Professional Documents
Culture Documents
CONTENTS
Company Information
Notice of Meeting
Financial Highlights
Directors' Report
Board of Directors
Pattern of Holding of Shares
Auditors' Report
Balance Sheet
Profit & Loss Account
Statement of Changes in Equity
Cash Flow Statement
Notes to the Accounts
Corporate Governance
Ten Years at a Glance
COMPANY INFORMATION
BOARD OF DIRECTORS
Nisar A. Memon, Chairman
Zaffar A. Khan, President & Chief Executive
S. Naseem Ahmad
Javed Akbar
Farid Dossani
Parvez Ghias
Shabbir Hashmi
Pervaiz Kausar
Tariq Iqbal Khan
Asif Qadir
Asad Umar
SECRETARY BANKERS
Andalib Alavi ABN AMRO Bank N.V
Standard Chartered Grindlays Bank Limited
Citibank N.A.
Faysal Bank Limited
Habib Bank Limited
Muslim Commercial Bank Limited
National Bank of Pakistan
Standard Chartered Bank
Union Bank Limited
United Bank Limited
AUDITORS
A. F. Ferguson & Co.
Chartered Accountants
REGISTERED OFFICE
PNSC Building
Moulvi Tamizuddin Khan Road
Karachi
NOTICE OF MEETING
NOTICE IS HEREBY GIVEN that the Thirty-sixth Annual General Meeting of Engro Chemical Pakistan -'
Limited will be held at Karachi Marriott Hotel, Abdullah Haroon Road, Karachi on Thursday,
March 28, 2002 at 10.00 a.m. to transact the following business:
1. To receive and consider the Audited Accounts for the year ended December 31, 2001 and the
Directors' and Auditors' Reports thereon.
2. To declare a final dividend at the rate of Rs. 3.50 per share for the year ended
December 31 2001.
Andalib Alavi
Karachi, Chief Legal Advisor &
Dated: January 30, 2002 Company Secretary
N.B.
1. The share transfer books of the Company will be closed and no transfers of shares will be
accepted for registration from Thursday, March 14, 2002 to Thursday, March 28, 2002 (both
days inclusive). Transfers received in order at the Registered Office of the Company upto the
close of business (4:30 p.m.) on Wednesday, March 13, 2002 will be in time for the purposes
of payment of the final dividend and entitlement to attend the Annual General Meeting.
2. A member entitled to attend and vote at this Meeting shall be entitled to appoint another person,
as his/her proxy to attend, speak and vote instead of him/her, and a proxy so appointed shall
have such rights, as respects attending, speaking and voting at the Meeting as are available to
a member. Proxies, in order to be effective, must be received by the Company not less than
48 hours before the Meeting. A proxy need not be a member of the Company.
FINANCIAL HIGHLIGHTS
2001 2000
FERTILIZER OPERATIONS
The year 2001 was a difficult period for the
agriculture sector in the economy. Shortage of
irrigation water both in the summer and winter
cropping seasons, reduced urea demand.
Additionally, the Government increased the price
of gas and levied General Sales Tax (GST) on a
deemed price of urea and requested the
producers to absorb the charge. The industry
agreed to help ease the financial burden on the
farming community who were suffering the impact
of drought conditions.
The demand for urea in 2001 declined by 1% to
4.0 million tons, while the indigenous production
increased by 7% to 4.2 million tons mainly on
account of better capacity utilization of the more
recently constructed plants. There was a nominal
import of 0.1 million tons early in the year, due to
low inventory levels in the country, but thereafter
supply was well in excess of demand for the rest
of the year.
Phosphates
In 2001, the industry demand for DAP fertilizer
declined by 5% over last year to 1.2 million tons
due to drought conditions and the relatively high
price of DAP.
FINANCIAL RESULTS
The Company earned a profit after tax of Rs.1,064 million in 2001 as compared to Rs.1,126
million achieved during the previous year. The profit numbers were impacted by a number of
favourable and unfavourable events which cumulatively resulted in a profit decline of ,.5.5%. Gains
were made through improvement in margins and an increase in dividend income from Engro Vopak
Terminal Ltd. However, the gains were more than offset by the cost of GST absorption, loss of
production and sales volume, high maintenance costs and start up losses on NPK and seeds
operation.
Your Board recommends that the net profit of Rs. 1,064 million earned during the year together with
the balance of unappropriated profit of Rs.4 million brought forward from prior years be
appropriated as follows:
Million Rupees
Appropriations
Transfer to general reserve 20.0
The Board elected not to recommend the issuance of bonus shares versus the 15% bonus share
announcement of last year. The Board expressed their disappointment at the recent levy of a 10%
withholding tax on bonus shares. The shareholders' equity as at December 31, 2001 was over
Rs.5,240 million compared to Rs.5,219 million last year.
