28,299
48,945NOTES TO THE ACCOUNTS FOR THE YEAR ENDED
SEPTEMBER 30,2002
2.1 Accounting Convention. These accounts have been prepared under “historical cost convention”, except certain fixed assets, which have been included at revalued amounts.
2.2
Staff retirement benefits.
The company operates an unfounded gratuity
scheme covering all its employees. Provision is made annually on the basis of
last salary drawn and length of services of the employees. The management is of
the opinion that the carrying amount of the liability recognized at balance
sheet date approximately the amount required to settle the liability.
2.3 Taxation:
Current:
Provision for current taxation is based on taxable income at current tax
rates after talking into account the tax rebates and tax credits available, if
any.
Deferred
The Company
accounts for deferred taxation on material
temporary differences using the liability method, however, deferred tax is not
provided if it can be established with reasonable probability that these
differences will not be reversed in foreseeable future.
2.4 Operating assets Operating assets are stated at cost or revalued amount less accumulated depreciation. Land is stated at revalued amount. Depreciation is charged to income applying the reducing balance method at the rates specified in the operating assets note. Full year’s depreciation is charged on additions during the year. However, depreciation for proportionate period of use is charged on major project cost capitalized during the year. No depreciation is charged on deletions during the year.
Maintenance and normal repairs are charged to income as and when incurred. Major renewals and improvements are capitalized.
Gains and losses on disposal of assets are included in current income.
Surplus on revaluation of fixed assets is adjusted on disposal/realization of
fixed assets.
2.5
Store & Spares:
These are valued at moving average
cost, except goods in transit which are valued at cost.
2.6 Stock in trade:
These are valued at lower of cost
and net realizable value applying the following basis. Raw material Weighted average cost Work
in process Average manufacturing cost
Finished goods Average manufacturing cost Waste
Net realizable value
2.7
Trade
debts:
Known bad debts are written
off and provision is made for debts considered doubtful.
2.8
Foreign currency translation:
Assets and liabilities in foreign currency are translated into Pak Rupees at the
rates of exchange revailing at
balance sheet date, except those covered under forward exchange contract and
exchange risk cover scheme which are
translated at the cover rate.
2.9
Revenue recognition:
Revenue from sales is recognized on dispatch of goods to customers.
2.10
Borrowing costs:
Borrowing costs are charged as expenses in the period in which they arise
except those incurred in respect of
quality assets, which are capitalized in accordance with IAS 23 Borrowing Costs.
2.11
Exchange gain/loss on Export sales:
The exchange gain / loss arising on
current export sales and against opening debtors realizations are adjusted in
the amount of export sales of the
year.
2.12
Assets subject to finance lease:
In view of certainty of ownership of the assets at the end of the lease period,
assets subject to finance lease are
stated at cost less accumulated depreciation. Depreciation is charged at the
rates and the basis applicable to the
company owned assets .The outstanding obligations under finance lease financial charges allocated to
future periods in a manner so as to
produce a constant periodic rate of
charge on the outstanding liability.
2.13
Trade and other payable:
Liabilities for trade and other
amounts payable are carried at cost which is the fair value of the consideration
to be paid in the
future for goods and services received, whether or not billed to the company.
2.14
Provisions:
Provisions are recognized when the company has a legal or constructive
obligation as a result of past event and it is
probable that an outflow of resources embodying economic benefits will be
required to settle the obligation
and a reliable estimate can be made to the amount of obligation.
2.15 Impairment: An assessment is made at each balance sheet date to determine whether is an indication for impairment any assets or group of assets. If any such indication exists, the recoverable amount of that asset is estimated and impairment losses are recognized in the profit and loss account.
2.16
Financial
instrument:
Financial instruments carried on
the balance sheet include, receivables, cash and bank balances, finances under
markup arrangement, liabilities subject to finance lease, long term loans and
other payables, deposits creditors, accrued and other liabilities. The
particular recognition methods adopted are disclosed in the individual policy
statements associated with each item.
