DYNEA PAKISTAN LIMITED 30, 2006.pdf · The retiring auditors M/s Ford Rhodes Sidat Hyder & Company,...
Transcript of DYNEA PAKISTAN LIMITED 30, 2006.pdf · The retiring auditors M/s Ford Rhodes Sidat Hyder & Company,...
DYNEA PAKISTAN LIMITED
COMPANY INFORMATION
Board of Directors :
Mr. Per Haga Chairman Mr. Syed Ali Vice Chairman Mr. Alireza M. Alladin Chief Executive Officer Mr. Rafiq M. Habib Mr. Chew Teck Liong Mr. Donald John Jenkin Mr. Farooq Hassan
Chief Operating Officer : Mr. Muhammad Hanif Ajari
Chief Financial Officer & Company Secretary : Mr. Muhammad Bashir Khan
Audit Committee :
Mr. Syed Ali Chairman Mr. Donald John Jenkin Member Mr. Farooq Hassan Member
Bankers :
M/s. Habib Bank AG Zurich M/s. Habib Bank Limited M/s. Metropolitan Bank Limited M/s. NIB Bank Limited M/s. National Bank of Pakistan M/s. United Bank Limited M/s. Union Bank Limited
Auditors :
M/s. Ford Rhodes Sidat Hyder & Company Chartered Accountants
Legal Advisors :
M/s. Sayeed & Sayeed Advocates & Legal Consultants M/s. Shahid Anwar Bajwa & Company M/s. S.M. Law Associates
Share Registrar :
Noble Computer Services (Pvt) Limited, 2nd Floor, Sohni Center, BS 5 & 6, Main Karimabad, Block-4, F.B. Area, Karachi-75950, Pakistan.
Registered Office :
1st Floor, Siddiqsons Tower, 3-Jinnah Co-operative Housing Society, Block 7/8, Sharea Faisal, Karachi-75350.
Factories :
1) A-101, 102, 103, 134, 135 & 136, Lasbella Industrial Estate Development Authority, Hub Chowki, Distt. Lasbella, Baluchistan.
2) 34-A, R-3, Industrial Estate, Gadoon Amazai, District Swabi, N.W.F.P.
DIRECTORS’ REPORT
The Directors of your company are pleased to welcome you to the twenty fourth Annual General Meeting of your Company and place before you the Annual Report with the Audited Financial Statements of the Company for the year ended June 30, 2006.
By the grace of Almighty Allah during the year 2005-06, Dynea Pakistan Limited posted excellent results. For the first time, Sales Revenue of the Company surpassed Rs. One billion and the Net Profit also improved significantly.
The summarized results are as under:
2006 2005 Rs. ‘000 Rs. ‘000
Profit before taxation 60,195 9,356 Provision for Taxation 23,671 (8,246)
Profit /(loss) after Taxation 36,524 1,110 Un-appropriated profit brought forward 61,080
59,970
Un - appropriated Profit carried forward 97,604 61,080
Resin Division
During the year under review, sales of resin division amounted to Rs. 482.72 million as compared to previous year’s sales of 365.34 million showing an improvement of 32%. Gross Profit of the division also improved significantly which in turn contributed to healthy bottom line.
Aminoplast Divisions Total sales of aminoplast divisions during the year under review amounted to Rs. 631.36 million as against Rs. 609.13 million achieved during the previous year.
For the last many years moulding operations of the company were under pressure due to the dumping of Chinese moulding compound at much cheaper rates and unethical practices (under invoicing) followed by importers. The National Tariff Commission (NTC) being supreme authority to deal with such matters was approached with a request to take appropriate steps to safeguard indigenous industry. The NTC after detailed investigation agreed with our point of view and finally imposed antidumping duty ranging from 4.34% to 11.58% on various Chinese exporters. It is, however very disappointing to report that the antidumping being very low has no impact on imports from China and influx of cheaper material from China coupled with under invoicing continued unabated during the year. Relevant Custom Authorities were also approached with concrete evidence of under invoicing but so far no positive step has been taken by the Government of Pakistan to curb such illegal practices.
Despite all these adverse factors, the company was able to achieve better results mainly because of efficient plant runs and judicious procurement of raw materials.
Future Outlook
Both resin and moulding sectors are showing strong growth and production and consumption of these materials is expected to increase in future. The moulding operations will remain under pressure until judicious antidumping duty is imposed on Chinese material and appropriate steps are taken by the Government to curb under invoicing. The management of the company is however, vigilant of the prevailing situation and all necessary steps will be taken to safeguard interests of all stakeholders.
Corporate Governance
The Directors of your Company confirm compliance with the Corporate and Financial Reporting Frame work of the Securities and Exchange Commission of Pakistan’s code of Corporate Governance for the following:
a) The financial statements prepared by the management of the Company present fairly the Company’s state of affairs, the result of its operations, cash flow and changes in equity.
b) Proper books of account of the Company have been maintained.
c) Appropriate accounting policies have been consistently applied in preparation of the financial statements and the accounting estimates are based on reasonable and prudent judgment.
d) International Accounting Standards, as applicable in Pakistan, have been followed in preparation of the financial statement and any departure there from has been adequately disclosed.
e) The system of internal control is sound in design and has been effectively implemented and monitored.
f) There are no significant doubts upon the Company ability to continue as a going concern unless the final decision come against us for the Vend Fee and Permit fee case mentioned earlier.
g) There has been no material departure from the best practices of Corporate Governance as detailed in the listing regulations.
h) Information about taxes and levies is given in the notes to the accounts.
i) Value of investment in the Company’s provident fund scheme based of audited accounts for the year ended June 30, 2006 stands at Rs. 57.77 million.
j) There has been no trading in the shares of the Company by the Directors, CEO and CFO, Company Secretary, their spouses or their minor children during the year ended June 30, 2006.
k) Statements regarding the following are annexed:
1. Key financial data for the last six years. 2. Pattern of Shareholding.
l) During the year under review, four meetings of the Board of Directors were attended as under:
Directors Attended
Mr. Per Haga (Nominee - Dynea OY Finland) 4 (all by alternate director) Mr. Syed Ali 4 Mr. Rafiq Habib 3 Mr. Alireza M. Alladin 4 Mr. Chew Teck Liong (Nominee OY Finland) 4 (all by alternate director) Donald John Jenkin (Nominee - OY Finland) 3 (One by alternate Directors) Mr. Farooq Hasan (Nominee - N.I.T) 4
m) The Directors, CEO, COO, CFO and Company Secretary and their spouses and minor children did not carry out any transaction in the shares of the Company during the year.
Dividend
The Board of Directors is pleased to propose a dividend of Rs. 0.75 per share (15%)
Earning per share
Earning per share after taxation is Rs. 1.94 (2005 : Rs. 0.06)
Vend Fee and Permit Fee
As regards Vend and Permit Fee case, Sinh High Court has already pronounced a very strong and favorable decision. The learned Supreme Court has also heard our case and the judgment has been reserved.
Appointment of Auditors
The retiring auditors M/s Ford Rhodes Sidat Hyder & Company, Chartered Accountants, being eligible, offer themselves for re-appointment for the ensuing year. They have been given satisfactory rating under the Quality Control Review Programme of the Institute of Chartered Accountant of Pakistan.
Employees relations
The relations between the Management and workers continued cordial throughout the year. The Directors would also like to express their appreciation to the efforts and hard work put in by the management, staff members and workers of the company.
Acknowledgement
The Directors wish to acknowledge the support and cooperation received from the financial institutions, customers and others institutions associated with the company.
