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Karachi: We have to inform you that the Board of Directors of the Company in their Meeting held on Saturday, July 30, 2011 at 11:30 a.m., at 6-A, Muhammad Ali Housing Society, A. Aziz Hashim Tabba Street, Karachi-75350 recommended the following:
| (i) | Cash Dividend | 40% |
| (ii) | Bonus Shares | Nil |
| (iii) | Right Shares | Nil |
| (iv) | Any other Entailment / Corporate | Nil |
| (v) | Any other Price-Sensitive information |
The Company has decided to set up a 1 million tons per annum cement manufacturing plant in DR Congo, details mentioned in Directors’ Report.
The financial results of the Company consisting of balance sheet, profit and loss account and directors’ report are annexed.
The 18th Annual General Meeting of the Company will be held on Thursday, September 29, 2011 at 10:30 a.m., at the registered office of the Company situated at factory premises Pezu, District Lakki Marwat, Khyber Pukhtunkhwa.
The Share Transfer Books of the Company will remain closed from Wednesday, September 21, 2011 to Thursday, September 29, 2011 (both days inclusive). Transfers received at our Share Registrar/Transfer Agent MIS. Central Depository Company of Pakistan Limited CDC House, 99-B, Block ‘B’, S.M.C.H.S. Main Shahrah-e-Faisal, Karachi-74400 at the close of business on Tuesday, September 20, 2011 will be treated in time for the purpose of above entitlement to the transferees.
| Balance Sheet | ||
| As at June 30, 2011 | ||
|
2011 |
2010 |
|
|
(Rupees in ‘000’) |
||
| Assets | ||
| Non-Current Assets | ||
| Fixed Assets | ||
| Property, Plant and equipment | 31,705,156 | 31,378,255 |
| Intangible assets | 1,685 | 2,977 |
| ———- | ———- | |
| 31,706,841 | 31,381,232 | |
| Long term advance | 55,373 | 55,373 |
| Long term deposits | 3,175 | 2,175 |
| ———- | ———- | |
| 31,765,389 | 31,438,780 | |
| Current Assets | ||
| Stores and spares | 6,313,584 | 4,008,288 |
| Stock-in-trade | 1,248,538 | 608,813 |
| trade debts – considered good | 620,961 | 779,305 |
| Loans and advances | 72,164 | 86,471 |
| Trade deposits and short term prepayments | 38,669 | 48,807 |
| Other receivables | 218,884 | 204,249 |
| Tax refunds due from the Government | 538,812 | 538,812 |
| Taxation – net | 41,652 | 145,151 |
| Sales tax refundable | – | 117,939 |
| Cash and bank balances | 351,202 | 333,629 |
| ———- | ———- | |
| 9,444,466 | 6,871,464 | |
| ———- | ———- | |
| Total Assets | 41,209,855 | 38,310,244 |
| ———- | ———- | |
| Equity and liabilities | ||
| Share Capital and Reserves | ||
| Share capital | 3,233,750 | 3,233,750 |
| Reserves | 24,539,079 | 21,862,179 |
| ———- | ———- | |
| 27,772,829 | 25,095,929 | |
| Non – Current Liabilities | ||
| Long term finance | 658,298 | 1,658,600 |
| Long term deposits | 37,306 | 31,957 |
| Deferred liability | 391,837 | 319,218 |
| Deferred tax liability | 1,652,796 | 1,562,850 |
| ———- | ———- | |
| 2,740,237 | 3,572,624 | |
| Current Liabilities | ||
| Trade and other payables | 4,043,689 | 3,043,320 |
| Accrued mark-up | 85,448 | 155,500 |
| Short term borrowings | 6,302,252 | 6,267,112 |
| Current portion of long term finances | 265,400 | 175,759 |
| ———- | ———- | |
| 10,696,789 | 9,641,691 | |
| Contingencies and Commitments | ||
| ———- | ———- | |
| Total Equity and Liabilities | 41,209,855 | 38,310,244 |
| Profit and loss Account | ||
| For the Year Ended June 30, 2011 | ||
| 2011 | 2010 | |
| (Rupees in ‘000’) | ||
| Gross sales | 31,767,053 | 29,052,901 |
| Less: Sales tax and excise duty | 5,545,549 | 4,226,459 |
| Rebates and commission | 203,985 | 317,649 |
| ———- | ———- | |
| 5,749,534 | 4,544,108 | |
| Net sales | 26,017,519 | 24,508,793 |
| Cost of sales | (17,306,400) | (16,529,932) |
| ———- | ———- | |
| Gross profit | 8,711,119 | 7,978,861 |
| Distribution cost | (3,236,425) | (3,433,047) |
| Administrative expenses | (313,389) | (303,244) |
| Finance cost | (517,788) | (569,184) |
| Other charges | (325,482) | (257,774) |
| Other income | 2,486 | 1,902 |
| ———- | ———- | |