The eight year income tax holiday period granted to the Company for its 1993 plant expansion at
Daharki expired on September 30, 2001. While an agreement approved by the Central Board of
Revenue formed the basis for apportioning revenue and expenses between exempt and taxable
income, nearly all previously assessed tax returns are being disputed by the tax authorities at the
end of the 8 year tax holiday. This is a major disappointment and the Company is taking
appropriate action to defend its position.
JOINT VENTURES
AUDITORS
The auditors, A.F. Ferguson & Company, retire and offer themselves for re-appointment.
PATTERN OF SHAREHOLDING
Major shareholders of Engro Chemical are its employees, annuitants and the ECPL Employees Trust,
CDC Group plc, International Finance Corporation (IFC), and Dawood Group entities including
Dawood Hercules Chemicals Limited. Other shareholders are local and foreign institutions and the
general public.
The lawsuit filed by the Company against certain Dawood Group companies is pending decision
in the High Court of Sindh. It will be recalled the case had been filed on grounds of violations of
provisions of law by the Dawood Group of companies in the acquisition of Engro shares.
During the year there was no appreciable shift in the share holding structure of the Company.
A statement of the pattern of shareholding as at December 31, 2001 is shown on page 33
of this report.
The Company's shares are traded on all the Stock Exchanges of the country.
BOARD OF DIRECTORS
The tragic demise of Mr. Shaukat R. Mirza, Chairman of the Board of Directors on July 26, 2001
was a great loss to the Company, the industry and the country. His contributions to the growth and
development of the Company as well as the high standards of professionalism and corporate
governance that he enunciated were recalled and greatly appreciated by the Board of Directors. In
recognition, the Company has instituted a merit scholarship named after him.
Mr. Nisar A. Memon was unanimously elected as the new Chairman of the Board. Mr. Memon has
been a director since April, 1994.
Mr. Shabbir Hashmi and Mr. Farid Dossani, representatives of CDC Group plc and IFC were
nominated as directors of the Company in place of Mr. David V. Johns and Mr. Raymond Chiu
respectively. Mr. Tariq Iqbal Khan, Chairman and Managing Director NIT and Managing Director
ICP was co-opted as Director of the Company in place of Mr. Istaqbal Mehdi. The Board
wishes to place on record its warm appreciation for the valuable contributions made by
Messrs. David V. Johns, Raymond Chiu and Istaqbal Mehdi.
The Company's near term focus is to improve the reliability of its plant at Daharki and to improve
the efficiency of its recently commissioned NPK plant. The Company will continue to pursue its twin
strategy of growing its core fertilizer business and seeking profitable opportunities to diversify in its
field of interest. The new Fertilizer Policy of the Government has specified the feed gas pricing
bases. This removes the uncertainty on this account which deterred long term planning. It is to be
noted that the Company's tax liability will increase in future as the tax holiday on the earnings of
the 1993 expansion have ended. Further, the Government is contemplating charging GST on urea
on the actual selling price, versus the current basis of deeming the price of urea. This will result in
a product price hike.
Your Board would like to take the opportunity to express its appreciation to the Engro dealers and
to the employees of the Company for their dedication and hard work throughout the year. We also
acknowledge the support and cooperation received from the Government, our suppliers, contractors
and all other stakeholders.
Zaffar A.
Nisar A. Memon Khan
Chief
Executiv
Chairman e
BOARD OF DIRECTORS
PERCEN
CATEGORIES OF NUMBER OF SHARES TAGE
SHAREHOLDERS SHARE HELD
HOLDERS
INDIVIDUALS 8,779 42,302,399 30.43
INVESTMENT COMPANIES 44 398,605 0.29
INSURANCE COMPANIES 17 14,138,748 10.16
JOINT STOCK COMPANIES 110 33,720,798 24.25
FINANCIAL INSTITUTIONS 105 40,544,747 29.16
MODARABA COMPANIES 15 135,313 0.10
TRADE ASSOCIATIONS 2 5,420 --
CO-OPERATIVE SOCIETIES 3 1,420,022 1.02
SECURITIES & EXCHANGE
COMMISSION OF PAKISTAN 1 1 --
OTHERS 52 6,370,382 4.59
------------
------------------ ------------------ ------
TOTAL 9,128 139,036,435 100.00
=======
========== ========== ===
Zaffar A.
