ITTEHAD CHEMICALS LIMITED Quarterly Report Septemb… · Ittehad Chemicals Limited (the Company)...

ITTEHADCHEMICALS

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ITTEHAD CHEMICALS LIMITED

CONDENSED INTERIM FINANCIAL STATEMENTS STFOR THE 1 QUARTER ENDED SEPTEMBER 30, 2016

(UN-AUDITED)

Corporate Information

Directors’ Report

Condensed Interim Balance Sheet

Condensed Interim Profit and Loss Account

Condensed Interim Statement of Comprehensive Income

Condensed Interim Cash Flow Statement

Condensed Interim Statement of Changes in Equity

Notes to the Condensed Interim Financial Information

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BOARD OF DIRECTORS Mr. Muhammad Siddique Khatri Chairman Non-Executive DirectorMr. Abdul Sattar Khatri Director/CEO Executive DirectorMr. Abdul Ghafoor Khatri Director Non-Executive DirectorMs. Farhana Abdul Sattar khatri Director Non-Executive DirectorMr. Waqas Siddiq Khatri Director Executive DirectorMr. Abdullah Mustafa Director Non-Executive DirectorMr. Pervaiz Ahmad Khan Director Independent Director

AUDIT COMMITTEE Mr. Abdullah Mustafa Chairman Mr. Abdul Ghafoor Khatri MemberMr. Pervaiz Ahmad Khan Member

HR & REMUNERATION Mr. Abdul Ghafoor Khatri ChairmanCOMMITEE Mr. Abdullah Mustafa Member

Mr. Waqas Siddiq Khatri Member

CHIEF FINANCIAL OFFICER Mr. Javed Iqbal

COMPANY SECRETARY Mr. Abdul Mansoor Khan

REGISTERED OFFICE/HEAD 39-Empress Road, P.O. Box 1414, Lahore-54000.OFFICE Tel: 042 - 36306586 - 88, Fax: 042 - 36365697

Website: www.ittehadchemicals.com, E-mail: [email protected]

PLANT G.T. Road, Kala Shah Kaku, District Sheikhupura.Ph: 042 - 37950222 - 25, Fax: 042 - 37950206

SHARES REGISTRAR M/s. Corplink (Pvt.) LimitedCorporate and Financial ConsultantsWings Arcade, 1-K Commercial, Model Town, Lahore.Ph : 042 - 35839182, Fax : 042 - 35869037

BANKERS Banks - Conventional Side Banks - Islamic Window OperationsAskari Bank Limited Al-Baraka Bank (Pakistan) LimitedAllied Bank Limited Burj Bank LimitedFaysal Bank Limited Dubai Islamic Bank (Pak) LimitedHabib Metro Bank Limited Bank Alfalah Limited-Islamic BankingMCB Bank LimitedNational Bank of Pakistan NIB Bank LimitedPak Libya Holding Co. (Pvt.) Ltd.Pakistan Kuwait Inv. Co. (Pvt.) Ltd.Pak Brunei Inv. Company LtdThe Bank of PunjabUnited Bank Limited

AUDITORS M/s. BDO Ebrahim & Co., Chartered Accountants,nd2 Floor, Block- C, Lakson Square Building No.1,

Sarwar Shaheed Road, Karachi.Ph: 021 - 35683189, 35683498 Fax : 021 - 35684239

LEGAL ADVISOR Cornelius, Lane & MuftiAdvocates & SolicitorsNawa-e-Waqt House4 - Shahrah-e-Fatima JinnahLahore-54000

Corporate Information

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The Directors of your Company take pleasure in presenting the un-audited condensed interim financial

statements of the Company for the first quarter ended September 30, 2016.

During the quarter under review, the Company posted net sales revenue of Rupees 1,031 Million (2015:

Rupees 1,122 Million). The cost of sales stood at Rupees 853 Million (2015: Rupees 894 Million) bringing

gross profit to Rupees 178 Million (2015: Rupees 228 Million). The bottom line showed a net profit of

Rupees 62 million (2015: profit Rupees 65 Million) which yielded earnings per share of Rupees 0.95

(2015: Rupees 1.19 per share).

By the grace of Almighty Allah, the Company has successfully transformed its entire (100%) Production

Technology on state of the art power efficient environmental friendly Ion Exchange Membrane Plants,

thanks to IEM Plant 2 Phase II which commenced its operations in September 2016. The Company has

now shut down its high power consuming Mercury based DSA (Caustic Soda) Plant. Although the

operational indicators for the future appear to be positive however financial performance will depend

upon a number of external factors like consistent availability of Gas during winter season, products

stable prices, incremental levies and political stability in the country.