| Profit before taxation | 4,320,521 | 3,417,514 |
| Taxation | ||
| Current | (260,175) | (195,697) |
| Deferred | (89,946) | (84,360) |
| ———- | ———- | |
| (350,121) | (280,057) | |
| ———- | ———- | |
| Profit after taxation | 3,970,400 | 3,137,457 |
| Other comprehensive income | – | – |
| ———- | ———- | |
| Total comprehensive income for the year | 3,970,400 | 3,137,457 |
| ———- | ———- | |
|
(Rupees) |
||
| Earnings per share – basic and diluted | 12.28 | 9.70 |
Directors’ Report
The Directors of your Company have pleasure to present before you the annual report of the Company with audited financial statements for the year ended June 30, 2011.
Overview
The Pakistan Cement Industry concluded the financial year ended June 30, 2011 with negative growth of 8.32% and achieved total sales volume of 31.36 million tons as compared to last year volume of 3421 million tons. The demand in domestic markets registered a decline of 6.69% and achieved volume of 21.97 million tons against the last year volume of 23.55 million tons. This decline was mainly attributed due to devastated floods and lack of Government spending on public infrastructure and other development projects. The export sales volume registered decline of 11.94% and achieved a volume of 9.39 million tons as compared to volume of 10.66 million tons in the same period last year.
Your Company continued to enhance its market share in domestic markets and achieved a share of 15.16% as compared to 13.26% same period last year. The local sales volume during the year under review registered a growth of 11.07% from 3.12 million tons cement sold last year to 3.46 million tons during the year under review. The export sales volume of your company plunged sharply by 32.9% from 3.51 million tons last year to 2.35 million tons during the financial year under review mainly due to sharp decline in clinker and loose cement sales in middle east countries coupled with slack construction activities and oversupply of cement. However, bagged cement exports sales volume of your Company was increased by 7.03%.
Business Performanc
(a) Production and Sales Volume Performance
The Production statistics of your Company for the Financial Year under review as compared to same period last year is as under:
| Particulars | FY
2010-11 |
FY
2009-10 |
Increase
(Decrease) |
|
Tons |
% |
||
| Clinker Production | 5,658,353 | 6,054,713 | (6.55%) |
| Cement Production | 5,779,710 | 5,461,726 | (10.55%) |
| Cement + Clinker Dispatches | 5,819,673 | 6,629,190 | (12.21%) |
Graphical representation of the above data is presented below:
A comparison of dispatches of the Industry and your Company for the Financial Year Ended on June 30, 201 lwfth the same corresponding period last year is as under:
| Particulars | FY | FY |
Growth / (Decline) |
|
| 2010-2011 | 2009-10 | |||
| (Tons) | (Tons) | (Tons) | % | |
| Cement Industry | ||||
| Local Sales | 21,975,308 | 23,550,741 | (1,575,433) | 6.69% |
| Export Sales | ||||
| Cement | ||||
| Bagged | 8,688,281 | 8,683,074 | 5,207 | 0.06% |
| Loose | 536,899 | 1,696,184 | (1,159,285) | -68.35% |
| Sub total | 9,225,180 | 10,379,258 | (1,154,078) | -11.12% |
| Clinker | 160,039 | 277,978 | (117,939) | -42.43% |
| Total Export | 9,385,219 | 10,657,236 | (1,272,017) | -11.94% |
| Grand Total | 31,360,527 | 34,207,977 | (2,847,450) | 8.32% |
| Lucky Cement | ||||
| Local Slaes | 3,464,300 | 3,119,107 | 345,193 | 11.07% |
| Export Sales | ||||
| Cement | ||||
| Bagged | 1,804,375 | 1,685,845 | 118,530 | 7.03% |
| Loose | 513,899 | 1,670,424 | (1,156,525) | -69.24% |
| Sub total | 2,318,274 | 3,366,268 | (1,037,994) | -30.93% |
| Clinker | 37,099 | 153,814 | (116,715) | -75.88% |
| Grand Total | 5,819,673 | 6,629,189 | (809,516) | -12.21% |
Market share
| LCL-Market Share (%) | FY
2010-2011 |
FY
2009-10 |
| Local Sales | 15.76% | 13.24% |
| Export sales | ||
| Cement | ||
| Bagged | 20.77% | 19.42% |
| Loose | 95.72% | 98.48% |
| Sub total | 25.13% | 32.34% |
| Clinker | 23.18% | 55.33% |
| Total Export | 25.10% | 32.94% |
