DIRECTORS’ REPORT TO THE SHAREHOLDERS
Your directors feel pleasure in presenting the 15th annual report with audited accounts of the company for the year
ended 30th , September 2002.
FINANCIAL RESULTS:
2002 2001
RUPEES RUPEES
Operating profit
Other Charges 6,972,518 22,012,422
Financial
Workers profit participation fund
5,581,232 18,845,079
Net profit for the year before taxation 1,391,286 3,167,343
Taxation 2,672,071 1,540,155
Net (loss) / profit for the year after taxation
From
ordinary activities
(1,280,785)
1,627,188
Extra ordinary item- adjustment of Morabaha 35,950,000
finance
Net profit for the year available for appropriation 34,669,215 1,627,188
Proposed cash dividend @5% for current year 6,300,580
Net profit for the year after appropriation 28,368,635 1,627,188
Accumulated loss brought forward (255,995,106) (257,622,294)
Accumulated loss carried forward (227,626,471) (255,955,106)
Earning per share 2.75 0.13
REVIEW OF FINANCIAL RESULTS:
Sales during the current year were up by 15.1% in comparison with last year Gross profit percentage decreased from 6.2% last year to 2.5% in the current year due to increase in cost of sales by 19.67% in comparison with last year. This was mainly due to increase in cost of fuel and power and increase in salaries and wages due to increments and accrual of bonus etc to workers. Depreciation also increased by 15.3% in the current year as it is based on unit production method. Production during the year increased in comparison to last year.
Included in other income is an amount of Rs.1,002,576, this being compensation on late refund of I. Tax, awarded by the Federal Tax Ombudsman, as a result of a hard fought legal battle.
Administration expenses in the current year have reduced by 11.7% in comparison with last year. This decrease is attributable to reduction in legal and professional fee. Exceptional legal fee was incurred last year due to cases relating to banks. Selling expenses increased during the year by 13.6% in comparison with last year due to increase in ocean freight charges/war risk surcharge.
Financial charges have reduced during the current year under review by as much as 70.5% from Rs 18,674 M last year to Rs.5,502 M in current year, this being due to court's decision i the case of Faisal Bank Limited, as explained below. Your company has earned a net profit after taxation and extra ordinary item of Rs. 34.67 Mr. Directors are pleased to recommend cash dividend of 5%(Rs 0.50 per share) for the year ended on 30.9.2002.
An amount of Rs.5,591, 401 has been shown in the balance sheet as custom levies payable. This consists of import duty and import duty and import surcharge on the import of ring spinning frames. The payment has not yet been made because the exact payable amount has to be settled with the custom authorizes .Our contention is that only 30% of the total import duty was payable, which the company has paid. As per our understanding it was intention of the Federal Government to exempt 70% of the import duty and that the exemption under SRO 1076(I195)should be extended to the import surcharge as well.
DECISION OF CASE FILED BY FAYSAL BANK LIMITED:
As mentioned in previous year's report Faisal Bank Limited (FBL) had filed a recovery suit against the company for Rs 45,616 M, being Rs. 40M for principle and Rs, 50616 M for profit. The case was decided by the court in accordance with the Islamic principles of Morahaba financing and a decree of Rs. 4.05 M in was awarded to the bank. Company paid the total decently amount. Based on prudent accounting policies full liability was booked in the previous accounts, which has now been written back and shown as extra ordinary item and other income.
OTHER COURT CASES:
The company had also filed a case against FBL on the subject matter as disused in the preceding paragraph. Upon legal advice this case was withdrawn.
The company has also filed a case against Muslim Commercial Bank for charging compound markup and/or markup over markup to the extent of Rs. 10.006 M .In all likelihood the company will succeed in winning this case, Inshallah.
FUTURE PROSPECTS:
Although there is inflationary trend in the prices of cotton and pressure on the selling prices of yarn, the management of your company will try its best to get positive result in the next year.
AUDITORS:
The present auditors M/s Yousaf Adil Saleem &Co., Chartered Accountants retire and offer themselves for reappointment for the next year.
PATTERN OF SHAREHOLDING :
Pattern of shareholding as on September 30,2002 as per new format is annexed.
NUMBER OF BOARD MEETINGS HELD:
Seven board meetings were held during the year ended on 30.9.2002.Attendnace by each director is given below:-
Name Of Director No of Meetings Attended
Mr.Imran Zahid(CEO) 7
Mr.Mehmood-UL-Hassan 7
Mr.Riaz Ahmed 7
Mr.Jamil Ahmed Tahir 7
Mr.Muhammad Siddique Farooq 7
Mr.Shamsher Khan 5
Mr.Barkat Ali 5
Directors who did not attended the above meetings were granted leave of absence by the Board of Directors.
AUDIT COMMITTEE:
The Board in compliance with the Code of Corporate Governance has established an audit committee comprising of the following members:
Mr.Imran Zahid - Chairman
Mr.Jamil Ahmed Tahir - Member
Mr.Riaz Ahmad - Member
CORPORATE AND FINANCIAL REPORTING FRAME WORK:
In compliance to new listing regulations of Stock Exchange and as required under the Companies Ordinance,1984 your directors are pleased t report as under:
The Financial Statements prepared by the management of your company present fairly its state of affairs, the result of its operation, cash flow and charges in equity.
Proper books of accounts of the company have been maintained.
Appropriate accounting policies have been consistently applied in preparation of financial statements and accounting estimates which are based on reasonable and prudent judgment.
International Accounting Standards, as applicable in Pakistan, have been followed in preparation of financial statements and any departure there form has been adequately disclosed.
The system of internal control is sound in design and has been effectively implemented and monitored.
There is no doubt upon the company's ability to continue as a going concern.
There has been no material departure from the best practices of corporate governance, as detailed in the listing regulations.
Key operating and financial data of last six year in summarized form is annexed.
DIRECTORS REMUNERATION:
As in previous years, the directors did not draw any remuneration during the current year.
ACKNOWLEDGEMENT:
The management would like to place on record its deep appreciation for the continuous support of its shareholders, customer and employees and expect to get the same cooperation in the future.
On behalf of the Board
Date: 20.01.2003 Imran Zahid
Faisalabad. Chief Executive
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J.A. Textile Mills Ltd.
16 C, People's Colony
Faisalabad 38090, PAKISTAN
Tel: 92-41-721953-6
Fax: 92-41-712399