Bestway Annual 2010-11

Contents
2-3 4 5 7-15 16-18 19 20 21 23-24 25 26 27 28 29-66 67 68-70 71-119 COMPANY INFORMATION RESULTS AT A GLANCE NOTICE OF ANNUAL GENERAL MEETING DIRECTORS' REPORT STATEMENT OF COMPLIANCE WITH THE CODE OF CORPORATE GOVERNANCE TEN YEARS' KEY OPERATING AND FINANCIAL DATA REVIEW REPORT TO THE MEMBERS ON STATEMENT OF COMPLIANCE WITH BEST PRACTICES OF CODE OF CORPORATE GOVERNANCE AUDITORS REPORT BALANCE SHEET PROFIT AND LOSS ACCOUNT STATEMENT OF THE COMPREHENSIVE INCOME CASH FLOW STATEMENT STATEMENT OF CHANGES IN EQUITY NOTES TO THE FINANCIAL STATEMENTS PATTERN OF SHAREHOLDING DETAILS OF CATEGORIES OF SHAREHOLDERS CONSOLIDATED FINANCIAL STATEMENTS
Sir M.A. Pervez O.B.E, H.Pk. Chairman
Zameer M. Choudrey B.A. (Hons), F.C.A. Chief Executive
Board of Directors
Sir Mohammed Anwar Pervez, O.B.E, H.Pk. Mr. Zameer Mohammed Choudrey Mr. Arshad Mehmood Chaudhary Mr. Muhammad Irfan A. Sheikh Mr. Mazhar Rafi Mr. Ghulam Sarwar Malik Mr. Mehmood Afzal Chairman Chief Executive Director Director Finance & CFO Director Administration & Marketing Director Projects, Procurement and Coordination Director Works
Company Secretary
Mr. Kaleem Ashraf, ACA
Statutory Auditors
KPMG Taseer Hadi & Co., Chartered Accountants.
Cost Auditors
BDO Ebrahim & Co., Chartered Accountants.
Legal Advisors
Raja M. Bashir, Advocate Supreme Court.
Audit Committee
Mr. Mazhar Rafi Mr. Mehmood Afzal Mr. Ghulam Sarwar Malik Chairman
Registered/ Head Office

Bestway Building, 19-A, College Road, F-7 Markaz, Islamabad. Tel: +92 (0) 51 265 4856 ~ 63 Fax: +92 (0) 51 265 4865 E-mail: management@bestway.com.pk
Annual Report 2011
02
B E S T WAY C E M E N T L I M I T E D
COMPANY INFORMATION
Plant Sites
Hattar Suraj Gali Road, Village Shadi, Hattar, Distt. Haripur, Khyber Pakhtunkhwa Pakistan. Tel: +92 (0) 303 771 1057 ~ 58, Fax: +92 (0) 303 771 1056 E-mail: gmworks1@bestway.com.pk
Chakwal
Village Tatral, Near PSO Petrol Pump 22 Km Kallar Kahar, Choa Saiden Shah Road Chakwal, Pakistan. Tel: +92 (0) 543 584 560 ~ 3 Email: gmworks3@bestway.com.pk
Marketing Head Office

House 293-A, Peshawar Road, Rawalpindi Tel: +92(0) 51 551 3110, 551 3110, 4492, 552 0962 Fax: +92(0) 51 551 3109 E-mail: gmmkt@bestway.com.pk
Shares Department
Progressive Management Services (Pvt) Ltd. 10th Floor, Mehdi Towers, A-115 S.M.C.H.S, Shahrah-e-Faisal, Karachi. Tel: +92(0) 21 452 6983 - 84, Fax: +92(0) 21 452 6985
Bankers
HabibBank Limited, Allied Bank Limited, MCB Bank Limited, Standard Chartered Bank (Pakistan) Limited, Faysal Bank Limited, United Bank Limited, Askari Bank Limited, Soneri Bank Limited, Meezan Bank Limited, The Bank of Punjab, Silkbank Limited, Bank Alfalah Limited, HSBC Bank Middle East Limited, NIB Bank Limited, Barclays Bank PLC, Pakistan, Habib Metropolitan Bank Limited, National Bank of Pakistan, Bank Al-Habib Limited,
03 02
Annual Report 2011
RESULTS AT A GLANCE
TURNOVER
(Rs. millions)
PROFIT/(LOSS) AFTER TAX

(Rs. millions)
14,815
14,000
13,333 13,332
12,000
1400
1,226
10,000
1200 1000
974 931
(1,209)
8,000
7,487
800 6,000
4,544 679 5,649
600 400
236
4,000
2,666
3,536
2,000
1,738
1,792
200 0
179
113 52 169
0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
2002
2003
2004
2005
2006
2007
2008
2009
2010 2011
SHAREHOLDERS FUNDS
(Rs. Millions)
10,972
DESPATCHES
(Thousand Tonnes)
4,253
4,000
3,390
10,000
8,216
8,000 7,000 6,000 5,000 4,000 3,000

2,213 2,181 2,859 4,850 6,857
3,000
7006 2,686
3,208
2,500
2,250
5,544
2,000
1,500
3,597 1,206 1039 1,203
1,000
650
837
2,000 1,000 0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
500
0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Annual Report 2011
04
NOTICE OF ANNUAL GENERAL MEETING
Notice is hereby given that the 18thth Annual General Meeting of Bestway Cement Limited (the Company) will be held at Bestway Building, 19-A, College Road, F-7 Markaz, Islamabad at 11:30 a.m. st on Monday, 31 October, 2011 to transact the following business: ORDINARY BUSINESS 1. 2. 3. 4. To confirm the minutes of the Extraordinary General Meeting held on April 18, 2011 To receive, consider and adopt the audited accounts for the year ended June 30, 2011 together with the Directors' and Auditors' reports thereon. To appoint auditors of the Company and fix their remuneration for the year 2011-12. The present auditors, M/s KPMG Taseer Hadi & Co., retire and being eligible, offer themselves for reappointment. Any other business with the permission of the chair.
October 10, 2011 Islamabad NOTES
Kaleem Ashraf Company Secretary
The share transfer books of the Company will remain closed from October 28, 2011 to November 4, 2011 (both days inclusive). No transfer will be accepted for registration during this period. Transfers received th in order at Progressive Management Services (Pvt.) Ltd, 10 Floor, Mehdi Towers, A-115, S.M.C.H.S., Shahrah-e-Faisal, Karachi upto the close of business on October 27, 2011 will be treated in time to attend the Annual General Meeting. 1. A member entitled to attend, speak and vote at the Annual General Meeting may appoint a proxy to attend and vote in place of the member. The Proxy Form, duly completed and signed, must be received at the Registered Office of the Company, 19-A, College Road, F-7 Markaz, Islamabad not less than 48 hours before the time of holding the meeting. No person shall act as proxy unless he/she himself/herself is a member of the Company, except that a corporation may appoint a person who is not a member. If a member appoints more than one proxy and more than one instrument of proxy is deposited by a member with the Company, all such instruments shall be rendered invalid.
2. 3.
For CDC Account Holders/Corporate Entities: In addition to the above the following requirements have to be met: 4. 5. 6. 7. 8. The proxy form shall be witnessed by two persons whose names, addresses and NIC number shall be mentioned on the form. Attested copies of NIC or the passport of the beneficial owners and the proxy shall be furnished with the proxy form. The proxy shall produce his original NIC or original passport at the time of meeting. In case of corporate entity, the Board of Directors resolution/power of attorney with specimen signature shall be submitted (unless it has been provided earlier) along with proxy form to the Company. Members are requested to promptly notify any changes in their addresses.
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Annual Report 2011
DIRECTORS REPORT
DIRECTORS REPORT
The Directors take pleasure in presenting their report together with the Company's Financial Statements for the year ended 30 June 2011 and the Auditors' Report thereon. Holding Company Bestway (Holdings) Limited of United Kingdom is the ultimate parent company of the Company. Industry Overview During the year under review, despatches of cement by the industry contracted by 8.19% to 31.41 million tonnes as against 34.21 million tonnes for the previous year. The exports contracted by 11.68% whereas domestic market shrank by 6.61%. Capacity utilisation for the industry decreased to 68.79% for the year under review as against 76.29% for the previous year. Production and Sales
Hattar 2011 Tonnes Clinker production Cement production Cement sales Clinker sales Chakwal 2011 Tonnes Clinker production Cement production Cement sales 2,190,536 2,354,836 2,325,657 2010 Tonnes 2,522,131 2,889,594 2,903,739 Decrease Tonnes 331,595 534,758 578,082
st
2010 Tonnes 1,139,861 1,332,262 1,346,074 3,439
Decrease Tonnes 352,798 444,140 464,115 3,439
Percentage Decrease 30.95 % 33.34 % 34.48 % 100.00 %
787,063 888,122 881,959 -
Percentage Decrease 13.15 % 18.51 % 19.91 %
Sales in the domestic market were badly affected by severe flooding during the 1 quarter of the year under review. Overall, it was another year of fierce competition. However, your Company was able achieve market share of 13.04% in the north zone and retained its position as one of the largest cement producers in the country. Bestway Cement continued to be one of the largest exporters of cement to Afghanistan and India. The industry as a whole exported 9.41 million tonnes during the year as against 10.66 million tonnes during the year ended 30 June 2011. Bestway Cement's share stood at 5.67% of total exports at 0.53 million tonnes as against 0.98 million tonnes in 2010.
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Annual Report 2011
DIRECTORS REPORT
Operating Highlights The Company recorded sales of Rs. 18,559 million compared to Rs. 18,486 million during the preceding year. Net turnover amounted to Rs. 13,332 million compared to Rs. 13,333 million for the preceding year after payment of Rs. 4,345 million towards Sales Tax and Excise Duty and Rs. 881 million as rebates and discounts to customers. Gross Profit increased to Rs. 2,913 million from Rs. 1,769 million last year. The increase in sales and gross profit despite reduction of more than 24% in despatches was primarily due to increasing trend in selling prices particularly during the last quarter of the year. Financial charges increased to Rs.2,489 million for the year ended 30 June 2011 from Rs. 2,223 million last year. This was primarily due to rising rates of markup. Profit before taxation for the year ended 30 June 2011 stood at Rs. 424 million as compared to loss of Rs.1,412 million for the previous year. Profit after taxation for the year ended 30 June 2011 amounted to Rs.179 million as compared to loss of Rs.1,209 million last year. Improved margins and significantly lower distribution costs enabled the Company to return to profitability. Earnings per share of the Company for the year ended 30 June 2011 on its paid up capital stood at Rs.0.31 as compared to last year's loss per share of Rs. 3.71. Balance Sheet The capital and reserves of your Company rose to Rs.10.97 billion as compared to Rs.7.01 billion at the end of last financial year. This was primarily due to a rights issue of Rs. 3.79 billion and profit for the year ended 30 June 2011. Your Company has continued to discharge its repayment obligations on all types of loans on time. The net current liabilities on 30 June 2011 stood at Rs.4,526 million as against Rs.4,310 million on 30 June 2010.
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DIRECTORS REPORT
Other Investments Bestway's investment in United Bank Limited continues to be highly profitable for the Company. The Bank's profit before tax for the year ended 31 December 2010 stood at Rs.17.7 billion as against Rs.14.4 billion for the corresponding period of last year which represents an increase of 22.9% year on year. We are delighted to inform you that the Bank paid out cash dividend of 50% for the year ended 31 December 2010 thus providing a return of Rs.468 million on your investment in the Bank. Plants' performance Your Company's management follows an elaborate plan of preventative maintenance, which it has adopted, right from the beginning. This proactive approach ensures efficient and stable operations with minimum disruptions. Our well-knit team of dedicated managers, engineers, technicians and other members of the management and administrative staff play key role in the successful implementation of this approach. During the year under review, both the cement plants and the Waste Heat Recovery plant operated satisfactorily. Quality Assurance Bestway Cement is a company driven by efficiency and quality consciousness. Strict quality control procedures are applied to ensure that these aims are achieved. Some of the best quality control equipment in Pakistan is in use at the plants. Apart from the usual equipment, Bestway's laboratories are equipped with state-of-the-art technology including X-ray Fluorescent Analyser and Diffractometer. Bestway Cement introduced this technology in
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Annual Report 2011
DIRECTORS REPORT
Pakistan for the first time. By virtue of this equipment, the Company has been able to consistently produce better quality cement than is currently available in the country. Marketing Bestway is the 2nd largest cement producer in Pakistan. Your Company continues to be among the top brands both in the domestic market and in Afghanistan and India where it is now firmly established as the best brand. Your Company has been able to maintain its status as a market leader due to its consistently superior quality, effective marketing strategy, customer care and sheer dedication of its marketing team. In recognition of its performance, your Company continues to win awards for being the leading exporter, including trophies from Rawalpindi and Sarhad Chambers of Commerce & Industry.
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DIRECTORS REPORT
Training and development The Company places great importance on the training, development and education of its personnel. In order to keep its workforce abreast with best operational techniques and practices, technical and general managerial training courses are organised for various departments and categories of personnel. Staff is also sent on courses, workshops and seminars organised externally by other institutions. The Company actively encourages and assists its employees in pursuit of professional development and career enhancement.
Health, Safety and Environment Your Company attaches highest priority to the health and safety of its personnel who are an essential and valuable component of its operations. Initiatives including safety meetings, incident reporting, safety audits, good housekeeping and hygiene controls are actively and consistently pursued to instil safe behaviour in all personnel. Bestway Cement actively pursues protection and up gradation of the environment by ensuring that its plants continue to comply with established environmental quality standards at all times. Our plants not only meet the stringent environmental quality standards prescribed by the Environment Protection Authority of Pakistan, they even surpass the international standards for emissions. Your Company always participates in various environment uplift programmes including the Tree Plantation drive each year by planting thousands of plants and trees in our factory areas and surrounding hills in order to contribute our share towards the improvement of environment. You would be delighted to learn that for the second year running your Company has been
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Annual Report 2011
DIRECTORS REPORT
given the prestigious Environment Excellence Award by the National Forum for Environment and Health
Social Responsibility Your Company regards itself as a responsible corporate citizen. Right from the outset, Bestway Cement has taken its social responsibilities, particularly towards the local community, very seriously and takes pride in its active participation in the development and welfare of the under-privileged. Bestway Foundation, the charitable trust of the Bestway Group to which your Company is a major contributor, was established in the year 1997. The Foundation is also certified from the Pakistan Centre for Philanthropy. Bestway Foundation's main goal is provision of education in rural communities. Quality education is fundamental to building up a strong and vibrant society. This aspect has long been neglected especially in the rural areas where masses are still deprived of good educational facilities. Bearing this in mind the Foundation has embarked upon construction of a brand new college building for girls in a far flung and backward area of Gujar Khan Tehsil to provide quality educational facilities to girls who would otherwise have had to go without higher education due to lack of a Girls College in the area. The building consisting of numerous classrooms, laboratories and facilities for extracurricular activities is nearing completion. Accommodation for the residence of the faculty members has also been provided. The project is being funded entirely by Bestway Foundation. In addition, the Foundation continues to provide scholarships to talented students who, for want of sufficient resources are unable to continue with their higher studies. Financial assistance is also provided to a large number of widows and indigents of the local community
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DIRECTORS REPORT
in the shape of monthly stipends. In the area of basic health, free medical facilities are provided to the local community through dispensaries located at our factory premises. Your Company also contributed generously towards flood relief activities during the year. Future Prospects The industry has had to contend with high fuel and power costs and interest rates for quite sometime. While fuel and power costs continue to increase, the interest rates seem to have passed their peak. With the consumer price inflation on the decline it is highly likely that the interest rates will also decline in the coming months. Given its high leveraging, lower interest rates bode well for your Company. The selling prices have continued to improve and further ascent is eminent. There also has been improvement in the law & order situation. These factors should result in higher domestic demand and decent profits for the industry, particularly your Company. On the export front, regional markets like the UAE are likely to remain depressed for the foreseeable future, while other markets like Afghanistan continue to generate good demand for Pakistani cement. Bestway is already firmly established as the leading brand in Afghanistan and India your Company will continue to expand its share in those markets. With smoother and increased movement of goods across Wagha Border likely in the near future, Indian market holds a lot of promise for your Company. Other markets like Central Asian States and parts of Africa are likely to continue to generate some demand for our cement. Despite various difficulties your Company was able to return to profitability during the year under review. Like always, your management is cognisant of the challenges that lie ahead and will continue to make all out efforts to ensure further growth and superior returns in the ensuing years. Corporate Governance Statement on Compliance with Code of Corporate Governance is annexed. Pattern of shareholding Pattern of shareholding as required under the Code of Corporate Governance is given in the accounts. Shares transacted by CEO, Directors, CFO, Company Secretary and their spouses and minor children
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Annual Report 2011
DIRECTORS REPORT
Shares transacted by the directors of the Company during the year under review are as follows:
Name
Increase during the year 1,333,333 2,392
Remarks
Arshad Mehmood Chaudhary Muhammad Irfan A. Sheikh

Presentation of Financial Statements
Right shares subscription Open market purchase
The financial statements prepared by the management of the Company fairly present its state of affairs, the results of its operations, cash flows and changes in equity. Books of Account The Company has maintained proper books of account. Accounting Policies Appropriate accounting policies have been adopted and consistently applied in preparation of financial statements and accounting estimates are based on reasonable and prudent judgement. Application of International Accounting Standards International Accounting Standards, as applicable in Pakistan, have been followed in preparation of financial statements. Internal Control System The system of internal controls is sound in design and has been effectively implemented. The system itself is also subject to continuous review for enhancement wherever and whenever necessary. Going Concern There are no doubts about the Company's ability to continue as a going concern. Listing Regulations There has been no material departure from the best practices of corporate governance, as detailed in the listing regulations.
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DIRECTORS REPORT
Financial highlights Key financial data for the last ten years is annexed. Board Meetings Attendance by each director in the 35 Board Meetings held during the year was as given below: No. of meetings attended Sir Mohammed Anwar Pervez 03 Zameer Mohammed Choudrey 07 Arshad Mehmood Chaudhary 01 Muhammad Irfan Anwar Sheikh 34 Mazhar Rafi 34 Ghulam Sarwar Malik 34 Mehmood Afzal 34 The directors who could not attend a Board Meeting were duly granted leave of absence from the Board in accordance with the Law. Auditors The present auditors, Messrs KPMG Taseer Hadi & Co., Chartered Accountants retire at the conclusion of the Meeting and, being eligible, have offered themselves for reappointment. The Audit committee of the Company has considered the matter and recommended the retiring auditors for reappointment. Acknowledgements The Directors wish to place on record their appreciation for the continued support, contribution and confidence demonstrated in the Company by its shareholders, members of staff, customers, suppliers, our Bankers particularly, Habib Bank Limited, Allied Bank Limited, MCB Bank Limited, United Bank Limited, Standard Chartered Bank (Pakistan) Limited, Faysal Bank Limited, The Bank of Punjab, Askari Bank Limited, Bank Al-Habib Limited, Silkbank Limited, HSBC Bank Middle East Limited, Habib Metropolitan Bank Limited, Soneri Bank Limited, NIB Bank Limited, Meezan Bank Limited, Bank Alfalah Limited, Barclays Bank PLC, Pakistan, National Bank of Pakistan and various Government agencies throughout the year. For and on behalf of the Board
Chief Executive 30 September 2011 Islamabad
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Annual Report 2011
CODE OF CORPORATE GOVERNANCE
This statement is being presented to comply with the Code of Corporate Governance contained in listing regulations of the Karachi Stock Exchange (Guarantee) Limited (KSE) for the purpose of establishing a framework of good governance, whereby a listed company is managed in compliance with the best practices of corporate governance. The Company has applied the 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 does not include independent non-executive directors and directors representing minority shareholders. 2. The directors have confirmed that none of them is serving as a director in more than ten listed companies, including this Company. 3. All the directors of the Company are registered as taxpayers and none of them has defaulted in payment of any loan to a banking company, a DFI or an NBFI or, being a member of a stock exchange, has been declared as a defaulter by that stock exchange. 4. No casual vacancy occurred in the Board of Directors of the Company during the year ended June 30, 2011. 5. Bestway Group enjoys an enviable reputation for having high ethical standards. The Board considers this to be central to the Company's success and goodwill and is fully conscious of its responsibility to ensure adherence to these ethical standards. The Company has prepared Statement of Ethics and Business Practices which has been duly communicated, acknowledged and signed by all the directors and employees of the Company. 6. The Board has developed a vision/mission statement, overall corporate strategy and significant policies of the Company. A complete record of particulars of significant policies along with the dates on which they were approved or amended has been maintained. 7. All the powers of the Board have been duly exercised and decisions on material transactions, including appointment and determination of remuneration and terms and condtions of employment of CEO and other executive directors, have been taken by the Board. 8. The meetings of the Board were presided over by the Chairman and, in his absence, by a director elected by the Board for this purpose and the Board met at least once in every quarter. Written notices of the Board meetings, along with agenda and working papers, were circulated at least seven days before the meetings. The minutes of the meetings were appropriately recorded and circulated. 9. The Directors of the Company have given a declaration that they are aware of their duties, powers and responsibilities under the Companies Ordinance, 1984 and the listing regulations of the stock exchange. The directors also attended orientation courses during the year for the changes in the
Annual Report 2011
16
corporate legislatures and to apprise their duties and responsibilities. 10. 11. 12. 13. 14. 15. The Board has approved appointment of CFO and Company Secretary, including their remuneration and terms and conditions of employment, as determined by the CEO. The Directors' Report for the FY 2010-11 has been prepared in compliance with the requirements of the Code and fully describes the salient matters required to be disclosed. The financial statements of the Company were duly endorsed by the CEO and the CFO before approval of the Board. The directors, CEO and executives do not hold any interest in the shares of the Company other than that disclosed in the pattern of shareholdings. The Company has complied with all the corporate and financial reporting requirements of the Code. The Board has formed an audit committee. It comprises of three members, and all the members including the Chairman of the Committee are executive directors and the appointment has been made with the approval of Board of Directors including nonexecutive directors. The meetings of the audit committee were held at least once every quarter prior to approval of interim and final results of the Company and as required by the Code. The terms of reference of the committee have been formed and advised to the committee for compliance. The Company has had a fully functional audit department since inception. The members of the department are considered suitably qualified and experienced for the purpose and are conversant with the policies and procedures of the Company and they are involved in the internal audit function on a full time basis. 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, 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 the International Federation of Accountants' (IFAC) guidelines on the code of ethics as adopted by the Institute of Chartered Accountants of Pakistan. The statutory auditors or the persons associated with them, have not been appointed to provide other services except in accordance with the listing regulations of the KSE and the auditors have confirmed that they have observed IFAC guidelines in this regard. The management of the Company is committed to good corporate governance and appropriate steps are being taken to comply with best practices. Related party transactions have been placed before the audit committee and approved by the Board of Directors to comply with the requirements of listing regulation number 37 of the Karachi Stock Exchange (Guarantee) Limited.
16.
17.
18.
19.
20. 21.
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Annual Report 2011
22.
We confirm that all other material principles contained in the Code have been complied with.
For and on behalf of Board
Zameer M. Choudrey Chief Executive
Annual Report 2011
18
19
2011 2009 2008 2007 2006 2005 2004 2003 2010 2002
Annual Report 2011