| Grand Total | 18.66% | 19.38% |
(b) Financial Performance
A comparison of the key financial results of the Company for the Financial Year Ended on June 30 ’2011 with same period last year is as under:
| Particular | FY-2010-11 | FY-2009-10 | % Change |
| Sales revenue | 26,018 | 24,509 | 6.16% |
| Gross Profit | 8,711 | 7,979 | 9.18% |
| Operating profit | 5,161 | 4,243 | 21.66% |
| Profit before tax | 4,321 | 3,418 | 26.42% |
| Net profit after tax | 3,970 | 3,137 | 25.55% |
| Earnings per shares | 12.28 | 9.70 | 26.55% |
The local sales revenue of your Company increased by 474% during the financial year under review as compared to same period last year because of increase in sales volume and the prices of cement on the backdrop of increase in production cost Whereas the export sales revenue declined by 15.6% during financial year under review as compared to same period last year due to decline in loose cement export and shifting of export volume to domestic markets.
The per ton cost of sates of your Company increased by 1926% during the financiaf year under review as compared to same period last year. The major cost component comprising of fuel and power increased by 23% even after the positive impact of cheap electricity generation from waste heat recovery plants. The prices of coal in the international markets ncreased by 40% as compared to same period last year.
The raw material cost due to diesel prices and the packing material cost increased by 12% and 15% respectively which resultantly increased the total cost of production.
Your Company achieved a gross profit rate of 335% for the year ended June 30, 2011 compared to 32.6% gross profit rate achieved during the same period last year.
The financing cost of your Company during the year under review was decreased to Rs.51 7.79 million from Rs. 569.18 million during the same period last year.
The distribution cost of the Company was decreased due to fall in export sales volumes. The percentage of distribution cost to exports sales was 26.4% for the year ended June 30, 2011 as compared to 22.1% last year. Major component of distribution cost was ocean freights which represented 60.9% as compared to 49.8% for the same period last year.
The deferred tax provision of Rs.89946 million has been provided in the profit and loss account making the total deferred tax liabilities to Rs. 1.653 billion as on June 30, 2011.
Your Company achieved a profit before tax of Rs.3.97 billion for the year under review compared to Rs.3.14 billion achieved last year. The profit after tax in terms of percentage was 15.26% which was 12.80% during the same period last year.
The earnings per share of your Company for the year ended June 30, 2011 was Rs.12.28 per share as compared to Rs.9.70 per share achieved during the same period last year.
A comparison of quarter-wise EPS trend is as under:
Capital Expenditures
During the period under review, your Company incurred capital expenditures of Rs. 1.91 billion on various projects in progress comprising of Karachi project TDF plant, addition of 40 trailers into logistic fleet, cement mill modification and Reverse Osmosis plant at Karachi and balance payment of Pezu Plant Waste Heat Recovery Project.
Cash Flaw Strategy
The Company has an effective Cash Flow Management System in place whereby cash inflow and outflows are projected on regular basic Working capital requirements are planned through internal cash generations and short term borrowings.
During the year under review, an amount of Rs. 407 billion was generated from operating activities which was used on fixed capital expenditures, payment of dividend to the shareholders and repayment of long term finance.
The Company is well placed for its commitments towards long and short term loans.
Progress on Ongoing Projects
During the year under review, the Waste Heat Recovery Project of Pezu plant successfully commenced its operation in October 2010 and since then it has been generating electricity for the Company.