On behalf of the Board of Directors
Alireza M. Alladin Karachi: September 09, 2006 Chief Executive Officer
1
DYNEA PAKISTAN LIMITED
BALANCE SHEET AS AT JUNE 30, 2006
2 0 0 6
2 0 0 5
Note Rupees
Rupees
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment
3 171,034,016
174,914,145
Long-term loans and advances
4 160,985
1,297,548
Long-term deposits
5 2,213,182
2,278,681
Deferred tax asset
14 -
2,980,065
173,408,183
181,470,439
CURRENT ASSETS
Stores and spares
6 9,184,399
12,351,360
Stock-in-trade
7 147,567,864
137,064,573
Trade debtors
8 229,640,571
163,777,243
Loans, advances, deposits, prepayments and other receivables
9
19,683,288
17,527,972
Taxation – net
10 3,952,789
13,375,181
Cash and bank balances
11 8,932,116
11,934,379
418,961,027
356,030,708
TOTAL ASSETS
592,369,210
537,501,147
EQUITY AND LIABILITIES
SHARE CAPITAL AND RESERVES
Authorised capital
40,000,000 (2005: 40,000,000) ordinary
shares of Rs.5/- each
200,000,000
200,000,000
Issued, subscribed and paid-up capital
12 94,362,065
94,362,065
Reserves
198,605,044
162,080,818
292,967,109
256,442,883
NON-CURRENT LIABILITIES
Liabilities against assets subject to finance lease
13 1,893,538
- Deferred tax liability
14 15,118,000
- Deferred liability
15 -
3,247,864
17,011,538
3,247,864
CURRENT LIABILITIES
Trade and other payables
16 75,751,429
102,523,349
Accrued mark-up
3,197,292
2,913,611
Short-term borrowings
17 197,845,250
161,093,321
Current maturity of liabilities against assets subject to finance lease
13
449,855
- Current portion of redeemable capital
-
10,714,281
Sales tax payable
5,146,737
565,838
282,390,563
277,810,400
CONTINGENCIES AND COMMITMENTS
18 -
-
TOTAL EQUITY AND LIABILITIES
592,369,210
537,501,147
28,083,679
7,633,843 The annexed notes from 1 to 39 form an integral part of these financial statements.
Alireza M. Alladin Chief Executive Officer
Farooq Hassan Director
2
DYNEA PAKISTAN LIMITED
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED JUNE 30, 2006
2 0 0 6
2 0 0 5
Note Rupees
Rupees
Turnover – net
19 1,114,079,977
974,478,446
Cost of Sales
20 (933,183,132)
(865,023,340)
Gross Profit
180,896,845
109,455,106
Distribution cost
21 (66,398,550)
(51,884,055)
Administrative expenses
22 (29,823,956)
(32,067,562)
(96,222,506)
(83,951,617)
Other operating income
23 1,262,215
3,682,512
Operating Profit
85,936,554
29,186,001
Finance costs
24 (18,429,195)
(11,591,054)
Other charges
25 (7,312,142)
(8,238,761)
(25,741,337)
(19,829,815)
Profit before taxation
60,195,217
9,356,186
Taxation
26 (23,670,991)
(8,245,671)
Profit after taxation
36,524,226
1,110,515
Basic and diluted earnings per share
27 1.94
0.06
The annexed notes from 1 to 39 form an integral part of these financial statements.
Alireza M. Alladin Chief Executive
Officer
Farooq Hassan Director
3
DYNEA PAKISTAN LIMITED CASH FLOW STATEMENT
FOR THE YEAR ENDED JUNE 30, 2006
2 0 0 6
2 0 0 5
Note Rupees
Rupees
CASH FLOWS FROM OPERATING ACTIVITIES
60,195,217
9,356,186
Profit before taxation
Adjustments for :
Depreciation
17,255,604
17,793,168
Provision for doubtful debts
5,000,000
19,725,101
Provision for gratuity
2,301,142
1,689,193
Finance costs
18,429,195
11,591,054
Gain on disposal of fixed assets
3,497,472
3,967,890
46,483,413
54,766,406
Operating profit before working capital changes
106,678,630
64,122,592
Decrease/(increase) in stores and spares
3,166,961
(1,150,430)
Increased stock-in-trade
(10,503,291)
(17,178,968)
Increase in trade debtors
(70,863,328)
(27,910,802)
(Increase)/decrease in loans, advances, deposits, prepayments and other receivables
(2,155,316)
3,835,043
(80,354,974)
(42,405,157)
(Decrease)/increase in trade and others payable
(26,771,920)
8,867,567
Increase/(decrease) short term finances (FCIF/Rupee TR)
142,182,643
(101,996,456)
Increase/(decrease) in sales tax payable
4,580,899
(1,454,750)
119,991,622
(94,583,639)
Cash generated from / (used in) operations
146,315,278
(72,866,204)
Finance costs paid
(18,145,514)
(9,831,827)
Income tax refund
9,920,255
8,234,484
Income tax paid
(6,070,788)
(4,618,506)
Gratuity paid
(5,549,006)
(8,449,708)
Long-term loans and deposits
1,202,062
2,900,659
Net cash generated from / (used in) operating activities
127,672,287
(84,631,102)
CASH FLOWS FROM INVESTING ACTIVITIES
Fixed capital expenditure
(16,909,874)
(15,665,933)
Proceeds from sale of fixed assets
2,942,927
1,291,955
Net cash used in investing activities
(13,966,947)
(14,373,978)
CASH FLOWS FROM FINANCING ACTIVITIES
Redeemable capital
(10,714,281)
(14,285,716)
Lease rentals paid
(562,608)
- Net cash used in financing activities
(11,276,889)
(14,285,716)
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 102,428,451
(113,290,796)
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF YEAR (118,194,136)
(4,903,340)
CASH AND CASH EQUIVALENTS AT THE END OF YEAR (15,765,685)
(118,194,136)
CASH AND CASH EQUIVALENTS COMPRISE:
Cash and bank balances
11 8,932,116
11,934,379
Running finances under mark-up arrangements
17 (24,697,801)
(130,128,515)
(15,765,685)
(118,194,136)
The annexed notes from 1 to 39 form an integral part of these financial statements.
Alireza M. Alladin Chief Executive Officer
Farooq Hassan Director
4
DYNEA PAKISTAN LIMITED
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED JUNE 30, 2006
Reserves
Issued,
subscribed
and paid-up
General
Unappropriated
Total
Total
capital
reserve
profit
Reserves
-----------------------------------------Rupees------------------------------------------
Balance as at June 30, 2004
94,362,065
101,000,000
59,970,303
160,970,303
255,332,368
Profit for the year
-
-
1,110,515
1,110,515
1,110,515
Balance as at June 30, 2005
94,362,065
101,000,000
61,080,818
162,080,818
256,442,883
Profit for the year
-
-
36,524,226
36,524,226
36,524,226
Balance as at June 30, 2006
94,362,065
101,000,000
97,605,044
198,605,044
292,967,109
The annexed notes from 1 to 39 form an integral part of these financial statements.
