Pakistan Synthetics Limited
CONTENTS
PAGE NO.
Company Information
2
Performance of the Company at a Glance
3
Report of the Directors
4
Mission Statement & Vision
8
Statement of Ethics and Business Practices
9
Statement of Compliance with Best
Practices of Code of Corporate Governance
10
Review Report to the Members on Statement
of Compliance with Best Practices of Code
of Corporate Governance
12
Auditors' Report to the Members
13
Balance Sheet
14
Profit and Loss Account
16
Statement of Comprehensive Income
17
Statement of Cash Flows
18
Statement of Changes in Equity
19
Notes to the Financial Statements
20
Pattern of Shareholding
49
Notice of Meeting
52
Form of Proxy
1
Pakistan Synthetics Limited
COMPANY INFORMATION
BOARD OF DIRECTORS
EBRAHIM HAJI KARIM
UMER HAJI KARIM
ANWAR HAJI KARIM
YAKOOB HAJI KARIM
PIR MUHAMMAD A. KALIYA
ABID UMER
SAJID HAROON
AAMIR AMIN
CHAIRMAN- NON-EXECUTIVE
CHIEF EXECUTIVE- EXECUTIVE
EXECUTIVE
EXECUTIVE
NON-EXECUTIVE
NON-EXECUTIVE
NON-EXECUTIVE
NON-EXECUTIVE
AUDIT COMMITTEE
Y AKOOB HAJI KARIM - CHAIRMAN
PIR MUHAMMAD A. KALIYA
ABID UMER
HUMAN RESOURCE AND
REMUNERATION COMMITTEE
SAJID HAROON - CHAIRMAN
YAKOOB HAJI KARIM
ABID UMER
CHIEF FINANCIAL OFFICER
SALEEM ADVANI
COMPANY SECRETARY
MUBBASHIR AMIN
BANKERS
HABIB BANK LIMITED
HABIB METROPOLIT AN BANK LIMITED
BANK AL HABIB LIMITED
NA TIONAL BANK OF P AKISTAN
MEEZAN BANK LIMITED
MCB BANK LIMITED
AUDITORS
KPMG T ASEER HADI & CO.
CHARTERED ACCOUNT ANTS
INTERNAL AUDITORS
M. YOUSUF ADIL SALEEM & Co.
CHARTERED ACCOUNTANTS
TABISH SHARIF- HEAD OF INTERNAL AUDIT
REGISTER
TECHNOLOGY TRADE (PVT.) LTD.
DAGIA HOUSE, 24-C, BLOCK-2, PECHS,
OFF: SHAHRAH-E-QUAIDEEN, KARACHI.
LEGAL ADVISOR
T ASAWUR ALI HASHMI
ADVOCA TE
REGISTERED OFFICE
3RD FLOOR, KARACHI DOCK LABOUR BOARD
BUILDING, 58- WEST WHARF ROAD,
KARACHI-74000
FACTORY
F . 1, 2, 3, & F . 13, 14 & 15,
HUB INDUSTRIAL TRADING EST A TE,
DISTRICT LASBELLA, BALOCHIST AN
PACKAGING UNIT
PLOT # A-5, N.W.I.Z. PORT QASIM AUTHORITY,
KARACHI.
2
Pakistan Synthetics Limited
PERFORMANCE OF THE COMPANY AT A GLANCE
YEAR
ENDED
30 JUNE
2003
2004
STATISTICAL SUMMARY
Gross sales
Profit / (loss) before taxation
2005
2006
2007
2008
2009
2010
2011
2012
2,284)
2,503
3,349) 4,234) 4,491)
Rupees in million
2,086
2,223 1,891)
1,873) 1,560)
99
47
(59)
27)
(103)
63)
63
77)
441)
40)
(58)
(16)
11
(1)
27)
(18)
(20)
(25)
(154)
(22)
41
31
(48)
26)
(76)
6
42
52)
286)
19)
1,392
1,357
1,302
1,292) 1,275)
1,696)
1,302
Paid-up capital
560
560
560
560)
560)
560)
560
560)
Shareholders' equity
973
1,005
956
983)
851)
857)
899
881) 1,167) 1,073)
0.92
Taxation
Profit / (loss) after taxation
Gross assets employed
(including capital work-in-progress)
EARNINGS AND PAY OUT
Earnings/(loss) per share after taxation
1,324) 2,644) 3,010)
560)
560)
Rs. per share of Rs. 10 each
0.74
0.56
(0.86)
0.47) (1.36)
0.10
0.76
Break-up value
17.36
17.92
17.06
17.53) 15.18)
15.29
16.04
Cash dividend
0.75
—
—
—
1.25
—
2.57:1
2.41:1
1.09:1
1.31:1
0:1
0:1
0:1
27:73
1.00)
FINANCIAL RATIOS
Current Assets : Current Liabilities
Long-term Debts : Equity
Polyester Chips - Tons
Plastic and Crown Caps - Cartons
0.33)
15.71 20.82) 19.15)
2.00)
—
Ratios
2.63:1 3.05:1 2.93:1
0:100
0:100
0:100
3.27:1 2.29:1 1.65:1
0:100)
PRODUCTION
Polyester Staple Fibre - Tons
—
5.11)
9:91)
7:93)
Quantity
24,973 23,063 17,532 23,092) 15,539) 24,921) 20,544 25,837 24,449 23,868
4,843
4,149
2,038
—
—
—
133)
—
—
—
—
—
—
—
—
—
—
—
3,785 129,492
3
Pakistan Synthetics Limited
REPORT OF THE DIRECTORS FOR THE YEAR ENDED 30 JUNE 2012
We are pleased to present before you the 27th Annual Report together with the Audited Financial
Statements of the Company for the year ended 30 June 2012.
OPERATING PERFORMANCE
During the year under review, the Company produced 23,868 tons of Polyester Staple Fibre as against
24,449 tons produced during the last year. The company sold 24,046 tons of PSF as against 24,846 tons
of last year. Further the Company produced 129,492 cartons of plastic and crown caps during the year
as against 3,785 cartons of last year and sold 83,490 cartons during the year as against 3,100 cartons
of last year.
FINANCIAL RESULTS
During the year under review, the company’s gross turnover increased to Rs. 4,490.56 million
from Rs. 4,234.05 million during the corresponding last year.
The Company earned profit before tax of Rs. 40.44 million as against profit before tax of
Rs. 440.58 million in the last year. The net profit after tax stood at Rs. 18.55 million as against net profit
after tax of Rs. 286.30 million in the last year.
Decrease in net profit is mainly attributable to the loss incurred in packaging segment during the year.
Further, there existed huge demand of fibre last year because of steep rise in cotton prices, whereas
during the year, the prices of cotton are on lower side which had affected the demand of fibre during the
year.
EARNING PER SHARE
The net earning per share, after providing for taxation, for the year ended 30 June 2012
was Re. 0.33 (2011: Rs. 5.11).
DIVIDEND
Based on the current liquidity position of the Company, the Directors did not recommend any dividend
for the year ended 30 June 2012.
FUTURE OUTLOOK
The prices of raw material of fibre have started to move upward, where as the prices of fibre remain on
the lower side. Further, energy cost is increasing day by day. All these conditions will result in the
contraction of margin per unit.
The Company is expecting that it will be able to expand its sale of packaging segment further during the rest
of the summer season which would have a positive impact on the earnings of the company in coming period.
4
Pakistan Synthetics Limited
REPORT OF THE DIRECTORS FOR THE YEAR ENDED 30 JUNE 2012
SUBSEQUENT EVENT
The Directors report that no material change or commitment has taken place, other than those disclosed
which has affected the financial position of the company from the end of the financial year up to the date
of this report.
FINANCIAL REPORTING FRAME WORK
As required under the Code of Corporate Governance, the Directors confirm compliance with the Corporate
and Financial Reporting Frame Work for the following:
a) The financial statements, prepared by the management of the Company, present fairly its state of
affairs, the results of its operations, cash flows and changes in equity.
b) The Company has maintained proper books of accounts.
c) Appropriate accounting policies have been consistently applied in preparation of financial statements
and accounting estimates are based on reasonable and prudent judgment.
d) International Accounting Standards, as applicable in Pakistan, have been followed in preparation of
financial statements
e) The system of internal control and other such procedures, which are in place, are sound in design and
have been effectively implemented and monitored on an on going basis by the management. The
process of review will continue and any weakness in control will be removed.
f) There are no significant doubts upon the Company’s ability to continue as a going concern.
g) There has been no material departure from the best practices of corporate governance, as detailed
in the listing regulations.
h) Key operating and financial data for the last ten years in summarized form is annexed.
i) Trade made by the Directors, executives and their spouses and minor children in the shares of the
Company during the year under review has been set out in pattern of shareholding.
j) Information about outstanding taxes and levies are given in the Notes to the Financial Statements.
5
Pakistan Synthetics Limited
REPORT OF THE DIRECTORS FOR THE YEAR ENDED 30 JUNE 2012
MEETING OF THE BOARD OF DIRECTORS
During the year, five (05) meetings of the Board of Directors were held. Attendance by each Director was
as follows:-
NAME OF DIRECTORS
NO. OF MEETING ATTENDANCE
I.
Mr. Ebrahim Haji Karim
0
II.
Mr. Umer Haji Karim
5
III.
Mr. Anwar Haji Karim
5
IV.
Mr. Yakoob Haji Karim
5
V.
Mr. Abid Umer
5
VI.
Mr. Sajid Haroon
4
VII.
Mr. Pir Mohammad A.Kaliya
5
VIII.
Mr. Aamir Amin-NIT
5
Leave of absence was granted to Directors who could not attend the Board meetings.
6
Pakistan Synthetics Limited
REPORT OF THE DIRECTORS FOR THE YEAR ENDED 30 JUNE 2012
DIRECTORS TRAINING PROGRAM
During the year under review, one of the Directors of the Company had obtained certification of Director
Training Program from Pakistan Institute of Corporate Governance.
PATTERN OF SHARE HOLDING
The pattern of share holding as on 30 June 2012 is annexed.
AUDITORS
The present auditors of the Company, KPMG Taseer Hadi & Co., Chartered Accountants, retire and being
eligible, offer themselves for re-appointment. The Directors endorsed recommendation of the Audit Committee
for their re-appointment for the year ending 30 June 2013.
ACKNOWLEDGEMENT
The Management would like to place on record its appreciation for dedication and hard work rendered by its
employees and workers for their dedication.
For and on behalf of the
Board of Directors
Date: 28 September 2012
Karachi
UMER HAJI KARIM
CHIEF EXECUTIVE
7
Pakistan Synthetics Limited
MISSION STATEMENT
OF
PAKISTAN SYNTHETICS LIMITED
Our Mission is to be a quality producer
of Polyester Staple Fibre, continuously
striving for excellence.
VISION
To be the leading Polyester Staple Fibre
manufacturing company, PSL realizes it
has a responsibility to treat all stakeholders
equitably and transparently to be true to
their trust.
