| Engro Chemical (Pakistan) Ltd - 2005 |
=============================================================================== BALANACE SHEET AS AT DECEMBER 31, 2005 =============================================================================== 2005 2004 Notes (Rupee in '000) =============================================================================== 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 4,429,240 Unappropriated profit 627,244 5,846,166 5,056,484 7,375,566 6,585,884 NON CURRENT LIABILITIES: Redeemable capital 4 2,887,500 2,575,000 Liability against asset subject to finance lease 5 2,289 4,515 Deferred Taxation 6 1,003,177 966,295 Retirement and other service benefits 7 43,004 68,514 3,935,970 3,614,324 CURRENT LIABILITIES CURRENT PORTION OF: - redeemable capital 4 687,500 1,086,500 - long term loan - 594,500 - liability against asset subject to finance lease 5 2,226 2,085 - other service benefits 7 20,230 22,471 Short term borrowings 8 - - Trade and other payables 9 1,969,001 1,236,790 Taxation 43,267 - Unclaimed dividends 77,870 42,803 2,800,094 2,985,149 Contingencies and commitments 10 FIXED ASSETS: Property, plant and equipment 11 6,840,058 7,096,330 Intangible assets 12 21,618 9,938 6,861,676 7,106,268 Long term investments 13 2,172,757 1,424,557 Long term loans, advances and other receivables 14 65,642 51,928 CURRENT ASSETS: Stores, spares and loose tools 15 665,902 587,288 Stock-in-trade 16 1,922,982 484,748 Trade debts 17 543,316 522,608 Loans, advances, deposits and prepayments 18 360,923 477,636 Other receivables 19 237,931 64,662 Taxation - 160,291 Short term investments 20 138,016 864,223 Cash and bank balances 21 1,142,485 1,441,148 5,011,555 4,602,604 14, 111,630 13,185,357 =============================================================================== =============================================================================== PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED DECEMBER 31, 2005 =============================================================================== 2005 2004 Notes (Rupees in '000) =============================================================================== Net sales 22 18,276,277 12,797,662 Cost of sales 23 (14,364,288) (9,528,215) Gross profit 3,911,989 3,269,447 Selling and distribution expenses 24 (1,270,703) (1,036,509) 2,641,286 2,232,938 Other income 25 1,144,987 558,154 Other operating charges 26 (286,652) (190,328) Financial charges 27 (280,070) (285,711) (566,722) (476,039) Profit before taxation 3,219,551 2,315,053 Taxation 28 (900,469) (704,478) Profit after taxation 2,319,082 1,610,575 Earnings per share - Basic and diluted 29 Rs 15.16 Rs 10.53 =============================================================================== =============================================================================================
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED DECEMBER 31, 2005
=============================================================================================
Revenue Reserve
Share Total
Capital General Unappropriated
Profit
(Rupees in '000)
=============================================================================================
Balance as at January 1, 2004 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
ended December31, 2004 - - 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
Final Dividend for the year ended
December 31, 2004 @ Rs 4.00 per share - - (611,760) (611,760)
Profit for the year ended
December 31, 2005 - - 2,319,082 2,319,082
Interim dividends
1st @ Rs 3.00 per share - - (458,820) (458,820)
2nd @ Rs 3.00 per share - - (458,820) (458,820)
1,529,400 4,429,240 1,416,926 7,375,566
=============================================================================================
=============================================================================== CASH FLOW STATEMENT for the Year Ended December 31 2005 =============================================================================== (AMOUNTS IN THOUSAND) 2005 2004 Notes (Rupees) =============================================================================== CASH FLOWS FROM OPERATING ACTIVITIES: Cash generated from operations 31 2,349,338 2,422,235 Retirement and other service benefits paid (61,204) (256,926) Financial charges paid (234,338) (283,883) Taxes paid (660,029) (906,127) Long term loans and advances (13,714) 23,295 Net cash inflow from operating activities 1,380,053 998,594 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditure (377,072) (520,106) Sales proceeds on disposal of fixed assets 11,023 19,751 Income on deposits/ other financial assets 53,044 42,372 Investment in a subsidiary company (748,200) - Dividends received 833,700 485,921 Net cash (outflow) / inflow from investing activities (227,505) 27,938 CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from redeemable capital 1,000,000 1,000,000 Repayment of redeemable capital (1,086,500) (587,500) Asset subject to finance lease (2,085) 6,600 Repayment of long term loan (594,500) - Dividends paid (1,494,333) (1,234,716) Net cash (outflow) from financing activities (2,177,418) (815,616) Net (decrease)/ increase in cash and cash equivalents (1,024,870) 210,916 Cash and cash equivalents at the beginning of the year 2,305,371 2,094,455 Cash and cash equivalents at the end of the year 32 1,280,501 2,305,371 ===============================================================================NOTES TO THE FINANCIAL STATEMENTS for the Year Ended December 31, 2005 1. STATUS AND NATURE OF BUSINESS Engro Chemical Pakistan Limited (the company) is a public listed company incorporated in Pakistan. The principal activity of the Company is manufacturing, purchasing and marketing of fertilisers. The Company is also involved in the production and marketing of seeds and has invested in joint ventures / other entities engaged in chemical related activities and industrial automation. During the year, the Company has incorporated a wholly owned subsidiary with the objective to undertake food business. The registered office of the Company is situated at 8th floor, PNSC Building, Moulvi Tamizuddin Khan Road, Karachi. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 2.1. STATEMENT OF COMPLIANCE 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 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. 2.2. BASIS OF PREPARATION 2.2.1. These financial statements have been prepared under the historical cost convention, except for the remeasurement of 'financial assets at fair value through profit or loss' including derivative financial instruments, at fair value and recognition of certain staff retirement benefits at present value. 2.2.2. The preparation of financial statements in conformity with approved accounting standards requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the company's accounting policies. The estimates / judgements and associated assumptions used in the preparation are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The resulting accounting estimates / judgements / assumptions will, by definition, seldom equal the related actual results. The estimates /judgements and associated assumption are reviewed on an ongoing basis. Revision to the accounting estimates are recognised in the period in which the estimate is revised, if the revision affects only that period, or in period of revision and future periods if the revision affects both current and future periods. The estimates, judgements and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of the assets and liabilities within the next financial year are discussed in respective notes. 