Alireza M. Alladin Chief Executive
Officer
Farooq Hassan Director
5
DYNEA PAKISTAN LIMITED
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2006
1. THE COMPANY AND ITS OPERATIONS
Dynea Pakistan Limited (the company) was incorporated in Pakistan on June 20, 1982 and is listed on the Karachi and Lahore stock exchanges in Pakistan. It is engaged in the manufacture and sale of urea/melamine, formaldehyde and aminoplast compound. The registered office of the company is situated at 1st Floor, Siddiqsons Tower, 3-Jinnah Co-operative Housing Society, Block-7/8, Sharea Faisal, Karachi, Pakistan.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.1
Statement of compliance
These financial statements have been prepared in accordance with approved accounting standards as applicable in Pakistan and the requirements of the Companies Ordinance, 1984 (the Ordinance). Approved accounting standards comprise of such International Accounting Standards (IASs) notified under the provisions of the Ordinance. Wherever, the requirements of the Ordinance or directives issued by the Securities and Exchange Commission of Pakistan (SECP) differ with the requirements of these standards, the requirements of the Ordinance or the requirements of the said directives take precedence.
Standards, interpretation and amendments to published approved accounting standards that are not yet effective
i. IAS 19 Amendments – Employee Benefits
effective from January 1, 2006
ii. IAS 39 Financial Instrument: Recognition and Measurement – Fair Value Option
effective from January 1, 2006
iii.
IAS 1 Presentation of Financial Statements Capital Disclosures
effective from January 1, 2007
Adoption of the above amendments may only impact the extent of disclosures presented in the financial statements.
In addition to above, a new series of standards called “International Financial Reporting Standards (IFRSs)” have been introduced and seven IFRSs have been issued by IASB. Out of these following four IFRS have been adopted by Institute of Chartered Accountant of Pakistan (ICAP) however since these have not been adopted by SECP therefore, do not form part of the approved local financial reporting framework:
IFRS-2 (Share based Payments); IFRS-3 (Business Combinations); IFRS-5 (Non-current Assets held for Sale and Discontinued Operations); and IFRS-6 (Exploration for and Evaluation of Mineral Resources).
The Company expects that the adoption of these pronouncements mentioned above will have no significant impact on the Company’s financial statements in the period of initial application.
2.2 Accounting convention
These financial statements have been prepared under the historical cost convention.
6
Dynea Pakistan Limited
2.3 Critical judgements and estimates
The preparation of financial statements in conformity with the above requirements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Company’s accounting policies. The
matters involving
a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in respective notes to the financial statements.
2.4 Property, plant and equipment
Owned
These are stated at cost less accumulated depreciation except for freehold land which is stated at cost. Depreciation is charged to income using the reducing balance method, other than freehold land which is determined to have an indefinite life, at the rates specified in note 3 to the financial statements. Depreciation on additions is charged for the full month in which the asset is put to use and on disposals upto the month immediately preceding the deletion. Assets residual values and useful lives are reviewed and adjusted, if appropriate at each balance sheet date.
Maintenance and normal repairs are charged to profit and loss account as and when incurred. Major renewals and improvements are capitalized and the assets so replaced, if any, are retired. Gains and losses on disposal of fixed assets are taken to profit and loss account currently.
Leased
Assets held under finance leases are capitalized at the lower of present value of the minimum lease payments at the inception of the lease term and the fair value of leased assets. The related obligations under finance lease less finance charges allocated to future periods are shown as liabilities. Finance cost is calculated at the rate implicit in the lease and are charged to profit and loss account. Depreciation is charged to income applying the same basis as for owned assets.
2.5 Impairment of assets
The carrying values of assets
are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. If any such indication exists and where the carrying values exceed the estimated recoverable amounts, the assets are written down to their recoverable amount. Impairment losses are recognized in the profit and loss account.
2.6 Stores and spares
These are valued at the lower of cost and net realizable value (NRV). Cost is determined on weighted average basis. Stores and spares are regularly reviewed by the management and obsolete items if any, are brought down to their NRV. NRV signifies the estimated selling price
the ordinary course of business, less estimated cost of completion and the cost necessary to make the sale.
2.7 Stock-in-trade
These are stated at the lower of net realizable value and cost determined as follows:
Raw and packing materials - Weighted average cost. Finished goods - Cost of direct materials and labour plus
attributable overheads. Goods in transit and stock in bonded warehouse - Invoice price plus other charges paid
thereon.
Net realizable value signifies the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.
7
Dynea Pakistan Limited
2.8 Trade debtors
Trade debts originated by the Company are recognized and carried at original invoice amount less provision for impairment which is based on management’s assessment of customers outstanding, and credit worthiness. Bad debts are written off as and when identified.
2.9 Cash and cash equivalents
Cash and bank balances are carried at cost.
For the purpose of cash flow statement, cash and cash equivalents consist of cash and bank balances net off short term running finances utilised under mark-up arrangements maturing within three months from the date of acquisition.
2.10
Staff retirement benefits
Defined contribution plan
The Company operates a recognised provident fund for its permanent employees. Equal monthly contributions are made to the
fund by the Company and the employees in accordance with the rules of the scheme. The Company has no further obligation once the contributions have been paid. The contributions made by the Company are recognised as employee benefit expense when they are due.
2.11
Compensated absences
The Company accounts for these benefits in the accounting period in which the absences are earned.
2.12
Trade and other payables
Liabilities for trade and other payables are carried at cost which is the fair value of the consideration to be paid in the future for goods and services received, whether or not billed to the Company.
2.13
Dividend and appropriation to reserve
Dividend and appropriation to the reserves are recognized in the period in which these are approved.
2.14
Revenue recognition
Sales are recorded when goods are dispatched to customers. Storage and rental charges are recognized on an accrual basis. Profit on bank deposits is recognized on an accrual basis on a time proportion basis.
2.15
Foreign currency transactions
Transactions in foreign currencies are translated into rupees at the rates of
exchange prevailing on the date of transactions. Monetary assets and liabilities denominated in foreign currencies are translated into rupees at the rates of exchange prevailing at the balance sheet date.
Exchange differences are taken to the profit and loss account.
8
Dynea Pakistan Limited
2.16
Operating leases
Lease payments under operating leases are recognized as an expense in the profit and loss account on a straight line basis over the respective lease term.
2.17
Borrowing costs
Borrowing cost is recognized as expense, in the period in which it is incurred.
2.18
Taxation
2.18.1
Current
Provision for taxation is based on taxable income at the current rate of tax after taking into account applicable tax credits, rebates and exemptions available, if any, or on one half percent of the turnover whichever is higher.
2.18.2
Deferred
Deferred tax liability is accounted for using the liability method on all taxable temporary differences, while deferred tax assets are recognized
for all deductible temporary differences, carry forward of unused tax assets and unused tax losses, if any, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, carry forward of unused tax assets and unused tax losses can be utilized.
The
carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on the tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.
2.19
Financial instruments
All the financial assets and financial liabilities are recognised at the time when the company becomes a party to the contractual provisions of the instrument. Financial assets are derecognised when the contractual rights that comprise the financial assets
are realised, expired or surrendered. Financial liabilities are derecognised when they are extinguished -
that is, when the obligation specified in the contract is discharged, cancelled, or expired. Any gain or loss on derecognition of the financial assets and financial liabilities is taken to the profit and loss account currently. All financial assets and liabilities are initially measured at cost, which is
the fair value, amortized cost or cost, as the case may be.
2.20
Offsetting of financial assets and financial liabilities
Financial assets and financial liabilities are offset and the net amount is reported
in the balance sheet when the Company has a legally enforceable right to set-off the recognised amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.
9
Dynea Pakistan Limited
2.21
Transactions with related parties
All transactions with related parties are priced on an arm’s length basis. Prices for these transactions are determined on the basis of admissible valuation method.
2.22
Provisions
Provision is recognised when the Company has a present legal or constructive obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate of the obligation can be made.
2.23
Segment reporting
A segment is a distinguishable component within a Company that is engaged in providing products and under a common control environment (business segment), or in providing products within a particular economic environment (geographical segments), which is subject to risks and returns that are different from those of other segments.
