The Company had commenced two separate arbitration proceedings against the Government of Pakistan for non-payment of marketing incidentals relating to the year 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. 12.5. CAPITAL COMMITMENTS OUTSTANDING COMMITMENTS ================================================================================================
2004 2003
(Rupees)
================================================================================================
Plant and machinery 111,425 217,319
================================================================================================13. PROPERTY, PLANTAND EQUIPMENT =======================================================================================================================================================
Plant Furniture, Fixtures
Land Building and and Equipment Vehicles 2004 2003
Free hold Lease hold Free hold Lease hold Machinery Own Leased
NOTES (Rupees) (Rupees)
=======================================================================================================================================================
Cost
At 1st January 12,820 187,396 478,096 270,889 8,912,047 360,631 151,952 - 10,373,831 10,047,495
Additions - 25,877 1,083 314,505 22,353 36,467 6,600 406,885 359,206
Disposals
/transfers - - - - (153) (14,021) (45,305) - (59,479) (32,869)
*(4,982) (4,982)
Transfers
13.1 - - - - 160,409 - - - 160,409
At 31st December 12,820 187,396 503,973 271,972 9,386,808 363,981 143,114 6,600 10,876,664 10,373,832
Depreciation
At 1st January - 33,652 179,816 18,207 3,306,860 189,392 94,454 - 3,822,381 3,340,714
Accumulated
depreciation
transfers 13.1 - - - - 48,233 - - - 48,233 -
Charge for the
year - 3,941 19,904 6,637 477,211 41,198 23,884 330 573,105 511,530
Disposals - - - - (17) (12,965) (33,595) - (46,577) (29,863)
Transfers (2,238) (2,238)
At 31st December - 37,593 199,720 24,844 3,832,287 215,387 84,743 330 4,394,904 3,822,381
Net book value 12,820 149,803 304,253 247,128 5,554,521 148,594 58,371 6,270 6,481,760 6,551,451
Annual rate of
depreciation % - 2 to 3.33 2.5 to 10 2.5 5 to 33.33 10 to 25 12 to 20 20
Capital work-in-progress
13.5 614,570 527,343
Total 7,096,330 7,078,794
(note 13.1)
=======================================================================================================================================================13.1. The Company, effective from current year, has reclassified the cost of catalysts from Deferred Cost to Plant and Machinery category under Fixed Assets, to comply with the revised Fourth Schedule to the Companies Ordinance, 1984.13.2. DEPRECIATION AND AMORTISATION HAVE BEEN ALLOCATED AS FOLLOWS: ================================================================================================
2004 2003
Notes (Rupees)
================================================================================================
Depreciation and
amortisation have
been allocated as following
Depreciation for the year 13 573,105 511,530
Amortisation for the year 14 9,206 8,740
582,311 520,260
Cost of sales 25 559,711 498,113
Selling and
distribution expenses 26 22,600 22,147
582,311 520,260
================================================================================================13.3. 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 -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 + 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 granted and regular hearing of the main appeal has also been concluded and judgement is awaited. The Company's management is of the view that the Supreme Court will uphold decision of the High Court and as such has not made any provision of the aforesaid amount it the accounts. Payments, without prejudice and under protest, totalling Rs. 22,207 made in to the Department during the pendency of the petition in the High Court on their contention interalia, that the stay order had expired have been shown as receivable (note 21). 13.4. PARTICULARS OF DISPOSAL OF FIXED ASSETS =======================================================================================================
Description and Sold to cost Accumulated Net book Sale
method of disposal depreciation value proceeds
(Rupees)
=======================================================================================================
Vehicles
By company policy Mr. Zaffar A. Khan 1,169 78 1,091 1,023
to existing/separating Mr. Mudassar Y. Rathore 735 294 441 596
executives Dr. Bin Yamin Khalid 555 296 259 270
Mr. Nadeem Ahmed 795 93 702 705
Mr. Gulsher Khan 849 354 495 496
Mr. Shoaib Salim 849 212 637 849
Mr. M. Khalid Mir 739 616 123 252
Sale and lease back
transaction First Habib Bank Modaraba 5,995 200 5,795 6,600*
Through Auction Mr. Sultan Hasan Khan 436 378 58 296
Mr. Abdul Aman 643 557 86 419
Mr. Mian Sultan Mehmood 4,845 2,907 1,938 1,700
17,610 5,985 11,625 13,206
Items having book
value upto Rs. 50 27,695 27,611 84 11,856
45,305 33,596 11,709 25,062
Furniture, fixtures and equipment
By company policy to Mr. Zaffar A. Khan 191 41 150 150
separating executives Mr. Zaffar A. Khan 78 7 71 71