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, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purpose and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantially enacted at the balance sheet date. Deferred tax asset is reduced to the extent that it is no longer probable that the related tax benefit will be realised. 2.4. RETIREMENT AND OTHER SERVICE BENEFITS DEFINED CONTRIBUTION PLANS -- The Company operates -- defined contribution provident fund for its permanent employees. Monthly contributions are made both by the Company and employees to the fund at the rate of 10% of basic salary. -- defined contribution pension fund for the benefit of management employees. Monthly contributions are made by the Company to the fund at the rate ranging from 12.5% to 13.75% of basic salary (note 7.6). Defined benefit plans and other service benefits -- The Company operates: -- defined benefit funded pension scheme for its management employees (note 7.1 and 7.6). -- defined benefit funded gratuity schemes for its management and non-management employees. The pension scheme provides life time pension to retired employees or to their spouses. Contributions are made annually to these funds on the basis of actuarial recommendations. The pension scheme has been curtailed and effective from July 1, 2005, no new members are inducted in this scheme (note 7.6). -- The Company also operates unfunded scheme for resignation gratuity of certain management employees. -- The Company recognises 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, 2005. -- Provision is also made under a service incentive plan for certain category of experienced employees to continue in the Company's employment. Employees' compensated absences -- The company accounts for compensated absences on the basis of unavailed leave balance of each employee at the end of the year. 2.5. FINANCIAL LIABILITIES All financial liabilities are recognised initially at fair value plus directly attributable transaction costs, if any, and subsequently measured at amortised cost using effective interest rate method. 2.6. PROPERTY, PLANT AND EQUIPMENT OWNED -- Operating assets are stated at cost less accumulated depreciation and impairment losses, if any, whereas capital work-in-progress is stated at cost. Borrowing and other related costs specific to a project during its construction period are capitalised. -- 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 following the one in which the asset is available for use and on disposal upto the month the asset is in use. The rates of depreciation are stated in note 11. -- Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipments. -- Maintenance and repairs are charged to income as and when incurred. Major renewals and betterments are capitalised 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. -- The residual value, if not insignificant, is reassessed annually. Leased 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. 2.7. 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. Costs associated with maintaining computer software products are recognised as an expense as incurred. 2.8. INVESTMENTS Subsidiaries and joint venture companies Investments in subsidiary and joint venture companies are stated at cost less 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 amortised cost using the effective interest rate method. Financial assets at fair value through profit or loss Investments are designated as 'financial assets at fair value through profit or loss' by the Company either at initial recognition or as per transitional provisions of International Accounting Standard 39, Financial Instruments: Recognition and Measurement. Surplus/ deficit arising from re-measurement is taken to profit and loss account. Investments are treated as current assets where the intention is to hold these for less than twelve months from the balance sheet date. Otherwise investments are treated as long term assets. 2.9. 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 realisable value of items identified as surplus to the Company's requirements. Adequate provision is also made for slow moving items. 2.10. STOCK-IN-TRADE Stock-in-trade is valued at the lower of cost and net realisable value. Cost is determined using weighted average method except for raw material in transit which are stated at cost. Cost includes applicable purchase cost and manufacturing expenses. The cost of work in process includes material and proportionate conversion costs. Net realisable value is the estimated selling price in the ordinary course of business less the costs of completion and selling expenses. 2.11. TRADE AND OTHER RECEIVABLES Trade and other receivables are recognised initially at fair value plus directly attributable transaction costs, if any, and subsequently measured at amortised cost using effective interest rate method less provision for impairment, if any. A provision for impairment of trade and other receivables is established when there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of receivables. 2.12. 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, balance 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. 2.13. PROVISIONS Provisions are recognised 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. 2.14. FOREIGN CURRENCY TRANSLATION Transactions in the foreign currencies are accounted for in Pak Rupees at the exchange rates prevailing at the date of the transactions. Monetary assets and liabilities in foreign currencies are translated into Pak Rupees at rates of exchange prevailing at the balance sheet date. Foreign exchange differences are recognised in the profit and loss account. 2.15. OFFSETTING OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES Financial assets and financial liabilities are offset and the net amount is reported in the financial statements only when the Company has a legally enforceable right to offset the recognised amounts and the Company intends either to settle on a net basis or to realise the asset and settle the liability simultaneously. 2.16. REVENUE RECOGNITION -- Sales are recognised when product is despatched to customers. -- Income on deposits and other financial assets is recognised on accrual basis. -- Dividend income is recognised when the Company's right to receive the payment has been established. 2.17. DERIVATIVE FINANCIAL INSTRUMENTS Derivatives that do not qualify for hedge accounting are recognised in the balance sheet at fair value with corresponding effect to profit and loss. Derivative financial instruments are carried as assets when fair value is positive and liabilities when fair value is negative. 2.18. TRANSACTIONS WITH RELATED PARTIES Sales, purchases and other transactions with related parties are carried out on commercial terms and conditions. 2.19. 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 such indications exist, the assets recoverable amount is estimated in order to determine the extent of the impairment loss, if any. Impairment loss is recognised as expense in the profit and loss account. 2.20. RESEARCH AND DEVELOPMENT COSTS Research and development costs are charged to income as and when incurred. 2.21. DIVIDEND DISTRIBUTION Dividend distribution to the Company's shareholders is recognised as a liability in the Company's financial statements in the period / year in which the dividends are approved. 3. ISSUED, SUBSCRIBED AND PAID-UP CAPITAL ===============================================================================