The Board is thankful to the valuable Members, Customers, Banks and Government departments for

their trust, confidence, persistent support and patronage and would like to place on record its gratitude

to all the Employees of the company for their contribution, dedication and hard work.

On behalf of the Board

October 25, 2016 Muhammad Siddique Khatri

Lahore Chairman

DIRECTORS' REPORT

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ASSETSNON CURRENT ASSETS

Property, plant and equipmentOperating fixed assets 6 3,637,902Capital work in progress 7 425,966

4,063,868

Intangible assets 6,445Investment properties 104,400Long term deposits 34,182

4,208,895

CURRENT ASSETSStores, spares and loose tools 519,748Stock in trade 476,639Trade debts 500,801Loans and advances 169,759Trade deposits and short term prepayments 12,142Tax refunds due from Government 80,438Taxation - net 154,109Cash and bank balances 126,405

2,040,041TOTAL ASSETS 6,248,936

EQUITY & LIABILITIESSHARE CAPITAL AND RESERVES

Authorized share capital 8.1 1,000,000

Issued, subscribed and paid up capital 8.2 650,000Share premium 150,000Unappropriated profit 1,184,570

1,984,570

SURPLUS ON REVALUATION OF FIXED ASSETS 794,848

NON CURRENT LIABILITIESLong term financing 9 757,791Long term diminishing musharaka 10 323,233Deferred liabilities 262,755

1,343,779

CURRENT LIABILITIESTrade and other payables 821,005Mark-up accrued 27,667Short term borrowings 948,986Current portion of long term liabilities 328,081

2,125,739CONTINGENCIES AND COMMITMENTS 11 -

TOTAL EQUITY AND LIABILITIES 6,248,936

The annexed notes from 1 to 16 form an integral part of these financial statements.

3,918,228343,276

4,261,504

6,445104,400

34,1974,406,546

507,332488,990516,709139,846

8,76094,061

206,439111,183

2,073,3206,479,866

1,000,000

650,000150,000

1,246,6332,046,633

794,848

748,497320,603238,434

1,307,534

863,37333,855

1,048,042385,581

2,330,851-

6,479,866

Condensed Interim Balance Sheetas at September 30, 2016 (Un-audited)

September 30,2016

(Audited)June 30,

2016

Note (Rupees in thousand)

CHIEF EXECUTIVE DIRECTOR

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Sales - net 1,031,162 1,122,246

Cost of sales 12 (853,066) (894,410)

Gross profit 178,096 227,836

Selling and distribution expenses (60,166) (55,181)

General and administrative expenses (40,931) (40,915)

Other operating expenses (2,343) (4,660)

Other operating income 2,948 2,859(100,492) (97,897)

Operating profit 77,604 129,939

Financial charges (40,971) (46,412)

Profit before taxation 36,633 83,527

Taxation 25,430 (18,325)

Profit after taxation 62,063 65,202

Earnings per share - basic and diluted (Rupee) 13 0.95 1.19


Condensed Interim Profit And Loss Account (Un-audited)for the quarter ended September 30, 2016

2016 2015Note (Rupees in thousand)

Quarter ended September 30,


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Profit for the period 65,202

Other comprehensive income -

Total comprehensive income for the period 65,202


62,063

-

62,063

Condensed Interim Statement of Comprehensive Income (Un-audited)for the quarter ended September 30, 2016

2016 2015(Rupees in thousand)



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CASH FLOW FROM OPERATING ACTIVITIESProfit before taxation 83,527Adjustments for items not involving movement of funds:

Depreciation 74,490Amortization of intangible assets 1,586Provision for gratuity 3,451Gain on sale of fixed assets -Gain on foreign exchange (916)Provision for bad debts - Bad debts written off 11Financial charges 46,412

Net cash flow before working capital changes 208,561Decrease / (increase) in current assets

Stores, spares and loose tools (33,797)Stock in trade (176,071)Trade debts (34,512)Loans and advances (7,705)Trade deposits and short term prepayments (1,223)Tax refunds due from the Government 27,533

(225,775)Increase / (decrease) in current liabilities

Trade and other payables 123,327Cash generated from operations 106,113Income taxes paid (32,563)Gratuity paid (2,315)Financial charges paid (54,019)

Net cash inflow from operating activities 17,216

CASH FLOW FROM INVESTING ACTIVITIESAdditions to operating fixed assets-net (2,230)Additions to capital work in progress (37,594)Proceeds from sale of operating fixed assets - Long term deposits -

Net cash (outflow) from investing activities (39,824)