269 48 221 221
Items having book
value upto Rs. 50 5013,905 12,933 972 1,068
14,174 12,981 1,193 1,289
59,479 46,577 12,902 26,351
======================================================================================================= * Excess of sale proceeds over the carrying amount being deferred and amortised over the lease term.13.5. CAPITAL WORK - IN PROGRESS ================================================================================================
2004 2003
(Rupees)
================================================================================================
Plant and machinery 463,992 442,113
Building and civil works 109,536 48,993
Furniture, fixtures and equipment 24,985 15,467
Advances to suppliers 16,057 20,770
614,570 527,343
================================================================================================14. INTANGIBLE ASSETS COST================================================================================================
2004 2003
(Rupees)
================================================================================================
At 1st January 62,213 56,521
Additions 2,218 5,692
At 31st December 64,431 62,213
Amortisation
At 1st January 45,287 36,557
Charge for the year 9,206 8,730
At 31st December 54,493 45,287
Net book value at 31st December 9,938 16,926
================================================================================================15. LONG TERM INVESTMENTS================================================================================================
2004 2003
Notes (Rupees)
================================================================================================
Unquoted
Subsidiary companies - at cost 15.1 84,557 84,557
Joint venture companies
- at cost 15.2 1,340,000 1,340,000
Other associated company
Arabian Sea Country Club Limited
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 1,424,557
================================================================================================15.1. SUBSIDIARY COMPANIES================================================================================================
(AMOUNTS IN THOUSAND)
Investment
at cost -
Name of Company Equity December 31
and description of interest % held 2004 / 2003
(Rupees)
================================================================================================
Engro Eximp (Private) Limited
10,000 Ordinary
shares of Rs. 10 each 100 100
Engro Management Services
(Private) Limited
250,000 Ordinary
shares of Rs. 10 each 100 2,500
Innovative Automation & Engineering
(Private) Limited
1,020,000 Ordinary
shares of Rs. 10 each 51 81,957
84,557
================================================================================================15.2. JOINT VENTURE COMPANIES================================================================================================
2004 2003
(Rupees)
================================================================================================
Engro Vopak Terminal Limited
45,000,000 Ordinary
shares of Rs. 10 each 50 450,000
Engro Asahi Polymer &
Chemicals Limited
89,000,000 Ordinary
shares of Rs. 10 each 50 890,000
1,340,000
================================================================================================15.3. Value of the above investments, based on the net assets of the investee companies as at December 31, 2004 was as follows:================================================================================================
2004 2003
(Rupees)
================================================================================================
Engro Eximp (Private) Limited 15,802 14,615
Engro Management Services (Private) Limited 2,388 2,500
Innovative Automation & Engineering (Private) Limited 55,269 58,536
Engro Vopak Terminal Limited 509,186 564,870
Engro Asahi Polymer & Chemicals Limited (EAPCL) 980,319 797,870
Arabian Sea Country Club Limited (as at 30th June) 2,946 2,971
================================================================================================15.4. The Company has agreed to extend financial support, if required, to EAPCL upto US$ 2,500. This support is by way of either further share subscriptions or provision of subordinated loans.16. LONG TERM LOANS AND ADVANCES - CONSIDERED GOOD ================================================================================================
2004 2003
NOTE (Rupees in thousands)
================================================================================================
Executives 69,805 92,670
Other employees 34,516 19,970
104,321 112,640
Less: Installments recoverable within twelve
months 20 52,393 37,417
51,928 75,223
================================================================================================16.1. RECONCILIATION OF THE CARRYING AMOUNT OF LOANS AND ADVANCES TO EXECUTIVES================================================================================================
2004 2003
(Rupees)
================================================================================================