13,332 10,419 2,914 2,405 2,489 424 179 14,814 10,044 4,770 3,163 2,286 1,205 974 7,487 6,479 1,008 587 1,236 (419) 169 5,649 4,637 1,013 871 1,212 56 52 2,666 1,596 1,070 1,009 139 994 679 13,333 11,564 1,769 571 2,223 (1,412) (1,209) Rupees in millions 4,544 3,536 2,250 1,987 2,294 1,549 2,144 1,431 469 140 1,730 1,298 1,226 931 1,792 1,334 458 405 269 159 113 1,738 1,118 621 570 245 329 236
Year
Operating Results Turnover (net) Cost of sales Gross profit Operating profit Financial charges Profit/(Loss) before taxation Profit/(Loss) profit after taxation
KEY OPERATING AND FINANCIAL DATA FOR TEN YEARS
Balance Sheet Shareholders' funds Operating fixed assets Long term finance Net current liabilities 10,972 16,459 8,221 4,526 8,216 16,991 11,786 2,606 6,857 16,004 12,507 1,622 5,544 14,175 12,380 607 7,006 16,896 11,571 4,310
Rupees in millions 4,850 3,597 10,689 5,069 9,459 3,148 624 221
2,859 3,200 1,895 80
2,181 3,306 1,701 1,289
2,213 3,287 1,579 168
Significant Financial Ratios Gross profit ratio Net profit ratio Interest coverage ratio Return on equity Earnings/(Loss) per share Dividend 21.86 1.34 1.17 3.10 0.57 32.20 6.57 1.53 29.90 3.17 13.46 2.26 0.66 7.09 0.59 13.27 (9.07) 0.36 (37.11) (3.71) -
17.93 0.92 1.05 2.02 0.20 -
Percentages 50.48 43.81 26.98 26.33 4.69 10.27 52.37 43.75 5.24 3.98 10.00 10.00
40.14 25.47 8.15 35.10 3.19 10.00
25.56 6.31 1.59 5.84 0.58 7.50
35.73 13.58 2.34 12.20 1.22 7.50
Despatches of cement 3,208 4,253
3,390
2,685
In thousand metric tonnes 2,250 1,203 1,206
1,039
837
650
REVIEW REPORT
To the Members on Directors Statement of Compliance with Best Practices of Code of Corporate Governance
We have reviewed the DirectosStatement of Compliance with the Best Practices( the Statement) contained in the Code of Corporate Governance prepared by the Board of Directors of Bestway Cement Limited, (the Company) to comply with the Listing Regulations No.35 of Karachi Stock Exchange(Guarantee) Limited 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 Companys 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 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 obtained 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 Boards statement covers all risks or controls, or to form an opinion on the effectiveness of such control, the Companys corporate governance procedures and risks. Further, Sub-Regulation (xiii a) of Listing Regulations 35 notified by the Karachi Stock Exchange (Guarantee) Limited vide circular KSE/N-269 dated January 19, 2009 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 arms length transactions and transactions which are not executed at arms 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 procedure to determine whether the related party transactions were undertaken at arms length price or not. 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 Companys compliance, in all material respects, with the best practices contained in the Code of Corporate Governance as applicable to the Company for the year ended June 30, 2011.
Islamabad 30 September 2011
KPMG Taseer Hadi & Co. Chartered Accountants Riaz Pesnani
Annual Report 2011
20
AUDITORS REPORT TO THE MEMBERS
We have audited the annexed unconsolidated balance sheet of Bestway Cement Limited ( the Company)as at 30 June 2011 and the related unconsolidated profit and loss account, unconsolidated statement of comprehensive income, unconsolidated cash flow statement and unconsolidated 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 Companys management to establish and maintain a system of internal control, and prepare and present the above said statements in conformity with the approved accounting standards and the requirements of the Companies Ordinance, 1984. Our responsibility is to express an opinion on these statements based on our audit. We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the above said statements are free of any material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the above said statements. An audit also includes assessing the accounting policies and significant estimates made by management, as well as, evaluating the overall presentation of the unconsolidated financial statements. We believe that our audit provides a reasonable basis for our opinion and, after due verification, we report that: (a) (b) in our opinion, proper books of account have been kept by the Company as required by the Companies Ordinance, 1984; in our opinion: (i) the unconsolidated balance sheet and unconsolidated 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; the expenditure incurred during the year was for the purpose of the Companys business; and the business conducted, investments made and the expenditure incurred during the year were in accordance with the objects of the Company;
(ii) (iii) (c)
in our opinion and to the best of our information and according to the explanations given to us, the unconsolidated balance sheet, unconsolidated profit and loss account, unconsolidated statement of comprehensive income, unconsolidated cash flow statement and unconsolidated 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 respectively give a true and fair view of the state of the Companys affairs as at 30 June 2011 and of the profit, its cash flows and changes in equity for the year then ended; and in our opinion, no Zakat was deductible at source under the Zakat and Ushr Ordinance, 1980 (XVIII of 1980). Islamabad 30 September, 2011 KPMG Taseer Hadi & Co. Chartered Accountants
Engagement Partner: Riaz Pesnani
(d)
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Annual Report 2011
UNCONSOLIDATED BALANCE SHEET AS AT 30 JUNE 2011
Note SHARE CAPITAL AND RESERVES Authorised share capital 700,000,000 (2010: 350,000,000) ordinary shares of Rs. 10 each Issued, subscribed and paid up share capital Share premium Unappropriated profit NON CURRENT LIABILITIES Long term financing - secured Liability against assets subject to finance lease - secured Long term murabaha - secured Long term musharaka - secured Deferred liabilities 6 7 8 9 10 4 5
2011 Rupees
2010 Rupees
7,000,000,000 5,782,019,740 3,225,770,245 1,964,378,938 10,972,168,923
3,500,000,000 3,257,475,910 1,963,498,330 1,785,148,713 7,006,122,953
6,155,833,339 109,754,039 1,765,000,000 300,000,000 477,018,764 8,807,606,142
9,686,358,893 154,309,555 1,885,000,000 386,112,881 12,111,781,329
CURRENT LIABILITIES Trade and other payables Markup accrued Short term borrowings - secured Current portion of long term financing Current portion of liability against assets subject to finance lease Current portion of long term murabaha
11 12 6 7 8
1,630,407,258 195,752,140 4,104,960,036 3,530,555,556 47,802,130 120,000,000 9,629,477,120 29,409,252,185
1,558,426,981 278,889,458 3,584,835,474 3,419,444,445 43,433,792 120,000,000 9,005,030,150 28,122,934,432
CONTINGENCIES AND COMMITMENTS
13
The annexed notes from 1 to 40 form an integral part of these unconsolidated financial statements.
CHIEF EXECUTIVE
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Annual Report 2011
UNCONSOLIDATED BALANCE SHEET AS AT 30 JUNE 2011
Note NON CURRENT ASSETS Property, plant and equipment Intangible assets Investment property Long term investments Long term advances Long term deposits 14 15 16 17 18 19
2011 Rupees
2010 Rupees
16,433,331,467 25,596,250 345,814,453 7,409,408,407 20,015,000 71,450,847 24,305,616,424
16,866,396,926 30,000,000 340,715,834 6,096,182,548 24,018,000 70,450,847 23,427,764,155
CURRENT ASSETS Stores, spare parts and loose tools Stock in trade Trade debts - considered good Advances Deposits and prepayments Interest accrued Other receivables Due from Government agencies Bank balances 20 21 22 23 24 25 26 27 2,377,548,437 1,190,297,675 276,921,829 227,774,295 31,649,484 76,190 59,121,344 826,104,396 114,142,111 5,103,635,761 2,167,264,132 785,462,819 297,188,037 395,685,381 7,619,146 62,490 30,579,142 823,532,386 187,776,744 4,695,170,277
29,409,252,185
28,122,934,432 -
DIRECTOR & CFO
Annual Report 2011
24
UNCONSOLIDATED PROFIT AND LOSS ACCOUNT FOR YEAR ENDED 30 JUNE 2011
Note Turnover - net Cost of sales Gross profit Administrative expenses Distribution cost Finance cost Other operating income 30 31 32 33 28 29
2011 Rupees 13,332,366,906 10,418,537,089 2,913,829,817 157,092,809 351,032,163 2,489,299,031 (507,731,792) 2,489,692,211 424,137,606
2010 Rupees 13,333,062,606 11,564,255,751 1,768,806,855 123,548,579 1,074,655,856 2,223,124,658 (240,527,682) 3,180,801,411 (1,411,994,556) 202,558,046 (1,209,436,510) Restated (3.95)
Profit / (loss) before taxation Taxation Profit / (loss) for the year 34
(244,907,381) 179,230,225
Earnings / (loss) per share - basic and diluted
37
0.57
CHIEF EXECUTIVE
DIRECTOR & CFO
25
Annual Report 2011
UNCONSOLIDATED STATEMENT OF COMPRIHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2011
2011 Rupees Profit / (loss) for the year Other comprehensive income for the year Total comprehensive income for the year 179,230,225 179,230,225
2010 Rupees (1,209,436,510) (1,209,436,510)
CHIEF EXECUTIVE
DIRECTOR & CFO
Annual Report 2011
26
UNCONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2011
2011 Rupees CASH FLOWS FROM OPERATING ACTIVITIES Profit / (loss) before taxation Adjustments for: Gain on disposal of operating fixed assets Depreciation Amortization Rental income from investment property Profit on deposit accounts Profit on held to maturity investment Gain on remeasurement of investment property to fair value Finance cost Provision for staff retirement benefits Trial period electricity generation from waste heat recovery project Dividend income 424,137,606 (1,431,291) 712,332,951 4,503,750 (21,172,260) (493,248) (5,098,619) 2,482,388,585 34,426,074 (468,248,720) 2,737,207,222 3,161,344,828 (210,284,305) (404,834,856) 20,266,208 167,911,086 (24,030,338) (28,542,202) 357,706 70,644,497 (408,512,204) 2,752,832,624 (2,565,525,903) (13,526,880) (177,830,408) (2,756,883,191) (4,050,567) (157,725,711) (100,000) (72,786,279) (50,507,380) 3,183,169 22,508,040 4,003,000 479,548 (1,000,000) 468,248,720 (1,313,225,859) (1,096,922,752) (3,419,414,443) 300,000,000 (40,187,178) (120,000,000) 3,786,815,745 520,124,562 1,027,338,686 (73,634,633) 187,776,744 114,142,111
2010 Rupees (1,411,994,556) (1,370,555) 666,723,685 (12,797,185) (723,668) (8,802) (4,375,685) 2,223,124,658 34,739,153 89,922,000 (212,840,328) 2,782,393,273 1,370,398,717 (387,603,799) 270,845,562 287,877,868 (62,613,417) 1,421,961 (3,032,607) 1,903,229 (1,749,960) 207,232,516 314,281,353 1,684,680,070 (2,285,526,806) (17,387,403) (304,892,008) (2,607,806,217) (923,126,147) (95,922,864) (577,524,924) 9,797,148 3,263,670 8,655,385 4,003,000 751,119 212,840,328 (105,543,751) (539,680,889) 2,050,000,000 (3,570,833,332) (34,962,793) 1,675,000,000 (120,000,000) 1,199,088,100 1,198,291,975 (264,515,061) 452,291,805 187,776,744
(Increase) / decrease in current assets Stores, spare parts and loose tools Stock in trade Trade debts Advances Deposits and prepayments Other receivables Due from Government agencies Increase / (decrease) in current liabilities Long term advances Trade and other payables Cash generated from operations Finance cost paid Staff retirement benefits paid Income tax paid Net cash used in operating activities CASH FLOWS FROM INVESTING ACTIVITIES Additions in operating fixed assets Additions in intangible assets Additions in capital work in progress (Increase) / decrease in stores held for capitalization Proceeds from sale of operating fixed assets Rent received from investment property Decrease in long term advances Profit on deposit accounts received Addition to long term deposits Dividend received Additions in long term investments Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Long term financing - disbursements - repayments Long term musharaka - disbursements Liability against asset subject to finance lease - repayments Long term murabaha - disbursements - repayments Proceeds against issue of right shares Increase in short term borrowings Net cash generated from financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at beginning of the year Cash and cash equivalents at end of the year The annexed notes from 1 to 40 form an integral part of these unconsolidated financial statements. CHIEF EXECUTIVE
DIRECTOR & CFO
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Annual Report 2011
Issued, subscribed and paid up share capital Rupees 3,257,475,910 1,963,498,330 2,994,585,223 8,215,559,463 Rupees Rupees Rupees
Capital reserve Share premium Total
Revenue reserve Unappropriated profit
Balance at 01 July 2009
Total comprehensive income for the year 3,257,475,910 3,257,475,910 1,963,498,330 1,963,498,330 1,785,148,713 1,785,148,713 (1,209,436,510) (1,209,436,510) (1,209,436,510) (1,209,436,510) 7,006,122,953 7,006,122,953
Loss for the year Total comprehensive income for the year - (loss)
Balance at 30 June 2010
Total comprehensive income for the year 179,230,225 179,230,225 179,230,225 179,230,225
Profit for the year Total comprehensive income for the year
Transactions with owners, recorded directly in equity 2,524,543,830 2,524,543,830 5,782,019,740 1,262,271,915 1,262,271,915 3,225,770,245 1,964,378,938 2,524,543,830 1,262,271,915 3,786,815,745 10,972,168,923
Issue of share capital Premium on issue of right shares Total transactions with owners, recorded directly in equity
UNCONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2011
Annual Report 2011
CHIEF EXECUTIVE
DIRECTOR & CFO
28
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 2011
1.
THE COMPANY AND ITS OPERATIONS Bestway Cement Limited ("the Company") is a public company incorporated in Pakistan on December 22, 1993 under the Companies Ordinance, 1984 and is listed on the Karachi Stock Exchange (Guarantee) Limited since April 9, 2001. The Company is engaged in production and sale of cement. The Company's registered office is situated at Bestway Building, 19-A, College Road F-7 Markaz, Islamabad.
2. 2.1
BASIS OF PREPARATION Statement of compliance These unconsolidated financial statements have been prepared in accordance with the approved accounting standards as applicable in Pakistan. Approved accounting standards comprise of such International Financial Reporting Standards (IFRS) issued by International Accounting Standard 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. These unconsolidated financial statements are separate financial statements of the company in which investment in subsidiary and associates is accounted for on the basis of direct equity interest rather than on the basis of reported results.
2.2
Basis of measurement These unconsolidated financial statements have been prepared on the historical cost basis except for the following; - investment property have been measured at fair value; and - liability related to staff retirement benefit are measured at present value.
2.3
Functional and presentation currency Items included in these unconsolidated financial statements are measured using the currency of the primary economic environment in which the Company operates. The unconsolidated financial statements are presented in Pakistan Rupees, which is the Company's functional and presentation currency
2.4
Use of estimates and judgments The preparation of unconsolidated financial statements in conformity with the approved accounting standards requires management to make judgments, estimates and assumptions that affect the application of policies and 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 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
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Annual Report 2011
accounting estimates are recognized in the period in which estimates are 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. Information's about significant areas of estimation, uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the unconsolidated financial statements is discussed in the ensuing paragraph. 2.4.1 Property, plant and equipment The Company reviews the useful lives and residual value of property, plant and equipment on a regular basis. Any change in estimates in future years which might affect the carrying amounts of the respective items of property, plant and equipments with a corresponding effect on the depreciation charge and impairment loss. 2.4.2 Provision for inventory obsolescence and doubtful receivables The Company reviews the carrying amount of stores, spare parts and loose tools and stock in trade on a regular basis and provision is made for obsolescence if there is any change in usage pattern and physical form of related stores, spare parts and loose tools. Further the carrying amounts of trade and other receivables are assessed on a regular basis and if there is any doubt about the realisability of these receivables, appropriate amount of provision is made. 2.4.3 Taxation The Company takes into account the current income tax law and decisions taken by the taxation authorities. Instances where the Company's views differ from the views taken by the income tax department at the assessment stage and where the Company considers that its view on items of material nature is in accordance with law, the amounts are shown as contingent liabilities. The Company also regularly reviews the trend of proportion of incomes between Presumptive Tax Regime income and Normal Tax Regime income and the change in proportions, if significant, is accounted for in the year of change. 2.4.4 Provision of staff retirement gratuity The Company adopts certain actuarial assumptions as disclosed in note 10.2 to these unconsolidated financial statements for determination of present value of defined benefit obligations. Any changes in these assumptions in future years might affect unrecognized gains and losses in those years. 2.4.5 Provisions and contingencies The Company reviews the status of all the legal cases on a regular basis. Based on the expected outcome and lawyers' judgments, appropriate disclosure or provision is made. 2.4.6 Impairment of financial assets In making an estimates in future cash flows from the Companys financial assets including investments in subsidiaries and associates, the management considers estimated future dividend
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30
stream and their terminal value. 2.5 Standards, interpretations and amendments to approved accounting standards that are not yet effective The following standards, amendments and interpretations of approved accounting standards will be effective for accounting periods beginning from the dates specified below: IAS 24 Related Party Disclosures (revised 2009) (effective for annual periods beginning on or after 1 January 2011). The revision amends the definition of a related party and modifies certain related party disclosure requirements for government-related entities. The amendment would result in certain changes in disclosures. 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 assets economic benefits over the life of the asset. The amendment has no impact on unconsolidated financial statements of the Company. Amendments to IFRIC 14 IAS 19 The Limit on a Defined Benefit Assets, Minimum Funding Requirements and their Interaction (effective for annual periods beginning on or after 1 January 2011). These amendments remove unintended consequences arising from the treatment of prepayments where there is a minimum funding requirement. These amendments result in prepayments of contributions in certain circumstances being recognised as an asset rather than an expense. This amendment has no impact on Company's unconsolidated financial statements. Improvements to IFRSs 2010 In May 2010 the IASB issued improvements to IFRSs 2010 which comprise of 11 amendments to 7 standards. Effective dates, early application and transitional requirements are addressed on a standard by standard basis. The majority of amendments are effective for annual periods beginning on or after 1 January 2011. The amendments include list of events or transactions that require disclosure in the interim financial statements, add an explicit statement that qualitative disclosure should be made in the context of the quantitative disclosures to better enable users to evaluate an entitys exposure to risks arising from financial instruments and fair value of award credits under the customer loyalty programmes to take into account the amount of discounts or incentives that otherwise would be offered to customers that have not earned the award credits. Certain of these amendments will result in increased disclosures in the unconsolidated financial statements.. IAS 27 Separate Financial Statements (2011) - (effective for annual periods beginning on or after 1 January 2013). IAS 27 (2011) supersedes IAS 27 (2008). IAS 27 (2011) carries forward the existing accounting and disclosure requirements for separate financial statements, with some minor clarifications. The amendments have no 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
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Annual Report 2011
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 unconsolidated 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 does not plan to adopt this standard early and the extent of the impact has not been determined. 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 unconsolidated financial statements of the Company. Disclosures Transfers of Financial Assets (Amendments to IFRS 7) - (effective for annual periods beginning on or after 1 July 2011). The amendments introduce new disclosure requirements about transfers of financial assets, including disclosures for financial assets that are not derecognised in their entirety; and financial assets that are derecognised in their entirety but for which the entity retains continuing involvement. The amendments have no impact on unconsolidated financial statements of the Company. 3. SIGNIFICANT ACCOUNTING POLICIES The accounting policies set out below have been applied consistently to all periods presented in these unconsolidated financial statements. 3.1 Staff retirement benefits Gratuity The Company maintains an unfunded gratuity scheme for all its eligible employees. Annual provision for gratuity is made on the basis of actuarial valuation carried out by using the Projected Unit Credit Method. Latest valuation was conducted as at 30 June 2011. The amount recognised in the balance sheet represents the present value of defined benefits as adjusted for unrecognized actuarial gains and losses. The Company uses the corridor approach as defined in IAS 19 " Employee Benefits" for recognition of actuarial gains or losses. The actuarial gains / losses in excess of corridor limit (10% of higher of present value of obligation and fair value of plan assets) are recognized over the expected remaining working life of its employees. Past service cost resulting from changes to defined benefit plans to the extent the benefits are already vested is recognised immediately and remaining unrecognised past service cost is
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recognised as an expense on a straight line basis over the average period until the benefits become vested. Compensated absences The Company recognises provision for compensated absences payable to employees at the time of retirement / termination of service. The provision is determined on the basis of last drawn salary and accumulated leaves balance at the reporting date. 3.2 Taxation Income tax expense comprises current and deferred tax. Income tax is recognized in profit and loss account except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity. Current The Company accounts for current taxation on the basis of taxable income at the current rates of taxation after taking into account tax credits and rebates, if any, in accordance with the provisions of the Income Tax Ordinance, 2001. Deferred A deferred tax asset is recognized to the extent that it is probable that future taxable profits will be available against which the temporary difference, unused tax losses and tax credits can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Deferred tax is recognized using the balance sheet liability method, providing for temporary difference between the carrying value of assets and liabilities for financial reporting purposes and the amount used for taxation purposes. Deferred tax is measured at the tax rates that are expected to be applied to temporary difference when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authorities on the same taxable entity, but the company intend to settle current tax liabilities and assets on a net basis or the tax assets and liabilities will be realised simultaneously. The effects on deferred taxation of the portion of income expected to fall under presumptive tax regime is adjusted in accordance with the requirement of Accounting Technical Release - 27 of the Institute of Chartered Accountants of Pakistan. Deferred tax is charged or credited to income. 3.3 Provisions A provision is recognized in the unconsolidated 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.
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3.4
Borrowing cost Markup, interest and other charges on borrowings are capitalized up to the date when the qualifying assets are substantially ready for their intended use. Borrowing cost is included in the related property, plant and equipment acquired / constructed out of the proceeds of such borrowings. All other markup, interest and related charges are charged to the unconsolidated profit and loss account in the period in which they are incurred.
3.5
Property, plant and equipment Tangible assets Owned These are stated at cost, which includes purchase price, import duties, directly attributable costs and related borrowing costs less accumulated depreciation and impairment loss, if any. Freehold land is stated at cost less impairment loss, if any. Normal repairs and maintenance are charged to the unconsolidated profit and loss account as and when incurred whereas major improvements and modifications are capitalized Capital work in progress is stated at cost including where appropriate, related borrowing costs less impairment loss, if any. These costs are transferred to operating fixed assets as and when assets are available for use. Depreciation is charged to income applying the reducing balance method except leasehold land, buildings and plant and machinery. Buildings and plant and machinery are depreciated on straight line method. Leasehold land is amortized over the remaining period of the lease. Rates of depreciation / estimated useful lives are mentioned in note 14.1. Depreciation is charged on prorated basis from the month in which an asset is acquired or capitalized, while no depreciation is charged for the month in which the asset is disposed off. Days in excess of fifteen days are considered as full month for the purpose of calculation of depreciation. Gains and losses on disposals of property, plant and equipment are taken to the unconsolidated profit and loss account. Leased Leases in terms of which the Company assumes substantially all the risks and rewards of ownership are classified as finance lease. Assets acquired by way of finance lease are stated at amounts equal to the lower of their fair value and the present value of minimum lease payments at the inception of the lease less accumulated depreciation and impairment losses, if any. Outstanding obligations under the lease less finance charges allocated to the future periods are shown as liability. Depreciation on assets held under finance lease is charged in a manner consistent with that for depreciable assets which are owned by the Company.
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3.6
Intangible assets An intangible asset is recognised if it is probable that the future economic benefits that are attributable to the asset will flow to the enterprise and that the cost of such asset can also be measured reliably. These are stated at cost less accumulated amortisation and impairment losses, if any. Amortisation of intangible assets, having finite useful life, is charged by applying straight line method, so as to write off the cost of assets at amortisation rate as mentioned in note 15 to the unconsolidated financial statements. Subsequent expenditure is capitalised only when it increases the future economic benefit embodied in the specific asset to which it relates. All other expenditure is recognised in unconsolidated profit and loss account as incurred.
3.7
Investment property Investment property is stated at its fair value at the balance sheet date. Gains or losses, if any, arising from changes in the fair value of investment property are recognized as profit or loss for the period in which they arise.
3.8
Impairment Non-financial assets The carrying amount of the Company's assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated. Impairment losses are recognized as expense in the profit and loss account. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount and loss is reversed only to the extent that the assets carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. For non-financial assets, financial assets measured at amortized cost, available-for-sale financial assets that are debt securities, the reversal is recognised in unconsolidated profit and loss account. 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.
3.9
Foreign currency transactions Foreign currency transactions are recorded on exchange rates prevailing on the dates of transactions. Monetary assets and liabilities in foreign currencies are translated at the exchange
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Annual Report 2011
rates prevailing at the balance sheet date. Exchange gains and losses are included in the profit and loss account. 3.10 Investments Investments in subsidiaries and associated companies Subsidiaries are those enterprises in which the Company directly or indirectly controls, beneficially owns or holds more than 50% of the voting securities or otherwise has power to elect and / or appoint more than 50% of its directors. Associates are those entities in which the Company has significant influence and which is neither a subsidiary nor a joint venture of the Company . Investments in subsidiaries and associates are stated at cost and the carrying amount is adjusted for impairment, if any. Held to maturity investments Investments with fixed or determinable payments and fixed maturity and where the Company has positive intent and ability to hold to maturity are classified as held to maturity. These are initially recognized at cost and are subsequently carried at amortized cost using the effective interest rate method. 3.11 Stores, spare parts and loose tools Stores, spare parts and loose tools are valued at weighted average cost except for items in transit which are stated at cost incurred upto the balance sheet date less impairment, if any. For items which are slow moving and/ or identified as surplus to the Company's requirements, adequate provision is made for any excess book value over estimated net realizable value. The Company reviews the carrying amount of Stores, spare parts and loose tools on a regular basis and provision is made for obsolescence. 3.12 Stock in trade Stocks of raw materials, work in process and finished goods are valued at the lower of weighted average cost and net realisable value. Cost of work in process and finished goods comprises of direct materials, labour and appropriate manufacturing overheads. Net realisable value signifies estimated selling price less costs necessary to be incurred to effect such sale. 3.13 Revenue recognition Revenue from sales is recognized on dispatch of goods when significant risks and rewards of ownership are transferred to the buyer. Return on investments is recognised on effective yield method. Dividend income is recognized when the right to receive such income is established. Rental income on investment property is recognised when due. 3.14 Markup bearing borrowings Markup bearing borrowings are recognized initially at cost, less attributable transaction costs.
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Subsequent to initial recognition, markup bearing borrowings are stated at original cost less subsequent repayments, while the difference between the original recognized amounts (as reduced by periodic payments) and redemption value is recognized in the profit and loss account over the period of borrowings on an effective rate basis. The borrowing cost on qualifying asset is included in the cost of related asset as explained in note 3.4. 3.15 Financial instruments Financial assets and liabilities are recognized in the balance sheet when the Company becomes a party to the contractual provisions of an instrument. Financial assets are derecognised when the Company looses control of the contractual rights that comprise the financial asset. The Company de-recognizes the financial assets and liabilities when it ceases to be a party to such contractual provision of the instruments. Any gain or loss on derecognition of the financial assets and financial liabilities is taken to profit and loss account. Trade and other payables Liabilities for trade and other payables are carried at cost which is the fair value of the consideration to be paid in future for goods and services, whether or not billed to the Company. Trade debts and other receivables Trade debts and other receivables are recognized at original invoice amount less allowance for estimated irrecoverable amounts. Known bad debts are written off, when identified. Offsetting of financial assets and financial liabilities Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if the Company has a legally enforceable right to setoff the recognised amounts and intends either to settle on a net basis or to realize the assets and settle the liabilities simultaneously. 3.16 Cash and cash equivalents Cash and cash equivalents are carried in the balance sheet at cost. For the purpose of cash flow statement, cash and cash equivalents comprise cash and bank balance, demand deposits, other short term highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change. 3.17 Dividend Dividend distribution to the shareholders is recognised as liability in the period in which it is declared. 3.18 Earnings per share The Company presents basic and diluted earnings per share (EPS). Basic EPS is calculated by dividing the profit and loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit and loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, adjusted for the effects of all dilutive potential ordinary shares.
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4.
Issued, subscribed and paid up share capital