2.17
Markup, interest, profit and other charges:
Markup, interest, profit and other charges on long term liabilities
obtained for acquisition of fixed
assets are
capitalized up to date of t he commencement of commercial production. All other
markup, interest, profit and
other related
charges are charged to current year income.
2.18
Capital work in progress:
All costs / expenditures connected with specific assets are collected
under this head. These are transferred to
specific
assets as and when assets are available for use.
2.19
Investment:
Long term investment are stated at cost. Provision is
made for permanent diminution in value of quoted
share. Short
term investment are stated at market value if materially differs from cost.
Reduction to market
value and
reversals such reductions are included in current income.
2.20
Deferred cost:
3. SURPLUS ON REVALUATION OF FIXED ASSETS: (Rupees in Thousand)
2002
2001
Balance as on September 30, 404,595 404,595
First revaluation of building on freehold land and machinery had been carried
out on September 30, 1995 by
an independent valuers M / S Iqbal A. Nanjee & Company Lahore on the basis
of depreciated replacement
values. Revaluation surplus had been credited to surplus on revaluation of fixed
assets.
Second revaluation of freehold land, building on freehold land and plant & machinery has been carried out on September 30,2002 by independent valuers M / S. Inspectorates Corporation International (Pvt) Ltd. Lahore and same has been verified by SBP’s approved auditors M.Yousaf Adil Saleem & Company Chartered Accountant Faisalabad on the basis of depreciation replacement values. Revaluation surplus has been credited to surplus on revaluation of fixed assets.
4. LONG TERM LOANS
Banking
companies-secured
Morabaha-I
Morabaha-II
TOTAL
TOTAL
Opening
balance
340,902 74,145
415,047
422,069 Paid
during the year (4.1)
-
-
-
7,022
340,902 74,145 415,047 415,047
4.1
The company is not repaying the loans
as a case has been filed against Faysal Bank Limited in the Honorable Lahore
High Court, Lahore. The facts are mentioned in note # 8. Accordingly the current
portion of these loans has not been transferred to current liabilities keeping
in view the expected outcome of the case.
4.2
It represents the loan created by
Faysal Bank Ltd. By converting various loans into long term Morabaha –I. At an
interest rate of 13% p.a. This loan
is secured against 1st charge of Rs. 505 million on fixed assets and
personal guarantees of director & chief executive of the company.
4.3
It represents an interest free loan
created by Faysal Bank Ltd by converting various loans / unpaid mark up in to
long term non-profit Morabaha-II. The loan is secured against securities
mentioned in note 4.2.
5.
GRATUITY
(RUPEES IN THOUSANDS)
2002
2001
Balance
as on October 01,
2,264
3,067
Provision
for the year
1,350
910
Gratuity payable 3,614 3,977 Paid during the year (431) (1,713)
Balance as on September 30, 3,183 2,264
(RUPEES IN THOUSAND)
6. SHORT TERM BORROWINGS 2002 2001
Secured Export finance - 850 Unsecured – interest free Bank overdrawn 2,544 2,544
2,544
3,394
7.
CREDITORS, ACCRUED AND OTHER LIABILITIES
Creditors 40,696 59,155 Accrued charge 2,423 2,065 Interest / markup on secured Long term loans 82,626 42,936 Short-term borrowings - 28 Workers profit participation fund - 26 Sales tax - 149 Income tax withheld 104 46 Worker’s profit participation fund - 147 Others 1,190 - 127,039 104,552
8
CONTINGENCIES & COMMITMENTS
Contingencies:
The company has filed
a suit in the Honourable Lahore High Court, Lahore against Faysal Bank Limited
for compensation of
loss suffered on acquisition of unremunerative agriculture land and disposal of
the same, for not providing timely cash finance facilities despite written
commitments and for charging illegal profits against the principles of Islamic
banking and in contravention of the objective clause of its Articles and
Memorandum of Association. The amount claimed for the first count is Rs. 141,831
M (including claims of Central Excise Duty ) and for last count has been left
for the court to determine.