8
Pakistan Synthetics Limited
STATEMENT OF ETHICS
AND
BUSINESS PRACTICES
PSL resolves to always place the Company’s interest first;
PSL resolves to excel through resource management namely,
human (professional & technical both), financial and other
infrastructural facilities and to ensure reasonable return to
all the stakeholders;
PSL conducts business as a responsible and law abiding
corporate member of society to achieve its legitimate
commercial objectives and supports unconditionally the
Compliance with the Best Practices of Corporate Governance
for the betterment of the corporate culture;
PSL expects from its employees full integrity, total honesty,
fair and impartial practices in all aspects of its business;
PSL resolves to adopt fair and ethical marketing practices
and to prepare itself to face the challenges of open markets
under WTO by supplying its customers quality Polyester
Staple Fibre at competitive prices;
PSL resolves not to compromise on principles.
9
Pakistan Synthetics Limited
STATEMENT OF COMPLIANCE WITH BEST PRACTICES OF CODE OF
CORPORATE GOVERNANCE FOR THE YEAR ENDED 30 JUNE 2012
This statement is being presented to comply with the Code of Corporate Governance contained in the listing
regulations of Karachi, Lahore and Islamabad Stock Exchanges for the purpose of establishing a framework
of good governance, whereby a listed entity is managed in compliance with the best practices of corporate
governance.
The Company has applied principles contained in the Code in the following manner:
1. The Company encourages representation of independent non-executive directors and directors representing
minority interests on its Board of Directors. At present the Board includes:
Category
Independent Directors
Executive Directors
Non-Executive
Directors
Name
Nil*
1) Umer Haji Karim
2) Anwar Haji Karim
3) Yakoob Haji Karim
1) Ebrahim Haji Karim
2) Abid Umer
3) Sajid Haroon
4) Pir Muhammad A. Kaliya
5) Aamir Amin
*Independent Director will be appointed at the date of next election of Directors.
2. The directors have confirmed that none of them is serving as a director on more than seven listed companies,
including this Company (excluding the listed subsidiaries of listed holding companies where applicable).
3. All the resident directors of the Company are registered as taxpayers and none of them has defaulted in
payment of any loan to a Banking Company, a Development Financial Institution or a Non-Banking Financial
Institution. None of the directors is a member of a stock exchange.
4. There was no casual vacancy in the Board during 2012.
5. The Company has adopted corporate values supported by” Statement of ethics and business practice”
and has ensured that appropriate steps have been taken to disseminate it throughout the Company along
with its supporting policies and procedures.
6. The Board has developed vision / mission statement. However, overall corporate strategy and significant
policies of the Company are yet to be formulated.
7. All the powers of the Board have been duly exercised and decisions on material transactions, including
appointment and determination of terms and conditions of employment of the CEO, other executive and
non-executive directors, have been taken by the Board.
8. The meetings of the Board were presided over by a director elected by the Board for this purpose as the
chairman did not attend any meeting during the year and the Board met at least once in every quarter
except for the meeting of first quarter which was held two days after the end of quarter. Written notices of
the Board meetings, along with agenda and working papers, were circulated atleast seven days before the
meeting. The minutes of the meetings were appropriately recorded and circulated.
9. Training programs / orientation courses were not arranged by the Company for its directors during the year.
However, one of the Directors has attended Corporate Governance Leadership Skills (CGLS) Program
organized by Pakistan Institute of Corporate Governance (PICG). The Directors, being in the corporate
sector for long time, are fully conversant with their duties and responsibilities, listing regulations of Stock
Exchanges, legal requirements and operational imperatives of the Company.
10.The Board has approved appointment of CFO, Company Secretary and Head of Internal Audit, including
their remuneration and terms and conditions of employment.
10
Pakistan Synthetics Limited
STATEMENT OF COMPLIANCE WITH BEST PRACTICES OF CODE OF
CORPORATE GOVERNANCE FOR THE YEAR ENDED 30 JUNE 2012
11.The Directors’ report for this year has been prepared in compliance with the requirements of the Code
and fully describes the salient matters required to be disclosed.
12.The financial statements of the Company were duly endorsed and signed by the CEO and CFO before
approval of the Board.
13.The CEO, directors and executives do not hold any interest in the shares of the Company other than that
disclosed in the pattern of shareholding.
14.The Company has complied with all the corporate and financial reporting requirements of the Code.
15.The Board has formed an Audit Committee. At present, it comprises three members including two
non-executive directors.
16.The meetings of the Audit Committee were held at least once every quarter except for the meeting of first
quarter which was held two days after the end of quarter. However meetings were held prior to approval
of interim and final results of the Company as required by the Code. The terms of reference of the Committee
have been formed and advised to the Committee for compliance.
17.The Board has formed an HR and Remuneration Committee. It comprises three members of whom
two are non-executive directors and the chairman of the Committee is a non-executive director. However,
the terms of reference of this Committee is yet to be formulated for approval of the Board.
18.The Board has outsourced an internal audit function to a firm of Chartered Accountants to carry out the
internal audit function independently that is considered suitably qualified and experienced for the purpose
and is conversant with policies and procedures of the Company. A full time existing employee has been
designated to act as coordinator between firm of Chartered Accountants providing internal audit services
and the Board.
19.The statutory auditors of the Company have confirmed that they have been given a satisfactory
rating under the quality control review programme of the Institute of Chartered Accountants of Pakistan
(ICAP), that they or any of the partners of the firm, their spouses and minor children do not hold shares
of the Company and that the firm and all its partners are in compliance with International Federation of
Accountants (IFAC) guidelines on code of ethics as adopted by the ICAP.
20.The statutory auditors or the persons associated with them have not been appointed to provide other
services except in accordance with the listing regulations and the auditors have confirmed that they have
observed IFAC guidelines in this regard.
21.The closed period prior to the announcement of interim/final results, and business decisions, which may
materially affect the market price of Company’s securities was determined and intimated to directors,
employees and stock exchanges.
22.Material/price sensitive information has been disseminated among all market participants at once through
stock exchanges.
23.We confirm that all other material principles enshrined in the Code have been complied with except for
those stated above towards which reasonable progress is being made by the Company to seek compliance
by the end of next accounting year.
For and on behalf of the Board of Directors
Date: 28 September 2012
Karachi
UMER HAJI KARIM
CHIEF EXECUTIVE
11
Pakistan Synthetics Limited
REVIEW REPORT TO THE MEMBERS ON STATEMENT OF COMPLIANCE
WITH BEST PRACTICES OF CODE OF CORPORATE GOVERNANCE
We have reviewed the Statement of Compliance with the best practices contained in the Code of Corporate
Governance prepared by the Board of Directors of Pakistan Synthetics Limited (“the Company”) to comply
with the Listing Regulation of Karachi, Lahore and Islamabad Stock Exchanges, where the Company is listed.
The responsibility for compliance with the Code of Corporate Governance is that of the Board of Directors
of the Company. Our responsibility is to review, to the extent where such compliance can be objectively
verified, whether the Statement of Compliance reflects the status of the Company’s compliance with the
provisions of the Code of Corporate Governance and report if it does not. A review is limited primarily to
inquiries of the Company’s personnel and review of various documents prepared by the Company to comply
with the Code.
As part of our audit of financial statements we are required to obtain an understanding of the accounting and
internal control systems sufficient to plan the audit and develop an effective audit approach. We are not
required to consider whether the Board’s statement on internal control covers all risks and controls, or to form
an opinion on the effectiveness of such internal controls, the Company’s corporate governance procedures
and risks.
Further, Listing Regulations of Stock Exchanges where the Company is listed requires the Company to place
before the Board of Directors for their consideration and approval related party transactions distinguishing
between transactions carried out on terms equivalent to those that prevail in arm’s length transactions and
transactions which are not executed at arm’s length price recording proper justification for using such alternate
pricing mechanism. Further, all such transactions are also required to be separately placed before the audit
committee. We are only required and have ensured compliance of requirement to the extent of approval of
related party transactions by the Board of Directors and placement of such transactions before the audit
committee. We have not carried out any procedures to determine whether the related party transactions were
under taken at arm’s length price or not.
As more fully explained in paragraphs 6, 8, 16 and 17 which describes inconsistencies in respect of formulation
of corporate strategy and significant policies, board of directors meetings, audit committee meeting and
formulation of terms of reference of HR and remuneration committee respectively towards which reasonable
progress is being made by the Company.
Based on our review, nothing has come to our attention which causes us to believe that the Statement of
Compliance does not appropriately reflect the Company’s compliance, in all material respects, with the best
practices contained in the Code of Corporate Governance.
Date: 28 September 2012
Karachi
12
KPMG TASEER HADI & CO.
Chartered Accountants
Pakistan Synthetics Limited
AUDITORS’ REPORT TO THE MEMBERS
We have audited the annexed balance sheet of PAKISTAN SYNTHETICS LIMITED (“the Company”)
as at 30 June 2012 and the related profit and loss account, statement of comprehensive income, statement
of cash flows and statement of changes in equity 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
as applicable in Pakistan 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;
b)
in our opinion:
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 comprehensive income, statement of cash flow
and statement of changes in equity together with the notes forming part thereof conform with approved
accounting standards as applicable in Pakistan and give the information required by the Companies
Ordinance, 1984, in the manner so required and give a true and fair view of the state of the
Company’s affairs as at 30 June 2012 and respectively of the profit, its cash flows and changes in
equity 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
Date: 28 September 2012
Karachi
KPMG TASEER HADI & CO.
Chartered Accountants
Mohammad Nadeem
13
Pakistan Synthetics Limited
BALANCE SHEET
AS AT 30 JUNE 2012
2012
Equity and liabilities
Shareholders' equity
Authorised capital of
70,000,000 ordinary shares of Rs. 10 each
2011
(Rupees in ‘000)
Note
700,000
700,000
560,400
560,400
General reserve
292,450
292,450
Unappropriated profit
220,503
314,036
1,073,353
1,166,886
Issued, subscribed and paid-up capital
4
Total shareholders’ equity
Liabilities
Non-current liabilities
Staff retirement benefits
5
28,746
25,617
Deferred taxation
6
111,074
89,184
Long term finance
Total non-current liabilities
7
406,250
546,070
114,801
Trade and other payables
8
553,712
271,979
Short-term borrowings
9
735,310
1,088,371
7,350
2,382
Current liabilities
Accrued markup
Current portion of long term finance
7
Total current liabilities
Contingency and Commitments
Total equity and liabilities
93,750
-
1,390,122
1,362,732
3,009,545
2,644,419
10
The annexed note 1 to 36 form an integral part of these financial statements.
UMER HAJI KARIM
CHIEF EXECUTIVE
14
ANWAR HAJI KARIM
DIRECTOR
Pakistan Synthetics Limited
BALANCE SHEET
AS AT 30 JUNE 2012
2012
Assets
Non-current assets
2011
(Rupees in ‘000)
Note
Property, plant and equipment
11
1,186,323
1,154,708
Long term loans to employees
12
738
186
Long term deposits
Total non-current assets
13
924
1,187,985
924
1,155,818
Stores and spares
14
151,628
154,554
Stock-in-trade
15
836,101
526,186
Trade debts
16
578,112
337,851
Loans and advances
17
5,182
3,613
1,527
17
48,354
75,932
39,201
1,521
161,455
1,821,560
388,927
1,488,601
3,009,545
2,644,419
Current assets
Short term deposits and prepayments
Other receivables
18
Taxation - net
Cash and bank balances
Total current assets
Total assets
19
The annexed note 1 to 36 form an integral part of these financial statements.