2011 2010 Number of shares 514,163,552 64,038,422 578,201,974 261,709,169 Ordinary shares of Rs.10 each issued for cash 64,038,422 Ordinary shares of Rs. 10 each issued as fully paid bonus share 325,747,591 Total 2011 Rupees 5,141,635,520 640,384,220 5,782,019,740 2010 Rupees 2,617,091,690 640,384,220 3,257,475,910
Bestway (Holdings) Limited, U.K. is the parent company controlling 319,885,740 i.e. 55.32% shares (2010: 222,358,381 i.e. 68.26% shares) of the Company. 5. Share premium The Board of Directors of the Company in their meeting held on 22 March 2011 announced issuance of 0.775 right share for every share held at a premium of Rs. 5 per share and during the year 252,454,383 ordinary shares of Rs.10 each were issued accordingly.
6.
Long term financing - secured Loans from banking companies Syndicate term finance facilities Current portion of long term financing
Note 6.1 6.2
2011 Rupees 3,376,388,889 6,310,000,006 9,686,388,895 (3,530,555,556) 6,155,833,339 687,500,000 888,888,889 1,800,000,000 3,376,388,889 860,000,000 800,000,006 2,600,000,000 2,050,000,000 6,310,000,006
2010 Rupees 4,362,500,000 8,743,303,338 13,105,803,338 (3,419,444,445) 9,686,358,893 962,500,000 1,000,000,000 2,400,000,000 4,362,500,000 1,719,970,000 1,333,333,338 3,640,000,000 2,050,000,000 8,743,303,338
6.1
Loans from banking companies Term Finance from MCB Bank Limited Term Finance from Allied Bank Limited Term Finance from Habib Bank Limited 6.1.1 6.1.2 6.1.3
6.2
Syndicate term finance facilities Term finance from syndicate Term finance from syndicate Term finance from syndicate Term finance from syndicate 6.2.1 6.2.2 6.2.3 6.2.4
6.1.1 This represents term finance facility of Rs. 1,100 million. This facility is repayable in 08 equal semi annual installments starting from April 2010. Markup is payable on quarterly basis at three months' KIBOR plus 0.55% (2010: three months' KIBOR plus 0.55%) per annum. The facility is secured by first pari passu hypothecation charge on all present and future assets excluding land and buildings of the Company for an amount of Rs. 1,283.34 million (2010: Rs. 1,466.67 million). 6.1.2 This represents term finance facility of Rs. 1,000 million. This facility is repayable in 09 equal semi annual installments starting from June 2011. Markup is payable on semi annual basis at six months' KIBOR plus 2.45% (2010: six months' KIBOR plus 2.45%) per annum. The facility is secured by
Annual Report 2011
38
first pari passu hypothecation charge on all present and future assets excluding land and buildings of the Company for an amount of Rs. 1,333.34 million (2010: Rs. 1,333.34 million). 6.1.3 This represents term finance facility of Rs. 3,000 million. This facility is repayable in 10 equal semi annual installments starting from December 2009. Markup is payable on quarterly basis at three months' KIBOR plus 1.25% (2010: three months' KIBOR plus 1.25%) per annum. The facility is secured by first pari passu hypothecation charge on all present and future current and movable assets of the Company and equitable mortgage ranking pari passu charge over the immovable assets of the Company including land and buildings for an amount of Rs. 3,200 million (2010: Rs. 4,000 million). This represents a syndicated term finance facility of Rs. 4,300 million from a syndicate of Habib Bank Limited, MCB Bank Limited, The Bank of Punjab, Allied Bank Limited and Standard Chartered Bank (Pakistan) Limited with the participation of Rs. 1,500 million, Rs. 1,200 million, Rs. 600 million, Rs. 500 million and Rs. 500 million respectively. This facility is repayable in 10 equal semi annual installments starting from November 2007. Markup is payable on semi annual basis at six months' KIBOR plus 1.10% (2010: six months' KIBOR plus 1.10 %) per annum. The facility is secured by first pari passu hypothecation charge on all present and future assets of the Company and first pari passu equitable mortgage over immovable properties of the Company for an amount of Rs. 2,293 million (2010: Rs. 4,586.67 million) in favour of syndicate. This represents a syndicated term finance facility of Rs. 3,200 million from a syndicate of Habib Bank Limited, MCB Bank Limited and Allied Bank Limited with the participation of Rs. 1,000 million, Rs. 1,000 million, and Rs. 1,200 million respectively. This facility is repayable in 12 equal semi annual installments starting from May 2007. Markup is payable on quarterly basis at six months' KIBOR plus 1.25 % (2010: six months' KIBOR plus 1.25 %) per annum. The facility is secured by first pari passu hypothecation charge on all the present and future assets of the Company and first pari passu equitable mortgage over immovable properties of the Company for an amount of Rs. 1,777.79 million (2010: Rs. 2,844.44 million) in favour of syndicate and pledge over 85.29% shares of Mustehkam Cement Limited. This represents a syndicated term finance facility of Rs. 5,200 million from a syndicate of Allied Bank Limited, Bank Alfalah Limited, Standard Chartered Bank (Pakistan) Limited, Askari Bank Limited, Faysal Bank Limited , Habib Bank Limited, Silk Bank Limited, HSBC Bank Middle East Limited, Bank Al Habib Limited, Habib Metropolitan Bank Limited and Soneri Bank Limited with the participation of Rs. 550 million, Rs. 1,000 million, Rs. 600 million, Rs. 500 million, Rs. 500 million, Rs. 500 million, Rs. 500 million, Rs. 400 million, Rs. 300 million, Rs. 250 million and Rs. 100 million respectively. This facility is repayable in 10 equal semi annual installments starting from April 2009. Markup is payable on semi annual basis at rate of six months' KIBOR plus 2.05 % (2010: six months' KIBOR plus 2.05 %) per annum. The facility is secured by first pari passu hypothecation charge on all present and future assets of the Company and equitable mortgage over immovable properties of the Company for an amount of Rs. 4,786.67 million (2010: Rs. 6,933.33 million).
6.2.1
6.2.2
6.2.3
6.2.4 This represents a syndicated term finance facility of Rs. 2,050 million from a syndicate of Allied Bank Limited, Habib Bank Limited, The Bank of Punjab and Faysal Bank Limited with the participation of Rs. 1,000 million, Rs. 500 million, Rs. 300 million and Rs. 250 million respectively. This facility is repayable in 06 equal semi annual installments starting from December, 2012. Mark up is payable on semi annual basis at six months' KIBOR plus 2.25% (2010: six months' KIBOR plus 2.25%) per annum. The facility is secured by first pari passu
39
Annual Report 2011
hypothecation charge on all the present and future assets of the Company excluding land and buildings for an amount of Rs. 2,733.33 million (2010: Rs. 2,733.33 million) in favour of syndicate. 7. Liability against assets subject to finance lease - secured
2011
Minimum lease payments Rupees Finance cost for future periods Rupees 18,617,490 22,293,828 40,911,318
2010
Present value of Present value of minimum minimum lease payments lease payments Rupees 47,802,130 109,754,039 (47,802,130) 109,754,039 Rupees 43,433,792 154,309,555 (43,433,792) 154,309,555
Not later than one year Later than one year and not later than five years Current portion of liability against assets subject to finance lease
66,419,620 132,047,867 198,467,487
7.1
8.
This represents lease finance facility of Rs. 227.05 million (present value of Rs. 157.56 million (2010: Rs. 197.74 million) for acquisition of plant and machinery obtained from Meezan Bank Limited, repayable in 10 semi annual installments starting from November 2009. Markup is payable on a biannual basis at six months' KIBOR plus 2.05% (2010: six months' KIBOR plus 2.05%) per annum with a floor and cap of 2.5% and 28% respectively. The facility is secured by way of ownership of leased assets and 10% security deposit of the financed asset. 2011 2010 Rupees Rupees Note Long term murabaha - secured
Faysal Bank Limited Faysal Bank Limited Meezan Bank Limited Current portion of long term murabaha
8.1
8.1 8.2 8.3
60,000,000 150,000,000 1,675,000,000 1,885,000,000 (120,000,000) 1,765,000,000
120,000,000 210,000,000 1,675,000,000 2,005,000,000 (120,000,000) 1,885,000,000
This represents murabaha finance facility of Rs. 300 million. This facility is repayable in 10 equal semi annual installments started from November 2007. Markup is payable on semi annual basis at six months' KIBOR plus 1.10 % (2010: six months' KIBOR plus 1.10 %) per annum. The facility is secured by first pari passu hypothecation charge on all present and future assets of the Company and equitable mortgage over the immovable properties of the Company for an amount of Rs. 160 million (2010: Rs. 320 million). This represents murabaha finance facility of Rs. 300 million. This facility is repayable in 10 equal semi annual installments started from April 2009. Markup is payable on semi annual basis at rate of six months' KIBOR plus 2.05% (2010: six months' KIBOR plus 2.05%) per annum. The facility is secured by first pari passu hypothecation charge on the present and future assets of the Company and equitable mortgage over immovable properties of the Company for an amount of Rs. 280 million (2010: Rs. 400 million). This represents commodity murabaha finance facility of Rs. 1,675 million (2010: Rs. 1,900 million). This facility is repayable in bullet installment at the time of maturity in July 2012. Markup is payable on annual basis at the rate of two years' KIBOR (2010: two years' KIBOR) per annum. The facility is secured by standby letter of credit(s) (SBLCs) of worth USD 19.78 million, for which security has been arranged by the directors of the parent Company, and
8.2
8.3
Annual Report 2011
40
ranking hypothecation charge on the present and future both current and fixed assets of the Company excluding land and buildings for an amount of Rs. 285 million (2010: Rs. 285 million).
9.
Long term musharaka - secured Meezan Bank Limited
Note 9.1
2011 Rupees 300,000,000
2010 Rupees -
9.1
This represents utilized amount of Diminishing Musharaka finance facility of Rs. 300 million. This facility is repayable in six semi annual installments starting from December 2013. Mark up is payable on semi annual basis at the rate of six months' KIBOR plus 1.85% (2010: Nil) per annum. The facility is secured by first pari passu hypothecation charge on all present and future assets of the Company excluding land and buildings for an amount of Rs. 400 million (2010: Rs. Nil).
10.
Deferred liabilities Deferred taxation Provision for gratuity Provision for compensated absences 10.1 10.2 10.3 377,876,469 87,475,267 11,667,028 477,018,764 307,869,780 64,649,982 13,593,119 386,112,881
10.1
Deferred tax liability is recognised on following major temporary differences: Taxable temporary differences Accelerated depreciation 2,975,037,586 2,921,708,816 Accelerated amortization 414,311 Deductible temporary differences Liability against assets subject to finance lease Unabsorbed tax losses 10.1.1
(43,012,834) (2,554,562,594) (2,597,575,428) (53,983,934) (2,559,855,102) (2,613,839,036)
377,876,469
307,869,780
10.1.1 Movement of deferred tax liability is as follows: Opening balance Charge / (credit) for the year Closing balance 10.2 The amount recognised in the balance sheet is as follow: Present value of defined benefit obligation Net actuarial losses not recognized Net liability at end of the year 307,869,780 70,006,689 377,876,469 552,523,596 (244,653,816) 307,869,780
105,421,459 (17,946,192) 87,475,267
85,085,476 (20,435,494) 64,649,982
41
Annual Report 2011
Note
2011 Rupees
2010 Rupees
The movement in present value of defined benefit obligation is as follows; Opening balance Charge for the year Benefits paid during the year Closing balance Expense recognised in profit and loss account: Current service cost Interest cost Actuarial losses recognised
Actuarial Assumptions Valuation discount rate Salary increase rate
64,649,982 27,957,907 (5,132,622) 87,475,267
49,522,737 25,146,563 (10,019,318) 64,649,982
14,248,679 10,727,491 2,981,737 27,957,907

2011 14% 14% EFU (61-66) Mortality Table
12,775,772 9,927,487 2,443,304 25,146,563

Expected gratuity expense for the next financial year is Rs. 30,444,749 (2010: Rs. 27,587,174) Historical information Present value of the defined benefit obligation 2011 2010 (Rupees) 87,475,267 64,649,982
2009 49,522,737
2008 36,351,025
2007 28,009,841
10.3 Actuarial valuation of compensated absences has not been carried out since the management believes that the effect of actuarial valuation would not be material.
11.
Trade and other payables Payable to contractors and suppliers Accrued liabilities Advances from customers Security deposits Workers' Welfare Fund Retention money Sales tax payable Excise duty payable Advance rent of investment property Other payables Unclaimed dividend 11.1 604,402,510 618,667,079 73,358,403 24,998,062 4,307,874 98,682,028 181,396,544 7,693,740 16,587,668 313,350 1,630,407,258 631,863,980 488,223,452 120,744,210 27,498,062 24,094,215 15,800,654 35,384,336 186,921,254 6,357,960 21,225,508 313,350 1,558,426,981
11.2
Annual Report 2011
42
11.1
This includes an amount of Rs. 71.52 million (2010: Rs. 0.23 million) payable to Sui Northern Gas Pipelines Limited (SNGPL) against gas consumption during the month of June 2011. The Company has issued bank guarantees in the normal course of business to SNGPL for commercial and industrial use of gas for an amount of Rs. 976.938 million (2010: Rs. 589.663 million). This includes an unsecured and interest free amount of Rs. 6.529 million (2010: Rs. 7.615 million) payable to parent company.
11.2
Note 12. Short term borrowings - secured Running finance from banking companies Habib Bank Limited Barclays Bank Limited Bank Al Habib Limited Askari Bank Limited Soneri Bank Limited Allied Bank Limited Meezan Bank Limited Habib Bank Limited Habib Bank Limited 12.1 12.2 12.3 12.4 12.5 12.6 12.7 12.8
2011 Rupees
2010 Rupees
32,122,827 39,564 579 494,342,269 79,939,727 467,957,630 358,394,636 1,080,976 1,433,878,208
24,537,361 348 5,641,012 499,987,281 130,288,840 53,941,720 300,000,000 365,000,000 354,997,244 1,734,393,806
Foreign currency import finance Meezan Bank Limited Habib Bank Limited Bank Al Habib Limited MCB Bank Limited Allied Bank Limited Soneri Bank Limited Export refinance Soneri Bank Limited Allied Bank Limited Barclays Bank Limited NIB Bank Limited Standard Chartered Bank Faysal Bank Limited Askari Bank Limited
12.9 12.10 12.11 12.12
556,674,708 395,576,529 284,918,642 290,911,949 1,528,081,828 100,000,000 339,000,000 65,000,000 450,000,000 90,000,000 99,000,000 1,143,000,000 4,104,960,036
362,798,983 224,162,400 318,592,794 249,842,491 1,155,396,668 93,045,000 350,000,000 65,000,000 187,000,000 695,045,000 3,584,835,474
12.13 12.14 12.15 12.16 12.17 12.18
43
Annual Report 2011
12.1 This represents utilized amount of running finance facility of Rs. 400 million (2010: Rs. 400 million) for a period of one year. Markup is payable on quarterly basis at the rate of one month's KIBOR plus 1.00% (2010: one month's KIBOR plus 1.00%) per annum. The facility is secured by ranking hypothecation charge on all present and future book debts, receivables and other movable assets of the Company for an amount of Rs. 533.34 million (2010: Rs. 533.34 million) and lien over US Dollar account upto USD 0.412 million of the Company (refer note 27.2). 12.2 This represents the utilized amount of running finance facility of Rs. 500 million (2010: Rs. 500 million) for a period of one year. Mark up is payable on quarterly basis at the rate of one month KIBOR plus 1.50% (2010: one month KIBOR plus 1.75%) per annum. The facility is secured by first pari passu hypothecation charge on all present and future current assets of the Company and ranking hypothecation charge on all present and future fixed assets of the Company excluding land and buildings for an amount of Rs. 667 million (2010: Rs. 667 million). 12.3 This represents the utilized amount of running finance facility of Rs. 500 million (2010: Rs. 500 million) for a period of one year. Markup is payable on quarterly basis at the rate of three months' KIBOR plus 1.50% (2010: three months' KIBOR plus 1.00%) per annum. The facility is secured by first pari passu hypothecation charge on all present and future current assets of the Company for an amount of Rs. 666.67 million (2010: Rs. 666.67 million). 12.4 This represents the utilized amount of running finance facility of Rs. 500 million (2010:Rs. 500 million) for a period of one year. Markup is payable on quarterly basis at the rate of three months' KIBOR plus 1.00% (2010: three months' KIBOR plus 1.00%) per annum. The facility is secured by first pari passu hypothecation charge on all present and future assets of the Company excluding land and buildings for an amount of Rs. 666.67 million (2010: Rs. 666.67 million). 12.5 This represents the utilized amount of a running finance facility of Rs. 375 million for a period of one year (2010: Rs. 375 million). Markup is payable on quarterly basis at the rate of three months' KIBOR plus 1.00% (2010: three months' KIBOR plus 1.00%) per annum. The facility is secured by first pari passu hypothecation charge on all present and future current assets of the Company for an amount of Rs. 500 million (2010: Rs. 500 million). 12.6 This represents the utilized amount of running finance facility of Rs. 1,000 million for a period of one year (2010: Rs. 1,000 million). Markup is payable on quarterly basis at the rate of one month KIBOR plus 1.50% (2010: one month KIBOR plus 1.50%) per annum. The facility is secured by first pari passu hypothecation charge on all present and future assets excluding land and buildings of the Company for an amount of Rs. 1,333.33 million (2010: Rs. 1,333.33 million). 12.7 This represents the utilized amount of running finance facility of Rs. 365 million for a period of one year (2010: Rs. 365 million). Markup is payable on quarterly basis at the rate of three month's KIBOR plus 1.50% (2010: three months' KIBOR plus 1.50%) per annum. The facility is secured by first pari passu hypothecation charge on all present and future current assets of the Company for an amount of Rs. 100 million and first pari passu hypothecation charge on all present and future fixed assets of the Company excluding land and buildings for an amount of Rs. 322 million (2010: Rs. 322 million). 12.8 This represents the utilized amount of running finance facility of Rs. 355 million (2010: Rs. 355 million). Mark up is payable on quarterly basis at the rate of one month KIBOR plus 2.00% (2010: one month KIBOR plus 2.00%) per annum. The facility is secured by first pari passu hypothecation charge on all present and future current and movable assets of the Company for an amount of
Annual Report 2011
44
Rs. 474 million (2010: Rs. 474 million). 12.9 This represents the utilized amount of USD 6.471 million of Foreign Currency Import Finance facility of Rs. 720 million (2010: Rs 720 million) available in USD obtained for import of coal with maximum tenor of 180 days. The facility carries mark up at the rate of six months' LIBOR plus 2.75% (2010: six months' LIBOR plus 2.75%) per annum payable at the time of maturity. The facility is secured by first pari passu hypothecation charge on all present and future current and movable assets of the Company for an amount of Rs. 960 million (2010: Rs. 960 million).
12.10 This represents the utilized amount of USD 4.598 million of Foreign Currency Import Finance facility of Rs. 500 million (2010: Rs. 500 million) available in USD obtained for import of coal with maximum tenor of 180 days. The facility carries mark up at the rate of six months' LIBOR plus 4.70% (2010: six months' LIBOR plus 3.50%) per annum payable at the time of maturity. The facility is secured by first pari passu hypothecation charge on all present and future assets of the Company excluding land and buildings for an amount of Rs. 668 million (2010: Rs. 668 million). 12.11 This represents the utilized amount of USD 3.312 million of Foreign Currency Import Finance facility of Rs. 300 million (2010: Rs. Nil) available in USD obtained for import of coal with maximum tenor of 180 days. The facility carries mark up at the rate of six months' LIBOR plus ranging from 3.25% to 3.40% per annum (2010: Nil) payable on quarterly basis or at maturity whichever comes earlier. The facility is secured by first pari passu hypothecation charge on all present and future assets excluding land and buildings of the Company for an amount of Rs. 400 million (2010: Rs. Nil). 12.12 This represents the utilized amount of USD 3.382 million of Foreign Currency Import Finance facility of Rs. 375 million (2010: Rs. Nil) available in USD obtained for import of coal with maximum tenor of 180 days. The facility carries mark up at the rate of six months' LIBOR plus 3.75% per annum (2010: Nil) payable at the time of maturity. The facility is secured by first pari passu hypothecation charge on all present and future current assets of the Company for an amount of Rs. 500 million (2010: Rs. Nil). 12.13 This represents the utilized amount of Export Re-Finance facility of Rs. 100 million (2010: Rs. 100 million) for a period of one year with maximum tenor of 180 days. Mark up is payable at the time of maturity of the facility or on quarterly basis whichever comes earlier at the rate defined by the State Bank of Pakistan plus 1.00% per annum. The facility is secured by first pari passu hypothecation charge on all present and future current assets of the Company for an amount of Rs. 134 million (2010: Rs. 134 million). 12.14 This represents the utilized amount of Export Re-Finance facility of Rs. 350 million (2010: Rs. 350 million) for a period of one year with maximum tenor of 180 days. Mark up is payable at the time of maturity of the facility or on quarterly basis whichever comes earlier at the rate defined by the State Bank of Pakistan plus 1.00% per annum. The facility is secured by first pari passu hypothecation charge on all present and future assets excluding land and buildings for an amount of Rs. 466.67 million (2010: Rs. 466.67 million). 12.15 This represents the utilized amount of Export Re-Finance facility of Rs. 75 million (2010: Rs. 75 million) for a period of one year with maximum tenor of 180 days. Mark up is payable at the time of maturity of the facility or on quarterly basis whichever comes earlier at the rate defined by the State Bank of Pakistan plus 1.00% per annum. The facility is secured by first pari passu
45
Annual Report 2011
hypothecation charge on all present and future fixed assets of the Company excluding land and buildings for an amount of Rs. 667 million (2010: Rs. 667 million). 12.16 This represents Export Re-Finance facility of Rs. 450 million for a period of one year (2010: Rs. Nil) with maximum tenor of 180 days. Mark up is payable at the time of maturity of the facility or on quarterly basis whichever comes earlier at the rate defined by the State Bank of Pakistan plus 1.00% per annum. The facility is secured by first pari passu hypothecation charge on all present and future assets of the Company excluding land and buildings for an amount of Rs. 600 million (2010: Rs. Nil). 12.17 This represents the utilized amount of Export Re-Finance facility of Rs. 250 million for a period of one year (2010: Rs. Nil) for maximum tenor of 180 days. Mark up is payable at the time of maturity of the facility or on quarterly basis whichever comes earlier at the rate defined by the State Bank of Pakistan plus 1.00% per annum. The facility is secured by first pari passu hypothecation charge on all present and future assets of the Company excluding land and buildings for an amount of Rs. 333.34 million (2010: Rs. Nil). 12.18 This represents the utilized amount of Export Re-Finance facility of Rs. 100 million for a period of one year (2010: Rs. Nil) for maximum tenor of 180 days. Mark up is payable at the time of maturity of the facility or on quarterly basis whichever comes earlier at the rate defined by the State Bank of Pakistan plus 1.00% per annum. The facility is secured by first pari passu hypothecation charge on all present and future assets of the Company excluding land and buildings for an amount of Rs. 133.34 million (2010: Rs. Nil). 12.19 Unavailed facilities The Company has running finance facilities and other short term borrowings facilities for an amount of Rs. 1,267 million (2010: Rs. 685 million) which the Company has not availed as at the year end. Facilities of letters of guarantee and letters of credit amounting to Rs. 380.93 million (2010: Rs. 633.63 million) and Rs. 4,210.19 million (2010: Rs. 3,657 million) respectively are available to the Company. Facilities of letters of guarantee are secured by first pari passu charge on present and future assets of the Company. 2011 2010 Note Rupees Rupees Contingencies and commitments
13.
In respect of bank guarantees In respect of letters of credits
13.1
70,329,762 958,887,579
68,329,762 685,764,775
13.1 All bank guarantees are secured by way of charge over operating fixed assets of the Company. 13.2 Competition Commission of Pakistan (CCP) issued a show cause notice dated 28 October 2008 to 21 cement companies (including the Company) under section 30 of the Competition Ordinance, 2007. On 27 August 2009, CCP imposed a penalty of Rs. 562 million on the Company. The cement manufacturers (including the Company) has challenged the CCP order in Honourable High Court and the Honourable High Court has passed an interim order restraining CCP from taking any adverse action against these 21 cement companies.
Annual Report 2011
46
Against the above referred order of CCP dated 27 August 2009 an appeal was also filed as abundant caution in the Honourable Supreme Court of Pakistan under Section 42 of the Competition Ordinance, 2007. During the year, the case was fixed for hearing on time to time, however because of non availability of defendant, the hearings of the case were adjourned. These appeals are still pending and management is confident of a favourable outcome of the case. 13.3 Tax related contingencies are disclosed in note 34 to these unconsolidated financial statements.
47
Annual Report 2011
14. Note 14.1 14.2 16,142,455,755 128,887,496 161,988,216 16,433,331,467 Owned Buildings on freehold land Vehicles Rupees Plant and machinery Quarry equipment Furniture and Other equipment fixtures Office equipment Plant and machinery Total Leased 16,866,396,926 16,670,843,327 84,072,763 111,480,836
Property, plant and equipment
2011 Rupees
2010 Rupees
Operating fixed assets Capital work in progress Stores held for capitalization
14.1 Operating fixed assets
Lease hold Free hold land land
Tangible assets 4,806,756,824 13,921,530 184,268,367 5,004,946,721 5,004,946,721 6,407,888 131,478 5,011,486,087 13,751,627,577 913,616,853 91,394,808 80,907,022 13,729,388,757 83,074,736 27,840,068 (88,675,984) 823,192,272 90,424,581 86,829,702 4,773,906 (208,800) 79,238,961 1,668,061 172,171,287 7,757,558 (5,647,338) 174,281,507 13,729,388,757 823,192,272 86,829,702 79,238,961 172,171,287 71,303,512 71,303,512 6,032,924 77,336,436 11,129,821,402 105,143,991 2,580,153,283 (85,729,919) 823,192,272 79,373,735 7,455,967 77,299,759 2,341,718 (402,516) 173,161,137 6,862,964 (7,852,814) 59,624,256 11,956,878 (277,622) 227,054,048 227,054,048 227,054,048 227,054,048 17,883,139,367 153,169,635 2,764,421,650 (86,410,057) (7,852,814) 20,706,467,781 20,706,467,781 203,484,068 27,971,546 (88,884,784) (5,647,338) 20,843,391,273
Cost Balance at 01 July 2009 Additions during the year Transferred from CWIP Adjustments Disposals
469,762,362 5,486,587 -
37,093,572 -
475,248,949
37,093,572
Balance at 01 July 2010 Additions during the year Transferred from CWIP Adjustments Disposals
475,248,949 3,344,414 -
37,093,572 -
478,593,363
37,093,572
Depreciation Balance at 01 July 2009 Charge for the year Adjustments Disposals 733,798,835 161,308,591 895,107,426 895,107,426 165,642,322 1,060,749,748 3,950,736,339 4,109,839,295 30yrs 10,888,802,772 11,271,295,661 30yrs 2,458,093,096 447,802,412 (43,070,703) 2,862,824,805 450,614,788 57,016,930 507,631,718 405,985,135 372,577,484 15% 2,458,093,096 450,614,788 2,090,336,743 396,791,357 (29,035,004) 384,865,820 65,748,968 35,613,019 6,139,474 41,752,493
14,406,809 1,342,191 -
22,304,418 5,562,426 (28,374) 27,838,470 41,752,493 6,385,911 (55,724) 48,082,680 43,312,128 45,077,209 10-15% 27,838,470 5,218,606 33,057,076 47,849,946 51,400,491 10%
88,094,922 16,659,580 (5,959,699) 98,794,803 98,794,803 15,018,686 (3,895,460) 109,918,029 64,363,478 73,376,484 20%
27,034,720 5,602,630 (99,908) 32,537,442 32,537,442 6,337,425 38,874,867 38,461,569 38,766,070 15%
7,568,468 7,568,468 15,136,936 15,136,936 7,568,468 22,705,404 204,348,644 211,917,112 30yrs
3,404,023,754 666,723,685 (29,163,286) (5,959,699) 4,035,624,454 4,035,624,454 712,332,951 (43,126,427) (3,895,460) 4,700,935,518 16,142,455,755 16,670,843,327
15,749,000
Balance at 01 July 2010 Charge for the year Adjustments Disposals Balance at 30 June 2011
15,749,000 1,342,191 17,091,191
Carrying value - 2011 Carrying value - 2010 30yrs
478,593,363 475,248,949
20,002,381 21,344,572
Annual Report 2011
Life in years / rates of depreciation per annum
48
14.1.1 Depreciation on operating fixed assets has been allocated as follows: Note Cost of sales Administrative expenses Distribution cost 29 30 31
2011 Rupees
702,174,701 6,766,304 3,391,946 712,332,951
2010 Rupees
656,237,833 6,949,570 3,536,282 666,723,685
14.1.2
Disposal of operating fixed assets

