Attock Refinery Limited (Annual Report 2008)
Transcript of Attock Refinery Limited (Annual Report 2008)
2008
Attock Refinery Limited
Annual Audited Financial Statements
We have audited the annexed balance sheet of Attock Refinery Limited as at June 30, 2008 and the related profitand loss account, cash flow statement and statement of changes in equity together with the notes forming partthereof, for the year then ended and we state that we have obtained all the information and explanations which, tothe best of our knowledge and belief, were necessary for the purposes of our audit.
It is the responsibility of the Company's management to establish and maintain a system of internal control, andprepare and present the above said statements in conformity with the approved accounting standards and therequirements of the Companies Ordinance, 1984. Our responsibility is to express an opinion on these statementsbased on our audit.
We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These standards requirethat we plan and perform the audit to obtain reasonable assurance about whether the above said statements arefree of any material misstatement. An audit includes examining on a test basis, evidence supporting the amountsand disclosures in the above said statements. An audit also includes assessing the accounting policies and significantestimates made by management, as well as, evaluating the overall presentation of the above said statements. Webelieve that our audit provides a reasonable basis for our opinion and, after due verification, we report that:
(a) in our opinion, proper books of account have been kept by the Company as required by the Companies Ordinance,1984;
(b) in our opinion
(i) the balance sheet and profit and loss account together with the notes thereon have been drawn up inconformity with the Companies Ordinance, 1984, and are in agreement with the books of account andare further in accordance with accounting policies consistently applied;
(ii) the expenditure incurred during the year was for the purpose of the Company's business; and
(iii) the business conducted, investments made and the expenditure incurred during the year were inaccordance with the objects of the Company;
(c) in our opinion and to the best of our information and according to the explanations given to us, the balancesheet, profit and loss account, cash flow statement and statement of changes in equity together with thenotes forming part thereof conform with approved accounting standards as applicable in Pakistan, and, givethe information required by the Companies Ordinance, 1984, in the manner so required and respectively givea true and fair view of the state of the Company's affairs as at June 30, 2008 and of the profit, its cash flowsand changes in equity for the year then ended; and
(d) in our opinion Zakat deductible at source under the Zakat and Ushr Ordinance, 1980 (XVIII of 1980), wasdeducted by the Company and deposited in the Central Zakat Fund established under section 7 of thatOrdinance.
Chartered AccountantsIslamabad: October 08, 2008
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Auditors' Report to the Members
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Balance Sheetas at June 30, 2008
2008 2007Note Rs ‘000 Rs ‘000
SHARE CAPITAL AND RESERVES
Share capital
Authorised 6 1,000,000 1,000,000
Issued, subscribed and paid-up 6 710,775 568,620Reserves and surplus 7 8,988,216 3,210,045
9,698,991 3,778,665
SURPLUS ON REVALUATION OF FREEHOLD LAND 8 1,923,339 1,923,339
11,622,330 5,702,004
DEFERRED LIABILITIES
Provision for staff gratuity 96,889 85,800
CURRENT LIABILITIES AND PROVISIONS
Short term finance 9 – –Trade and other payables 10 36,688,922 25,393,520Provision for taxation 1,673,042 1,006,629
38,361,964 26,400,149
CONTINGENCIES AND COMMITMENTS 11
50,081,183 32,187,953
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Balance Sheetas at June 30, 2008
2008 2007Note Rs ‘000 Rs ‘000
PROPERTY, PLANT AND EQUIPMENT
Operating assets 12 2,459,520 2,730,262Capital work-in-progress 13 442,431 217,683Stores and spares held for capital expenditure 27,701 20,190
2,929,652 2,968,135
LONG TERM INVESTMENTS 14 13,135,579 9,261,339
LONG TERM LOANS AND DEPOSITS 15 12,732 10,954
DEFERRED TAXATION 16 219,302 157,756
CURRENT ASSETS
Stores, spares and loose tools 17 542,500 630,836Stock-in-trade 18 4,844,853 3,852,646Trade debts 19 9,207,238 6,234,918Loans, advances, deposits, prepayments
and other receivables 20 244,695 191,255Cash and bank balances 21 18,944,632 8,880,114
33,783,918 19,789,769
50,081,183 32,187,953
The annexed notes 1 to 38 form an integral part of these financial statements.
Chief Executive Director
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Profit & Loss Accountfor the year ended June 30, 2008
2008 2007 Note Rs ‘000 Rs ‘000
Sales 22 91,910,703 59,154,780Less: Discount – 46,248
91,910,703 59,108,532Reimbursement due from the Government
under import parity pricing formula 23 1,743,602 355,393
93,654,305 59,463,925Less: Cost of sales 24 89,646,373 58,597,688
Gross profit 4,007,932 866,237
Less: Administration expenses 25 199,336 175,108Distribution cost 26 19,140 16,716Finance cost 27 1,244,373 246,545Other charges 28 235,711 102,151
1,698,560 540,520
2,309,372 325,717Other income 30 577,851 635,166
Profit before taxation from refinery operations 2,887,223 960,883Provision for taxation 31 879,653 456,550
Profit after taxation from refinery operations 2,007,570 504,333
Profit after taxation from non-refinery operations
Gain on sale of shares of an associated company 32 3,762,775 –Dividend income 33 377,429 244,652
4,140,204 244,652
Profit for the year 6,147,774 748,985
Earnings per share – Basic (Rs)Refinery operations 28.24 7.10Non-refinery operations 58.25 3.44
37 86.49 10.54
The annexed notes 1 to 38 form an integral part of these financial statements.
Chief Executive Director
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Cash Flow Statementfor the year ended June 30, 2008
2008 2007 Rs ‘000 Rs ‘000
CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts from – customers 102,962,499 72,705,853 – others 109,183 98,996
103,071,682 72,804,849
Cash paid for operating costs (80,364,440) (52,789,988)Cash paid to Government for duties, taxes and other levies (11,312,753) (14,106,632)Income tax paid (320,261) (231,353)
Net cash flows from operating activities 11,074,228 5,676,876
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (361,046) (81,160)Proceeds from sale of property, plant and equipment 2,743 954Proceeds from sale of shares of an associated company 4,438,944 –Purchase of shares of associated companies (4,542,444) (638,425)Long term loans and deposits (1,778) 659Income on bank deposits received 453,471 529,357Dividends received 454,734 277,697
Net cash flows from investing activities 444,624 89,082
CASH FLOWS FROM FINANCING ACTIVITIES
Long term loans – (4,547,000)Financial charges paid (1,244,374) (370,678)Dividends paid (226,812) (30)
Net cash flows from financing activities (1,471,186) (4,917,708)
EFFECT OF EXCHANGE RATE CHANGES 16,852 270
INCREASE IN CASH AND CASH EQUIVALENTS 10,064,518 848,520
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR 8,880,114 8,031,594
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 18,944,632 8,880,114
The annexed notes 1 to 38 form an integral part of these financial statements.
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Statement of Changes in Equityfor the year ended June 30, 2008
Chief Executive Director
Special reserve Surplus on Share Capital for expansion / General Un-appropriated revaluation of
capital reserve modernisation reserve Profit freehold land Total
Rs ‘000
Balance at June 30, 2006 454,896 5,948 2,187,629 55 381,152 1,923,339 4,953,019
Bonus shares @ 25% related to the year
ended June 30, 2006 113,724 – – – (113,724) – –
Profit for the year ended June 30, 2007 – – – – 748,985 – 748,985
Transfer to reserve for expansion /
modernisation – – 358,533 – (358,533) – –
Balance at June 30, 2007 568,620 5,948 2,546,162 55 657,880 1,923,339 5,702,004
Bonus shares @ 25% related to the year
ended June 30, 2007 142,155 – – – (142,155) – –
Final cash dividend @ 40% related to the
year ended June 30, 2007 – – – – (227,448) – (227,448)
Profit for the year ended June 30, 2008 – – – – 6,147,774 – 6,147,774
Transfer to reserve for expansion /
modernisation – – 1,861,770 – (1,861,770) – –
Balance at June 30, 2008 710,775 5,948 4,407,932 55 4,574,281 1,923,339 11,622,330
The annexed notes 1 to 38 form an integral part of these financial statements.
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Notes to the Financial Statementsfor the year ended June 30, 2008
1. LEGAL STATUS AND OPERATIONS
Attock Refinery Limited (the Company) was incorporated in Pakistan on November 8, 1978 as a private limitedcompany and was converted into a public limited company on June 26, 1979. The registered office of thecompany is situated at Morgah, Rawalpindi. Its shares are quoted on the Karachi, Lahore and Islamabad StockExchanges in Pakistan. It is principally engaged in the refining of crude oil.
The Company is a subsidiary of The Attock Oil Company Limited, UK and its ultimate parent is Bay ViewInternational Group S.A.
2. STATEMENT OF COMPLIANCE
These are separate financial statements of the Company. These financial statements have been prepared inaccordance with approved accounting standards as applicable in Pakistan. Approved accounting standardscomprise of such International Financial Reporting Standards (IFRS) issued by the International AccountingStandards Board as are notified under the Companies Ordinance, 1984, provisions of and directives issuedunder the Companies Ordinance, 1984. In case requirements differ, the provisions or directives of the CompaniesOrdinance, 1984 shall prevail.
3. ADOPTION OF NEW AND REVISED STANDARDS AND INTERPRETATIONS
In the current year, the Company has adopted IAS 1 (Amendment) - 'Presentation of Financial Statements -Capital Disclosures'. Adoption of this amendment only impacts the format and extent of disclosures as presentedin note 36.6 to the financial statements.
The following standards and interpretations which have not been applied in these financial statements wereissued by the International Accountancy Standards Board (IASB) but not yet effective:
Effective for periodsbeginning on or after
IFRS 7 Financial Instruments: Disclosure April 28,2008IFRS 8 Operating Segments April 28,2008IAS 1 Presentation of Financial Statements (Revised 2008) January 1,2009IAS 23 Borrowing costs (Revised 2008) January 1,2009IAS 27 Consolidated and separate financial statements (Revised 2008) January 1,2009IAS 29 Financial Reporting in Hyperinflationary Economies April 28,2008IAS 32 Financial Instruments: Presentation (Revised 2008) January 1,2009IFRIC 7 Applying the Restatement Approach under IAS 29 April 28,2008IFRIC 12 Service Concession Arrangement January 1,2008IFRIC 13 Customer Loyalty Programmes July 1,2008IFRIC 14 IAS 19 - The Limit on a defined benefit asset, minimum funding
requirements and their interaction January 1,2008IFRIC 15 Agreements for the construction of Real Estate January 1,2009IFRIC 16 Hedges of a Net Investment in a Foreign Operation October 1,2008
The management anticipates that adoption of these standards and interpretations in future periods will haveno material impact on the Company's financial statements except for additional disclosures when IFRS 7,IAS 1 and IFRIC 14 come into effect.
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Notes to the Financial Statementsfor the year ended June 30, 2008
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
4.1 Basis of measurement
These financial statements have been prepared under the historical cost convention modified by revaluationof freehold land referred to in note 4.4 and certain other modifications as required by approved accountingstandards referred to in the accounting policies given below.
4.2 Dividend Appropriation
Dividend is recognised as a liability in the financial statements in the period in which it is declared.
4.3 Taxation
Provision for current taxation is based on taxable income at the current rates of taxation or half percent ofturnover, whichever is higher.
Deferred income tax is accounted for using the balance sheet liability method in respect of all temporarydifferences arising between the carrying amount of assets and liabilities in the financial statements and thecorresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are recognised forall taxable temporary differences and deferred tax assets are recognised to the extent that it is probable thatfuture taxable profits will be available against which the deductible temporary differences can be utilised.
Deferred tax is calculated at the rates that are expected to apply to the period when the differences reversebased on the tax rates that have been enacted. Deferred tax is charged or credited to income except in thecase of items credited or charged to equity in which case it is included in equity.
4.4 Property, plant and equipment
a) Cost
Operating fixed assets except freehold land are stated at cost less accumulated depreciation. Freeholdland is stated at revalued amount. Capital work-in-progress and stores held for capital expenditure arestated at cost. Cost in relation to certain plant and machinery items include borrowing cost related tothe financing of major projects during construction phase.
b) Depreciation
Operating assets depreciation is calculated using the straight-line method to allocate their cost overtheir estimated useful lives at the rates specified in note 12.
c) Repairs and maintenance
Maintenance and normal repairs, including minor alterations, are charged to income as and when incurred.Renewals and improvements are capitalised and the assets so replaced, if any, are retired.
d) Gains and losses on deletion
Gains and losses on deletion of assets are included in income currently.
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Notes to the Financial Statementsfor the year ended June 30, 2008
4.5 Impairment of non-financial assets
Assets that have an indefinite useful life, for example land, are not subject to amortisation or depreciation andare tested annually for impairment. Assets that are subject to depreciation / amortisation are reviewed forimpairment at each balance sheet date or whenever events or changes in circumstances indicate that thecarrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset'scarrying amount exceeds its recoverable amount. Reversals of the impairment losses are restricted to theoriginal cost of the asset. An impairment loss or reversal of impairment loss is recognised in the profit and lossaccount.
4.6 Investments in associated and subsidiary companies
These investments are initially valued at cost. At subsequent reporting dates, the Company reviews the carryingamount of the investment to assess whether there is any indication that such investments have suffered animpairment loss. If any such indication exists, the recoverable amount is estimated in order to determine theextent of the impairment loss, if any. Such impairment losses or reversal of impairment losses are recognisedin the profit and loss account. The profits and losses of subsidiary and associated companies are carried inthe financial statements of the subsidiary and associated company and are not dealt with for the purpose ofthe financial statements of the Company except to the extent of dividend declared by the subsidiary andassociated companies.
4.7 Stores, spares and loose tools
These are valued at moving average cost less allowance for obsolete items. Items in transit are stated atinvoice value plus other charges paid thereon.
4.8 Stock-in-trade
Stock-in-trade is valued at the lower of cost and net realisable value. Crude oil in transit is valued at costcomprising invoice value. Cost in relation to crude oil is determined on the basis of annual average cost ofpurchases during the year on the principles of import parity and in relation to semi-finished and finished productsit represents the cost of crude oil and refining charges consisting of direct expenses and appropriate productionoverheads. Direct expenses are arrived at on the basis of average cost for the year per barrel of throughput.Production overheads, including depreciation, are allocated to throughput proportionately on the basis ofnameplate capacity.