UMER HAJI KARIM
CHIEF EXECUTIVE
ANWAR HAJI KARIM
DIRECTOR
15
Pakistan Synthetics Limited
PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 30 JUNE 2012
2012
Note
2011
(Rupees in ‘000)
Net sales
20
4,397,083)
4,154,303)
Cost of sales
Gross profit
21
(4,174,499)
222,584)
(3,567,817)
586,486)
Other operating income
22
19,864)
242,448)
21,097)
607,583)
Distribution and selling costs
Administration and general expenses
Other operating expenses
23
24
25
(25,884)
(30,443)
(53,797)
(110,124)
(17,048)
(70,237)
(70,302)
(157,587)
132,324)
449,996)
Profit from operations
Finance costs
Profit before taxation
26
(91,887)
40,437)
(9,417)
440,579)
Taxation
Profit for the year
27
(21,890)
18,547)
(154,275)
286,304)
(Rupees)
Earnings per share - basic and diluted
28
0.33)
The annexed notes 1 to 36 form an integral part of these financial statements.
UMER HAJI KARIM
CHIEF EXECUTIVE
16
ANWAR HAJI KARIM
DIRECTOR
5.11)
Pakistan Synthetics Limited
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2012
2012
2011
(Rupees in ‘000)
Profit for the year
Other comprehensive income
Total comprehensive income for the year
18,547)
286,304
-
-
18,547)
286,304
The annexed notes 1 to 36 form an integral part of these financial statements.
UMER HAJI KARIM
CHIEF EXECUTIVE
ANWAR HAJI KARIM
DIRECTOR
17
Pakistan Synthetics Limited
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2012
2012
CASH FLOWS FROM OPERATING ACTIVITIES
Note
Profit before taxation
Adjustments for:
Depreciation
Charge for staff gratuity
Profit on disposal of property, plant and equipment
Profit on saving and deposit accounts
Finance costs
Provision for doubtful debts and deposits
2011
(Rupees in ‘000)
40,437)
440,579)
150,300)
7,706)
(3,335)
(6,457)
91,887)
436)
280,974)
129,350)
5,733)
(200)
(20,554)
9,417)
39,355)
603,680)
(242,100)
(552)
38,322)
(395,524)
755)
(662)
208,249)
(4,577)
(86,919)
(37,680)
(90,854)
(6,209)
(7,035)
(97,550)
97,455)
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures paid
Proceeds from disposal of property, plant and equipment
Profit on saving accounts received
Net cash (used in) investing activities
(185,042)
6,462)
6,457)
(172,123)
(990,988)
200)
20,554)
(970,234)
CASH FLOWS FROM FINANCING ACTIVITIES
Long term diminishing musharka obtained
Short term foreign currency loan paid - net of loans obtained
Dividend paid
Net cash from financing activities
500,000)
(353,061)
(111,434)
35,505)
1,088,371)
(49)
1,088,322)
Net (decrease) / increase in cash and cash equivalents
(227,472)
215,543)
388,927)
161,455)
173,384)
388,927)
161,455)
388,927)
Movement in:
Working capital
Long term loans to employees
Long term deposits
Net cash from operations
33
Staff gratuity paid
Financial charges paid
Taxes paid
Net cash (used in) / from operating activities
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of the year
CASH AND CASH EQUIVALENTS COMPRISE
Cash and bank balances
19
The annexed notes 1 to 36 form an integral part of these financial statements.
UMER HAJI KARIM
CHIEF EXECUTIVE
18
ANWAR HAJI KARIM
DIRECTOR
Pakistan Synthetics Limited
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2012
Issued,
General Unappropriated Total
subscribed reserves
profit
reseves
and paid-up
capital
Balance as at 01 July 2010
Total comprehensive income for the
year - profit for the year
Balance as at 30 June 2011
Total comprehensive income for the
year - profit for the year
560,400
(Rupees in ‘000)
292,450
27,732) 320,182 )
Total
880,582 )
–
–
286,304)
286,304)
286,304)
560,400
292,450
314,036)
606,486) 1,166,886)
–
–
18,547)
18,547)
)
18,547)
–
–
(112,080)
(112,080)
(112,080)
560,400
292,450
220,503)
Transactions with owners recorded
directly in equity - distributions
Final dividend for the year ended
30 June 2011 (Rs. 2 per share)
Balance as at 30 June 2012
512,953) 1,073,353)
The annexed notes 1 to 36 form an integral part of these financial statements.
UMER HAJI KARIM
CHIEF EXECUTIVE
ANWAR HAJI KARIM
DIRECTOR
19
Pakistan Synthetics Limited
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
1.
STATUS AND NATURE OF BUSINESS
Pakistan Synthetics Limited (the Company) was incorporated on 18 November 1984 as a private limited
company in Pakistan and subsequently converted into a public limited company on 30 December 1987.
The shares of the Company are listed on Karachi, Lahore and Islamabad Stock Exchanges with effect
from 27 June 1995. The principal activity of the Company is manufacturing and sale of Polyester Staple
Fibre, Plastic Caps and Crown Caps. The registered office of the Company is situated at 3rd floor,
K.D.L.B, building, 58, West wharf, Karachi.
During the year ended 30 June 2011 the Company setup packaging division to manufacture crown and
plastic caps at plot No. A-5 North Western Industrial Zone of Port Qasim. Erection of machinery of
packaging division was successfully completed and the plant started its commercial production
during the year.
2.
BASIS OF PREPARATION
2.1
Statement of compliance
These financial statements have been prepared in accordance with approved accounting standards
as applicable in Pakistan. Approved accounting standards comprise of such International Financial
Reporting Standards (IFRS) issued by the International Accounting Standards Board as are notified
under the Companies Ordinance, 1984, provisions of and directives issued under the Companies
Ordinance, 1984. In case requirements differ, the provisions of, or directives issued under the Companies
Ordinance, 1984 shall prevail.
2.2
Basis of measurement
These financial statements have been prepared under the historical cost convention.
2.3
Functional and presentation currency
Items included in the financial statements are measured using the currency of the primary economic
environment in which the Company operates. The financial statements are presented in Pakistani
Rupees, which is also the Company's functional currency. All figures have been rounded off to the
nearest thousand of rupees, unless otherwise stated.
2.4
Use of estimates and judgments
The preparation of financial statements in conformity with approved accounting standards, as applicable
in Pakistan, requires management to make judgments, estimates and assumptions that affect the
application of policies and the reported amounts of assets, liabilities, income and expenses.
The estimates and associated assumptions are based on historical experience and various other factors
that are believed to be reasonable under the circumstances, the results of which form the basis of
making the judgments about the carrying values of assets and liabilities that are not readily apparent
from other sources. Actual results may differ from these estimates. The estimates and underlying
assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized
in the period in which the estimate is revised if the revision affects only that period, or in the period of
the revision and future periods if the revision affects both current and future periods.
Significant accounting estimates and areas where judgments were made by the management in the
application of accounting policies are discussed in the following notes:
i)
ii)
iii)
iv)
v)
20
Employee benefits (note 3.1)
Income taxes (note 3.3)
Estimated useful lives of property, plant and equipment (refer note 3.4)
Stock in trade and store and spares (note 3.5 & 3.6)
Impairment (note 3.10)
Pakistan Synthetics Limited
2.5
New approved accounting standards applied
During the year, certain amendments to standards became effective. However, they did not have
material affect on these financial statements.
2.6
New accounting standards and IFRIC interpretations that are not yet effective
The following standards, amendments and interpretations of approved accounting standards will be
effective for accounting periods beginning on or after 01 January 2012:
-
Amendments to IAS 12 – deferred tax on investment property (effective for annual periods beginning
on or after 1 January 2012). The 2010 amendment provides an exception to the measurement
principle in respect of investment property measured using the fair value model in accordance with
IAS 40 Investment Property. The measurement of deferred tax assets and liabilities, in this limited
circumstance, is based on a rebuttable presumption that the carrying amount of the investment
property will be recovered entirely through sale. The presumption can be rebutted only if the investment
property is depreciable and held within a business model whose objective is to consume substantially
all of the asset’s economic benefits over the life of the asset. The amendment has no impact on
financial statements of the Company.
-
IAS 19 Employee Benefits (amended 2011) - (effective for annual periods beginning on or after
1 January 2013). The amended IAS 19 includes the amendments that require actuarial gains and
losses to be recognised immediately in other comprehensive income; this change will remove the
corridor method and eliminate the ability for entities to recognise all changes in the defined benefit
obligation and in plan assets in profit or loss, which currently is allowed under IAS 19; and that the
expected return on plan assets recognised in profit or loss is calculated based on the rate used to
discount the defined benefit obligation. The Company’s policy is to account for actuarial gains and
losses using the corridor method and with the change unrecognized actuarial losses would need
to be recognized in other comprehensive income with revised actuarial estimate.
-
Presentation of Items of Other Comprehensive Income (Amendments to IAS 1) - (effective for annual
periods beginning on or after 1 July 2012). The amendments require that an entity present separately
the items of other comprehensive income that would be reclassified to profit or loss in the future if
certain conditions are met from those that would never be reclassified to profit or loss. The amendments
do not address which items are presented in other comprehensive income or which items need to
be reclassified. The requirements of other IFRSs continue to apply in this regard. The amendments
have no impact on financial statements of the Company.
-
IAS 27 Separate Financial Statements (2011) - (effective for annual periods beginning on or after
1 January 2013). IAS 27 (2011) supersedes IAS 27 (2008). Three new standards IFRS 10 Consolidated
Financial Statements, IFRS 11- Joint Arrangements and IFRS 12- Disclosure of Interest in Other
Entities dealing with IAS 27 would be applicable effective 1 January 2013. IAS 27 (2011) carries
forward the existing accounting and disclosure requirements for separate financial statements, with
some minor clarifications. The amendments have no significant impact on financial statements of
the Company.
-
IAS 28 Investments in Associates and Joint Ventures (2011) - (effective for annual periods beginning
on or after 1 January 2013). IAS 28 (2011) supersedes IAS 28 (2008). IAS 28 (2011) makes the
amendments to apply IFRS 5 to an investment, or a portion of an investment, in an associate or a
joint venture that meets the criteria to be classified as held for sale; and on cessation of significant
influence or joint control, even if an investment in an associate becomes an investment in a joint
venture. The amendments have no impact on financial statements of the Company.
21
Pakistan Synthetics Limited
-
Offsetting Financial Assets and Financial Liabilities (Amendments to IAS 32) – (effective for annual
periods beginning on or after 1 January 2014). The amendments address inconsistencies in current
practice when applying the offsetting criteria in IAS 32 Financial Instruments Presentation. The
amendments clarify the meaning of ‘currently has a legally enforceable right of set-off’; and that
some gross settlement systems may be considered equivalent to net settlement.
-
Offsetting Financial Assets and Financial Liabilities (Amendments to IFRS 7) – (effective for annual
periods beginning on or after 1 January 2013). The amendments to IFRS 7 contain new disclosure
requirements for financial assets and liabilities that are offset in the statement of financial position
or subject to master netting agreement or similar arrangement.
Annual Improvements 2009–2011 (effective for annual periods beginning on or after 1 January 2013). The
new cycle of improvements contains amendments to the following five standards, with consequential amendments
to other standards and interpretations.