Book value Rupees 207,207 190,711 279,152 373,215 373,646 125,657 202,290 1,751,878 1,893,115 Sale proceeds Rupees 353,543 650,000 519,242 553,485 666,000 234,395 206,504 3,183,169 3,263,670 Gain Rupees 146,336 459,289 240,090 180,270 292,354 108,738 4,214 1,431,291 1,370,555 Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Employee Employee Employee Employee Mr. Arif Muneer Mufti Employee Employee Mode of disposal Sold to
Description Vehicles Suzuki Cultus Honda Citi Honda Citi Honda Citi Suzuki Liana Suzuki Cultus Suzuki Cultus 2011 2010
Cost Rupees 617,340 844,757 898,234 1,158,265 912,222 599,180 617,340 5,647,338 7,852,814
14.2
Capital work in progress Opening balance Additions during the year Transferred to operating fixed assets: Plant and machinery Buildings on free hold land Intangible assets 14.2.2 14.2.1 84,072,763 72,786,279 156,859,042 (27,840,068) (131,478) (27,971,546) 128,887,496 2,390,891,489 487,602,924 2,878,494,413 (2,580,153,283) (184,268,367) (30,000,000) (2,794,421,650) 84,072,763
14.2.1 This includes borrowing cost capitalised amounting to Rs. 9.137 million (2010: Rs. 203.83 million) at capitalisation rate of 14.59% (2010: 13.98%) per annum.
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Annual Report 2011
Note 14.2.2 Break up of capital work in progress is as follows: Plant and machinery and other equipment Building and civil works Advances for capital work in progress Borrowing cost 15. Intangible assets Cost Opening balance at 01 July Additions during the year Closing balance at 30 June Amortization Opening balance at 01 July Charge for the year Closing balance at 30 June Carrying value Amortisation rate 15.1
2011 Rupees
2010 Rupees
89,303,181 30,447,235 9,137,080 128,887,496
59,326,209 4,033,622 18,225,693 2,487,239 84,072,763
30,000,000 100,000 30,100,000 4,503,750 4,503,750 25,596,250 15%
30,000,000 30,000,000 30,000,000 -
15.1
Amortization on intangible assets has been allocated as follows: Cost of sales 29 4,503,750 4,503,750 -
16.
Investment property Opening balance Gain on remeasurement of investment property to fair value Closing balance 340,715,834 16.1 5,098,619 345,814,453 336,340,149 4,375,685 340,715,834
16.1 The investment property is a portion of head office building held for commercial purposes. On 30 June 2011, an independent exercise was carried out to calculate the fair value of investment property. To assess the land prices, market research was carried out in the area around the plot where the investment property is situated. Fair value of investment property is based on independent valuer's judgment about average prices prevalent on the said date and has been prepared on openly available/ provided information after making relevant inquiries from the market. Valuation was carried out by an independent valuer who holds a recognized and relevant professional qualification and has recent experience in the location and category of the investment property being valued.
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50
17.
Long term investments Investments in related parties - at cost - quoted Subsidiary company - Mustehkam Cement Limited Associated company - United Bank Limited Other investments Held to maturity investment - at amortised cost - defence saving certificate
Note 17.1 17.2
2011 Rupees 5,546,605,457 1,862,802,950 7,409,408,407
2010 Rupees 4,233,311,598 1,862,802,950 6,096,114,548
7,409,408,407
68,000 6,096,182,548
17.1
Subsidiary company - Mustehkam Cement Limited (MCL) 127,176,457 shares (2010: 39,623,533 shares) of Rs. 10 each Market value Rs.10.39 (2010: Rs. 14.50) per share. Equity held 98.39% (2010: 95.03%) 17.1.1 5,546,605,457
4,233,311,598
17.1.1 The increase in investment represents, the amount invested / subscribed against the right shares announced by MCL. 17.2 Associated company - United Bank Limited (UBL) 93,649,694 shares (2010: 93,649,694 shares) of Rs. 10 each Market value Rs. 61.19 (2010: Rs. 54.20) per share 17.2.1 1,862,802,950 1,862,802,950
17.2.1 This represents 7.65% share (2010: 7.65%) in the equity of 1,224.2 million (2010: 1,224.4 million) shares of Rs. 10 each in UBL, an associated undertaking. Bestway Group holds 51.07% (2010: 31.07%) equity in UBL.
18.
Long term advances Advance for gas pipe line Current portion of advance for gas pipe line 18.1 23 24,018,000 (4,003,000) 20,015,000 20,015,000 28,021,000 (4,003,000) 24,018,000 24,018,000
18.1
This represents outstanding amount of long term advance of Rs. 40.03 million (2010: Rs. 40.03 million) given to Sui Northern Gas Pipelines Limited to facilitate gas pipeline laying for the Company's plant located at Chakwal. The advance along with markup at the rate of 1.5% per annum is recoverable in 10 equal annual installments which started from March 2008. Long term deposits This includes security deposits amounting to Rs. 64.182 million (2010: Rs. 64.182 million) given for the electricity connections of the plants.
19.
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Annual Report 2011
20.
Stores, spare parts and loose tools Stores, spare parts and loose tools Stores and spare parts in transit
Note
2011 Rupees 2,185,240,668 192,307,769 2,377,548,437 105,855,678 858,215,213 226,226,784 1,190,297,675
2010 Rupees 1,614,162,311 553,101,821 2,167,264,132 117,241,263 547,211,031 121,010,525 785,462,819
21.
Stock in trade Raw and packing material Work in process Finished stock
22.
Trade debts This includes Rs. 35.024 million (2010: Rs. 71.73 million) receivable from customers against export sales.
23.
Advances Advances to directors and executives - considered good Advances to suppliers and contractors - considered good Advance for export related expenses Advance to a related party 23.1 Current portion advance for gas pipe line 18 2,563,700 115,186,623 106,020,972 4,003,000 227,774,295 1,392,498 173,422,108 24,722,069 192,145,706 4,003,000 395,685,381
23.1 This represents amount due from Mustehkam Cement Limited ("MCL"), a related party and carries markup at Company's weighted average borrowing rate of 14.59% (2010: 13.89%) per annum. The Company has taken approval in its 15th Annual General Meeting for giving advances to the related party to meet its urgent working capital requirement upto Rs. 200 million.
24.
Deposits and prepayments Security deposits Prepayments 3,946,240 27,703,244 31,649,484 30,000,000 29,121,344 59,121,344 574,856,432 28,372,522 11,729,200 211,146,242 826,104,396 4,483,946 3,135,200 7,619,146 30,000,000 579,142 30,579,142 571,926,716 357,706 28,372,522 11,729,200 211,146,242 823,532,386
25.
Other receivables Due from subsidiary - MCL Others Due from Government agencies Advance tax - net Excise duty Customs duty Capital value tax Excise duty refundable
26.
26.1 26.1 26.2
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26.1 This represents customs duties paid in excess of 5% of the value assessed by the custom authorities for import of off high way dump trucks and the amount paid as Capital Value Tax (CVT) on this import. The collector of customs assessed 30% duty and CVT @ 7.5% of the assessed value on import of off high way dump trucks and did not allow exemption available to the Company under SRO No. 575(1) 2006 dated 06 June 2006. The Company deposited these amounts under protest as guarantee for clearance and filed an appeal before Honourable Sindh High Court. The Honourable High Court granted the leave of appeal and held that exemption for import of off high way dump trucks is available to the Company under SRO No. 575(1) 2006 dated 06 June 2006, therefore the excess amounts paid should be refunded to the Company. Collector of customs filed an appeal in Honourable Supreme Court against the order of Honourable High Court, however no stay was granted against the refund accrued to the Company. The Company has obtained legal opinion on the basis of which it decided to account for these as refund in the books of account of the Company. 26.2 The Honourable Supreme Court of Pakistan in its judgment dated 14 April 2007 in a comparable case for levy of excise duty, dismissed the appeal filed by the Federal Board of Revenue (FBR) and upheld the decisions made by the Honourable High Courts of Peshawar, Sindh and Punjab. [The dispute related to levy of excise duty on the retail price inclusive of excise duty or retail price excluding excise duty]. The FBR's point of view was that excise duty be calculated on a declared retail price inclusive of excise duty whereas the concerned respondents contended that the excise duty would not be included in retail price for calculation of excise duty payable to the Government. The full bench of the Honourable Supreme Court upheld the judgments made by the Honourable High Courts and dismissed the appeal of FBR. The FBR moved a review petition before the Honourable Supreme Court of Pakistan which is pending. Based on the legal opinion, the management believes that the Company's claim is valid and the amount is fully recoverable. The Company has filed a claim for Rs. 211.146 million relating to duty paid during the period June 1998 to April 1999 which pursuant to the above decision was otherwise not leviable and payable under the law. Commissioner Appeals rejected the claim of the Company, and the Company has filed an appeal with the Income Tax Appellate Tribunal (ITAT) against unlawful rejection of refund claims. A number of hearings were conducted during the year but the case is yet to be discussed. The Company has obtained legal opinion on the basis of which it decided to account for this amount as refund in the books of account of the Company.
27.
Bank balances Cash at banks Current accounts Deposit accounts
Note 27.1 27.2
2011 Rupees 48,324,796 65,817,315 114,142,111
2010 Rupees 98,282,231 89,494,513 187,776,744
27.1
This includes Rs. 10.33 million (2010: Rs. 9.43 million) held in current accounts maintained with United Bank Limited, an associated company.
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Annual Report 2011
27.2 This includes an amount of US Dollar 0.416 million (2010: US Dollar 0.457 million) in US Dollar saving accounts. US Dollar 0.412 million (2010: US Dollar 0.455 million) are under lien with Habib Bank Limited. 27.3 Deposit accounts carry interest rates ranging from 1% to 5% (2010: 1% to 5%) per annum.
28.
Turnover - net Gross turnover Government levies Sales tax Excise duties Rebates and discounts
Note
2011 Rupees 18,558,980,692 (2,267,597,201) (2,077,790,187) 14,213,593,304 (881,226,398) 13,332,366,906
2010 Rupees 18,486,164,147 (1,912,814,087) (2,376,790,578) 14,196,559,482 (863,496,876) 13,333,062,606
29.
Cost of sales Raw and packing materials consumed Fuel and power Stores, spare parts and loose tools consumed Repairs and maintenance Salaries, wages and benefits Support services Insurance Equipment rental Utilities Travelling, conveyance and subsistence Communication Printing and stationery Entertainment Depreciation Amortization Other manufacturing expenses Opening work in process Closing work in process Cost of goods manufactured Opening finished stock Closing finished stock 29.1 1,648,236,695 7,414,826,970 523,997,191 40,553,757 294,649,364 128,854,434 24,120,832 4,159,887 4,709,093 27,062,274 4,547,471 3,790,063 2,368,783 702,174,701 4,503,750 6,202,265 10,834,757,530 547,211,031 (858,215,213) 10,523,753,348 121,010,525 (226,226,784) 10,418,537,089 2,089,322,332 7,576,383,560 425,889,384 51,110,158 266,354,576 106,668,579 22,131,998 4,561,834 5,960,926 25,233,489 3,769,919 3,636,649 1,806,363 656,237,833 9,816,207 11,248,883,807 654,426,964 (547,211,031) 11,356,099,740 329,166,536 (121,010,525) 11,564,255,751
29.2
14.1.1 15.1
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Note 29.1 Raw and packing materials consumed Opening balance Purchases made during the year Closing balance 29.2 30.
2011 Rupees
2010 Rupees
117,241,263 1,636,851,110 (105,855,678) 1,648,236,695
72,714,881 2,133,848,714 (117,241,263) 2,089,322,332
Salaries, wages and benefits include staff retirement benefits amounting to Rs. 22.68 million (2010: Rs. 28.15 million) Administrative expenses Salaries, wages and benefits Rent, rates and taxes Repairs and maintenance Insurance Utilities Travelling, conveyance and subsistence Communication Printing and stationery Entertainment Advertisements Charitable donations Legal and professional charges Fees and subscription Management charges Auditors' remuneration Depreciation Other 30.1 99,056,233 1,269,174 4,133,465 2,590,228 2,433,496 10,338,090 1,664,203 2,567,732 406,650 953,185 6,773,705 3,294,365 11,046,963 559,141 2,414,200 6,766,304 825,675 157,092,809 82,588,449 1,270,220 4,816,958 1,270,110 2,908,323 8,928,396 2,060,280 2,641,712 355,865 515,955 120,100 3,850,877 1,500,791 511,292 2,182,000 6,949,570 1,077,681 123,548,579
30.2
30.3 30.4 14.1.1
30.1 Salaries, wages and benefits include staff retirement benefits amounting to Rs. 9.22 million (2010: Rs. 4.06 million). 30.2 A provision at 2.5% of the accounting profit after tax for an amount of Rs. 4.48 million (2010: Rs. Nil) has been made for donation to Bestway Foundation. The chief executive and directors are among the trustees of the Foundation. None of the trustees or their spouses have a beneficial interest in the Foundation. 30.2 This represents management charges of the parent company.
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Annual Report 2011
30.3 Auditors' remuneration Annual audit fee Audit of consolidated financial statements Fee of half year review Statutory certifications Taxation services Out of pocket expenses 31. Distribution cost Salaries, wages and benefits Support services Rent, rates and taxes Repairs and maintenance Utilities Travelling, conveyance and subsistence Communication Printing and stationery Entertainment Advertising and promotion Depreciation Fees and subscription Freight and handling - Local - Export Other
Note
2011 Rupees 900,000 300,000 300,000 140,000 600,000 174,200 2,414,200
2010 Rupees 900,000 300,000 300,000 600,000 82,000 2,182,000 23,602,883 536,634 3,982,966 1,270,378 693,699 4,125,284 1,182,119 2,417,597 559,805 2,052,475 3,536,282 31,366,718 89,045,199 910,203,637 80,180 1,074,655,856
31.1
14.1.1
25,274,323 552,176 4,398,180 1,016,900 823,242 6,098,634 1,099,562 2,014,542 249,655 4,156,780 3,391,946 595,932 37,982,215 263,305,214 72,862 351,032,163
31.1 Salaries, wages and benefits include staff retirement benefits amounting to Rs. 2.34 million (2010: Rs. 2.52 million). 32. Finance cost Markup on long term financing Markup on long term murabaha Markup on long term musharaka Markup on liability against assets subject to finance lease Markup on short term borrowings Exchange loss - net Bank charges and commissions 1,772,600,420 255,373,473 128,466 25,725,199 417,412,083 6,910,446 11,148,944 2,489,299,031 1,984,266,153 62,070,952 37,089,423 128,023,401 11,674,729 2,223,124,658
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56
2011 Rupees 33. Other operating income Income from financial assets Profit on deposit accounts Exchange gain - net Profit on held to maturity investment Income from non financial assets Gain on disposal of operating fixed assets Dividend income from UBL (associated company) Rental income from investment property Gain on remeasurement of investment property to fair value Management fee from related parties - net Other 493,248 493,248 1,431,291 468,248,720 21,172,260 5,098,619 8,679,782 2,607,872 507,238,544 507,731,792
2010 Rupees
723,668 1,219,270 8,802 1,951,740 1,370,555 212,840,328 12,797,185 4,375,685 5,307,498 1,884,691 238,575,942 240,527,682
34.
Taxation Current Deferred - current 174,900,692 70,006,689 244,907,381 42,095,770 (244,653,816) (202,558,046)
34.1
Numerical reconciliation between tax expense / (credit) and product of accounting profit / (loss) multiplied by the applicable tax rate is as follows:
Accounting profit / (loss) Tax on accounting profit / (loss) at applicable rate of 35% (2010: 35%) Under provision last year Tax effect of low rates on certain income Minimum tax Tax effect of permanent differences Tax effect of income taxable under final tax regime Tax effect on inadmissible income Tax effect on exempt income
424,137,606 148,448,162 5,292,509 (110,986,196) 114,416,907 27,754,104 58,223,735 1,784,517 (26,357) 244,907,381
(1,411,994,556) (494,198,095) 86,713,014 37,616,755 (130,352,055) 299,648,739 (1,531,489) (454,915) (202,558,046)
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Annual Report 2011
34.2 The assessments of the Company up to and including the Tax Year 2010 are deemed to be finalized under the self assessment scheme envisaged under the Income Tax Ordinance, 2001. Following are the open ended assessments of the Company: Assessments for Assessment Year 2000-2001to 2002-2003 were finalized by the tax authorities mainly by curtailing business expenditure claimed by the Company and charging surcharge on minimum tax. The appeals for Assessment Year 2000-2001 were decided against the Company by the Appellant Tribunal Inland Revenue [ATIR] against which the Company filed reference with the Islamabad High Court which is pending adjudication. The appeal filed with the Commissioner Inland Revenue (Appeals) [the CIR(A)] for the Assessment Year 2001-2002 decided against the Company and for the Assessment Year 2002-2003 certain issues were decided in favour of the Company. Against these orders the Company is in appeal with the ATIR which are pending adjudication. Assessment for the Tax Year 2005 was rectified in terms of section 221 of the Ordinance by tax authorities on the issue of set off of brought forward assessed business losses there by raising a demand of Rs. 63.28 million. Later on another rectified order was framed under section 221 of the Ordinance whereby demand was reduced to Rs.6.30 million after allowing adjustments of tax refunds and minimum tax paid for previous years. The tax authorities initiated audit proceedings for the Tax Years 2006 through 2008 out of which only the audit proceedings for the Tax Year 2007 were concluded. The tax authorities amended the assessment of the Company thereby making various disallowances and charging tax on property income and dividend income under the presumptive mode of taxation [PTR] amounting to Rs. 8.42 million. On appeal filed by the Company, the CIR(A) annulled the order of the tax authorities on all the issues except the taxation of property income and dividend income under PTR and disallowance of deduction claimed on account of donations paid during the year. The Company as well as the tax authorities have filed cross appeals before the ATIR on the issues not decided in their favour by the CIR (A). The appeals are sub judice before the ATIR, till to date. The tax authorities amended the assessment of the Company for the Tax Year 2009 thereby making various disallowances. The Company filed appeal with the CIR (A) and simultaneously moved rectification application with the tax authorities. While disposing of the rectification application, the tax authorities allowed partial relief to the Company. The remaining issues were decided by the CIR (A) in favour of the Company except the issue of disallowance of deductions claimed on account of donations. The Company as well as the tax authorities have filed cross appeals with the ATIR on the issues not decided in their favour by the CIR(A). These appeals are sub judice before the ATIR, till to date. The tax authorities have rectified the assessment of the Company for the Tax Year 2010 thereby charging minimum tax under section 113 of the Income Tax Ordinance, 2001 amounting to Rs. 48.99 million. The Company has filed appeal with the CIR (A) which is pending disposal till to date. The management of the Company is confident of the favourable outcome of appeals filed by it and accordingly no provision has been recognized in these financial statements in respect of tax charged by the tax authorities through amendment / rectification of assessments.
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35.
Remuneration of the chief executive, directors and executives The aggregate amounts charged in the unconsolidated financial statements for the year with respect to remuneration, including benefits and perquisites, were as follows:
Chief Executive Rupees 2011 2010 Managerial remuneration and allowances Bonus Provision for gratuity Compensated absences Number of persons 18,000,000 18,000,000 1 18,000,000 18,000,000 1 Directors, including Chairman Rupees 2011 2010 43,503,003 1,696,800 1,417,167 2,027,939 48,644,909 5 40,624,674 1,515,000 1,256,098 1,782,356 45,178,128 5 Executives Rupees 2011 92,626,272 5,064,730 7,068,636 104,759,638 60 2010 66,596,846 6,411,989 7,679,470 80,688,305 41
35.1 The directors and executives excluding chairman and chief executive are also provided with medical insurance facility as per their entitled limits. 36. Transactions with related parties The Company is a subsidiary of Bestway (Holdings) Limited, UK ("the Parent Company") therefore all subsidiaries and associated undertakings of the Parent Company are related parties of the Company. Other related parties comprise of directors, key management personnel, entities with common directorships and entities over which the directors are able to exercise influence. Balances with related parties and a guarantee arranged by directors of the Parent Company are shown elsewhere in the notes to the unconsolidated financial statements. Transactions with related parties are as follows: 2011 2010 Rupees Rupees
Transactions with parent company Management charges Transactions with subsidiary company Investment in issue of right shares Purchase of clinker Sale of cement Purchase of packing material Sale of packing material Sale of coal Purchase of coal Stores, spare parts and loose tools given Stores, spare parts and loose tools received Advances given Recoveries made Mark up on advances given Management fee Expenses incurred on behalf of subsidiary company
559,141 1,313,292,119 48,635,594 716,346 13,220,919 21,619,319 1,255,761,831 226,450,800 16,258,967 9,244,075 556,115,853 1,738,160,429 20,382,434 30,000,000 813,086
511,292 105,456,180 359,153,437 2,338,693 7,214,731 464,711,380 17,877,221 16,798,283 569,797,000 466,147,566 51,077,349 30,000,000 -
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Annual Report 2011
Transactions with associated undertakings under common directorship Note Management fee Service / bank charges Dividend received Sale of cement Transactions with key management personnel Remuneration, allowances and benefits 36.1 Remuneration, allowances and benefits Managerial remuneration and allowances Bonus Provision for gratuity Compensated absences 2011 Rupees 680,000 3,735,498 468,248,720 3,618,080 36.1 66,644,909 61,503,003 1,696,800 1,417,167 2,027,939 66,644,909 2011 179,230,225 0.57 2010 Rupees 480,000 3,443,886 212,840,328 63,178,128 58,624,674 1,515,000 1,256,098 1,782,356 63,178,128 Restated 2010 (1,209,436,510) 306,567,383 (3.95)
37.
Earnings / (loss) per share (basic and diluted) Profit / (loss) for the year (Rupees) Earnings / (loss) per share - basic and diluted (Rupees)
Weighted average number of ordinary shares in issue (Number) 311,776,814
The number of ordinary shares outstanding at 30 June 2010 have been adjusted to reflect the issuance of right shares during the year. There is no dilution effect on profit / (loss) per share of the Company.
38. Financial instruments The Company has exposures to the following risks from its use of financial instruments: Credit risk Liquidity risk Market risk The Board of Directors has overall responsibility for the establishment and oversight of the Companys risk management framework. The Board is also responsible for developing and monitoring the Companys risk management policies. The Companys 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
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to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Companys 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 Board of Directors of the Company oversees how management monitors compliance with the Companys risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Company. The Board is assisted in its oversight role by Internal Audit. Internal Audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Board. 38.1 Credit risk Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date is as follows: 2011 2010
Rupees Long term deposits Long term advances Trade debts Advances Deposits Interest accrued Other receivables Bank balances 71,450,847 24,018,000 276,921,829 108,584,672 3,946,240 76,190 59,121,344 114,142,111 658,261,233
Rupees 70,450,847 28,021,000 297,188,037 193,538,204 4,483,946 62,490 30,579,142 187,776,744 812,100,410
The maximum exposure to the credit risk for trade debts at reporting date by geographical region is: Domestic Middle east and African countries Asia - other than domestic 241,898,294 542,852 34,480,683 276,921,829 225,461,841 48,338,944 23,387,252 297,188,037
The maximum exposure to the credit risk for trade debts at reporting date by counter party is: End user customers 5,641,048 17,035,489 Dealers 271,280,781 280,152,548 276,921,829 297,188,037
The maximum exposure to credit risk for trade debts at the reporting date are with dealers and represents debtors within the country. Included in the these an amount of Rs. 35.02 million (2010: Rs. 71.73 million) secured against the letter of credits. The Company's most significant domestic customer is a dealer from whom Rs. 21.655 million (2010: Rs. 21.28 million) is outstanding at the year end.
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Annual Report 2011
The Company has placed funds in financial institutions with high credit ratings. The Company assesses the credit quality of the counter parties as satisfactory. The Company does not hold any collateral as security against any of its financial assets except as mentioned above
Impairment losses The aging of trade debts at the reporting date is: Gross Impairment 2011 2011 Rupees Not past due Past due 1-30 days 271,764,469 Past due 31-60 days 1,833,201 Past due 61-90 days Over 90 days 3,324,159 276,921,829 Impairment 2010 Rupees 210,389,477 56,501,739 4,449,873 25,846,948 297,188,037 Gross 2010
Based on past experience, the management believes that no impairment allowance is necessary in respect of trade debts. The allowance accounts in respect of trade debts are used to record impairment losses unless the Company is satisfied that no recovery of the amount owing is possible. The amount considered irrecoverable is written off against the financial asset directly. 38.2 Liquidity risk Liquidity risk is the risk that the Company will not be able to meet its financial obligations 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. The following are the contractual maturities of financial liabilities, including expected interest payments and excluding the impact of netting agreements:
Carrying amount Contractual cash Six months or flows less 2011 Financial liabilities Long term financing 9,686,388,895 Liabilities against assets subject 157,556,169 to finance lease Long term murabaha 1,885,000,000 Long term musharaka 300,000,000 Trade and other payables 1,549,355,115 Markup payable 195,752,140 Short term borrowings 4,104,960,036 17,879,012,355 2010 Financial liabilities Long term loans 13,105,803,338 Liabilities against assets subject 197,743,347 to finance lease Long term murabaha 2,005,000,000 Trade and other payables 1,431,324,811 Markup payable 278,889,458 Short term borrowings 3,584,835,474 20,603,596,428 18,060,652,109 260,621,869 2,575,424,492 1,431,324,811 278,889,458 4,149,118,928 26,756,031,667 2,682,507,792 32,702,567 89,486,696 278,889,458 1,546,127,164 4,629,713,677 2,673,892,407 32,702,567 85,224,953 2,602,991,764 5,394,811,691 4,992,707,564 65,405,134 380,587,199 5,438,699,897 7,711,544,346 129,811,601 2,020,125,644 9,861,481,591 12,318,853,447 198,467,487 2,184,934,136 476,019,494 1,549,355,115 195,752,140 4,567,333,772 21,490,715,591 2,183,538,693 33,209,810 76,157,244 23,637,699 195,752,140 2,919,317,802 5,431,613,388 Six to twelve months Rupees 2,704,756,220 33,209,810 71,566,833 23,380,767 1,648,015,970 4,480,929,600 3,915,157,930 66,419,620 1,969,744,548 46,890,000 5,998,212,098 3,515,400,604 65,628,247 32,341,595 382,111,028 3,995,481,474 One to two years Two to five years After five years
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38.2.1The contractual cash flow relating to long and short term borrowings, murabaha and musharaka have been determined on the basis of expected markup rates. The markup rates have been disclosed in note 6, 7, 8, 9 and 12 to these unconsolidated financial statements. 38.3 Market risk Market risk is the risk that the value of the financial instrument may fluctuate as a result of changes in market interest rates or the market price due to change in credit rating of the issuer or the instrument, change in market sentiments, speculative activities, supply and demand of securities and liquidity in the market. The Company is exposed to currency risk and interest rates only.
38.3.1Currency risk
Exposure to currency risk Trade debts Bank balances Secured bank loans Net exposure
2011 US Dollars 406,966 431,237 (17,756,005) (16,917,802)
2010 US Dollars 839,932 1,002,877 (13,529,995) (11,687,186)
The following significant exchange rates applied during the year Average rates Reporting date spot rates Rupees / Dollars
Sensitivity analysis A five percent strengthening of the PKR against US Dollar at 30 June would have increased profit and loss account by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. This analysis is performed on the same basis for 2010.
86.00
84.00
86.06
85.40
30 June 2011 Effect in US Dollar - gain 30 June 2010 Effect in US Dollar - loss
Profit or loss Rupees 72,797,302 72,797,302 49,901,479 49,901,479
A five percent weakening of the PKR against US Dollar at 30 June would have had the equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant. 38.3.2 Interest rate risk The interest rate risk is the risk that the fair value or the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Majority of the interest rate exposure
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arises from short and long term borrowings from banks and short term deposits with banks. At the balance sheet date the interest rate profile of the Company's interest bearing financial instruments is: Carrying Amount
2011 Rupees Fixed rate instruments Financial assets Financial liabilities Variable rate instruments Financial assets Financial liabilities
Fair value sensitivity analysis for fixed rate instruments
2010 Rupees 28,089,000 3,525,441,668 281,640,219 15,367,940,491
24,018,000 4,346,081,828 171,838,287 11,487,823,272
The Company does not account for any fixed rate financial assets and liabilities at fair value through profit or loss. Cash flow sensitivity analysis for variable rate instruments A change of 100 basis points in interest rates throughout the year would have increased / (decreased) profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. The analysis is performed on the same basis for 2010. Profit or loss 100 basis points 100 basis points increase decrease Rupees Rupees Cash flow sensitivity (net) Variable rate instruments 253,888,112 (253,888,112) 30 June 2011 253,888,112 (253,888,112)
Variable rate instruments 30 June 2010
154,695,236 154,695,236
(154,695,236) (154,695,236)
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64
38.4 Fair value versus carrying amounts
The fair values of financial assets and liabilities, together with the carrying amounts shown in the balance sheet, are as follows:
Assets carried at amortized cost Long term advances Long term deposits Trade debts Advances Deposits Interest accrued Other receivables Bank balances Liabilities carried at amortized cost Long term financing 6 Liabilities against assets subject to finance lease 7 Long term murabaha 8 Long term musharaka 9 Trade and other payables 11 Markup payable Short term borrowings 12 9,686,388,895 9,686,388,895 157,556,169 157,556,169 1,885,000,000 1,885,000,000 300,000,000 300,000,000 1,549,355,115 1,549,355,115 195,752,140 195,752,140 4,104,960,036 4,104,960,036 17,879,012,355 17,879,012,355 13,105,803,338 13,105,803,338 197,743,347 197,743,347 2,005,000,000 2,005,000,000 1,431,324,811 1,431,324,811 278,889,458 278,889,458 3,584,835,474 3,584,835,474 20,603,596,428 20,603,596,428 Note 2010 2011 Fair value Carrying amount Fair value Carrying amount Rupees Rupees 24,018,000 71,450,847 276,921,829 108,584,672 3,946,240 76,190 59,121,344 114,142,111 634,243,233 24,018,000 71,450,847 276,921,829 108,584,672 3,946,240 76,190 59,121,344 114,142,111 634,243,233 28,021,000 70,450,847 297,188,037 193,538,204 4,483,946 62,490 30,579,142 187,776,744 784,079,410 28,021,000 70,450,847 297,188,037 193,538,204 4,483,946 62,490 30,579,142 187,776,744 784,079,410
18 19 22 23 24 25 27
38.5 Determination of fair values A number of the Companys accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and / or disclosure purposes based on the following methods Non - derivative financial assets The fair value of non-derivative financial assets is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date. This fair value is determined for disclosure purposes Non-derivative financial liabilities Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date. 38.6 Capital management The Board's policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Board of Directors monitors the return on capital, which the Company defines as net profit after taxation divided by total shareholders' equity. The Board of Directors also monitors the level of dividend to ordinary
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shareholders. There were no changes to the Company's approach to capital management during the year and the Company is not subject to externally imposed capital requirements except for the maintenance of debt to equity ratios under the financing agreements.
39.
Plant capacity and production of clinker Note Available capacity - Hattar - Chakwal line-I - Chakwal line-II - Hattar - Chakwal line-I - Chakwal line-II
2011 Metric Tonnes 1,170,000 1,710,000 1,710,000 787,063 978,099 1,212,437
2010 Metric Tonnes 1,170,000 1,710,000 1,710,000 1,139,862 1,059,316 1,462,814
Actual production
39.1
39.1 During the year the actual production from Hattar remained limited due to shut down for the maintenance work at cement mill. 40. General These unconsolidated financial statements were authorized for issue by the Board of Directors of the Company in their meeting held on 30 September 2011.
CHIEF EXECUTIVE
DIRECTOR & CFO
Annual Report 2011
66
PATTERN OF HOLDING OF SHARES
Held by the Shareholders as at June 30, 2011 Share Holding From To