Reconciliation of the carrying
amount of loans and advano Executives:
Balance at the beginning of the year 92,670 114,677
Disbursements 15,556 14,352
Repayment (38,421) (36,359)
Balance at the end of the year 69,805 92,670
================================================================================================16.2. This includes services incentive loans to executives of Rs. 43,366 (2003: Rs. 41,054) 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 15,936 (2003: Rs. 712) pursuant to Collective Labour Agreement.It also includes advances of Rs. 38,883 (2003: Rs. 69,593) to employees for the purchase of Company's shares and these advances are repayable by 2006. 16.3. The maximum amount outstanding at the end of any month from the executives aggregated Rs. 114,751 (2003: Rs. 108,930). 17. STORES, SPARES AND LOOSE TOOLS ================================================================================================
2004 2003
(Rupees)
================================================================================================
Consumable stores 97,381 119,415
Spares 543,476 541,478
Loose tools 3,565 3,302
644,422 664,195
Less: Provision for surplus and slow moving items 57,134 97,273
587,288 566,922
================================================================================================18. STOCK-IN-TRADE================================================================================================
2004 2003
(Rupees)
================================================================================================
Raw materials 241,424 192,886
Work-in-process 2,720 9,668
Finished goods- own manufactured product 140,262 156,342
- purchased product 100,342 26,686
240,604 183,028
484,748 385,582
================================================================================================19. TRADE DEBTS================================================================================================
2004 2003
(Rupees)
================================================================================================
Considered good 522,608 640,243
Considered doubtful 7,923 7,839
530,531 648,082
Less: Provision for doubtful debts 7,923 7,839
522,608 640,243
================================================================================================20. LOANS, ADVANCES, DEPOSITS AND PREPAYMENTS================================================================================================
2004 2003
NOTE (Rupees)
================================================================================================
Current portion of long term loans and advances
to executives and other employees
- considered good 52,393 37,417
Sub-ordinated loan to Engro Eximp (Private)
Limited 20.1 200,000 -
Advances and deposits with:
- Statutory authorities - 304
- Others 46,689 22,316
Margins against letters of credit 135,519 6,738
Prepayments 43,853 57,993
Less: Provision for doubtful receivables 818 -
477,636 124,768
================================================================================================20.1. The loan carries mark-up at rates not being lower than the mark up payable by the Company for ordinary commercial finance of like maturities (presently at 5% per annum).The loan is subordinated to the facilities provided to the subsidiary by its banking creditors and is repayable on demand, taking into account the financing requirements of the subsidiary. This amount of Rs. 200,000 was outstanding at the date of authorisation of these financial statements. Due to the nature of the transaction, the sale and repurchase of underlying assets has not been recorded in the financial statements. 21. OTHER RECEIVABLES ================================================================================================
(AMOUNTS IN THOUSAND)
Notes 2004 2003
================================================================================================
Receivable from Government for:
- custom duty and sales tax 13.3 22,207 22,207
- others 13,560 19,475
35,767 41,682
Accrued income on deposits/bonds 10,179 7,309
Receivable from Gratuity funds 8 5,520 -
Sales tax refundable 1744 -
Due from:
- Innovative Automation & Engineering (Pvt) Ltd 5,108 867
- Engro Asahi Polymer & Chemicals Limited 215 -
- Engro Vopak Terminal Limited 41 -
Claims on foreign suppliers 6,075 4,406
Less: Provision for doubtful receivables 295 295
5,780 4,111
Others 357 1,111
Less: Provision for doubtful receivables 49 49
308 1,062
64,662 55,031
================================================================================================21.1. The maximum amounts due from joint venture / subsidiary companies at the end of any month during the year aggregated as follows:================================================================================================
2004 2003
(Rupees)
================================================================================================
- Engro Asahi Polymer & Chemicals Limited 1,933 3,271
- Engro Vopak Terminal Limited 1,669 842
- Innovative Automation & Engineering (Private) Limited 5,108 867
