NATIONAL FERTILIZER MARKETING LIMITED
MINUTES OF 76TH BOARD MEETING OF THE COMPANY
HELD ON 27TH JUNE 2011 AT 1900 HOURS IN LAHORE
PRESENT
1.
2.
3.
4.
5.
6.
7.
Mr. Muhammad Khalid Malik
Brig Balal Ahmed Khan (Retd)
Sitara-e-Imtiaz (Mil)
Mr. Nasrullah Khan
Mian Muhammad Zulqarnain Aamir
Sahibzada Faiz Mahmood Faizi
Mr. Agha Jan Akhtar
Mr. Arif Nadeem
Chairman
Managing Director
Director
Director
Director
Director
Director
IN ATTENDANCE
1.
2.
Miss Zahida Alvi
Mr. Muhammad Sharif Chaudhry
G.M. (Finance) NFC
Company Secretary
RECITATION
The meeting started with Recitation from the Holy Quran.
PROCEEDINGS
Mr. Muhammad Khalid Malik took the chair and welcomed the Directors to 76th meeting of
the Board of Directors of the Company.
Item-1 CONFIRMATION OF THE MINUTES OF PREVIOUS BOARD MEETING
The Board was informed that the Minutes of 75th meeting of the Board held on 31st
March 2011 were circulated to the Directors for their comments. It was confirmed
that no observation had been received from any of the Directors.
Minutes of 75th meeting, as circulated, were approved by the Board and signed
by the Chairman.
Item-2 MATTERS ARISING FROM PREVIOUS BOARD MEETING
2.1
Civil Court Stay Order against Agri. Tech
The Board appreciated the timely legal action taken by Managing Director to
obtain Stay Order against M/s. Agri. Tech. The Board further desired that
vigorous efforts may be made to pursue the necessary legal proceedings
against defendants in the larger interest of NFML.
2.2
NFML New Single Super Phosphate (SSP) Project
The Company Secretary informed the Board that copy of preliminary
economic feasibility was circulated to the Directors. Chairman NFC enquired
about the domestic source for supply of raw phosphate. Company Secretary
informed the Board that project is based on 50% local supply of raw
phosphate.
The Managing Director informed the Directors that M/s. Suraj Fertilizer
Industry has already started their production of SSP and we will revise our
feasibility study keeping in view their experience.
The Board agreed that NFML's detailed feasibility study of SSP plant should
be kept pending till positive results of M/s. Suraj Fertilizer Industry are
known. In this context, Director, Mr. Arif Nadeem also proposed that
Managing Director NFML should have a meeting with Mr. Ali Tahir,
Secretary, P&D.
Item-3 AUDITED ACCOUNTS OF THE COMPANY FOR THE YEAR 2009-10
The Audited Accounts of the Company for the year ended 30th June 2010, alongwith
Auditor’s Report thereupon, were placed before the Board for consideration and
approval.
While presenting the Accounts, Company Secretary apprised the Board that Balance
Sheet of NFML as at June 30, 2010 and the related Profit & Loss account, Cash
Flow Statement and Statement of Changes in equity have been thoroughly
examined, assessed and evaluated by M/s. Hyder Bhimji & Co., Chartered
Accountants. The Audited Annual Financial Statements of the Company have been
presented in conformity with the approved accounting standards and the
requirements of the Companies Ordinance 1984. He further elaborated the salient
features of the said Financial Statements as under:
-
The Company sold 1,518,569 M.Tons of local and imported Urea valuing
Rs.22,918.254 Million which increased by 75% in quantity terms and 96% in
value terms respectively which was highest in the history of the Company.
-
As at the year end, the Company was maintaining working balances of
Rs.7,001.245 million with scheduled Banks and on account of prudent and
proper financial management, the Company was able to earn mark up totaling
Rs.856.531 Million.
-
The Company has posted a net profit before taxation of Rs.121.343 Million in
the financial year 2009-10.
He further informed the Board that External Auditors have qualified their opinion with
regard to balance payable to Trading Corporation of Pakistan (TCP), balance
receivable from Utility Stores Corporation (USC) and Excess Dealers Allowance of
Rs.339.720 Million recoverable from TCP against price differential of Imported Urea.