1 101 501 1001 5001 10001 15001 20001 30001 35001 50001 60001 65001 75001 80001 95001 115001 125001 150001 165001 170001 185001 200001 215001 230001 255001 260001 275001 285001 300001 335001 495001 505001 575001 600001 1100001 1600001 2600001 3100001 3600001 4100001 6100001 11600001 12600001 15100001 18600001 24600001 37100001 110100001 160100001 100 500 1000 5000 10000 15000 20000 25000 35000 40000 55000 65000 70000 80000 85000 100000 120000 130000 155000 170000 175000 190000 205000 220000 235000 260000 265000 280000 290000 305000 340000 500000 510000 580000 1100000 1600000 2100000 3100000 3600000 4100000 4600000 6600000 12100000 13100000 15600000 19100000 25100000 37600000 160100000 210100000
No. of Shareholders
81 40 40 52 10 7 5 4 4 3 3 1 7 7 1 1 1 1 4 7 1 1 1 4 1 1 1 2 1 1 1 1 1 1 7 2 2 1 3 2 1 3 1 1 1 5 1 1 1 1 330
Total Shares Held

3,539 11,691 33,409 122,777 65,987 88,744 93,844 91,303 129,957 118,367 160,505 64,194 469,182 538,643 81,301 100,000 119,790 129,904 617,901 1,178,597 171,760 185,425 200,427 878,460 234,256 256,383 263,568 556,358 289,159 304,683 336,743 497,794 507,310 576,062 6,431,151 2,789,579 3,713,961 2,698,994 9,947,199 7,824,311 4,323,753 18,528,155 12,014,147 12,647,560 15,191,463 93,621,963 24,936,429 37,562,231 135,770,976 180,722,079 578,201,974
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Annual Report 2011
Categories of Share holders as at June 30, 2011

Categories of Shareholders No. of Shareholders
1 12 5 12 15 1 284 330
Shares Held
3 1,084,884 335,653,265 41,433,617 114,083 21,070 199,895,052 578,201,974
Percentage
00.00 00.19 58.05 07.17 00.02 00.00 34.57 100.00
MUTUAL FUNDS JOINT STOCK COMPANIES ASSOCIATED COMPANIES, UNDERTAKINS AND RELATED PARTIES DIRECTORS, CEO AND THEIR SPOUSES AND MINOR CHILDREN EXECUTIVES OF THE COMPANY/MODARABA OTHERS INDIVIDUALS
Detail of Categories of Shareholders as at June 30, 2011

Categories of Shareholders
MUTUAL FUNDS N. H. CAPITAL FUND LIMITED 1 JOINT STOCK COMPANIES A 1 SUPPORT SERVICES (PVT) LTD. ADHI SECURITIES (PVT) LTD. DARSON SECURITIES (PVT) LTD. DR. ARSLAN RAZAQUE SECURITIES (SMC-PVT) LTD. FAIR DEAL SECURITIES (PVT) LTD. FAIR DEAL SECURITIES (PVT) LIMITED IGI FINEX SECURITIES LIMITED PACE INVESTMENT & SECURITIES (PRIVATE) LIMITED 50002. PAK PEARL RICE MILLS (PVT) LTD (00154). PRUDENTIAL SECURITIES LTD. STOCK STREET (PVT) LIMITED YOUSUF YAQOOB KOLIA AND COMPANY (PVT) LTD. 12 256,383 900 100 150 50 3,000 1 6 819,794 500 1,000 3,000 1,084,884 3 3
No. of Share Holders
Shares Held
Annual Report 2011
68
Shareholders as at June 30, 2011

Shares Held
ASSOCIATED COMPANIES, UNDERTAKINGS AND RELATED PARTIES BESTWAY (HOLDINGS) LIMITED (00212) BESTWAY (HOLDINGS) LIMITED BESTWAY CASH & CARRY LIMITED BESTWAY NORTHERN LIMITED MAP RICE MILLS (PVT.) LTD 5
3,392,685 180,722,079 135,770,976 15,191,463 576,062 335,653,265
DIRECTORS, CEO AND THEIR SPOUSES AND MINOR CHILDREN

ARSHAD MEHMOOD CHAUDHAREY GHULAM SARWAR MALIK MAHMOOD AFZAL MAZHAR RAFI MOHAMMAD IRFAN ANWAR SHEIKH MOHAMMED ANWAR PERVEZ MOHAMMAD IRFAN ANWAR SHEIKH RAKHSHANDA CHOUDREY RAKHSHINDA CHOUDREY ZAMEER MOHAMMED CHOUDREY ZOHRA PERVEZ ZOHRA PERVEZ
12
3,912,156 75,150 8,000 17,618 81,301 12,647,560 69,882 185,425 6,169,971 6,188,213 64,194 12,014,147 41,433,617
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Annual Report 2011
Shareholders as at June 30, 2011

EXECUTIVES OF THE COMPANY/MODARABA
COL. MUHAMMAD TARIQ M. MUSADDAQ ALI KAHN MR. IRSHAD ALI AMEER MR. KALEEM AHMED MR. KAUSAR HUSSAIN MR. NAEEM ULLAH MR. SADAT ALAM MR. SAKHI ZAMAN MR. SHABBIR HUSSAIN MR. SHABBIR AHMED MR. TANVEER AHMED MR. ZAIGHAM ABBAS MR. MUHAMMAD SAADAT ALAM MR. SHAHID SOHAIL KHAN MR. SHAYAN AHMED
Shares Held
15 OTHERS CDC - TRUSTEE AND INDEX TRACKER FUND 1 CATEGORIES TOTAL INDIVIDUALS GRAND TOTAL 46 284 330
6,000 6,000 6,000 1,000 3,000 5,000 4,000 3,000 4,000 3,000 3,000 3,000 38,658 23,425 5,000 114,083
21,070 21,070
378,306,922 199,895,052 578,201,974
Share Holders Holding 10% or more voting Interest in the Company
Shares Held
ASSOCIATED COMPANIES, UNDERTAKINGS AND RELATED PARTIES
BESTWAY (HOLDINGS) LIMITED BESTWAY CASH & CARRY LIMITED 184,114,764 135,770,976
Percentage
31.84 23.48
Annual Report 2011
70
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011
AUDITORS REPORT TO THE MEMBERS
We have audited the annexed consolidated financial statements comprising consolidated balance sheet of Bestway Cement Limited ( the Company)as at 30 June 2011 and the related consolidated profit and loss account, consolidated statement of comprehensive income, consolidated cash flow statement and consolidated statement of changes in equity together with the notes forming part thereof, for the year then ended. We have also expressed separate opinion on the financial statements of Bestway Cement Limited and its subsidiary company. These consolidated financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these consolidated financial 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. In our opinion, the consolidated financial statements present fairly the financial position of the Company as at 30 June 2011, and the result of its operations, its cash flow and changes in equity for the year then ended in accordance with approved accounting standards as applicable in Pakistan.
Islamabad 30 September , 2011
KPMG Taseer Hadi & CO. Chartered Accountants

Engagement Partner: Riaz Pesnani
Annual Report 2011
72
CONSOLIDATED BALANCE SHEET AS AT 30 JUNE 2011
Note SHARE CAPITAL AND RESERVES Authorised share capital 700,000,000 (2010: 350,000,000) ordinary shares of Rs. 10 each Issued, subscribed and paid up share capital Share premium Exchange translation reserve Cash flow hedge reserve Deficit on revaluation of available for sale investments Unappropriated profit 4 5
2011 Rupees
2010 Rupees
7,000,000,000 5,782,019,740 3,225,770,245 669,838,385 (9,883,895) (166,440,194) 5,075,936,811 14,577,241,092 79,155,348 14,656,396,440
3,500,000,000 3,257,475,910 1,963,498,330 579,217,097 (18,263,046) (210,045,928) 4,271,289,486 9,843,171,849 157,375,906 10,000,547,755
Non-controlling interests NON CURRENT LIABILITIES Long term financing - secured Liability against assets subject to finance lease - secured Long term murabaha - secured Long term musharaka - secured Deferred liabilities CURRENT LIABILITIES Trade and other payables 11 Markup accrued Short term borrowings - secured 12 Current portion of long term financing 6 Current portion of liability against assets subject to finance lease 7 Current portion of long term murabaha 8 6 7 8 9 10
8,793,333,338 109,754,039 1,765,000,000 300,000,000 1,000,249,488 11,968,336,865
13,482,192,226 154,309,555 1,885,000,000 1,207,427,828 16,728,929,609
2,224,490,874 276,248,733 5,246,110,865 4,688,888,890 47,802,130 120,000,000 12,603,541,492 39,228,274,797
2,246,189,610 361,303,917 4,641,908,139 4,298,611,112 43,433,792 120,000,000 11,711,446,570 38,440,923,934
CONTINGENCIES AND COMMITMENTS
13
The annexed notes from 1 to 37 form an integral part of these consolidated financial statements.
CHIEF EXECUTIVE
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Annual Report 2011
CONSOLIDATED BALANCE SHEET AS AT 30 JUNE 2011
Note NON CURRENT ASSETS Property, plant and equipment Intangible assets Goodwill Investment property Long term investments Long term advances Long term deposits 14 15 16 17 18
2011 Rupees
2010 Rupees
25,031,259,675 25,596,250 1,135,192,353 345,814,453 5,831,817,548 20,015,000 89,495,534 32,479,190,813
25,725,960,207 30,000,000 1,135,192,353 340,715,834 5,211,855,784 24,018,000 87,495,534 32,555,237,712
CURRENT ASSETS Stores, spare parts and loose tools Stock in trade Trade debts - considered good Advances Deposits and prepayments Interest accrued Other receivables Due from Government agencies Bank balances 19 20 21 22 23 3,200,299,217 1,454,067,129 311,501,612 150,773,424 41,631,465 76,190 30,369,297 1,422,638,175 137,727,475 6,749,083,984 2,686,048,335 1,065,833,617 315,857,176 257,510,799 8,578,946 62,490 1,341,800 1,339,808,133 210,644,926 5,885,686,222
24 25
39,228,274,797
38,440,923,934
DIRECTOR & CFO
Annual Report 2011
74
CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 30 JUNE 2011
Note Turnover - net Cost of sales Gross profit Administrative expenses Distribution cost Finance cost Other operating income 28 29 30 31 26 27
2011 Rupees 17,074,382,123 13,532,789,160 3,541,592,963 192,320,872 358,037,366 3,275,907,499 (51,776,345) 3,774,489,392 939,896,213 706,999,784
2010 Rupees 15,154,627,998 13,457,014,344 1,697,613,654 200,787,352 1,080,812,151 2,572,607,642 (22,124,400) 3,832,082,745 772,394,949 (1,362,074,142) 1,076,769,338 (285,304,804)
Share of profit in associated company Profit / (loss) before taxation Taxation Profit / (loss) for the year
17.1
32
19,195,227 726,195,011
Attributable to: Shareholders of Bestway Cement Limited Non-controlling interests
729,817,198 (3,622,187) 726,195,011
(264,470,503) (20,834,301) (285,304,804)
CHIEF EXECUTIVE
DIRECTOR & CFO
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Annual Report 2011
CONSOLIDATED STATEMENT OF COMPRIHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2011
2011 Rupees Profit / (loss) for the year attributable to: Shareholders of Bestway Cement Limited Non-controlling interests Other comprehensive income: Exchange translation reserve Surplus on revaluation of available for sale investments Related deferred tax liability on surplus on revaluation of available for sale investments Gain / (loss) on cash flow hedge reserve Related deferred tax asset on cash flow hedge reserve Other comprehensive income for the year - net of tax Total comprehensive income for the year Total comprehensive income for the year attributable to: Shareholders of Bestway Cement Limited Non-controlling interests 2010 Rupees
729,817,198 (3,622,187) 726,195,011 90,621,288 48,450,815 (4,845,081) 9,310,168 (931,017) 142,606,174 868,801,185
(264,470,503) (20,834,301) (285,304,804) 92,568,825 88,477,987 (8,847,799) (620,986) 62,099 171,640,126 (113,664,678)
872,423,371 (3,622,187) 868,801,184
(92,830,377) (20,834,301) (113,664,678)
CHIEF EXECUTIVE
DIRECTOR & CFO
Annual Report 2011
76
CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2011
2011 Rupees CASH FLOWS FROM OPERATING ACTIVITIES Profit / (loss) before taxation Adjustments for: Gain on disposal of operating fixed assets Depreciation Amortization of intangible Provision for slow moving and obsolete stores, spare parts and loose tools Rental income from investment property Profit on deposit accounts Share of profit in associated company Profit on held to maturity investment Gain on remeasurement of investment property to fair value Finance cost Loss during trial period electricity generation Provision for staff retirement benefits 706,999,784 (1,431,291) 1,063,802,527 4,503,750 (21,172,260) (493,808) (939,896,213) (5,098,619) 3,266,628,434 38,498,267 3,405,340,787 4,112,340,571 (610,240,019) (388,233,512) 4,355,564 106,737,375 (33,052,519) (28,959,497) (73,080,168) (23,034,516) (1,045,507,292) 3,066,833,279 (3,351,683,618) (16,609,170) (225,398,182) (3,593,690,970) (526,857,691) (152,753,998) (122,110,738) (100,000) 3,183,169 22,508,040 4,003,000 480,108 (2,000,000) 468,248,720 221,458,301 604,202,726 (4,298,581,110) (120,000,000) 300,000,000 (40,187,178) 3,787,047,501 232,481,939 (72,917,451) 210,644,926 137,727,475 2010 Rupees (1,362,074,142) (1,370,555) 999,158,131 41,000,000 (12,797,185) (724,623) (772,394,949) (8,802) (4,375,685) 2,572,607,642 (28,701,556) 42,668,497 2,835,060,915 1,472,986,773 (462,273,542) 187,619,409 272,948,373 75,832,339 1,553,975 2,503,393 176,579,594 (1,749,960) 701,421,348 954,434,929 2,427,421,702 (3,146,487,455) (23,634,200) (338,221,497) (3,508,343,152) (1,080,921,450) (176,471,057) (917,555,471) 3,263,670 4,003,000 752,074 212,840,328 (873,167,456) 1,191,665,494 2,525,000,000 (3,570,833,332) 1,675,000,000 (120,000,000) 1,736,250 1,702,568,412 (251,520,494) 462,165,420 210,644,926
(Increase) / decrease in current assets Stores, spare parts and loose tools Stock in trade Trade debts Advances Deposits and prepayments Other receivables Due from Government agencies (Decrease) / increase in current liabilities Long term advances Trade and other payables Cash generated from operations Finance cost paid Staff retirement benefits paid Income tax paid Net cash used in operating activities CASH FLOWS FROM INVESTING ACTIVITIES Additions in operating fixed assets Additions in capital work in progress Additions in intangible assets Proceeds from sale of operating fixed assets Rent received from investment property Decrease in long term advance Profit on deposit accounts received Additions to long term deposits Dividend received Net cash from / (used in) investing activities CASH FLOWS FROM FINANCING ACTIVITIES Increase in short term borrowings Long term financing- proceeds - repayments Long term murabaha - proceeds - repayments Long term musharaka - proceeds Repayment of liability against assets subject to finance lease Proceeds from issue of right shares Net cash generated from financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at beginning of the year Cash and cash equivalents at end of the year The annexed notes from 1 to 37 form an integral part of these consolidated financial statements.
CHIEF EXECUTIVE
DIRECTOR & CFO
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Issued, subscribed and paid up share capital Rupees 3,257,475,910 1,963,498,330 486,648,272 (17,704,159) (289,676,116) 4,230,726,308 9,630,968,545 481,507,638 Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees 10,112,476,183
Attributable to shareholders of Bestway Cement Limited Capital reserves Revenu reserve Share premium Exchange Cash flow Surplus on Unappropriated translation hedge reserve revaluation of profit reserve available for sale investments Total Non-controlling interests Total equity
Total comprehensive income for the year 3,257,475,910 1,963,498,330 579,217,097 (18,263,046) (210,045,928) 4,271,289,486 9,843,171,849 305,033,681 305,033,681 305,033,681 305,033,681 92,568,825 (558,888) 79,630,188 (264,470,503) (92,830,377) 92,568,825 (558,888) 79,630,188 (264,470,503) (264,470,503) 171,640,126 (20,834,301) (20,834,301) 578,750 1,157,500 (305,033,681) (303,297,431) 157,375,906 (285,304,804) 171,640,126 (113,664,678) 578,750 1,157,500 1,736,250 10,000,547,755
Loss for the year Other comprehensive income for the year - net of tax
Total comprehensive income for the year - (loss)
Transactions with owners, recorded directly in equity Issue of right shares Premium on issue of right shares Effect of dilution of non-controlling interests due to purchase of unsubscribed right issue Total transactions with owners, recorded directly in equity
Balance at 01 July 2010 2,524,543,830 2,524,543,830 5,782,019,740 3,225,770,245 669,838,385 (9,883,895) 1,262,271,915 1,262,271,915 (166,440,194) 90,621,288 8,379,151 43,605,734 90,621,288 8,379,151 43,605,734 729,817,198 729,817,198 74,830,127 74,830,127 5,075,936,811 729,817,198 142,606,173 872,423,371 2,524,543,830 1,262,271,915 74,830,127 3,861,645,872 14,577,241,092 (3,622,187) (3,622,187) 154,504 77,252 (74,830,127) (74,598,371) 79,155,348 726,195,011 142,606,173 868,801,184 2,524,698,334 1,262,349,167 3,787,047,501 14,656,396,440
Total comprehensive income for the year
Profit / (loss) for the year Other comprehensive income for the year - net of tax
Total comprehensive income for the year
Transactions with owners, recorded directly in equity Issue of right shares Premium on issue of right shares Effect of dilution of non-controlling interests due to purchase of unsubscribed right issue Total transactions with owners, recorded directly in equity
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2011
Annual Report 2011
CHIEF EXECUTIVE
DIRECTOR & CFO
78
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2011
1.
THE GROUP AND ITS OPERATIONS Bestway Cement Limited ("the Parent Company") is a public company incorporated in Pakistan on December 22, 1993 under the Companies Ordinance, 1984 and is listed on the Karachi Stock Exchange (Guarantee) Limited since April 9, 2001. The Parent Company is engaged in production and sale of cement. The Parent Company's registered office is situated at Bestway Building, 19-A, College Road F-7 Markaz, Islamabad. The Parent Company has 98.39% (2010: 95.03%) holding in Mustehkam Cement Limited ("the Subsidiary Company"). The Subsidiary Company is a public company incorporated in Pakistan on July 29, 1954 under the Companies Act, 1913 since repealed and replaced by the Companies Ordinance, 1984 and is listed on the Karachi, Lahore and Islamabad Stock Exchanges. The Subsidiary Company is engaged in production and sale of cement. The Subsidiary Company's registered office is situated at Bestway Building, 19-A, College Road, F-7 Markaz, Islamabad.
2. 2.1
STATEMENT OF COMPLIANCE, BASIS OF CONSOLIDATION AND SIGNIFICANT ACCOUNTING ESTIMATES Statement of compliance These consolidated financial statements have been prepared in accordance with the approved accounting standards as applicable in Pakistan. Approved accounting standards comprise of such International Financial Reporting Standards (IFRS) issued by International Accounting Standard 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 consolidation These consolidated financial statements include the financial statements of the Parent Company and the Subsidiary Company together constituting "the Group Subsidiaries are those enterprises in which the Parent Company directly or indirectly controls, beneficially owns or holds more than 50 percent of the voting securities or otherwise has power to elect and appoint more than 50 percent of its directors. The financial statements of the Subsidiary Company are included in the consolidated financial statements from the date the control commences until the date the control ceases. The financial statements of the Subsidiary Company have been consolidated on a line-by-line basis. All material inter company balances, transactions and resulting unrealized profits / (losses) have been eliminated. Non controlling interest is that part of net results of the operations of the Subsidiary Company attributable to interests which are not owned by the Parent Company. Non controlling interest is presented as a separate item in the consolidated financial statements. Investment in associates Associates are those entities in which the Parent Company has significant influence but not control over the financial and operating policies. Investments in associates are accounted for using the
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equity method. Under the equity method, the investment in associates is initially recognized at cost and the carrying value is increased or decreased to recognize the Parent Companys share of the profit and loss of the associate after the date of its acquisition and the Parent Companys share in the associates equity that has not been recognized in the associates profit and loss account. The Parent Companys share of profit and loss of associates is included in the consolidated profit and loss for the year. This method is applied from the date when significant influence commences until the date when the significant influence ceases. When the associates share of losses exceed the carrying amount of investment in associates, the carrying amount is reduced to nil and the recognition of further losses is discontinued except to the extent that the Parent Company has incurred obligation in respect of the associate. The Parent Company has an associate which is a banking company engaged in commercial banking and related services. The applicability of International Accounting Standard 39, Financial Instruments: Recognition and Measurement and International Accounting Standard 40, Investment properties has been deferred for banking companies by the State Bank of Pakistan whereas IAS 39 and IAS 40 are applicable to the Parent Company. Accordingly, equity accounting of the associate is based on financial statements prepared under accounting framework applicable to banking companies in Pakistan except that surplus /deficit on revaluation of available for sale investments of the associate has been alligned to the Parent Company accounting policy. Acquisitions of non controlling interest Acquisitions of non controlling interest are accounted for as transactions with owners in their capacity as owners and therefore no goodwill is recognized as a result. Adjustments to non controlling interests arising from transactions that do not involve the loss of control are based on a proportionate amount of the net assets of the Subsidiary Company. 2.3 Basis of measurement These consolidated financial statements have been prepared on the historical cost basis except for the following; - investment property have been measured at fair value; and - liability related to staff retirement benefit are measured at present value. 2.4 Functional and presentation currency Items included in these consolidated financial statements are measured using the currency of the primary economic environment in which the Group operates. The consolidated financial statements are presented in Pakistan Rupees, which is the Group's functional and presentation currency. 2.5 Use of estimates and judgments The preparation of consolidated financial statements in conformity with the approved accounting standards requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors
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that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about 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 estimates are 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. Information about significant areas of estimation uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognised in the consolidated financial statements is discussed in the ensuing paragraphs. 2.5.1 Property, plant and equipment The Group reviews the useful lives and residual value of property, plant and equipment on a regular basis. Any change in estimates in future years which might affect the carrying amounts of the respective items of property, plant and equipments with a corresponding effect on the depreciation charge and impairment loss. 2.5.2 Provision for inventory obsolescence and doubtful receivables The Group reviews the carrying amount of stores, spare parts and loose tools and stock in trade on a regular basis and provision is made for obsolescence if there is any change in usage pattern and physical form of related stores, spare parts and loose tools. Further the carrying amounts of trade and other receivables are assessed on a regular basis and if there is any doubt about the realisability of these receivables, appropriate amount of provision is made. 2.5.3 Taxation The Group takes into account the current income tax law and decisions taken by the taxation authorities. Instances where the Group's views differ from the views taken by the income tax department at the assessment stage and where the Group considers that its view on items of material nature is in accordance with law, the amounts are shown as contingent liabilities. The Group also regularly reviews the trend of proportion of incomes between Presumptive Tax Regime income and Normal Tax Regime income and the change in proportions, if significant, is accounted for in the year of change. 2.5.4 Provision of staff retirement gratuity The Group adopts certain actuarial assumptions as disclosed in note 10.2 to these consolidated financial statements for valuation of present value of defined benefit obligations. Any changes in these assumptions in future years might affect unrecognized gains and losses in those years. 2.5.5 Provisions and contingencies The Group reviews the status of all the legal cases on a regular basis. Based on the expected outcome and lawyers' judgments, appropriate disclosure or provision is made.
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2.6
Standards, interpretations and amendments to approved accounting standards that are not yet effective The following standards, amendments and interpretations of approved accounting standards will be effective for accounting periods beginning from the dates specified below: IAS 24 Related Party Disclosures (revised 2009) (effective for annual periods beginning on or after 1 January 2011). The revision amends the definition of a related party and modifies certain related party disclosure requirements for government-related entities. The amendment would result in certain changes in disclosures. 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 assets economic benefits over the life of the asset. The amendment has no impact on consolidated financial statements of the Group. Amendments to IFRIC 14 IAS 19 The Limit on a Defined Benefit Assets, Minimum Funding Requirements and their Interaction (effective for annual periods beginning on or after 1 January 2011). These amendments remove unintended consequences arising from the treatment of prepayments where there is a minimum funding requirement. These amendments result in prepayments of contributions in certain circumstances being recognised as an asset rather than an expense. This amendment has no impact on Group's consolidated financial statements. Improvements to IFRSs 2010 In May 2010 the IASB issued improvements to IFRSs 2010 which comprise of 11 amendments to 7 standards. Effective dates, early application and transitional requirements are addressed on a standard by standard basis. The majority of amendments are effective for annual periods beginning on or after 1 January 2011. The amendments include list of events or transactions that require disclosure in the interim financial statements, add an explicit statement that qualitative disclosure should be made in the context of the quantitative disclosures to better enable users to evaluate an entitys exposure to risks arising from financial instruments and fair value of award credits under the customer loyalty programmes to take into account the amount of discounts or incentives that otherwise would be offered to customers that have not earned the award credits. Certain of these amendments will result in increased disclosures in the consolidated financial statements. IAS 27 Separate Financial Statements (2011) - (effective for annual periods beginning on or after 1 January 2013). IAS 27 (2011) supersedes IAS 27 (2008). IAS 27 (2011) carries forward the existing accounting and disclosure requirements for separate financial statements, with some minor clarifications. The amendments have no impact on consolidated financial statements of the Group. (effective January 1, 2012) 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
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investment in a joint venture. The amendments have no impact on consolidated financial statements of the Group. 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 Group does not plan to adopt this standard early and the extent of the impact has not been determined. 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 consolidated financial statements of the Group. Disclosures Transfers of Financial Assets (Amendments to IFRS 7) - (effective for annual periods beginning on or after 1 July 2011). The amendments introduce new disclosure requirements about transfers of financial assets, including disclosures for financial assets that are not derecognised in their entirety; and financial assets that are derecognised in their entirety but for which the entity retains continuing involvement. The amendments have no impact on consolidated financial statements of the Group. 3. SIGNIFICANT ACCOUNTING POLICIES The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements. 3.1 Staff retirement benefits Gratuity The Group maintains an unfunded gratuity scheme for all its eligible employees. Annual provision for gratuity is made on the basis of actuarial valuation carried out by using the Projected Unit Credit Method. Latest valuation was conducted as at 30 June 2011. The amount recognised in the balance sheet represents the present value of defined benefits as adjusted for unrecognized actuarial gains and losses. The Group uses the corridor approach as defined in IAS 19 " Employee Benefits" for recognition of actuarial gains or losses. The actuarial gains / losses in excess of corridor limit (10% of higher of present value of obligation and fair value of plan assets) are recognized over the expected remaining working life of its employees. Past service cost resulting from changes to defined benefit plans to the extent the benefits are already vested is recognised immediately and remaining unrecognised past service cost is recognised as an expense on a straight line basis over the average period until the benefits become vested.
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Compensated absences The Group recognises provision for compensated absences payable to employees at the time of retirement / termination of service. The provision is determined on the basis of last drawn salary and accumulated leaves due at the reporting date. 3.2 Taxation Income tax expense comprises current and deferred tax. Income tax is recognized in consolidated profit and loss account except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity. Current The Group accounts for current taxation on the basis of taxable income at the current rates of taxation after taking into account tax credits and rebates, if any, in accordance with the provisions of the Income Tax Ordinance, 2001. Deferred A deferred tax asset is recognized to the extent that it is probable that future taxable profits will be available against which the temporary difference, unused tax losses and tax credits can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Deferred tax is recognized using the balance sheet liability method, providing for temporary difference between the carrying value of assets and liabilities for financial reporting purposes and the amount used for taxation purposes. Deferred tax is measured at the tax rates that are expected to be applied to temporary difference when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authorities on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously. The effects on deferred taxation of the portion of income expected to fall under presumptive tax regime is adjusted in accordance with the requirement of Accounting Technical Release - 27 of the Institute of Chartered Accountants of Pakistan. Deferred tax is charged or credited to income. 3.3 Provisions A provision is recognized in the consolidated balance sheet when the Group 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. 3.4 Borrowing cost Markup, interest and other charges on borrowings are capitalized up to the date when the qualifying assets are substantially ready for their intended use. Borrowing cost is included in the
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related property, plant and equipment acquired / constructed out of the proceeds of such borrowings. All other markup, interest and related charges are charged to the consolidated profit and loss account in the period in which they are incurred. 3.5 Property, plant and equipment Tangible assets Owned These are stated at cost, which includes purchase price, import duties, directly attributable costs and related borrowing costs less accumulated depreciation and impairment loss, if any. Freehold land is stated at cost less impairment loss, if any. Normal repairs and maintenance are charged to the consolidated profit and loss account as and when incurred whereas major improvements and modifications are capitalized. Capital work in progress is stated at cost including where appropriate, related borrowing costs less impairment loss, if any. These costs are transferred to operating fixed assets and intangible as and when assets are available for use. Depreciation is charged to income applying the reducing balance method except leasehold land, buildings and plant and machinery. Buildings and plant and machinery are depreciated on straight line method. Leasehold land is amortized over the remaining period of the lease. Rates of depreciation/ estimated useful lives are mentioned in note 14.1. Effective 01 July 2010, the Subsidiary Company has revised the economic life of line-III plant and machinery and buildings to 30 years. Further, rate of depreciation for quarry equipment has also been revised to 15%. Previously buildings, Line III plant and machinery and quarry equipment were depreciated at 10%, 5% and 20% respectively. This change in accounting estimate has been accounted for in accordance with the requirements of IAS 8 (Accounting Policies, Changes in Accounting Estimates and Errors). Had there been no change in estimate the depreciation charge and loss for the year would have been higher by Rs. 88.42 million. Depreciation is charged on prorated basis from the month in which an asset is acquired or capitalized, while no depreciation is charged for the month in which the asset is disposed off. Days in excess of fifteen days are considered as full month for the purpose of calculation of depreciation. Gains and losses on disposals of property, plant and equipment are taken to the consolidated profit and loss account. Leased Leases in term of which the Group assumes substantially all the risks and rewards of ownership are classified as finance lease. Assets acquired by way of finance lease are stated at amounts equal to the lower of their fair value and the present value of minimum lease payments at the inception of the lease less accumulated depreciation and impairment losses, if any. Outstanding obligations under
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the lease less finance charges allocated to the future periods are shown as liability. Depreciation on assets held under finance lease is charged in a manner consistent with that for depreciable assets which are owned by the Group. 3.6 Intangible assets An intangible asset is recognised if it is probable that the future economic benefits that are attributable to the asset will flow to the Group and that the cost of such asset can also be measured reliably. These are stated at cost less accumulated amortisation and impairment losses, if any. Amortisation is charged by applying straight line method, so as to write off the cost of assets at amortisation rate as mentioned in note 15 to the consolidated financial statements. Subsequent expenditure is capitalised only when it increases the future economic benefit embodied in the specific asset to which it relates. All other expenditure is recognised in consolidated profit and loss account as incurred. 3.7 Investment property Investment property is stated at its fair value at the consolidated balance sheet date. Gains or losses, if any, arising from changes in the fair value of investment property are recognized as profit or loss for the period in which they arise. 3.8 Goodwill Goodwill represents the excess of cost of acquisition over the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of a subsidiary Company. Goodwill is initially recognised as an asset at cost. Subsequently, goodwill is measured at cost less accumulated impairment losses, if any, and charged to the consolidated profit and loss account. 3.9 Impairment Non-financial assets The carrying amount of the Group's assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated. Impairment losses are recognized as expense in the profit and loss account. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount and loss is reversed only to the extent that the assets carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. For non-financial assets, financial assets measured at amortized cost, available-for-sale financial assets that are debt securities, the reversal is recognised in consolidated profit and loss account. 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
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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. 3.10 Foreign currency transactions Foreign currency transactions are recorded on exchange rates prevailing on the dates of transactions. Monetary assets and liabilities in foreign currencies are translated at the exchange rates prevailing at the balance sheet date. Exchange gains and losses are included in the consolidated profit and loss account. 3.11 Stores, spare parts and loose tools Stores, spare parts and loose tools are valued at weighted average cost except for items in transit which are stated at cost incurred upto the balance sheet date less impairment, if any. For items which are slow moving and/ or identified as surplus to the Group's requirements, adequate provision is made for any excess book value over estimated net realizable value. The Group reviews the carrying amount of Stores, spare parts and loose tools on a regular basis and provision is made for obsolescence. 3.12 Stock in trade Stocks of raw materials, work in process and finished stocks are valued at the lower of weighted average cost and net realisable value. Cost of work in process and finished stock comprises of direct materials, labour and appropriate manufacturing overheads. Net realisable value signifies estimated selling price less costs necessary to be incurred to effect such sale. 3.13 Revenue recognition Revenue from sales is recognized on dispatch of goods when significant risks and rewards of ownership are transferred to the buyer. Return on investments is recognised on effective yield method. Dividend income is recognized when the right to receive such income is established. Rental income on investment property is recognised when due. 3.14 Markup bearing borrowings Markup bearing borrowings are recognized initially at cost, less attributable transaction costs. Subsequent to initial recognition, markup bearing borrowings are stated at original cost less subsequent repayments, while the difference between the original recognized amounts (as reduced by periodic payments) and redemption value is recognized in the consolidated profit and loss account over the period of borrowings on an effective rate basis. The borrowing cost on qualifying asset is included in the cost of related asset as explained in note 3.5. 3.15 Financial instruments Financial assets and liabilities are recognised in the consolidated balance sheet when the Group becomes a party to the contractual provisions of an instrument. Financial assets are derecognised when the Group looses control of the contractual rights that comprise the financial asset. The Group derecognises the financial assets and liabilities when it ceases to be a party to such
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contractual provision of the instruments. Any gain or loss on derecognition of the financial assets and financial liabilities is taken to the consolidated profit and loss account. Trade and other payables Liabilities for trade and other amounts payable are carried at cost, which is the fair value of the consideration to be paid in future for goods and services received, whether or not billed to the Group. Trade debts and other receivables Trade debts and other receivables are recognized at original invoice amount less allowance for estimated irrecoverable amounts. Offsetting of financial assets and financial liabilities Financial assets and financial liabilities are offset and the net amount is reported in the consolidated balance sheet if the Group has a legally enforceable right to setoff the recognised amounts and intends either to settle on a net basis or to realize the assets and settle the liabilities simultaneously. 3.16 Cash and cash equivalents Cash and cash equivalents are carried in the consolidated balance sheet at cost. For the purpose of consolidated cash flow statement, cash and cash equivalents comprise cash and bank balance, demand deposits, other short term highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change. 3.17 Dividend Dividend distribution to the shareholders is recognised as liability in the period in which it is declared.
4.
Issued, subscribed and paid up share capital