The Albaraka Islamic Bank has offered a guarantee against
L
/ C of Rs. 28.4 M, which
the bank confirmed as contingent liability. Infact the Company has admitted it
as liability and shown under the head “creditors, accrued and other
liabilities “.
9. OPERATING FIXED ASSETS (RUPEES IN THOUSANDS)
|
PARTICULARS |
COST |
DEPRECIATION |
W.D.V AS AT 30-09-2002 |
RATE % |
||||||
|
TOTAL AS AT 01-10-01 |
ADDITION |
(DELETION) |
TOTAL AS AT 30-092002 |
ACCUMUL ATED AS AT 01-10-01 |
ADJUSTM- ENT |
FOR THE YEAR |
ACCUMULA- TED AS AT 30-09-2002 |
|||
|
Free Hold Building on free hold land
Plant & machinery\
Electric installation
Factory equipments
Furniture fixture and office equipments
Vehicles |
9,802
52,264
496,891
6,257
356
1,246
1,038 |
-
-
771
183
-
123
3,009 |
-
-
-
-
-
-
- |
9802
52,264
497,662
6,710
356
1,369
4,047 |
-
2,613
24,845
4,140
215
425
773 |
-
-
-
-
-
-
- |
-
2,483
23,641
257
14
94
655 |
-
5,096
48,486
4,397
229
519
1,428 |
9,802
47,168
449,176
2,313
127
850
2,619 |
-
5
5
10
10
10
20 |
|
TOTAL 2002 |
568,124 |
4,086 |
- |
572,210 |
33,011 |
- |
27,144 |
60,155 |
512,055 |
- |
|
TOTAL 2001 |
568,065 |
235 |
(176) |
568,124 |
5,254 |
139 |
27,896 |
33,011 |
535,113 |
- |
( RUPEES IN THOUSANDS)
9.1 DEPRECIATION CHARGE FOR THE 2002 2001
YEAR IS ALLOCATED AS UNDER:
Manufacturing 26,395 27,739
Administrative 749 157
27,144 27,896
10. STORES AND SPARES (RUPEES IN THOUSANDS)
2002 2001
Stores 1,125 893
Spares parts 492 334
1,617 1,227
The company held no stores for capital expenditure.