-
IAS 1 Presentation of Financial Statements is amended to clarify that only one comparative period i.e.
30 June 2011 which is the preceding period of 30 June 2012 is required for a complete set of financial
statements. If an entity presents additional comparative information, then that additional information
need not be in the form of a complete set of financial statements. However, such information should
be accompanied by related notes and should be in accordance with IFRS. Furthermore, it clarifies that
the ‘third statement of financial position’, when required, is only required if the effect of restatement is
material to statement of financial position.
-
IAS 16 Property, Plant and Equipment is amended to clarify the accounting of spare parts, stand-by
equipment and servicing equipment. The definition of ‘property, plant and equipment’ in IAS 16 is now
considered in determining whether these items should be accounted for under that standard. If these
items do not meet the definition, then they are accounted for using IAS 2 Inventories.
-
IAS 32 Financial Instruments: Presentation - is amended to clarify that IAS 12 Income Taxes applies
to the accounting for income taxes relating to distributions to holders of an equity instrument and
transaction costs of an equity transaction. The amendment removes a perceived inconsistency between
IAS 32 and IAS 12.
-
IAS 34 Interim Financial Reporting is amended to align the disclosure requirements for segment
assets and segment liabilities in interim financial reports with those in IFRS 8 Operating Segments. IAS
34 now requires the disclosure of a measure of total assets and liabilities for a particular reportable
segment. In addition, such disclosure is only required when the amount is regularly provided to the chief
operating decision maker and there has been a material change from the amount disclosed in the
last annual financial statements for that reportable segment.
-
IFRIC 20 - Stripping cost in the production phase of a surface mining (effective for annual periods
beginning on or after 1 January 2013). The interpretation requires production stripping cost in a surface
mine to be capitalized if certain criteria are met.
22
Pakistan Synthetics Limited
3.
SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies adopted in the preparation of these financial statements are set out
below. These policies have been consistently applied to all the years presented.
3.1
Employee benefits
Defined benefit scheme
The Company operates an unfunded gratuity scheme for its permanent employees. Company’s obligation
under the scheme is determined through actuarial valuations carried out under the "Projected Unit Credit
Method". Actuarial valuations are carried out annually and the latest valuation was conducted at the
balance sheet date.
Net cumulative unrecognized actuarial gains / losses relating to previous reporting periods in excess
of 10% of present value of defined benefit obligation is recognized as income or expense over the
estimated remaining working lives of the employees.
Compensated absences
The Company accounts for its liability towards accumulated compensated absences for the
permanent staff members as per the service rules of the Company.
3.2
Financial Instruments
3.2.1 Non-derivative Financial assets
All non-derivative financial assets are initially recognised on trade date i.e. date on which the
company becomes party to the respective contractual provisions. Non-derivative financial assets
comprise loans and receivables that are financial assets with fixed or determinable payments that
are not quoted in active markets and includes trade debts, loans and advances, other receivables,
deposits and cash and cash equivalents. The Company derecognizes the financial assets when it
ceases to be a party to such contractual provisions of the instruments.
3.2.1.1 Trade debts, loans and advances, deposits and other receivables
These are recognised initially at fair value and subsequently measured at amortised cost or cost, as
the case may be, less provision for impairment, if any. A provision for impairment is established
when there is an objective evidence that the Company will not be able to collect all amounts due
according to the original terms of receivables. Items considered irrecoverable are written off.
3.2.1.2 Cash and cash equivalents
Cash and cash equivalents for cash flow purposes include cash in hand and balances held with
banks. Short term borrowings availed by the Company, which are payable on demand and form an
integral part of the Company’s cash management, are included as part of cash and cash equivalents
for the purpose of statement of cash flows.
23
Pakistan Synthetics Limited
3.2.2 Financial Liabilities
Financial liabilities are initially recognised on trade date i.e. date on which the company becomes
party to the respective contractual provisions. Financial liabilities represent markup bearing
borrowings and trade and other payables. Financial liabilities are initially recognised on trade date i.e.
the date on which the company becomes party to the respective contractual provisions of the
instruments. The Company derecognizes the financial liabilities when it ceases to be a party to such
contractual provisions of the instruments.
3.2.2.1 Markup bearing borrowings and borrowing costs
Mark-up bearing borrowings are recognized initially at fair value which is usually the cost, less
attributable transaction costs. Subsequent to initial recognition, mark-up bearing borrowings are stated
at amortised cost, while the difference between the cost (reduced for periodic payments) and
redemption value is recognised in the profit and loss account over the period of the borrowings.
Borrowing costs are recognized as an expense in the period in which these are incurred except to the
extent of borrowing costs that are directly attributable to the acquisition, construction or production of
a qualifying asset. Such borrowing costs, if any, are capitalized as part of the cost of the relevant asset.
3.2.2.2 Trade and other payables
Trade and other payables are recognized initially at fair value plus directly attributable cost, if any,
and subsequently measured at amortized cost.
3.2.3 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 there is legally enforceable right to set-off the recognized amounts and the
Company intends either to settle on a net basis or to realize the assets and to settle the liabilities
simultaneously.
3.3
Taxation
Income tax expense comprises current and deferred tax. Income tax expense is recognised in the profit
and loss account, except to the extent that it relates to items recognised directly in equity or in other
comprehensive income, in which case it is recognised in equity or in other comprehensive income
respectively. In making the estimates for income taxes currently payable by the Company, the management
looks at the current income tax law and the decisions of appellate authorities on certain issues in the
past.
Current
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using
tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in
respect of previous years.
Provisions for current taxation is based on taxability of income streams of the Company chargeable
at current rate of taxation under the normal tax regime after taking into account tax credits and tax
rebates available, if any.
Deferred
Deferred tax is recognized using balance sheet liability method, providing for temporary difference
between the carrying amounts of assets and liabilities for financial reporting purposes and the
amounts used for taxation purposes. The amount of deferred tax provided is based on the expected
manner of realization or settlement of the carrying amount of assets and liabilities, using the tax rates
enacted or substantively enacted at the balance sheet date.
24
Pakistan Synthetics Limited
The Company recognizes a deferred tax asset to the extent that it is probable that taxable profits for
the foreseeable future will be available against which the assets can be utilised. Deferred tax assets
are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
3.4
Property, plant and equipment
Operating assets and depreciation
Initial Recognition
The cost of an item of property, plant and equipment is recognised as an asset if it is probable that
future economic benefits associated with the item will flow to the entity and the cost of such item can
be measured reliably.
Recognition of the cost in the carrying amount of an item of plant and equipment ceases when the
items are in the location and condition necessary for it to be capable of operating in the manner
intended by the management.
Measurement
Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses,
if any. The cost of Property, plant and equipment includes:
(a) its purchase price including import duties, non refundable purchase taxes after deducting trade
discounts and rebates; and
(b) any other costs directly attributable to bringing the asset to the location and condition necessary
for it to be capable of operating in the manner intended by management.
(c) Borrowing costs, if any.
When parts of an item of property, plant and equipment have different useful lives, they are accounted
for as separate items (major components) of property, plant and equipment.
Subsequent expenditure (including normal repairs and maintenance)
Expenditures incurred to replace a significant component of an item of plant and equipment is
capitalised and the asset so replaced is retired. Other subsequent expenditure is capitalised only when
it is probable that future economic benefits associated with the item will flow to the entity and the
cost of the items can be measured reliably. All other expenditures (including repairs and normal
maintenance) is recognised in the profit and loss account as an expense when it is incurred.
Depreciation
Depreciation on all items except for freehold land is charged on straight line method. The rates of
depreciation are indicated in note 11.1.
Depreciation on additions to buildings and plant and machinery, furniture, fixture and office
equipment and vehicles is charged from the quarter the asset is available for use upto the quarter
prior to disposal.
Depreciation methods, useful lives and residual values of each part of property, plant and equipment
that is significant in relation to the total cost of the asset are reviewed, and adjusted if appropriate, at
each balance sheet date.
Gains and losses on disposal
Gains and losses on disposal of assets are taken to the profit and loss account, and the related surplus
on revaluation of property, plant and equipment, if any, is transferred directly to retained earnings /
accumulated losses.
25
PakistanSyntheticsLimited
Capital work in progress
Capital work in progress is stated at cost less impairment loss, if any and consists of expenditures
incurred (including any borrowing cost, if applicable) and advances made in the course of their construction
and installation. Transfers are made to relevant asset category as and when assets are available for
intended use.
3.5
Stores and spares
Stores and spares are stated at moving average cost except for items in transit which are stated at
cost, less impairment, if any.
3.6
Stock-in-trade
These are valued at lower of cost and net realisable value less impairment loss, if any. Cost is determined
under the weighted average basis. Cost comprises all costs of purchases, cost of conversion and other
costs incurred in bringing the inventories to their present location and condition, except for cost of work
in process which comprises of raw material cost only as conversion costs are not significant. Net
realisable value signifies the estimated selling price in the ordinary course of the business less net
estimated cost of completion and selling expenses.
3.7
Revenue recognition
Revenue from the sale of goods is measured at the fair value of the consideration received or receivable,
net of returns. Revenue is recognised when the significant risks and rewards of ownership have been
transferred to the buyer, recovery of the consideration is probable, the associated costs and possible
return of goods can be estimated reliably and there is no continuing management involvement with
the goods.
Interest income is accrued on a time apportion basis on the principal outstanding at the rates applicable.
3.8
Foreign currency translation
Transactions in foreign currencies are translated into Pakistani rupees at the rates of exchange
approximating those prevailing on the date of transactions. Monetary assets and liabilities in foreign
currencies are translated into Pakistani rupees at the rates of exchange ruling on the balance sheet
date.
Exchange differences are included in the profit and loss account currently.
3.9
Provisions
A provision is recognized in the balance sheet when the Company has a legal or constructive
obligation as a result of a past event, and it is probable that an outflow of economic benefits will be
required to settle the obligation and a reliable estimate can be made of the amount of obligation.
Provisions are measured at the present value of expected expenditure, discounted at a pre tax rate
that reflects current market assessment of the time value of money and the risk specific to the
obligation. However, provisions are reviewed at each balance sheet date and adjusted to reflect
current best estimate.
3.10
Impairment
Financial assets
A financial asset is assessed at each reporting date to determine whether there is any objective
evidence that it is impaired. A financial asset is considered to be impaired if objective evidence
indicates that one or more events have had a negative effect on the estimated future cash flows of
that asset.
Individually significant financial assets are tested for impairment on an individual basis. The remaining
financial assets are assessed collectively in groups that share similar credit risk characteristics.
All impairment losses are recognised in profit and loss account. An impairment loss is reversed if the
reversal can be related objectively to an event occurring after the impairment loss was recognised.
26
Pakistan Synthetics Limited
Non-Financial assets
The carrying amounts of the Company's non financial assets, other than deferred tax assets and
inventories are reviewed at each balance sheet date to determine whether there is any indication of
impairment. If such indication exists, the asset's recoverable amount, being higher of value of use
and fair value less costs to sell, is estimated. In assessing value in use, the estimated future cash
flows are discounted to their present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset. For the purpose of
impairment testing, assets that cannot be tested individually are grouped together into the smallest
group of assets that generates cash inflows from continuing use that are largely independent of the
cash inflows of other assets or groups of assets. An impairment loss is recognised whenever the
carrying amount of an asset exceeds its recoverable amount. Impairment losses are recognised in
the profit and loss account.