2005 2004 2005 2004
(Numbers) (Rupees in '000)
===============================================================================
40,352,000 40,352,000 Ordinary shares of 403,520 403,520
Rs 10 each fully paid
in cash
112,588,079112,588,079 Ordinary shares of 1,125,880 1,125,880
Rs 10 each issued
as fully paid
bonus shares
152,940,079152,940,079 1,529,400 1,529,400
===============================================================================4. REDEEMABLE CAPITAL=============================================================================================
Secured (Non-participatory)
Long term finance utilised under
mark-up arrangement
Instalments
Number Commencing from 2005 2004
(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 175,000 262,500
United Bank Limited 5 half yearly September 30, 2006 920,000 920,000
MCB Bank Limited (1) 5 half yearly September 30, 2006 680,000 680,000
Standard Chartered Bank 5 half yearly September 30, 2006 400,000 400,000
National Bank of Pakistan (3) 8 quarterly November 1,2009 600,000
MCB Bank Limited (2) 8 quarterly March 12, 2010 400,000 -
3,575,000 2,662,500
Term Finance Certificates (TFCs)
2nd Tranche - 999,000
3,575,000 3,661,500
Less: Current portion shown under current liabilities 687,500 1,086,500
2,887,500 2,575,000
=============================================================================================4.1. The long term finance carry mark-up ranging between 1.0% - 1.05% (2004:1.0% -1.05%) over six months Government Treasury Bills, except for National Bank of Pakistan (3) and MCB Bank Limited (2) on which markup is 1.3% over three month Karachi Interbank Offered Rate (KIBOR).4.2. During the year, the Company redeemed 2nd Tranche of Term Finance Certificates amounting to Rs 1 billion (amount of Rs 999,000 outstanding at December 31, 2004) by exercising the call option for early redemption. 4.3. The above finances are secured by an equitable mortgage upon the immovable property and floating charge over current and future fixed assets of the company. 4.4. In view of the substance of the transactions, the sale and repurchase of assets under long term finance have not been recorded in these financial statements. 4.5. The company has entered into an interest rate swap agreement with Citibank Pakistan to manage its interest rate exposure on floating rate borrowing for a notional amount of Rs one billion, amortising 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 fixed 5.47% 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. 4.6. As interest rates were peaking during the year, the Company entered into a matching swap with United Bank Limited, effective from March 2006 to perfectly offset the earlier swap of Citibank. Under this arrangement, the company will pay average of last three cut-off yields of six months Government Treasury Bills on notional amount of Rs one billion and receive fixed at 9.5% which will be settled semi-annually. The fair value of above swap is Rs 65,117 (note 14). 5. LIABILITY AGAINST ASSET SUBJECT TO FINANCE LEASE 5.1. The company has 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. 5.2. The amount of future payments for the finance leases and the periods in which these payments will become due are as follows: ===============================================================================
2005 2004
(Rupees)
Year
===============================================================================
2005 - 2,417
2006 2,400 2,400
2007 2,400 2,400
4,800 7,217
Less: Finance charges not due 285 617
4,515 6,600
Less: Current portion shown under current liabilities 2,226
2,085
2,289 4,515
===============================================================================6. DEFERRED TAXATION===============================================================================
2005 2004
(Rupees in thousand)
===============================================================================
CREDIT / (DEBIT) BALANCES ARISING ON ACCOUNT OF:
Accelerated depreciation allowance 1,036,297 1,026,353
Provision for - retirement benefits (22,132) (31,845)
Slow moving stores and spares/ doubtful receivables (6,058) (23,176)
Others (4,930) (5,037)
1,003,177 966,295
===============================================================================7. RETIREMENT AND OTHER SERVICE BENEFITS===============================================================================
2005 2004
Notes (Rupees in thousand)
===============================================================================
RETIREMENT BENEFITS:
Opening balance 19,960 177,475
Expense recognised - net 7.3 (4,297) 52,762
Contributions made (11,718) (210,277)
Closing balance 3,945 19,960
LESS: PAYABLE TO / (RECEIVABLE FROM) GRATUITY FUNDS:
9 & 19 450 (5,520)
3,495 25,480
Other service benefit plan 59,739 65,505
Less: Current portion shown under current liabilities 20,230 22,471
39,509 43,034
43,004 68,514
===============================================================================7.1. THE AMOUNTS RECOGNISED IN THE BALANCE SHEET ARE AS FOLLOWS===============================================================================
Defined Defined Defined
Benefit Benefit Benefit
Pension Plan Gratuity Plans Separation
Funded Funded Gratuity Plan
(Curtailed) Un-funded
(Rupees)
===============================================================================
Present value of funded obligations 358,066 180,341 -
Fair value of plan assets (401,942) (203,855) -
Deficit / (Surplus) (43,876) (23,514) -
Present value of unfunded
obligations - - 3,495
Unrecognised actuarial gain 43,876* 23,964 -
Net liability at the end of the year - 450 3,495
=============================================================================== * The actuarial gain on defined benefit plan (curtailed) will be recognised once the certainty of recovery is established.7.2. MOVEMENTS IN NET LIABILITY RECOGNISED ===============================================================================
Defined Defined Defined
Benefit Benefit Benefit
Pension PlanGratuity Plans Separation
Funded Funded Gratuity Plan
(Curtailed) Un-funded
(Rupees)
===============================================================================
NET LIABILITY AT THE BEGINNING:
of the year - (5,520) 25,480
Expense recognised 5,661 12,027 2,764
Reversals made - - (24,749)
5,661 12,027 (21,985)
Contributions made (5,661) (6,057) -
Net liability at the end of the year - 450 3,495