Directors, M/s. Nasrullah Khan and Sahibzada Faiz Mahmood Faizi observed that
keeping in view the highest sales turn-over of the Company, the profit had declined.
The management clarified that incidentals were fixed in July 2008 which need to be
revised.
While discussing the excess dealers allowance amounting to Rs.339.720 million
recoverable from TCP against price differential of Imported Urea, Miss Zahida Alvi,
General Manager (Finance) NFC, said that expenses in profit & loss account have
been under-stated to the extent of excess dealers allowance. She further argued that
allowances to dealers amounting to Rs.151.526 million as appearing in profit & loss
account should be increased to Rs.491.246 million.
Director, Mian Muhammad Zulqarnain Aamir, asked Miss Zahida Alvi to suggest a
solution of the matter. She stated that accounts of the Company should be revised and
as a result, the net profit of the Company would be converted into a net loss.
The Managing Director expressed his concern that revision of accounts at this stage
would not be appropriate because various legal issues might arise if approval of
accounts is further delayed. He also stated that Miss Zahida Alvi, General Manager
(Finance) NFC is not a Director and it is the prerogative of Directors to take a decision
in the matter which was endorsed by the Board.
The Chairman, however, remarked that her comments may be taken as his views.
Director, Mr. Agha Jan Akhtar, remarked that there must be some justification or
background for payment of excess dealers allowance. The Managing Director said that
a transparent investigation into the background of payment of excess dealers
allowance has already been ordered. The Chairman, however, proposed that inquiry
should be conducted by NFC.
The Company Secretary further brought to the notice of the Board that Auditors
Report also contained a qualification with regard to actual freight being more than the
amount allowed by TCP (which was subject to actual) amounting to Rs.1,002.014
million and excess dealers allowance amounting to Rs.339.720 million. Both the
amounts are to be recovered/adjusted against price differential payable to TCP and
accounts of the Company would again show a net profit.
Director, Sahibzada Faiz Mahmood Faizi also endorsed the views of the management
by giving an example of similar PASSCO operations and their incidentals receivable
from the Government which after realization again change the Company's profit &
loss position.
The Board discussed the pros & cons of excess marketing allowance and
approved the treatment given to excess marketing allowance in the Audited
Accounts.
Chairman, NFC did not agree with the point of view of other Directors and stated
that the excess marketing allowance should be adjusted in profit & loss account.
Director Mr. Nasrullah Khan enquired about the policy of NFML for fixation of price
of Imported Urea.
Managing Director NFML informed the Board that NFML fixes the price of Imported
Urea less by Rs.20-30 than the prevailing market price of private sector. Chairman
desired that the difference in price of NFML and private sector should not go to the
benefit of middle man.
The Board agreed that the price of Imported Urea should be fixed at a level
which is less than the private sector by 2% and allowed the Managing Director
NFML to seek ex-post facto approval of the Ministry of Industries.
After detailed deliberations and due consideration by the Board, it was :“Resolved that Audited Accounts of the Company for the
year 2009-10 be and are hereby approved and authorized to
be signed by Brig Balal Ahmed Khan (Retd), Sitara-e-Imtaiz
(Mil), the Director/Chief Executive and Mr. Agha Jan
Akhtar, Director.”
Item-4 ADDITIONS/DELETIONS TO FIXED ASSETS AND EXCESS DEALERS
ALLOWANCE
4.1
Additions/Deletions to Fixed Assets
The Board was informed that as required by the Companies Ordinance, 1984,
the Auditors of the Company have asked for specific approval in respect of
additions and deletions made to fixed assets during the year ended June 30,
2010. Details regarding Additions & Deletions were explained and were
reviewed by the Directors. The Board was informed that all corporate and
commercial formalities for disposal/acquisition of the Fixed Assets were
fulfilled.
After detailed review, it was:“Resolved that the items, as detailed below, be and are
hereby specifically approved."
Rs.
Additions to Fixed Assets
Disposal of Fixed Assets
Cost
Written Down Value
Sold for
4,127,099
299,600
1
228,000
4.2
Excess Dealers Allowance recovered from Trading Corporation of
Pakistan
The Board was informed that National Fertilizer Marketing Limited (NFML)
prior to September 04, 2009 was allowing Rs.100/- per M.Ton as
commission/marketing allowance to its dealers for the sale of Imported Urea.