CASH FLOW FROM FINANCING ACTIVITIESProceeds from long term financing (18,305)Repayment of long term financing -Proceeds from long term diminishing musharaka 1,561Repayment of finance lease liabilities (339)Short term borrowings 79,162

Net cash inflow / (outflow) from financing activities 62,079Net (decrease) / increase in cash and cash equivalents 39,471Cash and cash equivalents at the beginning of the period 119,390Cash and cash equivalents at the end of the period 158,861


36,633

74,202-

4,695(1,288)

(29)2,500

-40,971

157,684

12,416(12,351)(18,379)

29,9133,382

(13,623)1,358

42,368201,410(52,330)

(3,585)(42,488)103,007

(4,795)(259,605)

1,555(15)

(262,860)

96,788(68,582)

17,370-

99,055144,631(15,222)126,405111,183

Condensed Interim Cash Flow Statement (Un-audited)for the quarter ended September 30, 2016




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Share Share Unappropriated Totalcapital premium profit

(Rupees in thousand)

Balance as at July 01, 2016 500,000 - 1,078,189 1,578,189

Total Comprehensive income for the period - - 65,202 65,202Balance as at September 30, 2015 500,000 - 1,143,391 1,643,391

Transaction with owners:Final cash dividend 2015: Re. 1 per share - - (50,000) (50,000)Right shares issued during the period 150,000 150,000 - 300,000

150,000 150,000 (50,000) 250,000Total Comprehensive income for the period

Profit for the period - - 102,171 102,171Remeasurement of defined benefit liability - net - - (10,992) (10,992)

- - 91,179 91,179Balance as at June 30, 2016 650,000 150,000 1,184,570 1,984,570

Total Comprehensive income for the period - - 62,063 62,063Balance as at September 30, 2016


650,000 - 1,246,633 2,046,633

Condensed Interim Statement of Changes in Equity (Un-audited)for the quarter ended September 30, 2016


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Notes to the Condensed Interim Financial Information (Un-audited)for the quarter ended September 30, 2016

1 LEGAL STATUS AND OPERATIONS

Ittehad Chemicals Limited (the Company) was incorporated on September 28, 1991 to takeover the assets of Ittehad Chemicals and Ittehad Pesticides under a Scheme of Arrangement dated June 18, 1992 as a result of which the Company became a wholly owned subsidiary of Federal Chemical and Ceramics Corporation (Private) Limited. The Company was privatized on July 03, 1995 when 90% of the shares were transferred to the buyer.

The Company was listed on Karachi Stock Exchange on April 14, 2003 when sponsors of the Company offered 25% of the issued, subscribed and paid up shares of the Company to the general public.

The registered office of the Company is situated at 39, Empress Road, Lahore. The Company is engaged in business of manufacturing and selling caustic soda and other allied chemicals.

2 BASIS OF PREPARATION

2.1 Statement of compliance

These condensed interim financial statements are unaudited and are being submitted to the members as required under Section 245 of the Companies Ordinance, 1984.

These condensed interim financial statements have been prepared in accordance with approved accounting standards as applicable in Pakistan. Approved accounting standards comprise of such International Financial Reporting Standards (IFRS) issued by the International Accounting Standard Board as are notified under the Companies Ordinance, 1984, provisions of and directives issued under the Companies Ordinance, 1984. In case requirements differ, the provisions or directives of the Companies Ordinance, 1984 shall prevail.

The disclosures made in these condensed interim financial statements have, however, been limited in accordance with the requirements of the International Financial Reporting Standards (IFRS) IAS - 34, Interim Financial Reporting. They do not include all the information and disclosures made in the annual published financial statements and should be read in conjunction with the financial statements of the Company for the year ended June 30, 2016.

2.2 Basis of measurement

These condensed interim financial statements have been prepared under the historical cost convention, except for the recognition of certain staff retirement benefits at present value.

These condensed interim financial statements have been prepared following accrual basis of accounting except for cash flow information.

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2.3 Functional and presentation currency

These condensed interim financial statements have been presented in Pak Rupees, which is the functional and presentation currency of the Company.

3 SIGNIFICANT ACCOUNTING POLICIES

The accounting policies adopted and methods of computation followed in the preparation of these condensed interim financial statements are the same as those of the preceding published annual financial statements for the year ended June 30, 2016.

4 TAXATION

Income tax expense is recognized based on management's best estimate of the weighted average annual income tax rate expected for the full financial year.

5 ESTIMATES

The preparation of condensed interim financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates. The significant judgments made by management in applying the Company's accounting policies and key sources of estimation of uncertainty are the same as those that were applied to the financial statements for the year ended June 30, 2016.