3.11
Segment reporting
An operating segment is a component of the Company that engages in business activities from which
it may earn revenues and incur expenses, including revenues and expenses that relate to transactions
with any of the Company’s other components. All operating segments’ operating results are reviewed
regularly by the Company’s Chief Executive Officer and Board of Directors to make decisions about
resources to be allocated to the segment and to assess its performance, and for which discrete financial
information is available. In review and evaluation performance process, the business of the Company
has two reportable operating segments i.e., Polyster Staple Fibre segment and Crown and Plastic Caps
segment. Therefore, these are considered for segment reporting.
Segment results that are reported for review and performance evaluation include items directly attributable
to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise
mainly corporate assets and liabilities, certain other operating income and expenses, certain finance
costs, tax assets and liabilities and income tax expense.
Segment capital expenditure is the total cost incurred during the year to acquire tangible fixed assets
and intangible assets other than goodwill.
3.12
Dividend and appropriation to / from reserves
Dividend distribution to the Company's shareholders and appropriation to / from reserves is recognized
in the period in which these are approved.
4.
ISSUED, SUBSCRIBED AND PAID UP CAPITAL
2012
2011
(Number of shares)
37,360,000
37,360,000
18,680,000
56,040,000
Ordinary shares of Rs. 10 each
fully paid in cash
Ordinary shares of Rs. 10 each issued
as fully paid bouns shares
18,680,000
56,040,000
2012
2011
(Rupees in ‘000)
373,600)
373,600)
186,800)
560,400)
186,800)
560,400)
27
Pakistan Synthetics Limited
5.
STAFF RETIREMENT BENEFITS
5.1
Defined Benefit Gratuity Scheme
2012
The amount recognised in the balance sheet is as follows:
2011
(Rupees in ‘000)
Present value of defined benefit obligation
Unrecognised actuarial (loss) / gain
Liability as at 30 June
30,566)
(1,820)
28,746)
24,371)
1,246)
25,617)
24,371)
4,614)
3,092)
3,066)
(4,577)
30,566)
26,256)
2,723)
3,010)
(1,409)
(6,209)
24,371)
4,614)
3,092)
7,706)
2,723)
3,010)
5,733)
25,617)
7,706)
(4,577)
28,746)
26,093)
5,733)
(6,209)
25,617)
12.50%)
12.50%)
14%
13%
Movement in persent value of defined benefit obligation
Obligation as at 1 July
Current service costs
Intereset costs
Actuarial loss / (gain)
Benefits paid
Obligation as at 30 June
The amount recognised in the profit and loss account is as follows:
Current service costs
Interest costs
Movement in liability
Balance as on 1 July
Expense recognised
Payments during the year
Liability as at 30 June
Actuarial assumptions
Discount rate
Expected rate of salary increase
28
Historical Information
2012
2011
Present value of the defined
benefit obligation
30,566
24,371
2010
(Rupees in ‘000)
2009
2008
26,256
32,679
25,854
Pakistan Synthetics Limited
6.
DEFERRED TAXATION
Deferred tax liability comprises of (deductible) / taxable temporary differences in respect of the following:
2012
Opening Charge /
(Reversal)
Taxable temporary difference
Accelerated tax depreciation
2011
Closing Opening Charge /
(Reversal)
(Rupees in ‘000)
Closing
147,251
47,201
194,452
22,269
124,982
147,251
(8,966)
(1,095)
(10,061)
(9,133)
167
(8,966)
(48,070)
(1,031)
89,184
(764)
258
(23,710)
21,890
(48,834)
(773)
(23,710)
111,074
(34,415)
(21,279)
(13,655)
(1,031)
110,463
(48,070)
(1,031)
89,184
Deductible temporary differences
Provision for staff gratuity
Provision for doubtful debts, slow
moving and obsolete stores and
spares and doubtful deposits
Pre-commencement expenditure
Tax loss
7.
LONG TERM FINANCES - from an associated banking company - secured
2012
2011
(Rupees in ‘000)
Long term finances utilised under diminishing musharka
Current portion of long term finances shown under current liabilities
500,000)
(93,750)
406,250)
–
–
–
The Company has entered into a Diminishing Musharka arrangement with a commercial bank (an
associated company). It carries profit at the rate of 6 months average KIBOR + 1% per annum with a
floor of 10% per annum and cap of 20% per annum and is payable on quarterly basis. The tenor of
facility is five years with grace period of 12 months from the date of draw down. The principal is payable
in 16 equal quarterly installments with first installment due in December 2012. This facility is secured
against registered hypothecation charges over specific plant and machinery of plastic and crown caps
project.
8.
TRADE AND OTHER PAYABLES
Trade creditors including bills payable
Accrued expenses
Advances from customers
Retention money
Workers' welfare fund
Workers' profit participation fund
Unclaimed dividend
Bonus payable
Insurance premium payable
Due to employees
Sales tax payable
Short term compensated absences
Provision for Government levies
Others
8.1
8.2
517,910
2,132
584
1,757
835
2,333
3,229
8,618
1,976
2,993
1,778
1,838
7,690
39
553,712
215,212
1,309
590
1,239
9,475
23,687
2,583
7,101
2,474
741
4,862
2,459
247
271,979
29
Pakistan Synthetics Limited
8.1
Workers' profit participation fund
2012
Balance as at 01 July
Interest on funds utilised in the Company's business at 15%
(2011: 14.76%) per annum
Allocation for the year
25
Payments made during the year
Balance as at 30 June
24
2011
(Rupees in ‘000)
23,687)
3,987)
2,563)
26,250)
2,333)
28,583)
(26,250)
2,333)
270)
4,257)
23,687)
27,944)
(4,257)
23,687)
8.2
This represents salary and gratuity payable to employees amounting to Rs. 2.668 million and Rs. 0.325
million respectively.
9.
SHORT TERM BORROWINGS - secured
Short term import finance under markup arrangement
Short term import finance under diminishing musharka arrangement
9.1
9.2
735,310
735,310
513,716
574,655
1,088,371
9.1
The Company has obtained short-term import finance from an associated banking company in foreign
currencies equivalent amounting to Rs. 798.737 million as at 30 June 2012 (30 June 2011: Rs. 600
million). The facility can be availed in Pakistani rupees or in foreign currencies (USD and EURO). The
markup is based on 6 months LIBOR plus spread to be mutually decided at the time of disbursement
of loan in case of foreign currencies whereas rate on local currency is 0.50% plus 1 month average
KIBOR. As at 30 June 2012, the Company has availed facility in foreign currencies and its markup
ranges from 2.25% to 3.25% per annum. The arrangement is secured against registered hypothecation
of the Company’s stocks and trade debts. The facility expires on 31 December 2012 and is renewable.
9.2
The Company obtained short term import finance under diminishing musharka arrangement in foreign
currency from an associated banking company amounting to Rs. Nil as at 30 June 2012 (30 June 2011:
Rs. 600 million). The rate of mark-up was reset on monthly basis and was based on 6 months LIBOR
plus 1% per annum with a floor of 3.5% per annum and cap of 10% per annum. The arrangement was
secured against hypothecation of the Company’s stock-in-trade and trade debts and equitable charge
over fixed assets of the Company.
9.3
The Company has obtained murabaha finance facility of Rs. 150 million (2011: Rs. 150 million) from
a banking company. This facility can be availed in either Pakistani rupees or in USD and carries profit
at the preferential rate as approved by Bank from time to time and is based on KIBOR (Pakistani
Rupees) or LIBOR (USD). The facility is secured against the parri passu hypothecation of the Company’s
moveables and receivables. The facilities expire on 31 March 2013 and are renewable. As at 30 June
2012, this facility remained unavailed.
30
Pakistan Synthetics Limited
10.
CONTINGENCY AND COMMITMENTS
10.1
Contingency
The facility for opening letter of guarantee from an associated banking company amounted to Rs. 75
million. A bank guarantee amounting to Rs. 56.547 (2011: Rs. 56.547 million) have been issued in
favour of Sui Southern Gas Company Limited for paymen of gas bills and others.
10.2
Commitments
Letters of credits
The Company has facilities of Rs. 1,551.263 million (2011: Rs. 1,400 million) for opening letters of credit
including Rs. 951.263 million from an associated banking company (30 June 2011: Rs. 800 million).
At 30 June 2012, the open letters of credits amounted to Rs. 844.251 million (30 June 2011: Rs. 283.174
million) including Rs. 615.882 million from an associated banking company (30 June 2011: Rs. 283.174
million).
10.3 The facilities disclosed in notes 10.1 and 10.2 are secured by way of securities as disclosed in note
9.1, 9.2, export bills sent to collection, documents of title to goods consigned to the Company, Banker's
acceptance and Accepted Draft.
11.
PROPERTY, PLANT AND EQUIPMENT
- Operating assets
- Capital work in progress
11.1
1,186,323
1,186,323
972,801
181,907
1,154,708
31
Pakistan Synthetics Limited
11.1
Operating assets
2012
Leasehold Building on Plant and
Vehicles
Office
Furniture and Computer
land
leasehold machinery
Improvements equipment accessories
land
Cost
(Rupees in ‘000)
Balance as at 1 July 2011
26,943) 132,963) 2,651,074 44,050)
1,976
4,348
3,036
Additions
1,715)
53,033)
280,330 23,625)
7,883
363
Disposals
(540)
(2,990)
Balance as at 30 June 2012 28,118) 185,996) 2,931,404 64,685)
1,976
12,231
3,399
Total
2,864,390)
366,949)
(3,530)
3,227,809)
Depreciation
Balance as at 1 July 2011
Deperciation for the year
Deperciation on disposal
Balance as at 30 June 2012
2,327)
284)
(98)
2,513)
69,328)
4,295)
73,623)
1,788,249
137,573
1,925,822
23,753)
6,305)
(305)
29,753)
1,976
1,976
3,092
1,667
4,759
2,864
176
3,040
1,891,589)
150,300)
(403)
2,041,486)
Net book value as at 30 June 2012 25,605)
112,373)
1,005,582
34,932)
-
7,472
359
1,186,323)
20)
5 - 20
8)
5-15
3
Useful lives - years
50 - 99)
3
2011
Leasehold Building on Plant and
Vehicles
Office
Furniture and Computer
land
leasehold machinery
Improvements equipment accessories
land
(Rupees in ‘000)
Cost
Balance as at 1 July 2010 12,943
Additions
14,000
Disposals
Balance as at 30 June 2011 26,943
Total
72,269
60,694
132,963
1,895,941
730,206
2,626,147
40,839)
3,562)
(351)
44,050)
1,976
1,976
3,857
491
4,348
2,908
128
3,036
2,030,733)
809,081)
(351)
2,839,463)
2,117
210
2,327
66,193
3,135
69,328
1,642,321
121,001
1,763,322
20,036)
4,068)
(351)
23,753)
1,976
1,976
2,310
782
3,092
2,710
154
2,864
1,737,663)
129,350)
(351)
1,866,662)
Net book value as at 30 June 2011 24,616
63,635
862,825
20,297)
-
1,256
172
972,801)
20
5 - 20
8)
5-15
3
Depreciation
Balance as at 1 July 2010
Deperciation for the year
Deperciation on disposal
Balance as at 30 June 2011
Useful lives - years
32
50 - 99
3
Pakistan Synthetics Limited
11.2
The depreciation charge for the year has been allocated as follows:
2012
2011
(Rupees in ‘000)
Cost of sales
Distribution and selling costs
Administration and general expenses
11.3
21
23
24
144,288
1,503
4,509
150,300
124,170
1,295
3,885
129,350
The following fixed assets were disposed off / retired during the year:
Particulars
Cost Accumulated
depreciation
Vehicles
Book
Value
Sale
proceeds
Gain on
disposal
Mode of
disposal
Particulars
of buyers
(Rupees in ‘000)
Toyota Corolla
1,395
305
1,090
1,384
294) Insurance
claim
Adamjee Insurance
Karachi
Toyota Corolla
1,595
—
1,595
1,578
(17) Insurance
claim
Adamjee Insurance
Karachi
540
98
442
3,500
3,058) Negotiation
2012
3,530
403
3,127
6,462
3,335)
2011
351
351
—
200
200)
Leasehold land
Land at Port Qasim
Mr. Wazir Ali
11.4 During the year ended 30 June 2012, the Company reviewed and considered revision in estimated
useful life of its certain items of plant and machinery in view of the advice of its technical team. The
effect of revision has been accounted for prospectively. Had there been no change in estimate, the
carrying amount of the operating assets as at 30 June 2012 would have been lower by Rs. 21.076
million, unappropriated profit and profit for the year would have been lower by Rs. 13.699 million
respectively as at and for the year ended 30 June 2012.