Nisar A. Memon Khan
Chief
Executiv
Chairman e
We have audited the annexed balance sheet of Engro Chemical Pakistan Limited as at
December 31, 2001 and the related profit and loss account, statement of changes in equity and
cash flow statement, together with the notes forming part thereof, for the year then ended and we
state that we have obtained all the information and explanations which, to the best of our
knowledge and belief, were necessary for the purposes of our audit.
It is the responsibility of the Company's management to establish and maintain a system of internal
control, and prepare and present the above said statements in conformity with the approved
accounting standards and the requirements of the Companies Ordinance, 1984. Our responsibility
is to express an opinion on these statements based on our audit.
We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These
standards require that we plan and perform the audit to obtain reasonable assurance about whether
the above said statements are free of any material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the above said statements. An audit
also includes assessing the accounting policies and significant estimates made by management, as
well as, evaluating the overall presentation of the above said statements. We believe that our audit
provides a reasonable basis for our opinion and, after due verification, we report that:
(a) in our opinion, proper books of account have been kept by the Company as required by the
Companies Ordinance, 1984;
(i) the balance sheet and profit and loss account together with the notes thereon have been
drawn up in conformity with the Companies Ordinance, 1984 and are in agreement
with the books of account and are further in accordance with accounting policies
consistently applied;
(ii) the expenditure incurred during the year was for the purpose of the Company's
business; and
(iii) the business conducted, investments made and the expenditure incurred during the year
were in accordance with the objects of the Company;
(c) in our opinion and to the best of our information and according to the explanations given to
us, the balance sheet, profit and loss account, statement of changes in equity and cash flow
statement together with the notes forming part thereof conform with the approved accounting
standards as applicable in Pakistan, and, give the information required by the Companies
Ordinance, 1984, in the manner so required, and respectively give a true and fair view of
the state of the Company's affairs as at December 31, 2001 and of the profit, changes in
equity and its cash flows for the year then ended; and
(d) in our opinion, Zakat deductible at source under the Zakat and Ushr Ordinance, 1980 (XVIII
of 1980), was deducted by the Company and deposited in the Central Zakat Fund
established under Section 7 of that Ordinance.
A.F.
Ferguson
Karachi, & Co.
Chartere
d
Accounta
Dated: January 30, 2002 nts
BALANCE SHEET
AS AT DECEMBER 31, 2001
(AMOUNTS IN THOUSAND)
CURRENT LIABILITIES
Current portion of
- redeemable capital and accrued mark-up 4 341,905 210,248
- long term loans and related payable 5 197,395 389,767
Short term running finance 8 582,270 87,319
Creditors, accrued and other liabilities 9 1,650,593 1,396,479
Proposed dividend 486,628 362,704
------------
------------------ ------
3,258,791 2,446,517
CONTINGENCIES AND COMMITMENTS 10
------------
------------------ ------
12,423,712 11,562,71
0
=======
========== ===
FIXED ASSETS
Operating assets 11 6,584,723 6,367,857
Capital work-in-progress 12 276,853 531,366
------------
------------------ ------
6,861,576 6,899,223
LONG TERM INVESTMENTS 13 1,340,000 1,341,475
LONG TERM LOANS AND ADVANCES 14 151,988 150,744
DEFERRED COSTS 15 59,689 65,376
CURRENT ASSETS
Stores, spares and loose tools 16 590,079 600,351
Stock-in-trade 17 424,870 368,752
Trade debts 18 424,045 233,345
Loans, advances, deposits and prepayments 19 179,121 142,193
Other receivables 20 259,532 229,857
Taxation 499,460 353,351
Government of Pakistan Special US Dollar Bonds 21 695,940 669,959
Cash and bank balances 22 937,412 508,084
------------
------------------ ------
4,010,459 3,105,892
------------
------------------ ------
11,562,71
12,423,712 0
=======
========== ===
Zaffar A.
Nisar A. Memon Khan
Chief
Executiv
Chairman e
Appropriations
Dividends - 1st interim @ 20% -- -- -- (241,802) (241,802)
- 2nd interim @ 2 -- -- -- (241,802) (241,802)
- final @ 30% -- -- -- (362,704) (362,704)
Transfer to - reserve for issue of
bonus shares -- 181,352 -- (181,352) --
- general reserve -- -- 100,000 (100,000) --
------------
------------------ ------------------ ------------------ ------ ------------------
(1,127,66
-- 181,352 100,000 0) (846,308)
Balance as at
December 31, 2000/January 1,20 1,209,012 181,352 3,824,240 3,997 5,218,601
Appropriations
Dividends - 1st interim @ 20 -- -- -- (278,073) (278,073)
- 2nd interim @ 2 -- -- -- (278,073) (278,073)
- proposed final -- -- -- (486,628) (486,628)
Transfer to general reserve -- -- 20,000 (20,000) --
------------
------------------ ------------------ ------------------ ------ ------------------
(1,062,77
-- -- 20,000 4) (1,042,774)
------------
------------------ ------------------ ------------------ ------ ------------------
Balance as at December 31, 2001 1,390,364 -- 3,844,240 5,283 5,239,887
=======
========== ========== ========== === ==========
Zaffar A.