6 OPERATING FIXED ASSETS

Opening book value (NBV) 3,756,179Additions (at cost) during the period / year 6.1 190,278

3,946,457Disposals (at NBV) during the period / year 6.2 (1,716)Depreciation charged during the period / year (306,839)

(308,555)Closing net book value (NBV) 3,637,902

6.1 Details of additions (at cost) during the period / year are as follows:

Land -Building 21Plant and machinery 170,847Other equipment 11,316Furniture and fixtures 680Office and other equipment 2,688Vehicles 4,726

190,278

3,637,902354,795

3,992,697(267)

(74,202)(74,469)

3,918,228

--

350,0001,767

2721,1941,562

354,795

(Un-audited)September 30,

2016

(Audited)June 30,

2016

Note (Rupees in thousand)

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6.2 Details of disposals (at NBV) during the period / year are as follows:

Plant and machinery (102)Vehicles (1,614)

(1,716)

7 CAPITAL WORK IN PROGRESS

Plant and machinery 425,966425,966

7.1 An amount of Rs. 350.00 million (June 30, 2016: Rs. 149.738 million) has been transferred to operating fixed assets during the period.

8 SHARE CAPITAL

8.1 Authorized share capital

75,000,000 (June 30, 2016: 75,000,000) ordinary shares of Rs. 10/- each 750,000

25,000,000 (June 30, 2016: 25,000,000) preference shares of Rs. 10/- each 250,000

1,000,000

8.2 Issued, subscribed and paid up share capital

15,100,000 (June 30, 2016: 15,100,000) ordinary shares fully paid in cash 151,000

24,900,000 (June 30, 2016: 24,900,000) issued for consideration other than cash 249,000

25,000,000 (June 30, 2016: 25,000,000) fully paid bonus shares 250,000

650,000

-(267)(267)

343,276343,276

750,000

250,000

1,000,000

151,000

249,000

250,000

650,000


2016

(Audited)June 30,

2016


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9 LONG TERM FINANCING

From banking companies and financial institutions- securedBalance as at July 01 594,353Obtained during the period / year 467,220Repayments made during the period / year (117,068)

944,505From directors and others - unsecuredBalance as at July 01 4,810Repayments made during the period / year (4,810)

- 944,505

Current portion shown under current liabilities (186,714)757,791

10 LONG TERM DIMINISHING MUSHARAKA

From banking companies and financial institutions- securedBalance as at July 01 484,572Obtained during the period / year 101,561Repayments made during the period / year (121,533)

464,600Current portion shown under current liabilities (141,367)

323,233

11 CONTINGENCIES AND COMMITMENTS

11.1 Contingent liabilities

a) The Company has received an order under section 161/205 of the Income Tax Ordinance, 2001 for tax year 2004 creating demand of Rs. 12.069 million (June 30, 2015: Rs. 12.069 million). The Company challenged it before Commissioner of Inland Revenue (Appeals) Zone-1 who decided the case in favour of the Company. The department had filed an appeal before Appellate Tribunal Inland Revenue. The Honourable ATIR (Appellate Tribunal Inland Revenue) remanded the case back to the Commissioner (Appeals) Zone-1 to pass a speaking order. The Company expects a favorable outcome of the proceedings. However, if the case is decided against the Company, it may result in tax payable of Rs. 12.069 million.

b) The taxation authorities have amended the deemed assessment for the Tax Year 2010 by passing an order u/s 122(5A) of the Income Tax Ordinance, 2001 creating, thereby, income tax demand of Rs. 54.510 million. The Company has filed an appeal before Commissioner Inland Revenue (Appeals) who partially set aside and remanded back and also partially decided in favour of the Company. The Company as well as tax department filed an appeal against the said order before Appellate Tribunal Inland

944,50596,788

(68,582)972,711

---

972,711(224,214)

748,497

464,60017,370

-481,970

(161,367)320,603


2016

(Audited)June 30,

2016


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Revenue which is still pending adjudication. The Company expects a favorable outcome of the proceedings. However, if the case is decided against the Company, it may result in maximum tax payable of Rs. 54.510 million.

c) The taxation authorities have amended the deemed assessment for Tax Year 2006 by passing an order u/s 122(5A) of the Income Tax Ordinance, 2001. The Company challenged the same before Commissioner Inland Revenue (Appeals) who partially set aside and partially decided against the Company. The Company has filed an appeal before Appellate Tribunal Inland Revenue against the said order. The Company expects a favorable outcome of the proceedings. However, if the case is decided against the Company, it may result in tax payable of Rs. 18.737 million.