12.
LONG-TERM LOANS TO EMPLOYEES-considered good
2012
2011
(Rupees in ‘000)
Due from employees
Less: Recoverable within one year
2,225)
687)
(1,487)
(501)
738)
186)
Loans are granted to executives and employees of the Company in accordance with the Company’s
policy for purchase of cars, motor cycles and household appliances and are interest free. The loans
are recoverable in installments over a period of 24 to 36 months.
13.
LONG TERM DEPOSITS
Utility deposits
Security deposits
Less: Provision for doubtful deposits
1,588)
250)
1,838)
(914)
924)
1,588)
250)
1,838)
(914)
924)
33
Pakistan Synthetics Limited
14.
2012
STORES AND SPARES
2011
(Rupees in ‘000)
Stores and spares
- in hand
- in transit
Provision for slow moving and obsolete items
15.
183,891)
4,240)
(36,503)
151,628)
187,348)
3,709)
(36,503)
154,554)
489,473)
74,056)
563,529)
416,080)
1,880)
417,960)
46,463)
11,012)
227,985)
(1,876)
226,109)
97,214)
97,214)
836,101)
526,186)
STOCK-IN-TRADE
Raw and packing material
- in hand
- in transit
Work - in process
Finished goods
Written down of inventory to net realisable value
15.1
15.1 Finished goods costing Rs. 68.601 million (2011: Rs. Nil) has been carried at net realisable
value of Rs. 66.742 million (2011: Rs. Nil)
16.
TRADE DEBTS
Considered good
-secured
-unsecured
16.1
16.2
Considered doubtful
Provision for doubtful debts
80,615)
497,497)
578,112)
99,846)
677,958)
(99,846)
578,112)
90,928)
246,923)
337,851)
99,410)
437,261)
(99,410)
337,851)
16.1
These trade debts are secured through inland letter of credits.
16.2
The amount due from associated undertaking as at 30 June 2012 was Rs. 108.105 million (2011:
Rs.105.722 million). The maximum aggregate amount due from associated undertaking at the end of
any month during the year was Rs. 195.246 million (2011: Rs. 105.722 million).
17.
LOANS AND ADVANCES - considered good
Loans
Current maturity of long term loans due from employees
1,487)
501)
8)
925)
2,762)
3,695)
5,182)
12)
—
3,100)
3,112)
3,613)
Advances to:
- employees against salary
- letters of credit fees and expenses
- suppliers
34
Pakistan Synthetics Limited
18.
2012
OTHER RECEIVABLES
2011
(Rupees in ‘000)
46,682)
1,578)
94)
48,354)
75,859)
-)
73
75,932)
19.1
26,439)
134,844)
3,397)
385,469 )
19.2
386)
(386)
515)
(515)
Sales tax recoverable
Insurance claim receivable
Other receivable
19.
CASH AND BANK BALANCES
With banks
- On current accounts
- On saving accounts
- On deposit account
- Provision for doubtful deposit
Cash in hand
172 )
161,455)
61)
388,927)
19.1
Rates of returns on saving accounts range from 8% to 10.5% (2011: 10% to 12%).
19.2
This represents provision made against Certificates of Investment of Bankers Equity Limited.
20.
NET SALES
Polyester staple fibre
Waste fiber
Crowns and plastic caps
Waste packing material
4,052,481)
21,976)
412,522)
3,586)
4,490,565)
4,218,149)
51)
15,855)
4,234,055)
Brokerage, discounts and freight reimbursements
Sales tax and special excise duty
(36,572)
(56,910)
(93,482)
4,397,083)
(77,165)
(2,587)
(79,752)
4,154,303)
Net sales
35
Pakistan Synthetics Limited
21.
COST OF SALES
2012
2011
(Rupees in ‘000)
Raw and packing materials consumed
Opening stock
- in hand
- in transit
- Written down of inventory to net realisable value
Purchases
Closing stock
- in hand
- in transit
Salaries, wages and other benefits
Fuel and power
Depreciation
Repairs and maintenance
Service charges KESC
Rent, rates and taxes
Stores and spares consumed
Printing and stationary
Travelling and conveyance
Security expenses
Communication
Insurance
General expenses
Opening stock of work-in-process
Closing stock of work-in-process
Cost of goods manufactured
416,080)
1,880)
417,960)
3,847,615)
4,265,575)
266,798)
2,364)
(27,054)
242,108)
3,187,805)
3,429,913)
(489,473)
(74,056)
(563,529)
3,702,046)
117,928)
229,467)
144,288)
16,551)
6,079)
67,509)
1,464)
22,544)
3,262)
868)
12,842)
4,176)
4,329,024)
(416,080)
(1,880)
(417,960)
3,011,953)
97,562)
178,298)
124,170)
8,109)
5,400)
1,294)
60,683)
686)
17,872)
1,848)
192)
5,006)
1,548)
3,514,621)
11,012)
(46,463)
4,293,573)
5,136)
(11,012)
3,508,745)
Opening stock of finished goods
Written down of inventory to net realisable value
21.1
22.
97,214)
59,630)
(763)
97,214 )
58,867)
Import of finished goods
9,821)
97,419)
Closing stock of finished goods
(227,985)
(97,214)
Written down of inventory to net realisable value
1,876)
(226,109)
4,174,499)
3,567,817)
Salaries, wages and other benefits include Rs.6.55 million (2011: Rs. 4.85 million) in respect of
staff gratuity expense.
OTHER OPERATING INCOME
Income from financial assets
Profit on saving accounts
Markup charged to an associated company
Reversal of provision for doubtful deposits
Income from non financial assets
Profit on disposal of property, plant and equipment
Liabilities written back
Others
36
22.1
6,457
9,343
129
15,929
20,554)
20,554
3,335
108
492
3,935
19,864
200)
343)
543)
21,097)
Pakistan Synthetics Limited
22.1
23.
This represents markup charged by the Company on mutually agreed basis and at the rate of KIBOR
+ 2% per annum from an associated company on account of delayed payments of its balances over
its credit period.
2012
2011
DISTRIBUTION AND SELLING COSTS
(Rupees in ‘000)
Salaries and other benefits
Depreciation
Outward freight and handling charges
Travelling and conveyance
Fuel and power
Repair and maintenance
Communication
Other expenses
4,013
1,503
18,680
475
469
53
161
530
25,884
3,415
1,295
10,084
791
419
418
135
491
17,048
23.1
Salaries and other benefits include Rs. 0.29 million (2011: Rs. 0.22 million) in respect of staff
gratuity expense.
24.
ADMINISTRATION AND GENERAL EXPENSES
Salaries and other benefits
Rent, rates and taxes
Depreciation
Fuel and power
Travelling and conveyance
Communication
Printing, stationary and subscription fees
Provision for doubtful debts - net
Repair and maintenance
Pre-commencement expenditure
Legal and professional charges
Special excise duty written off
Other expenses
24.1
24.2
12,040
3,942
4,509
1,407
1,426
482
1,242
436
160
2,433
774
1,592
30,443
10,245
3,598
3,885
1,259
2,372
404
888
39,355
1,254
3,682
1,822
1,473
70,237
24.1
Salaries and other benefits include Rs. 0.87 million (2011: Rs. 0.67 million) in respect of staff
gratuity expense.
24.2
This has been adjusted with reversal of Rs. 2.564 million made during the year.
25.
OTHER OPERATING EXPENSES
Auditors’ remuneration
Donations
Workers’ profit participation fund
Workers’ welfare fund
Exchange loss - net
Provision for government levies
25.1
25.1
25.2
782
6,550
2,333
835
35,607
7,690
53,797
782
22,215
23,687
9,475
14,143
70,302
500
140
100
42
782
500
140
100
42
782
Auditors’ remuneration
Audit fee
Half yearly review
Special certifications
Out of pocket expenses
37
Pakistan Synthetics Limited
25.2
None of the directors or their spouses had any interest in the donees of the current year. However, one
of the directors of the Company holds various positions in different institutions (donees) to which an
amount of Rs. 11.5 million was donated last year.
26.
FINANCE COSTS
2012
2011
(Rupees in ‘000)
Mark-up on:
- long term finance
- short term murabaha
- short term running finance
- short term import finances
Bank guarantee commission
Discounting and documentation charges
Interest on workers’ profit participation fund
Bank charges
27.
49,150)
6,426)
3,014)
28,890)
452)
1,048)
2,563)
344)
91,887)
–
–
2,227)
3,944)
355)
2,106)
270)
515)
9,417)
TAXATION
21,890
21,890
Current year
Deferred
43,812
110,463
154,275
27.1
Minimum tax liability of Rs. 44.334 million has not been recognized in view of expectation of availability
of sufficient future taxable profits resulting in tax liability under normal tax regime in next five years
against which such liability would be adjusted.
27.2
Relationship between income tax expense and accounting profit
28.
Accounting profit before tax
40,437
440,579)
Tax at the applicable rate of 35% (2011: 35%)
Expenses and gains not allowed / taxable for tax purposes
Adjustments in tax written down value
14,153
7,679
58
21,890
154,203
72
154,275
EARNINGS PER SHARE - BASIC AND DILUTED
Profit for the year after taxation
Weighted average number of ordinary shares
Earnings per share- basic and diluted
29.