===============================================================================7.3. The following amounts have been charged in the profit and loss account in respect of retirement benefit schemes.===============================================================================
2005 2004
Defined benefit plans (Rupees in thousand)
===============================================================================
Current service cost 27,641 38,146
Interest cost 44,691 52,649
Reversal made (24,749) -
Expected return on plan assets (52,297) (38,237)
Net actuarial gain recognised in current year 417 204
(4,297) 52,762
Defined contribution plan 43,720 26,551
===============================================================================7.4. Actual returns on funded plan assets during 2004 were Rs 140,120.7.5. 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 9% p.a; -- expected long term rate of increase in salaries for employees at 9% per annum in case of Non management employees long range rate is 8% whereas for the first three years the increase has been assumed at 13%; -- expected post retirement pension increase rate at 5% per annum; and -- expected long term rate of return on investment at 9% per annum. 7.6. During the year, the company has set up a Defined Contribution Pension Scheme known as Engro Chemical Pakistan Limited MPT Employees Defined Contribution Pension Fund (the Fund) for the benefit of management employees. Employees joining the Company from July 1, 2005 will become members of the new Fund. Members of the existing pension fund (a defined benefit plan) were given a one-time option, exercisable upto June 15, 2005 to join the new Fund effective from July 1, 2005. The actuarially accrued liability in respect of past services of those members who have exercised this option has been transferred to the new Fund on the effective date. The Fund has been approved under the provision of the Income Tax Ordinance, 2001, effective July 1, 2005. 8. SHORT TERM BORROWINGS - SECURED The facility for short term running finance available from various banks amounts to Rs 2,400,000 (2004: Rs 2,400,000). The rates of mark-up range from 5% to 10.59% (2004:1.4% to 9.5%) and the facilities are secured by floating charge upon all current and future moveable property of the Company. 9. TRADE AND OTHER PAYABLES ===============================================================================
2005 2004
Notes (Rupees in thousand)
===============================================================================
Creditors 839,395* 296,915
Accrued liabilities 327,537 281,531
Payable to gratuity fund 7 450 -
Advances from customers 655,883 582,654
Financial charges accrued on secured
- redeemable capital and long term loan 61,377 40,363
- short term borrowings 26,813 2,095
Deposits from dealers refundable on
termination of dealership 7,486 6,957
Contractors' deposits and retentions 11,282 8,560
Workers' profits participation fund 9.1 6,716 1,594
Workers' welfare fund 27,297 16,121
Other 4,765 -
1,969,001 1 236 790
=============================================================================== * This includes payable of Rs 155,908 to Engro Eximp (Private) Limited.9.1. WORKERS' PROFITS PARTICIPATION FUND ===============================================================================
2005 2004
Notes (Rupees in thousand)
===============================================================================
Balance at the beginning of the year 1,594 4,607
Interest on funds utilised
in the company's business 27 82 30
Allocation for the year 26 171,716 123,565
Less: Amount paid to the Trustees of the Fund 166,676 126,608
6,716 1,594
===============================================================================10. CONTINGENCIES AND COMMITMENTSContingencies 10.1. Claims, including pending lawsuits, against the Company not acknowledged as debts amounted to Rs 48,911 (2004: Rs 45,412). 10.2. Corporate guarantee of Rs 153,850 (2004: Rs 143,682) have been issued to banks in favour of subsidiary companies. 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 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. 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 ===============================================================================
2005 2004
(Rupees in thousand)
===============================================================================
Plant and machinery 25,104 111,425
===============================================================================11. PROPERTY, PLANT AND EQUIPMENT===================================================================================================================
Land BuildingPlant and Catalyst Furniture Vehicles 2005 2004
Freehold Leasehold Freehold Leasehold Machinery
Fixtures and Own Leased
Equipment
(Rupees)
=====================================================================================================================
COST:
At January 1 12,820 187,396 503,973 271,9729,226,399 160,409 363,981 143,114 6,600 10,876,66 410,373,831
Additions - - 30,404 1,861 303,724 54,722 23,635 44,772 - 459,118 406,885
Disposals - - - - (13,993) - (6,603) (17,444) - (38,040) (64,461)
Transfers - - - - - - - - - - 160,409
At December 31 12,820 187,396 534,377 273,8339,516,130 215,131 381,013 170,442 6,6601 1,297,742 10,876,664
Depreciation
At January 1 - 37,593 199,720 24,8443,744,153 88,134 215,387 84,743 330 4,394,904 3,822,381
Accumulated
depreciation - - - - - - - - - - 48,233
Charge for the year - 3,982 21,870 6,853 455,470 36,850 47,846 25,539 1,320 599,730 573,105
Disposals - - - - (8,216) - (6,151) (11,188) - (25,555) (46,577)
Transfers - - - - - - - - - - (2,238)
At December 31 - 41,575 221,590 31,6974,191,407 124,984 257,082 99,094 1,650 4,969,079 4,394,904
Net book value 12,820 145,821 312,787 242,1365,324,723 90.147 123,931 71,348 4,950 6,328,663 6,481,760
Annual rate of
depreciation % - 2 to 3.33 2.5 to 10 2.5 5 to 10 20 to 33.33 10 to 25 12 to 20 20
Capital work-in-progress (note 11.4) 511,395 614,570
Total 6,840,058 7,096,330
=====================================================================================================================11.1. DEPRECIATION AND AMORTISATION HAVE BEEN ALLOCATED AS FOLLOWS===============================================================================
2005 2004
Notes (Rupees in thousand)
===============================================================================
Depreciation for the year 11 599,730 573,105
Amortisation for the year 12 9,449 9,206
609,179 582,311
Cost of sales 23 584,153 559,711
Selling and distribution expenses 24 25,026 22,600
609,179 582,311
===============================================================================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 an appeal in the Supreme Court. During the year, the Supreme Court of Pakistan dismissed the appeal and upheld the Sindh High Court judgement in company's favour. Payments totalling Rs 22,207 made to the Department during the pendency of the petition in the High Court of Sindh on their contention that the stay order had expired, are now refundable to the Company, for which an application has been filed with the Department and disclosed as receivable (note 19). 11.3. 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 Naveed A. Hashmi 535 437 98 155