However, effective September 05, 2009 dealer’s commission/marketing
allowance was increased to Rs.400/- per M.Ton in line with the
commission/marketing allowance being allowed by the competitors such as
Fauji Fertilizer Company (FFC), Engro and DHCL etc. so that the Company
may also sell Imported Urea at the prevailing market price which was being
changed from time to time.
The Company's expenses other than freight charges were being reimbursed @
Rs.420/- per M.Ton by TCP which duly include the commission/marketing
allowance to dealers at Rs.100/- per M.Ton. NFML cannot recover its
"Administrative and operating selling expenses" including dealers' allowance
by allowing Rs.400/- per M.Ton to dealers.
In view of excess commission/dealers allowance of Rs.300/- per M.Ton
allowed to dealers to sell Urea in line with the private sector competitors, it
was decided by the company management that excess amount of Rs.339.720
million be recovered /adjusted against the price differential on Imported Urea
payable to TCP.
The Auditors of the company have asked for specific approval of Board for
adjustment of excess dealers allowance of Rs.339.720 million.
After detailed deliberations and due consideration by the Board, it was:“Resolved that the excess commission/marketing
allowance of Rs.339.720 Million be and is hereby
specifically approved to be adjusted/recovered from the
amount payable to TCP against price differential.”
Item-5 DIRECTORS’ REPORT
The Directors’ Report to the Shareholders for the year ended June 30, 2010 was
placed before the Directors. The Report was considered and approved by the
Directors and signed by the Chairman.
Item-6 APPOINTMENT OF AUDITORS
The Board was informed that M/s. Hyder Bhimji & Co., Chartered Accountants,
Lahore were appointed as Auditors of the Company for the year 2009-10 on a
remuneration to be calculated on “Time Spent Basis” subject to a maximum of
Rs.125,000/-.
Being eligible for re-appointment, the retiring auditors have offered themselves for
re-appointment.
The Board after detailed discussion recommended to the Shareholders the
appointment of M/s. Hyder Bhimji & Co., Chartered Accountants, as Auditors of the
Company for the year 2010-11 at a remuneration to be calculated on “Time Spent
Basis” subject to a maximum of Rs.125,000/-.
Item-7 LONG-FORM REPORT FOR THE YEAR 2009-10
The Board was informed that all the observations/recommendations made by
Auditors of the Company for further improvement in the internal controls and
accounting procedures have been noted and the management has also given its
necessary comments thereon.
A major recommendation made by the External Auditors of the Company is to setup an appropriate Internal Audit Department headed by a qualified and experienced
person to ensure complete compliance of Company's rules and regulations to plug
the leakages and to eradicate other short-comings, if any. In order to establish a
separate Cell to perform Internal Audit functions, the requirements of
skilled/professional staff viz-a-viz Company's size, stature and nature of business are
being worked out.
Item-8 REVIEW OF OPERATIONS
-
Marketing Department
While updating the Directors about sales performance of the Company during
the period July 2010 to April 2011, the Board was informed that Urea off-take
of local industry on national level showed a decline of 1% over the prior year.
During the period under review, Urea sales by NFML decreased due to less
import of Urea as compared to last year. Other factors which also adversely
affected the Urea sales of the Company were price hike, heavy rains and floods
in all the four provinces of Pakistan.
-
Finance Department
The Board reviewed the operating results of the Company during July 2010 to
April 2011 and noted with satisfaction that the Company has earned a net
profit of Rs.286.110 Million.
The Company has taken up the matter with the Ministry regarding revision of
incidentals which were fixed in July 2008. NFML is also seeking approval of
ECC regarding payment of actual freight on dispatches from Karachi and
Gwadar Ports as a policy.
Item-9
ACHIEVEMENTS OF PRESENT MANAGEMENT IN TERMS OF
MONETARY VALUE
The Board reviewed the positive efforts made by the present management
specially the process of negotiations concluded with the Cartage Contractors who
offered better terms than the previous ones. Effective Distribution discipline and
increase in interest income on account of more competition amongst the Banks
were also perused by the Directors.