The 40 numbers trailers have also been inducted into the fleet of our logistic department for transportation of bagged cement and coal from Karachi plant to sea port and vice versa.
The work on the installation of grid station and inter connection of electricity supply lines with national grid is progressing as per schedule and it is expected that the supply of electricity to HESCO would commence by end of this calendar year.
The TDF plant and machinery for the Karachi Plant have arrived at the project site and its erection and commissioning works are in full Swing. It is expected that this project will start functioning by the end of this calendar year.
Joint Venture Investment in Cement Plant in DR Congo
The management of your Company has decided to set up a one million tons per annum green field cement manufacturing plant in Democratic Republic of Congo as a joint venture project with a local partner subject to all regulatory/statutory approvals required under the law. The total project cost is estimated at US$ 175 million which would be financed through 46% equity to be contributed equally by both partners and 54% debt which would be raised from multilateral institutions/international DFIs. Your Company would contribute US$ 40 million towards 50% share of its equity in the proposed project.
The technical and financial evaluation of the proposed project has been carried out both from international consultant and the team of experienced experts within the Company. The management is hopeful that this investment will pave a long term benefits for the shareholders of our Company.
Code of Corporate Governance
The Directors of your Company are aware of their responsibilities under the Code of Corporate Governance incorporated in the Listing Rules of the Stock Exchanges in the country under instructions from the Securities and Exchange Commission of Pakistan. We are taking all the necessary steps to ensure Good Corporate Governance in your Company as required by the Code.
As a part of the compliance of the Code, we confirm the following:
* The financial statements, prepared by the management of the Company, present fairly its state of affairs, the result of its Operations, cash flows and changes in equity.
* Proper books of account of the Company have been maintained.
* Appropriate accounting policies have been consistently applied in preparation of financial statements and accounting estimates are based on reasonable and prudent judgment.
* International Accounting Standards, as applicable in Pakistan, have been followed in preparation of financial statements and any departure there from has been adequately disclosed.
* The system of internal control is sound in design and being effectively implemented and monitored. The function of internal audit has been outsourced to M/s M. Yousuf Adil Saleem and Co. a member firm of Deloitte Touche Tohmatsu., Chartered Accountants.
* The Company has a very sound balance sheet with excellent debt equity ratio and therefore there is no doubt at all about Company’s ability to continue as a going Concern.
* There has been no material departure from the best practices of corporate governance, as detailed in the listing regulations.
* We have an Internal Audit Committee the members of which are amongst from the Board of Directors.
* We have prepared and circulated a Statement of Ethics and business strategy among directors and employees.
* The Board of Directors has adopted a mission statement and a statement of overall corporate strategy.
* As required by the Code of Corporate Governance, we have included the following information in this report:
i. Statement of pattern of shareholding has been given separately.
ii. Statement of shares held by associated undertakings and related persons have been separately.
iii. Statement of the Board meetings held during the year and attendance by each director.
iv. Key operating and financial statistics for last five years has been, given separately.
Attendance of Directors at Board Meetings:
During the year under review four board meetings were held and director is as under attendance of each director is as under.
| S. No | Name of Directors | No. of Meeting Attended |
| 1. | Mr. Muhammad Yunus Tabba | 4/4 |
| 2. | Mr. Muhammad Ali Tabba | 4/4 |
| 3. | Mr. Muhammad Sohail Tabba | 2/4 |
| 4. | Mr. Imran Yunus Tabba | 4/4 |
| 5. | Mr. Jawed Yunus Tabba | 3/4 |
| 6. | Mrs. Rahila Aleem | 4/4 |
| 7. | Mrs. Mariam Tabba Khan | 3/4 |
| 8. | Mr. Manzoor Ahmed | 4/4 |
| 9. | Mr. Ali J. Siddiqui | 2/4 |
Corporate Performance Highlights
(a) Corporate Social Responsibility
Your Company is fully aware of its Corporate Social responsibility and has been working positively to raise the educational, health and environmental standards of the Country in general and local communities in particular. Your Company is extensively supporting various educational projects like Karachi School for Business and Leadership (KSBL), Hub School Project, Concern for Children Trust, new academic block at IBA, various educational scholarships. Your Company has also planned to construct a state of the art primary school near its factory at Pezu in partnership with renowned NGO chartered by Government of Pakistan and endorsed by World Bank.