Nisar A. Memon Khan
Chief
Executiv
Chairman e
Zaffar A.
Nisar A. Memon Khan
Chairman Chief
Executiv
e
The Company also operates unfunded schemes for resignation gratuity of certain
management employees and for retirement of other employees. Provisions are made to
cover obligations on the basis of actuarial recommendations.
Consequential to the adoption of IAS 19 - Revised, the actuarial valuation for the above
pension and gratuity schemes as at December 31, 1998 determined a transitional
obligation of Rs. 85,858 net of a transitional asset of Rs. 820, which is being recognized
on a straight line basis over a period of five years commencing from January 1, 1999.
Rupees
Net Liability:
Present value of benefit obligation at December 31, 1998 396,471
Fair value of plan assets/book reserve (310,613)
------------------
Funded status 85,858
Transitional obligation recognized (net) upto December 31, 2001 (51,516)
------------------
Transitional obligation to be recognized in future years 34,342
==========
Further, the cost recognized in the current year in respect of pension, gratuity and unfunded
gratuity schemes amounted to Rs. 23,200, Rs. 6,920 and Rs. 7,990 respectively. The
actuarial valuation of the above funds was carried out as of December 31, 2001.
The projected unit credit method based on the following significant assumptions is used for
valuation of all the schemes mentioned above:
The Company recognises actuarial gains/losses over the expected future service of current
members.
The Company also 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 of 10% of basic pay.
Provision is also made under an incentive plan for certain category of experienced
employees to continue in the Company's employment.
2.3 Taxation
The current taxation charge is computed under existing tax law on income determined
to be taxable at the applicable rates and allows for the tax exemption referred to in
note 29.1.
Deferred taxation has been provided on all major timing differences using the
liability method.
Depreciation is charged to income using the straight-line method whereby the cost of an
operating asset is written off over its estimated service life. Depreciation on additions
during the year is charged on a pro-rata basis from date of use.
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.
2.8 Stock-in-trade
Stock-in-trade is valued at the lower of cost and net realisable value. Cost which includes
applicable purchase cost and manufacturing expenses is arrived at on a weighted average
basis For raw materials, and on a last-in-first-out basis For finished goods. The cost of
work-in-process includes material and proportionate conversion costs.
The particulars of the above long term finance and TFCs are given in notes
4.1 to 4.11 below:
16 half
PLHC 100,000 204,507 29,481 15% yearly June 1994
18 half
NDFC 195,000 656,280 230,742 16% yearly January 1994
30
NBP (1) 140,000 303,517 -- 16.43% quarterly June 1994
10 half
NBP (2) 500,000 973,194 170,350 12.8% to 18%* yearly December 2002
16 half
Cresbank 40,000 97,019 15,838 16.50% yearly January 1994
10 half
HBL 600,000 1,689,405 627,386 13.25%to 18%* yearly July 2000
10 half
ABN 700,000 1,364,894 190,553 13.5% to 19%* yearly July 2000
6 half
MCB 300,000 530,944 75,057 13.5% to 17%* yearly July 2002
6 half
UBL 350,000 612,740 98,527 12.5% to 17.5%* yearly February 2003
4.2 The TFCs issued during the year represent the first tranche out of Rs. 1,500,000 to be issued
in a maximum of three tranches over a period of 36 months. The rate of profit is subject to a
base rate of the weighted average of the last three cut-off rates of the 5 year Pakistan
Investment Bonds plus 1.15% with a floor of 13% p.a. and a cap of 17% p.a. The TFCs have
a tenor of five years with an embedded call option for early redemption exercisable by the
Company after the third year with three months notice. The principal amount of TFCs is to be
repaid in four equal semi-annual installments in arrears after a grace period of thirty-six months
from the date of issue.
4.3 The above finances, except for HBL (note 4.4) and MCB/UBL/NBP (2)/TFCs (Note 4.10) are
secured by:
ii) hypothecation of the current and future movable property of the Company; and
iii) a first floating charge on all the business, undertaking and goodwill of the Company
and its properties, assets and rights, current and future;
ranking pari passu with each other and with the long term loans along with the exceptions
referred to in note 5.4.
4.4 The HBL financing is secured by an equitable mortgage upon the immovable property of the
Company ranking pari passu with mortgages referred to in notes 4.3, 4.10 and 5.4.