Net realisable value in relation to finished product represents selling prices in the ordinary course of businessless costs necessarily to be incurred for its sale, as applicable, and in relation to crude oil represents replacementcost at the balance sheet date.
4.9 Foreign currency translation
Transactions in foreign currencies are converted into rupees at the rates of exchange ruling on the date of thetransaction. All monetary assets and liabilities denominated in foreign currencies at the year end are translatedat exchange rates prevailing at the balance sheet date. Exchange differences are dealt with through the profitand loss account.
4.10 Revenue recognition
Revenue is recognised to the extent that it is probable that economic benefits will flow to the Company andthe revenue can be reliably measured. Revenue is recognised as follows:
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Notes to the Financial Statementsfor the year ended June 30, 2008
i) Revenue from sales is recognised on delivery of products ex-refinery to the customers with the exceptionthat Naphtha export sales are recognised on the basis of products shipped to customers.
ii) The Company is operating under the import parity pricing formula, as modified from time to time, wherebyit is charged the cost of crude on 'import parity' basis and is allowed product prices equivalent to the'import parity' price, calculated under prescribed parameters.
Effective July 1, 2007, the Government made certain modifications in the prescribed parameters effectivelyreducing the price of Kerosene oil, Light Diesel Oil (LDO) and JP-8 in 2007 and 2008. The Governmenthas further modified the refineries pricing formula in August, 2008 whereby the 10% duty included inpricing of HSD has been cut to 7.5% and the motor gasoline pricing has been unilaterally revised bylinking its price to Arab Gulf 95 RON prices and calculating the price of 87 RON motor gasoline on aunitary method basis. This revision will adversely affect the pricing of HSD and motor gasoline whichare Company's two major products.
Earlier in July, 2002, the Government had modified the pricing formula that was applicable to the Companyrestricting the distribution of net profits after tax (if any) from refinery operations to 50% of paid-upcapital as at July 1, 2002 and diverting the surplus profits, if any, to a special reserve to offset anyfuture loss or make investment for expansion or upgradation of Refinery. Further the Government hadabolished the minimum rate of return of 10% which continues to be contested by the Company as itrepresented to the Government that the already existing agreement for guaranteed return could bemodified only with the mutual consent of both the parties.
iii) Dividend income is recognised when the right to receive dividend is established.
iv) Other income is recognised on accrual basis.
4.11 Borrowing cost
Borrowing cost related to the financing of major projects during construction phase is capitalised. All otherborrowing costs are expensed as incurred.
4.12 Employee retirement benefits
The main features of the retirement benefit schemes operated by the Company for its employees are as follows:
i) Defined benefits plans
The Company operates a pension plan for its management staff and a gratuity plan for its non-managementstaff. Pension plan is invested through an approved trust fund while the gratuity plan is book reserveplan. Contributions are made in accordance with actuarial recommendations. Actuarial valuations areconducted through an independent actuary, annually using projected unit credit method. The obligationat the balance sheet date is measured at the present value of the estimated future cash outflows.
Unrealised net gains and losses are amortised over the expected remaining service of current members.
ii) Defined contribution plans
The company operates an approved contributory provident fund for all employees. Equal monthlycontribution is made both by the Company and the employee to the fund at the rate of 10% of basicsalary.
4.13 Employees compensated absences
The Company also provides for compensated absences for all employees in accordance with the rules of theCompany.
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Notes to the Financial Statementsfor the year ended June 30, 2008
4.14 Financial Instruments
Financial assets and financial liabilities are recognised when the Company becomes a party to the contractualprovisions of the instrument and de-recognised when the Company loses control of the contractual rights thatcomprise the financial asset and in case of financial liability when the obligation specified in the contract isdischarged, cancelled or expired. The particular measurement methods adopted are disclosed in the individualpolicy statements associated with each item as shown below:
a) Investment in associated and subsidiary companies
The measurement methods adopted for investment in associated and subsidiary companies are disclosedin note 4.6.
b) Trade and other payables
Liabilities for trade and other amounts payable including amounts payable to related parties are carriedat cost which is the fair value of the consideration to be paid in the future for goods and services received.
c) Provisions
Provisions are recognised when a Company has a legal or constructive obligation as a result of pastevent and it is probable that an outflow of resources embodying economic benefits will be required tosettle the obligation and a reliable estimate of the amount can be made.
d) Trade debts and other receivables
Trade debts and other receivables are recognised and carried at original invoice amount / cost less anallowance for any uncollectible amounts.
e) Cash and cash equivalents
Cash in hand and at banks are carried at fair value. For the purpose of cash flow statement, cash andcash equivalents consist of cash in hand, balances in banks and highly liquid short term investments.
5. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
The preparation of financial statements in conformity with the approved accounting standards requires the useof certain critical accounting estimates. It also requires management to exercise its judgment in the processof applying the Company's accounting policies. Estimates and judgments are continually evaluated and arebased on historical experience, including expectation of future events that are believed to be reasonable underthe circumstances. The areas where various assumptions and estimates are significant to the Company'sfinancial statements or where judgment was exercised in application of accounting policies are as follows:
i) Estimate of recoverable amount of investment in National Refinery Limited - note 14.1
ii) Revaluation surplus on freehold land - note 12.1
iii) Provision for taxation
iv) Provision for retirement benefits - note 29
2008 2007Rs ‘000 Rs ‘000
6. SHARE CAPITAL
Authorised100,000,000 (2007: 100,000,000) ordinary shares of Rs 10 each 1,000,000 1,000,000
Issued, subscribed and paid up
Shares issued for cash8,000,000 ordinary shares of Rs 10 each 80,000 80,000
Shares issued as fully paid bonus shares63,077,500 (2007: 48,862,000) ordinary shares of Rs 10 each 630,775 488,620
71,077,500 (2007: 56,862,000) ordinary shares of Rs 10 each 710,775 568,620
The Attock Oil Company Limited held 40,032,687 (2007: 31,274,150) ordinary shares and Attock PetroleumLimited held 1,000,000 (2007: nil) ordinary shares at the year end.
2008 2007Rs ‘000 Rs ‘000
7. RESERVES AND SURPLUS
Capital reserve
Liabilities taken over from The Attock Oil Company Limitedno longer required 4,800 4,800
Capital gain on sale of building 654 654
Insurance and other claims realised relating topre-incorporation period 494 494
5,948 5,948
Special reserve for expansion / modernisation - note 7.1
Additional revenue under processing fee formula related to 1990-91 and 1991-92 32,929 32,929
Surplus profits under the import parity pricing formula 4,375,003 2,513,233
4,407,932 2,546,162
Revenue reserve
General reserve 55 55Surplus - unappropriated profit 4,574,281 657,880
4,574,336 657,935
8,988,216 3,210,045
7.1 Represents amounts retained as per stipulations of the Government under the pricing formula and is availableonly for offsetting any future loss or making investment in expansion or upgradation of the refinery. Transferto / from special reserve is recognised at each quarter end and is reviewed for adjustment based on profit /loss on an annual basis. The company has incurred capital expenditure of Rs 3,770 million on upgradationand expansion projects from July 1, 1997 to June 30, 2008 (July 1, 1997 to June 30, 2007: Rs 3,496 million).
8. SURPLUS ON REVALUATION OF FREEHOLD LAND
This represents surplus over book value resulting from revaluation of freehold land as referred to in note 12.1and is not available for distribution to shareholders.
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Notes to the Financial Statementsfor the year ended June 30, 2008
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Notes to the Financial Statementsfor the year ended June 30, 2008
9. SHORT TERM FINANCE
During the year, the Company has negotiated running finance facilities with various banks and accepted facilityoffer letters to the extent of Rs 3.5 billion, which were unutilised at the year end. As and when required, thesefacilities shall be secured by joint hypothecation by way of 1st registered charges over the Company's currentassets.
2008 2007Rs ‘000 Rs ‘000
10. TRADE AND OTHER PAYABLES
Creditors – note 10.1 24,371,362 18,020,915Due to The Attock Oil Company Limited – Holding Company 256,739 275,108Due to associated companies
Pakistan Oilfields Limited 1,685,628 1,384,104Attock Petroleum Limited – 1,430Attock Information Technology Services (Private) Limited 17,429 5,543
Accrued liabilities and provisions – note 10.1 1,714,975 737,635Due to the Government under pricing formula 7,138,356 4,707,073Advance payments from customers 2,677 5,533Sales tax payable 1,037,929 7,199Workers' Welfare Fund 196,966 131,989Workers' Profit Participation Fund – note 10.2 181,441 65,840Deposits from customers adjustable against freight
and Government levies payable on their behalf 376 1,271Payable to statutory authorities in respect of petroleum
development levy and excise duty 13,099 –Excess crude oil freight recovered through inland freight
equalisation margin 21,479 –Security deposits 48,890 48,940Unclaimed dividends 1,576 940
36,688,922 25,393,520
10.1 These balances include amounts retained from payments to crude suppliers for purchase of local crude as perthe directives of the Ministry of Petroleum and Natural Resources (the Ministry). Further, as per directive ofthe Ministry such withheld amounts are being retained in designated 90 days interest bearing accounts. Theamounts retained alongwith accumulated profits amounted to Rs 6,630.371 million (2007: Rs 10,173.029million).
2008 2007Rs ‘000 Rs ‘000
10.2 Workers' Profit Participation Fund
Balance at the beginning of the year 65,840 36,869Add: Interest on funds utilised in the Company's business 3,889 528
69,729 37,397Less: Amount paid to the Fund 65,959 37,261
3,770 136Add: Amount allocated for the year - notes 28 and 33 177,671 65,704
181,441 65,840
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Notes to the Financial Statementsfor the year ended June 30, 2008
2008 2007Rs ‘000 Rs ‘000
11. CONTINGENCIES AND COMMITMENTS
Contingencies:
i) Performance and commitment guarantees arranged by the Company on behalf of Attock Gen Limited (AGL), an associated company, as main sponsors – 214,255
ii) Guarantees issued by banks on behalf of the Company 300 300
iii) Claims for land compensation contested by the Company 1,300 1,300
iv) Price adjustment related to crude oil purchases as referred to in note 24.1, the amount of which can not be presently quantified – –
Commitments outstanding:
i) Capital expenditure 43,959 55,424
ii) Letters of credit other than for capital expenditure 172,722 125,775
12. OPERATING ASSETS
Freehold Buildings Furniture,land on freehold Plant & Computer fixtures
(note 12.1) land machinery equipment and equipment Vehicles TotalRs ‘000
COST
As at July 1, 2006 1,927,250 70,356 3,795,901 51,877 60,607 62,635 5,968,626Additions during the year – 14,375 113,947 3,687 1,546 7,975 141,530Disposals during the year – – – – (188) (290) (478)
As at June 30, 2007 1,927,250 84,731 3,909,848 55,564 61,965 70,320 6,109,678
Additions during the year – 16,918 98,971 2,356 6,056 4,486 128,787Disposals during the year – – (23,722) (10,244) (10,075) (852) (44,893)
As at June 30, 2008 1,927,250 101,649 3,985,097 47,676 57,946 73,954 6,193,572
DEPRECIATION
As at July 1, 2006 – 28,639 2,878,157 39,806 33,117 43,198 3,022,917Charge for the year – 3,908 330,939 8,999 4,784 8,239 356,869On disposals – – – – (80) (290) (370)
As at June 30, 2007 – 32,547 3,209,096 48,805 37,821 51,147 3,379,416
Charge for the year – 5,573 368,114 2,983 5,789 9,047 391,506On disposals – – (17,578) (10,215) (8,225) (852) (36,870)
As at June 30, 2008 – 38,120 3,559,632 41,573 35,385 59,342 3,734,052
WRITTEN DOWN VALUE
As at June 30, 2007 1,927,250 52,184 700,752 6,759 24,144 19,173 2,730,262
As at June 30, 2008 1,927,250 63,529 425,465 6,103 22,561 14,612 2,459,520
Annual rate of depreciation (%) – 5 10 20 10 20
12.1 Value of freehold land includes revaluation surplus of Rs 1,923.339 million arising from revaluation of freeholdland in January 2001 carried out by an independent valuer. Valuation was made on the basis of market value.The original cost of the land as at June 30, 2008 is Rs 3.911 million.
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Notes to the Financial Statementsfor the year ended June 30, 2008
2008 2007Rs ‘000 Rs ‘000
12.2 The depreciation charge for the year has been allocated as follows:
Cost of sales 378,170 341,975Administration expenses 12,405 13,361Distribution cost 298 900Desalter operating cost 633 633
391,506 356,869
13. CAPITAL WORK-IN-PROGRESS
Civil works 2,191 2,487Plant and machinery 411,820 186,977Pipeline project 28,420 28,219
442,431 217,683
14. LONG TERM INVESTMENTS – AT COST
2008 2007% age % age
holding Rs ‘000 holding Rs ‘000
Associated companies
Quoted
National Refinery Limited (NRL) – note 14.1 25 8,046,635 25 8,046,635
19,991,640 (2007: 16,659,700 ) fully paid ordinaryshares including 3,331,940 (2007 : Nil) bonus sharesof Rs 10 eachMarket value as at June 30, 2008: Rs 5,947 million(June 30, 2007 : Rs 5,681 million)
Attock Petroleum Limited (APL) – note 14.2 21.70 4,438,944 21.70 668,204
10,417,680 (2007 : 8,681,400 ) fully paid ordinaryshares of Rs 10 eachMarket value as at June 30, 2008 : Rs 4,503 million(June 30, 2007 : Rs 4,352 million)
Unquoted
Attock Gen Limited (AGL) – note 14.3 30 643,500 30 540,0006,435,000 (2007 : 5,400,000) fully paid ordinaryshares of Rs 100 each
Attock Information Technology Services (Private) Limited 10 4,500 10 4,500450,000 (2007 : 450,000) fully paid ordinary sharesof Rs 10 each 13,133,579 9,259,339
Subsidiary company
Unquoted
Attock Hospital (Private) Limited 100 2,000 100 2,000200,000 (2007: 200,000) fully paid ordinary sharesof Rs 10 each
13,135,579 9,261,339
All associated and subsidiary companies are incorporated in Pakistan.
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Notes to the Financial Statementsfor the year ended June 30, 2008
14.1 Based on a valuation analysis carried out by an external investment advisor engaged by the Company, therecoverable amount of investment in NRL exceeds its carrying amount. The recoverable amount has beenestimated based on a value in use calculation. These calculations have been made on discounted cash flowbased valuation methodology which assumes gross profit margin of 5.4% (2007: 6.4%), terminal growth rateof 4% (2007: 5%) and capital asset pricing model based discount rate of 18.64% (2007: 14.30%).