3. PROPERTY, PLANT AND EQUIPMENT
COST
DEPRECIATION / AMORTISATION
As at
As at
As at
As at
Written down
July 1,
June 30,
July 1,
Charge
June 30,
value as at
2005
Additions/ transfers
Disposals/ adjustments*
2006
Rate
2005
for the year
Disposals / adjustments*
2006
June 30, 2006
-----------------------------Rupees-------------------------------
%
-----------------------------Rupees-------------------------------
Rupees
Owned
Freehold land
659,961
-
-
659,961
-
-
-
-
-
659,961
Leasehold land
2,564,884
1,600,000
-
4,164,884
99 years
355,324
32,634
-
387,958
3,776,926
Buildings on freehold land
20,307,457
-
-
20,307,457
5
11,862,256
422,260
-
12,284,516
8,022,941
Buildings on leasehold land
41,143,033
-
(2,769,122)*
38,373,911
5
17,762,456
1,086,144
(1,097,621)*
17,750,979
20,622,932
Plant and machinery
291,376,488
11,989,391*
(9,635,468)
293,730,411
10
164,489,415
12,988,471
(4,228,146)*
173,249,740
120,480,671
Electrical installations
16,400,087
-
-
16,400,087
10
10,189,186
621,091
-
10,810,277
5,589,810
Furniture and fixtures
3,297,665
-
(853,475)
2,444,190
20
2,304,794
194,701
(663,617)
1,835,878
608,312
Office equipments
2,560,220
-
(707,871)
1,852,349
20
1,131,424
281,289
(488,846)
923,867
928,482
Computers and accessories
5,246,028
398,480
(3,480,184)
2,164,324
33
4,466,072
319,033
(3,284,427)
1,500,678
663,646
Vehicles
4,357,295
5,342,223
(1,540,354)
8,159,164
20
1,945,103
740,484
(147,580)
2,538,007
5,621,157
Storage tanks**
3,408,344
331,000
(583,309)
3,156,035
10
1,901,287
177,230
(467,927)
1,610,590
1,545,445
Leased assets
Motor vehicles
-
2,906,000
-
2,906,000
20 -
392,267
-
392,267
2,513,733
391,321,462
22,567,094
(19,569,783)
394,318,773
216,407,317
17,255,604
(10,378,164)
223,284,757
171,034,016
2 0 0 5
390,461,166
15,665,933
(14,805,637)
391,321,462
208,159,941
17,793,168
(9,545,792)
216,407,317
174,914,145
**
These includes transfer of raw material / finished goods containers having cost of Rs.2.751 million and written down value of Rs.1.656 million from building on lease hold land to plant and machinery. Had there been no change,
the depreciation expense for the year would have been lower and profit for the year would have been higher by Rs.82,217/-.
** These have been installed at the premises of certain customers and on vehicles of certain transporters and are not under the possession and control of the company. However, the future economic benefits associated with these assets are flowing to the Company.
10
Dynea Pakistan Limited
3.1.
The following property, plant and equipment were disposed off during the year:
Written
Gain /
Original Accumulated
Down
Sale
(loss) Mode of
cost
depreciation
Value
proceeds
on sale
disposal
Particulars of buyers
----------------------------------Rupees--------------------------------
Buildings on leasehold land *
17,902
2,742
15,160
-
(15,160)
Negotiation
Mr. Sajjad Khan Lasi, Shershah, Karachi
Plant and machinery
9,286,878
5,277,877
4,009,001
500,000
(3,509,001)
-do-
-do-
Furniture and fixtures
12,950
8,248
4,702
-
(4,702)
-do-
-do-
Office equipment
120,624
85,626
34,998
-
(34,998)
-do-
-do-
Computer accessories
2,857,495
2,736,519
120,976
-
(120,976)
-do-
-do-
Furniture and fixture
840,525
655,369
185,156
-
(185,156)
-do-
Mr. Gul khan, Gadoon Amazai, District Sawabi
Office equipment
587,247
403,220
184,027
50,000
(134,027)
-do-
-do-
Computer accessories
622,689
547,908
74,781
-
(74,781)
-do-
-do-
Extruder machine
348,590
45,148
303,442
650,000
346,558
-do-
Azmat Industries, Gujranwala.
Suzuki Mehran VXR
346,000
57,897
288,103
320,000
31,897
Insurance claim
Habib Insurance Co. Limited – related party
Vehicle - Coure
125,700
-
125,700
141,588
15,888
Company scheme
Mr. Maqbool Jaffer, Employee
Vehicle - Toyota
230,700
-
230,700
259,860
29,160
-do-
Mr. Rashid M. Yousuf, Employee
Vehicle - Coure
131,700
-
131,700
148,348
16,648
-do-
Mr. Tejpar Maheshwari, Employee
Vehicle - Coure
125,700
-
125,700
141,588
15,888
-do-
Mr. Kamil Saeed, Employee
Vehicle - Toyota
190,698
-
190,698
259,860
69,162
-do-
Mr. Rana M. Afzal, Employee
Vehicle - Coure
125,700
-
125,700
141,588
15,888
-do-
Mr. Mohammad Sadiq, Employee
Vehicle - Coure
125,700
-
125,700
141,588
15,888
-do-
Mr. Saeed-uz-Zafar, Employee
Various items having book value less than Rs. 50,000/=
721,765
557,610
164,155
188,507
24,352
-do-
Various parties
16,818,563
10,378,164
6,440,399
2,942,927
(3,497,472)
* These consist of sanitation and other fixtures attached to the buildings on leasehold land.
2 0 0 6
2 0 0 5 Note
Rupees
Rupees 3.2
Depreciation charge for the year has been allocated as follows:
Cost of sales 20 16,267,031
17,000,441
Distribution Cost 21 246,118
35,796
Administrative expenses 22 742,455
756,931
17,255,604
17,793,168
4. LONG-TERM LOANS AND ADVANCES
Unsecured - considered good
Due from executives
4.1 -
385,118
Due from other employees
4.1 530,423
3,087,472
Contractors
4.2 18,728
43,042
549,151
3,515,632
Less: Current portion shown under current assets 9 388,166
2,218,084
160,985
1,297,548
4.1
Loans were granted for purchase of property, motor vehicles and for miscellaneous purposes to the employees of the Company repayable in three years and a mark up @ 8% (2005:8%) is charged on these loans. These include mark-up free loans of Rs. 0.22 million (2005: Rs.0.16
million).
Maximum aggregate amount due from executives at the end of any month during the year was Rs. 0.37 million (2005:Rs. 0.5 million).
11
Dynea Pakistan Limited
2 0 0 6
2 0 0 5
Reconciliation of the carrying amount of loans to executives
Opening balance at the beginning of the year 385,118
-
Disbursement -
775,000
Interest charged for the year 5,184
29,939
Repayments (390,302)
(419,821)
-
385,118
4.2
The loans to contractors carry mark-up at the rate of 8 percent (2005: 8 percent) per annum.