- Engro Eximp (Private) Limited (advance against
purchases) 779,994 367,319
- Engro Management Services (Private) Limited 114 81
================================================================================================22. SHORT TERM INVESTMENTS================================================================================================
2004 2003
Notes (Rupees in thousands)
================================================================================================
Held-to-Maturity
Certificates of investments - 50,000
Available-for-Sale
Government of Pakistan Special US Dollar
Bonds 22.1 686,682 662,860
WAPDA Bonds - 53,162
Certificates of investments 22.2 25,000 -
Certificates of deposits 22.2 50,000 -
Fixed income / money market funds 22.3 102,541 -
864,223 766,022
================================================================================================22.1.The Government of Pakistan Special US Dollar Bonds held by the Company are due to mature on April 21, 2005. Profit is payable on US Dollar Bonds at a rate 2% above six-months LIBOR. US Dollar Bonds of US$ 11,499 are held under lien by certain banks referred to in notes 5.2 and 9.1. 22.2. The investments, carry a return ranging between 6% and 6.50% per annum. 22.3. These represents investments in open ended mutual funds of different companies and are valued at their respective redemption / repurchase price. 23. CASH AND BANK BALANCES ================================================================================================
2004 2003
(Rupees)
================================================================================================
With banks
- on deposit accounts 1,113,068 1,343,572
-on current accounts 149,368 47,953
In hand
- cheques / demand drafts 175,712 255,518
- cash 3,000 4,025
1,441,148 1,651,068
================================================================================================24. NET SALES================================================================================================
2004 2003
(Rupees)
================================================================================================
Own manufactured product 9,502,588 8,752,640
Less: Sales tax 1,017,902 1,066,441
8,484,686 7,686,199
Purchased product 4,592,093 4,800,549
Less: Sales tax 279,117 602,446
4,312,976 4,198,103
Net Sales 12,797,662 11,884,302
================================================================================================ SALES ARE NET OF MARKETING ALLOWANCES OF Rs 60,314 (2003: Rs 288,704)25. COST OF SALES ================================================================================================
2004 2003
Notes (Rupees)
================================================================================================
Raw materials consumed 2,287,659 1,395,271
Salaries, wages and staff welfare 542,305 503,927
Fuel and power 1,460,233 1,330,344
Repairs and maintenance 236,462 269,327
Depreciation / amortization 13.2 559,711 498,113
Consumable stores 76,143 81,098
Staff recruitment, training, safety and other expenses 23,869 23,823
Purchased services 98,569 91,757
Travel 21,245 18,404
Communication, stationery and other office expenses 29,368 28,015
Insurance 53,756 69,459
Rent, rates and taxes 4,817 4,472
Other expenses 26,371 27,342
Manufacturing cost 5,420,508 4,341,352
Add: Opening stock of work-in-progress 9,668 18,498
Less: Closing stock of work-in-progress 2,720 9,668
6,948 8,830
Cost of goods manufactured 5,427,456 4,350,182
Add: Opening stock of finished goods manufactured 156,342 230,465
Less: Closing stock of finished goods manufactured 140,262 156,342
16,080 74,123
Cost of goods sold - own manufactured product
purchased product
5,443,536 4,424,305
4,084,679 3,885,632
9,528,215 8,309,937
================================================================================================26. SELLING AND DISTRIBUTION EXPENSES================================================================================================
2004 2003
Note (Rupees in thousands)
================================================================================================
Salaries, wages and staff welfare 210,857 205,807
Staff recruitment, training, safety and other expenses 17,618 15,776
Product transportation and handling 594,812 609,780
Repairs and maintenance 13,330 9,664
Advertising and sales promotion 60,770 63,789
Rent, rates and taxes 30,287 27,550
Communication, stationery and other office expenses 26,485 26,332
Travel 21,503 19,188
Depreciation / amortization 13.2 22,600 22,147
Purchased services 11,990 11,836
Other expenses 26,257 28,158
1,036,509 1,040,027
================================================================================================27. OTHER INCOME================================================================================================
2004 2003
Notes (Rupees)
================================================================================================
Dividend income 27.1 491,021 323,000
Income on deposits/bonds 45,242 40,944
Service charges 5,825 17,206