to existing/separating Mr Irfan Nadeem Khan 795 172 623 634
executives Mr Shahid A. Hakim 849 71 778 774
Mr Majid Hasan 555 435 120 160
Mr Salim Azhar 1,169 565 604 615
Mr Azhar Iqbal Farooq 879 80 799 801
Mr Pervez Ghias 1,225 1,021 204 319
Mr Tahir Jawaid 849 212 637 681
Mr Ahsan Zafar Syed 795 145 650 674
Mr Mohammad Salim 849 241 608 600
Mr Ahmad Abbas Mirza 555 481 74 162
Mr Inamullah Naveed Khan 849 269 580 610
Insurance claim New Hampshire Insurance
Company 555 111 444 495
10,459 4,240 6,219 6,680
Items having book value up to Rs 50 6,985 6,948 37 1,102
17,444 11,188 6,256 7,782
Furniture, fixtures & equipment and Plant & machinery
By Auction Al Noor Trading Corporation 13,931 8,184 5,747 1,624
13,931 8,184 5,747 1,624
Items having book value up to Rs 50 6,665 6,183 482 1,617
20,596 14,367 6,229 3,241
38,040 25,555 12,485 11,023
================================================================================================================11.4. CAPITAL WORK-IN-PROGRESS===============================================================================
2005 2004
(Rupees in thousand)
===============================================================================
Plant and machinery 361,150 463,992
Building and civil works 96,184 109,536
Furniture, fixtures and equipment 47,595 24,985
Advances to suppliers 6,466 16,057
511,395 614,570
===============================================================================12. INTANGIBLE ASSETS===============================================================================
2005 2004
(Rupees in thousand)
===============================================================================
COST:
At 1st January 64,431 62,213
Additions 21,129 2,218
At 31st December 85,560 64,431
AMORTISATION:
At 1st January 54,493 45,287
Charge for the year 9,449 9,206
At 31st December 63,942 54,493
Net book value at December 31 21,618 9,938
===============================================================================13. LONG TERM INVESTMENTS===============================================================================
2005 2004
Notes (Rupees in thousand)
===============================================================================
UNQUOTED:
Subsidiary companies - at cost 13.1 832,757 84,557
Joint venture companies - at cost 13.2 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
2,172,757 1,424,557
===============================================================================13.1. SUBSIDIARY COMPANIES========================================================================================================
Name of the Company Equity Investment Equity Investment
and description of interest % held at cost - % held
at cost-
2005 2004
Note (Rupees) (Rupees)
========================================================================================================
Engro Eximp (Private) Limited
10,000 Ordinary shares of Rs 10 each 100 100 100 100
Engro Management Services (Private) Limited
250,000 Ordinary shares of Rs 10 each 100 2,500 100 2,500
Engro Foods (Private) Limited 13.1.1
15,000,000 Ordinary shares of Rs 10 each 100 150,000 - -
Advance against issue of share capital 598,200 - -
Innovative Automation & Engineering (Private) Limited
1,020,000 Ordinary shares of Rs 10 each 51 81,957 51 81,957
832,757 84,557
========================================================================================================13.1.1. 1During the year, the Company has incorporated a wholly owned subsidiary with the objective to undertake food business.13.2. JOINT VENTURE COMPANIES ===================================================================================================
Name of the Company Equity Investment Equity Investment
and description of interest % held at cost % held at cost
2005 2004
(Rupees) (Rupees)
===================================================================================================
Engro Vopak Terminal Limited
45,000,000 Ordinary shares of Rs 10 each 50 450,000 50 450,000
Engro Asahi Polymer & Chemicals Limited
89,000,000 Ordinary shares of Rs 10 each 50 890,000 50 890,000
1,340,000 1,340,000
===================================================================================================13.3. Value of the above investments, based on the net assets of the investee companies as at December 31, 2005 was as follows:===============================================================================
2005 2004
(Rupees)
===============================================================================
Engro Eximp (Private) Limited 85,649 15,802
Engro Management Services (Private) Limited 2,371 2,388
Engro Foods (Private) Limited (including advance against
equity amounting to Rs 598,200) 731,975 -
Innovative Automation & Engineering (Private) Limited 55,423 55,269
Engro Vopak Terminal Limited 457,951 509,186
Engro Asahi Polymer & Chemicals Limited 999,214 980,319
Arabian Sea Country Club Limited (June 30, 2005) 4,193 2,946
===============================================================================14. LONG TERM LOANS, ADVANCES AND OTHER RECEIVABLES===============================================================================
2005 2004
Notes (Rupees in thousand)
===============================================================================
CONSIDERED GOOD:
Executives 57,182 69,805
Other employees 6,372 34,516
63,554 104,321
Less: Instalments recoverable
within twelve months 18 31,029 52,393
Fair value of interest rate SWAP 4.5 & 4.6 65,117 -
Less: Current portion 19 32,000 -
33,117 -
65,642 51,928
===============================================================================14.1. Reconciliation of the carrying amount of loans and advances to Executives:===============================================================================
2005 2004
(Rupees in thousand)
===============================================================================
Balance at the beginning of the year 69,805 92,670
Disbursements 39,112 15,556
Repayment (51,735) (38,421)
Balance at the end of the year 57,182 69,805
===============================================================================14.2. This includes interest free services incentive loans to executives of Rs 43,464 (2004: Rs 43,366) repayable in equal monthly instalments over a three years period or in one lump sum at the end of such period and interest free loans given to workers of Rs 2,910 (2004: Rs 15,936) pursuant to Collective Labour Agreement.It also includes advances of Rs 10,734 (2004: Rs 38,883) to employees for the purchase of Company's shares and these advances are repayable by 2006. 14.3. The maximum amount outstanding at the end of any month from the executives aggregated to Rs 78,955 (2004: Rs 114,751). 15. STORES, SPARES AND LOOSE TOOLS ===============================================================================
2005 2004
(Rupees in thousand)
===============================================================================
Consumable stores 95,130 97,381
Spares 584,822 543,476
Loose tools 3,260 3,565
683,212 644,422