2 0 0 6
2 0 0 5 Note
Rupees
Rupees 5. LONG-TERM DEPOSITS
Deposits
- Against bank guarantees 981,583
981,583
- Utility corporations 823,200
870,800
- Lasbela Industrial Estate Development Authority 212,870
212,870
- Others 195,529
213,428
2,213,182
2,278,681
6. STORES AND SPARES
Stores
1,923,690
2,187,133
Spares
7,260,709
10,164,227
9,184,399
12,351,360
7. STOCK-IN-TRADE
Raw material:
In hand 86,415,737
60,462,830
In bonded warehouse 42,516,587
33,566,583
In transit 7,621,667
25,132,592
136,553,991
119,162,005
Packing material 1,084,049
644,477
137,638,040
119,806,482
Finished goods 9,929,824
17,258,091
147,567,864
137,064,573
8. TRADE DEBTORS - unsecured
Considered good 8.1 229,640,571
163,777,243
Considered doubtful
31,375,883
26,375,883
261,016,454
190,153,126
Less: Provision for doubtful debts 8.2 31,375,883
26,375,883
229,640,571
163,777,243
8.1 Includes amount of Rs. 6.43 million (2005: Rs. 9.1 million) due from Thal Limited –
a related party.
12
Dynea Pakistan Limited
2 0 0 6
2 0 0 5
Note
Rupees
Rupees
8.2 Reconciliation of provision for impairment of debts.
Opening provision 26,375,883
6,650,782
Charge for the year 5,000,000
20,000,000
Less: Reversal during the year
-
274,899
Balance at the end of the year 31,375,883
26,375,883
9. LOANS, ADVANCES, DEPOSITS, PREPAYMENTS AND
OTHER RECEIVABLES
Loans - considered good
Current portion of long term loans - Employees 369,438
2,175,042
- Contractors 18,728
43,042
4 388,166
2,218,084
Advances - considered good
- Suppliers and contractors
9,245,550
8,780,410
- Employees 2,435,392
1,698,970
11,680,942
10,479,380
Deposits
Margin against Letter of credit 5,333,500
-
Prepayments -
415,593
Other receivables
- Related parties 9.1 -
12,804
- Receivable against storage rentals -
209,178
- Sales tax refundable 1,828,332
2,831,887
- Others 452,348
1,361,046
2,280,680
4,414,915
19,683,288
17,527,972
9.1 Maximum aggregate amount due from associated undertakings, at the end of any month during the year was Rs. 0.013 million (2005: Rs. 0.49 million).
2006
2005 Note
Rupees
Rupees
10. TAXATION – NET
Advance tax 18.3
9,525,714
18,247,573
Provision for taxation (5,572,925)
(4,872,392)
3,952,789
13,375,181
11. CASH AND BANK BALANCES
Cash at banks - current accounts 8,578,879
11,632,086
Cash in hand
353,237
302,293
8,932,116
11,934,379
12. ISSUED, SUBSCRIBED AND PAID-UP CAPITAL
Number of ordinary shares of Rs. 5/- each
2 0 0 6 2 0 0 5
8,316,000
8,316,000
Fully paid in cash 41,580,000
41,580,000
10,556,413
10,556,413
Issued as fully paid bonus shares 52,782,065
52,782,065
18,872,413
18,872,413
94,362,065
94,362,065
The shares held by related parties as at June 30, 2006 were 7,028,319 (2005: 7,028,319) ordinary shares of Rs. 5/- each.
13
Dynea Pakistan Limited
13. LIABILITIES AGAINST ASSETS SUBJECT TO FINANCE LEASE
Minimum Present
Minimum Present
Lease Value of
Lease Value of
Payments MLP
Payments
MLP
2006
2005
Not later than one year 732,356
449,855
- -
Later than one year but not later than five years 2,328,982
1,893,538
- -
Total minimum lease payments 3,061,338
2,343,393
- -
Less : financial charges allocated to future periods 717,945
-
- -
Present value of minimum lease payments 2,343,393
2,343,393
- -
Less: Current maturity shown under current liabilities 449,855
449,855
- - 1,893,538
1,893,538
- -
This represents finance lease entered into with modaraba for vehicles. The balance of the liability is payable by December 2008 in quarterly installments. The above lease contracts contain a bargain purchase option. Quarterly lease payments include finance charges ranging from KIBOR+2 percent
to KIBOR+2.75 percent per annum (2005: Nil), which is used as a
discounting factor. There are no financial restrictions in the lease agreements.
2006
2005 Note
Rupees
Rupees
14. DEFERRED TAX (LIABILITY)/ASSET
This is comprised of the following:
Deductible temporary differences
- Provision for doubtful debts 10,981,560
9,231,559
- Provision for gratuity -
1,136,752
- Carry forward tax losses (assessed and unassessed)
-
18,994,320
Taxable temporary difference
Difference in tax and accounting bases of tangible fixed assets
(26,099,560)
(26,382,566)
(15,118,000)
2,980,065
15. DEFERRED LIABILITY
Staff gratuity 15.1 & 15.2
-
3,247,864
15.1 Movement in the net liability recognised in the balance sheet is as follows:
Opening balance 3,247,864
10,008,379
Charge for the year 2,301,142
1,689,193
5,549,006
11,697,572
Less: Benefits paid during the year 5,549,006
8,449,708
Closing balance -
3,247,864
15.2 Effective October 01, 2005, the Company converted the unfunded gratuity scheme to recognized
gratuity fund. Subsequently, during the year the Company has decided to withdraw the said benefit for the staff with effect from June 15, 2006.
2 0 0 6
2 0 0 5
Note
Rupees
Rupees 16. TRADE AND OTHER PAYABLES
Trade creditors
5,277,046
9,074,155
Accrued liabilities 46,784,093
53,009,659
Bills payable 12,273,376
29,129,499
Workers’ Welfare Fund
100,238
100,238
Workers’ Profit Participation Fund 16.1
3,168,169
492,427
Provident fund
-
986,227
Income tax deducted at source
22,793
952,739
Unclaimed dividend
673,755
675,586
Vend / permit fee
16.2
7,451,959
8,102,819
75,751,429
102,523,349
14
Dynea Pakistan Limited
2 0 0 6
2 0 0 5
Note
Rupees
Rupees
16.1 WORKERS’ PROFIT PARTICIPATION FUND
Balance at the beginning of the year
492,427
-
Interest on fund utilized in company’s business
23,066
-
515,493
-
Allocation for the year
3,168,169
492,427
3,683,662
492,427
Less: Payments during the year
515,493
- Balance at the end of the year
3,168,169
492,427
16.2
This represents amount charged to customers in respect of vend fee and permit fee. Depending on the outcome of the law suit mentioned in note 18.2, the amount would either be paid to the Excise and Taxation Department, Government of Sindh or refunded to the customers. The Company has discontinued this practice of charging the fee from July 2002 in accordance with the industrial norms.
2 0 0 6
2 0 0 5
Note
Rupees
Rupees 17. SHORT TERM BORROWINGS – Secured
Running finance under mark-up arrangements 17.1
24,697,801
130,128,515
Foreign currency import facility (FCIF) 17.2
173,147,449
-
Trust receipts (TR) arrangements -
30,964,806
197,845,250
161,093,321
17.1 Running finance under mark-up arrangements
These facilities have been obtained from banks and are secured by hypothecation of stores and spares, stock-in-trade and trade receivables. The facilities available under mark-up arrangements amount to Rs. 270 million (2005: Rs. 240 million) of which the amount unavailed at the year end was Rs .245.302 million (2005: Rs.109.87 million). The rates of mark-up for short term running finances ranged from 8.51 percent to 11.25 percent (2005: 4.16 percent to 8.99 percent) per annum.
17.2 Foreign currency import facility
The facilities for opening letters of credit and guarantees as at June 30, 2006 amounted to Rs. 315 million (2005: Rs. 210 million) and Rs.15 million (2005: Rs.15 million) respectively, of which the amount remaining unutilized at year end was Rs.141.85 million (2005:
Rs.161.56 million) and Rs. 2.39 million (2005: Rs. 3.39 million) respectively.