Profit on disposal of fixed assets 12,644 9,770
Sundries - 1,173
Net foreign exchange gain 29.1 3,422 -
558,154 392,093
================================================================================================27.1. DIVIDEND INCOME================================================================================================
2004 2003
(Rupees)
================================================================================================
Engro Vopak Terminal Limited 247,500 225,000
Engro Eximp (Private) Limited 228,221 98,000
Innovative Automation & Engineering (Private) Limited 15,300 -
491,021 323,000
================================================================================================28. OTHER OPERATING CHARGES================================================================================================
2004 2003
Note (Rupees)
================================================================================================
Workers' profits participation fund 10.1 123,565 124,607
Workers' welfare fund 32,674 43,642
Research and development including salaries
and wages 31,937 61,778
Auditors' remuneration
-statutory audit 1,000 1,000
- fee for other advisory services 1,025 353
- reimbursement of expenses 247 150
2,272 1,503
Less: Shown under capital work-in-progress (820) (260)
1,452 1,243
Professional tax 700 100
190,328 231,370
================================================================================================29. FINANCIAL CHARGES================================================================================================
2004 2003
NOTE (Rupees in thousands)
================================================================================================
Interest on - workers' profits participation
fund 10.1 30 648
Mark-up/interest on - redeemable capital and
long term loans 279,853 312,365
- short term borrowings 2,745 15,159
Exchange risk fee, administrative fee and others 3,083 35,127
Foreign exchange loss 29.1 - 8,511
285,711 371,810
================================================================================================29.1. NET FOREIGN EXCHANGE GAIN / (LOSS)================================================================================================
2004 2003
(Rupees)
================================================================================================
Foreign exchange gain / (loss) on Government of
Pakistan Special US $ Bonds - Rs. 23,822 (2003: loss
of Rs. 10,937) and foreign currency bank accounts 23,922 (12,137)
Foreign exchange (loss) / gain on foreign currency loan (20,500) 3,626
3,422 (8,511)
================================================================================================30. TAXATION================================================================================================
2004 2003
(Rupees)
================================================================================================
Current - for the year 586,906 779,405
Deferred 117,572 (12,937)
704,478 766,468
================================================================================================30.1. The income tax assessments of the Company have been finalised upto and including the income year ended December 31, 2000. However, the assessment orders for 1999 and 2000 have been set aside by the appellate authority. Appeals for 1996 (later 6 months), 1997 and 1998 have been decided in favour of the Company.The Department has filed appeals against the appellate orders in 1996 and 1997, which have been decided on the same lines. For the income years 1995 and 1996, 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, which are expected to be finalised during the current month. This demand primarily relates to the pro-ration of revenues and 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. 30.2. 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: ================================================================================================
2004 2003
(Rupees)
================================================================================================
Profit before tax 2,315,053 2,323,251
Tax calculated at the rate of 35% 810,269 813,138
Depreciation on exempt assets not deductible
for tax purposes 34,495 34,534
Effect of applicability of lower tax rate/exemption
on certain income and other tax credits/debits (142,286) (96,004)
Tax under presumptive regime 2,000 14,800
Tax charge for the year 704,478 766,468
================================================================================================31. EARNINGS PER SHAREThere is no dilutive effect on the basic earnings per share of the Company, which is based on: ================================================================================================
2004 2003
================================================================================================
Profit after taxation (Rupees) 1,610,575 1,556,783
Weighted average number of Ordinary shares
(in thousand) 152,940 152,940