18,547
286,304)
(Number of shares)
56,040,000)
56,040,000)
(Rupees)
0.33
5.11)
REMUNERATIONS OF CHIEF EXECUTIVE, DIRECTORS AND EXECUTIVES
The aggregate amounts charged in the financial statements for remuneration, including all benefits, to
the Chief Executive, Directors and Executives of the Company were as follows:
38
Pakistan Synthetics Limited
Chief Executive
2012
2011
Managerial
remuneration
Housing and
utilities
Gratuity
Medical
expenses
Leave
encashment
Other
allowances
Meeting fees
Number of
persons
Executive
Directors
2012
2011
Non - Executive
Directors
2012
2011
Rupees in ‘000)
Executives
2012
2011
Total
2012
2011
—
—
—
—
—
—
26,823 13,002 26,823
—
—
—
—
—
—
—
—
—
—
—
—
12,175
2,938
—
—
—
—
—
—
—
—
—
—
—
—
—
25
25
—
30
30
—
70
70
—
80
80
—
135
135
—
150
150
1
1
2
2
5
5
13,002
6,560 12,175
1,665 2,938
6,560
1,665
2,759
1,115
2,759
1,115
1,780
828
1,780
828
246
246
230
46,721 23,170 46,951
260
23,430
38
10
46
18
No remuneration is paid to directors of the Company including chief executive. However, three directors
and most of the executives of the Company are provided with free use of Company maintained cars.
30.
FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES
Financial risk management
The Board of Directors of the Company has overall responsibility for the establishment and oversight
of the Company's risk management framework. The Company has exposure to the following risks from
its use of financial instruments:
- Credit risk
- Liquidity risk
- Market risk
Risk management framework
The Board meets frequently throughout the year for developing and monitoring the Company’s risk
management policies. The Company’s risk management policies are established to identify and analyse
the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and
adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes
in market conditions and the Company’s activities. The Company, through its training and management
standards and procedures, aims to develop a disciplined and constructive control environment in which
all employees understand their roles and obligations.
The Audit Committee oversees how management monitors compliance with the Company’s risk
management policies and procedures, and reviews the adequacy of the risk management framework
in relation to the risks faced by the Company.
30.1 Credit risk
Credit risk is the risk of financial loss to the Company if a customer or counter party to a financial
instrument fails to meets its contractual obligations. Concentration of credit risk arises when a number
of counter parties are engaged in similar business activities or have similar economic features that would
cause their ability to meet contractual obligations to be similarly affected by changes in economics,
political or other conditions. Concentrations of credit risk indicate the relative sensitivity of the Company's
performance to developments affecting a particular industry. Customers of the Company's polyester
staple fibre segment are textile mills whereas customers of crown and plastic caps are food and beverages
companies.
39
Pakistan Synthetics Limited
Exposure to credit risk
Credit risk arises when changes in economic or industry factors similarly affects Company's of counter
parties whose aggregate credit exposure is significant in relation to the Company's total credit exposure.
Credit risk of the Company arises principally from the trade debts and bank balances. The carrying
amount of financial assets represents the maximum credit exposure. The maximum exposure to credit
risk at the reporting date is as follows:
2012
2011
(Rupees in ‘000)
Long term loan to employees
Long term deposits
Trade debts
Loan and advances
Short term deposits
Other receivables
Bank balances
738
924
578,112
1,487
372
1,578
161,455
744,666
186
924
337,851
501
388,866
728,328
Bank balances are held and trade debts are secured with reputable banks with high quality credit
ratings. Trade debts are monitored on an ongoing basis and related to domestic customers.
The aging of trade receivable at the reporting date is:
2012
2011
(Rupees in ‘000)
Not past due
Past due 90-183 days
Past due 183-365 days
Past due 365-730 days
Past due 730-1095 days
Past due 1095 days
503,262
70,311
16,994
400
86,991
677,958
276,092
36,773
34,704
400
851
88,441
437,261
The movement in the allowance for impairment in respect of trade receivables is as follows:
Opening balance
Provision for doubtful debts
Reversal made during the year
Closing balance
(99,410)
(3,000)
2,564)
(99,846)
(60,055)
(39,355)
(99,410)
Based on the past experience, consideration of financial position, past track records and recoveries,
the Company believes that appropriate impairment has been made.
40
Pakistan Synthetics Limited
30.2
Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with
financial liabilities that are settled by delivering cash or another financial asset. Liquidity risk arises
because of the possibility that the Company could be required to pay its liabilities earlier than expected
or difficulty in raising funds to meet commitments associated with financial liabilities as they fall due.
The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have
sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without
incurring unacceptable losses or risking damage to the Company's reputation, by having credit lines
available as disclosed in note 9 to these financial statements. The Company ensures
that it has sufficient cash on demand to meet expected working capital requirements. The following are
the contractual maturities of financial liabilities, including interest payments and excluding the impact
of netting agreements:
2012
Carrying
Contractual
Upto one
Two to
amount
cash flows
year
five years
(Rupees in ‘000)
Non-derivative financial liabilities
Long term finances
Trade and other payables
Short term borrowings
Accured markup
500,000
546,344
735,310
7,350
1,789,004
(637,701)
(546,344)
(735,310)
(7,350)
(1,926,705)
(139,313)
(546,344)
(735,310)
(7,350)
(1,428,317)
(498,388)
(498,388)
2012
Carrying
amount
Contractual
cash flows
Upto one
year
Two to
five years
(Rupees in ‘000)
Non-derivative financial liabilities
Short term borrowings
Accured markup
Trade and other payables
1,088,371
2,382
230,906
1,321,659
(1,088,371)
(2,382)
(230,906)
(1,321,659)
(1,088,371)
(2,382)
(230,906)
(1,321,659)
-
The contractual cash flows relating to the above financial liabilities have been determined on the basis
of mark-up rate effective as at 30 June. The rate of mark-up have been disclosed in notes 7 and 9 to
these financial statements.
30.3
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates
and equity prices will affect the Company’s income or the value of its holdings of financial instruments.
The objective of market risk management is to manage and control market risk exposures within
acceptable parameters, while optimising the return. The Company is exposed to currency risk and
interest rate risk only.
30.3.1 Currency risk
The Company is exposed to currency risk on foreign creditors and short term borrowings that are
denominated in a currency other than the respective functional currency of the Company. The Company’s
exposure to foreign currency risk is as follows:
41
Pakistan Synthetics Limited
Rupees
(341,467)
(735,310)
(1,076,777)
Foreign creditors
Short term borrowings
Gross balance sheet exposure
Rupees
The following significant exchange rate has been applied:
Average rate
2012
2011
91.26
118.20
85.65
117.62
(2,518)
(7,216)
(9,734)
2011
US Dollars
Amount in thousands
(59,262)
(1,088,371)
(1,147,633)
Foreign creditors
Short term borrowings
Gross balance sheet exposure
USD to PKR
Euro to PKR
2012
US Dollars
Amount in thousands
(677)
(5,827)
(6,504)
2012
Euro
(880)
(469)
(1,349)
Euro
(4,700)
(4,700)
Reporting date rate
2011
94.20
118.50
85.95
124.75
Sensitivity analysis
A two percent depreciation of the rupee against the following currencies at 30 June would have
(decreased) the equity and profit or loss by the after tax amounts shown below. This analysis assumes
that all other variables, in particular interest rates remain constant.
Equity and profit and loss
2012
2011
USD
EURO
(11,920)
(2,078)
(13,998)
(7,267)
(7,622)
(14,889)
A two percent appreciation of the Rupees against the above currencies at 30 June would have had the
equal but opposite effect on the above currency to the amounts shown above, on the basis that all other
variables remain constant.
30.3.2 Interest rate risk
Interest rate risk is the risk that the fair value on future cash flows of a financial instrument will fluctuate
because of changes in market interest rates. Interest rate exposure arises from long term finance and
short term borrowings.
At the reporting date the interest rate profile of the Company's significant interest bearing financial
instruments was as follows:
42
Pakistan Synthetics Limited
(1,044,338)
108,105
(1,152,443)
43
Pakistan Synthetics Limited
Fair value sensitivity analysis for fixed rate instruments
The Company does not account for any fixed rate financial assets and liabilities at fair value through
profit and loss. Therefore a change in interest rates at the reporting date would not affect profit and loss
account.
Cash flow sensitivity analysis for variable rate instruments
A change of 100 basis points in interest rates at the reporting date would have decreased / (increased)
profit after tax for the year by Rs. 3.250 million (2011: Rs. 3.735 million). This analysis assumes that
all other variables, in particular foreign currency rates, remain constant. The analysis is performed on
the same basis for 2011.
The sensitivity analysis prepared is not necessarily indicative of the effects on loss for the year and
assets / liabilities of the Company.
30.4
Fair value of financial instruments
The carrying values of the financial assets and financial liabilities approximate their fair values.
31.
TRANSACTIONS WITH RELATED PARTIES
The related parties comprise of entities over which the Company is able to exercise significant influence,
entities with common directors, major shareholders, staff retirement benefits, directors and key
management personnel. Transactions with related parties are entered into at commercial terms, as per
the terms of employment and actuarial advice, as the case may be. However, where balances with an
associated company on account of sale of goods exceeds credit period markup thereon is charged
(refer note 22.1). Details of transactions with related parties, other than those which have been specifically
disclosed elsewhere in these financial statements are as follows:
2012
2011
(Rupees in ‘000)
Associated company
388,178
296,943
Sales of goods
Markup charged
9,343
-
Key management personnel compensation
Managerial remuneration
26,823
13,002
Others
20,058
10,428
Associated banking company
Current account balance
16,802
13,075
Saving account balance
134,830
372,598
Long term finance
500,000
-
Short term borrowings
735,310
1,088,371
Accrued markup
7,350
2,382
Bank collection charges paid
1,048
2,106
Bank guarantee commission
452
355
Mark up on long term finance
Interest income on bank deposits
Mark up on short term import finance under markup arrangement
Mark up on short term borrowings
44
49,150
-
6,457
20,553
28,890
3,944
1,761
-
Pakistan Synthetics Limited
32.
33.
PLANT CAPACITY AND PRODUCTION
Capacity available - Polyester staple fibre / polyester chips
(tons)
2012
2011
(Rupees in ‘000)
28,000
28,000
Actual production - Polyester stple fibre
(tons)
23,868
24,449
Capacity available - Plastic and crown caps
(cartons)
360,000
36,000
Actual production - Plastic and crown caps
(cartons)
129,492
3,785
MOVEMENT IN WORKING CAPITAL
Decrease / (increase) in current assets:
Stores and spares
Stock in trade
Trade debts
Loan and advances
Short term prepayments
Other receivables
Increase in current liabilities:
Trade and other paybles
34.
2,926)
(309,915)
(240,697)
(1,569)
(1,510)
27,578)
(523,187)
(15,611)
20,636)
(62,864)
(3,107)
1,145)
16,105)
(43,696)
281,087)
(242,100)
61,937)
18,241)
CAPITAL RISK MANAGEMENT
The objective of the Company when managing capital is to safeguard its ability to continue as a going
concern so that it can continue to provide returns for shareholders and benefits for other stakeholders;
and to maintain a strong capital base to support the sustained development of its businesses.
The Company manages its capital structure by monitoring return on net assets and makes adjustments
to it in the light of changes in economic conditions. In order to maintain or adjust the capital structure,
the Company may adjust the amount of dividend paid to the shareholders or issue new shares.
35.
INFORMATION ABOUT BUSINESS SEGMENTS
35.1
The Company's reportable segments are as follows:
- Manufacturing and sale of polyester staple fibre. (polyester staple fiber segment).
- Manufacturing of crown and plastic caps (crown and plastic caps segment).