The facilities for foreign currency import financing obtained from banks as at June 30, 2006 amounted to Rs. 173.147 million (2005: Nil). Under new financing arrangements with the banks (except with Habib Bank AG. Zurich), FCIF/TR facilities were combined with the facilities available under running finance arrangements. The rates of mark-up for FCIF ranged from 5.149 percent to 6.40 percent per annum.
18. CONTINGENCIES AND COMMITMENTS
Contingencies
18.1 Bank guarantees amounting to Rs. 13.59 million (2005: Rs. 12.59 million) have been issued to the Collector of Customs against import of machinery and to Excise & Taxation Department
against liability on account of vend and permit fee and infrastructure cess.
15
Dynea Pakistan Limited
18.2 The Excise and Taxation Department, Government of Sindh imposed vend and permit fee on methanol, a major raw material used by the company in the production of formaldehyde. The Company filed a petition against the imposition of these levies in the Honourable High Court of Sindh in August 1996. In June 2001, the Honourable High Court of Sindh decided the case in the favour of the Company. However, the Excise and Taxation department filed an appeal in the Honourable Supreme Court of Pakistan against the above judgement. The Honourable Supreme Court of Pakistan suspended the decision of the Honourable High Court of Sindh and reverted the case back to the Honourable High Court of Sindh for fresh hearing. After a number of hearings, finally the Honourable Bench of Sindh High Court kept the judgment order reserved in November 2002. In March 2003, the division bench announced the judgment order and termed the impugned declaration and the notification to that effect as unlawful and set aside the impugned demands of the vend and permit fee on methanol.
The Company was served a notice from the Advocate on record, Honourable Supreme Court of Pakistan that the Advocate General Sindh, High Court has filed a petition for Leave to Appeal in the Honourable Supreme Court of Pakistan, that has been accepted and a stay has been granted to them with the remarks that the matter would be decided in near future and till then the status quo would be maintained and the matter will be heard afresh.
Total liability against vend and permit fee, as on June 30, 2006 works out at Rs. 621 million (2005: Rs. 568 million). Since the Company is confident to get a favourable decision from the Supreme Court, therefore no provision of the potential liability has been made
in these financial statements. Furthermore, management
is making necessary efforts to resolve this matter and is confident that the Company will be able to continue as a going concern.
18.3
The Company is in litigation with the Income Tax Department, Peshawar (Department) against levy of
minimum tax under section 80D of the repealed Income Tax Ordinance, 1979 on its former, subsidiary company, M/s Visionite (Private)
Limited. The subsidiary company was setup on June 7, 1993 and was exempt from income tax for a period of ten years under the repealed Income Tax Ordinance, 1979. While no tax was charged on profits of the subsidiary company during tax holiday period, minimum tax at the rate one half percent of turnover was recovered arbitrarily by the department for the assessment years 1994-95 to 2002-03. Out of total nine years of dispute, decision on eight appeals had been decided by Income Tax Appellate Tribunal, Peshawar in Company's favour while one (assessment year 2000-2001) being decided unfavourably by the Commissioner of Income Tax (Appeals)
was challenged and appealed with the learned Income Tax Appellate Tribunal, Peshawar. Decision of the learned Appellate Tribunal on that appeal is expected shortly. Department has also filed a reference in the High Court against the judgement of
Income Tax Appellate Tribunal on eight appeals.
As the Income Tax Appellate Tribunal, Peshawar has already decided favourably on all appeals filed against levy of minimum tax under section 80D of the repealed Income Tax Ordinance, 1979, so a favourable decision is also expected for the year 2000-01. Since the Company is confident to win all the appeals, therefore no provisions against income tax liability has been made in these financial statements. After favourable decision of learned Income Tax Appellate Tribunal, Peshawar, tax amounting to Rs. 8.4 million is levied under section 80D for the subject years has already been refunded by the Income Tax Department. However, tax amounting to Rs. 0.48 million levied under section 80D for the year 2000-01 has yet to be refunded after favourable decision of the Income Tax Appellate Tribunal, Peshawar, therefore, this amount has been shown as advance tax in these financial statements.
18.4
The Company during the year 2001 filed a writ petition in the High Court of Sindh against levy of Professional Tax by the Excise and Taxation Department. Since the Company is confident to win the case, therefore liability amounting to Rs. 0.5 million pertaining to the years 2001-06 has not been provided in these financial statements.
Commitments
18.5 Commitments under letters of credit as at the year end amounted to Rs. 86.179 million (2005: Rs. 48.44 million).
16
Dynea Pakistan Limited
2 0 0 6
2 0 0 5
Rupees
Rupees
18.6 Commitments for rentals under operating lease agreements
in respect of vehicles and leased factory are as follows:
Within one year
384,156
1,083,511
After one year but not more than five years
84,470
593,306
468,626
1,676,817
19. TURNOVER – net
Special
Resin
Aminoplast
aminoplast
division
Division
division
2 0 0 6
2 0 0 5
--------------------------------------- Rupees------------------------------------------
Sales
559,666,506
550,046,338
195,495,676
1,305,208,520
1,133,446,898
Less: Sales tax
72,949,659
69,931,986
24,904,429
167,786,074
146,275,909
Sales return
427,562
13,905,723
4,557,466
18,890,751
11,022,249
Rebate and discounts
3,573,510
348,190
530,018
4,451,718
1,670,294
76,950,731
84,185,899
29,991,913
191,128,543
158,968,452
482,715,775
465,860,439
165,503,763
1,114,079,977
974,478,446
Special
Resin
Aminoplast
aminoplast
division
division
division
2 0 0 6
2 0 0 5
--------------------------------------- Rupees------------------------------------------ 20. COST OF SALES
Opening stock - raw and
packing materials
13,262,466
47,844,841
-
61,107,307
52,021,113
Purchases
479,896,197
284,238,949
-
764,135,146
679,191,293
Inter division transfers-in
542,171
173,139,757
111,396,775
285,078,703
287,555,892
493,700,834
505,223,547
111,396,775
1,110,321,156
1,018,768,298
Closing stock - raw and
packing materials
(20,407,746)
(67,092,040)
-
(87,499,786)
(61,107,307)
Inter division transfers-out
(21,753,844)
(111,938,946)
-
(133,692,790)
(123,808,368)
Raw and packing material consumed
451,539,244
326,192,561
111,396,775
889,128,580
833,852,623
Manufacturing expenses:
Indirect material consumed
2,385,144
674,460
480,431
3,540,035
3,110,659
Stores, and spares consumed
5,953,551
2,907,491
3,320,878
12,181,920
6,397,268
Fuel and power
15,060,593
24,992,964
9,123,128
49,176,685
50,246,988
Gas charges
16,394
7,178
9,225
32,797
175,909
Salaries, wages and
other benefits - note 20.1
33,208,769
31,430,728
18,583,758
83,223,255
79,182,281
Rent, rates and taxes
109,630
152,570
63,060
325,260
248,714
Insurance
1,624,134
1,709,654
416,111
3,749,899
3,205,586
Repairs and maintenance
709,269
5,456,706
488,622
6,654,597
4,756,442
Vehicles running and maintenance
859,426
1,048,110
474,504
2,382,040
2,402,375
Lease rent
9,377
4,028
5,350
18,755
1,770,580
Vehicles lease rentals
346,624
285,506
190,422
822,552
1,461,681
Postage, telephone and telex
133,456
282,064
78,454
493,974
540,014
Storage and handling charges
4,089,872
-
-
4,089,872
3,811,287
Travelling and conveyance
397,919
483,804
199,853
1,081,576
4,820,864
Printing and stationery
124,393
154,533
67,274
346,200
384,744
Depreciation - note 3.2
11,076,444
4,613,654
576,933
16,267,031
17,000,441
Consultancy
198,000
84,194
111,606
393,800
Others
1,618,847
1,426,697
286,406
3,331,950
2,123,098
77,921,842
75,714,341
34,476,015
188,112,198
181,638,931
529,461,086
401,906,902
145,872,790
1,077,240,778
1,051,491,554
Inter division transfers of stock
(151,385,913)
-
-
(151,385,913)
(163,747,524)
Cost of goods manufactured
378,075,173
401,906,902
145,872,790
925,854,865
851,744,030
Cost of finished goods :
Opening stock
8,332,063
4,328,543
4,597,485
17,258,091
30,537,401
Closing stock
(3,614,343)
(3,196,743)
(3,118,738)
(9,929,824)
(17,258,091)
4,717,720
1,131,800
1,478,747
7,328,267
13,279,310
382,792,893
403,038,702
147,351,537
933,183,132
865,023,340
17
Dynea Pakistan Limited
20.1 Salaries, wages and other benefits
Salaries, wages and other benefits include Rs. 4.938 million (2005: Rs. 3.887 million) in respect of staff retirement benefits.