CostNumber of shares Rs ‘000
14.2 Investment in APL
As at July 1, 2007 (including 3,500,000 bonus shares) 8,681,400 668,204Bonus shares received during the year 1,736,280 –Disposal of shares during the year (10,417,680) (668,204)Purchase of shares during the year 10,417,680 4,438,944
As at June 30, 2008 10,417,680 4,438,944
14.3 Investment in AGL
As at July 1, 2007 5,400,000 540,000Right shares acquired during the year 1,035,000 103,500
As at June 30, 2008 6,435,000 643,500
2008 2007Rs ‘000 Rs ‘000
15. LONG TERM LOANS AND DEPOSITS
Loans to employees – considered good – note 15.1 25,879 21,079Less: Amounts due within next twelve months shown under
current assets – note 20 (14,095) (10,990)
11,784 10,089Security deposits 948 865
12,732 10,954
15.1 Loans to employees are for miscellaneous purposes which are recoverable in 24, 36, and 60 equal monthlyinstallments depending on case to case basis and are secured by a charge on the asset purchased and / oramount due to the employee against provident fund or a third party guarantee. These are interest free loans.These include an amount of Rs 4.366 million (2007: Rs 3.552 million) receivable from Executives of theCompany and does not include any amount receivable from Directors or Chief Executive. The maximum amountdue from executives of the Company at the end of any month during the year was Rs 4.720 million (2007:Rs 3.805 million).
2008 2007Rs ‘000 Rs ‘000
15.2 Reconciliation of carrying amount of loans to executives:
Opening balance as at July 1 3,552 2,233Add: Disbursements during the year 7,164 3,922
10,716 6,155Less: Repayments during the year 6,350 2,603
Closing balance as at June 30 4,366 3,552
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Notes to the Financial Statementsfor the year ended June 30, 2008
2008 2007Rs ‘000 Rs ‘000
16. DEFERRED TAXATION
Debit balances arising on Provisions for obsolete stores, doubtful debts and gratuity 54,737 48,980 Difference between accounting and tax depreciation 164,565 124,673Finance lease arrangements – (15,897)
219,302 157,756
17. STORES, SPARES AND LOOSE TOOLSStores (including items in transit
Rs 99.03 million; 2007: Rs 119.67 million) 351,123 446,579Spares 228,053 219,661Loose tools 624 596
579,800 666,836Less: Provision for slow moving items – note 17.1 37,300 36,000
542,500 630,836
17.1. Provision for slow moving items
Opening balance 36,000 34,500Add: Provision for the year 1,300 1,500
37,300 36,000
18. STOCK-IN-TRADE
Crude oil – in stock 902,525 1,488,648Crude oil – in transit 375,967 176,064
1,278,492 1,664,712Semi-finished products 436,792 311,633Finished products – note 18.1 3,129,569 1,876,301
4,844,853 3,852,646
18.1 Finished products include stocks carried at net realisable value of Rs 2 million (2007: Rs 236 million).Adjustments amounting to Rs 1 million (2007: Rs 43.8 million) have been made to closing inventory to writedown stocks of finished products to their net realizable value.
19. TRADE DEBTS
All debtors are unsecured and considered good. These include amount receivable from associated companiesAttock Petroleum Limited Rs 2,327 million (2007: Rs 1,011 million) and Pakistan Oilfields Limited Rs 11 million(2007: Rs nil).
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Notes to the Financial Statementsfor the year ended June 30, 2008
2008 2007Rs ‘000 Rs ‘000
20. LOANS, ADVANCES, DEPOSITS, PREPAYMENTSAND OTHER RECEIVABLES
Loans and advances – considered good
Current portion of long-term loans to employees – note 15 14,095 10,990Advances to suppliers 61,874 19,301Advances to employees 2,236 1,729
78,205 32,020
Deposits, prepayments and current accountbalances with statutory authorities
Trade deposits 286 286Short term prepayments 14,680 17,238Current account balances with statutory authorities in respect
of petroleum development levy and excise duty – 287
14,966 17,811
Other receivables
Due from subsidiary companyAttock Hospital (Private) Limited 1,279 1,966
Due from associated companiesNational Refinery Limited 2,610 4,677Attock Petroleum Limited 9,308 –Attock Leisure and Management Associates (Pvt) Limited 115 –Attock Gen Limited 5,394 2,415National Cleaner Production Centre Foundation 2,992 2,465Attock Cement Pakistan Limited – 155
Due from Staff Pension Fund 15,404 4,097Income accrued on bank deposits 108,888 78,867Crude oil freight recoverable through inland freight equalisation margin – 39,221Other receivables 5,534 7,561
151,524 141,424
244,695 191,255
Loans to employees include Rs 2.852 million (2007: Rs 2.265 million ) due from executives of the Companyand does not include any amount receivable from Directors or the Chief Executive.
2008 2007Rs ‘000 Rs ‘000
21. CASH AND BANK BALANCES
Cash in hand 910 292
With banks:Current accounts 2,703 2,790Deposit accounts 6,317,269 6,081,864Savings accounts (including US $ 366,766; 2007: US $ 379,624) 12,623,750 2,795,168
18,944,632 8,880,114
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Notes to the Financial Statementsfor the year ended June 30, 2008
21.1 Balances with banks include Rs 4,817.269 million (2007: 5,381.864 million) in respect of deposits placedin a 90-day interest-bearing account consequent to directives of the Ministry of Petroleum & NaturalResources on account of amounts withheld alongwith related interest earned thereon, as referred to innote 10.1.
21.2 Bank deposits of Rs. 0.300 million (2007: 0.300 million) were under lien with bank against a bank guaranteeissued on behalf of the Company.
21.3 Balances with banks include Rs 48.890 million (2007: Rs 48.940 million) in respect of security depositsreceived.
21.4 Balances with banks earned weighted average interest / mark-up @ 9.61% (2007: @ 9.73%) per annum.
2008 2007Rs ‘000 Rs ‘000
22. SALES
Gross sales (excluding Naphtha export sales) 93,428,851 66,083,779
Naphtha export sales 12,509,719 8,232,840Less: Cost of Naphtha purchased from third parties and
related handling charges recovered 1,684,095 1,175,285
10,825,624 7,057,555Less: Duties, taxes and levies - note 22.1 12,343,772 13,986,554
91,910,703 59,154,780
22.1 Duties, taxes and levies
Sales tax 10,418,456 8,166,096Development surcharge 1,903,321 5,356,523Custom duties and other levies 21,995 463,935
12,343,772 13,986,554
23. REIMBURSEMENT DUE FROM THE GOVERNMENTUNDER IMPORT PARITY PRICING FORMULA
This represents amount due from the Government of Pakistan on account of shortfall in ex-refinery prices ofcertain petroleum products under the import parity pricing formula.
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Notes to the Financial Statementsfor the year ended June 30, 2008
2008 2007Rs ‘000 Rs ‘000
24. COST OF SALES
Opening stock of semi-finished products 311,633 278,876Crude oil consumed - note 24.1 88,115,513 56,314,521Transportation and handling charges 1,174,592 1,016,615Salaries, wages and other benefits - note 24.2 296,102 250,262Printing and stationery 1,922 1,822Chemicals consumed 354,582 347,235Fuel and power 449,483 279,486Rent, rates and taxes 6,047 6,525Telephone and telex charges 2,283 1,602Professional charges for technical services 3,506 2,455Insurance 52,935 46,544Repairs and maintenance (including stores and spares consumed Rs 64.345 million; 2007: Rs 65.330 million) 162,555 118,433Staff transport and traveling 10,449 9,815Cost of receptacles 15,912 8,619Research and development 749 109Depreciation 378,170 341,975
91,336,433 59,024,894Closing stock of semi-finished products (436,792) (311,633)
90,899,641 58,713,261
Opening stock of finished products 1,876,301 1,760,728Closing stock of finished products (3,129,569) (1,876,301)
(1,253,268) (115,573)
89,646,373 58,597,688
* includes consumables wrongly classified as fixed assets written off during the year having book value of Rs 7,269 thousand.
2008 2007Rs ‘000 Rs ‘000
24.1 Crude oil consumed
Stock at the beginning of the year 1,664,712 1,484,204Purchases - note 38.3(i) 87,729,294 56,495,029
89,394,006 57,979,233Stock at the end of the year (1,278,493) (1,664,712)
88,115,513 56,314,521
Certain crude purchases have been recorded based on provisional prices notified by the Government and mayrequire adjustment in subsequent periods. Cost of purchases include Rs 706.120 million (2007: Nil) relatedto purchases in prior years.
24.2 Salaries, wages and other benefits under cost of sales, administration expenses, distribution cost and incomefrom crude desalter operations include the Company's contribution to the Provident Fund amounting toRs 13.245 million (2007: Rs 11.552 million).
*
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Notes to the Financial Statementsfor the year ended June 30, 2008
2008 2007Rs ‘000 Rs ‘000
25. ADMINISTRATION EXPENSESSalaries, wages and other benefits - note 24.2 108,425 97,666Staff transport, traveling and entertainment 12,768 12,065Telephone and telex charges 1,521 1,485Electricity, gas and water 5,570 4,430Printing and stationery 3,937 3,028Auditor's remuneration - note 25.1 1,074 986Legal and professional charges 4,145 5,874Repairs and maintenance 33,605 21,490Subscription 5,214 5,272Publicity 3,061 4,044Scholarship scheme 1,909 2,055Rent, rates and taxes 1,766 1,273Insurance 790 867Donations* 324 415Training expenses 2,582 745Other expenses 240 52Depreciation 12,405 13,361
199,336 175,108
* No director or his spouse had any interest in the donee institutions.
25.1 Auditor's remuneration
Statutory audit 440 350Review of half yearly accounts, audit of consolidated accounts, staff funds and special certifications 520 553Out of pocket expenses 114 83
1,074 986
26. DISTRIBUTION COST
Salaries, wages and other benefits - note 24.2 13,426 11,722 Staff transport, traveling and entertainment 652 568 Telephone and telex charges 221 210 Electricity, gas, fuel and water 1,857 1,476 Printing and stationery 137 81 Repairs and maintenance including packing and other stores consumed 2,066 1,295 Rent, rates and taxes 339 317 Legal and professional charges 144 144 Cost of samples – 3 Depreciation 298 900
19,140 16,716
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Notes to the Financial Statementsfor the year ended June 30, 2008
2008 2007Rs ‘000 Rs ‘000
27. FINANCE COST
Interest / mark-up on
Long term loans – 233,361 Workers' Profit Participation Fund - note 10.2 3,888 528
Bank and other charges 241 389 Exchange loss 1,240,244 12,267
1,244,373 246,545
28. OTHER CHARGES
Employees' retirement benefits
Staff gratuity benefits 20,764 15,321
Staff pension benefits 597 8,572Less: Contribution to subsidiary company (995) (955)
(398) 7,617 Contribution to employees old age benefits scheme 2,580 2,202
22,946 25,140
Fixed assets shortages / damages written off 648 – Provision for slow moving stores 1,300 1,500 Stores written off – 13 Workers' Profit Participation Fund 154,934 51,819 Workers' Welfare Fund 55,883 23,679
235,711 102,151
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Notes to the Financial Statementsfor the year ended June 30, 2008
29. EMPLOYEES' DEFINED BENEFIT PLANS
The latest actuarial valuation of the employees' defined benefit plans was conducted at June 30, 2008 usingthe projected unit credit method. Details of the defined benefit plans are:
Defined benefit Defined benefitPension plan Gratuity plan
2008 2007 2008 2007
Rs ‘000 Rs ‘000
a) The amounts recognised in the profit and loss account:
Current service cost 13,773 12,263 3,818 3,099Interest on obligation 31,449 27,772 12,890 10,076Expected return on plan assets (39,591) (30,235) – –Contribution from an associated company (144) (127) – –Net actuarial losses / (gains) recognised during the year (4,890) (1,101) 4,056 2,146
597 8,572 20,764 15,321
b) The amounts recognised in the balance sheet:
Fair value of plan assets 385,053 359,485 – –Present value of defined benefit obligations (321,136) (291,335) (152,656) (121,894)
63,917 68,150 (152,656) (121,894)Unrecognised actuarial gains / (losses) (48,513) (64,053) 55,767 36,094
Net liability 15,404 4,097 (96,889) (85,800)
c) Movement in the present value of defined benefit obligation:
Present value of defined benefit obligation as at July 1 291,335 263,054 121,894 96,058Current service cost 13,773 12,263 3,818 3,099Interest cost 31,449 27,772 12,890 10,076Benefits paid (11,158) (11,146) (9,675) (5,321)Actuarial (gains) / losses (4,263) (608) 23,729 17,982
Present value of defined benefit obligation as at June 30 321,136 291,335 152,656 121,894
d) Changes in the fair value of plan assets:
Fair value of plan assets as at July 1 359,485 280,495 – –Expected return 39,591 30,235 – –Benefits paid (11,158) (11,146) – –Contributions by employer 11,904 10,971 – –Contributions by associated company 144 127 – –Actuarial gains / (losses) (14,913) 48,803 – –
Fair value of plan assets as at June 30 385,053 359,485 – –
Actual return on plan assets 24,677 79,038 – –
Expected contributions to the defined benefit pension plans for the year ending June 30, 2008 are Rs 12.6million.