Less: Provision for surplus and slow moving items 17,310 57,134
665,902 587,288
===============================================================================16. STOCK-IN-TRADE===============================================================================
2005 2004
(Rupees in thousand)
===============================================================================
Raw materials 810,712 241,424
Work-in-process 1,032 2,720
Finished goods - own manufactured product 318,675 140,262
Purchased product 792,563 100,342
1,111,238 240,604
1,922,982 484,748
===============================================================================17. TRADE DEBTS===============================================================================
2005 2004
(Rupees in thousand)
===============================================================================
Considered good 543,316 522,608
Considered doubtful 7,923 7,923
551,239 530,531
Less: Provision for doubtful debts 7,923 7,923
543,316 522,608
===============================================================================18. LOANS, ADVANCES, DEPOSITS AND PREPAYMENTSCurrent portion of long term loans and advances to executives and other employees ===============================================================================
2005 2004
Notes (Rupees in thousand)
===============================================================================
Considered good 13 31,029 52,393
Sub-ordinated loan to Engro Eximp (Private)
Limited 18.1 190,000 200,000
Advances and deposits 89,393 46,689
Margins against letters of credit 185 135,519
Prepayments 51,134 43,853
Less: Provision for doubtful receivables 818 818
360,923 477,636
===============================================================================18.1. 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 9% per annum (2004: 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. Due to the nature of the transaction, the sale and repurchase of underlying assets has not been recorded in the financial statements. 19. OTHER RECEIVABLES ===============================================================================
2005 2004
Notes (Rupees in thousand)
===============================================================================
RECEIVABLE FROM GOVERNMENT FOR:
Custom duty and sales tax 11.2 22,207 22,207
Others 13,560 13,560
35,767 35,767
Accrued income on deposits
/ other financial assets 5,857 10,179
Receivable from gratuity funds 7 - 5,520
Sales tax refundable 6,609 1,744
Current portion of fair
value of interest rate swap 14 32,000 -
DUE FROM:
Subsidiary companies
Engro Eximp (Private) Limited 10,450 -
Engro Foods (Private) Limited 1,835 -
Innovative Automation & Engineering (Private) Ltd 432 5,108
Engro Management Services (Private) Limited 15 -
JOINT VENTURES:
Engro Asahi Polymer & Chemicals Limited 2,739 215
Engro Vopak Terminal Limited 135,006* 41
Claims on foreigh suppliers 7,307 6,075
Less: Provision for doubtful receivables 295 295
7,012 5,780
Others 258 357
Less: Provision for doubtful receivables 49 49
209 308
237,931 64,662
=============================================================================== * This includes dividend receivable of Rs 135,000.19.1. The maximum amounts due from joint ventures / subsidiary companies at the end of any month during the year aggregated as follows: ===============================================================================
2005 2004
(Rupees in thousand)
===============================================================================
SUBSIDIARY COMPANIES:
Engro Eximp (Private) Limited (advance against purchases) 779,330 779,994
Engro Foods (Private) Limited 29,397 -
Innovative Automation & Engineering (Private) Limited 432 5,108
Engro Management Services (Private) Limited 15 114
JOINT VENTURES:
Engro Asahi Polymer & Chemicals Limited 4,472 1,933
Engro Vopak Terminal Limited 135,006 1,669
===============================================================================20. SHORT TERM INVESTMENTSFinancial assets at fair value through profit or loss Government of Pakistan Special US Dollar. ===============================================================================
2005 2004
Notes (Rupees in thousand)
===============================================================================
Bonds - 686,682
Certificates of investments - 25,000
Certificates of deposits 20.1 25,000 50,000
Fixed income / money market funds 20.2 113,016 102,541
138,016 864,223
===============================================================================20.1. The investments carry a return @ 11% per annum.20.2. These represents investments in open end mutual funds and are valued at their respective redemption / repurchase price. 21. CASH AND BANK BALANCES ===============================================================================
2005 2004
(Rupees in thousand)
===============================================================================
WITH BANKS:
On deposit accounts 829,544 1,113,068
On current accounts 171,547 149,368
IN HAND:
Cheques / demand drafts 138,644 175,712
Cash 2,750 3,000
===============================================================================22. NET SALES===============================================================================
2005 2004
(Rupees in thousand)
===============================================================================
Own manufactured product 10,693,873 9,502,588
Less: Sales tax 966,635 1,017,902
9,727,238 8,484,686
Purchased product 9,123,314 4,592,093
Less: Sales tax 574,275 279,117
8,549,039 4,312,976
Net Sales 18,276,277 12,797,662
===============================================================================Sales are net of marketing allowances of Rs 72,967 (2004: Rs 60,314).23. COST OF SALES ===============================================================================
2005 2004
Note (Rupees in thousand)
===============================================================================
Raw materials, consumed 3,025,095 2,287,659
Salaries, wages and staff welfare 543,705 542,305
Fuel and power 1,655,614 1,460,233
Repairs and maintenance 283,577 236,462
Depreciation I amortisation 11.1 584,153 559,711
Consumable stores 74,824 76,143
Staff recruitment, training, safety and other expenses 31,938 23,869
Purchased services 101,542 98,569
Travel 22,862 21,245
Communication, stationery and other office expenses 28,971 29,368
Insurance 51,343 53,756
Rent, rates and taxes 4,817 4,817
Other expenses 43,197 26,371
Manufacturing cost 6,451,638 5,420,508
Add: Opening stock of work-in-process 2,720 9,668
Less: Closing stock of work-in-process 1,032 2,720
1,688 6,948
Cost of goods manufactured 6,453,326 5,427,456
Add: Opening stock of finished goods manufactured 140,262 156,342
Less: Closing stock of finished goods manufactured 318,675 140,262
(178,413) 16,080
Cost of goods sold - own manufactured product 6,274,913 5,443,536
Purchased product 8,089,375 4,084,679
14,364,288 9,528,215
===============================================================================24. SELLING AND DISTRIBUTION EXPENSES ===============================================================================
2005 2004
Note (Rupees in thousand)