20.2 Inter-segment pricing
Transfers between business segments are recorded at cost which includes direct material, direct labour and applicable overheads.
2 0 0 6 2 0 0 5
Note
Rupees Rupees
21. DISTRIBUTION COST
Salaries and other benefits 21.1 8,949,204
8,340,007
Cartage and freight 47,590,155
19,414,759
Rent, rates and taxes 380,640
355,000
Insurance 292,019
341,850
Repairs and maintenance 44,863
707,234
Vehicles running and maintenance 873,371
660,906
Vehicles lease rentals 136,383
441,150
Postage, telephone and telex 497,489
668,006
Travelling and conveyance 1,714,116
359,657
Printing and stationery 34,970
22,953
Electricity
62,765
107,881
Depreciation
3.2 246,118
35,796
Sales promotion 471,837
229,950
Entertainment 3,670
16,839
Subscription
7,459
- Provision for impairment of debts 5,000,000
19,725,101
Others 93,491
456,966
66,398,550
51,884,055
21.1 Salaries and other benefits
Salaries and other benefits include Rs. 0.332 million (2005: Rs. 0.59 million) in respect of staff retirement benefits.
2 0 0 6 2 0 0 5
Note
Rupees Rupees
22. ADMINISTRATIVE EXPENSES
Salaries and other benefits
22.1 16,295,691
19,075,298
Directors’ fee
8,000
8,000
Rent, rates and taxes
1,115,680
1,012,097
Insurance
379,582
219,108
Repairs and maintenance
1,217,530
1,335,064
Vehicles running and maintenance
789,695
1,047,802
Vehicle lease rentals
-
404,664
Postage, telephone and telex
645,037
744,864
Travelling and conveyance
1,503,496
1,306,342
Printing and stationery
362,482
661,468
Electricity and gas
716,512
707,795
Depreciation
3.2 742,455
756,931
Legal and professional charges
3,274,614
1,990,856
Advertisement and publicity
152,331
196,439
Charity and donations
22.2
877,633
260,000
Annual listing fee
88,750
106,249
Computer service charges
696,596
908,539
Auditors’ remuneration
22.3
510,505
468,535
Entertainment
-
8,850
Subscription
91,136
74,799
ISO certification fees
153,985
146,129
Others
202,246
627,733
29,823,956
32,067,562
18
Dynea Pakistan Limited
22.1 Salaries and other benefits include Rs. 0.551 million (2005: Rs. 0.904
million) in respect of
staff retirement benefits.
22.2 Charity and donations
Donations do not include any donee in whom any director of the Company or his / her spouse has any interest except an amount of Rs. 0.06 million (2005: Rs. 0.06 million) paid to Muhammad Ali Habib Welfare Trust, Karachi, of
which Mr. Rafiq M. Habib, Director of the
Company is a trustee.
2 0 0 6 2 0 0 5
Rupees Rupees
22.3 Auditors' remuneration
Audit fee
210,000
175,000
Taxation services
-
86,780
Certification and other services
217,000
141,700
Out of pocket expenses
83,505
65,055
510,505
468,535
23. OTHER OPERATING INCOME
Storage and rental income
-
823,529
Mark-up on loans to employees and contractors 132,327
559,170
Profit on bank deposits
3,426
6,882
Insurance claim received
200,000
1,787,904
Scrap sales
-
270,020
Rebate on imports
920,513
- Others
5,949
235,007
1,262,215
3,682,512
24. FINANCE COSTS
Mark-up on - redeemable capital 503,652
1,327,715
- short term/running finances 16,946,558
9,100,252
17,450,210
10,427,967
Markup on finance lease 164,370
- Interest on workers' profit participation fund 23,066
- Bank guarantees commission 122,941
471,948
Bank charges 668,608
691,139
18,429,195
11,591,054
25. OTHER CHARGES
Workers' profit participation fund 3,168,169
492,427
Loss on disposal of property, plant and equipment 3,497,472
3,967,890
Exchange loss 646,501
3,778,444
7,312,142
8,238,761
26. TAXATION
Current 5,570,400
4,872,392
Prior 2,525
(6,045,154)
Deferred 18,098,066
9,418,433
23,670,991
8,245,671
26.1 The provision for income tax is based on section 113 of the Income Tax Ordinance, 2001 which specifies minimum tax charge at the rate of one half percent of the Company’s turnover. Tax expense reconciliation is not presented as income for the current and prior year is subject to minimum tax on turnover.
19
Dynea Pakistan Limited
2 0 0 6 2 0 0 5
Rupees Rupees
27. BASIC AND DILUTED EARNINGS PER SHARE
There is no dilutive effect on the basic earnings per share which is based on :
Profit after taxation
36,524,226
1,110,515
Weighted average number of ordinary shares
18,872,413
18,872,413
Earnings per share
1.94
0.06
28. REMUNERATION OF CHIEF EXECUTIVE OFFICER, DIRECTOR AND EXECUTIVES
2006
2005 Chief
Chief
Executive
Director
Executives
Total
Executive
Director Executives
Total ---------------------------Rupees----------------------------
------------------------------Rupees-------------------------------
Managerial remuneration 1,073,771
-
3,151,976
4,225,747
1,073,771
-
3,151,976
4,225,747
Retirement and other benefits
445,294
-
2,073,323
2,518,617
445,294
-
2,073,323
2,518,617
House rent 118,738
-
1,012,968
1,131,706
118,738
-
1,012,968
1,131,706
1,637,803
-
6,238,267
7,876,070
1,637,803
6,238,267
7,876,070
Number of persons 1
-
4
5
1
-
4
5
28.1
In addition, the Chief Executive Officer, director and certain executives are provided with free use of company maintained cars.
28.2
Fee paid to non-executive directors was Rs. 8,000 (2005: Rs.10,000).