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Notes to the Financial Statementsfor the year ended June 30, 2008
Defined benefit Defined benefitPension plan Gratuity plan
2008 2007 2008 2007
Rs ‘000 Rs ‘000
e) The major categories of plan assets:
Investment in equities 119,841 109,498 – –Investment in mixed funds 103,448 136,837 – –Cash 161,764 113,150 – –
385,053 359,485 – –
f) Significant actuarial assumptions at thebalance sheet date:
Discount rate 13.25% 11.00% – –Expected return on plan assets 13.25% 11.00% – –Future salary increases 11.09% 8.89% – –Future pension increases 7.86% 5.71% – –
2008 2007 2006 2005 2004
Rs ‘000
g) Comparison for five years:
Defined Benefit Pension Plan
Present value of defined benefit obligation (321,136) (291,335) (263,054) (215,382) (190,998)Fair value of plan assets 385,053 359,485 280,495 225,121 196,918
Surplus / (deficit) 63,917 68,150 17,441 9,739 5,920
Actuarial (gains) / losses on plan liabilities (4,262) (609) 23,265 9,382 1,303Actuarial (gains) / losses on plan assets 14,914 (48,803) 29,017 13,388 9,384
Defined Benefit Gratuity Plan
Present value of defined benefit obligation (152,656) (121,894) (96,058) (88,578) (80,832)Fair value of plan assets – – – – –
Deficit (152,656) (121,894) (96,058) (88,578) (80,832)
Actuarial (gains) / losses on plan liabilities 23,729 17,982 (1,087) 3,611 16,991Actuarial (gains) / losses on plan assets – – – – –
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Notes to the Financial Statementsfor the year ended June 30, 2008
2008 2007Rs ‘000 Rs ‘000
30. OTHER INCOME
Income from financial assets
Income on bank deposits 483,492 569,024Exchange gain 16,852 270
500,344 569,294
Income from non – financial assets
Income from crude decanting 15,262 11,205Income from crude desalter operations – note 30.1 9,715 9,265Insurance agency commission 4,140 4,719Rental income 6,983 3,057Sale of scrap 12,930 10,613Profit on disposal of fixed assets 2,637 846Calibration charges 2,892 3,742Handling and service charges 16,586 15,901Registration charges from carriage contractors 200 –Penalties from carriage contractors 4,816 3,888Old liabilities written back – 694Miscellaneous 1,346 1,942
77,507 65,872
577,851 635,166
30.1 Income from crude desalter operations
Income 51,997 43,928
Less: Operating costs
Salaries, wages and other benefits – note 24.2 1,080 1,882Chemical consumed 8,098 7,058Fuel and power 22,889 16,828Repairs and maintenance 9,582 8,262Depreciation 633 633
42,282 34,663
9,715 9,265
31. PROVISION FOR TAXATION
Current – for the year 1,054,100 476,500– for prior years (112,900) –
941,200 476,500Deferred – for the year (61,547) (19,950)
879,653 456,550
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Notes to the Financial Statementsfor the year ended June 30, 2008
2008 2007% %
31.1 Reconciliation between the average effective tax rate andthe applicable tax rate.
Applicable tax rate 35.00 35.00
Tax effect of: Income chargeable to tax at special rate and other differences (0.62) 12.51 Prior years (3.91) –
Average effective tax rate charged to profit and loss account 30.47 47.51
2008 2007Rs ‘000 Rs ‘000
32. GAIN ON SALE OF SHARES OF AN ASSOCIATED COMPANY
Proceeds from sale of shares of Attock Petroleum Limited (net of expenses incurred on disposal) 4,430,979 –Cost of investment disposed off (668,204) –
3,762,775 –
33. DIVIDEND INCOME
Dividend income from associated companiesNational Refinery Limited 333,194 208,247Attock Petroleum Limited 121,540 69,451
454,734 277,698
Less: Related charges
Workers' Profit Participation Fund 22,737 13,885Workers' Welfare Fund 9,095 5,276Taxation @ 10% ( 2007: 5%) 45,473 13,885
77,305 33,046
377,429 244,652
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Notes to the Financial Statementsfor the year ended June 30, 2008
34. RELATED PARTY TRANSACTIONS
Attock Oil Company Limited holds 56.32% (2007: 55.00%) shares of the Company at the year end. Therefore,all subsidiaries and associated undertakings of Attock Oil Company Limited are related parties of the Company.The related parties also comprise of directors, major shareholders, key management personnel, entities overwhich the directors are able to exercise significant influence on financial and operating policy decisions andemployees' funds. Amount due from and due to these undertakings are shown under receivables and payables.The remuneration of Chief Executive, directors and executives is disclosed in note 35 to the financial statements.
2008 2007Rs ‘000 Rs ‘000
Associated companies
Sale of goods 24,713,370 12,941,980Sale of services 92,585 76,773
24,805,955 13,018,753
Purchase of goods 10,154,897 7,591,742Purchase of services 409,827 311,331
10,564,724 7,903,073Holding company
Sale of services 424 285
Purchase of goods 1,106,675 1,298,843Purchase of services 3,833 3,988
1,110,508 1,302,831
Subsidiary company
Sale of goods 441 614Sale of services 22,519 18,834
22,960 19,448
Purchase of services 23,471 19,653
Contribution to employees' pension and provident funds 25,149 22,523
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Notes to the Financial Statementsfor the year ended June 30, 2008
35. REMUNERATION OF CHIEF EXECUTIVE, DIRECTORS AND EXECUTIVES
The aggregate amounts charged in the accounts for remuneration, including benefits and perquisites, wereas follows:
Chief Executive Directors Executives2008 2007 2008 2007 2008 2007
Rs ‘000
Managerial remuneration / honorarium 3,525 3,910 * 1,219 1,219 24,555 22,188Company's contribution to provident and pension funds 731 789 – – 5,503 4,739Housing and utilities 2,208 1,037 – – 17,585 11,262Leave passage 420 330 – – 2,963 2,101
6,884 6,066 1,219 1,219 50,606 40,290
No of person(s) 1 1 3 3 22 20
Housing and utilities of executives include cash allowance for fuel and maintenance in respect of limited useof Company's cars provided to 12 executives for the period January 1, 2008 to June 30, 2008.
* This includes payments to Chief Executive of Rs 789 thousand representing arrears of salary for the periodFebruary 2005 to June 30, 2006.
35.1 In addition, the Chief Executive and 22 (2007: 18) executives were provided with limited use of the Company'scars. The Chief Executive and all executives were provided with medical facilities and 5 (2007: 7) executiveswere provided with unfurnished accommodation in Company owned bungalows. Limited residential telephonefacility was also provided to the Chief Executive and 12 (2007: 11) executives.
Fee paid to directors during the year was Rs nil (2007: Rs nil).
36. FINANCIAL INSTRUMENTS
36.1 Financial assets and liabilities2008 2007
Interest / Non-interest / Interest / Non-interest /mark-up bearing mark-up bearing Total mark-up bearing mark-up bearing Total
Rs ‘000
Financial assets:
Maturity upto one yearTrade debts – 9,207,238 9,207,238 – 6,234,918 6,234,918Loans, advances, deposits and other receivables – 168,141 168,141 – 154,428 154,428
Cash and bank balancesForeign currency – US $ 24,940 702 25,642 22,815 202 23,017Local currency 18,916,079 2,911 18,918,990 8,854,217 2,880 8,857,097
Maturity after one yearLong term investments – 13,135,579 13,135,579 – 9,261,339 9,261,339Long term loans and deposits – 12,732 12,732 – 10,954 10,954
18,941,019 22,527,303 41,468,322 8,877,032 15,664,721 24,541,753
Financial liabilities:
Maturity upto one yearTrade and other payables 6,630,615 30,055,630 36,686,245 9,471,565 15,916,422 25,387,987
Maturity after one yearStaff gratuity 96,889 – 96,889 85,800 – 85,800
6,727,504 30,055,630 36,783,134 9,557,365 15,916,422 25,473,787
Off balance sheet items:
Commitments (other than letters of credit) – 43,959 43,959 – 55,424 55,424Letters of credit – 172,722 172,722 – 125,775 125,775Bank guarantees – 300 300 – 214,555 214,555
– 216,981 216,981 – 395,754 395,754
The carrying value of financial assets and liabilities approximates their fair value except for long term investments,which are stated at cost.
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Notes to the Financial Statementsfor the year ended June 30, 2008
36.2 Credit risk
The Company's credit risk is primarily attributable to its trade debts and placements with banks. The salesare essentially to six oil marketing companies and reputable foreign customers. The Company's placementsare with banks having satisfactory credit rating. Due to the high credit worthiness of corresponding partiesthe credit risk is considered minimal.
36.3 Currency risk
Foreign exchange risk arises mainly from future commercial transactions or receivables and payables that existdue to transactions denominated in foreign currencies. Financial assets include Rs 840.260 million (2007:Rs 726.019 million) and financial liabilities include Rs 18,469.791 million (2007: Rs 10,714.731 million) whichwere subject to foreign exchange risk.
36.4 Interest / Mark-up risk
Financial assets include Rs 18,941 million (2007: Rs 8,877 million) and financial liabilities include Rs 6,727million (2007: Rs 9,557 million) which were subject to interest rate risk.
36.5 Liquidity risk
Liquidity risk reflects an enterprise's inability in raising funds to meet commitments. The Company follows aneffective cash management and planning policy to ensure availability of funds and to take appropriate measuresfor new requirements.
36.6 Capital risk management
The Company is to maintain a strong capital base so as to maintain investor, creditor and market confidenceand to sustain future development of the business. The Board of Directors monitors the return on capital andthe level of dividend to ordinary shareholders. There was no change to the Company's approach to the capitalmanagement during the year and the company is not subject to externally imposed capital requirement.
2008 2007Rs ‘000 Rs ‘000
37. EARNINGS PER SHARE
Profit after taxation from refinery operations 2,007,570 504,333Profit after taxation from non-refinery operations 4,140,204 244,652
6,147,774 748,985
Number of fully paid weighted average ordinary shares (‘000) 71,078 71,078
Earnings per share - Basic (Rs)Refinery operations 28.24 7.10Non-refinery operations 58.25 3.44
86.49 10.54
Basic earnings per share for the year 2007 reported in the previous year was Rs 13.17. This has been restatedon account of 14,215,500 bonus shares issued without consideration during the year ended June 30, 2008.
There is no dilutive effect on the basic earnings per share of the Company.
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Notes to the Financial Statementsfor the year ended June 30, 2008
38. GENERAL
38.1 Capacity and production
Against the designed annual refining capacity of 14,320 million (2007: 14,240 million) US barrels the actualthroughput during the year was 14,901 million (2007: 14,075 million) US barrels.
38.2 Number of employees
Total number of employees at the end of the year was 720 (2007: 731).
38.3 Non adjusting events after the balance sheet date
i) Subsequent to the year end, further exchange loss of Rs 622 million has been realised on paymentsagainst crude purchases relating to year ended June 30, 2008.
ii) Subsequent to the year end, the Government has changed the pricing formula of certain productsincluding reduction in deemed duty adversely impacting future selling prices of the products.
iii) The Board of Directors in its meeting held on October 8, 2008 has approved the transfer of Rs. 3,762.775million (2007: Rs nil) to Investment Reserve representing gain on sale of shares of an associatedcompany. The Board of Directors, in its meeting held on October 8, 2008 has also proposed for theapproval of members at the next Annual General Meeting (i) a 80% (2007: 40%) cash dividend of Rs 8(2007: Rs 4) per share and (ii) an issue of bonus share in the proportion of one (2007: one) share forevery five (2007: four) shares held i.e. 20% (2007: 25%) out of unappropriated profits. These financialstatements do not include the effect of these appropriations which will be accounted for in the financialstatements for the year ending June 30, 2009 as follows:
Transfer from unappropriated profit to: Rs ‘000
Proposed dividend 568,620 Reserve for issue of bonus shares 142,155
38.4 Date of authorisation
These financial statements have been authorised for issue by the Board of Directors of the Company onOctober 08, 2008.
Chief Executive Director
2008
Attock Refinery Limited
Annual Audited
Consolidated Financial Statements
We have audited the annexed consolidated financial statements comprising consolidated balance sheet of AttockRefinery Limited (ARL) and its subsidiary company, Attock Hospital (Private) Limited as at June 30, 2008 and therelated consolidated profit and loss account, consolidated cash flow statement and consolidated statement of changesin equity together with the notes forming part thereof, for the year then ended. We have also expressed separateopinions on the financial statements of ARL and its subsidiary company. These financial statements are the responsibilityof ARL's management. Our responsibility is to express an opinion on these financial statements based on our audit.
Our audit was conducted in accordance with the International Standards on Auditing and accordingly included suchtests of accounting records and such other auditing procedures as we considered necessary in the circumstances.
In our opinion, the consolidated financial statements present fairly the financial position of ARL and its subsidiarycompany as at June 30, 2008 and the results of their operations for the year then ended.
Chartered Accountants
Chartered AccountantsIslamabad: October 08, 2008
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Auditors' Report to the Members
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Consolidated Balance Sheetas at June 30, 2008
2008 2007Note Rs ‘000 Rs ‘000
SHARE CAPITAL AND RESERVES
Share capital
Authorised 6 1,000,000 1,000,000
Issued, subscribed and paid-up 6 710,775 568,620Reserves and surplus 7 10,702,108 5,371,775
11,412,883 5,940,395
SURPLUS ON REVALUATION OF FREEHOLD LAND 8 1,923,339 1,923,339
13,336,222 7,863,734
DEFERRED LIABILITIES
Provision for staff gratuity 96,889 85,800
CURRENT LIABILITIES AND PROVISIONS
Short term finance 9 – –Trade and other payables 10 36,691,014 25,394,393Provision for taxation 1,673,042 1,006,629
38,364,056 26,401,022
CONTINGENCIES AND COMMITMENTS 11
51,797,167 34,350,556
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Consolidated Balance Sheetas at June 30, 2008
2008 2007 Note Rs ‘000 Rs ‘000
PROPERTY, PLANT AND EQUIPMENT
Operating assets 12 2,462,965 2,734,127Capital work-in-progress 13 442,431 217,683Stores and spares held for capital expenditure 27,701 20,190
2,933,097 2,972,000
LONG TERM INVESTMENTS 14 14,842,438 11,416,312
LONG TERM LOANS AND DEPOSITS 15 12,732 10,954
DEFERRED TAXATION 16 219,588 158,008
CURRENT ASSETS
Stores, spares and loose tools 17 542,500 630,836Stock-in-trade 18 4,845,427 3,853,388Trade debts 19 9,207,878 6,235,378Loans, advances, deposits, prepayments
and other receivables 20 248,307 192,627Cash and bank balances 21 18,945,200 8,881,053
33,789,312 19,793,282
51,797,167 34,350,556
The annexed notes 1 to 38 form an integral part of these financial statements.