===============================================================================
Salaries, wages and staff welfare 202,972 210,857
Staff recruitment, training, safety and other expenses 24,680 17,618
Product transportation and handling 802,649 594,812
Repairs and maintenance 10,697 13,330
Advertising and sales promotion 62,893 60,770
Rent, rates and taxes 38,563 30,287
Communication, stationery and other office expenses 20,447 26,485
Travel 22,462 21,503
Depreciation / amortisation 11.1 25,026 22,600
Purchased services 13,434 11,990
Other expenses 46,880 26,257
1,270,703 1,036,509
===============================================================================25. OTHER INCOME===============================================================================
2005 2004
Notes (Rupees in thousand)
===============================================================================
Dividend income 25.1 963,600 491,021
Income on deposits / other financial assets 59,172 45,242
Service charges 19,507 5,825
Fair Value of interest rate swap 65,117 -
Reversal of resignation gratuity provision 7.2 24,749 -
Profit on disposal of fixed assets - 12,644
Net foreign exchange gain 25.2 1,322 3,422
Others 11,520 -
1,144,987 558,154
===============================================================================25.1. DIVIDEND INCOME===============================================================================
2005 2004
(Rupees in thousand)
===============================================================================
SUBSIDIARY COMPANIES:
Engro Eximp (Private) Limited 55,000 228,221
Innovative Automation & Engineering (Private) Limited 5,100 15,300
JOINT VENTURES:
Engro Vopak Terminal Limited 270,000 247,500
Engro Asahi Polymer & Chemical Limited 133,500 -
963,600 491,021
===============================================================================25.2. NET FOREIGN EXCHANGE GAIN / (LOSS)===============================================================================
2005 2004
(Rupees in thousand)
===============================================================================
Foreign exchange gain on Government of Pakistan
Special US Dollar Bonds - Rs 1,908 (2004: Rs 23,822)
and foreign currency bank accounts 1,223 23,922
Foreign exchange gain / (loss) on foreign currency loan 99 (20,500)
1,322 3,422
===============================================================================26. OTHER OPERATING CHARGES===============================================================================
2005 2004
Note (Rupees in thousand)
===============================================================================
Workers' profits participation fund 9.1 171,716 123,565
Workers' welfare fund 43,067 32,674
Research and development (including salaries and wages) 68,790 31,937
Loss on sale of fixed assets 1,462 -
AUDITORS' REMUNERATION:
- statutory audit 1,000 1,000
- fee for other services 603 1,025
- reimbursement of expenses 129 247
1,732 2,272
LESS: SHOWN UNDER INTANGIBLE ASSETS / CAPITAL:
Work-in-progress (315) (820)
1,417 1,452
Professional tax 200 700
286,652 190,328
===============================================================================27. FINANCIAL CHARGES===============================================================================
2005 2004
Note (Rupees in thousand)
===============================================================================
Interest on workers' profits
participation fund 9.1 82 30
Mark-up / interest on - redeemable capital
and long term loans 238,033 279,853
- short term borrowings 40,676 2,745
Others 1,279 3,083
280,070 285,711
===============================================================================28. TAXATION===============================================================================
2005 2004
(Rupees in thousand)
===============================================================================
Current - for the year 863,587 586,906
Deferred 36,882 117,572
900,469 704,478
===============================================================================28.1. The income tax assessments of the company has been finalised up to and including the income year ended December 31, 2002.For the income years 1995 and 1996 the assessments were set aside by Commissioner (Appeals) wiping off the additional tax demand of Rs 211,155. The appeals in 1996 (later 6 months), 1997 and 1998 have been decided in favour of the company by appellate authorities. However, in 1998 the Commissioner has rejected the company's appeal on the issue of incorporating correct turnover numbers in assessment. The company is in appeal before the Income Tax Appellate Tribunal (ITAT) which the Company is confident of winning. In 1999, 2000, 2001 and 2002 the Company has filed appeals before the Commissioner (Appeals) of which appeals in 2000 and 2001 has been decided in favour of the Company on most of the issues except on the issue of apportionment of the gross profit and selling and distribution expenses while appeals in 1999 and 2002 are pending. In 2000 and 2001 the Company is filing appeals before the ITAT which it is confident of winning. The company's management is confident that in view of the positive outcomes from the appeals process the issues will be ultimately decided in favour of the company and there would not be any additional tax liability relating to the prior years. Therefore, no additional tax charge has been made in that respect during the year. 28.2. 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: ===============================================================================
2005 2004
(Rupees)
===============================================================================
Profit before tax 3,219,551 2,315,053
Tax calculated at the rate of 35% 1,126,843 810,269
Depreciation on exempt assets not deductible
for tax purposes 33,599 34,495
Effect of applicability of lower tax rate/exemption
on certain income and other tax credits/debits (259,973) (142,286)
Tax under final regime - 2,000
Tax charge for the year 900,469 704,478
===============================================================================29. EARNINGS PER SHAREThere is no dilutive effect on the basic earnings per share of the Company, which is based on: ===============================================================================
2005 2004
===============================================================================
Profit after taxation (Rupees) 2,319,082 1,160,575
Weighted average number of Ordinary shares (in thousand) 152,940 152,940
===============================================================================30. REMUNERATION OF CHIEF EXECUTIVE, DIRECTORS AND EXECUTIVESThe aggregate amounts charged in the financial statements for remuneration, including all benefits, to chief executive, directors and executives of the Company are given below: =====================================================================================
2005 2004
Directors Directors
Chief Others Executives Chief Others Executives
Executive Executive
(Rupees)
=====================================================================================
Managerial remuneration 9,688 3,909 363,106 7,688 4,581 335,337
Retirement benefit funds 1,065 231 36,739 548 373 22,554