4.5 Accrued mark-up during grace period relates to NDFC and NBP finance.
4.6 The syndicated finance is led by ABN. Other members of the syndicate are NBP and MCB.
4.7 The HBL and part of ABN finance had been obtained for the plant retrofit expansion project.
4.8 The syndicated finance led by UBL was obtained to refinance existing debts. The other
participant is Union Bank Limited.
4.9 The NBP (2) finance was obtained for the NPK Plant.
4.10 The MCB, UBL, NBP (2) and TFC finances are secured by:
i) an equitable mortgage upon the immovable property of the Company ranking pari
passu with mortgages referred to in notes 4.3, 4.4 and 5.4; and
ii) a first floating charge on all the business, undertaking and goodwill of the Company
and its properties, assets and rights, current and future; ranking pari passu with the
charges mentioned in notes 4.3 and 5.4.
4.11 In view of the substance of the transactions, the sale and repurchase of assets referred to in note 4.1
above have not been recorded in these accounts.
Limit in Outstanding
foreign in foreign
Currency currency currency
2001 2000 2001 2000
-- (Rupees)--
Loans- Secured
International Finance
Corporation (IFC)
First Loan
First A Loan US$ 27,000 -- 4,200 -- 100,775
Second A Loan Yen 408,000 -- 60,000 -- 16,752
Third A Loan US$ 6,000 -- 900 -- 21,595
B Loan US$ 5,000 -- 716 -- 17,181
Second Loan
Second A Loan US$ 9,000 5,786 7,071 235,844 288,253
Second B Loan US$ 9,000 4,500 6,000 183,433 244,578
Commonwealth Development
Corporation (CDC)
First Loan £ Stg 5,668 -- 810 -- 35,807
Second Loan US$ 11,000 7,071 8,643 286,626 350,050
Related payable
Exchange risk cover (note 5.2) -- 3,174
------------
------ ------------------
726,320 1,134,991
Less: Current portion shown under current liabilities
- Loans 197,395 386,593
- Related payable -- 3,174
------------
------ ------------------
197,395 389,767
------------
------ ------------------
528,925 745,224
=======
=== ==========
The particulars of the loans in note 5 above are given in notes 5.1 to 5.5 below:
Repayme
nt
Number
5.1 Loans Rate of interest of
half
per annum Currency Commencing yearly
installme
from nts
January
CDC - First Loan 11% £ Stg 14 1995
- Second Loan 9% US$ 14 July 1999
January
NDFC 16% Rupees 18 1994
5.2 An exchange risk cover for the principal and interest was obtained from the State Bank of
Pakistan (SBP) in respect of IFC- First Loan and CDC - First Loan. The cover fee was payable
at the time of payment of each installment of the respective loans.
An exchange risk cover for the principal amount only has been obtained from National
Bank of Pakistan in respect of IFC - Second Loan and CDC - Second Loan and the cover fee
is payable annually in advance.
5.3 Repayment in Pak Rupees of IFC - First Loan and CDC - First Loan, fully repaid during the
year, was determined at exchange rates prevailing on L/C opening date. Repayment in Pak
Rupees of IFC - Second Loan and CDC - Second Loan was determined at the exchange rates
prevailing at the date of each disbursement.
a) an equitable mortgage ranking pari passu with each other and with redeemable
capital referred to in notes 4.3, 4.4 and 4.10 on the Company's immovable property;
b) hypothecation by way of first charge ranking pari passu with each other and with
redeemable capital referred to in note 4.3 on all current and future movable property
of the Company; and
c) a First floating charge ranking pari passu with each other and with the redeemable
capital referred to in notes 4.3 and 4.10 above on all the business, undertaking and
goodwill of the Company and its properties, assets and rights, current and future,
except movable assets to an aggregate maximum amount of Rs. 1,305,000 (2000:
Rs. 1,305,000) already encumbered for short term running finance requirements
referred to in note 8.
5.5 The IFC - Second Loan and CDC - Second Loan were obtained for the plant retrofit
expansion project.
2001 2000
(Rupees)
6. DEFERRED TAXATION
On accelerated depreciation allowances 856,817 802,289
Debit arising on tax loss carried forward -- (32,725)
Debits arising in respect of provisions
and unpaid liabilities (79,862) (66,431)
------------
------------------ ------
776,955 703,133
=======
========== ===
7.2 Actual returns on funded plan assets during 2000 were Rs. 49,798.
The facility for short term running finance available from various banks amounts to
Rs. 1,782,500 (2000: Rs. 1,734,500), which represents the aggregate of sale price of all
mark-up arrangements between the Company and the banks with a corresponding purchase
price of Rs. 2,292,816 (2000: Rs. 2,168,467). The purchase prices are payable on
various dates by September 30, 2002.