Chief Executive Director
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Consolidated Profit & Loss Accountfor the year ended June 30, 2008
2008 2007Note Rs ‘000 Rs ‘000
Sales 22 91,910,703 59,154,780Less: Discount – 46,248
91,910,703 59,108,532Reimbursement due from the Government
under import parity pricing formula 23 1,743,602 355,393
93,654,305 59,463,925Less: Cost of sales 24 89,646,373 58,597,688
Gross profit 4,007,932 866,237
Less: Administration expenses 25 199,336 175,108Distribution cost 26 19,140 16,716Finance cost 27 1,244,373 246,545Other charges 28 235,711 102,151
1,698,560 540,520
2,309,372 325,717Other income 30 577,851 635,166
Profit before taxation from refinery operations 2,887,223 960,883Provision for taxation 31 879,653 456,550
Profit after taxation from refinery operations 2,007,570 504,333
Profit after taxation from non-refinery operations
Share in profit of associated companies 32 1,982,679 1,384,628Profit / (loss) on investment in associated companies 33 1,709,687 –
3,692,366 1,384,628
Profit for the year 5,699,936 1,888,961
Earnings per share – Basic (Rs)
Refinery operations 28.24 7.10Non-refinery operations 51.95 19.48
37 80.19 26.58
The annexed notes 1 to 38 form an integral part of these financial statements.
Chief Executive Director
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Consolidated Cash Flow Statementfor the year ended June 30, 2008
2008 2007 Rs ‘000 Rs ‘000
CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts from – customers 102,999,100 72,736,844 – others 109,183 98,996
103,108,283 72,835,840
Cash paid for operating costs (80,399,323) (52,833,884)Cash paid to Government for duties, taxes and other levies (11,312,753) (14,106,632)Income tax paid (321,821) (231,932)
Net cash flows from operating activities 11,074,386 5,663,392
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (361,997) (81,167)Proceeds from sale of property, plant and equipment 3,149 954Proceeds from sale of shares of an associated company 4,438,944 –Long term investments (4,542,444) (638,425)Long term loans and deposits (1,778) 659Income on bank deposits received 453,487 529,386Dividends received 454,734 277,697
Net cash flows from investing activities 444,095 89,104
CASH FLOWS FROM FINANCING ACTIVITIES
Long term loans – (4,547,000)Financial charges paid (1,244,374) (358,411)Dividends paid (226,812) (30)
Net cash flows from financing activities (1,471,186) (4,905,441)
EFFECT OF EXCHANGE RATE CHANGES 16,852 270
INCREASE IN CASH AND CASH EQUIVALENTS 10,064,147 847,325
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR 8,881,053 8,033,728
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 18,945,200 8,881,053
The annexed notes 1 to 38 form an integral part of these financial statements.
Chief Executive Director
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Consolidated Statement of Changes in Equityfor the year ended June 30, 2008
Chief Executive Director
Special reserve Surplus onShare Capital for expansion / General Un-appropriated revaluation of
capital reserve modernisation reserve Profit freehold land Total
Rs ‘000
Balance at June 30, 2006 454,896 44,948 2,517,432 55 1,034,103 1,923,339 5,974,773
Bonus shares @ 25% related to the year ended June 30, 2006 113,724 – – – (113,724) – –
Profit for the year ended June 30, 2007 – – – – 1,888,961 – 1,888,961
Transfer to special reserve – – 358,533 – (358,533) – –
Transfer to special reserve by an associated company – – 124,108 – (124,108) – –
Balance at June 30, 2007, as previously reported 568,620 44,948 3,000,073 55 2,326,699 1,923,339 7,863,734
Transfer to general reserve by an associated company – – – 258,825 (258,825) – –
Balance at June 30, 2007, as restated 568,620 44,948 3,000,073 258,880 2,067,874 1,923,339 7,863,734
Bonus shares @ 25% related to the year ended June 30, 2007 142,155 – – – (142,155) – –
Final cash dividend @ 40% related to the year ended June 30, 2007 – – – – (227,448) – (227,448)
Profit for the year ended June 30, 2008 – – – – 5,699,936 – 5,699,936
Transfer to special reserve – – 1,861,770 – (1,861,770) – –
Transfer to special reserve by an associated company – – 743,781 – (743,781) – –
Transfer to general reserve by an associated company – – – 561,100 (561,100) – –
Sale of bonus shares of an associated company – (35,000) – – 35,000 – –
Bonus shares issued by an associated company – 33,320 – – (33,320) – –
Balance at June 30, 2008 710,775 43,268 5,605,624 819,980 4,233,236 1,923,339 13,336,222
The annexed notes 1 to 38 form an integral part of these financial statements.
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Notes to the Consolidated Financial Statementsfor the year ended June 30, 2008
1. LEGAL STATUS AND OPERATIONS
Attock Refinery Limited (the Company) was incorporated in Pakistan on November 8, 1978 as a private limitedcompany and was converted into a public limited company on June 26, 1979. The registered office of thecompany is situated at Morgah, Rawalpindi. Its shares are quoted on the Karachi, Lahore and Islamabad StockExchanges in Pakistan. It is principally engaged in the refining of crude oil.
The Company is a subsidiary of The Attock Oil Company Limited, UK and its ultimate parent is Bay ViewInternational Group S.A.
Attock Hospital (Private) Limited (AHL) was incorporated in Pakistan on August 24, 1998 as a private limitedcompany and commenced its operations from September 1, 1998. AHL is engaged in providing medical services.The Company is a wholly owned subsidiary of Attock Refinery Limited. For the purpose of these financialstatements, ARL and its above referred wholly owned subsidiary AHL is referred to as the Company.
2. STATEMENT OF COMPLIANCE
These financial statements have been prepared in accordance with approved accounting standards as applicablein Pakistan. Approved accounting standards comprise of such International Financial Reporting Standards(IFRS) issued by the International Accounting Standards Board as are notified under the Companies Ordinance,1984, provisions of and directives issued under the Companies Ordinance, 1984. In case requirements differ,the provisions or directives of the Companies Ordinance, 1984 shall prevail.
3. ADOPTION OF NEW AND REVISED STANDARDS AND INTERPRETATIONS
In the current year, the Company has adopted IAS 1 (Amendment) - 'Presentation of Financial Statements -Capital Disclosures'. Adoption of this amendment only impacts the format and extent of disclosures as presentedin note 36.6 to the financial statements.
The following standards and interpretations which have not been applied in these financial statements wereissued by the International Accountancy Standards Board (IASB) but not yet effective:
Effective for periods
beginning on or after
IFRS 7 Financial Instruments: Disclosure April 28,2008IFRS 8 Operating Segments April 28,2008IAS 1 Presentation of Financial Statements (Revised 2008) January 1,2009IAS 23 Borrowing costs (Revised 2008) January 1,2009IAS 27 Consolidated and separate financial statements (Revised 2008) January 1,2009IAS 29 Financial Reporting in Hyperinflationary Economies April 28,2008IAS 32 Financial Instruments: Presentation (Revised 2008) January 1,2009IFRIC 7 Applying the Restatement Approach under IAS 29 April 28,2008IFRIC 12 Service Concession Arrangement January 1,2008IFRIC 13 Customer Loyalty Programmes July 1,2008IFRIC 14 IAS 19 - The Limit on a defined benefit asset, minimum funding
requirements and their interaction January 1,2008IFRIC 15 Agreements for the construction of Real Estate January 1,2009IFRIC 16 Hedges of a Net Investment in a Foreign Operation October 1,2008
The management anticipates that adoption of these standards and interpretations in future periods will haveno material impact on the Company's financial statements except for additional disclosures when IFRS 7,IAS 1 and IFRIC 14 come into effect.
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Notes to the Consolidated Financial Statementsfor the year ended June 30, 2008
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
4.1 Basis of measurement
These financial statements have been prepared under the historical cost convention modified by revaluationof freehold land referred to in note 4.4 and certain other modifications as required by approved accountingstandards referred to in the accounting policies given below.
4.2 Basis of Consolidation
The consolidated financial statements include the financial statements of Attock Refinery Limited and itswholly owned subsidiary, Attock Hospital (Private) Limited.
Subsidiaries are all entities over which the Company has the power to govern the financial and operatingpolicies generally accompanying a shareholding of more than one half of the voting rights or otherwise haspower to elect and appoint more than one half of its directors. Subsidiaries are fully consolidated from thedate on which control is transferred to the Group and are de-consolidated from the date that control ceases.
The assets and liabilities of subsidiary company have been consolidated on a line by line basis and the carryingvalue of investments held by the parent company is eliminated against the subsidiary shareholders' equity inthe consolidated financial statements.
Material intra-company balances and transactions have been eliminated for consolidation purposes.
4.3 Dividend Appropriation
Dividend is recognised as a liability in the financial statements in the period in which it is declared.
4.4 Taxation
Provision for current taxation is based on taxable income at the current rates of taxation or half percent ofturnover, whichever is higher.
Deferred income tax is accounted for using the balance sheet liability method in respect of all temporarydifferences arising between the carrying amount of assets and liabilities in the financial statements and thecorresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are recognised forall taxable temporary differences and deferred tax assets are recognised to the extent that it is probable thatfuture taxable profits will be available against which the deductible temporary differences can be utilised.
Deferred tax is calculated at the rates that are expected to apply to the period when the differences reversebased on the tax rates that have been enacted. Deferred tax is charged or credited to income except in thecase of items credited or charged to equity in which case it is included in equity.
4.5 Property, plant and equipment
a) Cost
Operating fixed assets except freehold land are stated at cost less accumulated depreciation. Freeholdland is stated at revalued amount. Capital work-in-progress and stores held for capital expenditure arestated at cost. Cost in relation to certain plant and machinery items include borrowing cost related tothe financing of major projects during construction phase.
b) Depreciation
Operating assets depreciation is calculated using the straight-line method to allocate their cost overtheir estimated useful lives at the rates specified in note 12.
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Notes to the Consolidated Financial Statementsfor the year ended June 30, 2008
c) Repairs and maintenance
Maintenance and normal repairs, including minor alterations, are charged to income as and when incurred.Renewals and improvements are capitalised and the assets so replaced, if any, are retired.
d) Gains and losses on deletion
Gains and losses on deletion of assets are included in income currently.
4.6 Impairment of non-financial assets
Assets that have an indefinite useful life, for example land, are not subject to amortisation or depreciationand are tested annually for impairment. Assets that are subject to depreciation / amortisation are reviewedfor impairment at each balance sheet date or whenever events or changes in circumstances indicate that thecarrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset'scarrying amount exceeds its recoverable amount. Reversals of the impairment losses are restricted to theoriginal cost of the asset. An impairment loss or reversal of impairment loss is recognised in the profit andloss account.
4.7 Investments in associated companies
Investments in associated companies are accounted for using the equity method. Under this method investmentsare stated at cost plus the Company's equity in undistributed earnings and losses after acquisition, less anyimpairment in the value of individual investments.
4.8 Stores, spares and loose tools
These are valued at moving average cost less allowance for obsolete items. Items in transit are stated atinvoice value plus other charges paid thereon.
4.9 Stock-in-trade
Stock-in-trade is valued at the lower of cost and net realisable value. Crude oil in transit is valued at costcomprising invoice value. Cost in relation to crude oil is determined on the basis of annual average cost ofpurchases during the year on the principles of import parity and in relation to semi-finished and finished productsit represents the cost of crude oil and refining charges consisting of direct expenses and appropriate productionoverheads. Direct expenses are arrived at on the basis of average cost for the year per barrel of throughput.Production overheads, including depreciation, are allocated to throughput proportionately on the basis ofnameplate capacity.
Net realisable value in relation to finished product represents selling prices in the ordinary course of businessless costs necessarily to be incurred for its sale, as applicable, and in relation to crude oil represents replacementcost at the balance sheet date.
4.10 Foreign currency translation
Transactions in foreign currencies are converted into rupees at the rates of exchange ruling on the date ofthe transaction. All monetary assets and liabilities denominated in foreign currencies at the year end aretranslated at exchange rates prevailing at the balance sheet date. Exchange differences are dealt with throughthe profit and loss account.
4.11 Revenue recognition
Revenue is recognised to the extent that it is probable that economic benefits will flow to the Company andthe revenue can be reliably measured. Revenue is recognised as follows:
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Notes to the Consolidated Financial Statementsfor the year ended June 30, 2008
i) Revenue from sales is recognised on delivery of products ex-refinery to the customers with the exceptionthat Naphtha export sales are recognised on the basis of products shipped to customers.
ii) The Company is operating under the import parity pricing formula, as modified from time to time, wherebyit is charged the cost of crude on 'import parity' basis and is allowed product prices equivalent to the'import parity' price, calculated under prescribed parameters.
Effective July 1, 2007, the Government made certain modifications in the prescribed parameters effectivelyreducing the price of Kerosene oil, Light Diesel Oil (LDO) and JP-8 in 2007 and 2008. The Governmenthas further modified the refineries pricing formula in August, 2008 whereby the 10% duty included inpricing of HSD has been cut to 7.5% and the motor gasoline pricing has been unilaterally revised bylinking its price to Arab Gulf 95 RON prices and calculating the price of 87 RON motor gasoline on aunitary method basis. This revision will adversely affect the pricing of HSD and motor gasoline whichare Company's two major products.
Earlier in July, 2002, the Government had modified the pricing formula that was applicable to the Companyrestricting the distribution of net profits after tax (if any) from refinery operations to 50% of paid-upcapital as at July 1, 2002 and diverting the surplus profits, if any, to a special reserve to offset any futureloss or make investment for expansion or upgradation of Refinery. Further the Government had abolishedthe minimum rate of return of 10% which continues to be contested by the Company as it representedto the Government that the already existing agreement for guaranteed return could be modified onlywith the mutual consent of both the parties.
iii) Income on investment in associated companies is recognised using the equity method. Under thismethod, the company's share of post-acquisition profit or loss of the associated company is recognisedin the profit and loss account, and its share of post-acquisition movements in reserve is recognised inreserves. Dividend distribution by the associated companies is adjusted against the carrying amountof the investment.
iv) Dividend income is recognised when the right to receive dividend is established.
v) Other income is recognised on accrual basis.
4.12 Borrowing cost
Borrowing cost related to the financing of major projects during construction phase is capitalised. All otherborrowing costs are expensed as incurred.
4.13 Employee retirement benefits
The main features of the retirement benefit schemes operated by the Company for its employees are as follows:
i) Defined benefits plans
The Company operates a pension plan for its management staff and a gratuity plan for its non-managementstaff. Pension plan is invested through an approved trust fund while the gratuity plan is book reserveplan. Contributions are made in accordance with actuarial recommendations. Actuarial valuations areconducted through an independent actuary, annually using projected unit credit method. The obligationat the balance sheet date is measured at the present value of the estimated future cash outflows.