2011 2010 Number of shares 514,163,552 64,038,422 578,201,974 261,709,169 Ordinary shares of Rs.10 each issued for cash 64,038,422 Ordinary shares of Rs. 10 each issued as fully paid bonus share 325,747,591 Total 2011 Rupees 5,141,635,520 640,384,220 5,782,019,740 2010 Rupees 2,617,091,690 640,384,220 3,257,475,910
Bestway (Holdings) Limited, U.K. is the parent company controlling 319,885,740 i.e. 55.32% shares (2010: 222,358,381 i.e. 68.26% shares) of the Parent Company. 5. Share premium The Board of Directors of the Company in their meeting held on 22 March 2011 announced issuance of 0.775 right share for every share held at a premium of Rs. 5 per share and during the year 252,454,383 ordinary shares of Rs.10 each were issued accordingly.
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6.
Long term financing - secured Loans from banking companies Syndicate term finance facilities Current portion of long term financing
Note 6.1 6.2
2011 Rupees 4,772,222,222 8,710,000,006 13,482,222,228 (4,688,888,890) 8,793,333,338 687,500,000 888,888,889 1,800,000,000 1,000,000,000 395,833,333 4,772,222,222 860,000,000 800,000,006 2,600,000,000 2,050,000,000 2,400,000,000 8,710,000,006
2010 Rupees 6,037,500,000 11,743,303,338 17,780,803,338 (4,298,611,112) 13,482,192,226 962,500,000 1,000,000,000 2,400,000,000 1,200,000,000 475,000,000 6,037,500,000 1,719,970,000 1,333,333,338 3,640,000,000 2,050,000,000 3,000,000,000 11,743,303,338
6.1
Loans from banking companies Term Finance from MCB Bank Limited Term Finance from Allied Bank Limited Term Finance from Habib Bank Limited Term Finance from Habib Bank Limited Term Finance from Habib Bank Limited 6.1.1 6.1.2 6.1.3 6.1.4 6.1.5
6.2
Syndicate term finance facilities Term Finance from syndicate Term Finance from syndicate Term Finance from syndicate Term Finance from syndicate Term Finance from syndicate 6.2.1 6.2.2 6.2.3 6.2.4 6.2.5
6.1.1 This represents term finance facility of Rs. 1,100 million obtained by the Parent Company. This facility is repayable in 08 equal semi annual installments starting from April 2010. Markup is payable on quarterly basis at three months' KIBOR plus 0.55% (2010: three months' KIBOR plus 0.55%) per annum. The facility is secured by first pari passu hypothecation charge on all present and future assets excluding land and buildings of the Parent Company for an amount of Rs. 1,283.34 million (2010: Rs. 1,466.67 million). 6.1.2 This represents term finance facility of Rs. 1,000 million obtained by the Parent Company. This facility is repayable in 09 equal semi annual installments starting from June 2011. Markup is payable on semi annual basis at six months' KIBOR plus 2.45% (2010: six months' KIBOR plus 2.45%) per annum. The facility is secured by first pari passu hypothecation charge on all present and future assets excluding land and buildings of the Parent Company for an amount of Rs. 1,333.34 million (2010: Rs. 1,333.34 million). 6.1.3 This represents term finance facility of Rs. 3,000 million obtained by the Parent Company. This facility is repayable in 10 equal semi annual installments starting from December 2009. Markup is payable on quarterly basis at three months' KIBOR plus 1.25% (2010: three months' KIBOR plus 1.25%) per annum. The facility is secured by first pari passu hypothecation charge on all present and future current and movable assets of the Parent Company and equitable mortgage ranking pari passu charge over the immovable assets of the Parent Company including land and buildings for an amount of Rs. 3,200 million (2010: Rs. 4,000 million). 6.1.4 This represents a term finance facility of Rs. 1,200 million obtained by the Subsidiary Company, from Habib Bank Limited. The facility is repayable in 06 equal semi annual installments starting
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from June 2011. Markup is payable on semi annual basis at six months' KIBOR plus 0.25% (2010: six months' KIBOR plus 0.25%) per annum. The facility is secured by ranking hypothecation charge on all present and future book debts, receivables and movable assets of the Subsidiary Company for an amount of Rs. 1,412 million. This facility is also secured by lien on bank accounts for an amount of US Dollars 15.226 million of directors of the ultimate Parent Company. 6.1.5 This represents a term finance facility of Rs. 475 million obtained by the Subsidiary Company, from Habib Bank Limited. This facility is repayable in 06 equal semi annual installments starting from June 2011. Markup is payable on semi annual basis at six months' KIBOR plus 0.25% (2010: six months' KIBOR plus 0.25%) per annum. The facility is secured by ranking hypothecation charge on all present and future book debt, receivables and other movable assets of the Subsidiary Company for an amount of Rs. 560 million. This facility is also secured by lien on bank accounts for an amount of US Dollars 6.027 million of directors of the ultimate Parent Company. 6.2.1 This represents a syndicated term finance facility of Rs. 4,300 million obtained by the Parent Company, from a syndicate of Habib Bank Limited, MCB Bank Limited, The Bank of Punjab, Allied Bank Limited and Standard Chartered Bank (Pakistan) Limited with the participation of Rs. 1,500 million, Rs. 1,200 million, Rs. 600 million, Rs. 500 million and Rs. 500 million respectively. This facility is repayable in 10 equal semi annual installments starting from November 2007. Markup is payable on semi annual basis at six months' KIBOR plus 1.10% (2010: six months' KIBOR plus 1.10 %) per annum. The facility is secured by first pari passu hypothecation charge on all present and future assets of the Parent Company and first pari passu equitable mortgage over immovable properties of the Parent Company for an amount of Rs. 2,293 million (2010: Rs. 4,586.67 million) in favour of syndicate. 6.2.2 This represents a syndicated term finance facility of Rs. 3,200 million obtained by the Parent Company, from a syndicate of Habib Bank Limited, MCB Bank Limited and Allied Bank Limited with the participation of Rs. 1,000 million, Rs. 1,000 million, and Rs. 1,200 million respectively. This facility is repayable in 12 equal semi annual installments starting from May 2007. Markup is payable on quarterly basis at six months' KIBOR plus 1.25 % (2010: six months' KIBOR plus 1.25 %) per annum. The facility is secured by first pari passu hypothecation charge on all the present and future assets of the Parent Company and first pari passu equitable mortgage over immovable properties of the Parent Company for an amount of Rs. 1,777.79 million (2010: Rs. 2,844.44 million) in favour of syndicate and pledge over 85.29% shares of the Subsidiary Company. 6.2.3 This represents a syndicated term finance facility of Rs. 5,200 million obtained by the Parent Company, from a syndicate of Allied Bank Limited, Bank Alfalah Limited, Standard Chartered Bank (Pakistan) Limited, Askari Bank Limited, Faysal Bank Limited , Habib Bank Limited, Silk Bank Limited, HSBC Bank Middle East Limited, Bank Al Habib Limited, Habib Metropolitan Bank Limited and Soneri Bank Limited with the participation of Rs. 550 million, Rs. 1,000 million, Rs. 600 million, Rs. 500 million, Rs. 500 million, Rs. 500 million, Rs. 500 million, Rs. 400 million, Rs. 300 million, Rs. 250 million and Rs. 100 million respectively. This facility is repayable in 10 equal semi annual installments starting from April 2009. Markup is payable on semi annual basis at rate of six months' KIBOR plus 2.05 % (2010: six months' KIBOR plus 2.05 %) per annum. The facility is secured by first pari passu hypothecation charge on all present and future assets of the Parent Company and equitable mortgage over immovable properties of the Parent Company for an amount of Rs. 4,786.67 million (2010: Rs. 6,933.33 million). 6.2.4 This represents a syndicated term finance facility of Rs. 2,050 million obtained by the Parent Company, from a syndicate of Allied Bank Limited, Habib Bank Limited, The Bank of Punjab and
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Faysal Bank Limited with the participation of Rs. 1,000 million, Rs. 500 million, Rs. 300 million and Rs. 250 million respectively. This facility is repayable in 06 equal semi annual installments starting from December 2012. Markup is payable on semi annual basis at six months' KIBOR plus 2.25% (2010: six months' KIBOR plus 2.25%) per annum. The facility is secured by first pari passu hypothecation charge on all the present and future assets of the Parent Company excluding land and buildings for an amount of Rs. 2,733.33 million in favour of syndicate. 6.2.5 This represents a syndicated term finance facility of Rs. 3,000 million obtained by the Subsidiary Company, from syndicate of Allied Bank Limited, Summit Bank Limited, Standard Chartered Bank (Pakistan) Limited, Askari Bank Limited, Bank Al Habib Limited and MCB Bank Limited with participation of Rs. 1,400 million, Rs. 500 million, Rs. 400 million, Rs. 300 million, Rs. 200 million and Rs. 200 million respectively. This facility is repayable in 10 equal semi annual installments starting from November 2010. Markup is payable on semi annual basis at six months' KIBOR plus 0.75% (2010: six months' KIBOR plus 0.75%) per annum. This facility is secured by first pari passu mortgage charge on all present and future immovable properties and first pari passu hypothecation charge on all present and future moveable properties of the Subsidiary Company for an amount of Rs. 4,000 million. 7. Liability against assets subject to finance lease - secured
2011
Minimum lease payments Rupees Finance cost for future periods Rupees 18,617,490 22,293,828 40,911,318
2010
Present value of Present value of minimum minimum lease payments lease payments Rupees 47,802,130 109,754,039 (47,802,130) 109,754,039 Rupees 43,433,792 154,309,555 (43,433,792) 154,309,555
Not later than one year Later than one year and not later than five years Current portion of liability against assets subject to finance lease
66,419,620 132,047,867 198,467,487
7.1
8.
This represents lease finance facility of Rs. 227.05 million (present value of Rs. 157.56 million (2010: Rs. 197.74 million) obtained by the Parent Company, for acquisition of plant and machinery obtained from Meezan Bank Limited, repayable in 10 semi annual installments starting from November 2009. Markup is payable on a biannual basis at six months' KIBOR plus 2.05% (2010: six months' KIBOR plus 2.05%) per annum with a floor and cap of 2.5% and 28% respectively. The facility is secured by way of ownership of leased assets and 10% security deposit of the financed asset. Long term murabaha - secured Note Rupees Rupees
Faysal Bank Limited Faysal Bank Limited Meezan Bank Limited Current portion of long term murabaha
8.1
8.1 8.2 8.3
60,000,000 150,000,000 1,675,000,000 1,885,000,000 (120,000,000) 1,765,000,000
120,000,000 210,000,000 1,675,000,000 2,005,000,000 (120,000,000) 1,885,000,000
This represents murabaha finance facility of Rs. 300 million obtained by the Parent Company. This facility is repayable in 10 equal semi annual installments starting from November 2007. Markup is payable on semi annual basis at six months' KIBOR plus 1.10 % (2010: six months' KIBOR plus 1.10 %) per annum. The facility is secured by first pari passu hypothecation charge on all present and future assets of the Parent Company and equitable mortgage over the immovable properties of the Parent Company for an amount of Rs. 160 million (2010: Rs. 320 million).
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8.2
This represents murabaha finance facility of Rs. 300 million obtained by the Parent Company. This facility is repayable in 10 equal semi annual installments starting from April 2009. Markup is payable on semi annual basis at rate of six months' KIBOR plus 2.05% (2010: six months' KIBOR plus 2.05%) per annum. The facility is secured by first pari passu hypothecation charge on the present and future assets of the Parent Company and equitable mortgage over immovable properties of the Parent Company for an amount of Rs. 280 million (2010: Rs. 400 million). This represents commodity murabaha finance facility of Rs. 1,675 million (2010: Rs. 1,900 million) obtained by the Parent Company. This facility is repayable in bullet installment at the time of maturity in July 2012. Markup is payable on annual basis at the rate of two years' KIBOR (2010: two years' KIBOR) per annum. The facility is secured by standby letter of credit(s) (SBLCs) of worth USD 19.78 million, for which security has been arranged by the directors of the ultimate Parent Company, and ranking hypothecation charge on the present and future both current and fixed assets of the Parent Company excluding land and buildings for an amount of Rs. 285 million.
8.3
9.
Long term musharaka - secured Meezan Bank Limited
Note 9.1
2011 Rupees 300,000,000 300,000,000
2010 Rupees -
9.1
This represents utilized amount of Diminishing Musharaka finance facility of Rs. 300 million obtained by the Parent Company. This facility is repayable in six semi annual installments starting from December 2013. Mark up is payable on semi annual basis at the rate of six months' KIBOR plus 1.85% (2010: Nil) per annum. The facility is secured by first pari passu hypothecation charge on all present and future assets of the Parent Company excluding land and buildings for an amount of Rs. 400 million (2010: Rs. Nil).
10.
Deferred liabilities Deferred taxation Provision for gratuity Provision for compensated absences 10.1 10.2 10.3 892,987,960 94,039,789 13,221,739 1,000,249,488 1,122,055,397 69,552,586 15,819,845 1,207,427,828
10.1 Deferred tax liability is recognised on following major temporary differences: Taxable temporary differences Accelerated depreciation 3,959,422,851 Fair value of identifiable assets 686,928,964 Profits of associate 349,509,187 Deductible temporary differences Liability against assets subject to finance lease (43,012,834) Cash flow hedge reserve (1,098,210) Deficit on revaluation of available for sale investments (18,493,355) Unabsorbed tax losses (4,040,268,643) (4,102,873,042) 892,987,960
4,005,081,005 930,583,324 302,344,437 (53,983,934) (2,029,227) (23,338,436) (4,036,601,772) (4,115,953,369) 1,122,055,397
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92
2011 Rupees
10.1.1Movement in deferred tax liability is as follows: Opening balance Credit / (charge) to cash flow hedge reserve Credit to deficit on revaluation of available for sale investments Credit for the year Closing balance 1,122,055,397 931,017 4,845,081 (234,843,535) 892,987,960 114,667,127 (20,627,338) 94,039,789
2010 Rupees
2,232,472,141 62,099 8,847,799 (1,119,326,641) 1,122,055,397 91,824,649 (22,272,063) 69,552,586
10.2 The amount recognised in the consolidated balance sheet is as follows: Present value of defined benefit obligation Net actuarial losses not recognized Net liability at end of the year
Movement in the present value of defined benefit obligation is as follows: 69,552,586 Opening balance 31,291,735 Charge for the year (6,804,532) Benefits paid during the year 94,039,789 Closing balance Expense recognised in consolidated profit and loss account is as follows: Current service cost Interest cost Actuarial losses recognised
Actuarial Assumptions Valuation discount rate Salary increase rate Mortality rate
53,705,502 28,139,767 (12,292,683) 69,552,586
16,698,824 11,494,909 3,098,002 31,291,735