Under the agreements the purchase price is subject to prompt payment rebates of
Rs. 304,585 (2000: Rs. 232,116). The rates of mark-up net of prompt payment rebates
range from Rs. 0.2986 to Rs. 0.3698 (2000: Rs. 0.3288 to Rs. 0.3836) per rupee one
thousand per day.
Finance upto Rs. 1,087,500 (2000: Rs. 1,087,500) is secured by a floating charge upon
all current and future movable property of the Company upto an aggregate maximum
amount of Rs. 1,305,000 (2000: Rs. 1,305,000) referred to in note 5.4 and the balance
of Rs. 695,000 (2000: Rs. 647,000) is secured by lien over Special US Dollar Bonds
referred to in note 21
10.2 Under the concessions available to the fertilizer industry, qualifying machinery was
imported and duty/tax exemptions were availed on submission of indemnity bonds and
corporate guarantees. The Company has submitted the machinery installation certificates
required for the release of indemnity bonds.
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 late payment of forward exchange risk
cover fee on long term loans and has filed a suit in the High Court of Sindh. A partial refund
of Rs. 62,618 was, however, recovered in 1999 from SBP and the recovery of the balance
amount is dependent on Court's decision.
COMMITMENTS
(Rupees)
Tangible Assets
Freehold land 4,247 3,084 9,925 -- -- --
*2,594
Leasehold land 192,396 -- 192,396 22,018 4,042 26,060
Building on
- freehold land 178,568 8,169 167,347 28,237 4,059 32,176
*(19,390) *(120)
- leasehold land -- 270,889 270,889 -- 4,515 4,515
Housing Colony 155,735 2,741 174,908 91,440 11,349 101,895
(1,104) (1,071)
*17,536 *177
Railway siding 1,119 -- 1,119 1,119 -- 1,119
Roads, fences and 93,816 4,840 98,789 19,843 4,019 23,870
airstrip *133 *8
Plant and machinery 7,799,109 324,172 8,123,148 2,089,144 388,739 2,477,875
*(133) *(8)
Furniture, fixtures 250,443 24,522 266,608 127,228 23,391 143,515
and equipment (7,407) (7,030)
*(950) *(74)
Vehicles 113,571 40,125 137,083 61,195 20,559 68,751
(16,823)
*210
------------
------------------ ------------------ ------------------ ------ ------------------ ------------------
8,789,004 678,542 9,442,212 2,440,224 460,673 2,879,776
(25,334) (21,121)
Intangible assets
Software 33,185 10,983 44,168 14,108 7,773 21,881
------------
------------------ ------------------ ------------------ ------ ------------------ ------------------
8,822,189 689,525 9,486,380 2,454,332 468,446 2,901,657
(25,334) (21,121)
=======
========== ========== ========== === ========== ==========
2000 8,711,260 125,862 8,822,189 2,020,873 446,970 2,454,332
(14,933) (13,511)
=======
========== ========== ========== === ========== ==========
11.2 The Collector of Customs had disallowed exemption from custom duty and sales tax amounting to
Rs. 48,236 in prior years in respect of first catalyst and other items being part and parcel of the
expansion plant on the contention that these items do not fall under the definition of "plant and
machinery" which is exempt under the relevant SRO. The Company challenged the Department's
contention through a constitutional petition in the High Court of Sindh which stayed the recovery of
the amount claimed and in December 1994 decided the petition in favour of the Company. The
Department filed a petition for leave to appeal in the Supreme Court which was granted on October
26, 1996. The case will now be fixed for regular hearing of the main appeal. The Company's
management is of the view that the Supreme Court will uphold the decision of the High Court and
as such has not made any provision of the aforesaid amount in the accounts. Payments,
without prejudice and under protest, totalling Rs. 22,207 made in 1994 to the Department
during the pendency of the petition in the High Court on their contention, inter alia, that the
stay order had expired have been shown as receivable (note 20).
11.3 The current year additions include Rs. 496,105 capitalised on account of the NPK Plant.
12.1 The Company has undertaken an 'Energy Conservation Project' (Encon), aimed at improving
the overall site energy efficiencies of Daharki plant. The expenditure above includes
Rs. 79,115 (2000: Rs. 5,937) relating to this project.
13.2 Both Engro Vopak Terminal Limited (EVTL) and Engro Asahi Polymer & Chemicals Limited
(EAPCL) are also the Company's associated undertakings.
The aggregate share of the Company's interest in the joint venture companies under various
headings is noted in 13.3 below and is based on their unaudited accounts for the year ended
December 31, 2001. The comparative figures are however based on the audited accounts.