Segment profit is used to measure performance as management believes that such information is the
most relevant in evaluating the results of these segments. Information regarding the Company's reportable
segments is presented below.
45
Pakistan Synthetics Limited
35.2
SEGMENT REVENUE AND RESULTS
Following is an analysis of the Company’s revenue and results by reportable segment:
Purchase
46
Pakistan Synthetics Limited
47
Pakistan Synthetics Limited
35.2.1
Revenue from sale of polyester staple fibre represents 91.84% (2011 : 99%) of the gross sales
of the Company.
35.2.2
100% (2011: 100%) of the gross sales of the Company are made to customers located in Pakistan.
35.2.3
All non-current assets of the Company at 30 June 2012 are located in Pakistan.
35.2.4
Sales to three customers (2011: one customer) of the Company is more than 10% of total sales of
the Company during the year aggregating to 61.48% (2011: 34.3%).
35.3
Segment assets and liabilities
Polyester
Staple Fibre
Segment assets
Segment liabilities
Segment liabilities
35.3.1
Total
1,149,349
1,613,358
2,762,707
918,629
861,878
1,780,507
Polyester
Staple Fibre
Segment assets
2012
Crown and
plastic caps
(Rupees in ‘000)
2011
Crown and
plastic caps
(Rupees in ‘000)
Total
1,433,980
1,210,439
2,644,419
389,162
1,088,371
1,477,533
For the purpose of monitoring segment performance and allocating resources between segments:
- all assets are allocated to reportable segments except sales tax refundable, taxation - net and cash
and bank balances.
- all liabilities are allocated to reportable segments other than certain trade and other payables,
staff retirement benefits and deferred tax liabilities.
- Cash and bank balances are not allocated to reportable segments as these are managed by the
Company’s central treasury function.
2012
35.3.2
Other segment information
Polyester
Staple Fibre
Crown and
plastic caps
(Rupees in ‘000)
Total
22,283
344,666
366,949
48,778
101,522
150,300
Capital expenditure
Depreciation and amortisation
Non-cash items (excluding
depreciation and amortisation)
8,578
Polyester
Staple Fibre
Capital expenditure
Depreciation and amortisation
36.
2011
Crown and
plastic caps
(Rupees in ‘000)
8,578
Total
29,166
779,915
809,081
109,543
19,807
129,350
Non-cash items (excluding
45,088
45,088
depreciation and amortisation)
DATE OF AUTHORISATION FOR ISSUE
These financial statements were authorised for issue in the meeting or Board of Directors held on
28 September 2012.
UMER HAJI KARIM
CHIEF EXECUTIVE
48
-
ANWAR HAJI KARIM
DIRECTOR
Pakistan Synthetics Limited
PATTERN OF SHAREHOLDING
AS AT 30 JUNE 2012
NO. OF SHAREHOLDERS
SHAREHOLDING
From
355
443
249
328
45
19
7
5
3
3
1
2
1
1
2
1
1
1
1
1
2
1
1
1
1
1
3
4
1
1
1
1
1
2
1
1
1
101
501
1001
5001
10001
15001
20001
25001
30001
40001
45001
50001
55001
60001
65001
70001
125001
145001
155001
160001
220001
395001
495001
800001
925001
930001
945001
965001
1055001
1120001
1155001
1215001
1230001
1270001
1345001
TOTAL SHARES HELD
To
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
100
500
1000
5000
10000
15000
20000
25000
30000
35000
45000
50000
55000
60000
65000
70000
75000
130000
150000
160000
165000
225000
400000
500000
805000
930000
935000
950000
970000
1060000
1125000
1160000
1220000
1235000
1275000
1350000
16,877
120,858
194,965
781,084
357,497
247,471
125,500
111,795
83,925
98,700
43,900
98,150
55,000
60,000
129,300
67,450
70,810
129,450
149,900
157,500
323,550
225,000
397,050
500,000
801,400
927,850
2,792,094
3,791,368
968,400
1,056,191
1,124,933
1,157,986
1,217,060
2,464,446
1,273,845
1,348,030
49
Pakistan Synthetics Limited
PATTERN OF SHAREHOLDING
AS AT 30 JUNE 2012
NO. OF SHAREHOLDERS
SHAREHOLDING
From
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1506
S. NO.
1
2
3
4
5
6
7
8
9
10
1450001
1645001
1655001
1860001
1880001
1895001
1905001
2125001
2140001
2275001
2460001
2475001
3775001
4995001
CATEGORIES
OF
SHAREHOLDERS
INDIVIDUAL
JOINT STOCK COMPANIES
FINANCIAL INSTITUTIONS
INVESTMENT COMPANIES
INSURANCE COMPANIES
FOREIGN INVESTORS
BANK
MODARABA
LEASING
MUTUAL FUND
TOTAL SHARES HELD
To
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1455000
1650000
1660000
1865000
1885000
1900000
1910000
2130000
2145000
2280000
2465000
2480000
3780000
5000000
NUMBER
OF
SHAREHOLDERS
1,457
6
24
5
5
2
3
2
2
1,506
1,450,076
1,648,830
1,656,822
1,861,396
1,880,591
1,895,684
1,908,813
2,129,816
2,140,640
2,277,790
2,464,447
2,477,577
3,778,981
4,999,202
56,040,000
TOTAL
SHARES
HELD
PERCENTAGE
48,981,881
146,020
3,837,974
1,884,812
20,952
1,158,086
1,100
7,175
2,000
56,040,000
Trading in shares by Directors, Executives and their spouses and minor children
Mr. Abid Umer
Mrs. Zeenat Anwar
Mrs. Amina Umer
50
Purchase
240,763
470,552
2,846
Sale
-
87.41%
0.26%
6.85%
3.36%
0.04%
2.07%
0.00%
0.01%
0.00%
100.00%
Pakistan Synthetics Limited
PATTERN OF SHAREHOLDING
ADDITIONAL INFORMATION
AS AT 30 JUNE 2012
SI. No. Categories of Shareholders
1
2
Number
NIT and ICP
National Bank of Pakistan T rustees Department
Investment Corporation of Pakistan
2
Shares held
3,778,981
3,800
3,782,781
1
Directors, CEO & their Spouses
Mr. Ebrahim Haji Karim
2
3
Mr. Umer Haji Karim - Chief Executive Officer
Mrs. Amina (W/o Mr. Umer Haji Karim)
2,277,790
930,694
4
5
Mr. Anwar Haji Karim - Director
Mrs. Zeenat (W/o Mr. Anwar Haji Karim)
1,273,845
1,056,191
6
7
Mr. Yakoob Haji Karim - Director
Mrs. Shahida (W/o Mr. Yakoob Haji Karim)
2,140,640
947,848
8
9
Mr. Sajid Haroon - Director
Mrs. Akila (W/o Mr. Sajid Haroon)
1,656,822
930,700
10
Mr. Abid Umer - Director
1,861,396
11
Mr. Pir Mohammad A. Kaliya - Director
Executives
Public Sector Companies and Corporation
Banks, Development Finance Institutions, Banking
Finance Institutions, Insurance Companies and Modarabas
500
500
11
13,076,926
Nil
—
6
146,020
34
3,106,366
2
500
1,500
2,000
Mutual Funds
Asian Stock Funds Limited
Golden Arrow Selected Stock Fund
Individuals
35,925,907
Total 56,040,000
Shareholders holding 5% or more
National Bank of Pakistan Trustees Department
Noor Jehan Bano
Associated Companies, Undertakings and Related Parties
First Paramount Modaraba
6.74%
8.92%
3,778,981
4,999,202
100
51
Pakistan Synthetics Limited
NOTICE OF MEETING
Notice is hereby given that the Twenty Seventh Annual General Meeting of the shareholders
of Pakistan Synthetics Limited will be held on Saturday, 20 October, 2012 at 2.30 p.m. at
Moosa D. Desai Auditorium of the Institute of Chartered Accountants of Pakistan, G-13, Block-8,
Chartered Accountant Avenue, Clifton, Karachi, Pakistan to transact the following business;
1. T o confirm the minutes of the Twenty Sixth Annual General Meeting of the Company held
on 26 October, 2011.
2. To receive, consider and adopt the Audited Financial Statements of the Company together
with Directors' and Auditors' Reports thereon for the year ended 30 June 2012.
3. To appoint the Auditors of the Company and to fix their remuneration. The retiring auditors
M/s. KPMG Taseer Hadi & Co., Chartered Accountants being eligible have offered themselves
for reappointment.
4. To transact any other business with permission of the Chair.
By the Order of the Board
Date: 28 September 2012
Karachi
UMER HAJI KARIM
CHIEF EXECUTIVE
NOTES :1.
The Shares Transfer Books of the Company will remain closed from Saturday, 13 October 2012
to Saturday, 20 October 2012 (both days inclusive). Transfers received at the Registered Office of
the Company at the close of business on 12 October 2012 will be treated in time to attend
the Twenty Seventh Annual General Meeting of the Company.
2.
A member of the Company entitled to attend and vote at the Meeting may appoint any other member
as his/her proxy to attend, speak and vote at the Meeting on his/her behalf. Instrument appointing
proxies, in order to be effective, must be received at the Registered Office of the Company at 3rd Floor,
Karachi Dock Labour Board Building, 58-West Wharf Road, Karachi, duly stamped, signed and witnessed
not less than 48 hours before the time of holding of the Meeting. A proxy must be a Member of the
Company.
3.
Members are requested to notify the Company if there is any change in their addresses immediately.
4.
CDC Account Holders will further have to strictly follow the guidelines as laid down in Circular 1 dated
26 January 2000 issued by the Securities and Exchange Commission of Pakistan.
52
Pakistan Synthetics Limited
PAKISTAN SYNTHETICS LIMITED
FORM OF PROXY
TWENTY SEVENTH ANNUAL GENERAL MEETING
I/We
of
being a member(s) of Pakistan Synthetics Limited holding
Ordinary Shares hereby appoint
of
or failing him/her
of
who is / are also member(s) of Pakistan Synthetics Limited as my / our proxy
in my / our absence to attend and vote for me / us and on my / our behalf at Twenty Seventh Annual General
Meeting of the Company to be held on 20 October 2012 and / or any adjournment thereof.
As witness my/our hand/seal this
day of
2012
Signed by the said
in the presence of 1.
2.
Please Quote Folio # /
Participant ID# & A/c#
Signature on
Revenue Stamp
of Appropriate value
The signature should agree
with the specimen registered
with the Company.
IMPORTANT
1.
This Proxy Form, duly completed and signed
must be received at the Registered Office of the
Company at 3rd Floor, Karachi Dock Labour
Board Building, 58-West Wharf Road, Karachi.
not less than 48 hours before the time of holding
the meeting.
FOR CDC ACCOUNT HOLDERS/CORPORATE ENTITIES:
In addition to the above the following requirements have to be met:
1.
The Proxy Form shall be witnessed by two persons whose
names, addresses and NIC numbers shall be mentioned
on the Form.
2.
Attested copies of NIC or the passport of the beneficial owners
and the proxy shall be furnished with the Proxy Form.
2.
No person shall act as proxy unless he himself is a member
of the Company except that a corporation may appoint a
person who is not a member.
3.
If a member appoints more than one proxy and more than
one instruments of proxy are deposited by a member with the
Company, all such instruments of proxy shall be rendered
invalid.