14,910,338 10,737,944 2,491,485 28,139,767

Expected gratuity expense for the next financial year is Rs. 34,310,131 (2010: Rs. 31,012,369).
Historical information Present value of the defined benefit obligation 2011 2010 (Rupees) 94,039,789 69,552,586
2009 53,705,502
2008 39,618,179
2007 29,809,661
10.3 Actuarial valuation of compensated absences has not been carried out since the management believes that the effect of actuarial valuation would not be material.
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Annual Report 2011
2010 Rupees 1,081,931,876 647,377,299 134,017,523 28,048,062 1,970,768 4,351,852 30,548,987 35,384,336 233,654,421 6,357,960 41,951,783 594,743 2,246,189,610
11.
Trade and other payables Payable to contractors and suppliers Accrued liabilities Advances from customers Security deposits Workers' Profit Participation Fund Workers' Welfare Fund Retention money Sales tax payable Excise duty payable Current portion of advance rent Other payables Unclaimed dividend
Note
2011 Rupees 931,825,389 810,058,171 97,823,128 26,558,329 1,970,768 4,351,852 8,311,966 98,622,103 220,028,207 7,693,740 16,652,904 594,317 2,224,490,874
11.1 11.2
11.1 This includes an amount of Rs. 71.52 million (2010: Rs. 0.23 million) payable to Sui Northern Gas Pipelines Limited (SNGPL) against gas consumption during the month of June 2011. The Group has issued bank guarantees in the normal course of business to SNGPL for commercial and industrial use of gas for an amount of Rs. 1,202.84 million (2010: Rs. 664.96 million). 11.2 This includes an unsecured and interest free amount of Rs. 6.529 million (2010: Rs. 7.61 million) payable to Ultimate Parent Company.
12.
Short term borrowings - secured Running finance from banking companies Habib Bank Limited Barclays Bank Limited Bank Al Habib Limited Askari Bank Limited Soneri Bank Limited Allied Bank Limited Meezan Bank Limited Habib Bank Limited Habib Bank Limited Allied Bank Limited Bank Al Habib Limited NIB Bank Limited Barclays Bank Limited 12.1 12.2 12.3 12.4 12.5 12.6 12.7 12.8 12.9 12.10 12.11 12.12 32,122,827 39,564 579 494,342,269 79,939,727 467,957,630 358,394,636 1,080,976 145,467,345 398,385,513 177,845,150 348,489,432 2,504,065,648 24,537,361 348 5,641,012 499,987,281 130,288,840 53,941,720 300,000,000 365,000,000 354,997,244 136,934,916 399,990,113 133,769,727 300,128,837 2,705,217,399
Annual Report 2011
94
Note Foreign currency import finance Meezan Bank Limited Habib Bank Limited Bank Al-Habib Limited MCB Bank Limited Allied Bank Limited Soneri Bank Limited NIB Bank Limited Allied Bank Limited Export refinance Soneri Bank Limited Allied Bank Limited Barclays Bank Limited NIB Bank Limited Standard Chartered Bank Faysal Bank Limited Askari Bank Limited
2011 Rupees 556,674,708 395,576,529 284,918,642 290,911,949 70,963,389 1,599,045,217 100,000,000 339,000,000 65,000,000 450,000,000 90,000,000 99,000,000 1,143,000,000 5,246,110,865
2010 Rupees 362,798,983 224,162,400 318,592,794 249,842,491 86,249,072 1,241,645,740 93,045,000 350,000,000 65,000,000 187,000,000 695,045,000 4,641,908,139
12.13 12.14 12.15 12.16 12.17
12.18 12.19 12.20 12.21 12.22 12.23
12.1
This represents utilized amount of running finance facility of Rs. 400 million (2010: Rs. 400 million) obtained by the Parent Company, for a period of one year. Markup is payable on quarterly basis at the rate of one month's KIBOR plus 1.00% (2010: one month's KIBOR plus 1.00%) per annum. The facility is secured by ranking hypothecation charge on all present and future book debts, receivables and other movable assets of the Parent Company for an amount of Rs. 533.34 million (2010: Rs. 533.34 million) and lien over US Dollar account upto USD 0.412 million of the Group (refer note 27.2). This represents the utilized amount of running finance facility of Rs. 500 million (2010: Rs. 500 million) obtained by the Parent Company, for a period of one year. Markup is payable on quarterly basis at the rate of one month KIBOR plus 1.50% (2010: one month KIBOR plus 1.75%) per annum. The facility is secured by first pari passu hypothecation charge on all present and future current assets of the Parent Company and ranking hypothecation charge on all present and future fixed assets of the Parent Company excluding land and buildings for an amount of Rs. 667 million (2010: Rs. 667 million). This represents the utilized amount of running finance facility of Rs. 500 million (2010: Rs. 500 million) obtained by the Parent Company, for a period of one year. Markup is payable on quarterly basis at the rate of three months' KIBOR plus 1.50% (2010: three months' KIBOR plus 1.00%) per annum. The facility is secured by first pari passu hypothecation charge on all present and future current assets of the Parent Company for an amount of Rs. 666.67 million (2010: Rs. 666.67 million).
12.2
12.3
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Annual Report 2011
12.4
This represents the utilized amount of running finance facility of Rs. 500 million (2010:Rs. 500 million) obtained by the Parent Company, for a period of one year. Markup is payable on quarterly basis at the rate of three months' KIBOR plus 1.00% (2010: three months' KIBOR plus 1.00%) per annum. The facility is secured by first pari passu hypothecation charge on all present and future assets of the Parent Company excluding land and buildings for an amount of Rs. 666.67 million (2010: Rs. 666.67 million). This represents the utilized amount of a running finance facility of Rs. 375 million (2010: Rs. 375 million) obtained by the Parent Company, for a period of one year. Markup is payable on quarterly basis at the rate of three months' KIBOR plus 1.00% (2010: three months' KIBOR plus 1.00%) per annum. The facility is secured by first pari passu hypothecation charge on all present and future current assets of the Parent Company for an amount of Rs. 500 million (2010: Rs. 500 million). This represents the utilized amount of running finance facility of Rs. 1,000 million (2010: Rs. 1,000 million) obtained by the Parent Company, for a period of one year. Markup is payable on quarterly basis at the rate of one month KIBOR plus 1.50% (2010: one month KIBOR plus 1.50%) per annum. The facility is secured by first pari passu hypothecation charge on all present and future assets excluding land and buildings of the Parent Company for an amount of Rs. 1,333.33 million (2010: Rs. 1,333.33 million). This represents the utilized amount of running finance facility of Rs. 365 million (2010: Rs. 365 million) obtained by the Parent Company, for a period of one year. Markup is payable on quarterly basis at the rate of three month's KIBOR plus 1.50% (2010: three months' KIBOR plus 1.50%) per annum. The facility is secured by first pari passu hypothecation charge on all present and future current assets of the Parent Company for an amount of Rs. 100 million and first pari passu hypothecation charge on all present and future fixed assets of the Parent Company excluding land and buildings for an amount of Rs. 322 million (2010: Rs. 322 million). This represents the utilized amount of running finance facility of Rs. 355 million (2010: Rs. 355 million) obtained by the Parent Company. Mark up is payable on quarterly basis at the rate of one month KIBOR plus 2.00% (2010: one month KIBOR plus 2.00%) per annum. The facility is secured by first pari passu hypothecation charge on all present and future current and movable assets of the Parent Company for an amount of Rs. 474 million (2010: Rs. 474 million). This represents the utilized amount of running finance facility of Rs. 150 million (2010: Rs. 150 million) obtained by the Subsidiary Company. Markup is payable on quarterly basis at one month's KIBOR plus 1.5% (2010: one month's KIBOR plus 1.5%) per annum. The facility is secured by first pari passu hypothecation charge on all present and future assets (excluding land and buildings) of the Subsidiary Company for an amount of Rs. 200 million (2010: Rs. 200 million).
12.5
12.6
12.7
12.8
12.9
12.10 This represents the utilized amount of running finance facility of Rs. 400 million (2010: Rs. 400 million) obtained by the Subsidiary Company. Markup is payable on quarterly basis at three months' KIBOR plus 2% (2010: three months' KIBOR plus 1.5%) per annum. The facility is secured by first pari passu hypothecation charge on all present and future current assets of the Subsidiary Company for an amount of Rs. 533.34 million (2010: Rs. 533.34 million).
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12.11 This represents the utilized amount of running finance facility of Rs. 250 million (2010: Rs. 250 million) obtained by the Subsidiary Company. Markup is payable on quarterly basis at three months' KIBOR plus 2.5% (2010: three months' KIBOR plus 2.85%) per annum. The facility is secured by first pari passu hypothecation charge on all present and future fixed assets of the Subsidiary Company for an amount of Rs. 333.34 million. 12.12 This represents the utilized amount of running finance facility of Rs. 300 million (2010: Rs. 300 million) obtained by the Subsidiary Company. Markup is payable on quarterly basis at one month's KIBOR plus 2.5% (2010: one month's KIBOR plus 2.5%) per annum. The facility is secured by first pari passu hypothecation charge on all present and future current and movable assets of the Subsidiary Company for an amount of Rs. 400 million (2010: Rs. 400 million). 12.13 This represents USD 6.471 million of Foreign Currency Import Finance facility equivalent to Rs. 720 million (2010: Rs 720 million) obtained by the Parent Company. This facility is available in USD for import of coal with maximum tenor of 180 days. The facility carries markup at the rate of six months' LIBOR plus 2.75% (2010: six months' LIBOR plus 2.75%) per annum payable at the time of maturity. The facility is secured by first pari passu hypothecation charge on all present and future current and movable assets of the Parent Company for an amount of Rs. 960 million (2010: Rs. 960 million). 12.14 This represents USD 4.598 million of Foreign Currency Import Finance facility equivalent to Rs. 500 million (2010: Rs. 500 million) obtained by the Parent Company. This facility is available in USD for import of coal with maximum tenor of 180 days. The facility carries markup at the rate of six months' LIBOR plus 4.70% (2010: six months' LIBOR plus 3.50%) per annum payable at the time of maturity. The facility is secured by first pari passu hypothecation charge on all present and future assets of the Parent Company excluding land and buildings for an amount of Rs. 668 million (2010: Rs. 668 million). 12.15 This represents USD 3.312 million of Foreign Currency Import Finance facility equivalent to Rs. 300 million (2010: Rs. Nil) obtained by the Parent Company. This facility is available in USD for import of coal with maximum tenor of 180 days. The facility carries markup at the rate of six months' LIBOR plus ranging from 3.25% to 3.40% per annum (2010: Nil) payable on quarterly basis or at maturity whichever comes earlier. The facility is secured by first pari passu hypothecation charge on all present and future assets excluding land and buildings of the Parent Company for an amount of Rs. 400 million (2010: Rs. Nil). 12.16 This represents USD 3.382 million of Foreign Currency Import Finance facility equivalent to Rs. 375 million (2010: Rs. Nil) obtained by the Parent Company. This facility is available in USD obtained for import of coal with maximum tenor of 180 days. The facility carries markup at the rate of six months' LIBOR plus 3.75% per annum (2010: Nil) payable at the time of maturity. The facility is secured by first pari passu hypothecation charge on all present and future current assets of the Parent Company for an amount of Rs. 500 million (2010: Rs. Nil). 12.17 This represents USD 0.825 million of Foreign Currency Import Finance facility equivalent to Rs. 100 million utilizable in USD obtained by the Subsidiary Company. Markup is payable on quarterly basis or on maturity at six months' LIBOR plus 3.50% per annum. The facility is secured by first pari passu hypothecation charge on all present and future fixed assets of the Subsidiary Company for an amount of Rs. 150 million. 12.18 This represents Export Re-Finance facility of Rs. 100 million (2010: Rs. 100 million) obtained by
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Annual Report 2011
the Parent Company, for a period of one year with maximum tenor of 180 days. Markup is payable at the time of maturity of the facility or on quarterly basis whichever comes earlier at the rate defined by the State Bank of Pakistan plus 1.00% per annum. The facility is secured by first pari passu hypothecation charge on all present and future current assets of the Parent Company for an amount of Rs. 134 million (2010: Rs. 134 million). 12.19 This represents Export Re-Finance facility of Rs. 350 million (2010: Rs. 350 million) obtained by the Parent Company, for a period of one year with maximum tenor of 180 days. Markup is payable at the time of maturity of the facility or on quarterly basis whichever comes earlier at the rate defined by the State Bank of Pakistan plus 1.00% per annum. The facility is secured by first pari passu hypothecation charge on all present and future assets excluding land and buildings of the Parent Company for an amount of Rs. 466.67 million (2010: Rs. 466.67 million). 12.20 This represents Export Re-Finance facility of Rs. 75 million (2010: Rs. 75 million) obtained by the Parent Company, for a period of one year with maximum tenor of 180 days. Markup is payable at the time of maturity of the facility or on quarterly basis whichever comes earlier at the rate defined by the State Bank of Pakistan plus 1.00% per annum. The facility is secured by first pari passu hypothecation charge on all present and future fixed assets of the Parent Company excluding land and buildings for an amount of Rs. 667 million (2010: Rs. 667 million). 12.21 This represents Export Re-Finance facility of Rs. 450 million for a period of one year (2010: Rs. Nil) obtained by the Parent Company, with maximum tenor of 180 days. Markup is payable at the time of maturity of the facility or on quarterly basis whichever comes earlier at the rate defined by the State Bank of Pakistan plus 1.00% per annum. The facility is secured by first pari passu hypothecation charge on all present and future assets of the Parent Company excluding land and buildings for an amount of Rs. 600 million (2010: Rs. Nil). 12.22 This represents Export Re-Finance facility of Rs. 250 million (2010: Rs. Nil) obtained by the Parent Company, for a period of one year for maximum tenor of 180 days. Markup is payable at the time of maturity of the facility or on quarterly basis whichever comes earlier at the rate defined by the State Bank of Pakistan plus 1.00% per annum. The facility is secured by first pari passu hypothecation charge on all present and future assets of the Parent Company excluding land and buildings for an amount of Rs. 333.34 million (2010: Rs. Nil). 12.23 This represents the utilized amount of Export Re-Finance facility of Rs. 100 million (2010: Rs. Nil) obtained by the Parent Company, for a period of one year for maximum tenor of 180 days. Markup is payable at the time of maturity of the facility or on quarterly basis whichever comes earlier at the rate defined by the State Bank of Pakistan plus 1.00% per annum. The facility is secured by first pari passu hypothecation charge on all present and future assets of the Parent Company excluding land and buildings for an amount of Rs. 133.34 million (2010: Rs. Nil). 12.24 Unavailed facilities The Group has running finance facilities and other short term borrowings facilities for an amount of Rs. 1,417 million (2010: Rs. 685 million) which the Group has not availed as at the year end. Facilities of letters of guarantee and letters of credit amounting to Rs. 418.53 million (2010: Rs. 704.99 million) and Rs. 5,035.57 million (2010: Rs. 4,481.97 million) respectively are available to the Group. Facilities of letters of guarantee are secured by first pari passu charge on present and future assets of the Group.
Annual Report 2011
98
13. 13.1
Contingencies and commitments Contingencies of Parent and Subsidiary company 2011 Rupees 96,085,688 2010 Rupees 93,164,810
13.1.1 In respect of bank guarantees
All bank guarantees are secured by way of charge over operating fixed assets of the group.
13.1.2 Sales Tax Department has conducted Sales Tax Audit under section 25 and raised a tax demand of Rs. 52,749,082 vide Order-IN-Original No. 01 of 2010 dated 27/3/2010 mainly consisting of misconstrued/ duplicate demand raised on account of sales tax and federal excise duty relating to sale of clinker and rejection of input tax on certain eligible items. The Subsidiary Company has filed an appeal before the Commissioner of Inland Revenue (Appeals) against the impugned order, which is pending for adjudication. No Provision has been made in the financial statements as the management is confident of a favourable outcome of the case. 13.1.3 Competition Commission of Pakistan (CCP) issued a show cause notice dated 28 October 2008 to 21 cement companies (including the Group) under section 30 of the Competition Ordinance, 2007. On 27 August 2009, CCP imposed a penalty of Rs. 636 million on the Group. The cement manufacturers (including the Group) have challenged the CCP order in the Honourable High Court and the Honourable High Court has passed an interim order restraining CCP from taking any adverse action against these 21 cement companies. Against the above referred order of CCP dated 27 August 2009 an appeal was also filed as abundant caution in the Honourable Supreme Court of Pakistan under Section 42 of the Competition Ordinance, 2007. During the year, the case was fixed for hearing on time to time, however because of non availability of defendant, the hearings of the case were adjourned. These appeals are still pending and management is confident of a favourable outcome of the case. 13.1.4 Income tax related contingencies are disclosed in note 32 to these financial statements.
13.2
Commitments of Parent and Subsidiary company In respect of letters of credit 958,887,579 710,599,823
13.3
Share in contingencies and commitments of associated company Contingencies Direct credit substitutes 1,578,480,000 Transactions related 7,566,814,000 Trade related 9,817,784,000 Tax related Others 2,290,258,000 Commitments In respect of sale of forward foreign exchange contract 6,571,834,000 In respect of purchase of forward foreign exchange contract 10,031,805,000 Others 3,647,964,000 1,617,110,015 7,595,060,378 9,101,532,573 469,000,000 1,581,325,610 3,633,708,308 7,044,624,135 3,925,269,468
99
Annual Report 2011
14. Note 14.1 14.2 24,662,143,785 149,343,608 219,772,282 25,031,259,675 25,518,104,298 84,072,764 123,783,145 25,725,960,207
Property, plant and equipment
2011 Rupees
2010 Rupees
Operating fixed assets Capital work in progress Stores held for capitalisation
14.1 Operating fixed assets Rupees 40,652,466 40,652,466 40,652,466 40,652,466 14,970,301 1,520,136 16,490,437 16,490,437 1,510,038 18,000,475 22,651,991 24,162,029 30yrs 4,192,848,987 4,373,383,703 30yrs 18,460,196,805 19,149,548,400 30yrs - 5% 1,094,289,644 209,196,785 1,303,486,429 3,206,197,954 742,782,002 (53,250,082) 3,895,729,874 485,550,378 60,552,213 546,102,591 424,462,288 394,589,920 15% 858,587,147 235,702,497 1,094,289,644 2,594,429,475 640,803,483 (29,035,004) 3,206,197,954 414,087,035 71,463,343 485,550,378 37,887,019 7,829,338 45,716,357 45,716,357 9,036,450 (55,724) 54,697,083 61,826,127 60,686,722 10% 5,467,673,347 14,410,608 14,251,461 5,496,335,416 22,355,746,354 149,814,717 42,588,433 (192,222,825) 22,355,926,679 880,140,298 90,424,581 970,564,879 106,403,079 10,328,931 (208,800) 116,523,210 86,265,692 195,310,692 103,266,790 3,009,966 10,795,440 8,309,636 (5,647,338) 89,275,658 200,458,794 111,576,426 23,318,110 96,129,171 6,114,856 19,429,911 (28,374) (5,959,699) 29,404,592 109,599,383 29,404,592 109,599,383 5,770,056 17,962,573 (3,895,460) 35,174,648 123,666,496 54,101,010 56,861,100 10% 76,792,298 85,711,309 20% 35,180,420 8,726,099 (99,908) 43,806,611 43,806,611 9,423,942 53,230,553 58,345,873 59,460,179 15% 5,247,460,069 35,944,911 184,268,367 5,467,673,347 14,102,716,964 152,923,245 8,185,836,064 (85,729,919) 22,355,746,354 880,140,298 880,140,298 98,326,247 8,076,832 106,403,079 82,718,123 194,162,449 87,158,860 3,950,085 9,001,057 16,385,552 (402,516) (277,622) (7,852,814) 86,265,692 195,310,692 103,266,790 227,054,048 227,054,048 227,054,048 227,054,048 7,568,468 7,568,468 15,136,936 15,136,936 7,568,468 22,705,404 204,348,644 211,917,112 30yrs
Free hold land
Lease hold land
Buildings on free hold land
Plant and machinery
Owned Quarry equipment Other equipment Furniture and fixtures Vehicles Office equipment
Leased Plant and machinery
Total
Cost Balance at 01 July 2009 Additions during the year Transferred from CWIP Adjustments Disposals Balance at 30 June 2010
1,094,347,680 7,436,144 1,101,783,824
22,054,737,204 233,717,826 8,370,104,431 (86,410,057) (7,852,814) 30,564,296,590 30,564,296,590 291,879,817 56,839,894 (192,431,625) (5,647,338) 30,714,937,338 4,082,157,146 999,158,131 (29,163,286) (5,959,699) 5,046,192,292 5,046,192,292 1,063,802,527 (53,305,806) (3,895,460) 6,052,793,553 24,662,143,785 25,518,104,298
Balance at 01 July 2010 Additions during the year Transferred from CWIP Adjustments Disposals Balance at 30 June 2011
1,101,783,824 4,785,938 1,106,569,762
Depreciation Balance at 01 July 2009 Charge for the year Adjustments Disposals Balance at 30 June 2010
Balance at 01 July 2010 Charge for the year Adjustments Disposals Balance at 30 June 2011
Annual Report 2011
Carrying value - 2011 Carrying value - 2010 Life in years/ rates of depreciation per annum
1,106,569,762 1,101,783,824
100
14.1.1 Depreciation on operating fixed assets has been allocated as follows: Note Cost of sales Administrative expenses Distribution cost
14.1.2 Disposal of operating fixed assets
Book value Rupees 207,207 190,711 279,152 373,215 373,646 125,657 202,290 1,751,878 1,893,115 Sale proceeds Rupees 353,543 650,000 519,242 553,485 666,000 234,395 206,504 3,183,169 3,263,670 Gain Rupees 146,336 459,289 240,090 180,270 292,354 108,738 4,214 1,431,291 1,370,555 Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Employee Employee Employee Employee Mr. Arif Muneer Mufti Employee Employee Mode of disposal Sold to
2011 Rupees 1,051,011,961 8,082,462 4,708,104 1,063,802,527
2010 Rupees 986,094,103 8,238,658 4,825,370 999,158,131
27 28 29
Description Vehicles Suzuki Cultus Honda Citi Honda Citi Honda Citi Suzuki Liana Suzuki Cultus Suzuki Cultus 2011 2010
Cost Rupees 617,340 844,757 898,234 1,158,265 912,222 599,180 617,340 5,647,338 7,852,814
14.2
Capital work in progress Opening balance Additions during the year Trial run loss Transferred to operating fixed assets: Plant and machinery Buildings on free hold land Transferred to intangible assets: Intangible assets 14.2.2 (42,588,433) (14,251,461) (8,185,836,064) (184,268,367) 14.2.1 84,072,764 122,110,738 206,183,502 7,073,141,108 1,382,334,531 28,701,556 8,484,177,195
(56,839,894)
149,343,608
(30,000,000) (8,400,104,431)
84,072,764
14.2.1 This includes borrowing cost capitalised amounting to Rs. 10.66 million (2010: Rs. 668.58 million) at capitalisation rate ranging from 14.59% to 14.69% (2010: 13.85% to 13.98%) per annum.
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Annual Report 2011
14.2.2 Break up of capital work in progress is as follows: Note Plant and machinery and other equipment Building and civil works Advances for capital work in progress Borrowing cost 15. Intangible assets Cost Opening balance at 01 July Additions during the year Closing balance at 30 June Amortization Opening balance at 01 July Charge for the year Closing balance at 30 June Carrying value Amortisation rate 15.1 30,000,000 100,000 30,100,000 4,503,750 4,503,750 25,596,250 15% 15% 30,000,000 30,000,000 30,000,000 2011 Rupees 92,602,114 15,641,038 30,447,236 10,653,220 149,343,608 2010 Rupees 59,326,209 4,033,622 18,225,694 2,487,239 84,072,764
15.1
Amortization on intangible assets has been allocated as follows: Cost of sales 27 4,503,750 4,503,750 -
16.
Investment property Opening balance Gain on remeasurement of investment property to fair value Closing balance 340,715,834 5,098,619 345,814,453 336,340,149 4,375,685 340,715,834
16.1
16.1
The investment property is a portion of head office building held for commercial purpose. On 30 June 2011 an independent exercise was carried out to calculate the fair value of investment property. To assess the land prices, market research was carried out in the area around the plot where the investment property is situated. Fair value of investment property is based on independent valuer's judgment about average prices prevalent on the said date and has been prepared on openly available/ provided information after making relevant inquiries from the market. Valuation was carried out by an independent valuer who holds a recognized and relevant professional qualification and has recent experience in the location and category of the investment property being valued.
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102
17.
Long term investments Equity accounted investment - quoted Associated company - United Bank Limited (UBL) Other investments Held to maturity investment - at amortised cost
Note
2011 Rupees
2010 Rupees
17.1
5,831,817,548 5,831,817,548
5,211,787,784 68,000 5,211,855,784
17.1
Associated company - United Bank Limited (UBL) Cost of investment 93,649,694 shares (2010: 93,649,694 shares) of Rs. 10 each Share of post acquisition profits brought forward Share of profit for the year Dividend received during the year Parent Company's share of the associate's exchange translation reserve Parent Company's share of the associate's deficit on revaluation of available for sale investments Parent Company's share of the associate's cash flow hedge reserve 1,862,802,950 3,023,444,374 4,886,247,324 939,896,213 (468,248,720) 471,647,493 669,838,385 (184,933,549) (10,982,105) 5,831,817,548 1,862,802,950 2,463,889,753 4,326,692,703 772,394,949 (212,840,328) 559,554,621 579,217,097 (233,384,364) (20,292,273) 5,211,787,784
17.1.1 This represents 7.65% interest (2010: 7.65%) in the equity of 1,224.2 million (2010: 1,224.2 million) ordinary shares of Rs. 10 each in UBL, an associated company. Bestway Group as a whole has 51.7% (2010: 30.3 %) controlling interest in UBL. 17.1.2 Summarised financial information of the associated company is as follows:
Assets 2011 (Rupees, 000) 2010 (Rupees, 000) 772,692,668 668,774,588
Liabilities 694,727,134 599,281,657
Income 34,487,923 34,168,135
Profit after tax 12,286,225 10,016,009
Fair value of investment in associated company as of the year end was Rs. 5,730 million (2010: Rs. 5,075 million). The reporting date of United Bank Limited is 31 December. For the purpose of applying equity method of accounting, assets, liabilities and profit and loss account are based on the consolidated financial statements of the period ended 30 June 2011.
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Annual Report 2011
2010 Rupees 28,021,000 (4,003,000) 24,018,000
18.
Long term advances Advance for gas pipe line Current portion of advance for gas pipe line
Note 18.1
2011 Rupees 24,018,000 (4,003,000) 20,015,000
22
18.1
This represents outstanding amount of long term advance of Rs. 40.03 million paid to Sui Northern Gas Pipelines Limited to facilitate gas pipeline laying for the Parent Company's plant located at Chakwal. The advance along with markup at the rate of 1.5% per annum is recoverable in 10 equal annual installments which started from March 2008. Stores, spare parts and loose tools Stores, spare parts and loose tools Stores and spare parts in transit Provision for slow moving and obsolete stores, spare parts and loose tools 2,994,083,232 258,110,398 3,252,193,630 (51,894,413) 3,200,299,217 2,129,397,531 608,545,217 2,737,942,748 (51,894,413) 2,686,048,335
19.
20.
Stock in trade Raw and packing material Work in process Finished stock 148,085,201 1,019,355,974 286,625,954 1,454,067,129 155,652,564 780,333,422 129,847,631 1,065,833,617
21.
Trade debts- considered good This includes Rs. 35.024 million (2010: Rs. 71.73 million) receivable from customers against export sales.
22.
Advances Advances to directors and executives - considered good Advances to suppliers and contractors - considered good Advance for export related expenses Current portion of advance for gas pipe line 2,847,123 143,923,301 1,392,497 227,393,233 24,722,069 4,003,000 257,510,799
18 4,003,000 150,773,424
23.
Deposits and prepayments Security deposits Prepayments 4,756,040 36,875,425 41,631,465 5,293,746 3,285,200 8,578,946
Annual Report 2011
104
Note
24. Due from Government agencies Advance tax - net Sales tax Excise duty Customs duty Capital value tax Excise duty refundable
2011 Rupees
2010 Rupees
665,778,591 18,423,872 357,706 28,372,522 11,729,200 615,146,242 1,339,808,133
24.1 24.1 24.2
675,528,465 91,861,746 28,372,522 11,729,200 615,146,242 1,422,638,175
24.1
This represents customs duties paid in excess of 5% of the value assessed by the custom authorities for import of off high way dump trucks and the amount paid as Capital Value Tax (CVT) on this import. The collector of customs assessed 30% duty and CVT @ 7.5% of the assessed value on import of off high way dump trucks and did not allow exemption available to the Parent Company under SRO No. 575(1) 2006 dated 06 June 2006. The Parent Company deposited these amounts under protest as guarantee for clearance and filed an appeal before Honourable Sindh High Court. The Honourable High Court granted the leave of appeal and held that exemption for import of off high way dump trucks is available to the Parent Company under SRO No. 575(1) 2006 dated 06 June 2006, therefore the excess amounts paid should be refunded to the Parent Company. Collector of customs filed an appeal in Honourable Supreme Court against the order of Honourable High Court, however no stay was granted against the refund accrued to the Parent Company. The Parent Company has obtained legal opinion on the basis of which it decided to account for these as refund in the books of account of the Parent Company.
24.2
The Honourable Supreme Court of Pakistan in its judgment dated 14 April 2007 in a comparable case for levy of excise duty, dismissed the appeal filed by the Federal Board of Revenue (FBR) and upheld the decisions made by the Honourable High Courts of Peshawar, Sindh and Punjab. [The dispute related to levy of excise duty on the retail price inclusive of excise duty or retail price excluding excise duty]. The FBR's point of view was that excise duty be calculated on a declared retail price inclusive of excise duty whereas the concerned respondents contended that the excise duty would not be included in retail price for calculation of excise duty payable to the Government. The full bench of the Honourable Supreme Court upheld the judgments made by the Honourable High Courts and dismissed the appeal of FBR. The FBR moved a review petition before the Honourable Supreme Court of Pakistan which is pending. Based on the legal opinion, the management believes that the Company's claim is valid and the amount is fully recoverable. The Group has filed a claim for Rs. 611.146 million relating to duty paid during the period June 1998 to April 1999 which pursuant to the above decision was otherwise not leviable and payable under the law. Commissioner Appeals rejected the claim of the Group, and the Group has filed an appeal with the Income Tax Appellate Tribunal (ITAT) against unlawful rejection of refund claims. A number of hearings were conducted during the year but the case is yet to be discussed. The Group has obtained legal opinion on the basis of which it decided to account for this amount as refund in the books of account of the Group.
105
Annual Report 2011
2010 Rupees 121,139,436 89,505,490 210,644,926
25.
Bank balances Cash at banks Current accounts Deposit accounts
Note 25.1 25.2
2011 Rupees 69,538,276 68,189,199 137,727,475
25.1 25.2
This includes Rs. 10.33 million (2010: Rs. 21.42 million) held in current accounts maintained with United Bank Limited, an associated company. This includes an amount of US Dollar 0.416 million (2010: US Dollar 0.457 million) in US Dollar deposit accounts. US Dollar 0.412 million (2010: US Dollar 0.455 million) are under lien with Habib Bank Limited. Deposit accounts carry interest rates ranging from 1% to 5% (2010: 1% to 5%) per annum.
25.3
26.
Turnover - net Gross turnover Government levies Sales tax Excise duties Rebates and discounts Turnover - net during trial run 23,751,453,886 (2,806,404,888) (2,570,754,210) 18,374,294,788 (1,299,912,665) 17,074,382,123 17,074,382,123 21,841,583,424 (2,307,234,154) (2,869,191,407) 16,665,157,863 (941,237,664) 15,723,920,199 (569,292,201) 15,154,627,998
Annual Report 2011
106
27.
Cost of sales
Note
2011 Rupees 2,055,894,015 9,485,306,780 628,351,172 52,932,880 368,752,523 177,365,101 31,194,894 11,039,987 5,787,803 34,911,578 4,895,440 915,358 5,154,570 2,368,783 1,051,011,961 4,503,750 8,203,440 13,928,590,035 780,333,422 (1,019,355,974) 13,689,567,483 129,847,631 (286,625,954) 13,532,789,160 13,532,789,160
2010 Rupees 2,719,816,342 8,999,714,705 470,149,944 54,615,201 317,025,657 142,095,958 27,798,008 7,277,579 6,928,496 33,498,637 4,108,351 1,160,333 4,382,980 1,806,363 986,094,103 10,594,693 13,787,067,350 819,807,568 (780,333,422) 13,826,541,496 358,314,236 (129,847,631) 14,055,008,101 (597,993,757) 13,457,014,344
Raw and packing materials consumed 27.1 Fuel and power Stores, spare parts and loose tools consumed Repairs and maintenance Salaries, wages and benefits 27.2 Support services Insurance Equipment rental Utilities Traveling, conveyance and subsistence Communication Professional charges Printing and stationery Entertainment Depreciation 14.1.1 Amortization on intangible Other manufacturing expenses Opening work in process Closing work in process Cost of goods manufactured Opening finished stock Closing finished stock Cost of sales during trial run 27.1 Raw and packing materials consumed Opening balance Purchases made during the year Closing balance
155,652,564 2,048,326,652 (148,085,201) 2,055,894,015
75,331,221 2,800,137,685 (155,652,564) 2,719,816,342
27.2
Salaries, wages and benefits include staff retirement benefits amounting to Rs. 26.55 million (2010: Rs. 35.93 million).
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Annual Report 2011
2010 Rupees 109,638,235 1,692,620 4,816,958 1,296,354 2,908,323 9,295,320 2,066,273 2,791,246 376,364 730,255 41,000,000 120,100 6,098,811 4,972,991 511,292 3,002,000 8,238,658 1,231,552 200,787,352
28.
Administrative expenses
Note
2011 Rupees 123,097,535 1,269,174 4,133,465 2,590,228 2,433,496 10,531,341 1,818,646 2,756,023 417,026 1,234,415 6,773,705 4,469,285 17,698,173 559,141 3,374,000 8,082,462 1,082,757 192,320,872
Salaries, wages and benefits 28.1 Rent, rates and taxes Repairs and maintenance Insurance Utilities Traveling, conveyance and subsistence Communication Printing and stationery Entertainment Advertisements Provision for slow moving and obsolete stores, spare parts and loose tools Charitable donations Legal and professional charges Fees and subscription Management charges Auditors' remuneration Depreciation Miscellaneous 28.2
28.3 28.4 14.1.1
28.1 28.2
Salaries, wages and benefits include staff retirement benefits amounting to Rs. 9.348 million (2010: Rs. 4.159 million). A provision at 2.5% of the accounting profit after tax of the Parent Company for an amount of Rs. 4.48 million (2010: Rs. Nil) has been made for donation to Bestway Foundation ("Foundation"). The chief executive and directors are among the trustees of the Foundation. None of the trustees or their spouses have a beneficial interest in the Foundation. This represents management charges of the ultimate Parent Company.
28.3
28.4
Auditors' remuneration Annual audit fee Audit fee of consolidated financial statements Fee for half yearly review Statutory certifications Taxation services Out of pocket expenses 1,300,000 300,000 400,000 280,000 900,000 194,000 3,374,000 1,300,000 300,000 400,000 900,000 102,000 3,002,000
Annual Report 2011
108
29.
Distribution cost Salaries, wages and benefits Support services Rent, rates and taxes Repairs and maintenance Utilities Traveling, conveyance and subsistence Communication Printing and stationery Entertainment Advertising and promotion Depreciation Fees and subscription Freight and handling - local - export Miscellaneous
Note
2011 Rupees
2010 Rupees
29.1
14.1.1
29,059,306 737,708 4,398,180 1,037,461 823,242 6,098,634 1,160,296 2,203,020 299,181 4,156,780 4,708,104 895,932 39,073,263 263,305,214 81,045 358,037,366
26,175,469 663,066 3,982,966 1,333,628 693,699 4,125,284 1,259,534 2,587,752 600,829 2,052,475 4,825,370 31,634,107 90,461,644 910,319,611 96,717 1,080,812,151
29.1
Salaries, wages and benefits include staff retirement benefits amounting to Rs. 2.38 million (2010: Rs. 2.57 million).
30.
Finance cost Markup on long term financing 2,356,067,754 Markup on long term murabaha 255,373,473 Markup on long term musharaka 128,466 Markup on liability against assets subject to finance lease 25,725,199 Markup on short term borrowings 604,356,468 Exchange loss - net 9,279,065 Bank charges and commissions 24,977,074 3,275,907,499 2,230,993,853 62,070,952 37,089,423 228,159,709 14,293,705 2,572,607,642
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Annual Report 2011
2010 Rupees
2011 Rupees 31. Other operating income Income from financial assets Profit on deposit accounts Exchange gain - net Profit on held to maturity investment 493,808 493,808
724,623 12,242 8,802 745,667 1,370,555 12,797,185 4,375,685 480,000 470,618 1,884,690 22,124,400 42,557,303 (1,119,326,641) (1,076,769,338)
32.
Income from non financial assets Gain on disposal of operating fixed assets 2,075,291 Rental income from investment property 21,172,260 Gain on remeasurement of investment property to fair value 5,098,619 Management fee from related party 680,000 Sale of scrap 19,091,014 Others 3,165,353 51,776,345 Taxation Current Deferred 215,648,308 (234,843,535) (19,195,227)
32.1
Numerical reconciliation between tax credit and product of accounting profit / (loss)multiplied by the applicable tax rate is as follows:
Accounting profit / (loss) Tax on accounting profit / (loss) at applicable rate of 35% (2010: 35%) Under provision last year Tax effect of low rates on certain income Minimum tax Tax effect of permanent differences Tax effect of income taxable under final tax regime Tax effect on inadmissible income Tax effect on exempt income
32.2 Parent company
706,999,784 247,449,924 5,292,509 (134,847,582) 141,599,292 (338,671,266) 58,223,735 1,784,517 (26,357) (19,195,228)
(1,362,074,142) (476,725,950) (390,074,276) (213,630,947) 5,648,239 (1,531,489) (454,915) (1,076,769,338)
The assessments of the Parent Company up to and including the Tax Year 2010 are deemed to be finalized under the self assessment scheme envisaged under the Income Tax Ordinance, 2001. Following are the open ended assessments of the Parent Company: Assessments for Assessment Year 2000-2001 to 2002-2003 were finalized by the tax authorities
Annual Report 2011
110
mainly by curtailing business expenditure claimed by the Parent Company and charging surcharge on minimum tax. The appeals for Assessment Year 2000-2001 were decided against the Parent Company by the Appellant Tribunal Inland Revenue [ATIR] against which the Parent Company filed reference with the Islamabad High Court which is pending adjudication. The appeal filed with the Commissioner Inland Revenue (Appeals) [the CIR(A)] for the Assessment Year 2001-2002 decided against the Parent Company and for the Assessment Year 2002-2003 certain issues were decided in favour of the Parent Company. Against these orders the Parent Company is in appeal with the ATIR which are pending adjudication. Assessment for the Tax Year 2005 was rectified in terms of section 221 of the Ordinance by tax authorities on the issue of set off of brought forward assessed business losses there by raising a demand of Rs. 63.28 million. Later on another rectified order was framed under section 221 of the Ordinance whereby demand was reduced to Rs.6.30 million after allowing adjustments of tax refunds and minimum tax paid for previous years. The tax authorities initiated audit proceedings for the Tax Years 2006 through 2008 out of which only the audit proceedings for the Tax Year 2007 were concluded. The tax authorities amended the assessment of the Parent Company thereby making various disallowances and charging tax on property income and dividend income under the presumptive mode of taxation [PTR] amounting to Rs. 8.42 million. On appeal filed by the Parent Company, the CIR(A) annulled the order of the tax authorities on all the issues except the taxation of property income and dividend income under PTR and disallowance of deduction claimed on account of donations paid during the year. The Parent Company as well as the tax authorities has filed cross appeals before the ATIR on the issues not decided in their favour by the CIR (A). The appeals are sub judice before the ATIR, till to date. The tax authorities amended the assessment of the Parent Company for the Tax Year 2009 thereby making various disallowances. The Parent Company filed appeal with the CIR (A) and simultaneously moved rectification application with the tax authorities. While disposing of the rectification application, the tax authorities allowed partial relief to the Parent Company. The remaining issues were decided by the CIR (A) in favour of the Parent Company except the issue of disallowance of deductions claimed on account of donations. The Parent Company as well as the tax authorities have filed cross appeals with the ATIR on the issues not decided in their favour by the CIR(A). These appeals are sub judice before the ATIR, till to date. The tax authorities have rectified the assessment of the Parent Company for the Tax Year 2010 thereby charging minimum tax under section 113 of the Income Tax Ordinance, 2001 amounting to Rs. 48.99 million. The Parent Company has filed appeal with the CIR (A) which is pending disposal till to date. The management of the Parent Company is confident of the favourable outcome of appeals filed by it and accordingly no provision has been recognized in these consolidated financial statements in respect of tax charged by the tax authorities through amendment / rectification of assessments. 32.3 Subsidiary company Tax assessments of the Subsidiary Company up to and including the Assessment Year 2002-03 (year ended 30 June 2002) stands finalized under relevant sections of the repealed Income Tax Ordinance, 1979 [1979 Ordinance]. Assessments for the Tax Years 2003 to 2010 also stand finalized under section 120 of the Income Tax Ordinance, 2001.
111
Annual Report 2011
For the Assessment Year 1998-99 the Taxation Officer raised additional tax demand under section 87 of the 1979 Ordinance amounting to Rs. 10.388 million for nonpayment of advance tax. No appeal was filed with the Commissioner (Appeals) now Commissioner Inland Revenue (Appeals) [CIR (A)] against the impugned order upon instructions of the Government of Pakistan, being a State owned Enterprise, which insists upon resolution of disputes with the Federal Board of Revenue through inter ministerial consultations. As the Subsidiary Company is no more a State owned Enterprise, it therefore, pursued the case before the appellate authorities and accordingly filed an appeal with the CIR (A) with the request for condonation of delay in filing of appeal within the prescribed time. This request for condonation of delay was not accepted. The Subsidiary Company filed appeal with the Income Tax Appellate Tribunal now Appellate Tribunal Inland Revenue where the request for condonation in filling of appeal was also not entertained. Accordingly the Subsidiary Company filed a reference with the Honourable High Court; and believes for a favourable outcome of this reference therefore no provision has been made in these financial statement against this liability. No provision has been made in these consolidated financial statements in respect of outstanding issues as management is confident of a favourable outcome. 33. Remuneration of the chief executive, directors and executives The aggregate amounts charged in these consolidated financial statements for the year with respect to remuneration, including benefits and perquisites, were as follows:
Chief Executive 2011 Managerial remuneration and allowances Bonus Provision for gratuity Compensated absences Number of persons 18,000,000 18,000,000 1 2010 18,000,000 18,000,000 1 Directors, including Chairman Rupees 2011 2010 43,503,003 1,696,800 1,417,167 2,027,939 48,644,909 5 40,624,674 1,515,000 1,256,098 1,782,356 45,178,128 5 Executives 2011 98,674,027 5,401,995 7,340,465 111,416,487 66 2010 70,752,221 6,626,500 8,157,691 85,536,412 45
33.1 34.
The directors and executives excluding chairman and chief executive are also provided with medical insurance facility as per their entitled limits Transactions with related parties The Group is controlled by the Bestway (Holdings) Limited, U.K. ("ultimate parent company"), therefore all subsidiaries and associated undertakings of the ultimate parent company are related parties of the Group. Other related parties comprise of associate company, directors, key management personnel, entities with common directorships and entities over which the directors are able to exercise influence. Balances with related parties are shown elsewhere in the notes to these consolidated financial statements. Transactions with related parties are as follows:
Note Transactions with ultimate parent company Management charges
2011 Rupees 559,141
2010 Rupees 511,292
Annual Report 2011
112
Transactions with associated undertakings under common directorship Note Management fee Service / bank charges Dividend received Sale of cement Transactions with key personnel Remuneration to chief executive, directors and executives 34.1 Remuneration, allowances and benefits Managerial remuneration and allowances Bonus Provision for gratuity Compensated absences 2011 Rupees 680,000 3,735,498 468,248,720 3,618,080 2010 Rupees 480,000 3,443,886 212,840,328 -
34.1
66,644,909 61,503,003 1,696,800 1,417,167 2,027,939 66,644,909
63,178,128 58,624,674 1,515,000 1,256,098 1,782,356 63,178,128
35.
Financial instruments The Group has exposures to the following risks from its use of financial instruments: Credit risk Liquidity risk Market risk The Board of Directors has overall responsibility for the establishment and oversight of the Groups risk management framework. The Board is also responsible for developing and monitoring the Groups risk management policies. The Groups risk management policies are established to identify and analyse the risks faced by the Group, 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 Groups activities. The Group, 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 Board of Directors of the Group oversees how management monitors compliance with the Groups risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. The Board is assisted in its oversight role by Internal Audit. Internal Audit undertakes both regular and ad-hoc reviews of risk management controls and procedures, the results of which are reported to the Board.
35.1
Credit risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The carrying amount of the following financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date is as follows:
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Annual Report 2011
2010 Rupees 87,495,534 28,021,000 315,857,176 1,392,497 5,293,746 62,490 1,341,800 210,644,926 650,109,169
2011 Rupees Long term deposits Long term advance Trade debts Advances Deposits Interest accrued Other receivables Bank balances 89,495,534 24,018,000 311,501,612 2,847,123 4,756,040 76,190 30,369,297 137,727,475 600,791,271
The maximum exposure to the credit risk for trade debts at reporting date by geographical region is: Domestic 276,478,077 244,130,980 Middle east and African countries 542,852 48,338,944 Asia - other than domestic 34,480,683 23,387,252 311,501,612 315,857,176 The maximum exposure to the credit risk for trade debts at reporting date by counter party is: End user customers 5,641,048 17,035,489 Dealers 305,860,564 298,821,687 311,501,612 315,857,176
The maximum exposure to credit risk for trade debts at the reporting date are with dealers and represents debtors within the country. Included in these is an amount of Rs. 35.02 million (2010: Rs. 71.73 million) secured against the letter of credits. The Group's most significant domestic customer is a dealer from whom Rs. 26.06 million (2010: Rs. 23.78 million) is outstanding at the year end. The Group has placed funds with financial institutions with high credit ratings. The Group assesses the credit quality of the counter parties as satisfactory. The Group does not hold any collateral as security against any of its financial assets except as mentioned above. Impairment losses
The aging of trade debts at the reporting date is:

Impairment 2011 Rupees 303,828,309 1,833,200 5,840,103 311,501,612 Gross 2011 Gross 2010 Rupees 229,058,616 56,501,739 4,449,873 25,846,948 315,857,176 Impairment 2010 -
Not past due Past due 1-30 days Past due 31-60 days Past due 61-90 days Over 90 days
Annual Report 2011
114
Based on past experience, the management believes that no impairment allowance is necessary in respect of trade debts. The allowance accounts in respect of trade debts are used to record impairment losses unless the Group is satisfied that no recovery of the amount owing is possible. The amount considered irrecoverable is written off against the financial asset directly. 35.2 Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group'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 Group's reputation. The following are the contractual maturities of financial liabilities, including expected interest payments and excluding the impact of netting agreements:
Carrying amount Contractual cash Six months or flows less 2011 Financial liabilities Long term loans Liability against assets subject to finance lease Long term murabaha Long term musharaka - secured Trade and other payables Markup accrued Short term borrowings 13,482,222,228 157,556,169 1,885,000,000 300,000,000 2,126,667,746 276,248,733 5,246,110,865 23,473,805,741 2010 Financial liabilities Long term loans Liability against assets subject to finance lease Long term murabaha Trade and other payables Markup accrued Short term borrowings 17,780,803,338 197,743,347 2,005,000,000 2,105,814,127 361,303,917 4,641,908,139 27,092,572,868 24,356,752,356 260,621,869 2,575,424,492 2,105,814,127 361,303,917 5,369,307,399 35,029,224,160 3,283,935,381 32,702,567 89,486,696 2,105,696,040 361,303,917 1,716,871,097 7,589,995,698 3,532,070,499 32,702,567 85,224,953 54,236 3,652,436,302 7,302,488,557 6,617,349,226 65,405,134 380,587,199 63,851 7,063,405,410 10,923,397,250 129,811,601 2,020,125,644 13,073,334,495 17,189,622,698 198,467,487 2,149,810,220 476,019,494 2,126,549,659 276,248,733 5,888,823,088 28,305,541,379 3,034,213,703 33,209,810 76,157,244 23,637,699 2,126,549,659 276,248,733 3,083,693,685 8,653,710,533 Six to twelve months Rupees 3,512,475,707 33,209,810 71,566,833 23,380,767 2,805,129,403 6,445,762,520 One to two years Two to five years After five years
5,413,561,729 66,419,620 1,969,744,548 46,890,000 7,496,615,897
5,229,371,559 65,628,247 32,341,595 382,111,028 5,709,452,429
35.2.1 The contractual cash flow relating to long and short term borrowings, murabaha and musharaka have been determined on the basis of expected markup rates. The markup rates have been disclosed in note 6, 7, 8, 9, and 12 to these financial statements. 35.3 Market risk Market risk is the risk that the value of the financial instrument may fluctuate as a result of changes in market interest rates or the market price due to change in credit rating of the issuer or the instrument, change in market sentiments, speculative activities, supply and demand of securities and liquidity in the market. The Group is exposed to currency risk and interest rates risk only.
115
Annual Report 2011
35.3.1 Currency risk Exposure to currency risk Trade debts Bank balances Secured bank loans Net exposure The following significant exchange rates applied during the year Average rate 2011 2010 Rupees/ Dollars 85.83 84.12
Sensitivity analysis
2011 US Dollars 406,966 431,237 (18,580,586) (17,742,382)
2010 US Dollars 839,933 1,002,877 (14,540,008) (12,697,198)
Reporting date spot rates 2011 2010 86.06 85.40
A five percent strengthening of the Pakistan Rupee against US Dollar at 30 June 2011 would have increased profit and loss account by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. This analysis is performed on the same basis for 2010. Profit or loss Rupees 30 June 2011 Effect in US Dollar - gain 76,345,471 76,345,471
30 June 2010 Effect in US Dollar - gain
54,213,938 54,213,938
A five percent weakening of the Pakistan Rupee against US Dollar at 30 June would have had the equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant. 35.3.2 Interest rate risk The interest rate risk is the risk that the fair value or the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Majority of the interest rate exposure arises from short and long term borrowings from banks and short term deposits with banks. At the balance sheet date the interest rate profile of the Group's interest bearing financial instruments is: Carrying Amount 2011 2010 Rupees Rupees Fixed rate instruments Financial assets 24,018,000 28,021,000 Financial liabilities 4,417,045,217 3,611,690,740
Variable rate instruments Financial assets Financial liabilities
68,189,199 16,353,844,045
89,505,490 21,013,764,084
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116
Fair value sensitivity analysis for variable rate instruments The Group does not hold any financial asset or liability at fair value through profit and loss. Cash flow sensitivity analysis for variable rate instruments A change of 100 basis points in interest rates throughout the year would have increased / (decreased) profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. The analysis is performed on the same basis for 2010.
Profit or loss 100 basis points 100 basis points increase decrease Rupees Rupees Cash flow sensitivity (net) Variable rate instruments 30 June 2011 Variable rate instruments 30 June 2010
35.4 Fair value of financial assets and liabilities The fair values of financial assets and liabilities, together with the carrying amounts shown in the balance sheet, are as follows:
Assets carried at amortized cost Long term deposits Long term advance Trade debts Advances Deposits Interest accrued Other receivables Bank balances Liabilities carried at amortized cost Long term loans Liability against assets subject to finance lease Long term murabaha Long term musharaka - secured Trade and other payables Markup accrued Short term borrowings 6 7 8 9 11 12 13,482,222,228 157,556,169 1,885,000,000 300,000,000 2,126,667,746 276,248,733 5,246,110,865 23,473,805,741 13,482,222,228 157,556,169 1,885,000,000 300,000,000 2,126,667,746 276,248,733 5,246,110,865 23,473,805,741 17,780,803,338 2,005,000,000 197,743,347 2,105,814,127 361,303,917 4,641,908,139 27,092,572,868 17,780,803,338 2,005,000,000 197,743,347 2,105,814,127 361,303,917 4,641,908,139 27,092,572,868 Note 2011 Carrying amount Fair value Rupees 18 21 21 23 89,495,534 24,018,000 311,501,612 2,847,123 4,756,040 76,190 30,369,297 137,727,475 600,791,271 89,495,534 24,018,000 311,501,612 2,847,123 4,756,040 76,190 30,369,297 137,727,475 600,791,271 2010 Carrying amount Fair value Rupees 87,495,534 28,021,000 315,857,176 1,392,497 5,293,746 62,490 1,341,800 210,644,926 650,109,169 87,495,534 28,021,000 315,857,176 1,392,497 5,293,746 62,490 1,341,800 210,644,926 650,109,169
315,576,632 315,576,632 206,814,707 206,814,707
(315,576,632) (315,576,632) (206,814,707) (206,814,707)
25
117
Annual Report 2011
35.5
Determination of fair values

A number of the Groups accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and / or disclosure purposes based on the following methods.
Non - derivative financial assets

The fair value of non-derivative financial assets is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date. This fair value is determined for disclosure purposes.
Non-derivative financial liabilities

Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date.
35.6
Capital management The Board's policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Board of Directors monitors the return on capital, which the Group defines as net profit after taxation divided by total shareholders' equity. The Board of Directors also monitors the level of dividend to ordinary shareholders. There were no changes to the Group's approach to capital management during the year and the Group is not subject to externally imposed capital requirements except for the maintenance of debt to equity ratios under the financing agreements.
36.
Plant capacity and production of clinker
Note
Available capacity Parent Company: Hattar plant Chakwal line-I Chakwal line-II Subsidiary Company: Hattar plant Actual production Parent Company: Hattar plant Chakwal line-I Chakwal line-II Subsidiary Company: Hattar plant
2011 Tonnes
2010 Tonnes
1,170,000 1,710,000 1,710,000 1,109,700
1,170,000 1,710,000 1,710,000 1,109,700
36.1
787,063 978,099 1,212,437 849,729
1,139,862 1,059,316 1,462,814 669,847
Annual Report 2011
118
36.1 37.
During the year the actual production from Hattar plant of the Parent Company remained limited due to shut down for the maintenance work at cement mill. General These consolidated financial statements were authorized for issue by the Board of Directors of the Parent Company in their meeting held on 30 September 2011.
CHIEF EXECUTIVE
DIRECTOR & CFO
119
Annual Report 2011

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Contents

Sir M.A. Pervez O.B.E, H.Pk. Chairman

Zameer M. Choudrey B.A. (Hons), F.C.A. Chief Executive

Registered/ Head Office

Annual Report 2011

Marketing Head Office

Annual Report 2011

PROFIT/(LOSS) AFTER TAX

8,000 7,000 6,000 5,000 4,000 3,000

Annual Report 2011

October 10, 2011 Islamabad NOTES

Kaleem Ashraf Company Secretary

Annual Report 2011

2010 Tonnes 1,139,861 1,332,262 1,346,074 3,439

Decrease Tonnes 352,798 444,140 464,115 3,439

Percentage Decrease 30.95 % 33.34 % 34.48 % 100.00 %

787,063 888,122 881,959 -

Percentage Decrease 13.15 % 18.51 % 19.91 %

Annual Report 2011

Annual Report 2011

Annual Report 2011

Annual Report 2011

Annual Report 2011

Annual Report 2011

Annual Report 2011

Increase during the year 1,333,333 2,392

Arshad Mehmood Chaudhary Muhammad Irfan A. Sheikh

Right shares subscription Open market purchase

Annual Report 2011

Chief Executive 30 September 2011 Islamabad

Annual Report 2011

Annual Report 2011

Annual Report 2011

For and on behalf of Board

Zameer M. Choudrey Chief Executive

Annual Report 2011

Annual Report 2011

KEY OPERATING AND FINANCIAL DATA FOR TEN YEARS

2,859 3,200 1,895 80

2,181 3,306 1,701 1,289

2,213 3,287 1,579 168

17.93 0.92 1.05 2.02 0.20 -

40.14 25.47 8.15 35.10 3.19 10.00

25.56 6.31 1.59 5.84 0.58 7.50

35.73 13.58 2.34 12.20 1.22 7.50

Despatches of cement 3,208 4,253

In thousand metric tonnes 2,250 1,203 1,206

Islamabad 30 September 2011

KPMG Taseer Hadi & Co. Chartered Accountants Riaz Pesnani

Annual Report 2011

(ii) (iii) (c)

Annual Report 2011

7,000,000,000 5,782,019,740 3,225,770,245 1,964,378,938 10,972,168,923

3,500,000,000 3,257,475,910 1,963,498,330 1,785,148,713 7,006,122,953

6,155,833,339 109,754,039 1,765,000,000 300,000,000 477,018,764 8,807,606,142

9,686,358,893 154,309,555 1,885,000,000 386,112,881 12,111,781,329

1,630,407,258 195,752,140 4,104,960,036 3,530,555,556 47,802,130 120,000,000 9,629,477,120 29,409,252,185

1,558,426,981 278,889,458 3,584,835,474 3,419,444,445 43,433,792 120,000,000 9,005,030,150 28,122,934,432

CONTINGENCIES AND COMMITMENTS

Annual Report 2011

16,433,331,467 25,596,250 345,814,453 7,409,408,407 20,015,000 71,450,847 24,305,616,424

16,866,396,926 30,000,000 340,715,834 6,096,182,548 24,018,000 70,450,847 23,427,764,155

DIRECTOR & CFO

Annual Report 2011