29. SEGMENT INFORMATION
2 0 0 6
2 0 0 5
Special
Special
Resin
Aminoplast aminoplast
Resin
Aminoplast
aminoplast
division
division
division
Total
division
division
division
Total
-----------------------------Rupees------------------------------
-------------------------------Rupees--------------------------------
29.1
Business segments
Segment assets 365,336,808
153,040,852
29,348,291
547,725,951
321,874,476
126,403,003
27,478,482
475,755,961
Unallocated assets
44,643,259
61,745,186
Total assets
592,369,210
537,501,147
Segment liabilities -
12,273,376
-
12,273,376
41,317,169
31,975,148
764,133
74,056,450
Unallocated liabilities
287,128,725
207,001,814
Total liabilities
299,402,101
281,058,264
Capital expenditure 13,690,525
6,125,350
-
19,815,875
13,536,273
2,129,660
-
15,665,933
Depreciation
12,031,608
4,647,063
576,933
17,255,604
12,318,824
4,831,410
642,934
17,793,168
Non-cash expenses other
than depreciation 6,145,635
499,415
656,092
7,301,142
21,148,916
211,639
328,638
21,689,193
20
Dynea Pakistan Limited
30. TRANSACTIONS WITH RELATED PARTIES
Related parties of the Company comprise companies with common directorship, retirement funds, directors and key management personnel. Detail of transactions with associated companies during the year, other than those which have been disclosed elsewhere in these financial statements, are as follows:
2 0 0 6 2 0 0 5
Rupees Rupees
Sales
69,242,063
67,140,517
Purchases 500,325
4,136,796
Insurance premium 5,609,257
4,401,074
Insurance claim received 1,320,000
1,787,904
Contribution to the provident fund 3,519,229
3,657,863
There are no transactions with key management personnel other than under terms of employment.
The related party status of outstanding receivable/payable as at June 30, 2006 are disclosed in the respective notes to the financial statements.
Transactions with associated undertakings and related parties are made under normal commercial terms and conditions.
31. LIQUIDITY RISK
Liquidity risk is the risk that the company will be unable to meet its funding requirements. To guard against the risk, the company has diversified funding sources
and assets are managed with liquidity in mind. The maturity profile is monitored to ensure that adequate liquidity is maintained.
32. YIELD / MARK-UP RATE RISK
Yield/mark-up rate risk is the risk that the value of a financial instrument will fluctuate due to changes in the market yield/mark-up rates. Sensitivity to yield/mark-up rate risk arises from mismatches of financial assets and liabilities that mature or reprice in a given period. The company manages these mismatches through risk management strategies where significant changes in gap position can be adjusted. The company is exposed to yield/mark-up rate risk in respect of the following:
21
Dynea Pakistan Limited
2 0 0 6
Exposed to yield / mark-up rate
risk
Not
exposed
Maturity
Maturity
to yield /
upto one
after one
mark-up
rate
Total
Year
year
Sub-total
risk
Financial assets
-----------------------------------Rupees--------------------------------
Long-term loans and advances
549,151
388,166
160,985
549,151
-
Long-term deposits
981,583
-
-
-
981,583
Trade debtors
229,640,571
-
-
-
229,640,571
Loans, advances, deposits, Prepayments and other receivables
452,348
-
-
-
452,348
Cash and bank balances
8,932,116
-
-
-
8,932,116
240,555,769
388,166
160,985
549,151
240,006,618
Financial liabilities
Short term borrowings
197,845,250
197,845,250
-
197,845,250
-
Liabilities against assets subject to finance lease
2,343,393
449,855
1,893,538
2,343,393
- Trade and other payables
75,712,561
-
-
-
75,712,561
275,901,204
198,295,105
1,893,538
200,188,643
75,712,561
2 0 0 5
Exposed to yield / mark-up rate risk
Not exposed
Maturity
Maturity
to yield /
Upto one
after one
mark-up rate
Total
Year
year
Sub-total
Risk Financial assets
-----------------------------------Rupees--------------------------------
Long-term loans and advances
3,515,632
2,133,885
1,219,280
3,353,165
162,467
Long-term deposits
981,583
-
-
-
981,583
Trade debtors
163,777,243
-
-
-
163,777,243
Loans, advances, deposits, Prepayments and other receivables
1,583,028
-
-
-
1,583,028
Cash and bank balances
11,934,379
-
-
-
11,934,379
181,791,865
2,133,885
1,219,280
3,353,165
178,438,700
Financial liabilities
Redeemable capital
10,714,281
10,714,281
-
10,714,281
- Short term borrowings
161,093,321
161,093,321
-
161,093,321
- Trade and other liabilities
101,570,610
-
-
-
101,570,610
273,378,212
171,807,602
-
171,807,602
101,570,610
The effective mark-up / profit rates have been disclosed in the respective notes to the financial statements.
33. CREDIT RISK AND CONCENTRATION OF CREDIT RISK
Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss.
Concentration of credit risk arises when a number of counter parties are engaged in similar business activities or have similar economic features that would cause their ability to meet contractual obligations to be similarly
affected by changes in economic, political or other conditions. Concentrations of credit risk indicate the relative sensitivity of the company's performance to developments affecting a particular industry.
The Company’s exposure to credit risk is indicated by the carrying amount of its trade debtors. The company controls credit risk by monitoring the amount of credit extended, limiting transactions with specific customers and continually assessing the credit worthiness of the customers.
22
Dynea Pakistan Limited
2006
2005
Amount
Percent
Amount
Percent
(Rupees)
(Rupees)
Trade debtors
Wood working industry
175,971,365
77%
111,405,672
68%
Plastic industry
53,669,206
23%
52,371,571
32%
229,640,571
100%
163,777,243
100%
34. PROPOSED DIVIDEND
The Board of Directors at the meeting held on September 09, 2006
have proposed for the year ended June 30, 2006 cash dividend of Re. 0.75 per share (2005: nil), amounting to Rs. 14.154 million subject to approval of members at the annual general meeting to be held on October 18, 2006.
35. FOREIGN EXCHANGE RISK MANAGEMENT
Foreign currency risk is the risk that the value of a financial asset or a liability will fluctuate due to a change in foreign exchange rates. It arises mainly where receivables and payables exist due to transactions with foreign undertakings. Financial liabilities include Rs. 173.15 million (2005: Rs. Nil) which are subject to currency risk exposure and off-balance sheet risk consists of commitments under letters of credit as disclosed in note 18.5.The Company does not have any formal foreign currency risk management policy.
36. FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value is an amount for which an asset could be exchanged, or a liability settled, between knowledgeable willing parties in an arm's length transaction. Consequently, differences may arise between the carrying values and the fair value estimates.
Underlying the definition of fair value is the presumption that the Company is a going concern without any intention or requirement to curtail materially the scale of its operations or to undertake a transaction on adverse terms.
The carrying values of all financial assets and liabilities reflected in the financial statements approximate their fair values.
37. CAPACITY AND PRODUCTION
Rated
Actual
Rated
Actual
capacity
production
capacity
production
2 0 0 6
2 0 0 6
2 0 0 5
2 0 0 5
Note
-----------------------------M. Tons----------------------------
RESIN DIVISION
Urea/Melamine formaldehyde
34,000
34,341
34,000
29,101
Formaldehyde
39,000
31,543
39,000
29,359
37.1
73,000
65,884
73,000
58,460
========
=========
=========
==========
AMINOPLAST DIVISION
Aminoplast compound
8,000
8,878
8,000
9,927
Special aminoplast compound
2,000
3,241
2,000
3,345
10,000
12,119
10,000
13,272
========
=========
=========
==========
37.1
The reason for shortfall in actual production is due to low demand.
23
Dynea Pakistan Limited
38. DATE OF AUTHORISATION FOR ISSUE
These financial statements were authorised for issue on September 09, 2006
by the Board of
Directors of the company.
39. GENERAL
Figures have been rounded off to the nearest rupee.
Alireza M. Alladin Chief Executive
Officer
Farooq Hassan Director