================================================================================================32. REMUNERATION OF CHIEF EXECUTIVES, DIRECTORS AND EXECUTIVESThe aggregate amounts charged in the financial statements for remuneration, including all benefits, to chief executives, directors and executives of the Company are given below: =============================================================================================
2004 2003
Directors Directors
chief Others Executives Chief Others Executives
Executives Executives
(Rupees)
=============================================================================================
Managerial remuneration 7,688 4,581 335,337 8,908 9,323 320,941
Contributions to the
Provident fund 548 373 22,554 722 799 24,020
Other benefits 1,592 666 19,281 1,935 1,819 18,944
Fees - 16 - - 19 -
Total 9,828 5,636 377,172 11,565 11,959 363,905
Number of persons,
including those who
worked part of the year 2 9 279 1 9 276
=============================================================================================32.1. 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.32.2. Technical advisory fees paid during the year to one non-executive director (2003: two) during the year amounted to Rs. 900 (2003: Rs. 980). 33. CASH GENERATED FROM OPERATIONS ================================================================================================
2004 2003
Note (Rupees)
================================================================================================
Profit before taxation 2,315,053 2,323,251
Adjustment for non-cash charges and other items:
- Depreciation and amortisation 582,311 520,260
- Profit on disposal of fixed assets (12,644) (9,770)
- Provision for retirement and other service benefits 97,380 107,072
- Income on deposits/bonds (45,242) (40,944)
- Dividend income (491,021) (323,000)
- Financial charges 306,211 371,810
- Working capital changes 33.1 (329,813) (190,856)
2,422,235 2,757,823
================================================================================================33.1. WORKING CAPITAL CHANGES================================================================================================
2004 2003
(Rupees)
================================================================================================
(Increase)/Decrease in current assets
Stores, spares and loose tools (20,366) 30,884
Stock-in-trade (99,166) 385,473
Leasehold land held for sale - 4,608
Trade debts 117,635 (114,119)
Loans, advances, deposits and prepayments (352,868) 65,240
Other receivables (net) 3,859 48,266
Increase/(Decrease) in current liabilities (350,906) 420,352
- Trade and other payables including other
service benefits (net) 21,093 (611,208)
(329,813) (190,856)
================================================================================================34. CASH AND CASH EQUIVALENTS================================================================================================
2004 2003
Notes (Rupees)
================================================================================================
Cash and bank balances 23 1,441,148 1,651,066
Short term investments 22 864,223 766,022
Short term borrowings - (322,635)
2,305,371 2,094,455
================================================================================================35. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES35.1. FINANCIAL ASSETS AND LIABILITIES ======================================================================================================================================
Effective interest/ Interest/mark-up bearing Non-Interest/mark-up bearing
Mark-up rate maturity upto maturity after Total maturity upto maturity after Total
(%) one year one year one year one year
(Rupees)
======================================================================================================================================
Financial Assets
Loans and advances 5 200,000 - 200,000 52,393 51,928 104,321
Trade debts - - - - 522,608 - 522,608
Other receivables - - - - 27,151 - 27,151
Short term investments 2.0 to 6.5 864,223 - 864,223 - - -
Cash and bank balances 0.5 to 6.7 1,262,436 - 1,262,436 178,712 - 178,712
Financial Liabilities
2,326,659 - 2,326,659 780,864 51,928 832,792
Redeemable capital
-TFCs 11 999,000 - 999,000 - - -
- Other than TFCs 3.02 87500 2,575,000 2,662,500 - - -
Long term loans 3.96 594,500 - 594,500 - - -
Liabilities against assets
subject to finance lease 6 2,085 4,515 6,600 - - -
Trade and other payables - - - - 636,421 - 636,421
Dividends - - - - 42,803 - 42,803
1,683,065 2,579,515 4,262,600 679,224 - 679,224