11. STOCK IN TRADE
Raw material
Cotton 7,619 4,776
Polyester 80 1,077
Work in process 3,373 3,391
Finished goods 3,382 1,218
14,454 10,462
12. TRADE DEBTS
Considered good
Foreign - secured 730 1,031
Local - unsecured (12.1) 9,269 2,883
9,999 3,914
12.1 It includes rupees 8.994/- million (2001: Nil) receivable from an associated undertaking.
13 ADVANCE, PREPAYMENT & OTHER RECEIVABLES
Advances-considered good
Suppliers-unsecured 840 110
Employees-secured 804 776
Income tax - 10,773
Electric Power (13.1) 24117 35,018
Insurance 154 50
Duty drawback 1,166 -
Sales tax 1,218 -
28,299
48,945
13.1 It represents amount paid to an associated undertaking against supply of electric power.
14 CASH AND BANK BALANCES
Cash in hand 33 27
Cash with banks
in current accounts 3,679 508
in PLS accounts 2,907 5,840
6,586 6,348
6,619 6,375
15 SALES
Local
Yarn 388,128 3,78,450
Cotton 2,451 2,753
Waste 3,437 2,952
Export
Yarn 17,008 31,532
441,024 415,687
Commission (702) (3,677)
410,322 412,010
16 COST OF SALES
Material
Raw cotton consumed(16.1) 95,695 79,655
Polyester consuemed(16.2) 187,546 203,742
Yarn purchased - 2,166
Salaries, wages and benefits 24,062 22,277
Stores & Spares 8,516 6,457
Packing material 6,741 5,860
Fuel & Power 50,579 43,712
Repair & maintenance 449 223
Insurance 1,599 1,508
Depreciation(9.1) 26,395 27,739
Handling charges 951 853
General expenses
2,448
1,321
404,981 395,513
Work in process
Opening 3,391 4,324
Closing (3,373) (3,391)
18 933
Cost of goods manufactured 404,999 395,446
Finished goods
Opening 1,218 3,867
Closing
(3,382)
(1,218)
(2,164) 2,649
402,835 399,095
Duty drawbacks ( 806) (1,368)
402,029 397,727
16.1. RAW COTTON CONSUMED
Opening stock 4,776 5,648
Purchases including direct expenses 98,538 78,783
Cotton available for consumption 103,314 84,431
Closing stock (7,619) (4,776)
95,695 79,655
16.2 POLYESTER CONSUMED
Opening stock 1,077 2,395
Purchases including direct expenses 186,549 202,424
Polyester available for consumption 187,626 204,819
Closing stock (80) (1,077)
187,546 203,742
17. ADMINISTRATOR
Salaries, wages & benefits 2,144 1,326
Rent, rates & taxes - 355
Insurance 181 37
Traveling & conveyance 623 647
Entertainment 88 72
Vehicle running & maintenance 1,117 441
Communication 480 405
Printing & Stationery 238 183
Legal & Professional charges 330 1,171
Electricity 84 48
Audit fee 75 45
Fee & subscription 347 320
Advertisement 22 15
Depreciation (9.1) 749 157
General expenses 191 72
6,669 5,294
18. SELLING
Local freight & octroi 209 401
Ocean freight 519 1,401
General export expenses 49 55
Clearing & forwarding 161 303
938 2,160
19. OTHER INCOME
Profit on
PLS accounts 219 124
Sale of vehicle - 43
219 167
20. FINANCIAL
Interest / markup on
Long term loans (20.1) 39,691 46,647
Short term borrowings 3,764 6,859
Worker's Profit Participation Fund 16 26
Bank charges & commission 1,933 2,784
45,404 56,316
20.1. This amount represents markup on long term loans against which the company has filed suit as mentioned in
note # 4 & 8. If the case is decided in the company's favor the financial charges on long term loans amount
-ing to rupees 39.691 M (2001: Rs 46.647 M) would have to be adjusted accordingly.
21 TAXATION
Current year 2,056 2,078
Provision for taxation represents the minimum taxation due U/S 113 of the Income Tax Ordinance 2001.
Deferred
No provision for deferred tax is required as no material temporary difference has arisen.
22. EARNING PER SHARE 2002 2001
Net (loss) for the year (Rupees in thousand) (46,555) (51,398)
Weighted average No. of ordinary
shares outstanding during the year 15,177 15,177
Earning per share in rupees
(3.07)
(3.39)
23. CASH GENERATED FROM OPERATIONS (RUPEES IN THOUSAND)
(Loss) before taxation (44,499) (49,320)
ADJUSTMENT OF NON CASH/NON OPERATING ITEMS
Gratuity 1,350 910
Depreciation 27,144 27,896
Financials 45,404 56,316
Profit on sale of vehicle - (43)
73,898 85,079
OPERATING PROFIT BEFORE WORKING CAPITAL CHANGES 29,399 35,759
Charges in working capital
(Increase)/ Decrease in stores & spares (390) (164)
(Increase)/ Decrease in stock in trade (3,992) 5,772
(Increase)/ Decrease in trade debtors (6,085) 10,205
Decrease / (Increase) in advances, prepayment
& other receivables 9,913 (24,860)
(Decrease) / Increase in creditors, accrued
& other liabilities (17,149) 4,898
(17,703) (4,149)
11,696 31,610
24. AGGREGATE TRANSACTIONS WITH
ASSOCIATED UNDERTAKING
Purchase
Electric power 48,959 43,468
Goods 2,274 6,712
Services 1,976
Sales
Goods 18,864 8,575
25. REMUNERATION OF DIRECTORS AND EXECUTIVES
(RUPEES IN THOUSANDS)
2002 2001
Chief Executive Executive Chief Executive Executive
Managerial remuneration - 1,238 - 486
Rent and utilities - 619 - 243
Earned leaves - 32 - 28
- 1,889 - 757
Number of persons 1 9 - 4
The Chief Executive and Directors of the company have worried off their remuneration and meetings fee,
however chief executive is provided with fee use of company car.