2001 2000
(Rupees)
13.4 The Company has agreed to extend financial support, if required, both to EVTL upto US$
7,500 plus Rs. 58,500 and to EAPCL upto US$ 5,000. This support is by way of either further
share subscriptions or provision of subordinated loans.
13.5 The break-up value of Arabian Sea Country Club Limited's shares based on the
audited accounts for the year ended June 30, 2001 was nil (2000: Nil). The Chief Operating
Officer is Mr. Aslam Mohsin Ali.
This includes services incentive loans to executives of Rs. 32,345 (2000: Rs. 29,273)
repayable in equal monthly installments over a three year period or in one lump sum at the
end of such period and loans given to workers of Rs. 20,311 (2000: Rs. 4,253) pursuant
to Collective Labour Agreement. It also includes advances of Rs. 121,624
(2000: Rs. 131,437) to employees for the purchase of Company's shares and these
advances are repayable over a five year period.
The maximum amount outstanding at the end of any month from the executives aggregated
Rs. 131,851 (2000: Rs. 135,351).
The cost of finished goods on the basis of first-in-first-out method amounts to Rs. 199,215
(2000: Rs. 180,829). The purchased product amount includes stock-
in-transit of nil (2000: Rs. 224,846).
The maximum amount due from joint venture companies at the end of any month during
the year aggregated Rs. 2,187 (2000: Rs. 2,443).
20.1 In November 1999 and March 2000, the Company's manufacturing plant suffered
breakdown of the synthesis gas compressor rotors. After the second failure, a derated rotor
was installed which resulted in loss of production, sales and operating profit.
Insurance claim for the recovery of material damage, received during the year, amounted to
Rs. 46,928, of which Rs. 33,000 was recognised on provisional basis in the year 2000
(note 24).
The Company, upon expiry of the indemnity period during the current year as specified in
the business interruption policy, has filed its final claim amounting to Rs. 123,183, of which
Rs. 70,000 was recognised in the year 2000. Due to the interpretation of certain clauses of
the policy, the claim has not yet been finalised. The Company is vigorously pursuing the matter
with the insurers for the settlement of its final claim. The Company's management, however, is
certain that the final settlement would not be lower than the amount of claim recognised
last year. As a matter of prudence, the additional amount of claim has not been recognised
as income.
2001 2000
(Rupees)
- on saving accounts
local currency 117,431 138,602
foreign currency- US$ 266 (2000: US$ 1,189) 16,035 69,565
------------
------------------ ------
133,466 208,167
In hand
- cheques 576,986 135,779
- cash 3,630 3,770
------------
------------------ ------
937,412 508,084
=======
========== ===
23. SALES
Own manufactured product 6,344,951 5,580,261
Less: Sales tax- (note 23.1) (379,875) --
------------
------------------ ------
5,965,076 5,580,261
27.1 In 1997, the Company, as a matter of prudence, accrued Rs. 30,712 being penalty claimed
by the Port Qasim Authority for delayed payment of Peripheral Development Charges. On the
basis of legal opinion obtained, the Company reversed the provision in 2000 and is now
being disclosed as a contingent liability (note 10.1).
29.1 The provision for taxation has been made after taking into account the impact of a tax
holiday granted to the Company on the 1993 expansion for a period of eight years, which
expired on September 30, 2001. The tax exempt profit has been determined on the basis
confirmed and assessed by the tax authorities.
29.2 Subsequent to year end, the Deputy Commissioner of Income Tax has issued revised
assessment orders for the assessment year 1997-1998 and 1998-1999 whereby the
income from trading in purchased/imported fertilizers has been assessed under section
80C in addition to disallowance of certain expenses. The Company disputes the
Department's contention and as such is in the process of filing an appeal against the above
assessment. The Company's management is confident that the ultimate outcome would be
in their favour and as such no provision in the accounts has been made for the additional
tax demand resulting from the aforementioned assessment amounting to Rs. 120,435, net of
necessary rectification.
29.3 Under the new fertilizer policy, effective from July 1, 2001, income from trading in imported
fertilizer by a manufacturer would be subject to normal tax. The necessary amendments by
the Central Board of Revenue (CBR) in the Income Tax law for the same are still awaited. The
Company is confident that such amendments are expected very shortly, hence provision for
the current year has been made in the accounts under normal basis. Had the provision been
made on the assumption of section 80C, the current year income tax charged would be
higher by Rs. 69,724.