(b) Environmental protection measures
Your Company always ensures environment preservation and act as front line demeanor in adopting all the possible means for environment protection. We have been taking various steps to ensure minimal dust and gaseous emission from our plant and our production lines are installed with pollutant trapping and suppression systems to control dust particles and other emissions. A green belt around both production facilities also has been developed.
(c) Community investment and welfare schemes
Your Company constantly works to promote a sustainable future and plays an active role in contributing towards the welfare of the society at large. Your Company is working on various community development programs which include a health dispensary, women and children hospital, primary school in Pezu and renovation and upgrading of the D.I. Khan Airport.
(d) Occupational safety and health
Your Company believes that it is our duty to protect the health, safety and welfare of our workers and other people who might be affected by our business.
It is also ensured that all stakeholders are protected from anything that may cause harm and risks to injury or health that could arise at the workplace. Awareness workshops are also held regularly to educate employees about basic first-aid, basic life support and fire-fighting trainings to have a safe and preventive work environment.
(e) National cause donations
Your Company has always come forward with national spirit whenever the country needed assistance from its responsible citizens. Your company was one of the active participants in flood relief efforts and contributed generously towards providing relief to more than 15,000 households by donating food hampers, medicines and other items of daily necessity. Tents for shelter and comforters and sheets were also distributed among the flood victims.
(f) Contribution to national exchequer
Your Company contributed a total amount of Rs.5.474 billion (2010: Rs. 5.002 billion) to the Government Treasury in shape of taxes, levies, excise duty and sales tax. In addition to that your Company earned precious foreign exchange of approximate USS 133.5 million during the year under review from exports.
(g) Rural development programmes
Your Company is the highest employment provider in the cement industry and provides direct and indirect employment for countless individuals including dealers, wholesalers, retailers, vendors, transporters and construction industry. Besides this a 9 KM water pipeline for the clean drinking water for the residents of Pezu was also laid down, benefitting around 2,000 households and a transformer for uninterrupted supply of electricity to the localities in the outskirts of Pezu district was also installed.
Future Outlook
The Government in the recent budget has allocated substantial funds for public sector development projects, but the possibility of spending under this head is remote, however, this will be a key trigger for increase of cement demand in domestic market for the next financial year.
There will be pressure on cost of production because of rising coal and fuel prices, coupled with double digit inflation and the higher interest rates prevailing in the country. On the back of increasing cost, the selling prices of cement in the domestic market will be on increasing trend.
The export of the cement through land route to Afghanistan and India was 4.73 million and 0.59 million tons respectively during the year under review, these are expected to cross the level of 6 million tons in the next financial year. The export of cement and clinker by sea to the regional and African countries was 4.07 million tons during the year under review, these are expected to be in line with the financial year under review.
Dividend
The Board is pleased to propose a dividend of Rs. 4/- per share for the financial year ended June 30, 2011. The appropriations approved by the Board of Directors are as follows:
| Appropriations: | Rs.
in ‘000’ |
| Profit after Taxation | 3,970,400 |
| Un-appropriated profits from prior year | 725,257 |
| ———- | |
| Available for appropriation | 4,695,657 |
| Subsequent Effects: | |
| Proposed dividends for the year on | |
| ordinary shares @ Rs. 4/- | 1,293,500 |
| Proposed transfer to General Reserves | 2,500,000 |
| ———- | |
| 3,793,500 | |
| Un-appropriated profit carried forward | 902,157 |
Auditors
The Auditors, M/S Ernst and Young Ford Rhodes Sidat Hyder Chartered Accountants, retire and being eligible have offered themselves for reappointment.
Acknowledgement
Your Directors express their appreciation to the bankers and financial institutions that extended assistance in financing to the Company, supplier and contractors for their support, staff and executives for their devotion and hard work, which enabled the Company to achieve this performance.
For more information, contact:
Muhammad Abid Ganatra
Director Finance /
Company Secretary
Lucky Cement Limited
6-A, Muhammad Ali Housing Society,
A. Aziz Hashim Tabba Street,
Karachi-75350
Pakistan.
Tel: +9221 111-786-555
Fax: +9221 3453 4302
Email: info@lucky-cement.com
Web: www.lucky-cement.com