d) Additional Commissioner has passed an order u/s 122(5A) of the Income Tax Ordinance, 2001 adding back tax credit u/s 65B of the Income Tax Ordinance, 2001 on Balancing, Modernization, and Replacement and tax credit on donations for Tax Year 2012. Tax amounting to Rs. 12.570 million has been assessed. The Company has challenged the case before Commissioner Inland Revenue (Appeals) who has decided it against the Company. The Company has filed appeal before Appellate Tribunal Inland Revenue. The Company expects a favorable outcome of the proceedings. However, if the case is decided against the Company, it may result in tax payable of Rs. 12.570 million.

e) The Company is facing claims, launched in the labour courts, pertaining to staff retirement benefits. In the event of an adverse decision, the Company would be required to pay an amount of Rs. 3.489 million (June 30, 2016: Rs. 3.407 million) against these claims.

f) Letters of guarantee outstanding as at September 30, 2016 were Rs. 233.107 million (June 30, 2016: Rs. 237.198 million).

11.2 Commitments

Commitments as on September 30, 2016 were as follows:

a) Against letters of credit amounting to Rs. 79.705 million (June 30, 2016: Rs. 234.455 million).

b) Against purchase of land amounting to Rs. 1.838 million (June 30, 2016: Rs. 1.838 million).

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Quarter ended September 30,(Un-audited)

12 COST OF SALES

Raw materials consumed 176,764Other overheads

Stores, spares and consumables 58,746Packing materials consumed 11,702Salaries, wages and other benefits 94,116Fuel and power 604,238Repair and maintenance 8,152Rent, rates and taxes 5,029Insurance 3,646Depreciation 72,923Vehicle running expenses 4,750Telephone, telex and postage 225Printing and stationery 39Other expenses 814

864,380

Opening work in process 25,666Closing work in process (28,208)

(2,542)Cost of goods manufactured 1,038,602

Cost of stores traded 2,044

Opening stock of finished goods 71,417Closing stock of finished goods (217,653)

(146,236)894,410

13 EARNINGS PER SHARE - BASIC AND DILUTED

Profit after taxation - (Rupees in thousand) 65,202

Weighted average number of ordinary shares - (In thousand) 54,793

Earnings per share - basic and diluted - (Rupees) 1.19

There is no dilutive effect on the basic earnings per share of the Company.

Prior period earnings per share have been adjusted to give effect of bonus element included in the right issue made during the period

139,943

78,8017,939

99,230497,757

6,909200

4,30372,781

4,046173

39819

772,997

21,107(26,491)

(5,384)907,556

30

323,412(377,932)

(54,520)853,066

62,063

65,000

0.95

2016 2015Quarter ended September 30,

(Un-audited)

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14 TRANSACTIONS WITH RELATED PARTIES

The related parties comprise group companies, other associated companies, staff retirement funds, directors and key management personnel. Transactions with related parties and associated undertakings are given as under:

Relationship with Nature of transactionthe Company

Associated company Sale of goods 478Other related party Marketing services charges 5,334Other related party Loan received 1,500Retirement benefit plans Contribution to staff retirement

benefit plans 99Key management personnel Remuneration and other benefits 24,295

15 DATE OF AUTHORIZATION

These financial statements were authorized for issue on October 25, 2016 by the Board of Directors of the Company.

16 GENERAL

i Figures have been rounded off to the nearest rupees in thousand unless stated otherwise.

ii Corresponding figures have been rearranged and reclassified, wherever necessary, for the purpose of comparison, the effect of which is not material.

-4,924

-

11822,239


Quarter ended September 30,(Un-audited)


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ITTEHADG R O U P www.ittehadchemicals.com

Registered/Head Office:

Factory:

39-Empress Road, Lahore-Pakistan. Tel: +92 42 3630 6586-88, Fax: +92 42 3636 5697

G.T. Road, Kala Shah Kaku, District Sheikhupura-Pakistan. Tel: +92 42 3795 0222-25, Fax: +92 42 3795 0206

A U S T R I AH E L L A S

EN ISO 9001/2008 EN ISO 14001/2004

A U S T R I AH E L L A S

TNA OR IE NT LNI

A

MCUC RR OE FD NTI TIOA

IAF Ms CertificationNo of Certificate 236

ITTEHAD CHEMICALS LIMITED Quarterly Report Septemb… · Ittehad Chemicals Limited (the Company)...

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Transcript of ITTEHAD CHEMICALS LIMITED Quarterly Report Septemb… · Ittehad Chemicals Limited (the Company)...