Unrealised net gains and losses are amortised over the expected remaining service of current members.
ii) Defined contribution plans
The company operates an approved contributory provident fund for all employees. Equal monthlycontribution is made both by the Company and the employee to the fund at the rate of 10% of basicsalary.
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Notes to the Consolidated Financial Statementsfor the year ended June 30, 2008
4.14 Employees compensated absences
The Company also provides for compensated absences for all employees in accordance with the rules of theCompany.
4.15 Financial Instruments
Financial assets and financial liabilities are recognised when the Company becomes a party to the contractualprovisions of the instrument and de-recognised when the Company loses control of the contractual rights thatcomprise the financial asset and in case of financial liability when the obligation specified in the contract isdischarged, cancelled or expired. The particular measurement methods adopted are disclosed in the individualpolicy statements associated with each item as shown below:
a) Investment in associated companies
The measurement methods adopted for investment in associated and subsidiary companies are disclosedin note 4.6.
b) Trade and other payables
Liabilities for trade and other amounts payable including amounts payable to related parties are carriedat cost which is the fair value of the consideration to be paid in the future for goods and servicesreceived.
c) Provisions
Provisions are recognised when a Company has a legal or constructive obligation as a result of pastevent and it is probable that an outflow of resources embodying economic benefits will be required tosettle the obligation and a reliable estimate of the amount can be made.
d) Trade debts and other receivables
Trade debts and other receivables are recognised and carried at original invoice amount / cost less anallowance for any uncollectable amounts.
e) Cash and cash equivalents
Cash in hand and at banks are carried at fair value. For the purpose of cash flow statement, cash andcash equivalents consist of cash in hand, balances in banks and highly liquid short term investments.
5. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
The preparation of financial statements in conformity with the approved accounting standards requires theuse of certain critical accounting estimates. It also requires management to exercise its judgment in theprocess of applying the Company's accounting policies. Estimates and judgments are continually evaluatedand are based on historical experience, including expectation of future events that are believed to be reasonableunder the circumstances. The areas where various assumptions and estimates are significant to the Company'sfinancial statements or where judgment was exercised in application of accounting policies are as follows:
i) Estimate of recoverable amount of investment in National Refinery Limited - note 14.1
ii) Revaluation surplus on freehold land - note 12.1
iii) Provision for taxation
iv) Provision for retirement benefits - note 29
2008 2007Rs ‘000 Rs ‘000
6. SHARE CAPITAL
Authorised100,000,000 (2007: 100,000,000) ordinary shares of Rs 10 each 1,000,000 1,000,000
Issued, subscribed and paid up
Shares issued for cash8,000,000 (2007: 8,000,000) ordinary shares of Rs 10 each 80,000 80,000
Shares issued as fully paid bonus shares63,077,500 (2007: 48,862,000) ordinary shares of Rs 10 each 630,775 488,620
71,077,500 (2007: 56,862,000) ordinary shares of Rs 10 each 710,775 568,620
The Attock Oil Company Limited held 40,032,687 (2007: 31,274,150) ordinary shares and Attock PetroleumLimited held 1,000,000 (2007: nil) ordinary shares at the year end.
2008 2007Rs ‘000 Rs ‘000
7. RESERVES AND SURPLUS
Capital reserveLiabilities taken over from The Attock Oil Company Limited
no longer required 4,800 4,800Capital gain on sale of building 654 654Insurance and other claims realised relating to
pre-incorporation period 494 494Donations received for purchase of hospital equipment 4,000 4,000Bonus shares issued by associated company 33,320 35,000
43,268 44,948
Special reserve for expansion / modernisationAdditional revenue under processing fee formula related
to 1990-91 and 1991-92 – note 7.1 32,929 32,929Surplus profits under the import parity pricing formula -note 7.1 4,375,003 2,513,232Surplus profits of associate under the import parity pricing formula 1,197,692 453,912
5,605,624 3,000,073
Revenue reserveGeneral reserve 819,980 258,880Surplus – unappropriated profit 4,233,236 2,067,874
5,053,216 2,326,754
10,702,108 5,371,775
7.1 Represents amounts retained as per stipulations of the Government under the pricing formula and isavailable only for offsetting any future loss or making investment in expansion or upgradation of the refinery.Transfer to / from special reserve is recognised at each quarter end and is reviewed for adjustment basedon profit / loss on an annual basis. The company has incurred capital expenditure of Rs 3,770 millionon upgradation and expansion projects from July 1, 1997 to June 30, 2008 (July 1, 1997 to June 30, 2007:Rs 3,496 million).
8. SURPLUS ON REVALUATION OF FREEHOLD LAND
This represents surplus over book value resulting from revaluation of freehold land as referred to in note 12.1and is not available for distribution to shareholders.A
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Notes to the Consolidated Financial Statementsfor the year ended June 30, 2008
9. SHORT TERM FINANCE
During the year, the Company has negotiated running finance facilities with various banks and accepted facilityoffer letters to the extent of Rs 3.5 Billion, which were unutilised at the year end. As and when required, thesefacilities shall be secured by joint hypothecation by way of 1st registered charges over the Company's currentassets.
2008 2007Rs ‘000 Rs ‘000
10. TRADE AND OTHER PAYABLES
Creditors – note 10.1 24,371,972 18,021,734Due to The Attock Oil Company Limited – Holding Company 256,723 275,089Due to associated companies
Pakistan Oilfields Limited 1,684,783 1,383,271Attock Petroleum Limited – 1,046Attock Information Technology Services (Private) Limited 17,429 5,543Attock Cement Pakistan Limited 72 –
Accrued liabilities and provisions – note 10.1 1,717,026 738,703Due to the Government under pricing formula 7,138,356 4,707,073Advance payments from customers 2,677 5,533Sales tax payable 1,037,929 7,197Workers' Welfare Fund 196,966 131,989Workers' Profit Participation Fund – note 10.2 181,441 65,840Deposits from customers adjustable against freight
and Government levies payable on their behalf 376 1,271Payable to statutory authorities in respect of petroleum
development levy and excise duty 13,099 –Excess crude oil freight recovered through inland freight
equalisation margin 21,479 –Security deposits 49,110 49,165Unclaimed dividends 1,576 939
36,691,014 25,394,393
10.1 These balances include amounts retained from payments to crude suppliers for purchase of local crude as perthe directives of the Ministry of Petroleum and Natural Resources (the Ministry). Further, as per directive ofthe Ministry such withheld amounts are being retained in designated 90 days interest bearing accounts. Theamounts retained alongwith accumulated profits amounted to Rs 6,630.371 million (2007: Rs 10,173.029million).
2008 2007Rs ‘000 Rs ‘000
10.2 Workers' Profit Participation Fund
Balance at the beginning of the year 65,840 36,869Add: Interest on funds utilised in the Company's business 3,889 528
69,729 37,397Less: Amount paid to the Fund 65,959 37,261
3,770 136Add: Amount allocated for the year – notes 28 and 33 177,671 65,704
181,441 65,840
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Notes to the Consolidated Financial Statementsfor the year ended June 30, 2008
2008 2007Rs ‘000 Rs ‘000
11. CONTINGENCIES AND COMMITMENTS
Contingencies:
i) Performance and commitment guarantees arranged by theCompany on behalf of Attock Gen Limited (AGL),an associated company, as main sponsors – 214,255
ii) Guarantees issued by banks on behalf of the Company 300 300
iii) Claims for land compensation contested by the Company 1,300 1,300
iv) Price adjustment related to crude oil purchases as referred to innote 24.1, the amount of which can not be presently quantified – –
v) Corporate guarantees and indemnity bonds issued by an associatedcompany to the collector sales tax and Federal Excise, Islamabad 667,950 242,192
Commitments outstanding:
i) Capital expenditure 43,959 55,424
ii) Letters of credit other than for capital expenditure 172,722 125,775
12. OPERATING ASSETS
Freehold Buildings Furniture, land on freehold Plant & Computer fixtures
(note 12.1) land machinery equipment and equipment Vehicles TotalRs ‘000
COST
As at July 1, 2006 1,927,250 70,356 3,804,719 52,464 62,036 62,635 5,979,460Additions during the year – 14,375 113,953 3,687 1,547 7,974 141,536Disposals during the year – – – – (188) (290) (478)
As at June 30, 2007 1,927,250 84,731 3,918,672 56,151 63,395 70,319 6,120,518
Additions during the year – 16,918 99,922 2,356 6,056 4,486 129,738Disposals during the year – – (24,703) (10,244) (10,084) (852) (45,883)
As at June 30, 2008 1,927,250 101,649 3,993,891 48,263 59,367 73,953 6,204,373
DEPRECIATION
As at July 1, 2006 – 28,639 2,882,892 40,323 33,767 43,198 3,028,819Charge for the year – 3,908 331,821 9,047 4,927 8,239 357,942On disposals – – – – (80) (290) (370)
As at June 30, 2007 – 32,547 3,214,713 49,370 38,614 51,147 3,386,391Charge for the year – 5,573 368,993 2,994 5,931 9,047 392,538On disposals – – (18,222) (10,215) (8,232) (852) (37,521)
As at June 30, 2008 – 38,120 3,565,484 42,149 36,313 59,342 3,741,408
WRITTEN DOWN VALUE
As at June 30, 2007 1,927,250 52,184 703,959 6,781 24,781 19,172 2,734,127
As at June 30, 2008 1,927,250 63,529 428,407 6,114 23,054 14,611 2,462,965
Annual rate of depreciation (%) – 5 10 20 10 20
12.1 Value of freehold land includes revaluation surplus of Rs 1,923.339 million arising from revaluation of freeholdland in January 2001 carried out by an independent valuer. Valuation was made on the basis of market value.The original cost of the land as at June 30, 2008 is Rs 3.911 million.
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Notes to the Consolidated Financial Statementsfor the year ended June 30, 2008
2008 2007Rs ‘000 Rs ‘000
12.2 The depreciation charge for the year has been allocated as follows:
Cost of sales 378,170 341,975Administration expenses 12,405 13,361Distribution cost 298 900Desalter operating cost 633 633Depreciation of subsidiary company 1,032 1,073
392,538 357,942
13. CAPITAL WORK-IN-PROGRESS
Civil works 2,191 2,487Plant and machinery 411,820 186,977Pipeline project 28,420 28,219
442,431 217,683
14. LONG TERM INVESTMENTS
Investment in associated companies
Beginning of the year 11,416,312 9,637,407Sale of investment in associated company (1,550,881) –Purchase of shares of associated companies 4,542,444 638,425Share of profit of associated companies 2,059,708 1,418,177Impairment loss against investment in NRL (1,170,411) – Dividend from associated companies received (454,734) (277,697)
14,842,438 11,416,312
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Notes to the Consolidated Financial Statementsfor the year ended June 30, 2008
2008 2007% age % age
holding Rs ‘000 holding Rs ‘000
14.1 Long term investments
Associated companies
Quoted
National Refinery Limited (NRL) – note 14.2 25 9,556,004 25 9,558,251 19,991,640 (2007: 16,659,700 ) fully paid ordinary
shares including 3,331,940 (2007 : Nil) bonus sharesof Rs 10 eachMarket value as at June 30, 2008: Rs 5,947 million(June 30, 2007 : Rs 5,681 million)
Attock Petroleum Limited (APL) – note 14.3 21.70 4,627,293 21.70 1,311,091
10,417,680 (2007 : 8,681,400 ) fully paid ordinaryshares of Rs 10 eachMarket value as at June 30, 2008 : Rs 4,503 million(June 30, 2007 : Rs 4,352 million)
Unquoted
Attock Gen Limited (AGL) – note 14.4 30 653,754 30 542,0546,435,000 (2007 : 5,400,000) fully paid ordinaryshares of Rs 100 each
Attock Information Technology Services (Private) Limited – note 14.5 10 5,387 10 4,916
450,000 (2007 : 450,000) fully paid ordinary sharesof Rs 10 each
14,842,438 11,416,312
All associated and subsidiary companies are incorporated in Pakistan.
14.2 The carrying value of investment in National Refinery Limited at June 30, 2008 is net of impairment loss ofRs 1,170,411 thousand (2007: Nil). The carrying value is based on a valuation analysis carried out by anexternal investment advisor engaged by the Company. The recoverable amount has been estimated based ona value in use calculation. These calculations have been made on discounted cash flow based valuationmethodology which assumes gross profit margin of 5.4% (2007: 6.4%), terminal growth rate of 4% (2007: 5%)and capital asset pricing model based discount rate of 18.64% (2007: 14.30%).
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Notes to the Consolidated Financial Statementsfor the year ended June 30, 2008
Carrying valueNumber of shares Rs ‘000
14.3 Investment in APL
As at July 1, 2007 (including 3,500,000 bonus shares) 8,681,400 1,311,091Bonus shares received during the year 1,736,280 –Share in pre-disposal profit of APL – 361,330Dividend received – (121,540)Disposal of shares during the year (10,417,680) (1,550,881)Purchase of shares during the year 10,417,680 4,438,944Share in post acquisition profit of APL – 188,349
As at June 30, 2008 10,417,680 4,627,293
14.4 Investment in AGL
As at July 1, 2007 5,400,000 542,054Right shares acquired during the year 1,035,000 103,500Share in profit of Attock Gen Limited (AGL) – 8,200
As at June 30, 2008 6,435,000 653,754
14.5 Although the Company has less than 20 percent shareholding in Attock Information Technology Services(Private) Limited, this company has been treated as associates since the Company has representation on itsBoard of Directors.
2008 2007Rs ‘000 Rs ‘000
15. LONG TERM LOANS AND DEPOSITS
Loans to employees – considered good – note 15.1 25,879 21,079Less: Amounts due within next twelve months shown under
current assets – note 20 (14,095) (10,990)
11,784 10,089Security deposits 948 865
12,732 10,954
15.1 Loans to employees are for miscellaneous purposes which are recoverable in 24, 36, and 60 equal monthlyinstallments depending on case to case basis and are secured by a charge on the asset purchased and/oramount due to the employee against provident fund or a third party guarantee. These are interest free loans.These include an amount of Rs 4.366 million (2007: Rs 3.552 million) receivable from Executives of theCompany and does not include any amount receivable from Directors or Chief Executive. The maximum amountdue from executives of the Company at the end of any month during the year was Rs 4.720 million (2007:Rs 3.805 million).