The Board highly appreciated the resultant savings amounting to Rs.111.000
Million. This significant development will further enhance NFML capability
to provide optimal solutions for its future plans.
Item-10
STRATEGIC MEASURES TAKEN BY THE MANAGEMENT FOR
IMPROVING THE NFML AFFAIRS
The Board was informed about the problem areas, present achievements and future
plans in detail.
The Board expressed its complete satisfaction about the strategic measures
taken by the management for improving NFML affairs.
Item-11
NFML EMPLOYEES WELFARE FUND
The proposal for creation of a Welfare Fund to help the employees of NFML
initiated by the present management was discussed in detail by the Board. The
directors desired to know the funding sources and the management clarified that
basically it would be a self-funded project.
The Board agreed in principal and granted administrative approval for
creation of NFML Employees Welfare Fund and directed the management to
put-up other details regarding Board of Trustees and by-laws etc. for Board's
approval.
Item-12
REQUEST FOR
1)
Performance Incentive for NFML Employees
The Board was informed that the Company had achieved all its business
targets set by the Government of Pakistan regarding Marketing and
Distribution of Imported Urea throughout the Country during the year
2009-10 with dedicated efforts of the management despite acute shortage of
professional/experienced manpower and limited resources.
The Board approved performance incentive for the year 2009-10 equal to
2 basic salaries for all regular/contractual and assignees employees of
NFML subject to their performance.
2) Service Benefits
The Board approved the followings as fresh entitlement:
i)
Revision in Gratuity
The gratuity was revised from 30 days to 60 days on the basis of last
drawn basic pay for each completed year of service for executives as
prevailing in NFC.
ii) Long Term Service Award
NFML employees are being paid long term service award on completion
of 15, 20 and 25 years service in the following manner:
- On completion of 15 years service
- On completion of 20 years service
- On completion of 25 years service
One month basic salary
Two months basic salary
Three months basic salary
Long Term Service Award shall also be paid on completion of 30 years
service @ four months basic salary to eligible employees. The policy of
Long Service Award be amended/revised accordingly.
iii) Promotion from Grade G-II to G-III
Up-gradation of 1 position from Grade G-II to G-III was allowed purely
on merit/seniority.
iv) Enhancement of TA/DA Rate
Enhancement in the mileage allowance from Rs.12/- per Km to Rs.16/per Km for use of private car for official use and increase in Daily
Allowance of NFML employees was allowed as prevailing in NFC.
As regards TA/DA for Managing Director, the Board approved that
the Managing Director because of his vital operational
responsibilities be given TA/DA equivalent to management grade.
v) Enhancement of Car Loan Amount
Ceiling of Car Loan amount be enhanced from Rs.337,500/- to
Rs.600,000/- for executives (G-III to G-VI) and from Rs.450,000/- to
Rs.750,000/- for management grade i.e. D-III to D-I.
Item-13
OPENING OF BANK ACCOUNT WITH ALLIED BANK
The Board was informed that the management is trying to further increase the
interest income from Banking Sector by keeping Company's working balances in
different scheduled commercial banks having good long term and short term
ratings.
The Board considered and approved the opening of Company's account with
Allied Bank Limited, 21-Z, DHA Branch, Lahore.
In this perspective, the following resolution was also passed:
Resolution No.95
"Resolved that funds of the Company may be placed with Allied Bank, 21-Z,
DHA Branch, Lahore and in this respect one officer from each category as
mentioned below is hereby authorized to jointly execute/sign necessary
documents/operate the Account with the Bank.
Category – 'A'
-
Category – 'B'
Managing Director
- Acting General Manager (Finance)
Regional Manager, Lahore
- Deputy Manager (Finance)
Senior Manager (Commercial) - Deputy Manager (Accounts)"
It was further resolved as under:
Resolution No.96
"Resolved that the Managing Director NFML shall stand authorized to open
a Bank Account with any scheduled commercial bank in line with the
approved policy of Finance Division, Government of Pakistan and guidelines
issued by the Corporation."
There being no other business, the meeting ended with a vote of thanks to the Chair.
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