26. FINANCIAL ASSETS AND LIABILITIES TO INTEREST RATE AND CREDIT RISK
Interest Rate Risk
The company's exposure to risk associated with interest rates on its financial assets and liabilities is summarized
as follows
|
PARTICULARS |
NOTE |
Interest /Markup bearing |
Non Interest/Non Markup bearing |
Total |
|||
|
Maturity up to one year |
Maturity more than one year |
Maturity up to one year |
Maturity more than one year |
2002 | 2001 | ||
FINANCIAL ASSETS
Trade debts 12 - - 9,999 - 9,999 3,914
Advance, prepayment &
other receivables 13 - - 26,501 - 26,501 37,276
Cash and bank balances 14 2,907 - 3,712 - 6,619 6,375
2,907 - 40,212 - 43,119 47,565
FINANCIAL LIABILITIES
Long term loans 4 - 340,902 - 74,145 415,047 415,047
Gratuity 5 - - - 3,183 3,183 2,264
Short term borrowings 6 2,544 - - - 2,544 3,394
Creditors, accrued and other
liabilities 7 - - 44,413 82,626 127,039 104,552
2,544 340,902 44,413 159,954 547,813 525,257
EFFECTIVE MARK-IP RATE
Financial assets 7% to 10%
Financial Liabilities
Long term loans 13%
Short term borrowings 16%
W.P.P.F 17.5%
CONCENTRATION OF CREDIT RISK
Credit risk represents the accounting loss would be recognized at the reporting date if counter parties failed compeltely
to perform as contracted. All related income is received accordingly as per contracts.
FOREIGN EXCHANGE RISK MANAGEMENT
Foreign exchange risk arises mainly due to conversion of foreign assets and liabilities in to local currency. The company
is not materially exposed to foreign currency risk on assets and liabilities.
LIQUIDITY RISK
Liquidity risk reflects an enterprise's inability in raising funds to meet commitments. The company's management closely
monitors the company's liquidity and cash flow position.
FAIR VALUES OF FINANCIAL ASSETS AND LIABILITIES
The carrying values of all the financial assets and liabilities reported in the financial statements approximate their fair value.
(RUPEES IN THOUSANDS)
27. MAXIMUM AGGREGATE AMOUNTS 2002 2001
DUE FROM ASSOCIATED UNDERTAKING
AT THE END OF ANY MONTH
Associated undertaking 57,498 35,019
28. PLANT CAPACITY AND ACTUAL PRODUCTION
Number of spindles installed 19200 19200
Number of spindles worked 18,996 19,004
Number of shifts per day 3 3
Total shifts worked 1,083 1,083
Capacity after conversion in to 20/s count (Kgs) 7,157,899 6,940,398
Actual production of yarn after conversion
into 20/s count (Kgs) 7,157,899 6,940,398
28.1 REASON FOR LOW PRODUCTION
Actual production in comparison to plant capacity is low due to the periodic, scheduled and unscheduled repair
& maintenance of plant & machinery.
29 TOTAL NUMBER OF EMPLOYEES
As At September 30, 540 533
30. FIGURES
-have been rounded off to the nearest thousand of rupees.
-of prior year have been rearranged and regrouped wherever necessary for the purpose of comparison.
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Asim Textile Mills Ltd.
16 C, Peoples Colony
Faisalabad 38090, PAKISTAN
Tel: 92-41-721953-6
Fax: 92-41-712399