2008 2007Rs ‘000 Rs ‘000
15.2 Reconciliation of carrying amount of loans to executives:
Opening balance as at July 1 3,552 2,233Add: Disbursements during the year 7,164 3,922
10,716 6,155Less: Repayments during the year 6,350 2,603
Closing balance as at June 30 4,366 3,552
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Notes to the Consolidated Financial Statementsfor the year ended June 30, 2008
2008 2007Rs ‘000 Rs ‘000
16. DEFERRED TAXATION
Debit balances arising on Provisions for obsolete stores, doubtful debts, gratuity and others 55,014 48,980 Difference between accounting and tax depreciation 164,574 124,925Finance lease arrangements – (15,897)
219,588 158,008
17. STORES, SPARES AND LOOSE TOOLSStores (including items in transit
Rs 99.03 million; 2007: Rs 119.67 million) 351,123 446,579Spares 228,053 219,661Loose tools 624 596
579,800 666,836Less: Provision for slow moving items – note 17.1 37,300 36,000
542,500 630,836
17.1. Provision for slow moving items
Opening balance 36,000 34,500Add: Provision for the year 1,300 1,500
37,300 36,000
18. STOCK-IN-TRADE
Crude oil – in stock 902,525 1,488,648Crude oil – in transit 375,967 176,064
1,278,492 1,664,712Semi-finished products 436,792 311,633Finished products – note 18.1 3,129,569 1,876,301Medical supplies 574 742
4,845,427 3,853,388
18.1 Finished products include stocks carried at net realisable value of Rs 2 million (2007: Rs 236 million).Adjustments amounting to Rs 1 million (2007: Rs 43.8 million) have been made to closing inventory to writedown stocks of finished products to their net realizable value.
19. TRADE DEBTS
All debtors are unsecured and considered good. These include amount receivable from associated companiesAttock Petroleum Limited Rs 2,327 million (2007: Rs 1,011 million) and Pakistan Oilfields Limited Rs 11 million(2007: Rs nil).
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Notes to the Consolidated Financial Statementsfor the year ended June 30, 2008
2008 2007Rs ‘000 Rs ‘000
20. LOANS, ADVANCES, DEPOSITS, PREPAYMENTSAND OTHER RECEIVABLES
Loans and advances – considered good
Current portion of long-term loans to employees – note 15 14,095 10,990Advances to suppliers 61,874 19,301Advances to employees 2,236 1,729
78,205 32,020
Deposits, prepayments and current accountbalances with statutory authorities
Trade deposits 286 286Short term prepayments 14,705 17,266Current account balances with statutory authorities in respect
of petroleum development levy and excise duty – 287
14,991 17,839
Other receivables
Due from associated companiesNational Refinery Limited 2,610 4,677Attock Petroleum Limited 9,436 –Attock Leisure and Management Associates (Pvt) Limited 115 –Attock Gen Limited 5,394 2,415National Cleaner Production Centre Foundation 2,992 2,465Attock Cement Pakistan Limited – 103
Due from Staff Pension Fund 15,404 4,097Income accrued on bank deposits 108,888 78,867Income tax refundable 4,738 3,362Crude oil freight recoverable through inland freight equalisation margin – 39,221Other receivables 5,534 7,561
155,111 142,768
248,307 192,627
Loans to employees include Rs 2.852 million (2007: Rs 2.265 million ) due from executives of the Companyand does not include any amount receivable from Directors or the Chief Executive.
2008 2007Rs ‘000 Rs ‘000
21. CASH AND BANK BALANCES
Cash in hand 955 339
With banks:Current accounts 2,731 2,805Deposit accounts 6,317,269 6,081,864Savings accounts (including US $ 366,766; 2007: US $ 379,624) 12,624,245 2,796,045
18,945,200 8,881,053
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Notes to the Consolidated Financial Statementsfor the year ended June 30, 2008
21.1 Balances with banks include Rs 4,817.269 million (2007: 5,381.864 million) in respect of deposits placedin a 90-day interest-bearing account consequent to directives of the Ministry of Petroleum & NaturalResources on account of amounts withheld alongwith related interest earned thereon, as referred to innote 10.1.
21.2 Bank deposits of Rs. 0.300 million (2007: 0.300 million) were under lien with bank against a bank guaranteeissued on behalf of the Company.
21.3 Balances with banks include Rs 48.890 million (2007: Rs 49.165 million) in respect of security depositsreceived.
21.4 Balances with banks earned weighted average interest / mark-up @ 9.61% (2007: @ 9.73%) per annum.
2008 2007Rs ‘000 Rs ‘000
22. SALES
Gross sales (excluding Naphtha export sales) 93,428,851 66,083,779
Naphtha export sales 12,509,719 8,232,840Less: Cost of Naphtha purchased from third parties and
related handling charges recovered 1,684,095 1,175,285
10,825,624 7,057,555
Less: Duties, taxes and levies – note 22.1 12,343,772 13,986,554
91,910,703 59,154,780
22.1 Duties, taxes and levies
Sales tax 10,418,456 8,166,096Development surcharge 1,903,321 5,356,523Custom duties and other levies 21,995 463,935
12,343,772 13,986,554
23. REIMBURSEMENT DUE FROM THE GOVERNMENTUNDER IMPORT PARITY PRICING FORMULA
This represents amount due from the Government of Pakistan on account of shortfall in ex-refinery prices ofcertain petroleum products under the import parity pricing formula.
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Notes to the Consolidated Financial Statementsfor the year ended June 30, 2008
*
2008 2007Rs ‘000 Rs ‘000
24. COST OF SALES
Opening stock of semi-finished products 311,633 278,876Crude oil consumed – note 24.1 88,115,513 56,314,521Transportation and handling charges 1,174,592 1,016,615Salaries, wages and other benefits – note 24.2 296,102 250,262Printing and stationery 1,922 1,822Chemicals consumed 354,582 347,235Fuel and power 449,483 279,486Rent, rates and taxes 6,047 6,525Telephone and telex charges 2,283 1,602Professional charges for technical services 3,506 2,455Insurance 52,935 46,544Repairs and maintenance (including stores and spares consumed Rs 64.345 million; 2007: Rs 65.330 million) 162,555 118,433Staff transport and traveling 10,449 9,815Cost of receptacles 15,912 8,619Research and development 749 109Depreciation 378,170 341,975
91,336,433 59,024,894Closing stock of semi-finished products (436,792) (311,633)
90,899,641 58,713,261
Opening stock of finished products 1,876,301 1,760,728Closing stock of finished products (3,129,569) (1,876,301)
(1,253,268) (115,573)
89,646,373 58,597,688
* includes consumables wrongly classified as fixed assets written off during the year having book value of Rs 7,269 thousand.
2008 2007Rs ‘000 Rs ‘000
24.1 Crude oil consumed
Stock at the beginning of the year 1,664,712 1,484,204Purchases – note 38.3(i) 87,729,294 56,495,029
89,394,006 57,979,233Stock at the end of the year (1,278,493) (1,664,712)
88,115,513 56,314,521
Certain crude purchases have been recorded based on provisional prices notified by the Government and mayrequire adjustment in subsequent periods. Cost of purchases include Rs 706.120 million (2007: Nil) relatedto purchases in prior years.
24.2 Salaries, wages and other benefits under cost of sales, administration expenses, distribution cost and incomefrom crude desalter operations include the Company's contribution to the Provident Fund amounting toRs 13.245 million (2007: Rs 11.552 million).
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Notes to the Consolidated Financial Statementsfor the year ended June 30, 2008
2008 2007Rs ‘000 Rs ‘000
25. ADMINISTRATION EXPENSESSalaries, wages and other benefits – note 24.2 108,425 97,666Staff transport, traveling and entertainment 12,768 12,065Telephone and telex charges 1,521 1,485Electricity, gas and water 5,570 4,430Printing and stationery 3,937 3,028Auditor's remuneration – note 25.1 1,074 986Legal and professional charges 4,145 5,874Repairs and maintenance 33,605 21,490Subscription 5,214 5,272Publicity 3,061 4,044Scholarship scheme 1,909 2,055Rent, rates and taxes 1,766 1,273Insurance 790 867Donations* 324 415Training expenses 2,582 745Other expenses 240 52Depreciation 12,405 13,361
199,336 175,108
* No director or his spouse had any interest in the donee institutions.
25.1 Auditor's remuneration
Statutory audit 440 350Review of half yearly accounts, audit of consolidated accounts, staff funds and special certifications 520 553Out of pocket expenses 114 83
1,074 986
26. DISTRIBUTION COST
Salaries, wages and other benefits – note 24.2 13,426 11,722 Staff transport, traveling and entertainment 652 568 Telephone and telex charges 221 210 Electricity, gas, fuel and water 1,857 1,476 Printing and stationery 137 81 Repairs and maintenance including packing and other stores consumed 2,066 1,295 Rent, rates and taxes 339 317 Legal and professional charges 144 144 Cost of samples – 3 Depreciation 298 900
19,140 16,716
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Notes to the Consolidated Financial Statementsfor the year ended June 30, 2008
2008 2007Rs ‘000 Rs ‘000
27. FINANCE COST
Interest / mark-up on
Long term loans – 233,361 Workers' Profit Participation Fund – note 10.2 3,888 528
Bank and other charges 241 389 Exchange loss 1,240,244 12,267
1,244,373 246,545
28. OTHER CHARGES
Employees' retirement benefits
Staff gratuity benefits 20,764 15,321
Staff pension benefits 597 8,572Less: Contribution to subsidiary company (995) (955)
(398) 7,617 Contribution to employees old age benefits scheme 2,580 2,202
22,946 25,140
Fixed assets shortages / damages written off 648 – Provision for slow moving stores 1,300 1,500 Stores written off – 13 Workers' Profit Participation Fund 154,934 51,819 Workers' Welfare Fund 55,883 23,679
235,711 102,151
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Notes to the Consolidated Financial Statementsfor the year ended June 30, 2008
29. EMPLOYEES' DEFINED BENEFIT PLANS
The latest actuarial valuation of the employees' defined benefit plans was conducted at June 30, 2008 usingthe projected unit credit method. Details of the defined benefit plans are:
Defined benefit Defined benefitPension plan Gratuity plan
2008 2007 2008 2007
Rs ‘000 Rs ‘000
a) The amounts recognised in the profit and loss account:
Current service cost 13,773 12,263 3,818 3,099Interest on obligation 31,449 27,772 12,890 10,076Expected return on plan assets (39,591) (30,235) – –Contribution from an associated company (144) (127) – –Net actuarial losses / (gains) recognised during the year (4,890) (1,101) 4,056 2,146
597 8,572 20,764 15,321
b) The amounts recognised in the balance sheet:
Fair value of plan assets 385,053 359,485 – –Present value of defined benefit obligations (321,136) (291,335) (152,656) (121,894)
63,917 68,150 (152,656) (121,894)Unrecognised actuarial gains / (losses) (48,513) (64,053) 55,767 36,094
Net liability 15,404 4,097 (96,889) (85,800)
c) Movement in the present value of defined benefit obligation:
Present value of defined benefit obligation as at July 1 291,335 263,054 121,894 96,058Current service cost 13,773 12,263 3,818 3,099Interest cost 31,449 27,772 12,890 10,076Benefits paid (11,158) (11,146) (9,675) (5,321)Actuarial (gains) / losses (4,263) (608) 23,729 17,982
Present value of defined benefit obligation as at June 30 321,136 291,335 152,656 121,894
d) Changes in the fair value of plan assets:
Fair value of plan assets as at July 1 359,485 280,495 – –Expected return 39,591 30,235 – –Benefits paid (11,158) (11,146) – –Contributions by employer 11,904 10,971 – –Contributions by associated company 144 127 – –Actuarial gains / (losses) (14,913) 48,803 – –
Fair value of plan assets as at June 30 385,053 359,485 – –
Actual return on plan assets 24,677 79,038 – –
Expected contributions to the defined benefit pension plans for the year ending June 30, 2008 are Rs 12.6million.
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Notes to the Consolidated Financial Statementsfor the year ended June 30, 2008
Defined benefit Defined benefitPension plan Gratuity plan
2008 2007 2008 2007
Rs ‘000 Rs ‘000
e) The major categories of plan assets:
Investment in equities 119,841 109,498 – –Investment in mixed funds 103,448 136,837 – –Cash 161,764 113,150 – –
385,053 359,485 – –
f) Significant actuarial assumptions at thebalance sheet date:
Discount rate 13.25% 11.00% – –Expected return on plan assets 13.25% 11.00% – –Future salary increases 11.09% 8.89% – –Future pension increases 7.86% 5.71% – –
2008 2007 2006 2005 2004
Rs ‘000
g) Comparison for five years:
Defined Benefit Pension Plan
Present value of defined benefit obligation (321,136) (291,335) (263,054) (215,382) (190,998)Fair value of plan assets 385,053 359,485 280,495 225,121 196,918
Surplus /(deficit) 63,917 68,150 17,441 9,739 5,920
Actuarial (gains) /losses on plan liabilities (4,262) (609) 23,265 9,382 1,303Actuarial (gains) / losses on plan assets 14,914 (48,803) 29,017 13,388 9,384
Defined Benefit Gratuity Plan
Present value of defined benefit obligation (152,656) (121,894) (96,058) (88,578) (80,832)Fair value of plan assets – – – – –
Deficit (152,656) (121,894) (96,058) (88,578) (80,832)
Actuarial (gains) / losses on plan liabilities 23,729 17,982 (1,087) 3,611 16,991Actuarial (gains) / losses on plan assets – – – – –
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Notes to the Consolidated Financial Statementsfor the year ended June 30, 2008
2008 2007Rs ‘000 Rs ‘000
30. OTHER INCOME
Income from financial assets
Income on bank deposits 483,492 569,024Exchange gain 16,852 270
500,344 569,294
Income from non – financial assets
Income from crude decanting 15,262 11,205Income from crude desalter operations – note 30.1 9,715 9,265Insurance agency commission 4,140 4,719Rental income 6,983 3,057Sale of scrap 12,930 10,613Profit on disposal of fixed assets 2,637 846Calibration charges 2,892 3,742Handling and service charges 16,586 15,901Registration charges from carriage contractors 200 –Penalties from carriage contractors 4,816 3,888Old liabilities written back – 694Miscellaneous 1,346 1,942
77,507 65,872
577,851 635,166
30.1 Income from crude desalter operations
Income 51,997 43,928
Less: Operating costs
Salaries, wages and other benefits – note 24.2 1,080 1,882Chemical consumed 8,098 7,058Fuel and power 22,889 16,828Repairs and maintenance 9,582 8,262Depreciation 633 633
42,282 34,663
9,715 9,265
31. PROVISION FOR TAXATION
Current – for the year 1,054,100 476,500– for prior years (112,900) –
941,200 476,500Deferred – for the year (61,547) (19,950)
879,653 456,550
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Notes to the Consolidated Financial Statementsfor the year ended June 30, 2008