====================================================================================================================================== (a) Financial assets and liabilities exposed to foreign exchange rate risk included in above amount to Rs. 686,682 and Rs. 594,500 respectively.(b) Financial liabilities exposed to floating interest rate risk included in above amount to Rs 4,256,000. 35.2. FINANCIAL RISK MANAGEMENT Overall, risks arising from the Company's financial assets and liabilities are limited. The Company manages its exposure to financial risk in the following manner: (a) Foreign exchange risk This exists due to the Company's exposure resulting from outstanding import payments and a foreign currency index loan. A Foreign Exchange Risk Management Policy has been developed and approved by the Management Committee. The policy allows the Company to take currency exposure for limited periods within predefined limits and open exposure is rigorously monitored. The Company ensures that it has options available to exit or hedge any exposure, either through forward contracts or prepayments, etc. Alternatively, Special US Dollar Bonds also serve as a synthetic hedge for part of the currency exposure. (b) Interest /Mark-up rate risk The Company has long term Rupee based loans at variable rates. Part of the variable rate Rupee loans are hedged against interest rate risk by instituting interest rate caps and floors. This protects the Company against any adverse movement in market interest/mark-up rates. In addition, part of the Rupee variable rate loans have been swapped into London Inter Bank Offer Rate (LIBOR) based variable rate loan with a cap on LIBOR. The foreign currency index loan has variable rate pricing that is dependent on LIBOR. Variable rate loans also have a prepayment option, which can be exercised upon any adverse movement. Rates on short term loans are effectively fixed. (c) Credit risk The Company is exposed to a concentration of credit risk on its trade debts amounting to Rs. 522,608 by virtue of all its customers being agri-based businesses in Pakistan. However, this risk is mitigated by applying individual credit limits and by securing the majority of trade debts against bank guarantees from reputable banks. In addition to the above, the Company may become exposed to credit risk upon the crystallization of its obligation to support its joint venture company to the extent mentioned in note 15.4. Concentration of credit risk on cash based financial assets is minimised by dealing with a variety of major banks. (d) Liquidity risk Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding to an adequate amount of committed credit facilities and the ability to close out market positions due to the dynamic nature of the business. The Company's treasury aims at maintaining flexibility in funding by keeping committed credit lines available. 35.3. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES The carrying value of all financial assets and liabilities reflected in the financial statements approximate their fair values. 36. TRANSACTIONS WITH RELATED PARTIES 36.1. Related parties comprise subsidiaries, joint venture companies, other companies with common directors, retirement benefit funds, directors, and key management personnel. 36.2. Details of transactions with related parties during the year, other then those which have been disclosed elsewhere in these accounts, are as follows: ================================================================================================
2004 2003
================================================================================================
Purchases and services 3,866,740 3,377,505
Service charges recoverable 4,723 3,624
================================================================================================36.3. Associated companies held 41,357,402 (2003: 41,357,402) Ordinary shares in the Company at year end.37. DONATIONS Donations include the following in which a director or his spouse is interested: ==============================================================================================
Interest in Name and address of Donee 2004 2003
Donee (Rupees)
==============================================================================================
Mr Zaffar Ahmad Khan Member Patients Welfare Program
Aga Khan University
Hospital, Karachi 50 1,000
Spouse of Mr. Parvez Ghias Member Citizen's Education
Development Foundation, Karachi 25 25
Mr Zaffar Ahmad Khan Member Oncology Unit Project,
Aga Khan University Hospital,
Karachi 2,000 50
2,075 1,075
==============================================================================================38. PRODUCTION CAPACITY===================================================================
Designed Annual Actual Production
Capacity 2004 2003
Metric Tons Metric Tons
===================================================================
Urea 850,000 870,321 954,923
NPK 100,000 120,566 72,180
===================================================================39. NUMBER OF EMPLOYEESTotal number of permanent employees as at December 31, 2004 was 752 (2003: 765). 40. DATE OF AUTHORISATION FOR ISSUE These financial statements were authorised for issue on February 10, 2005 by the Board of Directors of the Company. 41. CORRESPONDING FIGURES Previous year figures have been rearranged and reclassified wherever necessary for the purposes of comparison. Major changes made during the year were reclassifications resulting from the substituted Fourth Schedule to the Companies Ordinance, 1984 (notes 11.1 and 13.1). |