Other benefits 2,559 257 17,273 1,592 666 19,281
Fees - 202 - - 16 -
Total 13,312 4,599 417,118 9,828 5,636 377,172
Number of persons,
including those who
worked part of the year 1 9 281 2 9 279
=====================================================================================30.1. 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. 30.2. Technical advisory fees paid to one non-executive director (2004: one) during the year amounted to Rs 900 (2004: Rs 900). 31. CASH GENERATED FROM OPERATIONS ===============================================================================
2005 2004
Note (Rupees in thousand)
===============================================================================
Profit before taxation 3,219,551 2,315,053
ADJUSTMENT FOR NON-CASH
CHARGES AND OTHER ITEMS:
Depreciation and amortisation 609,179 582,311
Loss/(profit) on disposal of fixed assets 1,462 (12,644)
Provision for retirement
and other service benefits 39,423 97,380
Income on deposits/other financial assets (59,172) (45,242)
Dividend income (963,600) (491,021)
Financial charges 280,070 306,211
Working capital changes 31.1 (777,575) (329,813)
2,349,338 2,422,235
===============================================================================31.1. WORKING CAPITAL CHANGES===============================================================================
2005 2004
(Rupees in thousand)
===============================================================================
(INCREASE)/DECREASE IN CURRENT ASSETS:
Stores, spares and loose tools (78,614) (20,366)
Stock-in-trade (1,438,234) (99,166)
Trade debts (20,708) 117,635
Loans, advances, deposits and prepayments 116,713 (352,868)
Other receivables (net) (42,761) 3,859
(1,463,604) (350,906)
INCREASE/(DECREASE) IN CURRENT LIABILITIES:
Trade and other payables including
other service benefits (net) 686,029 21,093
(777,575) (329,813)
===============================================================================32. CASH AND CASH EQUIVALENTS===============================================================================
2005 2004
Notes (Rupees in thousand)
===============================================================================
Cash and bank balances 21 1,142,485 1,441,148
Short term investments 20 138,016 864,223
1,280,501 2,305,371
===============================================================================33. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES33.1. FINANCIAL ASSETS AND LIABILITIES ========================================================================================================================
Effective interest/ Interest/mark-up bearing Non-Interest/mark-up bearing
mark-up rate Maturity Maturity Maturity Maturity Maturity Maturity
(%) upto from one to more than Total upto from one to more than Total
one year five years five years one year five years five years
(Rupees)
========================================================================================================================
FINANCIAL ASSETS:
Loans and advances 9 190,000 - - 190,000 31,029 65,642 - 96,671
Trade debts - - - - 543,316 - - 543,316
Other receivables - - - - 163,540 - - 163,540
Short term investments 11 25,000 - - 25,000 113,016 - - 113,016
Cash and bank balances 3 to 13 829,544 - - 829,544 312,941 - - 312,941
1,044,544 - - 1,044,544 1,163,842 65,642 - 1,229,484
Financial Liabilities
Redeemable capital 3.75 to 10.30 687,500 2,462,500 425,000 3,575,000 - - - -
Liability against asset
subject to finance lease 6 2,226 2,289 - 4,515 - - - -
Trade and other payables - - - - 1,308,353 - - 1,308,353
Unclaimed Dividends - - - - 77,870 - - 77,870
689,726 2,464,789 425,000 3,579,515 1,386,223 - - 1,386,223
======================================================================================================================== (a) Financial liabilities exposed to floating interest rate risk included above amount to Rs 3,575,000.33.2. 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. 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. (b) Interest / mark-up rate risk The company has long term Rupee based loans at variable rates. Variable rate loans 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 543,316 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. 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. 33.3. 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. 34. TRANSACTIONS WITH RELATED PARTIES 34.1. Related parties comprise subsidiaries, joint venture companies, other companies with common directors, retirement benefit funds, directors and key management personnel. 34.2. Details of transactions with related parties during the year, other than those which have been disclosed elsewhere in these financial statements, are as follows: =========================================================================
2005 2004
(Rupees)
=========================================================================
SUBSIDIARY COMPANIES:
Purchases and services 7,871,594 3,790,158
Service rendered 1,311 1,242
ASSOCIATED COMPANIES:
Purchases and services 71,289 76,582
Service rendered 5,865 3,481
Dividend paid 612,974 330,859
OTHERS:
Dividend paid 12,719 10,175
=========================================================================34.3. Associated companies held 63,857,402 (2004: 41,357,402) Ordinary shares in the Company at year end.35. DONATIONS Donations include the following in which a director or his spouse is interested: ===========================================================================================
Interest in Name and address of Donee 2005 2004
Donee (Rupees)
===========================================================================================
Mr Zaffar Ahmad Khan Member Patients Welfare Program
Aga Khan University Hospital, Karachi 40 50
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 2,000
Mr Asad Umar Member Engro Community Welfare
Foundation, Karachi 1,795 -
Mr Asad Umar Member Lahore University of Management
Sciences, Lahore 100 100
Spouse of Mr Asad Umar Member Book Group, Karachi 195 -
4,155 2,175
===========================================================================================36. PRODUCTION CAPACITY==================================================================
Designed Annual Actual Production
Capacity 2005 2004
Metric Tons Metric Tons
==================================================================
Urea 850,000 911,672 870,321
NPK 100,000 157,013 120,566
==================================================================37. NON-ADJUSTING EVENT AFTER BALANCE SHEET DATEThe board of Directors in its meeting held on January 31, 2006 has proposed a final cash dividend of Rs 5 per share (2004: Rs 4 per share final cash dividend) for approval of the members at the Annual General Meeting to be held on March 30, 2006. The financial statements for the year ended December 31, 2005 do not include the effect of the proposed cash dividends which will be accounted for in the financial statements for the year ending December 31, 2006. 38. DATE OF AUTHORISATION FOR ISSUE These financial statements were authorised for issue on January 31, 2006 by the Board of Directors of the company. |