2008 2007% %
31.1 Reconciliation between the average effective tax rate andthe applicable tax rate.
Applicable tax rate 35.00 35.00
Tax effect of: Income chargeable to tax at special rate and other differences (0.62) 12.51 Prior years (3.91) –
Average effective tax rate charged to profit and loss account 30.47 47.51
2008 2007Rs ‘000 Rs ‘000
32. SHARE IN PROFIT OF ASSOCIATED COMPANIES
National Refinery Limited 1,501,358 1,050,664
Attock Petroleum Limited 563,407 375,107Less: Unrealised profit from intra-group transactions
included in closing stock in trade 13,728 9,940
549,679 365,167Attock Gen Limited 8,200* 2,054Attock Information Technology Services (Private) Limited 471 292
2,059,708 1,418,177Less: Related charges
Workers' Profit Participation Fund – note 9.4 22,737 13,885Workers' Welfare Fund 9,095 5,276Taxation @ 10% (2007: 5%) 45,473 13,885
77,305 33,046
1,982,403 1,385,131Profit/(loss) of Attock Hospital (Private) Limited,
a wholly owned subsidiary – note 33.1 276 (503)
1,982,679 1,384,628* net of restatement of 2007 profit by Rs 7,744 thousands
33. PROFIT / (LOSS) ON INVESTMENT IN ASSOCIATED COMPANIES
Gain on sale of shares of Attock Petroleum LimitedProceeds from sale of shares (net of expenses incurred on disposal) 4,430,979 –Carrying value of investment (1,550,881) –
2,880,098 –Impairment loss on investment in National Refinery Limited (1,170,411) –
1,709,687 –
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Notes to the Consolidated Financial Statementsfor the year ended June 30, 2008
2008 2007Rs ‘000 Rs ‘000
33.1 Profit/(loss) from Attock Hospital (Private) Limited
Revenue* 36,615 31,329Less: Operating expenses
Salaries, wages and other benefits (including employees'retirement benefits of Rs 1,168 thousands(2007: Rs 1,064 thousands) 22,451 17,499
Medical supplies 3,157 2,953Dietary cost 617 571Sanitation and general services 2,388 3,433Utilities and other office expenses 6,470 6,332Audit fee 75 65Depreciation 1,032 1,074
36,190 31,927
Profit/(Loss) before taxation 425 (598)
Provision for taxation – Current 183 157 – Deferred (34) (252)
149 (95)
Profit/(Loss) after taxation 276 (503)
* The revenue includes inter – company billings amounting to Rs 26,588 thousands (2007 : Rs 22,703thousands) which have not been eliminated from revenue and costs. It is considered that this gives a fairerview of the operating results of the Group. The revenue also includes income on bank deposits Rs 83 thousands(2007: Rs 21 thousands).
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Notes to the Consolidated Financial Statementsfor the year ended June 30, 2008
33.2 Summarised financial information of associated companies:
The aggregate assets, liabilities, revenue and profit / (loss) of associated companies based on their auditedfinancial statements are as follows:
2008 2007Rs ‘000 Rs ‘000
AssetsNational Refinery Limited 46,604,615 32,641,559Attock Petroleum Limited 15,513,336 8,983,767Attock Gen Limited 10,658,986 1,820,220Attock Information Technology Services (Private) Limited 60,852 52,541
LiabilitiesNational Refinery Limited 29,185,570 19,895,170Attock Petroleum Limited 9,977,487 5,529,470Attock Gen Limited 8,479,805 13,375Attock Information Technology Services (Private) Limited 6,982 3,378
RevenueNational Refinery Limited 129,385,816 91,326,538Attock Petroleum Limited 53,242,330 44,130,536Attock Gen Limited 69,848 10,531Attock Information Technology Services (Private) Limited 19,515 13,642
Profit/(loss)National Refinery Limited 6,005,432 4,202,654Attock Petroleum Limited 2,641,552 1,728,606Attock Gen Limited 53,147 6,845Attock Information Technology Services (Private) Limited 4,707 2,923
The Company's share in shareholders' equityNational Refinery Limited 25.00% 25.00%Attock Petroleum Limited 21.70% 21.70%Attock Gen Limited 30.00% 30.00%Attock Information Technology Services (Private) Limited 10.00% 10.00%
34. RELATED PARTY TRANSACTIONS
Attock Oil Company Limited holds 56.32% (2007: 55.00%) shares of the Company at the year end. Therefore,all subsidiaries and associated undertakings of Attock Oil Company Limited are related parties of the Company.The related parties also comprise of directors, major shareholders, key management personnel, entities overwhich the directors are able to exercise significant influence on financial and operating policy decisions andemployees' funds. Amount due from and due to these undertakings are shown under receivables and payables.The remuneration of Chief Executive, directors and executives is disclosed in note 35 to the financial statements.
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Notes to the Consolidated Financial Statementsfor the year ended June 30, 2008
35. REMUNERATION OF CHIEF EXECUTIVE, DIRECTORS AND EXECUTIVES
The aggregate amounts charged in the accounts for remuneration, including benefits and perquisites, were as follows:
Chief Executive Directors Executives2008 2007 2008 2007 2008 2007
Rs ‘000
Managerial remuneration / honorarium 3,525 3,910 * 1,219 1,219 28,020 24,673Company's contribution to provident and pension funds 731 789 – – 6,150 5,209Housing and utilities 2,208 1,037 – – 18,728 11,586Leave passage 420 330 – – 3,328 2,324
6,884 6,066 1,219 1,219 56,226 43,792
No of person(s) 1 1 3 3 25 22
Housing and utilities of executives include cash allowance for fuel and maintenance in respect of limited useof Company's cars provided to 12 executives for the period January 1, 2008 to June 30, 2008.
* This includes payments to Chief Executive of Rs 789 thousand representing arrears of salary for the periodFebruary 2005 to June 30, 2006.
35.1 In addition, the Chief Executive and 23 (2007: 19) executives were provided with limited use of the Company'scars. The Chief Executive and all executives were provided with medical facilities and 8 (2007: 9) executiveswere provided with unfurnished accommodation in Company owned bungalows. Limited residential telephonefacility was also provided to the Chief Executive and 15 (2007: 13) executives.
Fee paid to directors during the year was Rs nil (2007: Rs nil).
2008 2007Rs ‘000 Rs ‘000
Associated companies
Sale of goods 24,713,370 12,941,980Sale of services 95,703 76,773
24,809,073 13,018,753
Purchase of goods 10,154,897 7,591,742Purchase of services 409,827 311,331
10,564,724 7,903,073Holding company
Sale of services 424 285
Purchase of goods 1,106,675 1,298,843Purchase of services 3,833 3,988
1,110,508 1,302,831
Contribution to employees' pension and provident funds 25,149 22,523
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Notes to the Consolidated Financial Statementsfor the year ended June 30, 2008
36. FINANCIAL INSTRUMENTS
36.1 Financial assets and liabilities2008 2007
Interest / Non-interest / Interest / Non-interest /mark-up bearing mark-up bearing Total mark-up bearing mark-up bearing Total
Rs ‘000
Financial assets:
Maturity upto one yearTrade debts – 9,208,809 9,208,809 – 6,235,379 6,235,379Loans, advances, deposits and other receivables – 166,990 166,990 155,773 155,773
Cash and bank balancesForeign currency – US $ 24,940 702 25,642 22,816 201 23,017Local currency 18,916,574 2,984 18,919,558 8,855,093 2,942 8,858,035
Maturity after one yearLong term investments – 14,842,438 14,842,438 – 11,416,312 11,416,312Long term loans and deposits – 12,732 12,732 – 10,954 10,954
18,941,514 24,234,655 43,176,169 8,877,909 17,821,561 26,699,470
Financial liabilities:
Maturity upto one yearTrade and other payables 6,630,615 30,059,862 36,688,337 9,471,565 15,917,291 25,388,856
Maturity after one yearStaff gratuity 96,889 – 96,889 85,800 – 85,800
6,727,504 30,059,862 36,785,226 9,557,365 15,917,219 25,474,656
Off balance sheet items:
Commitments (other than letters of credit) – 43,959 43,959 – 55,424 55,424Letters of credit – 172,722 172,722 – 125,775 125,775Bank guarantees – 300 300 – 214,555 214,555
– 216,981 216,981 – 395,754 395,754
The carrying value of financial assets and liabilities approximates their fair value except for long term investmentswhich are stated at cost.
36.2 Concentration of credit risk
The Company's credit risk is primarily attributable to its trade debts and placements with banks. The salesare essentially to six oil marketing companies and reputable foreign customers. The Company's placementsare with banks having satisfactory credit rating. Due to the high credit worthiness of corresponding partiesthe credit risk is considered minimal.
36.3 Currency riskForeign exchange risk arises mainly from future commercial transactions or receivables and payables that existdue to transactions denominated in foreign currencies. Financial assets include Rs 840.260 million (2007:Rs 726.019 million) and financial liabilities include Rs 18,469.791 million (2007: Rs 10,714.731 million) whichwere subject to foreign exchange risk.
36.4 Interest / Mark-up risk
Financial assets include Rs 18,941 million (2007: Rs 8,877 million) and financial liabilities include Rs 6,727million (2007: Rs 9,557 million) which were subject to interest rate risk.
36.5 Liquidity risk
Liquidity risk reflects an enterprise's inability in raising funds to meet commitments. The Company follows aneffective cash management and planning policy to ensure availability of funds and to take appropriate measuresfor new requirements.
36.6 Capital risk management
The Company is to maintain a strong capital base so as to maintain investor, creditor and market confidenceand to sustain future development of the business. The Board of Directors monitors the return on capital andthe level of dividend to ordinary shareholders. There was no change to the Company's approach to the capitalmanagement during the year and the company is not subject to externally imposed capital requirement.
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Notes to the Consolidated Financial Statementsfor the year ended June 30, 2008
2008 2007Rs ‘000 Rs ‘000
37. EARNINGS PER SHAREProfit after taxation from refinery operations 2,007,570 504,333Profit after taxation from non-refinery operations 3,692,366 1,384,628
5,699,936 1,888,961
Number of fully paid weighted average ordinary shares ('000) 71,078 71,078
Earnings per share - Basic (Rs)Refinery operations 28.24 7.10Non-refinery operations 51.95 19.48
80.19 26.58
Basic earnings per share for the year 2007 reported in the previous year was Rs 33.22. This has been restatedon account of 14,215,500 bonus shares issued without consideration during the year ended June 30, 2008.
There is no dilutive effect on the basic earnings per share of the Company.
38. GENERAL
38.1 Capacity and production
Against the designed annual refining capacity of 14.320 million (2007: 14.240 million) US barrels the actualthroughput during the year was 14.901 million (2007: 14.075 million) US barrels.
38.2 Number of employees
Total number of employees at the end of the year was 751 (2007: 763).
38.3 Non adjusting events after the balance sheet date
i) Subsequent to the year end, further exchange loss of Rs 622 million has been realised on paymentsagainst crude purchases relating to year ended June 30, 2008.
ii) Subsequent to the year end, the Government has changed the pricing formula of certain products includingreduction in deemed duty adversely impacting future selling prices of the products.
iii) The Board of Directors in its meeting held on October 8, 2008 has approved the transfer of Rs. 3,762.775million (2007: Rs nil) to Investment Reserve representing gain on sale of shares of an associatedcompany. The Board of Directors, in its meeting held on October 8, 2008 has also proposed for theapproval of members at the next Annual General Meeting (i) a 80% (2007: 40%) cash dividend of Rs 8(2007: Rs 4) per share and (ii) an issue of bonus share in the proportion of one (2007: one) share forevery five (2007: four) shares held i.e. 20% (2007: 25%) out of unappropriated profits. These financialstatements do not include the effect of these appropriations which will be accounted for in the financialstatements for the year ending June 30, 2009 as follows:
Transfer from unappropriated profit to: Rs ‘000
Proposed dividend 568,620 Reserve for issue of bonus shares 142,155
38.4 Corresponding figures
Comparative figures of general reserve and unappropriated profit for the year ended June 30, 2007 have beenrestated for transfer to general reserve by an associated company, as shown in the statement of changes inequity.
38.5 Date of authorisation
These financial statements have been authorised for issue by the Board of Directors of the Company onOctober 08, 2008.
Chief Executive Director
I/ We
of
being member(s) of Attock Refinery Limited holding
ordinary shares hereby appoint Mr./ Mrs./ Miss
of another member of the Company or failing him / her
of
another member of the Company as my / our proxy in my / our absence to attend and vote for me / us and on
my / our behalf at the 30th Annual General Meeting of the Company to be held on Friday, 31st October, 2008 at
11:00 a.m. at Pearl Continental Hotel, Rawalpindi and at any adjournment thereof.
As witness my / our hands seal this day of 2008.
Signed by
in the presence of
Signature onFive Rupees
Revenue Stamp.
The Signature should agreewith the specimen registered
with the Company
Ann
ual R
epor
t 2008
111
Form of Proxy
Important:
1. This Proxy Form, duly completed and signed, must be received atthe Shares Department of M/s. Noble Computer Services (Pvt)Limited, 2nd Floor, Sohni Centre, BS 5&6, Main Karimabad,Block-4, Federal B Area, Karachi-75950, Pakistan, not less than48 hours before the time of holding the meeting.
2. If a member appoints more than one proxy and more than oneinstruments of proxy are deposited by a member with the Company,all such instruments of proxy shall be rendered invalid.
3. For CDC Account Holders / Corporate Entities
In addition to the above the following requirements have to be met.
i. Attested copies of CNIC or the passport of the beneficial ownersand the proxy shall be provided with the proxy form.
ii. The proxy shall produce his original CNIC or original passportat the time of the meeting.
iii. In case of a corporate entity, the Board of Directorsresolution / power of attorney with specimen signature shall besubmitted (unless it has been provided earlier) alongwith proxyform to the Company.
Folio No. CDC Account No.
Participant I.D. Account No.
AFFIXCORRECTPOSTAGE
The Company Secretary
ATTOCK REFINERY LIMITEDP.O. Refinery, Morgah,Rawalpindi - 46600.