2001 2000
2001 2000
Directors Directors
Chief Chief
Executiv
Executive Others Executives e Others Executives
(Rupees)
Fees -- 11 -- -- 19 --
Managerial remuneration 6,546 10,786 252,725 5,895 10,555 236,100
Retirement benefits 558 972 20,934 288 546 11,159
Other benefits 1,708 2,565 17,713 1,717 1,902 25,129
------------
------------------ ------------------ ------------------ ------ ------------------ ------------------
Total 8,812 14,334 291,372 7,900 13,022 272,388
=======
========== ========== ========== === ========== ==========
Number of persons,
including those who
worked part of the year 1 10 292 1 10 270
=======
========== ========== ========== === ========== ==========
31.1 The Company also makes contributions based on actuarial calculations to pension and
gratuity funds and provides certain household items for use of some employees. Cars are also
provided for use of some employees and directors. Employees based at plant site, Daharki,
are also provided with schooling and subsidised club facilities. Monetary values of these
facilities relating to the above employees are not readily available.
31.2 Technical advisory fees paid during the year Rs. 480 (2000: Rs. 480) to two non-executive
directors (2000: two).
2001 2000
(Rupees)
Maturity
Maturity upto Maturity after Total upto Maturity after Total
one year one year one year one year
(Rupees)
Financial Assets
Loans and advances -- -- -- 24,359 151,988 176,347
Trade debts -- -- -- 424,045 -- 424,045
Other receivables -- -- -- 217,850 -- 217,850
Government of Pakistan
US Dollar Bonds 695,940 -- 695,940 -- -- --
Cash and bank balances 323,721 -- 323,721 613,691 -- 613,691
------------
------------------ ------------------ ------------------ ------ ------------------ ------------------
1,019,661 -- 1,019,661 1,279,945 151,988 1,431,933
=======
========== ========== ========== === ========== ==========
Financial Liabilities
Redeemable capital
and accrued mark-up 332,020 2,461,881 2,793,901 9,885 1,292 11,177
Long term loans and
related payable 197,395 528,925 726,320 -- -- --
Short term
running finance 582,270 -- 582,270 -- -- --
Creditors, accrued and
other liabilities -- -- -- 1,498,102 -- 1,498,102
Dividends -- -- -- 486,628 -- 486,628
------------
------------------ ------------------ ------------------ ------ ------------------ ------------------
1,111,685 2,990,806 4,102,491 1,994,615 1,292 1,995,907
=======
========== ========== ========== === ========== ==========
a) Financial assets and liabilities exposed to foreign exchange rate risk included in
above amount to Rs. 893,930 and Rs. 34,268 respectively.
b) Financial liabilities exposed to fixed interest rate risk and floating interest rate risk
included in above amount to Rs. 346,944 and Rs. 3,755,547 respectively.
In addition to the above, the Company may become exposed to credit risk upon
crystallization of its obligation to support its joint venture companies to the extent
mentioned in note 13.4.
Concentration of credit risk on cash based financial assets is minimised by dealing with
a variety of major banks.
2001 2000
(Rupees)
36. DONATIONS
Donations include the following in which a director or his spouse is interested:
Spouse of Mr. Pervaiz Kausar President Behbood Association, Karachi 200 200
Spouse of Mr. Asif Qadir Member Sahara Welfare Society, Daharki 150 150
Mr. Zaffar Ahmad Khan Non - Pakistan Centre for Philanthropy 500 --
Executive
Director
37.1 The shortfall in production was mainly due to the operation of the synthesis gas compressor
derated rotor until April 2001 and vibration problems in one of the compressor stages.
Zaffar A.
Nisar A. Memon Khan
Chief
Executiv
Chairman e
CORPORATE GOVERNANCE
The Board of Directors of Engro Chemical Pakistan Ltd., is committed to upholding the highest
standards of corporate governance. The Board of Directors held seven meetings during 2001.
The Board has construed the following Committees for greater focus on certain important aspects of
corporate governance explained below:
The BAC is composed of outside directors who are not officers or employees of Engro. These
directors are independent of management and free of any relationship that would interfere with their
exercise of independent judgment as members of this committee. The committee held four meetings
in 2001.
Members
Nisar A. Memon (Chairman)
S. Naseem Ahmed
Shabbir Hashmi
Tariq Iqbal Khan
Azhar I. Farooq (Secretary)
All members of this committee except the CEO of the Company are outside directors. The CEO
excludes himself from deliberations of the Committee on matters that pertain to him. The committee
held three meetings in 2001.
Members
S. Naseem Ahmed (Chairman)
Farid Dossani
Zaffar A. Khan
Nisar A. Memon
Salim Azhar (Secretary)
The following Committees act at the operating level in an advisory capacity to the CEO,
providing recommendations relating to businesses and employee matters: